Re: Bottom of the property cycle reached ?
 

If you look at the overall picture Oz is about also 6-8 months behind on many economic readings (falls in business sentiment, retail sales, job losses, rate moves, growth). So if you think this is just the beginning of any general economic deterioration it follows that this is just the start of a property market deterioration too.

Rents tumble in inner Sydney - http://www.smh.com.au/news/national/...257317698.html

I know there are differing views on the implications of this but my own view is that property prices go up with rising debt, rents go up with rising income. If prices fall enough some renters who couldn't afford to buy now can. This reduces the number of renters and demand, which in turn pushes down rental prices. If rental prices are now lower you create a cycle as this can put downward pressure on house prices as investment properties are sold, sentiment over prospective appreciation falls and although some of those renters can buy they won't see the point of paying as much. Obviously there is a balance between renters/buyers but given the number of investment properties, hoarding, falling debt levels, incomes not rising as rapidly and more difficult financing I think the cycle only points one way.

Re: Bottom of the property cycle reached ?
 

And in the same article..

Those with the expensive properties are having to trim rents to keep the renters who may otherwise go to cheaper properties.

Those with the cheaper properties, are now catching up after a period where rents have been low for so long.

Re: Bottom of the property cycle reached ?
 

Australia is far more conservative than the UK and the US in terms of borrowing, Britain has a ridiculously high rate of borrowing - in any case saving $100,000 is far beyond the average person in this day and age. Someone on $100K would have to spend 5-6 years living like a pauper just to get a deposit. (I know that's what people used to do)

Re: Bottom of the property cycle reached ?
 

Maybe. This is just my own view, but most of the same indicators from the top of the UK market ... record personal debt levels, tougher financing, lower retails sales and business sentiment, over-leveraged building firms with problems, rising unemployment, high price/income ratios, low wage growth and falling rents, government scrambles to support FTBs...and a special addition here with legislation to prevent banks selling off repossessed properties at real clearing rates...tells me this is just the beginning here.

Re: Bottom of the property cycle reached ?
 

The QLD government have just enacted legislation to try to keep rents from going up to fast here.

and, the latest data from Housing NSW showed rents in NSW had jumped by 10.3% in the September quarter compared to a year ago.

With rents for the high end dropping, wouldn't that mean that the lower end must be rising even faster ?

Re: Bottom of the property cycle reached ?
 

Maybe due to internal migration - people moving for employment/study opportunities and needing somewhere to rent quickly? If so that’s only a transferral of population and a zero sum game. At the same time some areas of brisbane have recorded the biggest falls in the country over 3m to Sep, with an auction clearance rate of 26% last weekend.

I haven’t seen the data from Housing NSW but I take your word for it. “… the lower end must be rising even faster?” That depends how you interpret data and I would certainly say ‘risen’ rather than ‘rising’. Any rise compared to Q3 last year is missing any more recent trend. How did the rents compare with the previous quarter? And are there any early statistics for Oct-present?

I’ve been hunting for factors that would make Australia an exception to a global and historical rule. There was an interesting article in the sun herald where a property analyst rebutted the idea of a housing shortage, which would be the only aspect that could differentiate this country.

http://au.pfinance.yahoo.com/b/micha...vs-bank-shares

Why would the government introduce grants if it didn’t see at least anecdotal evidence of greater falls? Why are they preventing banks from selling distressed property assets at fair value? Why have they effectively guaranteed bank loans for mortgages? Why have they weighed into the discussion about whether private firms should be laying people off?

The general risk aversion and deleveraging trend towards all other assets (shares, bonds, savings, pensions, annuities, jobs and secure incomes) must have affected levels of risk aversion towards houses. Admittedly it could have pushed some into housing instead, but I think that’s only likely with affluent investors with long investment horizons. I doubt the average person would grow more risk averse yet exclude housing from that outlook – it’s that change in sentiment that’s only just begun and will keep the ball rolling.

Re: Bottom of the property cycle reached ?
 

The internal migration bit would not support my finding of Rent rises, as NSW has a net loss on internal migration; many seem to be moving up here.

Owning a property in Western Sydney, I have been too well aware of stagnant rents between 2002-2007, but from 2007 to recently, the agents have been able to get reasonable rent increases.

How things are right now, and especially what they will be like after Christmas, well, a working Crystal ball would be nice ;)

There have been a few theories thrown around on the low Auction clearance rates. One was about Agents selling people on the benefit of an auction, but then the bids did not meet expectations and many properties have been taken of the market, due to not getting the offers they were led to believe.
However, if the agent does his job "well", the property owner may get carried away, and still sell, even at a lower than expected price.

Re: Bottom of the property cycle reached ?
 

That's what I mean - net immigration to Queensland being 'dealt with' by legislation now, whereas the NSW data is already historical and possibly subect to other criteria such as hoarding, a lag, bad data/sample size...?...I don't know - one of the problems with statistics is the data set. For example some of the data about median prices in Brisbane is far too negative but seems to be due to far more properties at the lower end selling (not necessarily at a much lower prices) - and this has pushed down the 'median'. So perhaps that's also the case with the rental figures? Anyway, I agree with you about 'theories being thrown around' - auctions, EAs and others.

Happy to completey concede there's data that will disagree with any opinion, including my own. No crystal ball here either, just trying to take an objective look at the macro picture (specific pockets aside) and it doesn't seem to support a bottom.

Re: Bottom of the property cycle reached ?
 

Deleveraging by banks the world over means that the previous oversupply of money fuelling house prices has been reversed. Australias's current account deficit is an indicator that money was borrowed from overseas. Even if Australia's banks lend like before the non-bank lending sector is a fraction of its former self. Both raised money from overseas markets that are now shut.

Another indicator of the shortage of cash is the companies going to the stock market issuing new shares at a discount. IPL - 1.3 billion, Westpac 2 billion, NAB etc etc. These are profitable companies which in normal times would have gone to debt markets in the US. Those markets shutdown after Lehmans. Some are saying first in best dressed as the raisings will drain the market of cash.

Anyone thinking of buying these shares should look at gearing and governance.

Right now the market is just reacting to uncertainty and risk aversion. It will take a year of results and forecasts before certainty returns and it maybe a certainty we do not want to know.

The point is that the cash is not there that used to fuel house prices so IMO we have not seen the falls necessary to return Australia's debt to pre boom levels. Normal post bubble cycles see a period under trend. Crystal ball put away now.

Re: Bottom of the property cycle reached ?
 

http://www.theaustralian.news.com.au...-20501,00.html
http://www.bloomberg.com/apps/news?p...efer=australia

Re: Bottom of the property cycle reached ?
 

Yup. I don't see any benefit in outlining quite how concerned I am about the global financial, economic and geopolitical outlook, but I think we must be using a very similar crystal ball.

Re: Bottom of the property cycle reached ?
 

so you wouldn't buy a northern beaches 3 bed house early next year then??

Re: Bottom of the property cycle reached ?
 

If I could afford a northern beaches 3 bed house, planned to live in it, had a secure job with an income that cushioned mortgage rates higher than they are now, and knew I'd stay in the area for the forseeable future then I would buy one.

I'm still glass half full, just pragmagtic...and a sceptic...but a happy one.

Re: Bottom of the property cycle reached ?
 

Oh, there's no need to be at all concerned:

(1) Australia isn't in the same position as the rest of the world
(2) The nice Mr Rudd is giving us all (except perhaps me?) loadsacash to spend on Chinese junk imports

........so, all's well with the world. She'll be right.

:thumbdown:

Re: Bottom of the property cycle reached ?
 

As long as the lessons of 1929 are learnt IMO we just in for a decade of stagnant growth. We must not let governments put up barriers to trade and a way of financing viable companies must be maintained whilst slowly dissolving the financial institutions that got us in this mess. The moral hazard of the current guarantees scares the sh!t out of me.

Infrastructure spending will help but that did not get Japan back to where it was after their late eighties bust.

Most importantly China and Russia must be kept engaged economically as the risks of those nations failing or going into conflict are too great. We have already seen Putin's willingness to invade a nation. Maybe Russia has seen the economic folly of what it did to Georgia.