NKSK version 2

Hurray!

Property market in free fall


But now really is the time to buy (REIWA)

Gems

Rents may have fallen in Geraldton.
However house prices have not. My estate is still building new houses and selling well. No price drop yet here, but keeping my fingers crossed it will soon. Would love to see some house price falls in Greenough, as its lovely rural place.

Gems

astonmartinv8

Good.

One thing I have learnt is that REIWA are full of sh*t. They talk up the market because they have an interest in it. The resources boom has been driving growth. REIWA and their members made plenty.

One thing I wasn't aware of is the AMAZING fact that it is typical and accepted in Australia that your investment properties here can have negative gearing, and you can claim your loss as a tax-offset. It seems to me that the house of cards here is even more shakey than the UK.

Then - Easy access to money. Massive demand. Growing market.

Now - Limited access to money. Much reducing demand. Falling market.

About time.

Make sure you get in for the next cycle.

Geelong Gent

Speaking of which is it 100 years already. Man that century went fast

Catch

It is said,that on a Quiet day you can hear the house prices falling in Perth

ABCDiamond

According to the REIWA, much of the lower end of the market was holding ground, buoyed by a surge in people capitalising on cheaper homes and a tripling of the first-home buyers grant.

Properties priced up to $400,000 in areas popular with first-home buyers have either been steady in price or fallen only very very marginally.

$1 million-plus properties plummeting 20 per cent.

So if you are looking for a high end property, they are coming down in price, same as they did on the East Coast. But under $400k ???

NKSK version 2

I'm interested to know how this can work.

If top end prices are coming down then surely this will put downward pressure on lower end properties.

Otherwise, isn't the logical conclusion that you will be able to get a crap house for $500K or a fantastic house for....$510K?

Sounds like more REIWA bullsh*t to me.

brendarover

NOT GOOD For all us newbies?





AUSTRALIA will go into recession this year with a budget that's "buggered", forcing Canberra to choose between its infrastructure priorities and more populist middle-class welfare and industry bailouts.


Economy 'buggered'


Economic forecasters have painted a grim picture of Australia's economy.
Leading economic forecaster Access Economics warns in its quarterly Business Outlook, released today, that the nation's economic boom will "unwind scarily fast", halving corporate profits, costing more than 300,000 people their jobs and blowing out the current account deficit to more than $100 billion.

"Batten the hatches. This is not just a recession. This is the sharpest deceleration Australia's economy has ever seen," the report says.

Thanks to China's growth, Australia last year escaped the recessions that sent major economies such as the US and Britain into reverse.

The Government has consistently talked up the economy's prospects for 2009, citing Treasury forecasts of 2per cent growth in 2008-09.

But yesterday Wayne Swan acknowledged there was "no point gilding the lily in any way".

"The year ahead will be tough, and there's no quick fix," the Treasurer said.

The Access Economics report is the latest to challenge the Treasury forecasts for the Australian economy, released in November, before the full extent of China's slowdown became apparent.

In an interview with The Weekend Australian, Mr Swan conceded neither the budget nor the economy would meet the official published forecasts.

"China and other emerging economies, now caught up in this crisis, are expected to slow much more sharply than previously anticipated," he said yesterday.

Access Economics director Chris Richardson said Mr Swan would already have more updated, unpublished Treasury forecasts that exposed the extent of the problems facing his budget.

"The Government knows how ugly things are. None of this is a surprise to them," he said.

Access Economics said the federal budget was "buggered" because of its heavy reliance on company taxes and royalties - both of which would be hit hard by the collapse in commodity prices.

"The glory days of big budget surpluses are over, and the feds are now staring down the barrel of deficits as far as the eye can see," its outlook says.

The total public sector deficit - which combines federal, state and local government balances - is forecast to blow out to $10.5 billion this financial year, mostly due to Canberra's stimulus package.

But while Mr Swan may be able to rein in that deficit in 2009-10, the reprieve will be shortlived. Access Economics predicts that in the following year commodity price falls will exact a $22.8 billion toll from total government finances, which are dominated by the federal budget. The national fiscal deficit could blow out to $29.4billion in 2011-12. Such a shortfall could cripple the Government's capacity to deliver promised tax cuts, maintain programs, cushion the cost of its emissions trading scheme and fund infrastructure spending plans.

Access Economics warns that the Government and Opposition could "freeze in the headlights" as a result, choosing to shore up existing handouts to the middle class and to the car industry rather than making the politically difficult decision to cut them in favour of more worthy uses, such as building infrastructure.

Mr Swan yesterday repeated his assurance that the Government and Reserve Bank would take "every responsible step to strengthen the economy and protect jobs". But he has remained silent on how the Government will reprioritise spending in the event of a budget deficit.

The pressures on commonwealth coffers have intensified as states and territories have trimmed their spending to accommodate lower revenues. Access Economics says the two levels of government are working at cross-purposes, given Canberra's efforts to pump-prime the economy with multi-billion-dollar spending programs. "The states are failing those tests, tightening into the downturn, having spent up big during the upturn, making them part of the problem rather than part of the solution," it says.

Australia's current account, already in deficit, was also at risk of blowing out to record levels, forcing a change in the dollar's historic value, the report says.

Mr Richardson said freefalling commodity prices had stripped billions of dollars off the value of mining and farm exports, but had not dented demand for imports to the same extent. As a result, the current account deficit could top the $100 billion mark in 2009-10, dramatically up from $65 billion this financial year.

DMH

We've been in the Northern Perth suburbs for a year and have been renting, keeping an eye on the house prices. To be honest we were watching the prices for abut 6 months prior to arriving too, for obvious reasons. As we arrived they seemed to have just about peaked as they stayed steady until about March 08, having been increasing since Mid-07 when we started to watch them properly.

Now for the record, we were looking at 4x2 houses in the Joondalup and surrounding areas, between 400-600K. We weren't really looking at anything else over this whole period. We looked at other areas and prices for certain lengths of time but not enough to paint a time-lapse picture.

From around March we really noticed the prices start to come down, quite quickly at first (about 5%), then seemed to hold steady for a couple of months, then decreased by a further 5-10% since then until Nov. Before the econmic downturn in Nov the prices were predicted to hold steady at worst (for buyers) or fall another <=10% in 2009. Since then, speculation has been rife but I don't think anybody really knows.

I've not really noticed much of a change since the economic downturn and we are watching even closer now as we are in a position to buy. It seems the decrease in loan interest rates really has helped to offset the concerns over the future as I believe more houses are selling in the bracket we are now looking at (around 570k). It's certainly still a buyers market though!

What the future holds, who knows, but there's a taste of the recent past as I saw it.

My plan is to buy with a fixed 5 year interest rate. The house we buy will be a mid-term house in that we expect to stay there for 7-12 years. The 5 year fixed rate will hopefully get us through the resession/uncertainty period and will also mean the kids will be in school and out of expensive daycare ($640 combined/week) so we'll be able to afford to pay a higher interest rate once the 5 year fixed is over.

Good luck to everyone buying and selling, here or in the UK!

walla

Not really, it's all about supply and demand. At the expensive end there are far fewer buyers. At the 400k ish price range there are still lots of buyers out there.

Another thing too, buyers at the top end, one would think have lots of cash, and where's the big cash? Aye, in the resources sector and those workers are being laid off left right and centre.

ABCDiamond

The people in the expensive houses need/want to sell and buy something cheaper, so the demand on the cheaper properties increases, hence prices should rise, but are more likely to be stable under current conditions.

Also, Median prices have been artificially high recently, due to the large number of higher priced properties being sold over the last year or so, but this will be changing now as more properties at the lower price end will be selling.

It is interesting to see some calculations showing the median prices dropping even though the average properties are rising in price.

I can give you a full explanation if you like.

NKSK version 2

I can understand the cause of it but the logic doesn't stack up to me.

Say you have a house A which the market deems to be worth $100K more than house B. (And aren't all valuations relative?).

If house A collapses to $20K more than house B - i.e. the gap is narrowed, how can this exist in the long term?

e.g I get a swimming pool, a sauna and a house 2 kms from the CBD for a tiny fraction more than a house 50kms out. Surely this is not a long term position for the market to be in?

Rational buyers will think "Well, why would I pay just $20K less for a house which is massively lower in spec? I want to pay a lot less than that for such a lower spec"
Rational sellers who are trading up will think, "I don't need to sell my house for $500K anymore, I can accept $400K"

This is why is doesn't ring true.

Can anyone explain why it is possible to have such a situation existing?

NKSK version 2

[QUOTE=ABCDiamond;7186547]

Also, Median prices have been artificially high recently, due to the large number of higher priced properties being sold over the last year or so, but this will be changing now as more properties at the lower price end will be selling.

QUOTE]

I think that this comes closest to answering the conundrum...but this suggests that the long term equilibrium is for top end and low end prices to be much closer together than had occurred over the last few years....?

ABCDiamond

The gap between the two is currently unusually high, hence the reason for little surprise that the high end properties are dropping back and resulting in a normal closer gap in prices.

Kalenge

I don't think you're comparing like with like. In your first question about this you were talking about a $1 Million house and a $500k house. In the unlikely event that the $1 Million property falls by 50%(!!) to $500k, of course the $500 house won't remain in the same value range. It will drop, but probably not by 50%, but perhaps about 35% to about $325k.

It's as simple as the fact that properties in the top end of the market have more to lose and less (people and $) to prop it up. The top end falls the most, the middle loses a bit less, and the bottom end of the market loses the least.

It's the same the world over, and not just a phenomena of the housing market. Have a look at the car market - there's bigger margins being slashed off the top-end models than the bottom of the range models.