What's going to happen to the property market?

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Permalink Reply by JeffK on March 25, 2009 at 10:54am

Hi Marie, I think ff123 meant that it has articles now whereas it was jam-packed with ads before. Actually all the print publications are suffering big-time because of the property downturn, and I reckon it's going to get worse.

As for missing the boat, don't fret, as property prices are due for a massive fall. ANd first home buyers are set to get slammed, which is a travesty as they're the same people who have been waiting patiently on the sidelines for years waiting for property to get more affordable only to get in right at the top.

The best way to see whether an asset class - in this case property - is stuffed is when all the first-time investors jump on the bandwagon. They are the least-knowledgeable and most easily influenced by confirmation bias and are equivalent to the albatross circling a ship. The death knell for property is ringing load and clear with the massive jump in first home owners getting into the market. I feel so sorry for these people, who have been conspired against by:

1. The Government, with it First Home Owners' Grant. Sucker money - all it does is increase the demand for lower-end properties, thereby pushing up (temporarily) the price. FHBs pay more for the property than it is worth, so all they end up doing is paying more interest to the banks. The banks win.
2. Real Estate Industry lobby groups - REIA, REINSW, REIQ, RPData, Banks, etc. These guys flood the media with "good news stories" no matter the climate as it's in their best interest that the property market continues to rise. They're a slick PR machine.
3. The media - not only is the media influenced by the slick PR machine mentioned above, the journos writing about property also have a vested interest in property going up. The majority own property, if not all of them. On top of this, advertising from the property industry is big business for the media - why would they bite off the hand that feeds them?
4. The RBA. The Reserve Bank of Australia, who sets interest rates, has cut rates to a 40-year low, which has got FHBs in a flurry. But WHY are interest rates low? Because the economy is stuffed and this is a measure that the RBA uses to help stimulate the economy. While it's great to have low rates, a stuffed economy is not so good as it means that you're much more likely to lose your job. And then your new house. It's precisely those people who are getting into the property market for the first time that are most likely to lose their jobs - those with lower income, casual jobs, the unskilled, or those just starting their careers.
5. The Banks. Well, this is pretty obvious. Banks make money the more they lend, and their lending practices have been diabolical over recent years, lending out more money than people can afford to pay back.

In theory it seems like a good time for FHBs to get into the market - low interest rates, First Home Buyers' Grant, property has come back a bit, property has been a great investment over the last decade - but it's actually the worst possible time.

Why is no one looking out for the poor, unsuspecting FHBs? There will be hell to pay when this bubble bursts on them.

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Permalink Reply by ff123 on March 27, 2009 at 7:04am

Spot on JeffK - and I actually feel for Marie and other FHB's out there - unemployment is about to rise in a big way and am waiting ( not with any joy) for the repossessions to happen around me - please God let me be wrong about this one - everything seems to have sunk back to 04 prices except housing - hopefully this does not happen to house prices as it will cripple many hard working people for decades to come.

Marie use that anger to get yourself off the treadmill - not suggesting that you sell your soul to become a millionaire but you can use that energy to get you and yours into a better place financially - I suspect most of the people here have felt your frustration/disgust with the way it all really works - but recognising it and using it to your advantage does not make you a horrible person.

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Permalink Reply by Sally Millton-Ellis on July 12, 2009 at 7:27pm

I have been reading these posts with baited breath, I have been on the verge of buying a new house. Now I am not so sure. My job is safe for now but what if it isn't and if property is going to fall then what!

Thanks so much for the posts it's really made me think :)

I have been trying to be smart about it and shop around been using this comparison site called Mozo:

http://mozo.com.au/home-loans

And been using Google alerts looking for property related stories, kinda my own half baked attempted at hot spotting. Again I am now totally confused seem the best thing to do is to wait.

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Permalink Reply by Bandwidth on August 13, 2009 at 9:44am

Well what are the thoughts on this question now.

Seems some confidence is starting to come back, both in the financial and property markets. It could be a short term rally and be overcome by a further downtrend.

I must admit I have interests in both the share and property market but I am not over leveraged so fortunately I can and have ridden the storm.

My thoughts go to a life size cut out, outside a real estate office, of an old man with a walking stick and the attached sign "Young man waiting for the property market to turn his way"

When researching trading mentality the major teaching is that humans are more driven by fear of loss than by the opportunity of gain. Recent times have given the fear mongers the opportunity to peddle their wears.

Recent announcements add interesting fuel to this discussion.

Businesses are reducing hours and other expenses, rather than lay off staff.
Rises in unemployment is slowing.
Business confidence is the highest in 2 years.
Consumer confidence is on the rise.

Humans have 20/20 hindsight and the people who act, based on objective use of available information, will be able to say look what I did rather than "I should/shouldn't have done this or that.

Are house prices going to rise, in the near future ? my view is, probably. BTW I am, like most others, an average punter so these are my views and should not be used as financial advice.

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Permalink Reply by Bandwidth on August 13, 2009 at 4:12pm

Does the following announcement mean housing affortability just got better ?????

Average weekly earnings up 1.2 per cent to $1196

AAP
August 13, 2009 12:00pm

THE average weekly wage in Australia is now $1196.50, after surging by 6.1 per cent in the year to May.
Average weekly ordinary time earnings (AWOTE) for adult full-time employees rose by 1.2 per cent in the three months to May for an annual rate of 6.1 per cent, seasonally adjusted, the Australian Bureau of Statistics said today.

The quarterly survey showed AWOTE for the private and public sectors combined was $1196.50.

Private sector AWOTE was up 1 per cent in the quarter at $1174.50, seasonally adjusted, for an annual rise of 6.1 per cent.

Public sector AWOTE rose by 0.9 per cent to $1269.30, seasonally adjusted, in the same period for an annual rise of 5.7 per cent.

There was no market forecast for this series.

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Permalink Reply by ff123 on August 16, 2009 at 5:28pm

Most of this thread is old now - between March and August a lot of stuff has happened - when you see the RBA warning about raising interest rates they reckon the economy is on the mend.

There is no crystal ball with any of this stuff, still know people who have been laid off and are being laid off, but if you are in a good place and can afford the payments at 8 or 9%(best to have a margin of safety in all of this) then maybe the time is right for you to act.

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