First home buyer price expectations collapse

Find below Westpac’s quarterly survey of consumer house price expectations, which seems to have surprised with a decent fall in January. Westpac puts on a brave face but if there is a first home buyer strike, it seems to have been entrenched by the death of FHOG:

  • Westpac-Melbourne Institute Consumer House Price Expectations Index moderated in January, all but reversing a spike in October.
  • The net balance of the Index indicated that 26.7% of respondents expect house prices to rise over the year ahead.This is a fall of 7.7pts from October, following a rise of 9.1pts between July and October.
  • This reversal of consumer’s house price expectations early in 2013 was despite the Reserve Bank lowering interest rates further in December.
  • The Westpac-MI survey reveals that expectations were at their low point in July and October 2011. Interest rate cuts by the RBA in November and December 2011 provided a boostto house price expectations, with the net balance rising to+25.1% in January 2012 up from +9.1% in October. But since then, the Index has gained just 1.6pts, notwithstanding an additional 125bps of rate cuts from the RBA over this time.
  • The proportion of respondents expecting house prices to rise was 46.5% in January. This is a fall of 3.8pts from October and matches the average result of the January, April and July surveys in 2012.
  • About a third of respondents expect house prices to remain stable. The January reading of 33.7% is virtually unchanged from 33.9% in October.
  • Some 19.8% expect house prices to weaken over the year ahead. This is up from 15.9% in October, but still lower than an average 22.1% for the previous three updates.
  • The state split is very uneven. The WA market is positive but has cooled as confidence in the mining sector weakened(net 51.0% down from a high of 65.2% in July). NSW is on the improve, responding to lower interest rates (43.9%, up from 26.8% a year earlier). The Qld market is struggling to make progress (23.9%, down from 27.0% in January 2012).While Victoria has been volatile (-1.0%, compared to 34.1% in October and +2.8% in July).
  • Across ‘demographic’ groups renters tempered their price expectations, partially reversing a burst of exuberance evident in October. The age-group breakdown showed a collapse in expectations of 18-24 year olds, to +19.8% from 65.2% in October. It may be that this group has been unsettled by recent changes in state government incentives and there maybe a reassessment after earlier expectations of rising prices in response to lower interest rates have not been met.
  • Overall, the January update suggests the stabilisation apparent in Australia’s housing markets over the first half of 2012 will be sustained. But while ‘purchase sentiment’ is turning very positive a more mixed view on the price outlook points to amore restrained upturn that may take longer to come through and appears somewhat less assured.

Here is Bill Evans from last week discussing the FHB problem.

er20130121BullConsumerHousePriceExpectations.pdf

Comments

  1. reusachtigeMEMBER

    I am proud to see that First Home Buyers are waking up and staying away from purchasing ripped off housing! Good stuff!! Leave that poison chalice to the investors – I’d much rather they take the big hit than young people just starting out.

    • LOL – is that your best case scenario – let the investors buy all of the available housing stock?

      How will that work out in the end?

      • How will that work out in the end?

        Hopefully, with huge price drop and the bubble burst break the speculative mentality of the “investors” herd once and for all, then FHBs can once again afford a decent home.

        Maybe it is hard to imagine now in Australia, but in 2006 USA nobody also believe what will happen to their property market as well.

        • in 2006 USA nobody also believed what would happen to their property market
          You must have spoken to many people in the USA to make this claim.
          Did you, by chance, speak to Peter Schiff?

          • I was not that lucky. Just based on reading what most market pundits in US said back then, including our beloved FED Chairman Mr. Bernanke.

          • Several great comments above; agree with the points. FHB’s need to wake up and stop being cannon fodder; the speculators need to take a massive haircut; prices need to come back to “affordable” and FHB’s need to get a fair go going forward once the policy mess that has led to this problem is sorted out for once and for all.

      • It will work out that our young will move to another country where they can get affordable housing, and ‘investors’ will have no tenants.

        • A surprising number of quite well paid 20-30-yr olds are sharing accommodation. I know a few. Others are staying with parents in granny flats etc.

          Lots of people have opted out of the tulip bubble.

    • I totally agree I am also glad to see it, FTB dont buy now, please just don t buy 😉

      or if you really want to buy, buy the outskirt crap, future ghetto, far from good school /Infrastructure on tiny land parcel.

      • dumb_non_economist

        dam,

        Being an avid fisher I’d like to ask you for a few pointers. When trolling do you use a heavy line with a light drag or a light line with no drag?

      • Dam,
        .
        Your sound more and more like the well known property forum troll ‘MICHAEL OF SYDNEY’ or ‘BEARTRAP’ as we was otherwise known.
        .
        Your english is poor one day, and yet perfect the next… You should ask your colleague’s in your Real Estate Office to keep things consistent when logging on as ‘Dam’… 😉

  2. GunnamattaMEMBER

    Peter Fraser
    January 22, 2013 at 8:10 am

    LOL – is that your best case scenario – let the investors buy all of the available housing stock?

    How will that work out in the end?

    OK Peter, what is your best case scenario?

    Because as someone who knows quite a few younger people looking at buying places I tell them all to be very very careful buying housing. As someone who does a lot of work for investment banks I can tell you that talking with just about anyone (apart from those with a direct pecuniary interest in it) brings you to the view that Australian Real estate ranks right up there with the ‘worlds worst investmenents’ and those most interested in it from here will be those who want to get out of other markets for generally political reasons (eg, Chinese money wanting a domicile outside China etc).

    You cant seriously tell me that you believe that young people are making a good investment in most Australian property, can you? I spoke with a kid yesterday who told me he had 200K in the kitty, and he and his girlfriend want to buy a place, He has done the sums and reckons it will require him to take a circa 200 grand mortgage to get something a zillion miles from anywhere – in his case (mid 20s) he is thinking of a lifetime debt servitude. I hear this sort of story a lot – doesnt matter if it is Melbourne, Sydney, Brisbane or Adelaide. As far as I can make out the only remotely affordable cities in Australia are probably Ballarat and maybe Launceston.

    Now a lot of these kids have come out of University – those that have jobs have twigged to the fact they will wait in line for managerial positions in large employers if they stay in the Australian market. Increasingly, according to the circle that I know of, they are looking to go overseas – sure there are not many jobs overseas, but even if they are working as barmen in London pubs they can have a look around at something other than the Boomerville world they come from. Increasingly many are finding that if they can swing a gig that works remotely (and I work remotely generally – from Europe) then there isnt actually all that much keeping them in Australia apart from a sense that they get gouged on mobile phones, in supermarkets, in banking services, and have crap media – AND THE FACT THAT THEY HAVE WHAT AMOUNTS TO ABOUT THE WORLDS WORST OUTLOOK FOR BUYING HOUSES AS FAR AS THEY ARE CONCERNED.

    If they buy a 400K house in Australia now then that is broadly akin to maybe a 430K USD house in the States or a 320 K EUR abode in Europe (roughly). What they are seeing – and I understand their point entirely – is that they could spend their next twenty years paying something like that off and even if Australian property prices dont decline then their their 400K Australian house is likely to be worth considerably less in terms of what it may get elsewhere. Even dollars bulls see the end of the line somewhere, and even the most pessimistic about US or EU think it will come off a nadir.

    Then on top of that many of these kids are surprisingly economically literate. Many of them are actually asking the question of what we actually do on the far side of a mining boom – pointing them in the direction of history tells them that Australia is virtually guaranteed to have an economic recession somewhere along the line, and their street smarts often tell them that they are a fair chance of having some downtime on the employment circuit (Yet another reason many of them see taking on massive amounts of debt for a dud investment to be just silly). Increasingly these types of kids are wondering just what it is Australia will be doing (and how much it will be paying for what it is doing, and what slice of that they will be getting) on the far side of a mining boom. They arent seeing much (and this view is from what I am seeing surprisingly unanimous).

    So if people like you are holding up the prospect of investment buyers completely taking over the real estate market, and posing questions like ‘How will that work out in the end?’ (when we all know that that will work out is people being held to ransom to buttress someone elses investment margin) then the answer as far as I am concerned (and as well from the point of view of most of the kids I tend to come across) is not to think ‘Oh Gee, I had best rush out and sign up for a lifetime worth of debt’ it is to think long and hard about what the alternatives are. Even most of the Chinese buying here dont actually want to be here for economic reasons or to take part in Australia’s buoyant economic outlook, they want to use us sort of like a retirement home – as a place to come to when they have made their money elsewhere.

    And there certainly are alternatives to being placed in a mortgage cage and creamed for margins by babyboomer investors. If nothing else (while the political cycle is tight) there is great scope for simply asking the question of governments about when they will start building affordable housing – thats right, back to the 1940s and 1950s to a response which would underline a market which has ceased to be functional (as housing often has around the world).

    Just as a comparison on what these guys see have a look below

    France 325K USD – 45 Minutes from Bordeaux
    http://www.prestigeproperty.co.uk/property/149096/House-in-Rauzan-Area-Gironde-33-France/
    Spain 332K USD – 35 Minutes from Valencia
    http://www.kyero.com/property/1970293-villa-for-sale-benitachell
    Italy 366K USD – 30 Minutes from Florence, Pisa
    http://www.gate-away.com/property_detail.php?id=41006
    UK 349K USD – 15 Minutes Cambridge, Leicester, 25 Minutes Birmingham, 90 Minutes London
    http://www.rightmove.co.uk/property-for-sale/property-34882480.html?premiumA=true
    Germany 363K USD – the suburbs of Berlin
    http://www.rightmove.co.uk/property-for-sale/property-34882480.html?premiumA=true
    US – Chicago 320K USD
    http://www.trulia.com/property/1094624510-864-W-Barry-Ave-G-Chicago-IL-60657#photo-4
    US – Cincinnati 329K USD
    http://www.comey.com/re/homesearch/displaylisting/listnum/1315504/mls/mls_cincy/MLS-1315504/306-Circlewood-Dr-Wyoming-OH-45215
    US – Philadelphia 350K USD
    http://www.realestate.com/detail/252-6151104-511-E-MOUNT-PLEASANT-AVE-PHILADELPHIA-PA-19119/
    US – 10 Minutes from Kansas City 350K USD
    http://www.homefinder.com/MO/Kansas-City/10402-N-Helena-Ct-92664479d
    US – 10 Minutes from San Antonio 335K USD
    http://www.homefinder.com/TX/Garden-Ridge/9180-Garden-Ridge-Dr-87618894d
    US – 10 Minutes from Richmond VA 329K USD
    http://www.homefinder.com/VA/Richmond/4905-Monument-Ave-92685633d

    Australia – 1 Hour drive from Melbourne (Pakenham) – 360K AUD
    http://www.realestate.com.au/property-house-vic-pakenham-112799339
    Australia – 1 Hour drive from Melbourne (Belmont, Geelong) – 330K AUD
    http://www.realestate.com.au/property-house-vic-belmont-112243359
    Australia – 1 Hour drive from Sydney (Blacktown) – 365K AUD
    http://www.realestate.com.au/property-house-nsw-blacktown-112451939
    Australia – I Hour drive from Sydney (Liverpool )- 370K AUD
    http://www.realestate.com.au/property-house-nsw-lurnea-112605479
    Australia – 1+ Hour drive from Sydney (Camperdown) – 320K AUD
    http://www.realestate.com.au/property-house-nsw-bradbury-112630751
    Australia – 1 Hour drive from Brisbane (Nerang) – 395K AUD
    http://www.realestate.com.au/property-house-qld-highland+park-112634551
    Australia – 20 Minute drive from Brisbane (Mogill) – 350K AUD
    http://www.realestate.com.au/property-house-qld-moggill-112720055
    Australia – 45 Minute drive from Canberra (Conder) – 399K AUD
    http://www.realestate.com.au/property-house-act-conder-112298455
    Australia – 4 hour drive from anywhere (Swan Hill) – 350K AUD
    http://www.realestate.com.au/property-house-vic-swan+hill-111063135
    Australia – 30 minute drive from Adelaide (Salisbury) – 330K AUD
    http://www.realestate.com.au/property-house-sa-salisbury+east-112779231

    Frankly I see people like you as promoting generational ransoming and societal extortion.

    • unless the gov implement some sort of broad land tax and crush land banking you can always speculate how unfair the life is, how it should be, how the world you be or whatever

      but there is the reality to deal with and leaving the housing to investors only is not a good policy but it s what happening with a home ownership rate falling fast.

      have and have not, rents will increase steadly and interest rates are most probably stay very low or ZIRP for one or two generations.( note : i personaly rent )

      and in term of investment POV, well placed land/property compare very favorably with stocks which have no or very little real returns, especially when you take the survival bias into consideration, and crash 50% every 5 years.Gold has very little intrinsic value and is more akin to tulip bulb waiting for a return to mean.

      • rents will increase steadly and interest rates are most probably stay very low or ZIRP for one or two generations.

        This is repeated ignorant boast you did the other day just to scare FHB generation. If ZIRP is to be there for 2 generations as you said …pls remember 2 generations means around 40 years at least…then the Australian economy will so very bad to allow such extreme measure. How on earth then we can have the fantasy to have rents increase steadily ? Who’s going to pay that when economic situation will be that bad ? Your lame attempt to use sarcasm and scare-tactic is very clear by posters here.

        • welcome to the new state of the world, you can have pretty much zirp and ok economy, it s not a close system we are in you know.

          • Yeah, as always the last resort argument by astroturfer like you:

            This time is different, right ? 😉

      • in term of investment POV, well placed land/property compare very favorably with stocks which have no or very little real returns, especially when you take the survival bias into consideration, and crash 50% every 5 years.Gold has very little intrinsic value and is more akin to tulip bulb waiting for a return to mean.

        Another scare tactic ? well-placed property ? how about not so well-place one compared to well-selected share portfolio ?

        Survival bias in share index ? What about survival bias in property investment where there’s no reliable index to check.

          • Know what ? care to enlighten the audience ?

            Just saying “you stupid” is not an argument in a debate last time I check.

          • simple way to put it, by def property has no survival bias, land is always there, house are insured, stocks disappear.When the survival bias is taken into account the stocks returns is generally 50% less, very material indeed, add to that the 50% crash every 5 years (which make property volatility pretty much negligible), despite what shares spruikers/financial service industry want you to believe, it s not very motivating to invest in stocks long term.

          • “When the survival bias is taken into account the stocks returns is generally 50% less, very material indeed…”

            Perhaps it might be helpful to link to some statistics to back this up. That’s a rather ambitious claim.

          • @AB
            This is not the academic paper I am looking for but still it shows it as well.

            when I was trading I did my backtesting with a survivorship free data on the ASX (not easy to get, very laborious) and my results were were similar, around 50% less perf

        • property has no survival bias

          So when property spruikers like you told innocent yet ignorant people that “residential property price always go up” and “property investment always double every 10 years”..without making any disclaimer that there are lots of examples that properties actually go down and vendors lose money – that is not survival bias ? when you mentioned well-located properties performance without mentioning bad performance in Gold Coast and Byron Bay recently – that is also not survival bias ?

      • General Disarray

        ZIRP for 40 years? That’s the most stupid thing I’ve read here in ages (and that includes my posts).

        Well done, sir.

      • Gold has very little intrinsic value and is more akin to tulip bulb waiting for a return to mean

        Oh dear. Where to begin?

        * Gold has been a store of value for over 5000 years.
        * Gold is expensive to mine and refine. There’s your intrinsic value right there; it cannot be printed or magicked into existence like electronic money “that’s not worth the paper it’s not printed on” (hat-tip Celente).
        * Central Banks in Asia are buying gold and encouraging citizens to do the same (China). Why, if there is no intrinsic value?
        * Precious metals have no counterparty risk (some value in that, surely?)

        I have another 20 points to make, but it occurred to me that I’m troll-feeding.

        • gold was only few hundreds few years ago, are you telling me that mining it is now 400% more expensive ?

          frankly !

          Gold has some use but nothing that relate to its current pricing, it can easy revert to mean to $500.

          if you scared of fiat, buy land, at least it s valuable 😉

          • gold was only few hundreds few years ago, are you telling me that mining it is now 400% more expensive ?

            Take a look at what the CEOs of a couple of the top Gold Mining companies have said about costs over the past few months:

            Mark Cutifani, CEO of AngloGold Ashanti: “If you want to go on a total cost basis, we’re running at about $1200. The industry average is probably around $1250 an ounce.”

            Steve Letwin, CEO of Iamgold: “It’s going to be difficult for anybody to produce gold at less than $1200 an ounce.”

            Land is valuable, yes, but not when its supply is artificially constrained.

          • They probably lying or cut lot of fat, or both 😉
            noway cost have increased that much, noway.

            scarcity of land is there to stay in very long foreseeable future, especially close to CBD/Infrastructure.

            gold vs land, there s not even a contest 😉

          • noway cost have increased that much, noway.

            Damn Dam, lookit:

            Gold mining costs have risen significantly over the past six months because companies have to dig deeper to find high-grade gold deposits. In many cases, that means digging more than one mile into the ground. We have passed “peak gold” and as with oil, it’s getting more costly to mine the stuff.

            Land is not scarce in Oz. I see vacant blocks, land banked by twerps with a mindset similar to yours, all over the place, everywhere. Bring that all to market and watch the crash unfold! 😯

          • “it (Gold) can easy revert to mean to $500”

            LOL’d at this.

            That would be below the cost of 99% of Australian Gold mines and Australia is the world’s 2nd largest Gold producer. China is the world’s largest and they are net importers of Gold.

            I don’t deny the possibility that Gold could head that low in some sort of temporary collapse, but an “easy” reversion to mean at $500? That’s just nonsense.

          • Gold has some use but nothing that relate to its current pricing, it can easy revert to mean to $500.

            “Housing has some use but nothing that relate to its current pricing, it can easy revert to mean to 50% of current levels.”

      • Gold has very little intrinsic value and is more akin to tulip bulb waiting for a return to mean.
        Perhaps Indian women should all swap their gold jewelry for something more useful like 4GB USB drives. They would be intrinsically lighter and intrinsically carry more data. But would they hold their (non-intrinsic) value?

          • Matt Ridley complains near the beginning of his book “The Rational Optimist”, that the price of so many products in the world go down and down; but government interference stops this happening with housing.

            Spot on as usual, Ridley.

    • people like you as promoting generational ransoming and societal extortion.

      +100

      It is huge wealth transfer from younger generation to older one and they still want to keep doing it till there’s nothing left. The high immigration rate is done mostly to feed more youths as the future sacrificial lambs to be slaughtered by the older vested interests.

      • Yeah, that was a surprisingly nasty comment from PF. Like most permabulls, trying to explain something to him from an opposing POV is like trying to give a fish a bath. He could use some time on the whetstone. But usually he responds civilly. Of course, I have the people skills of a belt sander, so best not to criticise 😉

        Permabulls couldn’t get a clue during the clue mating season in a field full of horny clues if they smeared their bodies with clue musk and did the clue mating dance. That leads to disappointment, and the loss of temper. I suspect that’s what we are seeing.

    • It’s not just the young that are rejecting the Australian housing market. I know several Aussie expats that would love to return but just cant financially justify the extravagance. Flying the whole family to Oz one or twice per year looks cheap compared to owning a home here. Even in my case, and I can easily afford a house, I’ll have to admit that my wife is asking why buy here, the Aussie RE market just does not make sense.

      Interestingly my wife’s my objection to buying is not that RE prices might retreat BUT rather, what will happen to a hollow economy when its most important asset class (housing) fails? That’ll learn me to marry the daughter of a economist!

      • I know a guy who went to live in Germany for a few years, and when he came back he could no longer afford to buy back into a house (he has been renting ever since), and the prices were far higher than Germany.

      • mostly whinging that the world is not fair and irrelevant links, could have linked to the grocery prices in France/Spain/US which are at least 50% cheaper as well.And the point was ???

        • it mostly show that our salaries are much higher than in most other countries and our currency is monstrously overvalued.

          • Are you sure that it’s not because our household is top leader in the world in terms of mortgage debt balance ? Are you sure it is not because our big banks have consistently borrowed huge amounts from overseas investors to keep feeding the “investment frenzy” ?

          • have a second look at these prices with a AUD around 0.70 (and a much stronger Euro) like it was few years ago

            what do you see ???

            add to the mix the average Spaniard salary

            what do you see ???

            obvious isn t ?

          • I can also say that you can look house price before banking deregulation more than 25 years ago. Back then, banks did not apply such lax credit standard like now and they did not have big debts from overseas like now.

            Voila, the housing price is more moderate in terms of income multiples like demonstrated by Demographia.

            Obvious, not ?

          • deregulation was everywhere

            we earn more, we have much more discretionary spending to spend on housing and our currency is crazy overvalued, this is what makes look comparisons stupid (demographia is even beyond this point)

          • “…..deregulation was everywhere….”

            But urban growth containment regulation was getting tighter and tighter. A toxic mix if there ever was one.

            Note that the only cities in the world that remained unaffected, were those with low regulations on urban development. South Korea is a counter-example: a market with very tight credit restrictions, and they still have unaffordable prices.

          • Dam hasn’t heard of economic history nor doesn’t believe it can repeat in Australia. This is otherwise known as ‘magical thinking’.

            He has never seen nominal debt to GDP figures from the 1890s & 1930s depressions in Australia which show huge increases consistent with Ponzi-financing of the highest order which subsequently falls over when the land bubble implodes (in those periods, primarily commercial land speculation).

            He hasn’t seen the huge nominal debt: GDP figure for Australia since 1996 showing we put those previous economic depressions to shame in terms of the rapid size and growth of this debt – but this time we have piled the Ponzi debt into residential housing.

            In dam’s fantasy land, land bubbles never form and bust causing massive wealth loss and subsequent financial crises requiring massive government bailouts, despite the many examples worldwide in recent years.

            Why? Because ‘dam’ is an anagram of ‘mad’ and deserves the same level of respect accorded to other well known chumps like 2d.

    • I take that one near Florence thanks. $200k less than a 2 bedroom flat near where I live and I can spend that difference on coming home for Christmas every year.

      Must go and have a word to my boss about working from home…

      • I like the one in Tuscany, 5 acres with a beautiful stone house for $350k or summat.

        Oh woe is me, why can’t I speak Italian?

    • A kid in his mid 20s with 200k in the bank is hardly a typical example! Even more so if he’s just out of Uni!

      • Regarding the 20 something year old with 200K, fresh from Uni..

        geez, assuming he earned that through smart work (legally), he doesnt need advice from anyone, we should be taking advice from him.

        What did he do as a job whilst at uni? A hitman?

        or is his parents millionaires?

        Anyways, with 200K, I’d rather save that on a high interest account. Live at home or rent, and jump in the housing market in 5-10 years.

        Or do what most do, give 10% deposit ride out the low interest interest, then when it starts getting high, pump a chunk of the 170-180K left over (+ accumulated money through the high interest saving rate) to dampen the interest on the house.

    • Top work, Gunna! Your point that young Aussies have no incentive to buy at current prices is amply made. I see in this thread a new realization, a new question: How may we keep the best and brightest of our young adults from emigrating to cheap lands?

      The current trickle will be a flood within 12 months, if the stated aim of government et al to maintain land prices succeeds.

      Don’t Buy Now!

    • “Australia – 1+ Hour drive from Sydney (Camperdown) – 320K AUD”

      The traffic’s pretty bad when it takes an hour to get to the CBD from Camperdown!

    • Gunna, That kid with $200k in the bank should have no probs with a $200k mortgage to purchase, cheaper than renting.

      I definitely don’t buy the ‘there’ll be a mass exodus of young people to cheaper climes’ theory – some yes, mass, no – too many considerations like employment prospects, transferability of skills, family connections etc – a few only will be in position to take advantage of better value housing o/s.

      Finally accept just accept it, if the slow melt in house prices does not suit there will be half a generation of new renters come onto the market – and I wonder if this is something savvy investors are only too aware of – owning or renting you still need a roof over your head.

      Am I correct to interpret from comments above that most are happy campers renting?

      • 3d, I have a large some of money (over 7 figures), and I’m renting. Loving it. Just getting bored, want to start my own big garden, is all.

        Won’t buy until I see some sanity return to market.

        If no sanity returns, I’ll go to the US, UK, or elsewhere (I have access to these countries and more).

      • I think the exodus may also covers older people (not only young ones), especially people who are more recent migrants. I have saved good sum, and have no particular preference between renting or buying. The thing that annoys me more is about the unfair advantages given to older vested interests who tried to impose huge wealth transfer to younger generation and later residents (migrants) by granting more favorable tax and welfare policies for themselves.

        I will consider taking my good savings and retire comfortably overseas where my dollars last longer.

    • darklydrawlMEMBER

      Whilst I totally agree with you here (so much so we have put our money where our mouths are, and have purchased property in the US), I would say that anyone who can travel from Pakenham (VIC) to Melbourne in 1 hour is doing it at 3 AM on a weeknight.

      It would take a lot longer than 1 hour during the day – perhaps double that (or more).

      That said, the house prices here are stupid. We purchased a nicer house in the US in Phoenix, AZ, for 1/5 of what our 3br room house on a dual occupancy block is ‘worth’ in Oz.

      • I hate to say this, but as someone who knows NV and AZ well, and who lived there for a long time, my advice is to sell up as soon as you can make a decent capital gain. AGW is bearing down on this region like a freight train.

        Lake Mead Water Level

        • I lived in Scottsdale for a couple of years and the complete lack of any attempts to manage (or even realistically price) water completely blew my mind. The Phoenix region would just about have to be the world’s poster child for profligate use of resources.

          It’s one of the country’s _golfing_ meccas, FFS. The middle of the desert !

    • Honestly I don’t have the time to read your version of war and peace, and it’s really just one big strawman argument. I tend to ignore long posts unless they are interesting.

      The one Brisbane example you used is in a rural community on the outskirts of Ipswich, I know because I used to live nearby in Pullenvale. People live in that and surrounding suburbs because they enjoy country life. Property in Brisbane is actually well priced IMHO.

      Nerang is not a suburb of Brisbane, it’s hinterland Gold Coast territory. Would you like me to link a unit in Surfers Paradise that sold for $30K – I assume not.

      We can all pluck examples out of the internet to prove whatever we want, but it proves nothing at all.

      Gunna I don’t ask you to justify your value to society, and nor do I have to do likewise for you. I choose to defer from playing your little boy games.

      Have a nice day.

      • Peter – I enjoy your posts – a welcome alternative view (or perhaps real world view) on property. You are unfailingly civil, explain with great patience your position and present your views modestly and concisely.

        As an aside: Reading this thread I am starting to think what is the problem? Most commenters here recommend renting as the best option, most commenters here appear to be renting, most commenters appear to not be property purchasers – does that mean most commenters are well-pleased to be out of the property market and happy with their choice?

        What is the problem? Most commenters appear to be acting in a manner that best suits them! 😉

        • Reading this thread I am starting to think what is the problem?

          As I mentioned above also, the problem is the unfair advantages given to the old vested interests. The young generation, regardless their preference on rent v. buying, have been totally screwed by the unfair government policies with the objective to maintain the status-quo rent seeking class.

          • Some prefer rents, some have no choice but this is not a point as I mentioned above.

            What bugs me (and maybe others) are the advantages given to the FIRE gank and the way the government issuing policies to perpetuate the unfair advantages, which has make most younger generation lost-out economically, e.g. tax and welfare advantages, high immigration, financial repression in form of low interest rate, etc.

            As taxpayer and regular person, it just does not sit well with my sense of fairness and equity. If the vested interests did not get the unfair advantages from the government, I wouldn’t be bothered at all.

          • A serious question Deo. What are the unfair advantages available to vested interests that are not available to you?

          • You may be correct that I can access most of them, but I cannot get one which is most important i.e. the opportunity to be in Australian cities earlier either by birth or migration.

            It will be different story if I can be in SYD maybe 15-25 years ago…or even 10 years ago when the bubble was just started to form. Now, it is peaking if not already at the peak.

        • 3d1k – I would have to write my own version of “War and Peace” to explain that, and I can promise you that the draft edition would not be well received by the 3000 “editors” here.

          But I’m going to have a glass of cheap and cheerful red wine with my wife and an old friend, so cheers and have a good night all.

      • Would you like me to link a unit in Surfers Paradise that sold for $30K – I assume not.

        I would.

      • When did you live in Pullenvale Peter? Must have been in the 30s because if you think Moggill is a rural community with a country lifestyle. By the way we just had a new business called Mcdonalds move into the area. I’m sure you city slickers in Pullenvale and Brookfield have had it for years, we’re a little backward here in Moggill really.

        “We can all pluck examples out of the internet to prove whatever we want” … oh the irony.

        Signed your friendly Moggill yokel.

  3. While I’m arguably one of the “striking FHBers” at this time- not for political reasons though!- I have mixed feelings about the “prices must fall” argument. I suspect that this is the last thing fed and state goverments want and they will do what they can to prevent it.

    Firstly, not all Aussies can decamp overseas. We don’t all have carte blanche (or carte verte!) to do that. OK so the US is recovering, but Europe is still mediocre so unless you have specialised skills there will be plenty of locals to suck up the jobs. So one way or the other the majority of locals will be stuck trying to live in what they can in Oz.

    Secondly, even if the goverment can’t reinstate the vendor grant for budget reasons, they can have bring up immigration numbers to soak up supply. They’re already doing this. And it’s not too hard to make Oz an attractive place for overseas buyers to park money. Lax business migration laws, scope for bringing in elderly relatives under family reunion, there’s lots they can do.

    • I am pleased to see the sport of bot-kicking had taken off.

      Anonymous corporate avatars exist to put the views of their paymasters and deflect the debate from substantive issues. They can take remarkable levels of punishment.

      The only caution need be in correctly identifying bots, so seek corroboration if uncertain. Have fun!

      • They can take remarkable levels of punishment.

        Hey, it’s a job. [shrugs]

        The whole problem with the world is that fools and fanatics are always so certain of themselves, and wiser people so full of doubts.
        (Bertrand Russell)

        • “fools and fanatics are always so certain of themselves”
          that s define bears here quite well isn’t, they been wrong for so long but still, the crash will come LOL

          • I’m watching a slow crash in real terms occurring already. I’m in Australia though. Where are you living?

          • Ahhh! Bertrand Russell. Godson of J S Mill, convicted pacifist and life-long Georgist.

            “Advocates of capitalism are very apt to appeal to the sacred principles of liberty, which are embodied in one maxim: The fortunate must not be restrained in the exercise of tyranny over the unfortunate.”

            BERTRAND RUSSELL, “Freedom in Society”

    • dam mentioned that he’s renter though shamelessly promoting property investment by using scare tactics.

      Now ajostu, you said you’re striking FHBer but in your post, you mostly mentioned lots of scare messages usually used by property spruikers.

      Coincidence ?

      • of course i rent, I dont want to pay 40-50k in realestate/stamp duty every few years each time I move, and the great investment deals are not where I want to leave.

        I rent a fantastic place, happy with it 😉 rental value in premium properties is awesome (not great investments that for sure)

    • While I’m arguably one of the “striking FHBers” at this time- not for political reasons though!- I have mixed feelings about the “prices must fall” argument. I suspect that this is the last thing fed and state goverments want and they will do what they can to prevent it.

      Yes, but prevention is not a costless exercise.

      The cost of prevention will impair the wider economy. I would assert the ongoing cost of prevention will be greater than allowing it to crash.

      And at the centre of the malaise is a unexercisable myth that simpletons fall for.

      Current pricing has in place a premium for perceived shortage. More people desiring shelter than shelter is available.

      This can not be enudring unless you have a permanent shortage, you structurally ensure there are less houses than people wanting them.

      Otherwise, once the population perceives the supply matches up witht he demand, the scarcity premium has to disappear.

      Ferrari’s have a scarcity premium, there will always be an undersupply.

      Firstly, not all Aussies can decamp overseas. We don’t all have carte blanche (or carte verte!) to do that. OK so the US is recovering, but Europe is still mediocre so unless you have specialised skills there will be plenty of locals to suck up the jobs. So one way or the other the majority of locals will be stuck trying to live in what they can in Oz.

      We don’t need a critical mass to decamp, the price of shelter is set at the margins.

      As much as the fiscal child-abusers like to chortle about higher rents, once their house is empty, it becomes the worst investment in the world.

      Once a margin of no occupancy sets into the market, prisoner’s dilemma will see them race to the bottom.

      There is a big enough margin of Australians who have European heritage, or scarce skills, or even now.. 150k Euro to get Spanish residency, $USD500 for a green card.

      The question is to be asked, with housing the price it is in Australia….

      Do you wish to tolerate greater hardship in Australia just to satisfy your need for shelter?

      You will experience greater hardship in acquiring shelter than virtually every other OECD country.

      Extrapolate that question to the young and financially literate.

      Secondly, even if the goverment can’t reinstate the vendor grant for budget reasons, they can have bring up immigration numbers to soak up supply.

      Again, this isn’t a costless exercise.

      Greater numbers of people are displaying unrest about the quality of our public services.

      We could all afford to fund these services if housing cost 25-40% less.

      Housing is just diverting resources away from other areas. it’s not creating increased national wealth, it’s just ensuring other areas aren’t getting access to their resources.

      They’re already doing this. And it’s not too hard to make Oz an attractive place for overseas buyers to park money.

      Erhh, it’s harder to think of a less attractive place for anything longe than 10 years.

      Housing sure to decline in real terms.

      Manufacturing already sacrificed to accomodate our levels of consumption.

      The education industry and agriculture made to ensure hardship for our consumption levels.

      No innovation, our young (next generation of entrepreneurs) disgruntled, our infrastructure inadequate and bankrupted state governments with little money available to improve it.

      Donald Horne would have to be channelling divine powers for us to get out of this one.

      Lax business migration laws, scope for bringing in elderly relatives under family reunion, there’s lots they can do.

      Elderly relatives don’t create more wealth, they just offer greater levels of consumption, with an increased chance of welfare dependency in the future.

      • “…… I would assert the ongoing cost of prevention will be greater than allowing it to crash…..”

        I would agree with you.

        Property price inflation is an eroder of REAL economic growth and productivity. It is a cancer on the real economy. It is the means of the eventual destruction of the economy. Living with it is kind of an option, but we are in a competitive world, not a palliative care home.

      • Hi Rusty,

        it’s probably too late to reply- the argument has moved on I suspect- but thanks for actually answering my points. A whole lot of people wrote a whole lot of crap about bots that didn’t make a whole lot of sense.

        Firstly I’m not an industry shill – or a bot – and anyone who says I am can name the time and place and I’ll set them straight.

        I agree that there are many Aussies who have European connections that give them passport access. I’m one of them actually. But I still maintain that the European economy is sufficiently stuffed that the opportunity to get good jobs in Europe is low. And if you don’t have an EU pass tough luck. At the moment, actually the US is a better bet as their economy is picking up and the visa system favours Aussies.

        As an aside I think there are whole areas of the economy (manufacturing for example) where the general level of Aussies is so lousy that we’re deluding ourselves if the think we can all trundle overseas and pick up jobs at will. A big reason our manufacturing base has declined- unlike the Germans- is that we’re really crap at it.

        Still if the global economy picks up then I agree you good get 40k outflow a year overseas easy. Maybe even more. But if the feds have 300k inflow, then that covers that problem.

        I still maintain that the govermnemt will try to immigrate their way out of housing trouble. That may be because of my anecdotal experience where in the suburbs I’ve looked at asian buyers dominate the auction scene. Also, if you travel around Sydney and look at the demographic shift over the last decade this is clear. Let me make it clear that I’m pro immigration at around the 50k/year net level. Higher than that is too much, because we’re just so crap at infrastructure.

        As for your comment that “elderly relatives don’t create more wealth”, or that “the ongoing cost of prevention will be greater than allowing it to crash”, well of course. You seem to imply that governments might make decisions for economically sound reasons rather than to dig themselves out of a hole. Yeah right!

        Of course Sydney is overpriced. But I personally believe that the MB espoused idea of slow deflation is the most likely option, rather than an enormous crash.

        And I also suspect that, while prices may decline, in Sydney at least they may never revert to genuinely affordable- a decen house will still require two salaries on way-above-average salaries to buy.

        I *would* be prepared to concede that we might have a crash (relatively speaking) in apartment prices.

  4. The FHB strike is probably as much to do with bank lending policy as it is the buyers themselves!

    Macrobusiness have often reported on bank property valuations being adjusted down even while a loan is being processed and the buyers needing to increase their deposit to cover the difference… which kills the deal!

    72% of house-and-land buyers are having trouble getting finance.

    In the new reality of contracting house prices and ‘responsible’ lending, with LVRs around the 70-80% mark on near peak valuation housing… the market for FHBers in their 20s – 30s with a lazy $120 – 150k deposit is EXTREMELY limited!

    • Look, if young people can save a $120K to $150K deposit, they freakin’ well deserve to get a house with next to no mortgage, as they would in a US median-multiple-3 city, of the same quality as what they are going into mortgage slavery for life for in Aussie.

      • Indeed. Have managed to save almost double that amount and I’m yet to hit 30. It will only take a few more years saving at my current rate if I wanted to buy something outright. However, there’s no impending hurry as it still doesn’t look like good value. It’s also nice having a stash of cash around for emergencies.

        • Mining BoganMEMBER

          Indeed. I’m seeing plenty of that. The ones who have the nous to save and invest wisely will not touch real estate. They see it as risky as going to the casino. Or one of my stock tips.

  5. Excellent post Mr.Gunnamatta. Far from a “whinge”, you’ve nailed it.

    And as an English teacher, might I suggest that Mr. Dam consider enrolling in an English course? Just tell the girls at reception that your level is Pre-Int.

    • yeah I know, when I post, i forget about the decency of proofing before sending.Sorry about that, I have to improve ( I ve learn english only 7 years ago, too old to get it right, and I am blood lazy)

    • Yes, I have been looking and looking for somewhere to post a congratulations to Gunnamatta – a top comment.

      The threads following his comment have got so long that I have to just put it way down here.

      • Yep great post from Gunna, and loved his comment that Dr AW would have been better to have mooned the camera…still laughing

      • Yeah, Gunna is totes ridiculous, still cant stop laughing at that. MB guys: you should ask Gunna to post a sarcastic post on australian housing sometimes, in the vain of Stephen Colbert. He can pose as PF and write a terrific spruiking post!

    • The leaders must be the nine pirate lords of the Brethren Court who convene at Shipwreck Cove.

      Hei ho, hoist the colours 😉

    • “Some people have a way with words, and other people…oh, uh, not have way.”
      – Steve Martin

  6. GunnamattaMEMBER

    Peter Fraser
    January 22, 2013 at 4:16 pm

    Honestly I don’t have the time to read your version of war and peace, and it’s really just one big strawman argument. I tend to ignore long posts unless they are interesting.

    The one Brisbane example you used is in a rural community on the outskirts of Ipswich, I know because I used to live nearby in Pullenvale. People live in that and surrounding suburbs because they enjoy country life. Property in Brisbane is actually well priced IMHO.

    Nerang is not a suburb of Brisbane, it’s hinterland Gold Coast territory. Would you like me to link a unit in Surfers Paradise that sold for $30K – I assume not.

    We can all pluck examples out of the internet to prove whatever we want, but it proves nothing at all.

    Gunna I don’t ask you to justify your value to society, and nor do I have to do likewise for you. I choose to defer from playing your little boy games.

    Have a nice day.

    Peter,

    Good to see you returned at some point during the day to poke your head above the parapet, I had sort of hoped you would have something of substance to say, but somehow knew that wasn’t going to be forthcoming.

    You spend a fair chunk of many days at the Macrobusiness site. Some of your comments are perceptive and useful, but a lot of the time you drift into pontificating about real estate investment, making glib specious statements which have an obvious disconnect from the day to day experience of many others who come here too.

    I gather you are a mortgage broker or something similar which presumably means you have a vested interest in demand for mortgages being as strong as possible. Given this, your inability to articulate something coherent and mildly logical about why it would conceivably be in peoples (particularly young peoples) interests to commit themselves to the very large mortgages required for the vast majority of them to buy a reasonable abode (and possibly even to articulate whether they would be greater or lesser net beneficiaries of such an action in comparison to other vested interests in the mortgage and real estate system – or would that be too much?) must, I dare say you will understand, give rise to questions about your capacity to comprehend and understand the experiences, perceptions, and thought processes of others, and bring into question your ability to empathise without a pecuniary interest.

    I am quite sure you will not feel bad about this – in fact I assume you have no idea what I am even talking about – for I am quite sure that you are typical of an entire industry, satirized here.

    http://www.scribd.com/doc/117554892/University-of-Australian-Real-Estate-2012-2013Draft

    I certainly didn’t ask you to explain your value to society (politeness would hold me back from asking that of any connected with Australian real estate), I asked you to explain what advantage there may be for younger people in taking out the large mortgages to buy Australian real estate. You may well have chosen to defer from playing little boy games on this particular forum posting, but I am 100% certain you will continue to do so on any other given post relating to real estate at Macrobusiness, because I suspect purveying glib speciousness, but not addressing genuine points of interest for large numbers of Macrobusiness readers about real estate, is part of you Peter.

    Thank you for clarifying things for everyone….

    • gunna, I know that you think that you have an intellectual talent for writing witty comments, but in truth your grasp of the english language and writing skills are on par with the average grade eight student.

      Sorry mate but you just can’t cut it with your contorted messages and lack of genuine writing style. Please don’t give up your day job.

      You wrote one long strawman argument that stated that house prices in countries where they have high unemployment and lower wages are lower than house prices here – well so what. It’s what any intelligent person would expect. Did you not expect that result? Seriously?

      I see that you are continuing with more strawman arguments. Without data you only have an opinion, and opinions are not in short supply here, in fact opinions are in a bubble.

      Please please stop telling yourself you write intelligent witty articles, you just don’t have the talent.

      Sorry to be the bearer of the bad news.