Gottliebsen says some Sydney unit prices have fallen 25 percent as market has cracked

[cobran20 110]

I'll believe it when margin calls start making the front page news

link

[Solomon 34]

Or a whole heap of highflyers are complaining they can't get Centrelink payments.

[zaph 45]

2 hours ago, Solomon said:

Or a whole heap of highflyers are complaining they can't get Centrelink payments.

The humanity of being a pensioner!

[Mr Medved 47]

The claim is dubious unless there's a dramatic drop in auction clearance rates. A fall like that would mean (much) less than 50%. I'm not sure what the current stats are.

[cobran20 110]

More overblown BS

'Significant turn of events': Sydney property prices suffer quarterly fall

[Mr Medved 47]

http://www.zerohedge.com/news/2017-11-01/worlds-longest-bull-market-55-years-australian-house-prices-over-according-ubs

[cobran20 110]

1 hour ago, Mr Medved said:

http://www.zerohedge.com/news/2017-11-01/worlds-longest-bull-market-55-years-australian-house-prices-over-according-ubs

If it proves to be true, then that Italian strikes again!

[Dose 11]

We are drifting towards your 50% number...

[Swaize 10]

Marty said the top in Real Estate is in and high level real estate in the international cities is crashing.

 

Do you guys see any evidence of this price crash of high-end real estate in sydney, melbourne, and new zealands biggest city? (forgot the name)

Edited January 18, 2018 by Swaize

[Mr Medved 47]

I think it's too early to tell. Auction clearance rates are a helpful indicator but I'm not familiar with current figures.

The really, really expensive places are normally private sales, but expensive suburbs tend to be auctions (not a particular price) - hence clearance rates are handy.

[Mr Medved 47]

I've said for years 50-70% drop in real terms (minimum) but that was years ago. Hard to say what nominal drop will be.

Bullion Baron's house prices in silver and gold ounces gives a different perspective of how much they may fall.

[zaph 45]

11 hours ago, Swaize said:

new zealands biggest city? (forgot the name)

It's Logan. Logan is NZ's biggest city. 

[zaph 45]

3 hours ago, Mr Medved said:

I've said for years 50-70% drop in real terms (minimum) but that was years ago. Hard to say what nominal drop will be.

Bullion Baron's house prices in silver and gold ounces gives a different perspective of how much they may fall.

That's the most bearish view I've ever seen! So my house, purchased for 475k 5 years ago, now going for 600k +/- would drop to 250k? Perhaps even 150k or lower? Would rents drop a similar amount in your scenario? 

Without some sort of major thing happening I just can't see your prediction happening. 

[Mr Medved 47]

I said in real terms, not nominal terms.

[zaph 45]

8 hours ago, Mr Medved said:

I said in real terms, not nominal terms.

Real or nominal doesn't make much difference in low inflation environment of the last five years. 

So what do you expect my place to drop to? Importantly what about rents? 

 

[Solomon 34]

On 1/19/2018 at 11:34 AM, zaph said:

That's the most bearish view I've ever seen! So my house, purchased for 475k 5 years ago, now going for 600k +/- would drop to 250k? Perhaps even 150k or lower? Would rents drop a similar amount in your scenario? 

Without some sort of major thing happening I just can't see your prediction happening. 

I happen to agree. Since the year 2000 when house prices increased 300%, I think we have arrived at a new normal. Too many people have made extraordinary amounts of money from housing, and they will maintain the levels. It would be an apocalyptic scenario to go back to $150,000 (average sized) housing from the heady heights we are currently experiencing. The most anyone can expect might be 25%.

There would be so much wealth destruction with a 70% decline that almost half the population would be living in poverty.

I just can't see it happening either. Unfortunately I am probably one of those who have been left behind. I will now no longer ever to be able to afford a detached home, and may have to be content with a unit, or villa somewhere. I'm sure if I went out west far enough I would find a home that I could afford, but at what cost to my lifestyle.

I like your work Mr Med, and I do appreciate your comments on many subjects, but on this particular occasion I think you are wrong. No disrespect but my imagination is unable to create a scenario that would fit your suggestion. For those of us who have been left behind, we can only wish and dream such might be the case, but I doubt it. The chook has flown the coop!!

I just feel for the future generations, because we are slowly but surely suffocating the working classes, and wealth is being accumulated in less and less hands. Human dignity will be lost somewhere in this.

[zaph 45]

12 hours ago, Solomon said:

I will now no longer ever to be able to afford a detached home, and may have to be content with a unit, or villa somewhere. I'm sure if I went out west far enough I would find a home that I could afford, but at what cost to my lifestyle.

In large cities a unit is what you get. If you want a house move to bumf*ck. 

Quote

 

I like your work Mr Med, and I do appreciate your comments on many subjects, but on this particular occasion I think you are wrong. No disrespect but my imagination is unable to create a scenario that would fit your suggestion. For those of us who have been left behind, we can only wish and dream such might be the case, but I doubt it. The chook has flown the coop!!

I just feel for the future generations, because we are slowly but surely suffocating the working classes, and wealth is being accumulated in less and less hands. Human dignity will be lost somewhere in this.

 

Price, rent or sale price is a function of desirability and distance from the action. 

I lived in CNS and it was only an extra schilling to live within pissing distance of city centre. Brisbane was an extra 10 schillings. Brisbane has grown and it's now 20 schillings. 

 

[Mr Medved 47]

On 1/20/2018 at 0:38 AM, zaph said:

Real or nominal doesn't make much difference in low inflation environment of the last five years. 

So what do you expect my place to drop to? Importantly what about rents? 

 

At some point interest rates will increase. When they do things will turn down. If interest rates don't go down you'll see the AUD drop and inflation "hidden" by government statistics.

At some point there will be a recession. I don't believe Australian households are very resilient, nor the banks as resilient as they may say. Major external conflict could also impact the Australian economy. People have had it so good for so long they don't realise how hard the landing is when cycles turn.

Re rents - I remember reading the breakdown of household expenses during the Great Depression. Most of it went of food, clothing and energy. A lower percentage was on rent/shelter, some landlords even rented out places for free to protect the property from becoming derelict.

Prices always revert to the mean - or overshoot. In the case of property that is linked strongly to median income. The level of foreigners buying existing property has propped up prices (as they are set at the margin). I haven't checked recently, but if prices are 10x median income at the peak then they'll drop to 3-5x, which is not unrealistic IMO. Last I checked they were down by about a third in gold ounces from the peak.

The Australian economy really is houses and holes. There's not much else for 20+m people.

I'm predicting more of stagnation over time like Japan's lost decades rather than a sharp crash, but not ruling that out 100%.

I'm not too concerned if I'm wrong. My philosophy is to focus on personal/skill development and increasing my salary/income. I'll be landing a contract which in 5 weeks will be roughly the equivalent of 50 weeks of my graduate salary (not inflation adjusted). I figure if you earn sh*tloads of money then property prices are a minor concern... as long as you can hold off the wife long enough.

 

[Mr Medved 47]

I don't often visit macrobusiness, though did today because I was feeling tired, and this article has some excellent charts as to why prices have scope to fall a long way (in real terms).

 

https://www.macrobusiness.com.au/2018/01/2018-demographia-international-housing-affordability-survey/

[zaph 45]

5 hours ago, Mr Medved said:

At some point interest rates will increase. When they do things will turn down. If interest rates don't go down you'll see the AUD drop and inflation "hidden" by government statistics.

At some point interest rates will increase - in response to a stronger economy. Some things will turn down when they do but mostly it will be business as usual. Unless the RBA phuck up the OCR. 

Quote

At some point there will be a recession. I don't believe Australian households are very resilient, nor the banks as resilient as they may say. Major external conflict could also impact the Australian economy. People have had it so good for so long they don't realise how hard the landing is when cycles turn.

It's certain that at some point there will be a recession. Recessions are a great time for people who remain employed - which is 80-90% of people. 

Quote

Re rents - I remember reading the breakdown of household expenses during the Great Depression. Most of it went of food, clothing and energy. A lower percentage was on rent/shelter, some landlords even rented out places for free to protect the property from becoming derelict.

Maybe not Australia, but the world had a depression starting around 2007. I believe it's coming to an end. This depression saw massive stimulus and social welfare - something that didn't happen in the 30's

Quote

Prices always revert to the mean - or overshoot. In the case of property that is linked strongly to median income. The level of foreigners buying existing property has propped up prices (as they are set at the margin). I haven't checked recently, but if prices are 10x median income at the peak then they'll drop to 3-5x, which is not unrealistic IMO. Last I checked they were down by about a third in gold ounces from the peak.

Huh?

Quote

I'm not too concerned if I'm wrong. My philosophy is to focus on personal/skill development and increasing my salary/income. I'll be landing a contract which in 5 weeks will be roughly the equivalent of 50 weeks of my graduate salary (not inflation adjusted). I figure if you earn sh*tloads of money then property prices are a minor concern... as long as you can hold off the wife long enough.

Well congratulations on that. 

I've never had a wife, but from my limited experience if you buy them something shiny they will be happy.  

[Swaize 10]

yes australias houses are crazy expensive, plus im comparing with swiss quality standards, we all have a bunker/cellar and a roof-storage-room, proper brick building technique lasting 100years, we got insulation, always heated to 21C  (no aircon) and so on

yes demographics look not great for many more rural places 

yes interest rates will double according to marty and that will halve what people can afford to pay for a house due to monthly payments to the bank doubling

yes assets move cyclically and houses are peaking, also we younger ones dont think living in the suburbs is cool at all... i would prefer the penthouse with swimming pool terrace and ocean view, plus some veggies and herbs

yes the aussi dollar collapsed by 10-15% already so houses havent advanced as fast as it looks in real value

yes governments are bankrubt and raising taxes is a big trend, and houses are easy targets!

 

[cobran20 110]

12 minutes ago, Swaize said:

yes australias houses are crazy expensive, plus im comparing with swiss quality standards, we all have a bunker/cellar and a roof-storage-room, proper brick building technique lasting 100years, we got insulation, always heated to 21C  (no aircon) and so on

yes demographics look not great for many more rural places 

yes interest rates will double according to marty and that will halve what people can afford to pay for a house due to monthly payments to the bank doubling

yes assets move cyclically and houses are peaking, also we younger ones dont think living in the suburbs is cool at all... i would prefer the penthouse with swimming pool terrace and ocean view, plus some veggies and herbs

yes the aussi dollar collapsed by 10-15% already so houses havent advanced as fast as it looks in real value

yes governments are bankrubt and raising taxes is a big trend, and houses are easy targets!

 

yes we're stuffed. Thank you for sharing!

[Mr Medved 47]

12 minutes ago, cobran20 said:

yes we're stuffed. Thank you for sharing!

Yes, but we're stuffed in a more precise manner thanks to contributions from Swaize.

The thing I hate most is AUD weakness, because at the moment that's all I earn. I would like to plough more capital into other currencies and foreign real estate but don't really have enough to make it worthwhile. I may do some apartment scouting in March, just a shame I don't have a spare 100k else I'd probably buy something.

[Swaize 10]

Wait til i start talking about Europe haha

I used to annoy my friends by talking about economics, but now that i understand the whole european situation even i find it too depressing to talk about it!

I travelled a bit in Europe this year, italy, spain, germany, swiss, poland, denmark, sweden and what i noticed is that i liked those places that had the least:  migrants, foreigners, tourists, old people, fat people

recently read malmö (which feels horrible to walk around, so many migrants) is ridden with crime now 

in Frankfurt kurds and turks had a massive brawl inside the airport

So if you buy real estate, avoid places with high foreigner populations. Also, depending on the city there is a different mix of foreigners and some are nicer like polish, czech, and some are worse like turks, maroccans (all based on personal experience, anecdotal evidence and news articles of crime sydicates in netherlands and berlin) in switzerland a guy i know who rents-out hundreds of appartments told me, he is now throwing all the greeks out, cause they are just terrible, never pay, always excuses. Probably also a culture difference and different mentality.

 

@medved

just wait til asia gets crashed by dollar debt and china slowdown, then nice opportunities will be had

or buy the dow jones, or gold stocks on dips, or start looking in the AG space like land or farm companies or commodity ETFs as marty thinks these will go up eventually into 2024

i forgot to add: lending will also dry up for real estate when the first wave of houses with 0% downpayment go bust after rising rates. usually not a good idea longterm to chase something that had past gains, better to look what is cheap and poised to rallye eventually! 

 

Edited January 26, 2018 by Swaize

[zaph 45]

1 hour ago, cobran20 said:

yes we're stuffed. Thank you for sharing!

We've been 'stuffed' for a decade according to the grizzly bears. Yet no collapse.