Low-end housing to go down by up to 10%

I agree that it might lead to softening up the demand however unless interest rates start creeping up or employment figures take a major dip, I dont see how the values will instantly drop 10%.

Harris
 
Personally, I think this is not likely...as they are not building enough houses, particularly if unemployment goes only to 7%. The other being interest rates going up rapidly.

Bear in mind once the FHOG settles it will go to a normal market....and prices will more likely stabilise till the next upturn.

The bigger risk is the stuff above 600k as people deleverage.....there is already evidence people are doing this. Also, be mindful in some areas the lower end dropped 40% (Western Sydney between 2003-2007)...they have come up by about 15%...they are still down about 20-25% since the peak.



Strannik said:
yet another prediction

http://www.news.com.au/business/money/story/0,28323,25755098-5013951,00.html

now this one, for a change, is in line with my predictions :p
Click to expand...
 
Where did it say anything about an 'instant' fall of 10%? These things take time.

I think the lack of demand post FHOG and rising unemployment will hammer the bottom/mid end of the market over the next year or two. Possibly falls of up to 20%.
 
Rents will stagnate or might also soften

Also from the same source:

http://www.news.com.au/heraldsun/money/story/0,26887,25759963-5015810,00.html

I am already finding that in these lower areas rents are not as easy to increase of late (past month or two). Not worth losing a "good tenant" for the sake of 5-10 bucks a week.

This may affect returns and thereby investor demand.

Some of these suburbs (if indeed they come off 10 % or so) have had quite a decent appreciation (some like Broadmeadows in Vic b/w 40-50 % in two years), so in the long term scheme of things (property not being a liquid asset) it's trivial.......unless one is trading property. I doubt that there would be many in that boat here.

To be prepared, one could have revals done now with funds at the ready to embrace any opportunities that may present if things in this lower arena soften by 10 % or maybe more, and investor demand stagnates.

There will of course be markets and sub-markets to consider and broad generalisation to the whole nation would be incorrect.

Despite, a housing shortage as we are told is the situation, to believe that rising unemployment will not affect prices and rentals is naive as house sharing and deferred moving out of home (or moving back with parents) is already occurring.
 
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sash said:
Personally, I think this is not likely...as they are not building enough houses, particularly if unemployment goes only to 7%. The other being interest rates going up rapidly.
Click to expand...

i think people tend to concentrate too much on "not enough houses being built" mantra, without taking into account "not enough people who are able to buy"

so while the first one is true in theory, without the people who actually CAN buy, and haven't done so during the FHOB craze, thre is no demand for those extra houses
 
kero said:
mmm... why would the sub $500k houses are to drop? can't find the answer in the article.
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Me either :confused:

I think I'm ready to put CB Richard Ellis into the same mental file as BS Shrapnell.

Mostly lower end houses do not drop. There is always activity in that end of the market in good times & in bad. I attended a couple of OFIs on the week-end for properties between $400K - $500K and they were very well attended. People all over the front lawn in one instance waiting for the agent to turn up.

The mantra of the Somers and the other well respected property people of "buy at or below the median" is for a reason - experience - lots of experience.

And OK, lets take a doomsday scenario and say prices do drop 10%. Av $350K house goes down $35K. I'd much rather that, than my RIO shares falling from $155 to $47 or my ANZ shares falling from $30 to $15 or my $2M house falling by $400K :eek:

And btw - I'm not predicting a 10% fall - far from it. I think those who do may be under-estimating the amount of pent-up investor demand coming online 1/1/10 and evidence of which I already see entering the market now with the FHBs starting to ease off.
 
I only know my own local patch of dirt, so cann't comment on the rest of Aust. But i have a hard time believing prices will fall by 10% in Canberra - prices are still on the rise here. Either way I win, my PPOR and my soon to be built IP were both purchased under market value. If prices continue to rise - Yay! If they do drop (which I doubt), then I will hopefully be able to snatch up a bargain.
 
Propertunity said:
And btw - I'm not predicting a 10% fall - far from it. I think those who do may be under-estimating the amount of pent-up investor demand coming online 1/1/10 and evidence of which I already see entering the market now with the FHBs starting to ease off.
Click to expand...

I'm with you on that one. I think too much emphasis is put behind the belief that the FHOG is holding up the market. I don't think that's the case, but hey - that's just me.
 
Good point but its not the only one. The other is that most people dont want to buy in the areas houses are being built. Its not always about lack of housing, its also about where the lack of housing is.


Strannik said:
i think people tend to concentrate too much on "not enough houses being built" mantra, without taking into account "not enough people who are able to buy"

so while the first one is true in theory, without the people who actually CAN buy, and haven't done so during the FHOB craze, thre is no demand for those extra houses
Click to expand...
 
If you think you bought 'under market' you're wrong. Its a common fallacy.

The price you paid is the market.You make (and made) the market.

If you paid less than you expected it means the market is falling, but its still the market price.

rugrat said:
Either way I win, my PPOR and my soon to be built IP were both purchased under market value. If prices continue to rise - Yay! If they do drop (which I doubt), then I will hopefully be able to snatch up a bargain.
Click to expand...
 
evand said:
If you think you bought 'under market' you're wrong. Its a common fallacy.

The price you paid is the market.You make (and made) the market.

If you paid less than you expected it means the market is falling, but its still the market price.
Click to expand...
Semantics. Buying under market usually refers to finding an over-anxious/ill-informed vendor who sells for less than fair value. Fair value usually equating to market value.

Using your definition, it's impossible to overpay for a house either.... because you just paid (and made) the market price :rolleyes:... and the market moved upwards.
 
I look at rising unemployment as a bit of a helper to my lower end IPs. (and some of mine are real bottom dwellers!) If people lose jobs and have a mortgage they may have to sell and rent creating more demand for rentals making rents go up. this then makes property more attractive to investors with it's higher yield therefore pushing price of said house up.
Also, if person loses job and is renting mid market property they may well choose to downgrade to a bottom dweller like mine, creating for demand for my rental which pushes the rent up which in turn .....

That is why I have always chosen the bottom quarter of the market. I can see that FHB can add to the competition in that area but I don't really see my bottom dwellers dropping. will be interesting to see how it all pans out but I believe it is still part of a big cycle.
 
Well....you may want to ask the 160,000 or so immigrant who come to this country. As long as they keep coming...there will be shortage of housing in the major cities of Australia.

Australia needs about 180,000 homes....we are building about 150,000. The reason for this is because developer finance is more stringent!



Strannik said:
i think people tend to concentrate too much on "not enough houses being built" mantra, without taking into account "not enough people who are able to buy"

so while the first one is true in theory, without the people who actually CAN buy, and haven't done so during the FHOB craze, thre is no demand for those extra houses
Click to expand...
 
i quite agree with joanmc... the low end market is a bit like a double edge sword... its an attractive entry to most first home buyers and its also a safety net as it can be attractive for 'in need' renters.

one thing still puzzles me is, why is the FHB always link to unemployment? unemployment hits all classes of workers- staff, middle management and senior management... so i would thought it'll hit the low end, middle end and high end housing.
 
Propertunity said:
And OK, lets take a doomsday scenario and say prices do drop 10%. Av $350K house goes down $35K. I'd much rather that, than my RIO shares falling from $155 to $47 or my ANZ shares falling from $30 to $15 or my $2M house falling by $400K :eek:
Click to expand...
why is everyone looking for a doomsday? :confused:
houses dropped 10%, noted, hopefully profited from it - move on with your life:rolleyes:
 
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