i hope so. that'll teach all those greedy mum+dad investors to negative gear.

UK house prices fall 11% in August

probably not in Melbourne where there is a serious housing shortage. We are unlikely to see the massive inflation of property prives that we've seen in the last few year but we are also unlikely to see massive falls either.

Just means it could be a good time to invest in UK or US property perhaps.

We are unlikely to see the massive inflation of property prives that we've seen in the last few year but we are also unlikely to see massive falls either.

elaine, being a non property type person, can you explain why this is?

i heard that it also has to do where you buy. i brought in a suburb that isn't going down.

Just means it could be a good time to invest in UK or US property perhaps

Yes, unless they follow the same example as Japan where after the property bubble burst prices didn't rise for over 17 years...:

Last week, the Financial Times reported that residential real estate prices in central Tokyo rose by 0.9% in 2004. That rise is nothing to write home about… except that it is the first time in 17 years that residential real estate prices in central Tokyo actually went up!

Link

elaine, being a non property type person, can you explain why this is?

Isn't she talking about simple supply & demand? Housing shortage = demand outstripping supply = keeps prices high?

& absolutely it depends on where you buy (& what you buy). If things take a downturn, it's usually the very bottom end & very top end of the market that suffer most. If you have good property in a good location then the market should always be ok.

no i think elaine is talking about the financial imapcts on why we didn't see massive increases and therefore massive decreases

sure,

We are unlikely to see the massive inflation of property prives that we've seen in the last few year but we are also unlikely to see massive falls either.

inflation is unlikely due to the slowing economy and higher interest rates. The vast majority of people just can't afford to pay such increasing prices until a range of economic factors occur. This includes: the economy picks up encouraging investment, interest rates come down again, time passing means that income inflates enough to spend more (also wrapped up in a perkier economy), um, changes to taxation to make it attractive to invest, a bear market.

Some suburbs and properties will see a fall in real prices, but these will be properties that were over-priced, poor infrastructure, shitty construction. Inner suburbs in particular will retain their value and keep growing due to demand.

Australia is a little different to other countries too. Property is the Great Australian Dream (TM) and many, many people see owning property almost as a 'right', the rental market is geared toward renting being a transitional move between living with the folks and buying your own and is quite insecure (just look at the number of chats who have been given 60 day notices in the last little while). Australians invest preferentially in property to other forms of investment.

I don't know the figures for other cities but Melbourne has 1500 people moving here each week and they have to live somewhere.

With property as with every investment there are good investments and bad investments, safe and risky. I'm guessing where you live is a very good place to buy ohyeah. If I had cash right now, I'd buy in Footscray or Preston south of Bell st and east of Albert st.

it'll burst in the burbs

An economic slowdown will see migration to Victoria also slow, and this will ease some of the demand on housing and supply will increase. This will at least see a temporary stabilsation in prices.

A key structural issue which will have an impact on prices is whether fuel costs have permanently increased or if the over US$100/barrel oil price we've seen is a temporary issue. If the cost of oil is permanently high (which seems likely) then suburbs with poor public transport infrastructure (and hence a necessity to drive) will be permanently less attractive than those which are easier to get to and from areas to work/shop/be entertained via public transport.

Unless urban planning improves! I'd like to see little epicentres outside the cbd. For people to get back to doing things locally.

/end(pipedream)

Unless urban planning improves! I'd like to see little epicentres outside the cbd

So, you'd like the whole country to be like say, Canberra then? ;-)

I agree Elaine, but even if there was a concerted effort to create mini-hubs of work/shopping closer to where people live, this wouldn't have an impact for a long time - meaning that property prices would be flat in the suburbs if petrol prices stay high.

agreed.

and littlesmoke, canberra is pretty suburban but some parts aren't that bad.

and littlesmoke, canberra is pretty suburban but some parts aren't that bad.

Oh, don't get me wrong...I love Canberra, perhaps more than anyone else. :-)

I was just pointing out that your pipedream is exactly how Canberra is designed. ie. Local epicentres/hubs for employment, business, shopping, etc. outside of the CBD.

LET''S ALL MOVE TO CANBERRA AND DOSS ON LITTLESMOKES COUCH

Struth.

*orders bigger couch*

stacks on!

yes, banks refusing to lend to large property developers. Who has basically funded their growth through leverage in the boom and were going under.

Righto, folks are lobbying for it. I thought you meant legislation had been introduced/passed and it was a sure thing.

Cannot see this getting up.

Well the government has proposed it, and from what i understand they are trying to sneak it in - this would add more air to the bubble. There is a good and easy to understand analysis of it here.

this is what we could do with more of in australia

''a legal system that gives tenants greater security and more freedom to decorate their own homes. ''

i hate renting becuase i'm terrified of damaging the house, needing repairs that be seen as an excuse to jack up the rent (at an uncontrolled and unpredictable rate only stipulated as no more than once every six months), having to offer more than the advertised price per week to secure the place and having to have the kind of stable and well-paid job i have never had to get the lease in the first place...

no wonder all this stress is making me ill.

*Well the government has proposed it, and from what i understand they are trying to sneak it in - this would add more air to the bubble. There is a good and easy to understand analysis of it here. *

How is this any different than the mortgage insurance that you have pay now if you don't have a 20% deposit?

How is this any different than the mortgage insurance that you have pay now if you don't have a 20% deposit?

Rather than an insurance company being the guarantor of the mortgage, the government is. Basically the risk of loan is transferred from the bank to the public. The idea is to increase competition in the market, but the problem is that with the financial lenders not having to take on the risk if someone defaults on the loan, lending criteria will become even more lax. More people will be able to become investors, obtain interest only loans with zero deposits, and jack up prices even more. If this gets through, it could potentially create a US style sub-prime in Australia, and if it doesn't expect house prices to continue their 5-10% growth per annum for another decade. A terrifying prospect.

is it reasonable to suggest that the obsession to own will continue unless rental tenancy rights improve?

@theparisend: No, the obsession to own will continue as long as renting is perceived to be throwing money away, as opposed to buying being a guaranteed, rock-solid investment.

I'm in the camp that is still heavily cynical of the latter, and I'm enjoying this thread a lot as I continue to clarify my understanding and opinion of it all.

i need a valium just to approach this shit

it stirs up so many deep-seated anxieties about home, security, family...

@theparisend: No, the obsession to own will continue as long as renting is perceived to be throwing money away, as opposed to buying being a guaranteed, rock-solid investment.

I'm in the camp that is still heavily cynical of the latter, and I'm enjoying this thread a lot as I continue to clarify my understanding and opinion of it all.

Paying interest to a bank is effectively throwing money away. Say you spent $400,000 to buy a flat. Your monthly mortgage repayments at today's level would be around $3,000 pcm but to rent it you would probably pay $1,200 pcm. The rental amount is lower that the interest you would pay if you bought it. The economic fundamentals are so out of whack in the housing market that it only points to one thing - a massive bubble. Anyway I picked it two years ago, I'll revisit this thread in 6 months time to see if I was correct.

The house I used to live in sold at auction for 1.57million. Insane. Over the 3 years I was living there rent went from $470-500.

Although the layout looks good on camera it isn't really all the practical and isn't exactly conducive to ''open space''.
http://www.realestate.com.au/property-house-nsw-annandale-106950053

Good to see the unaffordable housing is the fault of foreigners. Easy credit, poor planning policies and a tax system that encourages speculation has nothing to do with it.

Great Economist article today.

Good to see the unaffordable housing is the fault of foreigners. Easy credit, poor planning
policies and a tax system that encourages speculation has nothing to do with it.

The comments at the end of that article are insane, given that the research for the article is completely based on anecdotes.

[http://theage.domain.com.au/the-foreign-real-estate-raider-alarming-fact-or-urban-fiction-20101023-16ynf.html](Foreign buyers a fiction)

Foreign buyers a fiction

Online campaign targets high cost of housing

And another article from Steve Keen

Cast your three votes](http://suggest.getup.org.au/forums/60819-campaign-ideas/suggestions/1595687-first-home-buyers-property-buyers-strike?ref=title)

that buyers' strike is pretty interesting

i think a lot about this house price shit

i know there are countries where renting is a much better experience, but the home to the highest bidder stuff i seriously abhor.

it's a basic needs vs profits issue

and i feel vulnerable with the way things are at present

good article on negative gearing the other day: http://www.smh.com.au/business/imagine-a-tax-system-that-penalised-work-20110329-1ceqb.html

as far as i can tell theres only been 2 such articles in the last 6-12 months, and i love how they're punctuated by ads for real estate. i've been saying the same thing much less coherently for years. the problems with house pricing is only the tip of the iceberg, you can blame the whole negative gearing howard youth attitude to our economy as the source of australia being such creative blackhole over the last 10-15 years. tradie steakhead wonderland.

A commodity boom, loose credit and a decade of Howard's policies that favoured babyboomers ahead of other demographics has inflated this bubble to immense proportions. While the commodity boom continues unabated then real estate prices will probably drift sideways in real terms for 5 or 10 years until affordability improves. If consumer sentiment changes rapidly due to some unforeseen economic event (China slowdown is the one everyone tips) and investors start offloading properties en-mass then you get oversupply of housing and a crashing market. Since so much wealth is tied up in houses (you can borrow money using your homes equity), then the rot would spread to the rest of the economy and we would look like the USA, Ireland or the UK. So it is catch 22 atm, the RBA is doing its best to deflate the bubble while State and Federal Governments aimlessly going about their business providing us with shockingly bad leadership while being able to hide behind strong economic growth and low unemployment.

Punch me, I'm watching the renovators. But what the fuck is with the agents running around harassing the bidders? Surely illegal?