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TOPIC : Property
If we as a society maintain a belief in the "Great Australian Dream", house prices will change in concert with disposable household income. (Watch house prices fall in 2012, February 3)
A lot of commentators have discussed the reasons for property price growth, but fail to reflect on how purchasing habits have changed over time. Twenty years ago, it cost more to buy clothes for the kids than it does now (and that's in nominal dollars, too!). This is similar for many goods. Take cars for example, a Nissan Pulsar cost $20,000 with air in 1998; 15 years later a Nissan Tiida costs $18,000 (air is now standard).
So, what does this mean? The spend profile of households has changed dramatically over time. Households are now able to spend much more (relative to total income) on their mortgages and are willing to do so, to keep their great Australian dream alive. I can recall a saying that income was generally split 25 per cent to taxes, 25 per cent to living costs, 25 per cent to mortgage and 25 per cent to savings. I don't think this is valid today.
The belief that house prices rise forever is, of course, a fallacy. It is just like any other market, with cyclical tendencies derived from nature. However, if the masses believe they will generally rise, then they will get into property when they can (i.e. based on disposable household income levels).
Philip Smith
3 Feb 2012 1:56 PM
TOPIC : Property
The theory that available finance is what drives the market is logical. It all seems "on the money" that the latter half of 2012 could be a buyers market - if you can meet the now serviceability-based requirements of lenders, as opposed to the pre-GFC equity based. (Watch house prices fall in 2012).
Cash-flow seems the king nowadays. In a positive light amongst the gloom is what hasn't been mentioned here - as per the nation's economy, the current two-teared realty market. The big cities are proving Steve's dour comments correct but not in the well-researched mining towns. Rental yields are growing more every quarter, thus so is the serviceability of loans, so is the approval of loans. Values are rising due to the increased demand from investors. I bought in Chinchilla, Queensland, three years ago for $201,000 at $220 per week rental return. I spoke to the agent today and it is now, ballpark, worth $290,000 with a just renewed lease at $320 p/w rent. Woolies have just built, and Maccas are locked in to open up. Industrial and commercial are looking good, too.
If you've the guts, sell up and rent in the big smoke, reap the tax benefits and redirect capital to a well-researched regional area with high employment
prospects. Then, buy back into the big cities after Steve's theory has run it's course. If not that way inclined, buy government bonds.
David Tregear
3 Feb 2012 1:51 PM
TOPIC : Property
Rents are not rising but are falling in many areas and RBA lowering rates will not help, just as ZIRP has not revived the housing markets elsewhere. (Watch house prices fall in 2012, February 3)
Jas Spectator
3 Feb 2012 1:39 PM
TOPIC : Property
If I was a property investor and could see capital gains flattening out or decreasing, I would want more rent to compensate. (Watch house prices fall in 2012, February 3). After all, there is no point to negative gearing if there is no capital gain to offset the loss. My loss might be reduced by 45c in dollar income tax saving but it would not want to go beyond a break-even point. If I thought it was a long term trend I would probably sell up, making the situation even worse.
Terry Donnelly
3 Feb 2012 1:19 PM
don't use
TOPIC : Property
I just dont understand why you (Steven Keen) are so invested in seeing Australian House prices fall? Why are you so concerned about being right and in doing so, doing your best to make it a self fullfilling prophecy that house prices fall, instead of being constructive? It's always easier to tear something down than it is to build it, why dont you just stop undermining peoples hopes and dreams and help them to be more realistic and pragmatic about buying/investing in property? Be a builder Steve not a destroyer! (Watch house prices fall in 2012, February 3.)
Stuart Jones
3 Feb 2012 1:03 PM
TOPIC : Property
It seems articles are published each day oscillating between +10 per cent -10 per cent or whatever. As others mention, who cares? People on the sell-side perhaps (ie banks, brokers etc). On the buy (retail) side, everyone's situation is different, and there is no free lunch (Watch house prices fall in 2012, February 3).
If you have 10 apartments in the Gold Coast and are negatively geared, yes, chances are you are screwed, or stupid, or taking a very high risk-reward approach. If you are a home owner and haven't over stretched mortgage-wise then it doesn't really matter (unless you are forced to relocate or something).
Has *anyone* read this or other articles and actually done something (buy, sell or change equity levels)?
Andy Pettica
3 Feb 2012 12:42 PM
TOPIC : Eurozone debt crisis
"Too many international bankers are bonus-driven with little understanding of risk." Robert, I'd say your statement sums up the entire GFC. (The Aussie bank saviour who got away, February 2).
Sadly, it appears international banking has learned nothing from the GFC. Bonus-driven pay is still a huge and inappropriate incentive to take reckless risks with other people's money. Until that problem is eliminated, it hard to see how anyone could have confidence in international financial institutions.
Kieran Miller
3 Feb 2012 12:42 PM
TOPIC : Property
I'm sure your forecast will be correct so long as your assumptions hold. But will mortgage debt continue to decelerate? (Watch house prices fall in 2012, February 3)
Dominic Flynn
3 Feb 2012 12:29 PM
TOPIC : Politics
Wow, the worst government in Australia's history is really focusing on the big issues facing Australia and the Australian people - not! (Gillard govt's 2012 priorities, February 3)
Peter Watson
3 Feb 2012 12:28 PM
TOPIC : Industrial relations
Small business is, or was, the largest employer in this country. Because of the wages and penalties demanded under the Fair Work Act I have reduced my staffing by 75 per cent just to survive, as have most of my fellow business owners. (Fair Work laws discourage hiring: survey, February 2). What does it take for the powers that be to wake up to the fact that the wages demands are crippling and destroying the business sector, not the "rising dollar".
Sue Hodson
3 Feb 2012 12:28 PM
TOPIC : Politics
Hmm! The fearless independents will be keeping their heads down (or pulling them in?) from now on. Just my guess! (Rudd leadership move may be on: Abbott, February 3)
Brian Hill
3 Feb 2012 12:27 PM
TOPIC : Retail sector
I was "stress testing" margins and revenue for a recent dispute. The client buys product in (direct importer) for around $2.60 and retails it for $49.99. The mark-up is a whopping 1800 per cent. (Standing up to a retail rip-off, February 3). The Australian consumer awaketh. Wages and other fixed costs have to adjust.
Don Gilbert
3 Feb 2012 12:24 PM
TOPIC : Automotive industry
What amazes me about the comments of GM on the loss of Australian export markets is that the Australian operation is only "selling" within the GM group, components like motors or models. (Shorten calls Toyota after IR criticism, February 2)
So the reason the export markets have been lost is that GM are getting the equivalent vehicle from another GM source. These guys are playing off governments all over the world against each other.
I wonder, if you took out all the subsidies and grants they get from all governments all over the world, would they still make a profit? An interesting case study, don't you think?
Peter Watson
3 Feb 2012 12:24 PM
TOPIC : Management
"Age does have a bearing on the appropriateness and aptitude of a person to do their job." (A time for workplace ageism, February 2)
Only true if people actually look their age. It does not have a bearing on the appropriateness and aptitude if the person looks a lot younger or older than they actually are.
I look very young but I am nearly 50 (don't drink coffee or alcohol and you will stay looking young). Everyone under 30 thinks I'm extremely old whereas everyone my age or older thinks that I am not less than 20 years younger than my age.
I am constantly discriminated against. People often insist (I mean insist!) that I must have been eight years old when I had my first child. They become angry with me when they stumble on their prejudices. Apparently it's a compliment to be mistaken for a child bride or as totally inexperienced because they wish that they were so lucky to look as young as I do - that I should be grateful and consider myself extremely lucky.
What people perceive me to be ought to be irrelevant. I have to be extremely strategic when seeking work. All government jobs I have applied for recently required me to state my age for police checks. I was not considered for any of these jobs. However, private employers don't do an age check so I usually become a candidate for consideration upon application.
Ageism is my daily bread. I put my age in candles on my last year's birthday cake at work and it made people angry because they had been treating me as you would a 20-year-old (like stupid rubbish). But my cake brought it home that I am only a few years younger that my discriminators. They then decided to get me out of the workplace and made serious complaints about my conduct which were taken seriously because, on the hierarchy of things, I look so much younger than these astute old people who must be telling the truth because they were "older" than me (young people are so much more likely to lie and cheat apparently). "Know your place", I was told.
Libby Murphy
3 Feb 2012 12:21 PM
TOPIC : Property
Steve, you are famous for your "40 per cent collapse" in Aussie home values. Are you still prepared to stick to your prediction? (Watch house prices fall in 2012, February 3). Many people would like to know. This 10 per cent reduction (if it happens) will bring us to a 15 per cent reduction in three years - so what about the other 25 per cent?
Bob Mckay
3 Feb 2012 12:16 PM
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