Visiting a business colleague today I drove down a major suburban street in Brisbane today which I see at least once a fortnight. Was shocked to find 7 for lease, or for rent signs with only one having a Leased by sticker on it. I thouht about possible reasons and given it was over a 1.5 km stretch and not just in one area I can only guess that it wasnt due to a whole bunch of people suddenly deciding to move out at once. Possible rasons: 1. Rents increased and became unaffordable. 2. Some local issue annoyed residents enough for there to be a cluster of movers. and finally what I think....... 3. These houses had been vacant investment properties that are not performing to the needs of the investors. They can't sell because prices are lower than they expected and being probably negatively geared the owners are slightly underwater even. So they are trying to get tenants into the houses as a way of reducing their losses. So much property was bought for the rapid flipping over a year or two and held vacant that I think this is a real possibility. Thoughts?
intel the place on compton is logan city. and thats one of the lowest socio econ. places in oz i reckon, small jitter in the economy thats probably the first place you'll see it
There's a few places locally where rents have been dropped 3% -15% after advertising for over a week or two according to www.refindhouseprices.com. I'm use to seeing roughly a 10% increase in rents Y/Y around these areas so it's not surprising there are some pullbacks
Some ski shops in the city (Sydney) are now charging $50 for a ski boot fitting, which is refunded if the customer buys boots in-store. It can take 2 hours for a professional fitter to get a perfect fit, and then the customers are writing down the spec and brand, walking out and buying off the net from overseas. Some retailers are now considering introducing a change room charge too. It's not to stop people from shopping on the net overseas, it's to stop shoppers using Australian retail stores time, facilities and staff for fittings and technical assistance in the full knowledge that they are wasting someone else's time by using the Aussie business as a free fitting and customer service facility for an offshore seller. I would expect to see a lot of empty shops soon, in fact I am already seeing it in some areas. I don't feel sorry for the commercial landlords in areas like Bondi Junction, they gouge like wounded bulls and have had it too good for too long. I do feel sorry for the business owners who are closing, and the staff that are losing their jobs or having their hours cut, in the end this leads right back to what Intelligencer saw - if you don't have a job, you can't pay a mortgage, or much rent for that matter. Time to move back in with your parents. I think that there will be a lot of "for lease" signs and "for sale" signs going up in front of houses and in shop windows in the next year. As in America, if your cashed up there will be bargains, and if you are a person who lives from pay cheque to pay cheque you had better start figuring out a contingency plan.
Empty shops? Well I stopped through a major retail strip in Melbourne yesterday and there were many stores with zero customers and only one store with more than one customer. That's Saturday morning when retailers are hoping to make up for a flat week! Then I hear on the teenager's radio station this morning "how no one can afford good makeup and cosmetics anymore, so here are some handy tips to get by..." Are the trickles converging?
Might as well throw a spanner in the works... True RE will take a hit here but do you think to the same extent as OS? If your considering - RE debt is not the place to be right now but if your 'stuck' and can hang-on until 25% to 35% falter then you looking at bailout/stimulus package. My guess is Banks are approx 60% RE and can ill afford a major crash due to there exposure to CDO's and other toxic assets they currently hold on balance sheets - remember these are the guys running the show - remember Paul Keating and his Recession? Banks learnt a painful lesson and expect softer heavy handed tactics this time around. As in USA,there will be many close door deals going on between Banks and Mortgage holders ... There is plenty of ways they can cushion the blow ie, release less land, building incentives(like the current $10K plus first home buys grants) ,high inflation (pay back the debt with cheaper dollars and new buyers pay the same 'face value'), interest rate drop, generation loans, etc. Ultimately the asset has lost real value but on paper can look minor. RE is still a intrinsic asset compared to cash. If I had no other choice will take the bricks and mortar anyday I believe most assets go through the 7 year cycle - i.e 2000 to 2007/08 RE boom, 2007/2008 to 2014 bust. RE will recover and is always the best investment long term - for me PM's are the vehicle to acquire more than otherwise possible. As investors get squeezed, rents will increase which lead's people to purchasing - there two side to this outcome. Interest rates will drop to prop up the market - just take CBA last week dropping 60bpts on Fixed and WESTPAC 20bpts the same. Would happy to take a bet on the RBA doing 50bpts drop next 3 months. My surrounding area has little for sale - namely because the market is dead, but also because I believe they CAN afford the position they entered to pay off the loans - employment is the key or lynch pin currently
That is not quite correct. Many who rent will never, ever be in a position to buy a house; many others will choose not to buy. If rents increase then many people living alone will share-house, increasing stock/supply and dampening any further rises. Rent is always a function of what people can afford to pay (i.e., % of income). A landlord could try jacking up the rent but may end up with an empty property. The banks cutting IRs may be related to currency valuations and not future interest rate expectations. The AUD has dropped almost 10% against other major currencies in the last fortnight.
The common misconception with "price" is that they can be sustained or sustainable if people don't sell, or less land is released or other ways of curbing supply can be instituted. It's a myth. Price is determined at the margin; meaning that to discover the price of an item you don't need to sell every unit. One sale at a lower price determines the value of all similar items. When there are no buyers left, then you can limit supply all you like, the price is going to come down. The RE boom was fueled by the mysterious thing known as credit. When no one has access to credit, and it dries up, then no one has the money to buy. People will be shocked at the prices to come. The 20-35% etc are all just the most pessimistic of the optimists. There is denial still. When the reality hits, people will face drops of 50-75% and even there I think I am being conservative. This bubble is HUGE with a capital H.
Yep good point's. Personally never rented as a landlord dictating to me how I chose to live isn't within by acceptance boundaries. A friend who did rent was evicted because he hung a picture on the wall without permission True - many(regardless of the economic conditions) will never be in a position to purchase a house/unit hence creates a rental/RE investment market - true? So if there is little to no investment reasons or gains to hold RE over other asset classes then the stock/supply of rentals dies - true? Those RE investors who do have high equity or low repayments can continue to offer low rent's - but will they stay in RE while the principle gets eroded? Wont they increase the rent if stock/supply is limited? more renters chasing less available property? Whats the other option? Gubberment will have to provide housing - which comes full circle why investment properties are given tax breaks and other incentives to save the Gubberment coffers. I'm thinking the incentives will increase dramatically as the RE market weakens. True many can share (younger singles) but bit trickier for Married couples with a few pups. If Inflation keeps running (reasonable assumption based on the last 3 years), workers will demand/require higher wages to survive or seek employment from those employers/industries who do. With the building industry currently dead, stock/supply of new property has died with it. Both rentals and principle places of residence. Sorry - I'm really not explaining myself very well - shocking head cold - Just pointing out there more than one squeeze on the RE market. NOT SUGGESTING BUYING ANY RE THROUGH! but the hopes of picking up a 3 bedder for a few hundred $K isn't sure as sh#t thing either. I've listened to the coming crash for the last 3 years - seen USA fall - seen UK fall and seen a correction (guessing 10-15% avg) in AUS but still no crash? So with the AUD dropping almost 10% against other major currencies in the last fortnight how is it really that much safer than RE?
I do accept your point - but still still not as convinced as your good self... a 50-75% drop is possible...so who will pick up the bill? Borrower defaults,so will the Bank? Bank squeals like a Pig to the Gubberment who bails out - the bill will be split between all of us via taxes. Your suggesting the can can not be kicked down the road again? I know it's dinked the the sh%t house and full of concrete but that doesn't stop the Gubberment strapping on some steel caps boots for the next round
I will have to write separately about this at a later time but I'll just go into some superficial explanation which may hint at the problem people have in understanding this. It is complex because it gets down to the difficult question of what exactly money is. You and I, and everyone else has heard commentators say things like "$30 billion was wiped off the sharemarket in last week's trading". What does that mean exactly? Where did the $30 billion go? Did it just evaporate away? Where was the incinerator in which all that money was burned? The truth is that there is actually no money IN the sharemarket. All that's getting traded around is titles of ownership, much like a house. When a market exists, the money isn't in the market, it merely facilitates it. Money that is paid for a share (or a house) is out of the market. Someone pays money to the previous person who owned that thing and the money is therefore always outside of the market. What you hold is a title of ownership which you hope someone else will pay money to you to own. So the $30 billion loss is merely a loss in valuation, not an actual loss of money. The money is still out there circulating around, being hoarded or being paid for other things. Money is ephemeral, nebulous, and hard to pin down. But it's good to think of it as being a representation of someone's effort in this world, be that physical or mental. Real money is created when someone does real work. So what happens when the valuation on houses drops in huge way? It means that the money that was paid for that house, which is almost always borrowed has a certain quantity of work owing on it by the buyer. The "credit" extended to that buyer, is a claim on that person's future work. An amount that the person in different market conditions believed was a fair amount in order to own the house. When the price valuation collapses, they are left with the situation that they still owe the same amount of work to own the house; and the bank still has a claim on that amount of work from you. If you cannot do that work, or you lose the capacity to do so, then you lose the house. The bank loses the "froth" ie. the value of the loan over and above the current valuation. If more than a certain percentage of their customers are unable to stay solvent, then the bank itself also becomes insolvent and should face the music, just like its customers all have to. The credit boom and malinvestment isn't a one sided fault, it's a tango and the take home message should be that banks must be made to suffer the consequences. Government money if it's used at all, shouldn't be used as a blank cheque, but rather the failing banks should be nationalised and shareholders and creditors should take the losses. Anyhow, the post is beginning to get out of hand. Suffice it to say that time will tell and show us just how far the prices can come down. The credit is still out there, and there are massive holes to be filled in the banks loan books. That money will get there by hook or by crook and it's going to devastate the house market and prices in the process. To give you a real life example; I had a bank who was willing to lend me whatever money I wanted at one point; and on the investment property I recently completed building (long story) the bank wanted a valuation during the construction before they released the final funds. That, for someone who has the capacity to pay off the loan in 3 years based on income. So I hate to imagine what others are facing in order to borrow these days.
Many thanks intelligencer - no need to continue the explanation - I appreciate your time and view point as stated above regards Ag
Dont forget Motherhood - its divine. It looks like your wife is going into a "bubble" thats worth having. Congratulations.
Last night I was "tuning out" with some TV when I noticed a new show on Channel 9 called "Joy of Sets" about TV programs of the past. What was interesting is that HotProperty by Michael Caton has been pulled off the air! Axed after being scheduled at prime time of 11:30pm on a Sunday night! I had seen a few episodes with disastrous passing in of auctions and there reaally was no amazing stories to tell. The boom in property was over a while ago, but the passing in of that show is very telling imo. Today I saw 8 For sale signs on a road I go through once a month. People are noticing.
We need to lease an additional commercial space in Sydney to allow for expansion in our other premises, but I am wary of signing anything in this climate. I have been holding off, it is almost a relief that the inevitable GFC stage II arrived on Friday, at least now I can see watch for a bit and see where the carnage has landed so as to be able to make more informed business decisions for the next phase.
RPData September: http://jasonnevinsrealestate.files.wordpress.com/2011/09/rp-data-sep-2011.pdf Sort of confirms what you're all seeing?
