Nothing is for ever, house prices will fall. There are tell tail signs already showing signs of a dramatic decrease in property prices.

Remember in that late 90's, South East Asia was the power house of the world. Everyone thought the boom would never end, but boy did it ever. China's economy will contract (consumer demand from America is already dropping sharply) and Australians, who have leveraged on the belief that house prices will continue to rise indefinitely, will loose.

What do others think?:ohno:

Of course there will be a crash or 'correction', it is the nature of the beast methinks. I just wish I knew when it will happen so I can know when to buy.

Do you guys think house prices will fall, or stay steady, i.e. they wont fall, or increase, but stay on the same level?

They will fall. As demand from the US for Chinese products declines. Interest rates are going up and will continue to be raised until inflation is within the 3% band. The gap between wages and house prices has forced first home owners out of the market. Lastly consumer debt is at record levels. All in all this is a dangerous coctail... tick tock

move over saul eslake

Isn't it good when prices fall?

Cheaper prices = population increase = more investment = more sales.

They will fall. As demand from the US for Chinese products declines. Interest rates are going up and will continue to be raised until inflation is within the 3% band. The gap between wages and house prices has forced first home owners out of the market. Lastly consumer debt is at record levels. All in all this is a dangerous coctail... tick tock

Any ideas when the crash is going to occur, or is it happening right now as we speak?

Does anyone have a date? There is all this talk, but no estimates, surely someone can have an estimate to the fall, is it happening now, or will it happen mid year?

I wan't it to happen, nothing is better then when all the greedy people lose there money, from riches to rags, that's the way it should be.

Sorry LB, when house prices crash it's generally the little people who get hurt. If you own a $10m mansion in Toorak outright and prices drop by 10%, it really doesn't matter much. If you've struggled to save the 10% deposit on a $400K suburban house and owe the rest, a 10% drop wipes out your equity - any more and you're in negative equity. A fall might be potentially helpful to FTBs but many of them would hold back, worried that the market had further to fall.

Sorry LB, when house prices crash it's generally the little people who get hurt. If you own a $10m mansion in Toorak outright and prices drop by 10%, it really doesn't matter much. If you've struggled to save the 10% deposit on a $400K suburban house and owe the rest, a 10% drop wipes out your equity - any more and you're in negative equity. A fall might be potentially helpful to FTBs but many of them would hold back, worried that the market had further to fall.

Yes very true, but people who get greedy and buy 10 houses on loans, these people get greedy and can suffer a little, but your right, the rich ones in Toorak don't get hurt, it always seems the rich get richer and the poor get poorer.

Of course there will be a crash or 'correction', it is the nature of the beast methinks. I just wish I knew when it will happen so I can know when to buy.

+ 1

I think it will be a more steady correction than a sharp crash, but realistically I know no better than anyone else :)

My two bobs worth ! :ohno:

IMHO we are about to revisit the early 1990's - the main objections to this view tends to come from Gen Y's who haven't tode the wave before and still think the sky is the limit.

Re Toorak Toffs being protected, I disagree. These are the merchant bankers on mega bonus packages who have 6 apartments in the Docklands and a share portfolio leveraged to the hilt - e.g. David Coe @ Allco, King @ MFS, the cracks have already appeared. In this economy the poor battlers haven't been able to buy a house in Melbourne.

The RBA is very clear in their last announcements that they are going to inflict pain ! Think what happens when the economy pulls up.....the banks at an institutional level have already ceased lending !!

The end is nigh my friends - run for the hills, or better still, get a job in repossesions or insolvencies !!

Any ideas when the crash is going to occur, or is it happening right now as we speak?

Does anyone have a date? There is all this talk, but no estimates, surely someone can have an estimate to the fall, is it happening now, or will it happen mid year?

I wan't it to happen, nothing is better then when all the greedy people lose there money, from riches to rags, that's the way it should be.
__________________
We can only speculate when it will happen or how big the crash will be. I don't believe it will simply be a correction. This is hopeful thinking. In the past 10 years house prices have risen by 250% driven by low interest rates, tax incentives by the Howard Government and now the resource boom. We know tax rates will increase at least another 4 times this year (the reserve bank has already signaled such). And the Howard Government has been dumped. This now means we are pinning all our hopes on the resource boom continuing. This means the Chinese and Indian economies need to continue to grow. Unfortunately both these economies are heavily dependant on demand from US consumers, and the US economy is tinkering on recession. In other words, there is a whole plethora of factors that could affect house prices in Australia and none of these are looking particularly stable.

:|

While you're at it, can you tell me which day I have to buy a powerball ticket so I can win the Jackpot?

Or when i can holiday safely in Afghanistan....

Qantas - yes
Lightning Bolt - yeh we have an exact date but we just not telling anyone!
Londoner - wrong!
Lightning Bolt - also wrong
Spin Doctor - very true
Agent X - I'm with you
Shyhigh - get off the date already!
Tayser - Yes!!!!
Edward - Never going to happen, but I get your point!

Qantas - yes
Lightning Bolt - yeh we have an exact date but we just not telling anyone!
Londoner - wrong!
Lightning Bolt - also wrong
Spin Doctor - very true
Agent X - I'm with you
Shyhigh - get off the date already!
Tayser - Yes!!!!
Edward - Never going to happen, but I get your point!

It's good to see someone thinks their an authority on everything:applause:

Hey, not on everything, but I know a little about property and construction!

In all seriousness, what's your take on the state of the domestic property market?

It's unfair. A whole generation muscled out of the property market. And a whole other dumb generation staring at you with a blank face going "Why don't you just save a deposit and buy a house? It's not hard. I did it, so can you." :bash:

all depends on market sentiment in oz. As we all tracking very well financially (inflation the problem) should people get nervous over spending and pull the reigns (too much) and this couple with rising interest rates, thinks could affect peoples 'feeling' and spiral out... No one can predict the future but trends arent looking good.

You might like to get you head around this dire warning!Lets hope he is not right.

http://64.233.187.99/search?q=cache:poH5MG1eicgJ:cvbtheanalyst.wordpress.com/2008/01/11/legendary-funds-manager-julian-robertson-predicts-utter-global-collapse-stemming-from-bursting-of-property-bubble/+http://cvbtheanalyst.wordpress.com/2008/01/11/legendary-funds-manager-julian-robertson-predicts-utter-global-collapse-stemming-from-bursting-of-property-bubble/&hl=en&ct=clnk&cd=1


In a recent interview on CNBC with Ron Insana, one of the “old-timer”funds manager, Julian Robertson, predicted “utter global collapse” as a consequence of the bursting of the world-wide property bubble.

Often called “Never Been Wrong Robertson”, the former head of Tiger Management (once the largest hedge fund in the world), is extremely worried about the speculative bubble in real estate.

Specifically, he is very worried about a world that is sustained by American consumer spending which is in turn 1/4 sustained by a property bubble. He predicts that 20 million people could lose their homes once the property bubble bursts.

Even more worrisome, he thinks central banks around the globe out of desperation will try to re-inflate the world economy with more liquidity that will create an inflationary spiral unseen in the economic history of mankind. “Where does it end?”, Insana asked Robertson. “Utter global collapse,” he answered. But not just economic collapse … collapse of epic proportions. Collapse and disintegration of all infrastructure, including government. Inflation will run into the double and triple digits. “Food production will fall. People will be carrying around U.S .

dollars in wheelbarrows like Germany,” he said.

There will be “total collapse of public infrastructure. Total collapse of medical care systems. All public pension plans, Social Security will collapse. All corporate pension plans will collapse.”

“The American consumer is effectively now supporting the rest of the planet,” he continued. “Consumption rates in all other nations are falling, have fallen to the point that the tax revenues to governments, that the business and industries those nation states are providing is now a net negative number relative to total debt service and public cost, that this exists in virtually every nation state on the planet now.”

And for much of this “doom”, interestingly, he blames the Bush-Cheney “regime”. “They have now consolidated power and money on the planet to the maximum extent possible. The planet’s net liquidity, that is its, net free cash flow. Is now a negative number. The planet is not simply sinking into a sea of red ink; it is already sunk. The people just don’t realize it yet,” he said.

According to Robertson, “the Bush-Cheney regime is preparing the nation for transition from democracy into dictatorship because a dictatorship will be necessary to control, in 5 years time, food and water riots.” He said “the federal government, that part of Patriot II Act, the internal exile, that the government is going to have to build now huge detention compounds on federal lands, probably in the West where the land is available, to potentially house 50 million or more citizens that will be in financial ruin.”

In 10 years time, whoever is left will be effectively starting again, he said. “More importantly, and I’m trying to think how we imply this or how we express this to the people, what extraordinary times we are living in and how the destruction of the planet has been engineered by the Bushonian Cabal from 1980 to 1992, and then from 2001 to present, which has effectively destroyed the economic liquidity of the planet,”

he said.

Robertson ended the interview by saying that he hopes he is not alive to see this. “The lucky ones are the ones who are my age now,” he said.

Eeek.

doomsday part................deux dix?

What are the chances of SAMA not going ahead now? :ohno:

ALL SPECULATIVE!

What are the chances that you'll loosen up and stop worrying about everything? Seriously, do you even manage to get any sleep at night?

Chamomile tea can help...and long walks in the bush to clear the head.

http://www.institutional-economics.com/index.php/weblog/zero_bubble1/


Building more mid- to high-density residential property in the inner and middle suburbs can help too.

In my lifetime I have seen boom and bust in the stockmarket and real estate market several times already.

Let me emphasize, these cycles have always been with us, get over it and just relax (and don't take out a massive loan). :lol:

So what if you have no loan, and no house? Still has an element of eeek. :)

gud gawd

I chose the wrong decade to grow up!

Shares and property, as a long term investment, in most cases will generate a healthy return. There will always be peaks and troughs. The loses are those that buy during peak times and sell when prices contract. Prices only fall on paper, it is only when you sell that the contraction is realised. The market always bounces back, but it won’t happen over night.

Wow I'm so relieved that it so simple. Phew! Wow I'm so suprised that people can ever lose money with that philosophy. Gee think of all those idiots that just didn't hang on to their shares and property in the last crash. Because there wouldn't be any other external factors that could possibly make someone sell in a trough. You should really get your own financial advise website. "Only fall on paper." Brilliant!

But the difference is that few 'ordinary' people borrow money to buy shares, whilst when it comes to property the smart thing is to gear yourself as highly as possibly ... until interest rates rise and/or capital values slide, when it downside of gearing becomes very evident.

http://www.illusionsgallery.com/Four-Horsemen-Mikh-L.jpg

Perhaps not just yet..........

Cheers,

Adam

There will be “total collapse of public infrastructure. Total collapse of medical care systems. All public pension plans, Social Security will collapse. All corporate pension plans will collapse.”


What are the chances of SAMA not going ahead now? :ohno:

ALL SPECULATIVE!

Society and its supporting infrastructure, as speculated by Julian Robertson, will colapse completely....and yet all you can think about is SAMA and if the development will go ahead?!?!? .....i think you will have more important life dependant issues to worry about if this eventuates rather than a skyscraper development

Wow I'm so relieved that it so simple. Phew! Wow I'm so suprised that people can ever lose money with that philosophy. Gee think of all those idiots that just didn't hang on to their shares and property in the last crash. Because there wouldn't be any other external factors that could possibly make someone sell in a trough. You should really get your own financial advise website. "Only fall on paper." Brilliant!

I sense a hint of sarcasm in your post :)

Lightning Bolt - yeh we have an exact date but we just not telling anyone!


I'm not asking for an exact date, only one person knows that, no one can predict that, is iot going to occur this year next year, what's an estimate to someone, isn't going to hurt.

Oh and the only person who knows is Chuck of course.

Wow I'm so relieved that it so simple. Phew! Wow I'm so suprised that people can ever lose money with that philosophy. Gee think of all those idiots that just didn't hang on to their shares and property in the last crash. Because there wouldn't be any other external factors that could possibly make someone sell in a trough. You should really get your own financial advise website. "Only fall on paper." Brilliant!

mmmmm

I'm not asking for an exact date, only one person knows that, no one can predict that, is iot going to occur this year next year, what's an estimate to someone, isn't going to hurt.

Oh and the only person who knows is Chuck of course.


In my view it is almost impossible to gage. There are a number of factors that need exist before demand takes a nose dive. One thing is for sure, if interest rates do rise another 4 times this year (as the reserve bank has indicated) we are likely to see an aggregate shift in the demand curve.
:)

In my view it is almost impossible to gage. There are a number of factors that need exist before demand takes a nose dive. One thing is for sure, if interest rates do rise another 4 times this year (as the reserve bank has indicated) we are likely to see an aggregate shift in the demand curve.
:)

It's good for the struggler, but not for the devloper, means things are going to slow down around Melbourne town.

well the 'threat of a recession' has been looming for a few years now and it hasn't stopped all these great developments from happening. let's just wait and see. i'm glad a few of these 'great developments' are well into their construction phase though.

for selfish reasons i would like this to happen soon so i can get in the market! :nuts:

if you go by the numbers, real estate prices are really overpriced at this stage (calling south yarra...)

but you also need to take into account the boom in population especially from migrants... the more they come, the more demand there will be, which pushes prices further up.

that said there is the factor of interest rate rises and the resulting mortgage stress amongst a great number of homeowners.

until such time that immigration/continued demand cannot offset the effects of high interest rates, then we will see a downturn, whether its gonna be gradual or a crash its hard to tell atm.

Some more food for thought! From todays AGE sorry for some reason I cant copy the link.

The revolution comes

Martin Jacques
February 20, 2008

Page 1 of 2 | Single page

A global power shift is in the making, as the growing economic crisis takes hold, writes Martin Jacques.

THE world is holding its breath, still trying to grasp the potential enormity of what is unfolding. Economic downturns and stock-market crashes are hardly unfamiliar, of course, even if a decade or so seems a long time ago for Western consumers habituated to rising house prices and non-stop shopping. But this crisis threatens to be rather different, a Big One.

Already it has forced the British Government to engage in what has been a heresy for almost three decades: nationalisation. Major crises — such as the Northern Rock debacle in Britain — are not matters of punctuation or pauses for reflection, but defining historical moments, marking the end of one era and the beginning of another.

The 1970s was a classic case, as huge oil price hikes fed an inflationary spiral that brought both the long boom and the postwar welfare consensus to an end, and led to the rise of neo-liberalism and deregulation.

This crisis, however, threatens to be even more fundamental. While the 1973 gyrations were the result of a temporary shift of power from the industrial world to the Organisation of Petroleum Exporting Countries, the underlying cause this time is permanent and far-reaching — a fundamental shift in power from the developed world to the developing world — above all China and India. There has not been anything like this since the inception of the West as an industrial powerhouse in the 19th century.

The economic and political consequences will be of such a scale that they are impossible to comprehend. The present crisis has been long in the making, even if it has been obscured by the US spending more than a decade in denial, as illustrated by the absurd neo-conservative hubris after September 11 that envisaged America as a latter-day Rome and failed to tackle the growing imbalances between the US as a huge over-spender and East Asia as a massive saver.

There are two conclusions that we can draw from the economic crisis that began last August and might, in some form or another, last for a prolonged period. First, it heralds a major reduction in the global economic and political influence of the US, rather in the manner that the 1931 crisis announced the final and belated end of Britain's global economic supremacy.

Fundamental systemic crises are often associated with the decline of the dominant imperial power and its increasing inability to sustain the system over which it had previously presided. The profound instability of the interwar period owed much to Britain's inability to maintain its role.

The present crisis, at root, is a consequence of the economic decline of the US and its increasing weakness at the apex of an international financial system of which it was the architect and chief beneficiary. This is most clearly expressed in the US' chronic balance-of-payments deficit and its long-term dependence on East Asian inward capital flows to shore up the value of the dollar.

Perhaps the present turmoil will ease, but in truth the old arrangements are now coming apart and, in anything other than the short term, seem patently unsustainable. We are entering a period of protracted instability as the old order breaks down, the US seeks to resist change and the world embarks on a conflictual and painful passage towards a new global economic order.

The second conclusion is that the political consequences of this shift will be enormous. The interwar crisis led to the Second World War and the birth of Keynesianism. The less significant OPEC crisis of the 1970s destroyed the social-democratic consensus and led to the triumph of neo-liberalism.

And this time? One thing seems certain: the neo-liberal orthodoxy will be undermined. This could come in many different forms. It could lead to a rise of protectionism in the US and Europe against developing countries such as China, or new regulations designed to prevent sovereign wealth funds from taking over what are deemed key strategic assets.

When the free market and deregulation are the means by which the Western world extends its global economic power over the developing world, then they are deemed highly virtuous. But it is a different matter when they become the instrument by which developing countries can extend their influence over Western economies.

Similarly, during a recession, the state is likely to be called into active service on a far more regular basis as Western governments seek to deal with the mushrooming effects of market failure.

It is not an accident that developing countries — virtually the whole of East Asia, for example — view the role of the state in a far more interventionist way than does the Anglo-Saxon world. Laissez-faire and free markets are the favoured means of the powerful and privileged. The decline of the Western world could well usher in a significant change in this mind-set.

The political terrain is shifting. Attitudes towards the US are a case in point. The move towards neo-liberalism in Britain was intimately bound up with the embrace of the US as the country to be aped and copied. The American model was celebrated by Thatcherites and New Labour alike, California worshipped as the model of the future, "Anglo-Saxon" embalmed as the fitting metaphor for the shared Anglo-American legacy, Europe denigrated and the rest of the world ignored.

How perceptions of the US have changed: a country living beyond its means, dependent on large helpings of Asian credit, characterised by huge inequalities, its great financial institutions guilty of huge folly, forced to rely for their salvation on the sovereign wealth funds of China and elsewhere. And, remember, we are only at the very beginning of the biggest geopolitical shift since the dawn of the industrial era.

Martin Jacques is visiting research fellow at the Asia research centre, London School of Economics.

Auctions slump signals end of boom.

MELBOURNE'S rampaging property boom has finally cooled after years of soaring prices. Auctions failed to fire yesterday and the Real Estate Institute of Victoria last night declared the market had peaked and prices were easing.

In the first big test for the market this year, some real estate agents reported clearance rates of less than 60 per cent. The figures are well below last year's high-flying results, which consistently topped 80 per cent clearance. Few buyers attended sales across the metropolitan area and those who did nervously sat on their hands. Auctions in outlying suburbs were especially quiet.

Even "bargain" homes offered at foreclosure auctions failed to sell. And many agents blamed the Reserve Bank's warning this week of a sustained wave of interest rate rises. Despite the six consecutive interest rate rises in the past two years, the bank is still warning it must further rein in spending.

Real Estate Institute of Victoria chief Enzo Raimondo said the excitement of high capital growth was "over for this year". "I've spoken to a lot of agents in the past few days and they are saying that things are starting to slow," he said. At Melton West, a mortgagee sale of a six-bedroom house passed in at $200,000 -- $255,000 had been offered in November. A MODERN four-bedroom Vermont home passed in for $800,000, despite five buyers having made earlier offers about $850,000; and an ALTONA North family cancelled an auction of their three-bedroom home because of a lack of interest.

http://www.news.com.au/heraldsun/story/0,21985,23266297-661,00.html

But house prices always go up, because the Herald Sun told me so last year!

I was at an auction in Melbourne yesterday. Reasonable crowd but only a couple of serious bidders. The property passed in at about 150K below reserve of 1.4 million. It later sold for less than reserve. Before Christmas, this property would have easiliy gone for 1.5 - 1.6 million.

We are going to see a 5 - 10% decline in capital city residential prices this year. A lot of people have been seriously burnt by the recent 15- 20 % fall in equity markets and at the same time, rising interest rates are eating into peoples borrowing capacity. I have also heard rumours that there are some financial sector layoffs around the corner......watch this space !

Just bought an apartment for below the advertised price. It seems that we were the only really interested buyers. Things are slowing down.

For the best methinks. We don't want to end up in the same boat as NSW with 30,000 younglings per year up and moving to cheaper climes to live....

Don't know if it's slowed down in South Yarra though. Just came back from an auction in Lang st which was the size of a normal double garage but twice as long and ready to be pulled down. It went for 1,050,000. So the buyers were only paying for land value.

By the way the property was marketed at 750-850. So it sold well above the quoted price.

Just bought an apartment for below the advertised price. It seems that we were the only really interested buyers. Things are slowing down.

Congrats! Not in Camberwell Junction i hope!

http://www.news.com.au/heraldsun/story/0,21985,23266297-661,00.html

MELBOURNE'S rampaging property boom has finally cooled after years of soaring prices.

Auctions failed to fire yesterday and the Real Estate Institute of Victoria last night declared the market had peaked and prices were easing.

In the first big test for the market this year, some real estate agents reported clearance rates of less than 60 per cent.

The figures are well below last year's high-flying results, which consistently topped 80 per cent clearance.

Few buyers attended sales across the metropolitan area and those who did nervously sat on their hands.

Auctions in outlying suburbs were especially quiet.

Even "bargain" homes offered at foreclosure auctions failed to sell.

And many agents blamed the Reserve Bank's warning this week of a sustained wave of interest rate rises.

Despite the six consecutive interest rate rises in the past two years, the bank is still warning it must further rein in spending.

Real Estate Institute of Victoria chief Enzo Raimondo said the excitement of high capital growth was "over for this year".

"I've spoken to a lot of agents in the past few days and they are saying that things are starting to slow," he said.

At Melton West, a mortgagee sale of a six-bedroom house passed in at $200,000 -- $255,000 had been offered in November.

A MODERN four-bedroom Vermont home passed in for $800,000, despite five buyers having made earlier offers about $850,000; and
AN ALTONA North family cancelled an auction of their three-bedroom home because of a lack of interest.

At auctions across the Barry Plant network yesterday the auction clearance rate was 58 per cent. It would normally be about 70 per cent at this time of the year, Mr Plant said.

"The negative publicity in the past week (about increasing repossessions of Victorian houses) has made people a little cautious about their spending," said agent Jeffrey Anderson, of Woodards.

Houda Hameed, who withdrew her Altona North property from auction, said her house was better than others that had sold in her street.

"I just don't understand why this happened," she said.

Roxburgh Park agent Kon Balasis, of Raine & Horne, said: "Buyers are taking their foot off the accelerator a little bit."

Agents said there was a widening gap between what buyers were offering and the prices vendors hoped for.

"There has been a shift back towards the buyers," said inner northwest agent Brad Teal.

Mr Teal said this year's market was a "totally different animal" to last year's rampage.

Barry Plant Group director Barry Plant said buyers were less urgent.

"I feel it pulling back a little bit," Mr Plant said.

I do not see it roaring forward in the next three months."

BAH, why do we bother.

might want to look back a page.

My take on all this is that we're all in a bit of a mess.

We've had 7-8 years of rises now, which is clearly unsustainable. Before the boom, property was cheap here relatively. Now we're not far behind London and New York with the average cost of a (crappy) house (in a crappy suburb) here costing a staggering 7.5 times the average income. Wages haven't risen - only stamp duty, petrol and the cost of living has. Thanks to inflation interest rates are now rising faster than you can say 'foreclosure'. Which means first home buyers, the lifeblood of the market, can't afford to get in.

It's for this simple reason I think that the market is stuffed because if you can't get on the property ladder, you can't work your way up the property ladder, which means those who bought pre-boom won't be able to sell their home later to downsize and fund their retirement either. A lot of these pre-boom owners have been borrowing against their home equity too thinking prices will just keep rising 10% a year, which probably isn't the smartest idea.

What annoys me is that this biggest property bubble in history hasn't helped anyone except real estate agents. It's just made lot of older people paper rich and younger people stressed. Governments globally have done nothing to stem the investor madness and now it's too late to fix it. It's speculation to say what will happen, but it's now such a big mess worldwide the only thing that might fix it is a crash.

Young people today must feel like they have little hope of ever owning a house. Which wouldn't be so bad, but there's nothing to rent either. No wonder so many young kids are go into the city every night just to find someone to beat up.

Just bought an apartment for below the advertised price. It seems that we were the only really interested buyers. Things are slowing down.

Gappa - given the contents of this thread and general consensus, I am interested to know what motivated you to buy at this time? Was it a particularly good bargain for that area etc?

Congratulations anyway!! :)

Gappa - given the contents of this thread and general consensus, I am interested to know what motivated you to buy at this time? Was it a particularly good bargain for that area etc?

Congratulations anyway!! :)

Mainly because we liked it and have been dissapointed before by missing out on something we really liked, we've been hunting for around six months. Not a super bargain but we are happy with the price and it's well within our means.

Thanks.

[gloat mode] Oh, the pleasure of having bought at the lowest part of the cycle, to have refinanced just before the rate rises at a 5 year fixed rate so there's no worry about rate rises and not to have overfinanced [/gloat mode]

Feel kinda bad for some colleagues who borrowed 110% of their property's value and are now in negative equity with rising rates:mad:

The market will soften but houses are still as safe as themselves.

Cheers,

Adam

My take on all this is that we're all in a bit of a mess.

We've had 7-8 years of rises now, which is clearly unsustainable. Before the boom, property was cheap here relatively. Now we're not far behind London and New York with the average cost of a (crappy) house (in a crappy suburb) here costing a staggering 7.5 times the average income. Wages haven't risen - only stamp duty, petrol and the cost of living has. Thanks to inflation interest rates are now rising faster than you can say 'foreclosure'. Which means first home buyers, the lifeblood of the market, can't afford to get in.

What annoys me is that this biggest property bubble in history hasn't helped anyone except real estate agents. It's just made lot of older people paper rich and younger people stressed. Governments globally have done nothing to stem the investor madness and now it's too late to fix it. It's speculation to say what will happen, but it's now such a big mess worldwide the only thing that might fix it is a crash.

ok, a few points:

1.i generally agree with

2.i'm glad you acknowledged that it is a problem overseas too, not just in Australia.

3.i wonder if compulsory superannuation was introduced earlier, and there was more of an aggressive push towards medium density urban development, rather than a weak half-hearted shift towards dual occupancy in the late 80's/early 90's, how much different the state of the market would be now. eventually prices would have increased--it's inevitable--but maybe we could have avoided this boom and the 'spread effect' would have occured over a 15 or so years, instead of a 5-6 year one, allowing time for wages to catch up.


Young people today must feel like they have little hope of ever owning a house. Which wouldn't be so bad, but there's nothing to rent either. No wonder so many young kids are go into the city every night just to find someone to beat up.

i think the effects of this are going to be more deleterious to Australian society than people think. it's a big change in our way of living, that's for sure, and it's bound to have negative social effects, unless it's handled correctly, ideally through legislation. i doubt it though. Australia, like America, has become too market centric for its own good.

This article covers housing affordability and much more....

http://www.theage.com.au/news/national/2028-bigger-than-sydney/2008/03/03/1204402365089.html

From The Age

Victoria unlocks vast tracts for housing
Paul Austin
March 4, 2008

TENS of thousands of new home sites will be created around Melbourne under a dramatic State Government strategy to tackle the housing affordability crisis and cope with the city's population boom.

Premier John Brumby will announce today that all available land within Melbourne's urban growth boundary will be zoned residential — one of the biggest land releases in the city's history — in a bid to give more young families and first-time buyers the chance to get into the property market.

The fast-tracked home sites will be concentrated in five outer-suburban growth corridors: Wyndham and Melton-Caroline Springs in the west, Hume in the north, Whittlesea in the north-east and Casey-Cardinia in the east.

The Age believes the release will cover private land — meaning some farmers, for example, will be able to subdivide their holdings for the first time — but will not encroach on the city's protected green wedges.

Mr Brumby, who believes Melbourne will overtake Sydney as Australia's biggest city by 2028, will unveil his plans hours before the Reserve Bank is expected to raise interest rates again and a day after Prime Minister Kevin Rudd announced the Federal Government would double the national rental affordability scheme.

State cabinet decided to speed up the release of residential land after receiving what one Government insider dubbed a "big wake-up call" about the extent of Melbourne's population boom.

Department of Treasury and Finance analysis of data from the 2006 national census shows Melbourne is on track to regain its title as Australia's biggest city within 20 years.

With Melbourne now growing at nearly 1500 people a week, the population is expected to top 6.2 million in 2020, a decade earlier than previous estimates based on the 2001 census.

This move will put further pressure on the Government's 2030 strategy for Melbourne's urban growth by increasing housing density in the outer suburbs more quickly than previously planned.

The Treasury analysis shows Melbourne's population increased by about 270,000 — one-third above forecasts — between 2001 and 2006. There were more new households — 86,613 — in Melbourne than in any other Australian city in the five years between censuses.

Mr Brumby believes the biggest challenge is managing Victoria's growth, so the state does not become a "victim of success".

The Government is expected within weeks to endorse contentious plans for a multibillion-dollar tunnel under Melbourne's inner northern suburbs to help ease traffic congestion by connecting CityLink with the Eastern Freeway, and has already announced projects valued at $5 billion to secure Melbourne's water supply.

Mr Brumby will use a speech today to the Urban Development Institute of Australia to paint this as a historic moment for Melbourne.

The city outgrew Sydney in the 1850s because of the gold rush and was known internationally as "Marvellous Melbourne" in the 1880s, but was overtaken by Sydney early in the 20th century.

Many commentators expected the 2000 Olympics to mark the final "victory" of Sydney over Melbourne, with some demographers predicting the Brisbane-Gold Coast corridor would soon push Melbourne back to third place.

But a poll earlier this week revealed that one in five Sydneysiders were considering leaving the city. Among the main reasons were the high cost of living, traffic congestion and overcrowding.

The Premier argues that the Bracks/Brumby Government's pro-families policies of the past eight years — including reinvesting in schools, hospitals and police — have helped transform Melbourne once again into a people magnet.

In the 1980s and early '90s Victoria was losing families to other states. Now it is consistently recording net gains in interstate and overseas migration.

In a bid to portray himself as the leader for the times, Mr Brumby will say the past decade was for rebuilding Victoria, but the next decade is for action.

He will say the state's rapid growth is a sign of success but the challenge is to prevent it from undermining Victoria's famous "liveability".

Today's speech is the first in a series expected this year to outline what the Government plans to do to ensure Victoria has sufficient services and infrastructure for future growth.

They will focus on transport congestion, regional Victoria, preventive health, climate change and "social inclusion".

On housing affordability, Mr Brumby will release today a report showing Melbourne now has only about eight years of zoned residential land supply — compared to the 10 years forecast just 12 months ago.

He will argue that housing affordability is mainly a Commonwealth issue because it is governed largely by interest rates and inflation.

But he will acknowledge that the states can help by unlocking land.

What are people's opinions on this policy to tackle housing affordability?

Personally, I have no interest in buying a property in Zone 3, either for investment or owner occupier, and since I think there are others like me - I'm not sure if it will ease the demand and therefore affordability on inner-city dwellings very much.

But I'm willing to be proven wrong...in fact I hope I will be!

Happy to prove you wrong...though on a minor point. There's no more zone 3. Though i must agree with your overall sentiment.

What are people's opinions on this policy to tackle housing affordability?

Personally, I have no interest in buying a property in Zone 3, either for investment or owner occupier, and since I think there are others like me - I'm not sure if it will ease the demand and therefore affordability on inner-city dwellings very much.

But I'm willing to be proven wrong...in fact I hope I will be!

It's not going to improve inner city prices. But that's the way it goes. Good property close to the city will always be in demand and therefore expensive. The aim would be to bring the prices of homes that are not inner city, back to realistic prices, so that the majority of the population (middle class families, and lower income earners) can afford to comfortably buy a home to raise their family in.

It's not going to improve inner city prices. But that's the way it goes. Good property close to the city will always be in demand and therefore expensive. The aim would be to bring the prices of homes that are not inner city, back to realistic prices, so that the majority of the population (middle class families, and lower income earners) can afford to comfortably buy a home to raise their family in.

No that's not the answer. Affordability can't simply be pushed to the outskirts of the cities as it creates bigger and worse problems. Look at very expensive cities like London for example, where schools have had to shut down because they can't get teachers, because the teachers can't afford to live near by.

What we need is proper affordable housing as part of EVERY development over a certain size (say 15 dwellings), sold exclusively to either low-income earners or NFP housing associations for rent - all with caveats controlling price and onward selling. In the middle and outer suburbs, this would be achieved easily through building smaller, more efficient houses in denser developments. In the inner city, it would require sacrificing of more luxury aspects to developments: Ensuites, expensive kitchens, car parking spaces, pools and gyms etc.

Unit developments in middle suburbs (such as Waverley Park) are also wasting land. There is generally 2-3 units maximum per suburban block, and they are often quite large and often only single storey. A family of 3 or 4 can live quite comfortably in a 3 bedroom, 120m2 unit. In Waverley Park for instance, there are very few properties smaller than about 250m2 and 4 bedrooms. Most blocks could easily contain 4 or 5 such units with plenty of open space. There is no reason that such developments - if built modestly, couldn't be made profitable at a price of 250-300k. We don't all need 3 bathrooms and 3 living spaces.

^^ I didn't say it was the answer. I said it would be the aim (amongst others) of this current plan, and it would be used to attempt to ease strain on prices in the deep suburbs. They aren't interested in improving affordability in the inner city. And frankly no matter what you do, it's always going to be expensive to live close to the city.

Yes but not as disproportionately expensive. There should still be price layers which enable mid-income earners to enter the market in inner-city properties (not be relegated to Caroline Springs).

OSJ - completely agree with your post.

And frankly no matter what you do, it's always going to be expensive to live close to the city.

No. That's not true, and it's not sustainable. We can't expect low income people to only afford living on the periphery, especially as the periphery is now up to 60km from the centre. What would happen in 50 or 100 years? New home buyers being forced to buy in Seymour or beyond Geelong? What would that do for transport, not to mention social cohesion??

Affordable housing schemes work elsewhere, and there is no reason (other than political will) that they couldn't work here. If we don't act, we will find ourselves very quickly in the same situation as Sydney - where the problems of affordability have slowed the growth of the city.

No. That's not true, and it's not sustainable. We can't expect low income people to only afford living on the periphery, especially as the periphery is now up to 60km from the centre. What would happen in 50 or 100 years? New home buyers being forced to buy in Seymour or beyond Geelong? What would that do for transport, not to mention social cohesion??

Affordable housing schemes work elsewhere, and there is no reason (other than political will) that they couldn't work here. If we don't act, we will find ourselves very quickly in the same situation as Sydney - where the problems of affordability have slowed the growth of the city.

Close to the city does not mean within city limits. It means CLOSE to the city. IE less than 10km from the center. Where it will always be expensive to live, period, because demand for inner city areas rarely if ever slows, so house prices will be high to reflect that demand.

Build low cost housing close to the city center, delegate percentages of new housing developments close to town as "affordable" by all means, but that won't change the median house price for the homes you look at in the windows of the real estate agent on Acland Street. The inner city will remain expensive for the person that doesn't fall into the low income (and can take advantage of low cost housing) or high income brackets.

I'm not saying it's right, or fair, or sustainable. It's outrageous how much people are getting away with selling a 1 bedroom flat for. I want to live inner city. I'm young, have no children, and spend 98% of my time in the CBD or it's bordering suburbs, but because my income sits in between the high bracket and the low bracket, it's not likely to be a feasible option for me. I can't afford the high prices without sacrificing any semblance of a life, and I'm not eligible to buy property that is set aside for low income earners.

^I don't think you understand how affordable schemes work. There are a variety of mechanisms:

For instance - Some involve cost control, where the prices are regulated. They go up with CPI, but are fixed to remain at a percentage below market value. Some involve building more modestly to keep costs down. Some involve shared ownership schemes (where you purchase equity in a percentage and the government owns the rest).

The important aspect is that such units are NOT open to higher income earners or investors, either when first built or sold on, and management is done through not-for-profit organisations.

In London for instance, they are now pushing for 50% of ALL developments to be affordable. That won't help the problem instantly, but it will go a long way. In the UK, affordable housing schemes are open to either low-income earners or what are referred to as "key-workers" ie people in essential industries such as nurses, teachers or police on low or middle incomes. You go on a list until something comes up.

We already have some affordable housing in Australia - but it is generally only provided for welfare recipients - and generally only for rent. These schemes extend that to up to middle income earners. So for instance, I rented in London in one of the more expensive areas (could never afford to buy), yet there were many developments within the area which had affordable properties either to buy or rent.

This helps on many levels - it avoids wealthy enclaves, it ensures that workers in ALL industries can live close to work, and helps to regulate the market.

In order to expand the schemes here, you'd need to set up the mechanisms for assessment or expand existing ones. There are already NFP housing associations here, but they'd need expanding. Builders would need to find models that build economically without creating slums. In the suburbs, the simple answer is density, as the land is the biggest cost. Currently normal suburban houses are built to a cost (to the purchaser) of around $800-900 per square metre - meaning that a 2-3 bedroom unit costs around $100k icluding profit. Get 5 onto a $600k suburban block and you should in theory be able to sell them easily for $250k - even in areas close to the city.

In the inner city, the simple method would be to elimate car parks for affordable. The market currently demands a parking space per unit, and therefore developers are forced to build quite large parking structures. With affordable, they would instantly save probably 20k off the build cost of a unit by not having a parking space, or dedicating car-share spaces to several units. Reducing the inclusion of pools, gyms, full glazing to every external facade, expensive fitouts etc, would help to further lower the costs.

Shumway here is an example from London:

Albion Riverside, by Foster and Partners (image from their website). The curvy building is the private expensive flats in Battersea - which is quite central and pricey, right on the river. You can see the smaller white and minty green coloured buildings to the rear and side. These are the affordable units, managed by a not-for-profit housing trust, and built as a requirement of the scheme. They comprise over 20% of the entire development.

http://www.fosterandpartners.com/content/projects/1001/64478.jpg

OSJ I'm not debating the fact that there is a need for sustainable/low income housing, or that projects need to be implemented to help rectify the balance of salaries living in the inner city, or that they help people break into the property market in an area close to the city, or how these projects actually work. All I'm saying is that these projects alone don't reduce the median house price of a suburb and they rarely benefit middle income earners because lower income earners or average earners in public service industries are given priority or exclusivity in these schemes.

Therefore the issue still remains that the inner city will remain notoriously expensive because 98% of homes/units are privately owned, for private sale, at market prices.

^Yes but if these schemes were universal and to a decent level - ie 20% of all newbuild stock, then it would slowly have an effect. The inner city's population has grown signficantly over the last 15 and will do the same for the next 20 years. Affordable housing schemes if universal would get the numbers of such units to levels where they would effect overall house prices, both through effecting the average, and through reducing the ability of investor lead booms to occur.

By regulating the bottom third or quarter of the market, restraint would be introduced to the rest of the market. Buyers of full price private developments would be lost to affordable schemes, and investors would be pushed out in favour of owner/occupiers or NFP organisations.

Well, it ain't quite crashed just yet!

I am flabbergasted by what the house two doors up for me just sold for.

Cheers,

Adam