How Low will House Prices Go ?

[MyFavco]

There are many forces coming together to bring downward pressure on House Prices. As some have said, many people on this forum are not yet on the property ladder, so all this negative news is a positive to many.

But how low will they go and when do you buy?

Australian economics typically follows the same fate as Amercia and the UK. This gives us about 12 months early warning on what is about to happen.

The US house prices have collapsed, and some areas decimated due to their links with the failed US manufacturing industry.

The UK has started their more general downward trend, and is now looking for the bottom. They expect that prices will have dropped by a massive 30% by late 2009.

UK house prices 'to fall by 30%'
BBC News | 16-12-08

The head of Barclays bank has predicted that economic gloom will deepen, with house prices to fall in total by 30%.

John Varley's warning comes ahead of the latest UK unemployment figures on Wednesday, where the number of jobless is expected to rise sharply.
A new survey suggests household debt is on the increase, and the value of sterling has fallen against the euro.

House prices have already fallen by 15% this year, and his remarks suggest they may fall at the same rate next year.

John Varley, group chief executive of Barclays, painted a bleak outlook in an interview on Sky News, during which he criticised mortgage borrowing levels over the last decade.

He warned the UK was only "halfway" through the slump with house prices set for even greater falls.

He said: "Our view was that from the top to the bottom, you would see a fall of something like 25 to 30%.

"I suspect we're about halfway through that at the moment. I mean that slowdown, the negative house price inflation started in 2007, it's accelerated in 2008.

"We're probably about halfway through that period, so in other words we've got another 10 to 15% to fall between now and the end of next year. That would be our assessment."

His bleak prediction extended into the jobs market.
He said: "Our view is that unemployment will rise. Unemployment is likely to go north of 7% over the course of the next 12 months or so, it might be as high as 7.5%.

"I think an additional 700,000 people unemployed over the course of the next 12 months is certainly possible to contemplate."

Mr Varley was speaking ahead of the release, on Wednesday, of the latest UK unemployment figures.

The number of jobless could rise sharply, with some forecasters warning the total of those out of work might hit two million or more.

Debt increase
Meanwhile, a survey commissioned by the Bank of England has suggested an increase in the number of households struggling with debt.

Many said they had less to spend after paying household bills and had saved less than they expected.

Nearly 2,500 households were interviewed for the survey in late September and early October.

More respondents were finding their debts to be a burden than in any similar survey since the mid 1990s.

The bank says after a period of growth and low inflation, it has seen an abrupt change in the circumstances facing British households.

Sterling's lows
International investors' lack of confidence in the UK economy has seen the the pound hitting new lows against the euro: last week one pound bought as little as 1.11 euros, the lowest ever.

But the government appears to have ruled out action to shore up sterling.
On Sunday the chief secretary to the Treasury, Yvette Cooper, told the BBC the government was not planning to step in to support the pound.
She said attempts by previous administrations to target exchange rates had been unsuccessful.

Instead the government would continue to try to keep inflation under control and support the economy, she said.
"We have never had a policy of targeting the pound. Our policy has been to target inflation and that, I think, has been the right way. It has paid off over the last 10 or 11 years."

Huge deficits
But the government has been warned that any action it takes to support the UK economy must not break EU rules.

European Central Bank President Jean-Claude Trichet told the Financial Times that the EU's "stability and growth" pact must not be allowed to fall apart.
The pact has rules designed to stop EU member states from racking up huge budget deficits and national debt in order to boost their economies.
"We would destroy confidence if we blew up the pact," he said.

Mr Trichet is said to be worried that fiscal indiscipline - such as governments printing large amounts of currency in order to boost spending - could threaten "already fragile" economic confidence.

[Dean]

Originally Posted by MyFavco

The US house prices have collapsed

The situations/events that caused the meltdown of US property prices are the exact opposite as to what's happening in Australia.

The US has a massive over supply of unsold houses with no buyers while in Australia we can't build them fast enough to keep up with demand.

[Skyline Art]

Only problem is people must be looking for cheaper or new homes.

The problem is perhaps Australia must have the wrong kind of housing stock for different people's needs, as there appears to be thousands of homes for sale around the country; just look up a place on www.realestate.com.au or in the local news papers. There's always plenty of pages of ads for most Qld places, even Darwin seems to have heaps, not sure about other cities though...

[AndyGM]

Prices will come down, but not to the same extent as the US.
There just isn't the same level of oversupply in the market.

[LanceDriver]

^ prices are far higher in australia against inflation compared to the long term average than in the us or uk. when people lose their jobs, or a fearful of losing them, they will happily share a rental property with other people to spread the load. rents are dropping across sydney even though there is a so called "under-supply" and supply of housing stock isn't as thin as it may seem compared to the long term average household size.

[ryan79]

..

[AtD]

It really depends how long the financial crisis lasts, because it's the unavailability of credit that's the limiting factor at the moment. We still have population growth rising and construction rates falling.

[Dean]

Originally Posted by AtD

It really depends how long the financial crisis lasts, because it's the unavailability of credit that's the limiting factor at the moment. We still have population growth rising and construction rates falling.

The dust will settle eventually, maybe 6-12 months, and the credit squeeze will ease. All those people who are waiting for the bottom to drop out so they can buy will miss the boat once again.

[zach24]

15% - 20% from peak - conservative figures.

Add in inflation to give a real negative return.

[Locke]

40-50%, in some cases more.

Just wait and see, it's already started.

[Sanj]

Originally Posted by Locke

40-50%, in some cases more.

Just wait and see, it's already started.

lawl

[ryan79]

..

[Nate Von Longneck II]

This thread will enter its fourth year in ten days.

Lance and Locke must be loaded by now.

[mapps]

Originally Posted by Nate Von Longneck II

This thread will enter its fourth year in ten days.

Lance and Locke must be loaded by now.

hahahaha

[Locke]

For all the pumping in this thread by ryan and nate over the years, fact is, year after year, I could walk into ryan's suburb and get a better deal than he got on a slice of Perth surburbia.

[Sanj]

Originally Posted by Locke

For all the pumping in this thread by ryan and nate over the years, fact is, year after year, I could walk into ryan's suburb and get a better deal than he got on a slice of Perth surburbia.

for all the dumping in this thread by locke and lancy over the years the fact is, year after year, i have made a lot more from porperty than i have lost

the fact is nate lives in a fully paid off apartment 3kms from the cbd

no matter which way you slice it locke, by you sitting on the sidelines waiting for your balls to drop you have done nothing to improve your financial position

indeed

[Nate Von Longneck II]

Originally Posted by Locke

For all the pumping in this thread by ryan and nate over the years, fact is, year after year, I could walk into ryan's suburb and get a better deal than he got on a slice of Perth surburbia.

You may get a better deal, you may get a worse deal.

Step one is educating yourself, you really need it.

Originally Posted by Locke

40-50%, in some cases more.

Just wait and see, it's already started.

[Locke]

Originally Posted by Nate Von Longneck II

You may get a better deal, you may get a worse deal.

Step one is educating yourself, you really need it.

Well I'd get a better deal.

If I ever need some lessons about negative ROI I'll be sure to look you up though, cheers brah!

[Nate Von Longneck II]

Originally Posted by Locke

Well I'd get a better deal.

If I ever need some lessons about negative ROI I'll be sure to look you up though, cheers brah!

We'll do a swap!

You could give me lessons on how to let three years of my life slip away without making any financial progress, whilst simultaneously acting like an expert in an investment class I have zero experience in!

Fair deal?

[Sanj]

Originally Posted by Locke

40-50%, in some cases more.

Just wait and see, it's already started.

hai locke 228 railway pde, bayswater

owner bought it the same time you predicted 50% drops, in some cases more

purchase of 2x1 house on 770 sqm - $490k

renovations - around $40k

subdivision costs around $20k

construction costs (started this year, just finished) - around $200k

allow $50k contingency+$50k holding (he was living there so that is waqy too much but im in a generous mood)

total costs = $850k.

just sold - front house $550k

rear house $635k

minimum profit = $250k. not bad when you were predicting 50% drops hey?

i had nothing to do with this btw, just wanted to show with a real example that once again there have been opportunities everywhere while you worry about the sky falling in. sorry brah