[cobran20]

I guess he won't be advising his clients in the US to buy property here. But then if you were in the US and wanted to buy property, why would you look here in the first place when you get much better value at home?!

NEWS: Bloodbath to hit Australian real estate, US property analyst Jordan Wirsz says

Quote

AUSTRALIA'S love affair with property is about to be tested amid predictions prices will plummet by as much as 60 per cent, with capital cities hardest hit.
That’s the Armageddon-esque warning from leading US real estate analyst Jordan Wirsz, who believes Australia is heading towards a property bloodbath as the global economic downturn spreads to China and eventually here.

Mr Wirsz advises Fortune 500 CEOs and fund managers on investing in real estate.

He predicts that a flood of properties will begin to hit the the market in Australia from next year as investors scramble to bail out, leading to a property crash of magnitude the country has not seen before.

“Right now is not a time to be buying real estate in Australia," Mr Wirsz said.

"The market has slowed substantially but residential prices are likely to fall up to 60 per cent, possibly even more, within five years."

The outlook is even grimmer for land investments, which Mr Wirsz said are more speculative and will plummet by as much as 80 and 90 per cent in value.

Commercial property will also take a hit in line with the residential sector shedding at least 50 per cent of its value.

Mr Wirsz pointed to artificially low interest rates, high loan-to-value lending practices, overinflated property prices, unrealistic vendor expectations and Australia's large number of second mortgages.

“I’m bearish about world real estate but I couldn’t be more bearish about the Australian market," he said.

"There have been corrections but they don’t hold up to the scale of what is coming.

"The paradigm is that nobody ever believes house prices can go down but those who have bought at the top of the market are going to be sorely disappointed."

He predicts property prices will be on a slippery slope next year when interest rates begin to rise, commodity prices peak and China's demand for Australian exports slows.

A sluggish recovery will begin in 2016.

“If you are homeowner, be cautious, get rid of your debt, consider selling if you don’t plan to be in your house for more than seven years and downsize or become a tenant," he said.

The only winners will be real estate agents cashing in on bank-owned properties, he added.

Adding to the glum outlook, properties in capital city would be hardest hit “because Australian cities are some of the most overvalued in the world and more speculative than regional areas", Mr Wirsz said.

Mr Wirsz joins other international naysayers including visiting US economist Harry Dent who recently said Australian house prices were 50 per cent overvalued.

With few exceptions, local experts disagree with their predictions.

HSBC’s chief economist Paul Bloxham said for property values to crash there would need to be sharp rises in interest rates, unemployment and housing stocks.

That combination is not on the cards, he said.

"I am not of the view that there is a looming housing bubble in Australia as it seems many doom and gloomsters are," Mr Bloxham said.

"Surely if the market was going to collapse it would have happened in 2009 after the Lehman's collapse when we had the biggest aversion to housing assets that you’ve seen.

"All we saw was a 3 per cent fall in house prices and then they rose."

Mr Bloxham believes an undersupply of housing, more rate cuts, low dwelling price to income ratios and strong overseas demand for Australian assets will act as buffer from global instability

"Some commentators aren’t doing the calculations correctly, they typically look at detached houses in the capital cities, they don’t incorporate apartments and regional areas, and they overstate the level of house prices to income."

Sydney real estate agent Charlie Bailey of Ray White Inner West believes there will not be a burst because there is no bubble.

"People have been predicting house prices to fall every year and every year we have an increase in prices," Mr Bailey said.

"In Sydney, we have 20,000 people a week looking for accommodation and not enough supply.

"I can't see the city's housing infrastructure changing any time soon so a prediction of a 60 per cent fall in property prices is a big call."

[savagegoose]

i look forward to cash only sales

[tor]

Quote

"Surely if the market was going to collapse it would have happened in 2009 after the Lehman's collapse when we had the biggest aversion to housing assets that you’ve seen.

"All we saw was a 3 per cent fall in house prices and then they rose."

How much did that cost us again?

[savagegoose]

i think it was $40 billion in mortgage insurance ran up by Ruddy Boy. at around $8B a time.

[Solomon]

Quote

"The market has slowed substantially but residential prices are likely to fall up to 60 per cent, possibly even more, within five years."
The outlook is even grimmer for land investments, which Mr Wirsz said are more speculative and will plummet by as much as 80 and 90 per cent in value.
Commercial property will also take a hit in line with the residential sector shedding at least 50 per cent of its value.
Mr Wirsz pointed to artificially low interest rates, high loan-to-value lending practices, overinflated property prices, unrealistic vendor expectations and Australia's large number of second mortgages.
“I’m bearish about world real estate but I couldn’t be more bearish about the Australian market," he said.
"There have been corrections but they don’t hold up to the scale of what is coming.

Now that's what I call bearish!! Whoa!!

Has this guy got credibility though?
Any runs on the board?
Or is he talking through the top of his hat?

I like to know that what I'm hearing has some substance to it, before I get all gooey inside.

[Mr Medved]

Solomon, on 20 January 2012 - 12:11 PM, said:

Now that's what I call bearish!! Whoa!!

Not really. I've been consistently stating of a predicted fall in real terms of at least 50-70% for the past 3-4 years, with some markets falling over 80% from peak to trough. I think it was syd2k or someone else who presented a spreadsheet that predicted a 78% drop. I don't expect a bottom before 2018 (at the earliest).

However I don't advise Fortune 500 CEOs on real estate so take it with a grain of salt.

[Solomon]

I also should declare that one of my children signed a contract on a home this week.
They are expecting their second child, and have outlived their current unit.
They were talked into it by the in-laws though.
"You've got to put your toe into the water sometime, and get into the market", type talk.
My concerns were pretty well dismissed, as just doomy and gloomy.
Ah well, you can lead a horse to water, but you can't make them drink.
I resort to faith, when my children do things I have no control over.

So to read that report, sent shivers down my spine.
I guess that's why my reaction is a bit strong.
When it strikes close to home, you realise what some people have on the line with a mortgage hanging over their head.
I must admit that they have been sensible about it, and did have a reasonable deposit to put towards the purchase, but they are still borrowing around $200,000, which is a fair amount in my books.
I've worked through their finances with them, and they seem to be able to meet the repayments fairly comfortably, given that I expect interest rates to rise again at some point through their 25 year mortgage.
We worked on a buffer up to 10%.
I know they can go higher, but you can't paint too bleak a future for them. They get cranky!!!
And I thought I was the cranky one.

I don't anticipate them turning the home over, in the near future, or maybe even for 20 years, so that's a little comforting.
But for now its settle in, and allow whatever will be, will be.

[savagegoose]

nvm sol,
over in this thread http://www.simplesus...__fromsearch__1 i posted about the 9500 a year the gov is giving to new home builders to rent out to people , over 10 years. it seems the gov really is keen to keep prises pumped as long and as hard as possible.
we will have to go back to 1930 depression for the gov to consider cutting back on support for house prices.

[mattau]

Solomon, on 20 January 2012 - 12:39 PM, said:

I also should declare that one of my children signed a contract on a home this week.
They are expecting their second child, and have outlived their current unit.
They were talked into it by the in-laws though.
"You've got to put your toe into the water sometime, and get into the market", type talk.
My concerns were pretty well dismissed, as just doomy and gloomy.

Tha article is very much about doom and gloom.

If it does turn out that AUS gets its "bloodbath", then at least you'll be able to tell them "i told you so"...

[satanoperca]

savagegoose, on 20 January 2012 - 01:05 PM, said:

nvm sol,
over in this thread http://www.simplesus...__fromsearch__1 i posted about the 9500 a year the gov is giving to new home builders to rent out to people , over 10 years. it seems the gov really is keen to keep prises pumped as long and as hard as possible.
we will have to go back to 1930 depression for the gov to consider cutting back on support for house prices.

All facets of government are implicit in keeping RE prices high for a simple reason, they need the revenue generated from high property prices because of their inability to be financially responsible with money.

State Govnuts need to stamp duty, with all state govnuts heavily in debt, how much revenue would they loose in stamp duty if property prices halved

Local Govnuts, same goes again with council rates based on the value of your home. I find this one funny, my retireed parents wish property prices halved for the simple reason there insurance and council rates would decrease. they dont care about the value of their home, as they will stay there until they take there last breath of air.

I also see the major negative effect falling property prices will have the economy with this simple scenerio :

Mr and Mrs Jones own a nice home in inner melbourne valued at $500,000. Every year they have been told their property is worth 8% more. So every year they don't mind spending savings of $40K because their equity has gone up the same amount, money for nothing fantastic and everyone benefits, especially retail.

This year Mr and Mrs Jones have been told their property has gone down 8%, there is no way they are willing to spend that $40K, they need to save that $40K to remain at break even. If this situation is played out across the entire country, a massive amount of spending money dries up immediately and then results in many job losses, which further weakens the housing market.

So it has been consecutive govnuts mismanagment of the RE sector that have caused this problem and it will effect every Australian. I propose we hang first Kevin Rudd from the increase in the FHVG and secondly for selling our children out with opening up the FIRB rules and allowing every cat and dog from every part of the globe to buy our land.


I was at a BBQ last night, everyone was talking about RE, all of the home owners with large mortgagees, they all believed that property will keep on rising throughout the decade. After listening to them all for some time boast about how much equity they had I offered them a simple bet for a small amount, compared to their equity of $10,000. I predict that RE will be down 15% from peak over the next three years. They all laughed at me with comments of no way can that happen, I laughed back and said they could all make an easy $10K then. Not one of them had the balls to take the bet, I was very disappointed.

Cannot see RE going anywhere in the next few years.

Cheers and back to my cave I shall go.

[zaph]

Quote

All facets of government are implicit in keeping RE prices high for a simple reason, they need the revenue generated from high property prices because of their inability to be financially responsible with money.

that does not apply equally across all levels of government. local councils are the most able to keep their revenue the same if house prices declined.

Quote

State Govnuts need to stamp duty, with all state govnuts heavily in debt, how much revenue would they loose in stamp duty if property prices halved

it would be unsavoury for state govts to double stamp duty if house prices halved. they would have to look elsewhere for tax revenue.

Quote

Local Govnuts, same goes again with council rates based on the value of your home. I find this one funny, my retireed parents wish property prices halved for the simple reason there insurance and council rates would decrease. they dont care about the value of their home, as they will stay there until they take there last breath of air.

if house prices halved it would be politically easy for local councils to double rates, the absolute rates figure would stay the same.

Quote

Cannot see RE going anywhere in the next few years.

agreed

[tom]

mattau, on 20 January 2012 - 02:20 PM, said:

If it does turn out that AUS gets its "bloodbath", then at least you'll be able to tell them "i told you so"...

I take it you don't have children?

Even putting children to one side living somewhere where house prices are off about 15% the odd throw away comment a few years back about the ridiculous house prices around here at BBQ's or dinners out do occasionally come back to haunt me now with a "seems like you might have been right, tom", I typically now try to distance myself from earlier comments as I definitely do not want to be known as the pr**** who saved money off others peoples misery. Sure I don't mind being that pr***. But I don't want to be known as it.

It is a terrible conversation to have with someone when they are seeing what they thought was wealth, eroded. If they are in real deep it nearly ranks up there with the discussion of a recent cancer diagnosis, so I don't think rubbing their faces in it is approapriate when the shtf for them.

Sure you might say, what about all those torturous evenings where you had to listen to people gloating of their most recent house projcet or the new powerboat they bought off equity, but really didn't we always know they were going to be doomed in the end? That was certainly some solace for me at the time.

[tom]

satanoperca, on 21 January 2012 - 02:00 AM, said:

Cannot see RE going anywhere in the next few years.

I can see it being supported early this year, sure and not falling or rising much.

My timeline of the rapid descent of Australian house prices is around the current level of mining investment. I know plenty say but it only employs 10% or less of our workforce but it employs breadwinners not part time jobs. Add to that the jobs in construction that will go and you have a whole lot of direct hurt.

Second to that flagging government revenues will mean they may be forced to tighten fiscally at the worst possible time.

Add to that that our governments credit rating is fundamental to our ccurrent mortgage rates.

Add to that, that thuis investment flows to more places than mining and construction and the profits these companies make are also distributed in part amoung Australian shareholders.

Even if China does not shrink its iron ore demand I still think just with the supply levels coming on line in the next 18 months we now have about 12 months tops before the mining "boom" finishes up. It will take only about 6 months after this for house prices to comence a more rapid ond obvious descent.

[savagegoose]

i ask those who gloat about their financial prowess, , what if they sell and move? what can the buy with the money?
as most people only have 1 house, the answer is, nothing other than another house. ie they made nothing.

maybe the people who had 5 properties, ans still have 5 properties, and decide to sell 4 of the, , maybe they have financial prowess. but i dont meet any at BBQ's

This post has been edited by savagegoose: 21 January 2012 - 05:28 AM

[Ruffian]

tom, on 21 January 2012 - 05:01 AM, said:

I take it you don't have children?

Even putting children to one side living somewhere where house prices are off about 15% the odd throw away comment a few years back about the ridiculous house prices around here at BBQ's or dinners out do occasionally come back to haunt me now with a "seems like you might have been right, tom", I typically now try to distance myself from earlier comments as I definitely do not want to be known as the pr**** who saved money off others peoples misery. Sure I don't mind being that pr***. But I don't want to be known as it.

It is a terrible conversation to have with someone when they are seeing what they thought was wealth, eroded. If they are in real deep it nearly ranks up there with the discussion of a recent cancer diagnosis, so I don't think rubbing their faces in it is approapriate when the shtf for them.

Sure you might say, what about all those torturous evenings where you had to listen to people gloating of their most recent house projcet or the new powerboat they bought off equity, but really didn't we always know they were going to be doomed in the end? That was certainly some solace for me at the time.

I totally agree with you, Tom.

Previously I didn't talk about RE much because my views were considered to be extreme and alarmist, now I don't talk about it much because to do so would be smug or socially inappropriate.

I do listen quite a lot though...

[tor]

I used to talk about it because the idea of a house price problem was an interesting idea. Now that it has happened I don't talk about it because it isn't interesting anymore.

[ummester]

tor, on 21 January 2012 - 08:44 AM, said:

I used to talk about it because the idea of a house price problem was an interesting idea. Now that it has happened I don't talk about it because it isn't interesting anymore.

It ain't over till the fat lady sings (or cries - where is my equity?), so it is still vaguely interesting.

satan - I can't belive no-one took your bet:)

zaph, that thing about rates has been discussed before, I'm sure. Rates = value X variable - where the variable is adjusted to produce the same rates whatever the value. Was having this discussion with a homeowner once who complained their land rates didn't decrease when their land value decreased in the 90s or something - the ACT government just adjusted the variable and then, whe values rise again, they adjust it by less to get some extra on the way up. Even on the way down, profit on the way up - keeps the public services wages flowing:)

[tor]

ummester, on 22 January 2012 - 04:13 AM, said:

so it is still vaguely interesting.

Not hugely though. The lead up was interesting because it was either a new thing in history or going to be spectacularly the opposite of what the pundits were claiming. Like the dotcom bubble.

Now we are at a point where the majority of pundits are in roughly the ball park of what I expect to happen (sorry S3K, I just don't see 70 - 80% drops across, say, Sydney). 15% drops or 20% drops in a year and everyone can say they were close enough.

With any luck this bubbles popping will lead to the interesting things we got from the dotcom bubble bursting. Probably not as houses are just houses but I can hope.

[ummester]

tor, on 22 January 2012 - 05:20 AM, said:

Now we are at a point where the majority of pundits are in roughly the ball park of what I expect to happen (sorry S3K, I just don't see 70 - 80% drops across, say, Sydney). 15% drops or 20% drops in a year and everyone can say they were close enough.

With any luck this bubbles popping will lead to the interesting things we got from the dotcom bubble bursting. Probably not as houses are just houses but I can hope.

I'm still thinking 10-20% in 2012, then 5-10% in 2013, 5-10% in 2014, then flat a bit then up very slowly between 2016 and 2020. Min 25% correction over the next 3 years, max 40%ish. Even this will severely change the way Australia deals with money going forward, so still interesting times ahead.

[tor]

ummester, on 22 January 2012 - 05:45 AM, said:

I'm still thinking 10-20% in 2012, then 5-10% in 2013, 5-10% in 2014, then flat a bit then up very slowly between 2016 and 2020. Min 25% correction over the next 3 years, max 40%ish. Even this will severely change the way Australia deals with money going forward, so still interesting times ahead.

True but, if you can see what I mean, everyone is expecting drops now. It was an interesting discussion when everyone was claiming it was the only way to get rich. Now it is just that I am a little bit different to normal sentiment which leads to a discussion which terminates with "oh so a bit worse than what everyone else is saying".

Very few people have the math / logic to continue the discussion when it rolls into what the impact of these drops will be because, I suspect, they think they will personally be exempt.