Author Topic: Bad real estate situation. I mean really bad.  (Read 10551 times)

terrier56

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Bad real estate situation. I mean really bad.
« on: May 18, 2014, 01:11:43 AM »
Ok so I don't want to sound like a mr complainypants but I am struggling to deal with the real estate prices of my local city. I was hoping for some advice on the matter.

The city: Perth Western Australia
Median house price: $590000 AUD ($549k USD)
Median wage for Perth: $68k AUD (63.3k USD)

This means that houses are a whooping 8.6 times median wage which however everyone I know continues to buy housing. Since i am getting close now to have a deposit ready it will be expected of me to purchase a house soon in the future.

Is the correct option for me to rent until these ridiculous prices drop (if they ever do, whenever i mention a drop people seem to snarl at me as if i have done something wrong)???
Please help me mustachians!! :)

agent_clone

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Re: Bad real estate situation. I mean really bad.
« Reply #1 on: May 18, 2014, 02:09:22 AM »
Hmm, admittedly I don't know the Perth Market.  But, there may be some indication that prices are going down.

It looks like rental vacancy rates are going up and rents going down at the moment:
http://www.macrobusiness.com.au/2014/04/winter-chill-comes-early-to-perths-rental-market/

My understanding that Perth prices are somewhat dependant on the mining sector so I guess it depends on how you think that may go?  If you are planning on living there a long time it won't matter too much, however I would get something that you are comfortable paying.

E.g. assuming a 80k p.a. wage, and a 90k deposit, a place around 400k is doable.  As it is the media, there should be homes for more, and homes for less than 590k.

If you don't mind a 50 minute train commute to the city you could also try somewhere like Mandurah there seem to be a number of houses <300k there though I guess it may be harder to sell if you decide to move?

If I were looking to buy in Perth I would keep an eye on what is happening over the next 6-12 months and see from there, it will probably take that long to find something you like anyway.  If you are planning on living there longer term and you feel you have a stable job, then just buy if you want.  I personally wouldn't be buying in Perth at the moment though (Then again I keep thinking about buying in Canberra even though I don't know whether I want to stay here longer term as I hate the cold and I don't have a permanent job, we all know where that market is going...).

People around you don't need to know how much of the deposit you have, really its none of their business!  If you decide to wait and see just keep saying your saving a deposit.  No one needs to know how large that deposit is!

N.B. People are snarling at you because they don't want their own house prices to go down making them underwater.

deborah

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Re: Bad real estate situation. I mean really bad.
« Reply #2 on: May 18, 2014, 02:29:12 AM »
Why do you have to live in Perth? OK, I know that everyone who moves from there longs to be back to the great beaches, the absolutely magnificent Swan River, the balmy days... I'm serious, I have worked with people who are constantly applying for jobs back in Perth. You don't have to build your stash where you end up retiring. Perth is a lot smaller than Sydney, Melbourne and Brisbane, so there are more job opportunities in these other places.

With the mining sector in decline for a few years, it may be a bad place to stay from a job perspective, and a bad place to buy if the house prices go down. I don't think we have seen what happens when the FIFO families desert a city when a mining boom slows down. Perth is about to have that happen to it, so house prices could easily go down.

And listen to the people here. They say that you should buy what you need now rather than the 5 bedroom 4 bathroom McMansion that all your friends are buying - just in case you have 4 kids in 10 years time. That can be a lot cheaper than you think - you won't be paying extra interest and you will own the house sooner. Also, stay in it until you are bursting at the seams.

One reason for buying the bigger house would be if you plan to have housemates. This can be an option that really reduces the time you have a mortgage, but you need to be prepared to live with other people in your house - some people don't want to do that.

johnintaiwan

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Re: Bad real estate situation. I mean really bad.
« Reply #3 on: May 18, 2014, 02:35:14 AM »
I feel your pain. I live in an area where house prices vs rent seem crazy to me.  The house next door sold for about $150K (usd) and we pay about $270 a month for our place. But, people keep pressuring my wife and I to buy something. I think I am going to try and keep making excuses and keep renting. I can live with not owning something and having prices continue to go up. I might seem strange to some family members, but so be it.

SnackDog

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Re: Bad real estate situation. I mean really bad.
« Reply #4 on: May 18, 2014, 04:36:25 AM »
If you can't afford a house, buy an apartment near the university, live there until it is legal to rent out for the tax advantage.

Blackadder

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Re: Bad real estate situation. I mean really bad.
« Reply #5 on: May 18, 2014, 07:04:39 AM »
I don't get the pressure to buy. It reminds me of the thinking that just this one last purchase would make ones life complete. Of course, because that kind of thinking is the problem, then comes the next item to purchase, and so on.

I've bought a house before discovering MMM, not overpriced, but not a bargain either, and I have serious regrets. If I were you, I would whip up a spreadsheet and compare cost of the alternatives. Personally, in the calculation, I would also assume appreciation inflation to be the same, that is, ignore them both.

totoro

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Re: Bad real estate situation. I mean really bad.
« Reply #6 on: May 18, 2014, 07:59:51 AM »
I live in an area with the same house price to income ratios. 

I don't live in Australia however, so I don't understand all the tax dis/advantages of rent v. buy - do you?  Also, what are the rates, term and amort. of mortgages?  How are capital gains treated?  Do you get an exemption for your primary residence?  When is mortgage interest tax deductible? If you don't know all of this I would study up first.

In our case we chose to buy a triplex rather than a SFH because the rental income pays the mortgage and expenses.  It is also a hedge against high future mortgage rates (although we have a ten year term).   You should run the numbers in your neighbourhood for multi-family or larger houses where you can rent out rooms if you would consider this. 

When I say "run the numbers" it means you need to do the math.  There are spreadsheets out there on sites like bogleheads or maybe a RE blog for Australia.  A lot of them allow you to put the numbers in and get a cash on cash return plus a cap rate.

You then need to do long-term modelling.  What happens if prices drop?  Can you hold?  What if you lose your job?  Can you still hold?  What if prices rise?  How about equity paydown over time?  How will this purchase affect your path to FI in 5, 10, 15 and 20 years making reasonable and conservative assumptions about prices (they can't continue to increase past the rate of inflation forever imo) over the long-term.

I wouldn't buy a house because you are expected to.  I would buy if you understand everything and believe you are making a good investment that works with early retirement if that is your goal.

arebelspy

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Re: Bad real estate situation. I mean really bad.
« Reply #7 on: May 18, 2014, 08:07:55 AM »
Lots of good advice in this thread.

I'd be renting and investing all my money in various stock markets (or in real estate overseas if you'd like real estate).

If you have to own then realize it's not a financial decision, but an emotional one, own up to it, and just do it. 

:)
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totoro

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Re: Bad real estate situation. I mean really bad.
« Reply #8 on: May 18, 2014, 09:09:54 AM »
I understand the advice to rent rather than own, but I don't agree that this necessarily works for your situation. 

The fact is that there may be a crash, but maybe not.  The US had some unusual lending practices and economic circumstances that were not mirrored in Canada or Australia and did, imo, lead to a bubble/crash situation.  What arebelspy has done during the crash in the US was a very smart move and he will exceed my returns - but it is not an opportunity we may get in Canada or Australia.  Your life is time limited and you have only so many opportunities to buy depending on savings/income/credit and stage of life.

In Canada and the US there may also be a long period of low rates with low growth to balance the past run up.  Where I live, the flat  scenario now appears more likely and has, in fact, been occurring for four years now.  In addition, if you are just starting out and have a smaller down payment and rates rise you are in situation in which you will be paying a lot more interest because the mortgage is so large.  You may not be able to qualify for a mortgage.

In this environment buying a smart rental property can work and, in any situation but a crash where you have lots of cash (assuming the crash is correlated with a rise in interest rates as your cash gives you a huge advantage), seems to be an okay move.   

Rental income acts as a hedge against all the risks.  In a high value market you are going to make a lot of money on one property provided you can hold through a down or flat period and you have a longer-term low-rate mortgage.  This is where modelling is your friends.  Run the numbers through all scenarios.

In our case, our mortgage and expenses are paid by rental income on a property we purchased for approx $720,000 plus reno costs.   The purchase prices was more than for a single family house, but we are in a very good financial position because of this - we are actually put into the position of having a house fully paid for ie. no monthly housing cost.  This frees up other income to invest.

In ten years, we will have saved the equivalent rental cost of the unit we are in ($1700 a month).  In our case we have an extra $20,400 a year after tax to invest.  Compounded at 6% over ten years (assuming we are at average returns for the stock market), this is $321,554.80.  It would actually be more because rents go up over time and because this money will be used to make RRSP contributions and reduce other taxable income.

Now we need to deduct the lost opportunity costs of our $180,000 initial investment (assuming again 6% over ten years compounded) of $147,000, and we get about $174,554 more as a result of owning this property.

Then add the principal pay down of an additional $160,000 and in ten years you have $334,554 more than you would have had as a renter, assuming no home appreciation whatsoever.

In ten years our house would have to be worth about half what we purchased it for for renting to have been better than buying.    However, we know that historically houses have appreciated at 5% annually.  Given the run up, if we reduce this to 3% the house might be worth $967,619 in ten years.  That is an additional $247,619 in equity.  That said, we will have to pay capital gains tax on part of it due to renting part of the property.   However, we won't sell in a year of high income, if ever, so I expect we will pay little in capital gains taxes on it.

If you add up those numbers you will see that you get to about $540,000 in the black in ten years - deduct $30,000 for costs of sale and you get $510,000.   This is a rough example of what a good spreadsheet can do for you.  It will be much more accurate with real numbers and all variables accounted for, but I believe that there is a large advantage to buying in this situation. 

Also, will continue to receive rental income in increasing amounts as the mortgage is paid off.  This means we will be put into a better situation than a paid-off SFH eventually.  It will be housing and retirement income in one.

If you are in a low-cost low-rent area like the US I would not use this strategy as there are other options and buying a SFH might be reasonable. In high value area this works imo.  What is too risky for me in a high value area is a SFH with no rental income.  I would not do this.  I like value my free time too much to spend it paying for a very expensive house.
« Last Edit: May 18, 2014, 09:12:29 AM by totoro »

Another Reader

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Re: Bad real estate situation. I mean really bad.
« Reply #9 on: May 18, 2014, 09:29:51 AM »
"low-cost low-rent area like the US"

Hahahaha....Silicon Valley has you beat by a fair margin.  I'm sure there are low-cost low-rent areas in Canada, just not in the areas that are highly desirable.  Same as the US.  Same strategy would apply, except 2 to 4 unit properties in good locations around here are hard to find at any price.  Most folks are stuck on their hamster wheels, paying for the seven figure tract home.

totoro

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Re: Bad real estate situation. I mean really bad.
« Reply #10 on: May 18, 2014, 10:26:00 AM »
Very hard to find around here too and getting harder as time passes and more people understand the math and prices go up. 

It is possible though, and where it is not possible you might need to understand how to convert to multi-family and where it would be permitted to get good returns.

aj_yooper

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Re: Bad real estate situation. I mean really bad.
« Reply #11 on: May 18, 2014, 10:46:38 AM »
Hmm, admittedly I don't know the Perth Market.  But, there may be some indication that prices are going down.

It looks like rental vacancy rates are going up and rents going down at the moment:
http://www.macrobusiness.com.au/2014/04/winter-chill-comes-early-to-perths-rental-market/


If the population is constant or increasing, declining rents and higher rental vacancy would argue for more home buying, no? 

arebelspy

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Re: Bad real estate situation. I mean really bad.
« Reply #12 on: May 18, 2014, 11:28:22 AM »
Hmm, admittedly I don't know the Perth Market.  But, there may be some indication that prices are going down.

It looks like rental vacancy rates are going up and rents going down at the moment:
http://www.macrobusiness.com.au/2014/04/winter-chill-comes-early-to-perths-rental-market/


If the population is constant or increasing, declining rents and higher rental vacancy would argue for more home buying, no?

Sure. And in the US in 2004-2007 rental rates slid and vacancies increased as everyone bought.  Wasn't sustainable though, and then home prices went down as rents increased and rental vacancies decreased as people lost their homes.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
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totoro

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Re: Bad real estate situation. I mean really bad.
« Reply #13 on: May 18, 2014, 11:53:18 AM »
Yes, and the real estate cycle is impacted by national trends and policies, but also by local matters. 

Now in many places in the US prices are rising.  In absence of something like the loss of a long-term employer, real estate cycles do not rise or fall in a straight line but, just like when you look at the stock market, they rise over the long term as an average.  Those impacted by a downturn (subprime mortgages on marginal qualifications?) are not those who bought a rental property with income enough to cover their mortgages, they would have been able to ride out the cycle and perhaps buy more at or near bottom.

In some desirable markets the crash was less severe and prices have recovered to a new high already if I understand matters correctly?  I might be wrong because I don't follow the US market closely but this chart seems to indicate this for San Francisco at least (which might be comparable to Perth on desirability):  http://www.paragon-re.com/3_Recessions_2_Bubbles_and_a_Baby   Maybe that chart isn't accurate as it is published by a RE company, so someone who knows can correct me.

Even if you bought at peak in many the desirable areas and you wait ten years you will be well above purchase price.  If you had rental income you would be far ahead in ROI.  If you bought at the low you would be doing even better, but waiting for bottom is not the only way to make an acceptable return.

totoro

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Re: Bad real estate situation. I mean really bad.
« Reply #14 on: May 18, 2014, 11:55:01 AM »
Yes, and the real estate cycle is impacted by national trends and policies, but also by local matters. 

Now in many places in the US prices are rising.  In absence of something like the loss of a long-term employer, real estate cycles do not rise or fall in a straight line but, just like when you look at the stock market, they rise over the long term as an average.  Those impacted by a downturn (subprime mortgages on marginal qualifications?) are not those who bought a rental property with income enough to cover their mortgages, they would have been able to ride out the cycle and perhaps buy more at or near bottom.

In some desirable markets the crash was less severe and prices have recovered to a new high already if I understand matters correctly?  I might be wrong because I don't follow the US market closely but this chart seems to indicate this for San Francisco at least (which might be comparable to Perth on desirability):  http://www.paragon-re.com/3_Recessions_2_Bubbles_and_a_Baby   Maybe that chart isn't accurate as it is published by a RE company, so someone who knows can correct me.

Even if you bought at peak in many the desirable areas and you wait ten years you will be well above purchase price.  If you had rental income you would be far ahead in ROI.  If you bought at the low you would be doing even better, but waiting for bottom is not the only way to make an acceptable return.  In some places a crash may not occur.

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Re: Bad real estate situation. I mean really bad.
« Reply #15 on: May 18, 2014, 12:43:10 PM »
Small multi-family properties here are much different than in the Eastern and Midwest cities.  You don't convert single family to multi-family here.  The zoning won't permit that in most residential subdivisions.  You don't see two or three family properties that have upper and lower units.  You see neighborhoods of duplexes and triplexes built as such.  Usually one story sometimes with a unit over the parking.  Even if they are in high COLA areas, these properties will skew towards more transient, lower income folks.  You do see some conversions in the older most densely populated areas with inventory of large two story homes, but overall the number is low.

San Francisco is geographically constricted and there is a huge wave of cash sloshing through the world economy right now.  Lots of money from Asia is being invested in San Francisco.  Once the printing machines slow and/or there is a recession in Asia, prices will stabilize and fall.  As I said in another thread, some neighborhoods in SF are resistant to downward price pressure, because the people that live there are not dependent on the job market or even the general economy.  The rest of the city is more subject to the cyclical forces.

totoro

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Re: Bad real estate situation. I mean really bad.
« Reply #16 on: May 18, 2014, 12:51:34 PM »
Small multi-family properties here are much different than in the Eastern and Midwest cities.  You don't convert single family to multi-family here.  The zoning won't permit that in most residential subdivisions.  You don't see two or three family properties that have upper and lower units.  You see neighborhoods of duplexes and triplexes built as such.  Usually one story sometimes with a unit over the parking.  Even if they are in high COLA areas, these properties will skew towards more transient, lower income folks.  You do see some conversions in the older most densely populated areas with inventory of large two story homes, but overall the number is low.

San Francisco is geographically constricted and there is a huge wave of cash sloshing through the world economy right now.  Lots of money from Asia is being invested in San Francisco.  Once the printing machines slow and/or there is a recession in Asia, prices will stabilize and fall.  As I said in another thread, some neighborhoods in SF are resistant to downward price pressure, because the people that live there are not dependent on the job market or even the general economy.  The rest of the city is more subject to the cyclical forces.

This is a good example of why real estate options and opportunities are local.  Here you can legally suite a SFH in most but not all neighbourhoods.  There is a policy in place that actively encourages carriage houses in the city, especially those that have laneway access, due to our low vacancy rates, lack of affordable housing and relatively low density.   

Due to the high house prices there are many illegal suites that have been built over the years. 

terrier56

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Re: Bad real estate situation. I mean really bad.
« Reply #17 on: May 18, 2014, 04:31:53 PM »
Thanks everyone for the input. I really happy with these responses overall as this is not the usual advice I would get.

1. I will get a spreadsheet going asap.

2. I will be a bit more stuborn in regards to my choices and opinion on overpriced property (overpriced land really, "don't you know there is a land shortage!")

marty998

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Re: Bad real estate situation. I mean really bad.
« Reply #18 on: May 18, 2014, 04:47:03 PM »
Correct answer imo is to shack up with someone and bite the bullet. 8.6x quickly becomes 4.3x and you can see why these "high" prices suddenly become affordable.

mrcheese

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Re: Bad real estate situation. I mean really bad.
« Reply #19 on: May 18, 2014, 07:10:07 PM »
Perth rents are dropping as supply is starting to catch up with demand and demand is dropping off. Especially for apartments close in to the city.
I'm about to buy a house by myself 30 mins from the city for about 5x the median wage, with no deposit thanks to the WA government's generous first home owners grant and Keystart program. With very mustachian proximity to everything necessary :)
I'm not counting on massive capital gains as I think Australian house prices should stagnate for a while, IMO there's too much invested in the "Great Australian Dream" for prices to drop significantly, but there's no denying they are somewhat ridiculous.

HappierAtHome

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Re: Bad real estate situation. I mean really bad.
« Reply #20 on: May 18, 2014, 08:16:24 PM »
Ok so I don't want to sound like a mr complainypants but I am struggling to deal with the real estate prices of my local city. I was hoping for some advice on the matter.

The city: Perth Western Australia
Median house price: $590000 AUD ($549k USD)
Median wage for Perth: $68k AUD (63.3k USD)

This means that houses are a whooping 8.6 times median wage which however everyone I know continues to buy housing. Since i am getting close now to have a deposit ready it will be expected of me to purchase a house soon in the future.

Is the correct option for me to rent until these ridiculous prices drop (if they ever do, whenever i mention a drop people seem to snarl at me as if i have done something wrong)???
Please help me mustachians!! :)

People in Perth are completely irrational when it comes to house prices. Don't listen to them.

You haven't provided your income level, age, what kind of a deposit you've saved, or something else that would indicate whether your housing affordability is better or worse than the median. Which is my perspective on this: yes, if you look at the median then it's terrible. But if you work your way into a high paying job and save a massive deposit, and buy a modest house that you're happy to live in for thirty years, suddenly the market doesn't look so bad.

That's my tactic. Save as much as I can for my deposit (which is pretty easy in a DINK relationship), buy something I can actually afford, and don't fall into the trap of upgrading or thinking that I need a mcmansion.

If I was single and/or lower paid, I would rent in Perth until either the market stagnated longer term or my income / savings rose to the point where I could afford to buy without any financial strain.

Also: welcome to the forum! There are lots of other Perthies on here too.

Norrie

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Re: Bad real estate situation. I mean really bad.
« Reply #21 on: May 18, 2014, 09:01:40 PM »
Real estate in Perth is unbelievable. My parents sold their house in Duncraig for about $88,000 in 1986, and it's now worth well over half a million dollars. We would love to buy a house down again someday, but it's looking pretty impossible (still have family in North Beach, Subiaco, and Kalamunda).

Best of luck to you. I know that it's not an easy situation, but it seems like a lot of young folks (at least ones that we know) are still buying. How?!

sleepyguy

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Re: Bad real estate situation. I mean really bad.
« Reply #22 on: May 18, 2014, 10:00:18 PM »
Same here... Toronto... Land of the $800k avg detached home.  We were quite fortunate to buy a 'fixer-upper' for $315k a few year back just 30 mins outside of Toronto.  Now 'valued' about 675k.

I say keep renting if you feel the market is gonna correct itself.  And if you feel the location is terrible... get that stache huge and move somewhere where RE isn't insane :)

DoctorOctagon

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Re: Bad real estate situation. I mean really bad.
« Reply #23 on: May 20, 2014, 07:17:03 AM »
Housing in Australia is near the peak of a super bubble.  Google Japanese asset bubble.  Buying something you have to hold for 30 years at this point in time seems extremely dangerous, especially if it's real estate.  Rent!

HappierAtHome

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Re: Bad real estate situation. I mean really bad.
« Reply #24 on: May 20, 2014, 10:56:19 PM »
Housing in Australia is near the peak of a super bubble.  Google Japanese asset bubble.  Buying something you have to hold for 30 years at this point in time seems extremely dangerous, especially if it's real estate.  Rent!

I would be so happy if the bubble burst in the near future. I'd buy a cute little house in Subiaco before you could even say "affordable housing!" :D and then live the rest of my life in a great suburb walking distance to the CBD without a huge mortgage.

mrcheese

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Re: Bad real estate situation. I mean really bad.
« Reply #25 on: May 20, 2014, 11:40:18 PM »
Out of curiosity, how do you all see the 'bubble' bursting. What would trigger it and how would it pan out?
I'm looking for some rational arguments here, not just emotive statements (esp about the most recent budget). Convince me that the banks, big business and government would allow a big measure of household wealth to decrease and consumer confidence to therefore plummet to horrible lows.
I myself think mild falls and a long stagnation more likely, and I'm in the market right now!

totoro

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Re: Bad real estate situation. I mean really bad.
« Reply #26 on: May 21, 2014, 08:33:31 AM »
Out of curiosity, how do you all see the 'bubble' bursting. What would trigger it and how would it pan out?
I'm looking for some rational arguments here, not just emotive statements (esp about the most recent budget). Convince me that the banks, big business and government would allow a big measure of household wealth to decrease and consumer confidence to therefore plummet to horrible lows.
I myself think mild falls and a long stagnation more likely, and I'm in the market right now!

I agree.  A crash could occur, but Australia and Canada seem on track for a longish period of zero or below-inflation growth and low interest rates.  This would also impact the economy ie. no HELOC money, but it is less catastrophic than what happened in the US.

SU

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Re: Bad real estate situation. I mean really bad.
« Reply #27 on: May 24, 2014, 06:14:24 AM »
I'd also consider whether you want to or even have the option of staying in Perth long term. Owning a house can be a drag on your willingness to move - even if you can make a rational decision to move if you get offered a great job in Brisbane, you're still stuck renting out a house you're emotionally attached to and having a tenant trash the floorboards you just had polished, etc. Overall, I think the high level of home ownership in Australia has the effect of reducing worker mobility, and given the disparity in different States' growth rates, you might want more flexibility about where you live.

Having said that, I bought a 1BR flat and loved living in it but that was in Canberra where there is (was) a high proportion of renters and I was sick of sharing with housemates. Then two years later I moved overseas so someone else is enjoying my flat now... so if you are planning to do anything like extended travel, work in another state or overseas, etc. I'd stick with renting. There are also benefits to be had from being a long term reliable tenant, as your rent increases could start to lag behind the market - and you always have your deposit ready if the market takes a big dip or the right house becomes available.

SU

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Re: Bad real estate situation. I mean really bad.
« Reply #28 on: May 24, 2014, 07:43:13 AM »
Shortly after my last post I came across this: http://www.nytimes.com/2014/05/22/upshot/five-questions-you-need-to-ask-yourself-before-buying-a-home.html

How much is permanence worth to you?
How confident are you that you will want to stay?
How confident are you about your future income?
Can you force yourself to save?
Can you accept that the future is unknowable?

+ 1

stripey

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Re: Bad real estate situation. I mean really bad.
« Reply #29 on: May 24, 2014, 08:31:12 AM »
So I reckon a lot of the 'first tier' suburbs south of the river have a lot more 'for sale' and 'for rent' signs out the front than say 6 months ago. I also see a lot more houses/duplexes for rent that are vacant for in excess of a month than I used to. I also have several friends that have been able to negotiate very well in their favour for rent prices, etc. at the moment. That coupled with the documented rising vacancy rate makes me think it's very much a tenant's market at the moment. If I were single and not on a crazy-high salary at the moment I would be thinking of renting for the next little while.

deborah

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Re: Bad real estate situation. I mean really bad.
« Reply #30 on: May 25, 2014, 03:40:47 PM »
Out of curiosity, how do you all see the 'bubble' bursting. What would trigger it and how would it pan out?
I'm looking for some rational arguments here, not just emotive statements (esp about the most recent budget). Convince me that the banks, big business and government would allow a big measure of household wealth to decrease and consumer confidence to therefore plummet to horrible lows.
I myself think mild falls and a long stagnation more likely, and I'm in the market right now!
The commentaries on Australian house prices always say that some of the main reasons for the price are negative gearing and the shortage of land released for housing. The first home buyers schemes have also increased prices because the two underlying reasons were not fixed. The removal of many of these schemes has partly caused the price stagnation seen over the past few years. We also have continually increasing population due to migration, and there are fewer houses built than the population is estimated to need (but this is partly because of the shortage of land being released).

Australian cities have planning zones which (artificially) restrict the land availability - countries without these laws have cheaper housing. Negative gearing encourages people to buy more houses than they might be able to afford by giving tax breaks to those who are already wealthy (since it came in, the inequity of Australian society has increased). There is a growing concern about negative gearing, and that may change at some stage (but I wouldn't hold my breath). I don't see zoning changing - it is considered by many people to have stopped problems. This is why many Australian commentators think that overseas commentators are just wrong about "bubbles".

However, that doesn't mean that individual parts of Australia can't have bubbles. House prices in Perth have been growing in the last decade or so because of the mining boom - especially building of infrastructure for the mines. Many workers in mines FIFO (fly in - fly out)  from Perth, so Perth has participated in the boom of the Pilbara region. Since most mines are have finished building infrastructure, they are reducing their workforce, and many people will be leaving Perth - although I know a FIFO worker in Perth who works in Laos rather than the Pilbara. This could cause stagnation, or it could burst the bubble - depending on the numbers and the suddenness of the change. Remember that if half the residents disappear, a shop in the area is no longer viable, so more people are effected than just the miners)

Similarly, many thousand public servants have left Canberra in the past few years, and there will be even fewer with the latest budget. Because this has been a gradual thing house prices have stagnated over the past few years, and are beginning to go down.