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Why there will be no crash in Perth; Perth bears have their fantasy smashed
Topic Started: 21 Aug 2014, 02:38 AM (43,326 Views)
herbie
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It would seem to me that Perth could well be in for a bit of a setback?

Are there any Perth based dudes on this site actually buying (except for future development potential maybe) at this time? - I'd be interested to hear if you are - Ta.

Hmmm - Absolute minimum, I reckon I'd hold off until mid 2015 at least re Perth, to at least let a bit of the dust settle; See what the fallout might be. But definitely NO rush to buy at all is my punt on the Perth market at this time.

And yes, depending how things go, it's just possible nominal Perth prices might not increase for a decade. Such things do happen in the big bad world of property investing ... :)
Edited by herbie, 21 Aug 2014, 05:34 PM.
A Professional Demographer to an amateur demographer: "negative natural increase will never outweigh the positive net migration"
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skamy
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Massive
21 Aug 2014, 03:30 PM
Every cycle it’s the same thing: Perth / WA stagnates and relies on eastern states for benefits and funding. Mining kicks in and WA starts talk of secession and how they are capable of going it alone. Revenues start being distributed to other states that are not doing so well. Signs of slowdown emege and WA political party calls out the federal government as playing favourites and demand WA should be allowed to sit on its wealth… WA stagnates as economy peters out.. cycle resets..

but this cycle is different right ? you, BP and mike have born witness to this cycle time and again and know the fundamentals are -- oh .. wait... you were never here for the previous cycles..
Massive how about you take the time to provide some facts and figures to back up these claims of yours.

I have posted facts showing that WA has very good fundamentals and that it has no property bubble, it has lots of future employment opportunities on the books and big Perth companies are having some very good results. Property is just emerging from a downcycle, look at Jimbo's area with houses discounted 40% on 2007 prices.

Are you really saying that Perth has a cycle where prices fall for years then they stagnate for years? There is no evidence for this in house price records at all.
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I have been playing with some ABS stats and have calculated Perth prices to incomes with the data that is available. I put Jun with May and Dec with Nov for the data series (the data is below) Here is the chart, this chart clearly shows that there was no rise in house prices with income rises. The actual value of the Houseprice/Income is larger than reality as the only data available from the ABS is WA income not Perth income.

Posted Image


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Edited by skamy, 21 Aug 2014, 05:08 PM.
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The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
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Massive
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skamy, put those house prices against inflation rate ....

house prices stagnate / lose value against the economy every downturn..
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we are only at the start of that downturn at the moment... wages werent rising that much from 2007-now, the gains happened from 2002-2007 as i have shown to you time and time again.. what we have been seeing is a slowing down and no news of what will replace the high paying jobs that are now being closed out....

Some questions you still havent answered :
If wage growth slows, or pauses due to re-positioning of labor, how can house prices rise?
If the State government is forced to introduce more levies and reduce costs due to shortfalls in budget due to falling commodity prices, how will that assist with disposable income/purchasing power for housing?
if the aussie dollar falls in value, how will perth people get their new cars, tv's , white goods and basic houshold items for the same prices and still have money left over to pay multiples of their income on houses?

answer those questions and i will be more optimistic on the state of the Perth property market over the next 5-10 years..
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Jimbo
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skamy
21 Aug 2014, 05:05 PM
I have posted facts showing that WA has very good fundamentals and that it has no property bubble, it has lots of future employment opportunities on the books and big Perth companies are having some very good results. Property is just emerging from a downcycle, look at Jimbo's area with houses discounted 40% on 2007 prices.

Are you really saying that Perth has a cycle where prices fall for years then they stagnate for years? There is no evidence for this in house price records at all.

I have been playing with some ABS stats and have calculated Perth prices to incomes with the data that is available. I put Jun with May and Dec with Nov for the data series (the data is below) Here is the chart, this chart clearly shows that there was no rise in house prices with income rises. The actual value of the Houseprice/Income is larger than reality as the only data available from the ABS is WA income not Perth income.
You are forgetting to incorporate into your stats that the average home of 1974 was on a 1/4 acre block. Places like Wembley, Cottesloe, Mt Pleasant,Como and Rossmoyne all had big blocks many which have been subdivided and re-developed.

This is hidden inflation that you can't account for in your chart.

Also, I would say with a great deal of confidence that in 1974, 90% of Perth property would have been within 15km of the city. I remember when Kardinya was being developed and was considered to be "out in the sticks".

If you took the price chart and just increased just the value of those properties that existed in 1974, you would have a very different picture.

The other thing about your wages to prices chart is that you are assuming that Perth wages are higher than WA regional wages but that is not the case.
Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be :?: rising.
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All evidence points to a severe prolonged downturn for Perth and WA, it has had the rug pulled from under it.

The circus has been, had the party, is now packing up and leaving town, Iron ore prices rose from around 5 dollars in 2002 to $190 in ten years, the economy , jobs and house prices rode along with them, and now the economy , jobs and house prices will fall along with them. No rocket science, just common sense.

Amusing that the bulls here could claim there was no bubble in perth , when facts show a bubble is the only description one could use.

All propped up by counterfeit money printed from a machine in china. They have used you all like slaves, simply cut down a tree and printed one billion dollars from it to pay you with, pretty simple stuff, they must be laughing, did not even need to give you real wealth or money like gold, you where all happy to take trees as payment and flood your own economy and currency with their artificial dollars.
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newjez
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Jimbo
21 Aug 2014, 05:48 PM
You are forgetting to incorporate into your stats that the average home of 1974 was on a 1/4 acre block. Places like Wembley, Cottesloe, Mt Pleasant,Como and Rossmoyne all had big blocks many which have been subdivided and re-developed.

This is hidden inflation that you can't account for in your chart.

Also, I would say with a great deal of confidence that in 1974, 90% of Perth property would have been within 15km of the city. I remember when Kardinya was being developed and was considered to be "out in the sticks".

If you took the price chart and just increased just the value of those properties that existed in 1974, you would have a very different picture.

The other thing about your wages to prices chart is that you are assuming that Perth wages are higher than WA regional wages but that is not the case.
I really don't know how you guys have the patience. Show me facts and figures my arse! Unbelievable.
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
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Veritas
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So tell us then Skamy.

Seeing as most of those fundamentals were in place for much of the last ten years, how come South of the River got smashed in 08/09?
Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?

The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly.
Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
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Mike
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newjez
21 Aug 2014, 03:54 PM
I don't keep stats on REIWA - but sales this week 806, 4 weks ago, 842, last year 900.

So it looks to be down 4% on last month, and down over 10% on last year.

Stock on market is falling - which can be a bad sign as sellers lose interest in a bad market.

Rentals decreasing, investors are bailing.

Not a good sign. Maybe you should follow the herd - you usually do.
I dont follow the herd, its why I normally ahead of the curve.

When people buy I sell, when people sell I buy.

Look up the last 8 weeks, tell me what the sales are compared to last year and you have your answer. As I said sales are up this Winter over 2013 and 2013 was the strongest winter since 2007.

Rental stock decreasing, vacancy rate falling, sales rising what more do you want. As I said a healthy market with increasing activity.
http://mike-globaleconomy.blogspot.com.au/
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Veritas
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Mike
21 Aug 2014, 07:34 PM
I dont follow the herd, its why I normally ahead of the curve.

When people buy I sell, when people sell I buy.

Look up the last 8 weeks, tell me what the sales are compared to last year and you have your answer. As I said sales are up this Winter over 2013 and 2013 was the strongest winter since 2007.

Rental stock decreasing, vacancy rate falling, sales rising what more do you want. As I said a healthy market with increasing activity.
Mike

Your investment strategy ( as you tell it ) seems to defy all logic.

Can you please tell us under what circumstances you would go bust.

What level of debt are you holding?

Seeing as you have no problem telling us early and often about the scale of your property empire, you might tell us how leveraged it is.
Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?

The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly.
Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
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Mike
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Veritas
21 Aug 2014, 07:38 PM
Mike

Your investment strategy ( as you tell it ) seems to defy all logic.

Can you please tell us under what circumstances you would go bust.

What level of debt are you holding?

Seeing as you have no problem telling us early and often about the scale of your property empire, you might tell us how leveraged it is.
How many times do I have to repeat myself.

I keep my Portfolio around 60% LVR.

If you know anything about lending and developements you find it difficult to get developement loans over 60% LVR. You can get them at 80% but it is far more difficult, hence why I try to keep mine at 60% or below.

I am not expanding my portfolio, I have enough properties in terms of numbers. When a developement completes, depending on current prices in the immediate area I may sell or rent, I may sell older stock and keep some of the new builds or all of them. It is very variable.

It does not matter what % Rp data say prices are rising by or falling, let alone any other indice. Nice for a debate but has no real influence at a suburb and street level. Prices could be falling but 49% of properties may still increase in value, just 51% fell in value. One suburb may boom up 30% while others decline, it is very variable.

At present I build/sell, I may keep 1-2 new builds and sell some of my older stock. This keeps depreciation high which helps to offset some of my capital gains.

The problem I have had for the past 18 months is land is too expensive to buy for larger developements to turn a decent profit. The developements I have under construction now (2 of them) I bought the last land in early 2012 when the market had just started to increase, the other in 2011 when the market was slow.

If prices fell 40% it would mean I would need to use more of my own funds, I may lose money on some new properties but the older ones would take prices falling much further. However my properties are spread out in 4 different states in 4 different capital cities. I only talk about Perth no as I live here. I have lived in Sydney for 12 years, Melbourne for 10 years and hold properties in both as well as Perth.

Is that good enough.
Edited by Mike, 21 Aug 2014, 07:53 PM.
http://mike-globaleconomy.blogspot.com.au/
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