I should be right then, house prices will be 60% off by 2016.
stinkbug omosessuale Frank Castle is a liar and a criminal. He will often deliberately take people out of context and use straw man arguments. Frank finally and unintentionally gives it up and admits he got where he is, primarily via dumb luck! See here Property will be 50-70% off by 2016.
I can remember a mini crash in Brisbane prices in early 2008, they dropped 20% in a few months from memory. That was a good thing for the market because all the streets up until that time were clogged with Forsale signs. It seemed all the empty nesters in the older inner suburbs wanted to cash in on the rediculous prices that had been reached. After that the marked went back to normal, until the GFC that is. A decent reset all across Australia, a crash of 20% or 30% would clear out the false conceptions and allow a re-set, like happened in America. It won't effect the average home owner because they just want to live out their lives and pass it on to the kids. Most of us will gladly trade lower prices now if it will allow our children to buy a home. It will stop a lot of that equity for holiday spending nonsence too.
You have conveniently neglected to state that the banks have at times have given certain developers a very, very hard time...of course you cannot state who these guys are.
Actually I don't know who you are talking about. Usually if a bank has an issue with a developer, they won't lend - simple.
Any expressed market opinion is my own and is not to be taken as financial advice
Actually I don't know who you are talking about. Usually if a bank has an issue with a developer, they won't lend - simple.
Developer loans are what really suck some overseas banks.
Its much riskier lending.
Whereas the banks know that the Government will do an awful lot to stop the Johnny mortgage holder getting into trouble.
The property/finance/government complex in full flow.
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
It's not APRA it's the banks own risk assessment teams. They have seen major developments in SEQ fail with developers going into bankruptcy - several on the GC. They then close up shop on developments and won't go back into the water until they see successful developments that are very profitable - then they are interested again.
Given the lead time for a major tower it's almost compulsory for the industry to be boom and bust, and always undersupplied.
Even Harry Triguboff has changed his model to a "rent first then sell when the market recovers model" When times are good you can knock up a six-pack with 20% equity on the hard costs plus you have to cover the soft costs, but that equity doesn't last long when the market turns down and you have unsold apartments at high interest rates. Developers pay high rates to reflect the risk and short term nature of the finance. Even today they would probably pay 9% or 10% interest. They might get 8% if they are very strong.
The other issue is the skill shortage - when the market is hot they can't get contractors at a decent price, so the price has to be jacked up above realistic costs. To make a profit the head contractor has to systematically screw the smaller contractors during the build. When the project turns bad all of the sub-contractors go broke because they don't get paid and they can't pay their suppliers.
developers make a bucketload of cash if they can get into the cycle early and hit the market at the right time, and they go broke if they get in late.
It's no place for the feint of heart, developers need large testicles.
A good summary of this game. I used to audit some major construction companies and agree, with the exception being towards the end of major bull markets the supply of construction work in progress is usually excessive against demand. The construction industry is notorious for both higher levels of cooking the books than most businesses, and for higher rates of insolvencies. Some really well run construction businesses are able to consistently make profits over the long term.
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