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Ecconomic Bust....or is it??

Old 28th Nov 2008, 11:59
  #21 (permalink)  
 
Join Date: May 2002
Location: Australia
Posts: 408
Well the Industry I work for was touted to be "safe" from economic pain.
Yesterday they cut 20% of the workforce. The boffins have done the bean counting and the models show it will be getting a whole lot worse in the next 12 months. At least the bosses have taken 30-50% pay cuts as well.
They say the sackings will help the company ride the storm. Unless it gets way way worse.
They also mentioned that cutting people now will give them the best chance to get a job. Trouble is, no one is hiring.
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Old 28th Nov 2008, 12:18
  #22 (permalink)  
 
Join Date: Jun 2002
Location: Eden Valley
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Just one for the property doomsdayers. I have re-leased 3 properties in the last three months and the rents have gone up. Interest rates have gone down. So yields are up very significantly.

Capital gains are beautiful. But cashflow is always king.
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Old 28th Nov 2008, 20:24
  #23 (permalink)  
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The long overdue real estate correction is on its way, finally. 7.5 times average income for the average property was never sustainable, compared with 3-3.5 in the rest of the industrialised world.

Much pain, no gain in housing bust | The Australian

Prices had dropped furthest at the top end of the market, Nedlands agent Chris Shellabear said. “The better properties have dropped by 12.5 to 15 per cent,” he said. “Some other properties by 20 to 25 per cent. Some of the bigger percentage falls are occurring at the top end because they flew higher and longer than those in the other part of the market.”

“From the June quarter to the September quarter the turnover (in the western suburbs) has dropped 54 per cent,” Davies said. “And the September turnover is one-tenth of what it was normally over the last five years per quarter.

“And this quarter is worse. That’s the way it’s shaping up. I’ve been through this before, but in 40 years of real estate this is the worst I’ve ever seen it.”
This is in Perth, one of the hottest markets in the country, but prices are falling in other areas, it seems Melbourne's prices are getting a bit less illusionary.

Gnadenburg, the rental market may still be tight, but that's more than anything else a function of the inability of the government to release land in line with demand for housing, and because of the many inhibitors to provision of affordable rental housing like excessive council charges for development et al.
 
Old 28th Nov 2008, 23:17
  #24 (permalink)  
 
Join Date: Jun 2002
Location: Eden Valley
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Gnadenburg, the rental market may still be tight, but that's more than anything else a function of the inability of the government to release land in line with demand for housing, and because of the many inhibitors to provision of affordable rental housing like excessive council charges for development et al.
The aforementioned properties are inner city residential and commercial. Unless they knock down universities and hospitals there isn't any spare land.

"Coming off the boil" should have been expected. The prices offered for some of these properties were very high as we were in a boom market.

Don't confuse a boom market deflating with a property market under serious correction- we aren't there at the moment. I know because I am in the market and there is good vendor resistance to negotiation in prime areas.

And if it does all turn to worms. Cash flow is king.
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Old 29th Nov 2008, 00:48
  #25 (permalink)  
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Gnadenburg, agree that prime inner city areas are some of the last affected, but if more land is released quicker in the burbs, this has an overall effect on supply and demand, with more people moving out to more affordable areas, general demand softening and prices therefore also developing to a more sustainable level.

IMHO, this is what this country sorely needs. As a property owner, you are naturally resistant to any school of thought arguing for lower overall property values, but 7.5 times average income is not sustainable, and in conjunction with the widespread availability of easy credit for everyone it's outright dangerous as masses of average income earners overextend themselves, and when credit availability contracts, lots of people are in trouble. You can watch the beginnings happening at the moment, in the US it's in full swing..
 
Old 1st Dec 2008, 01:05
  #26 (permalink)  
 
Join Date: Jun 2002
Location: Eden Valley
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I think we are correcting against an overheating, exuberant market. The ballooning prices unsustainable.

We are nowhere near correcting against fundamentals. If unemployment and interest rates rise it will be the mother of all collapses. Don't see that myself. And the government is well aware of the importance of a stable housing market.

Low interest rates, modestly rising unemployment, tax cuts, low availability. Sensibly bought Australian property is cushioned- the question for me is how much unsensibly bought property there is out there.
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