I hope you all had a great Christmas with family and friends and that 2013 will be a great year.
I’ve been reading, calling and delving into the market this last week to uncover just exactly what is going on.
Well – the Stock Market continues to defy logic and trend higher but despite a dramatic series of interest rate cuts, the housing market is still sick.
Stock levels here on the Gold Coast and in Brisbane are very high making this a Buyer’s market extraordinaire however I’m still advising friends and clients not to buy. Prices are still too high despite reports of people losing 50% or more if they bought post 2006 and sold into this market.
The sub $400,000 market has shown some resilience as long as the property is beautifully maintained, well positioned and so on – in other words “location, location, location”, “condition, condition and condition” and not to forget “presentation, presentation, presentation”. These results are, however, rare. There are many examples of buyers from overseas and interstate being “sold a pup” and paying way more than I would if I were in the market and offering on the same property.
The over-a-million market is just a blood bath with buyers taking to post 2006 prices with a chain saw. Results are horrific and losses extreme.
The market is descending into a deflationary-like state. Buyers, like retail customers, are wary of making an offer lest they are caught paying too much. Sentiment is cautious to outright negative and will remain so throughout 2013 and beyond.
Properties that are moving are super quality (as in any market there is a flight to quality) with astute buyers looking for places with a higher end use, that is, subdivision, family accommodation, or conversion to a medical centre or other commercial use if on a busy road and/or corner position. In other words, they are looking for some factor to preserve what they paid if the market fails them. They are looking for and buying “insurance”.
I’ve spoken with many people who’ve owned their homes since the early 1990’s say and are now quite happy to stay where they are. They had plans to sell and upgrade, or sell and travel, but now facing $200,000 to $300,000 paper losses from the highs of 2006-2008 they can no longer afford to sell, upgrade or travel. Others who “have” to sell are facing a nasty road with their mortgages officially under water and the Bank breathing down their neck. Many are a stone’s throw from Mortgagee-In-Possession but it seems the Banks are giving many the opportunity to bow out gracefully. One younger couple have already sold and are looking at bankruptcy as they still owe Mr. Bank about $80,000.00.
I’ve said it before and will continue to say it. As a former trader I know that all things tend to equilibrium, balance and a return to stability. It’s just “nature” at work. Aussie houses are still too expensive and until and unless the prices return to a level where people can actually afford to buy them without having a heart attack at the repayments or having to work two jobs each and eat baked beans to meet those repayments, it’s all a bit of a mess.
Take the price of any property you’re considering as at 2000, add compounded CPI and that’s where the price should be today. In some markets prices are back at those levels, but mostly they are still well above and correcting (downward) toward that line. Do your own sums and see what I mean.
Had a chance to speak to a number of couples in their 20’s who are madly saving for a deposit and want to buy their own home soon. They had no idea what they were really facing! Their ignorance of the true cost of ownership was scary. After I’d finished going through a spreadsheet of repayments, rates, insurance, repairs, maintenance, yearly capital allowance and so on, their collective countenances were white. They had no idea of the difference between a principal and interest repayment and an interest only repayment. One couple had been “pre approved” for a loan. They had no idea that the repayments quoted were interest only at about $2000.00 a month and that after 2 or 3 years would revert to Principal and Interest at about $2,600.00 a month. They confided that they were stretched at $2,000.00 a month plus the costs I’d “filled them in on” and were mortified to learn that their repayments would jump by that much. Their plans to start a family flew out the window…
Well that’s about enough doom and gloom for one dissertation…til next time…