The warnings come thick and loud


Don't feed your daughter to the crocodiles
Creative Commons License photo credit: tm-tm

On Sunday 9 October, The Sunday Age published an article by Chris Vedelago Buyers Nibble but No Big Bite. I would link, but can’t see it in The Age online.

Here are the money quotes:

“But a survey conducted by The Sunday Age found that only 35 per cent of properties actually sold under the hammer in the September quarter.

“Meanwhile, the flood of supply on to the spring market has continued.

“SQM Research estimates there are 49,600 properties listed for auction and private sale around the city, up 11.4 per cent on September. The stock level is now 65.3 per cent higher than at the same time last year.

“There are 720 auctions scheduled next weekend. The REIV is also set to release its median house price and unit price data for the September quarter on Saturday.” (ie 15 October)

And Ben Hurley in today’s Australian Financial Review (paywalled) writes on an ANZ report Asset Returns: Past Present and Future:

“In a comparison of past returns on various asset types, ANZ found owner-occupied housing generated average annual returns of 12 per cent over the past 24 years – higher than any other asset class.

“However, the bank forecasts that owner-occupied housing will return about 5 per cent a year for the next decade, which is much lower than for equities or commercial property.

“Deutsche Bank and other investment banks say household deleveraging is likely to keep house price gains weak for years.

The spruikers and spivs in the politico-housing complex will claim I am selectively quoting from among the most bearish commentary. I am. I do. Guilty!

It is because these comments have a thread. They reveal the old slogan ‘property goes up forever’ for the lie it is. The Herengracht Index shows, over the very long term, the after-inflation price change is 0.45 per cent.

We keep saying land prices are set to fall long and hard. Purchasing now or in the immediate future will present the innocent with an invidious choice: bankruptcy or a lifetime of heavy debt.

Don’t Buy Now!

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https://prosper.org.au/2011/10/11/the-warnings-come-thick-and-loud/