Funny you should mention that, Ned. I just responded to a ‘Your Opinion’ survey, which included that exact issue as one of fifty or so questions.

The bear mentality is often amusing. Enjoy comment # 100, here:

http://www.perthnow.com.au/business/wa-facing-severe-housing-shortgall-by-2020-housing-industry-association/comments-e6frg2ru-1226127950925

Our expiring leases involving _vacating_ tenants have all been raised 10% this year, Ned. One hopeful tried the NF trick (“Offer half or a third the increase requested…”)

We rejected his offer outright. He raised his offer to our price, dropped all his demands. We declined his application. More respectful applicant applied. Game over… .

It’s all very strange??? (Well, to me it is anyway?)

Here are a few more:

* What if interest rates continue to fall?

* What if population continues to rise?

* What if the new economic migration is (again) from Europe,
rather than Asia?

* What if rents continue to rise?

I accept that these all are quite fanciful notions. You’re probably right. We should have bought shares!~

Interesting to see how the GFC has affected LV. Properties are (still) down 61%. Looking at the location, what’s on offer, the unemployment rate (15%), the median wage ($35K) and the incredibly cheap rents, it is hard to make comparisons, say to Sydney, Melbourne, or Perth.

Meanwhile it’s hard to go wrong growing your own fruit, veges, eggs, nuts, etc.

Biker, Vancouver

As you say, we have a lot riding on the fortunes of China which also means we have a lot to lose if the China boom comes to an end.

Demand for housing does not automatically mean rising prices if there aren’t the people willing to buy them.
IN 1911 there was an average of 4.6 people per house in Australia -houses that were smaller than todays. This has steadily fallen to 2.3 people/house and could be headed even lower while economics hold up. But take a walk in Woodridge Brisbane and see what is happening to the so called “refugee increased demand” and you will see dozens of small double storied houses with over 12 people living in each. Some of you might have seen on the news the tragic fire recently where 11 people died in a relatively small double story house. Whats this got to do with demand? A lot -stick with me here. If unemloyment rises because of world economic directions and (dare I say it?) a drop in Chinese demand for our resources (check our burgeoning debt of local govt in China)then we could be facing an increase in housing defaults and mortgage stress. I see a few families already escaping rent and mortgage stress by 2 families living in one house. Doubling up and going home to mum and dad and friends is a real and probable option for people whose part time work hours have dropped. I for one am considering renting out a room at home just to cover the rediculous hikes in regos water and electricity in wonderful Queensland. If our occupancy rates of houses crept from 2.3 back to 4.0 how many thousands of houses would there now be empty that are currently lived in and how many landlords would be stuck with their investment property scrambling to sell it in a fire sale market?

Lets look at 100 homes with 2.3 in each -thats 230 people in 100 houses. Now if they move to 4 people a house then only 58 houses are needed and 42 percent of the houses are now vacant! Where did all that demand go to? Even if the move to friends and relatives makes the 2.3 per house go up to 3.0 people (less than one person a house extra!) a house -24 houses out of the 100 would be empty. Make a minor move from 2.3 people in each house to 2.6 people and still 12 percent of houses are left vacant. Yes there are more small apartments and dwellings in Australia but the average size is much bigger than even 20 years ago.

Watch peoples ability to BUY. if you think you might lose your job your not gonna outlay 300 000 plus borrowings for a small house. If you have lost your job your going to look for the cheapest place to rent or ways of doing it. If you have an investment property your going to watch what happens if just a few people move in with mum because your house could be one of the ones that becomes suddenly vacant.

I hope this never happens but do the maths. We depend far too much on China and the rest of the world. In the end we have to do more than just sell dirt if we want to be strong. Its time to capitalize on world food shortages and look at becoming farmers once again and help feed the world. We have built this housing bubble on massive debt and its beginning to look very weak. Pity we neglected farming and manufacturing as we pumped billions into First home buyers and tax incentives for those buying houses. Markets will have their way in the end despite all the best stimulus that Govt think will rescue us. In the end it just increases our increasing debt and borrows from our children. Only Aussie pride says what happened in the USA and UK etc cant touch us or our weakening banks.

http://www.perthnow.com.au/money/interest-rates/home-loan-providers-fix-rate-at-a-discount/story-fn3izto3-1226120957147

http://www.theage.com.au/business/house-prices-extend-falls-in-july-20110831-1jkvh.html

Biker, Vancouver

My current thinking is that our property market is basically linked to the fortunes of the Chinese economy. If China keeps importing our coal and iron ore for example in large volumes (and at current prices) then perhaps home prices will continue to head upwards.

But if the Chinese economy was to slow or enter a recession could this trigger a fall in Australian residential homes prices?

Maybe a lot of the supply/demand fundamentals when it comes to housing and home prices are being distorted by the China boom?

I’m interested in your comment, Chris. Do you have any available data on that, please? Our own building experience in the last decade indicates building costs have risen over twice the rate of inflation, annually, in WA.

In the case of two of our projects, this may have really amped our gains. In the first case, our original total project cost was $375K (replacement cost now $880K). In the second, our total cost was $258K (replacement cost now $550K).

These are, admittedly, unusual examples I’ve cherry-picked, but in _all_ cases, annual building costs seem to have risen well over 6%.

The correlation between commodities prices and the BDI is pretty loose that’s for sure, but I do think the two are worth watching together.

The BDI is tricky because shipping supply can be taken out of the system through scrapping or laying vessels up so there is more at play than just the demand for moving dry goods around.

But it puzzles me why it has kept falling.

My ‘gut’ feeling is that the Chinese economy is coming off the boil.

I will have to write something more detailed about this soon.

Cheers!

I also follow the BDI and finding it hard to correlate the index to commodity prices and the general market indicators. Do you have an opinion on what may be unfolding?

Already it appears changes to mandatory detention policies may impact on accommodation shortages in some areas. No shortage of accommodation? Surplus housing? Perhaps in cities experiencing high unemployment and low wages… .

How that would play out in the housing market is anyone’s guess.

I believe the ANZ and any other financial institutions talking (WA) property down are wrong. We’re seeing unprecedented action at the low end of the market.

Once good blocks in the $170K -- $300K range all disappear, we think this will escalate to homes in the $390K -- $460K range.

Maybe we’ve got the timing right… .

I have been neutral in regards to Australian residential real estate prices for a while and nothing I see makes me change that view either to the upside or downside.

I did expect home prices to slip back last year around 10% or so if they rise again this year then I will be trying to hide somewhere.

Still I am way ahead of Steve Keen..and he is suppose to be an expert on the subject!