Adelaide Property Market

[Punk Rooster]

Now, having done some (minor) research, it's my belief that the Adelaide Property Market is over-valued- just like the ASX.
What does this mean?
Well, when an item is popular & sought after, it's value increases.
The price is driven up by market forces.
These same forces (or lack of) can also help to drive down prices- ie an item in lesser demand, it's value drops.
The other factor is less available credit = fewer buyers = more competition amongst home owners to sell- this is a market where the wheat will be sorted from the chaff in the sales side of things.
Now, this may be a fairly basic (some say naive) argument, but I believe the above principle to be in application to our current Property Market.
The ASX & it's off-shoots will tell you shares always go up, & they're a great investment etc, yet their view is one of self-interest.
Just the same as the self-interest of the Real Estate Industry to promote continued growth in the Property Market, & they achieve this with saturation coverage in the print media. The Advertiser/Sunday Mail needs to maintain a healthy relationship with this industry, as they rely heavily on the advertising revenue they draw.
Yes houses will go up in the long term (just like shares), but the current rate of growth in the APM cannot be sustained at it's current rate- something has to give.Historically, high growth is followed by years of flat-lining, or minor correction. If we look to the last Stock Market Crash ('87), we had a recession within 2 yrs. The theme of the time (blame if you will) was Wall St greed- sound familiar?
We can start laying the blame at the feet of greedy CEO's, who've convinced everyone they're worth $50 million, & in turn, causing others to share that belief of worth.
As I said, I can't see a (Wall Street type) collapse of the Property Market, but I believe they've both reached a position where they're over-valued- dot.com crash anybody?

[Wedgie]

Dunno mate, with the mining sector only just starting to hit our housing sector as it hit WAs years ago and with Adelaide's lack of ability to expand due to geographical issues and now with interest rates on their way down it wouldnt surprise me if Adelaide's real estate market defies the rest of the nations trend in the next few years and continues to go up.
There's still an unbelievable shortage of rental properties making it an A1 target for investments.

[Punk Rooster]

Dunno mate, with the mining sector only just starting to hit our housing sector as it hit WAs years ago and with Adelaide's lack of ability to expand due to geographical issues and now with interest rates on their way down it wouldnt surprise me if Adelaide's real estate market defies the rest of the nations trend in the next few years and continues to go up.
There's still an unbelievable shortage of rental properties making it an A1 target for investments.

fair enough- by no means is my original post 100% spot on, but more an "opinion piece" with a look at an alternate viewpoint.
Naturally, both sides of the argument will make some strong points.

[Ian]

industry is predicting a fall in house prices/values, who raelly knows what will happen?

[Psyber]

Waves and troughs have always occurred in the Adelaide real estate market - more so than in the eastern states:

In 1976 I bought a house in the good part of Prospect. Beween 1980 and 1983 I would have struggled to get my money back. In early 1984 I got double what I had paid.

In 1996 I bought a house in West Lakes. I struggled to get my money back in early 1998, but did after pulling it off the market for 5 months and trying again.

In September 2003 we were in Adelaide for a while and I thought of buying a house in Wayville but declined to pay the asking price of "$800K+", because I thought the market was dropping - and I said so. In January 04 the agent contacted me and said his vendors would look at $650K - they had just missed the surge of 2002-03 with that one. I suspect they'd have got the higher price 6 months earlier.

[Punk Rooster]

Waves and troughs have always occurred in the Adelaide real estate market - more so than in the eastern states:

In 1976 I bought a house in the good part of Prospect. Beween 1980 and 1983 I would have struggled to get my money back. In early 1984 I got double what I had paid.

In 1996 I bought a house in West Lakes. I struggled to get my money back in early 1998, but did after pulling it off the market for 5 months and trying again.

In September 2003 we were in Adelaide for a while and I thought of buying a house in Wayville but declined to pay the asking price of "$800K+", because I thought the market was dropping - and I said so. In January 04 the agent contacted me and said his vendors would look at $650K - they had just missed the surge of 2002-03 with that one. I suspect they'd have got the higher price 6 months earlier.

that's in the same mould as what I was trying to say- people who've bought at the peak times will not sell at a loss (unless forced to by mortgage pressure), but a % owners who bought prior to the latest increase & rode the height of the wave will be the ones to accept "less", as their original investment has already reached the point of profit, even if they did hang on to the property a bit too long, & lose a bit back.

[GWW]

I heard somewhere recently that property values could go down as much as 40% (i'm not sure what the time period would be) in Adelaide. I'm hoping that if this is the case i personally aren't affected as badly, having purchased in the inner Eastern suburbs.

[Punk Rooster]

I heard somewhere recently that property values could go down as much as 40% (i'm not sure what the time period would be) in Adelaide. I'm hoping that if this is the case i personally aren't affected as badly, having purchased in the inner Eastern suburbs.

I guess some could go down- the properties in this bracket, might i suggest, the 2 bedroom units sitting on top of each other, houses in less fashionable areas etc

[Psyber]

There are doom-sayers suggesting Australia could see the sort of plunge that has occurred overseas - of the order of 25 -40% - but I think it is unlikely here because of our relatively stable economy, population growth, and high aspiration to home ownership. Apparent drops of that ilk have occurred in some newer areas in Sydney, but I think the houses in those areas were sold at hyperinflated prices in the first place to "marks" desperate to get a house at all. They were guaranteed finance they couldn't get elsewhere if they bought these homes at those prices, and assured the prices were valid and would hold up.

Some of the doom-sayers are of the "all housing should be public housing" philosophy perhaps, and maybe some are hoping to whip up a collapse so they can then go out and buy cheap...

[Psyber]

I heard somewhere recently that property values could go down as much as 40% (i'm not sure what the time period would be) in Adelaide. I'm hoping that if this is the case i personally aren't affected as badly, having purchased in the inner Eastern suburbs.

I guess some could go down- the properties in this bracket, might i suggest, the 2 bedroom units sitting on top of each other, houses in less fashionable areas etc

In 1996, when I was struggling to recapture my money on Delfin Island, houses in Craigmore were down 11% or so on original cost, but Toorak Gardens, Tusmore, and Leabrook, were still rising.
I'm still kicking myself, when I recall it, that I didn't buy the place in Ferguson Square, Toorak Gardens, I looked at then because I thought they may drop soon at the time!
It is possible the Craigmore houses had never been worth their new prices a few years earlier too, like the recent Sydney experiences.

[Punk Rooster]

http://www.news.com.au/adelaidenow/stor ... 62,00.html

& I didn't even watch 60 Minutes! (note my original post @ 5pm)

[Hondo]

The Weekend Financial Review says that a housing price slump is a possibility however nowhere near the extent seen in some areas overseas.

This needs to be put in context of the recent huge rises in property values (Adelaide has seen a 20% rise in some areas over the last 12 months and an average of 10%, compared to 20% in Qld and NSW). So the long term trend is still as it's always been. Also, SA is still expecting a resources boom over the next 2-5 years and interest rates will drop further to help stimulate demand.

But it's hard to know where this global crisis will end, it's making everyone very uncertain. Every week the predictions get worse.

EDIT: 10 pages on and Citigroup's Chief Economist forecasts a 4% increase in house prices across Australia in the next 12 months, driven by further interest rate cuts which will release held-back demand for houses and the generally healthy state of Australian banks and big companies ..... so who knows? Probably no-one really ...

[FlyingHigh]

Will be interesting. The REISA and its whipping boy (The Advertiser) like to keep telling us our house prices are always more stable than the Eastern states. However, that was before the influx of interstate investors over the last 3-4 years.

There is the chance our property values could remain stable or rise because of those specualtive investors who bought in WA selling there and buying here (the bloke on Kochie's show last night said WA could be the big loser).

Even if the SA house price falls 40% from 360k to about 220k, this is still approx 4.5 times the average SA income, whereas in America the average before the last years events was around 3. More factors involved than just this I know.

Personally, I think (and hope) prices will fall by 10-15% over the next two years and flatten for about 5 after that, especially as you'd think/hope banks will be more strict on lending.

Housing affordability will always suffer whilst society has the mind-set of residential property as an investment rather than a form of savings.

[Dutchy]

I think it will remain suite stable over the next 1-2 years with another spike after that, we could see record low interest rates shortly which will keep it at least even.

In adelaide we didnt see the sharp jumps that the Eastern states did during the boom therefore we dont have as far to fall...

[THE MOLE]

The more i listen to the "experts", the more confused i get.
The 40% drop was stated to be on the sydney market.
I was looking at selling up and going overseas for a year, my house was to go on the market in the next month, but with all indecision that is happening at the moment it doesnt make it easy and i think im going to hold off and wait and see if that is the right decision!

[Psyber]

The more i listen to the "experts", the more confused i get.
The 40% drop was stated to be on the sydney market.
I was looking at selling up and going overseas for a year, my house was to go on the market in the next month, but with all indecision that is happening at the moment it doesnt make it easy and i think im going to hold off and wait and see if that is the right decision!

I'm in the same boat. I'll put my house to the market, but be quite clear in my agreement with the agent that there is a minimum price, and if I don't get that price I'll pull it off the market and rent it out for 12 months instead. There is no sign of prices dropping around my area so far.

The few big drops in Sydney were in specific areas where developers, and local valuers and mortgage brokers, colluded in conning the desperate who couldn't get loans elsewhere into paying far more than house and land packages were worth ,and in conning the lenders into believing those valuations. I don't think there is any evidence of a widespread drop there either.

There are those about who stand to profit from a fear induced real estate collapse and are talking it up, just as potential vendors and agents have an investment in affirming it is not going to happen and values will continue to rise.

[Sojourner]

Its my suggestion that if the stock market has a rapid fall then house prices could actually rise if enough people look to move some of their investments into real estate.

If you pay an additional 1$ into your home loan, you will save yourself $2 in compound interest and the same scenario is the case for a mortgaged rental property. With super funds going into negative growth, where else can you find an investment like that, that has the capacity to have a return of $2 for every additional 1$ invested?

[THE MOLE]

Its my suggestion that if the stock market has a rapid fall then house prices could actually rise if enough people look to move some of their investments into real estate.

If you pay an additional 1$ into your home loan, you will save yourself $2 in compound interest and the same scenario is the case for a mortgaged rental property. With super funds going into negative growth, where else can you find an investment like that, that has the capacity to have a return of $2 for every additional 1$ invested?

That was one of my thoughts, but now theses people who have lost $$$$ on the stocks dont have as much money as they previously did to invest

[Psyber]

Its my suggestion that if the stock market has a rapid fall then house prices could actually rise if enough people look to move some of their investments into real estate.

If you pay an additional 1$ into your home loan, you will save yourself $2 in compound interest and the same scenario is the case for a mortgaged rental property. With super funds going into negative growth, where else can you find an investment like that, that has the capacity to have a return of $2 for every additional 1$ invested?

Yes, that happened in 1986-7 and house prices rose dramatically. Then interest rates were jacked up to curb the inflationary spiral, and when house prices started to fall and interest rates had killed business investment, tax deductions became the next popular investment. That's when I sold a car at 40% profit...

[devilsadvocate]

Its my suggestion that if the stock market has a rapid fall then house prices could actually rise if enough people look to move some of their investments into real estate.

If you pay an additional 1$ into your home loan, you will save yourself $2 in compound interest and the same scenario is the case for a mortgaged rental property. With super funds going into negative growth, where else can you find an investment like that, that has the capacity to have a return of $2 for every additional 1$ invested?

That was one of my thoughts, but now theses people who have lost $$$$ on the stocks dont have as much money as they previously did to invest

Exactly, the stockmarket is a leading indicator. Generally you can expect an 18 month - 3 year lag, but in this case, IMO it will be quicker than that given the 'credit crunch'. Aus is somewhat insulated due to demand and capacity constraints in the economy and the fact that even during the recent property booms, we haven't physically been able to build a glut of new houses. But it's places like outser Sydney suburbs that have been mentioned above that will take a bit of a hit.

IMO, RADelaide will stagnate for a few years and perhaps see the odd 1-2% declines, but I can't see prices falling off a cliff.