After all the previous blogs about anti-property buying, in the UK and in France people have started to buy again to place their money. They do not trust banks anymore and teh cash they have they prefer to invest it in gold or properties. I wonder if South Africa will follow?
I am hearing many, many stories of homes not selling, being reduced from R4 million to R2,5 million, in Athol JHB (very desirable area, still not selling)
•In the suburbs outside New York, it’s estimated housing values will recover – by 2020. •It’s now believed US realtors have exaggerated sales of existing homes by up to 20%, meaning the current market is worse than that of the Great Depression. •New home sales are the lowest ever. (Records have been kept for 50 years.) •Las Vegas had one of the hottest real estate booms six years ago. A home that sold for $240,000 is today worth $80,000.
Go http://www.prosper.org.au/2011/03/15/prosper-calls-for-buyers-strike/
400 years of real house prices in the Netherlands - notice the recent bubble is the highest housing bubble in 400 years - that is how bad the situation is.
Notice also that there are repeated up and down cycles of between 30 to 70 years going up ... followed by the same number of years going down. We have just completed a 60 year up cycle that has peaked. That means a 60 year down cycle is now underway.
For most of us we will be long dead before a new upturn returns.
If the stats were available I would not be surprised if a similar picture would be seen worldwide.
The truth is that the glory days of property are over for a very long time. History books will talk about the new millennium global property bubble that almost destroyed the world's economy and how it contributed to the demise of the great US empire ...
I'm always interested to see the comparisons with the SA market to other countries. Invariably its normally the US or UK, and we're told see X happened there and since we normally lag by two years X will happen here now.
However, there is hardly any similarities in our housing economies to most of these examples. Who is the most similar economy to SA, Brazil?
Not to be pedantic JDog, but that means you bought for 65% of asking price (with 35% discount). I’ve seen this with other properties in upmarket areas (Bishopscourt …etc). As soon as the price goes over 3 or 4 mill the valuations seem to be wildly exaggerated and are driven more by sentiment than reality. Good for you for making a cheeky offer. Like most sellers they were greedy and were trying their luck.
33% to 35% discount seems to be de rigeur nowdays. The danger now of course, is that sellers will hook on to this trend, and just inflate the original asking prices by 35%
That means that 4.5m is presently the going price for such a property - I reckon with 10% annual inflation for 3 or so years we will need a 20% drop in nominal prices over the same time to get the required 50% real drop required to return to norms. So in 3 or 4 years time your salary should be 35% higher and your house worth about 3.5m ... and Prime will be about 15.
On a totally different subject I see 13% of all US homes are empty - in Florida it is 20%. Ouch.
My interpretation of what Buffet once said, is that property is an asset class and its price should reflect what it is worth to the investor i.e. npv of discounted cash flow. I believe the confusion has come from people believing that capital gain is part of the eguation in evaluating a potential property?
New home sales are at its worse since 1963 in the USA, maybe the second dip? See: http://finance.yahoo.com/news/Home-price-declines-deepen-in-apf-2179818115.html?x=0&sec=topStories&pos=3&asset=&ccode=#mwpphu-container
Yes, I hear your rationale on the primary residence. Property price issues stand separately, because the price of a primary residence is really quite a different matter from investment property as you say. Its the whole emotional touchy feely thing that has a value all of its own.
Maybe you need to do business entertaining and need a great place. Or you just want to dominate in an awesome pad - cos who knows how long we got left! Will a small, but rent ratio efficient pad give you that same great feeling every time you come home?
Its like when you buy a Lexus for work, but know that a Polo is a better financial decision...however will you feel confident enough to get the deal arriving in the Polo?
Physical items and emotional conditioning are a whole different, tangled value chain...
Ja, you may not give a stuff what the home is worth over the next 20 years, that's true, IF:
1. You don't lose your job, or 2. Get divorced, or 3. The neighbourhood tanks, or 4. The wife wants out NOW, or 5. You get robbed 3 or 4 times, or 6. The municipality jacks rates by stupid amount, or 7. You get nthe picture, broer?
It just doesn't nmake sense to overpay, no matter your circumstances
I see US nominal property prices are now back to what they were 11 years ago ... now THAT is a crash doing what it is meant to do. Same thing is happening in Ireland and Spain. The UK and SA seem to be resisting the crash forces ... but the truth is it is not possible - you may be able to delay it ... or create inflation and let that take care of the real falls needed ... but the fact that prices in SA need to somehow fall 50% can't be avoided.
Wow scary stuff, thanks for sharing. Similar prob to SA, with loads of people needing housing - but affordable housing!
Population growth of China is slowing, hitting a population peak in 2030 and then actually declining due to the delayed impact of the 1978 1 baby policy. Replacement birth rate is 2.1 babies per female.
Similar to SA although for different reasons, with the declining population predicted after 2030 by SAIRR due to AIDS impact.
At the end of the day, someone needs to live in those apartments or they are worthless. Those people are there in China living in sub-standard housing now, but they don't have the money to move.
If the goverment is funding the building of all of this property, do you think they might step in and subsidise house prices?
25 comments:
*meep* *meep* *meep*
Anybody there?
Yeah sorry real life has been piling it on lately and story tips from readers have been scarce lately *hint*.
After all the previous blogs about anti-property buying, in the UK and in France people have started to buy again to place their money. They do not trust banks anymore and teh cash they have they prefer to invest it in gold or properties. I wonder if South Africa will follow?
the bubble is bursting in SA
I am hearing many, many stories of homes not selling, being reduced from R4 million to R2,5 million, in Athol JHB (very desirable area, still not selling)
the "stealth crash" is underway, methunks
•In the suburbs outside New York, it’s estimated housing values will recover – by 2020.
•It’s now believed US realtors have exaggerated sales of existing homes by up to 20%, meaning the current market is worse than that of the Great Depression.
•New home sales are the lowest ever. (Records have been kept for 50 years.)
•Las Vegas had one of the hottest real estate booms six years ago. A home that sold for $240,000 is today worth $80,000.
Go http://www.prosper.org.au/2011/03/15/prosper-calls-for-buyers-strike/
Coming to SA soon, ne?
see the graph on page 5 of this link -
http://tinyurl.com/494ghdt
400 years of real house prices in the Netherlands - notice the recent bubble is the highest housing bubble in 400 years - that is how bad the situation is.
Notice also that there are repeated up and down cycles of between 30 to 70 years going up ... followed by the same number of years going down. We have just completed a 60 year up cycle that has peaked. That means a 60 year down cycle is now underway.
For most of us we will be long dead before a new upturn returns.
If the stats were available I would not be surprised if a similar picture would be seen worldwide.
The truth is that the glory days of property are over for a very long time. History books will talk about the new millennium global property bubble that almost destroyed the world's economy and how it contributed to the demise of the great US empire ...
I'm always interested to see the comparisons with the SA market to other countries. Invariably its normally the US or UK, and we're told see X happened there and since we normally lag by two years X will happen here now.
However, there is hardly any similarities in our housing economies to most of these examples. Who is the most similar economy to SA, Brazil?
Just bought in Camps Bay for 35% of original asking :)
Jdog, for real? Give us some details...
35% ? wow, give us the deets dawg!
original asking was 6.9, by the time we offered it was down to 5.25. concluded at 4.5.
happiness!
Not to be pedantic JDog, but that means you bought for 65% of asking price (with 35% discount). I’ve seen this with other properties in upmarket areas (Bishopscourt …etc). As soon as the price goes over 3 or 4 mill the valuations seem to be wildly exaggerated and are driven more by sentiment than reality. Good for you for making a cheeky offer. Like most sellers they were greedy and were trying their luck.
35% of 6.9 = 2.4
Now that would be a real bargain.
A 35% discount seems to be de rigueur these days.
33% to 35% discount seems to be de rigeur nowdays.
The danger now of course, is that sellers will hook on to this trend, and just inflate the original asking prices by 35%
Ok... a 35% discount is possible. But 35% of asking (i.e. 65% discount would be killer).
R4.5 million is still a lot of money. Out of my price range for sure.
ermmmmmm
35% off when asking is 50% too much is not a bargain, I reckon
could be crying buckets in a year's time, I reckon
this bubble is unprecedented, and so are it's consequences, I reckon
Just saying ...
That means that 4.5m is presently the going price for such a property - I reckon with 10% annual inflation for 3 or so years we will need a 20% drop in nominal prices over the same time to get the required 50% real drop required to return to norms. So in 3 or 4 years time your salary should be 35% higher and your house worth about 3.5m ... and Prime will be about 15.
On a totally different subject I see 13% of all US homes are empty - in Florida it is 20%. Ouch.
My interpretation of what Buffet once said, is that property is an asset class and its price should reflect what it is worth to the investor i.e. npv of discounted cash flow. I believe the confusion has come from people believing that capital gain is part of the eguation in evaluating a potential property?
New home sales are at its worse since 1963 in the USA, maybe the second dip? See: http://finance.yahoo.com/news/Home-price-declines-deepen-in-apf-2179818115.html?x=0&sec=topStories&pos=3&asset=&ccode=#mwpphu-container
sorry, dropped the 'f' from 'off'
my bad.
CJ since it is a primary residence and not just an investment, I really couldn't give a continental about the price for the next 20 years.
@Jdog
Yes, I hear your rationale on the primary residence. Property price issues stand separately, because the price of a primary residence is really quite a different matter from investment property as you say. Its the whole emotional touchy feely thing that has a value all of its own.
Maybe you need to do business entertaining and need a great place. Or you just want to dominate in an awesome pad - cos who knows how long we got left! Will a small, but rent ratio efficient pad give you that same great feeling every time you come home?
Its like when you buy a Lexus for work, but know that a Polo is a better financial decision...however will you feel confident enough to get the deal arriving in the Polo?
Physical items and emotional conditioning are a whole different, tangled value chain...
Ja, you may not give a stuff what the home is worth over the next 20 years, that's true, IF:
1. You don't lose your job, or
2. Get divorced, or
3. The neighbourhood tanks, or
4. The wife wants out NOW, or
5. You get robbed 3 or 4 times, or
6. The municipality jacks rates by stupid amount, or
7. You get nthe picture, broer?
It just doesn't nmake sense to overpay, no matter your circumstances
Wake up, smell the coffee
I see US nominal property prices are now back to what they were 11 years ago ... now THAT is a crash doing what it is meant to do. Same thing is happening in Ireland and Spain. The UK and SA seem to be resisting the crash forces ... but the truth is it is not possible - you may be able to delay it ... or create inflation and let that take care of the real falls needed ... but the fact that prices in SA need to somehow fall 50% can't be avoided.
CJ is korrekt!
"64 million empty apartments in China."
http://www.sbs.com.au/dateline/story/transcript/id/601007/n/China-s-Ghost-Cities
Now there's a bubble for you.
@Benjamin Nortje
Wow scary stuff, thanks for sharing. Similar prob to SA, with loads of people needing housing - but affordable housing!
Population growth of China is slowing, hitting a population peak in 2030 and then actually declining due to the delayed impact of the 1978 1 baby policy. Replacement birth rate is 2.1 babies per female.
Similar to SA although for different reasons, with the declining population predicted after 2030 by SAIRR due to AIDS impact.
At the end of the day, someone needs to live in those apartments or they are worthless. Those people are there in China living in sub-standard housing now, but they don't have the money to move.
If the goverment is funding the building of all of this property, do you think they might step in and subsidise house prices?
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