Posted to The Age (30/11/2011) on 30/11/2011 at 3:20 PM - 3:22 PM
Commenting on "Home price falls accelerate"
http://www.theage.com.au/business/home-price-falls-accelerate-20111130-1o5wx.html
The house prices fall is real, many people cannot afford to buy houses is real, many are waiting for the prices to come down further is real, and interest cut by RBA does not arouse buyers' excitement is real.
Student accommodation market is booming is false, there are not enough houses to sell is false, sellers are not prepared to negotiate is false, real estate agents are doing a good job is false, and the Australian's economy will continue at gang busting rate is false.
End of Part 1 of 3
Whew, now that these are off my chest, I shall say something about the current state of affairs. You probably have heard the saying "what goes up must come down". Why can so many things defy gravity and go up? Almost everyone in the real estate or other investment market understands the word "bubble". I prefer an alternative choice - balloon, or to be precise, a helium filled balloon.
If one fills a balloon with helium, the balloon will fly upwards against gravity. When most of the gas has escaped, the balloon will fall back to the ground. If one fills more helium than originally intended, the balloon will either fly further up, but still comes down eventually or burst before it has a chance to rise.
Many helium-like factors made the real estate balloon rise. In fact, before the real estate balloon started to descend after December 2008 (for Victoria), the State and Federal governments topped up the balloon with more helium-like incentive mid-air by extending the FHOG. The hype and craze lived on, pushing the houses prices and interest rate up. The door allowing more foreigners to buy real estate with less scrutiny from FIRB started to sideline a lot more genuine and hardworking home buyers, as distinct from house buyers.
End of Part 2 of 3
The flood gate for overseas investors is closed. The policies on international students coming to study have been revamped. The lending criteria have tightened. These major reasons have resulted in disastrous outcome. Those who did not understand the reasons for the uncontrolled rise of the over inflated balloon and joined in the wild party were hurt badly.
To many people, investment is business. Some business people cut their losses and walk away from it when prevailing conditions are not favourable. However, ill-advised and unwise business people may have to default, and assets are up for grabs.
If that is the case, there should be more properties in the market for sale. Why do not many real estate agents have enough listings? Many real estate representatives (only real estate licensed professionals can be called as agents) lack the human touch. Their technique is too aggressive, and they lack the apathy and sympathy in dealing with potential vendors who are in financial or marital trouble. These clients cannot afford expensive advertisements, and therefore you cannot find them in the real estate section of the newspapers or magazines. They also need every cent of the sale proceed, and cannot afford to pay thousands of dollars in commission.
Commenting on "Home price falls accelerate"
http://www.theage.com.au/business/home-price-falls-accelerate-20111130-1o5wx.html
The house prices fall is real, many people cannot afford to buy houses is real, many are waiting for the prices to come down further is real, and interest cut by RBA does not arouse buyers' excitement is real.
Student accommodation market is booming is false, there are not enough houses to sell is false, sellers are not prepared to negotiate is false, real estate agents are doing a good job is false, and the Australian's economy will continue at gang busting rate is false.
End of Part 1 of 3
Whew, now that these are off my chest, I shall say something about the current state of affairs. You probably have heard the saying "what goes up must come down". Why can so many things defy gravity and go up? Almost everyone in the real estate or other investment market understands the word "bubble". I prefer an alternative choice - balloon, or to be precise, a helium filled balloon.
If one fills a balloon with helium, the balloon will fly upwards against gravity. When most of the gas has escaped, the balloon will fall back to the ground. If one fills more helium than originally intended, the balloon will either fly further up, but still comes down eventually or burst before it has a chance to rise.
Many helium-like factors made the real estate balloon rise. In fact, before the real estate balloon started to descend after December 2008 (for Victoria), the State and Federal governments topped up the balloon with more helium-like incentive mid-air by extending the FHOG. The hype and craze lived on, pushing the houses prices and interest rate up. The door allowing more foreigners to buy real estate with less scrutiny from FIRB started to sideline a lot more genuine and hardworking home buyers, as distinct from house buyers.
End of Part 2 of 3
The flood gate for overseas investors is closed. The policies on international students coming to study have been revamped. The lending criteria have tightened. These major reasons have resulted in disastrous outcome. Those who did not understand the reasons for the uncontrolled rise of the over inflated balloon and joined in the wild party were hurt badly.
To many people, investment is business. Some business people cut their losses and walk away from it when prevailing conditions are not favourable. However, ill-advised and unwise business people may have to default, and assets are up for grabs.
If that is the case, there should be more properties in the market for sale. Why do not many real estate agents have enough listings? Many real estate representatives (only real estate licensed professionals can be called as agents) lack the human touch. Their technique is too aggressive, and they lack the apathy and sympathy in dealing with potential vendors who are in financial or marital trouble. These clients cannot afford expensive advertisements, and therefore you cannot find them in the real estate section of the newspapers or magazines. They also need every cent of the sale proceed, and cannot afford to pay thousands of dollars in commission.
With all these clues, what is your next move?
End Part 3 of 3
