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Real(i)ty bites – Canberra house prices fall seven per cent

By 2604 - 10 December 2008 128

The ABC reports that house prices in the ACT have fallen by seven per cent in the past three months. Annualized, that turns into a whopping 28 per cent fall!

Of course, this news is accompanied by the usual REIACT statements hosing down any negative consequences for house sellers. I wouldn’t have guessed it, but it turns out that now really is a great time to put your house on the market.

Thoughts anyone?

While this will have negative consequences for ppl who borrowed heavily to purchase at the top of the boom and now have no choice but to sell, I think that this is great news for everyone else. The sooner that we can forget about the possibility of a whole generation never being able to afford to buy a house, the better.

What’s Your opinion?


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128 Responses to
Real(i)ty bites – Canberra house prices fall seven per cent
Pommy bastard 10:35 am 10 Dec 08

I have a house in the UK, I rent here. When I bought my house there, I saved for five years just to raise the deposit. The first four years I lived in it the mortgage took up over half of my income.

tylersmayhem 10:24 am 10 Dec 08

I think it’s about time that potential home buyers get a break, and have a chance to make it in to the market. I recently bought, and were lucky enough to buy in what was almost a 2 week lull in the market.

While I;m a home owner now, and prices seem to be falling, and I think would be fair to drop quite a bit more, I have no real concern because I am of the old school mentality of wanting one family home for the next 20 or so years. Not multiple investment properties which I believe is somewhat of a greedy mindset and has caused much of the housing price problems, housing shortages and ridiculous rental prices over the last 10 years or so.

Good luck new home buyers – you all deserve the chance. And for those with investment property owners, I think Holden has a great perspective about it all. Good on you Holden.

Holden Caulfield 10:19 am 10 Dec 08

justbands said :

> It may be anecdotal but there’s a lot to be said for simply knuckling down and doing it.

It’s the only way Thumper. I’m not saying that houses are easy to afford, they’re not. I’m just pointing out that sacrifices need to be made & that less & less people seem prepared to make them. It’s the “I want it all & I want it now” attitude that seems to be everywhere nowadays.

I agree with you guys on the knuckle down and get on with it attitude.

However, getting a housing loan in 1991 was a bit different to getting one (or any form of credit) in the early-mid 2000s. As a society we’ve come to expect/demand more from our lifestyles. Even in that short 10-15 year period.

So most Gen Y types probably don’t know anything else other than big plasmas, McMansions and easy credit. Looks like they’re just starting to find out how Gen Xers and Baby Boomers grew up.

p1 10:13 am 10 Dec 08

I agree with the “how tough it was in my day” comments to some degree. I remember when I was a kid exactly what my parent thought was normal, how big a house they bought, etc…

But I suggest to you that society has change (not saying I think it’s all good, just that is has), and that the two are not really comparable.

I also know that my Dad at the time was on a pretty low wage, and my Mum stayed at home to raise the kids, yet they could (barely) afford the repayments. I think that is much harder to do now, with or without plasmas.

And anyway, that’s what the baby bonus is supposed to pay for isn’t it?

justbands 10:11 am 10 Dec 08

> It may be anecdotal but there’s a lot to be said for simply knuckling down and doing it.

It’s the only way Thumper. I’m not saying that houses are easy to afford, they’re not. I’m just pointing out that sacrifices need to be made & that less & less people seem prepared to make them. It’s the “I want it all & I want it now” attitude that seems to be everywhere nowadays.

Thumper 10:08 am 10 Dec 08

I did the same as Mr Bands.

Second hand everything, old car, buses, no meals at restaurants or coffees, cheap plonk, no holidays, etc.

It may be anecdotal but there’s a lot to be said for simply knuckling down and doing it.

justbands 10:03 am 10 Dec 08

> 54-11/justbands: How about some evidence instead of your back-in-my-day anecdotes?

My wife & I purchased our first place in 1991….smack bang in the middle of a massive boom, as referenced in the link you’ve provided.

Anyway, that report doesn’t mention Canberra at all…so, what evidence?

Holden Caulfield 10:02 am 10 Dec 08

We’ve got an investment property in Gungahlin coming off lease in February that we’d like to sell. Not the ideal time to be flogging off a house, but we built/bought it at a good time, so have to take the good with the bad.

Given the way the share market has gone tits up, I dare say we’ll be miles ahead of where would have been had we put all the money spent on our property into shares over the same time frame.

I just hope we can find a buyer in a reasonable amount of time.

Woody Mann-Caruso 9:58 am 10 Dec 08

Annualized, that turns into a whopping 28 per cent fall!

Wow! Using your dubious mathematics, I calculate that in less than four years houses will be free!

Spectra 9:55 am 10 Dec 08

The ABC reports that house prices in the ACT have fallen by seven per cent in the past three months. Annualized, that turns into a whopping 28 per cent fall!

I hate to be a pedant, but it doesn’t work that way. If they fall 7% a quarter, that’s not the same as falling 28% over the year. Take a $400,000 house:

1st quarter: $400,000 * .93 = $372,000
2nd quarter: $372,000 * .93 = $345,960
3rd quarter: $345,960 * .93 = $321,742.80
4th quarter: $321,742.2 * .93 = $299,220

However for a straight 28% fall:

$400,000 * .72 = $288,000

“Annualised”, it is actually a 25.2% fall (not that I’m suggesting that’s not still a significant fall, but let’s get our elementary maths right please).

Probably of more interest than maths games, however, is the claim I heard that there aren’t enough house sales per quarter in the ACT for a single quarter-to-quarter change to be seen as indicative of the overall state of the market (since you can’t guarantee a sufficient spread and distribution of property types for the values to be directly comparable quarter to quarter). While I have neither the data nor the statistical acumen to evaluate this one way or the other, it does seem like a reasonable argument for what is a relatively small market.

Don’t get too excited about affordability….house prices are always on the way up & up long term.

True, although “long term” may be very long indeed – the Japanese market suffered a decade straight of declining prices (which tends to make a bit of a lie of the “land supply” argument). Assuming they grew at the same rate once the market recovered, that’s still 20 years before you start to see your “long term” gains 🙂

caf 9:52 am 10 Dec 08

54-11/justbands: How about some evidence instead of your back-in-my-day anecdotes?

justbands 9:45 am 10 Dec 08

54-11: You’ve highlighted a view I’ve long held myself. There’s a lot of whinging & whining about affordability nowadays..but as you’ve mentioned, was it really any easier when we got our first places? Like you…we scrimped & saved to buy a 2 bedroom townhouse. We moved in with my parents for 18 months, I drove a 1976 Lancer, we ate cheap, we rarely went out. Now we have friends that complain about not being able to afford a house whilst playing xbox360 on their HD large screen plasma, drinking imported beer that they ducked to the shops in their $40K car to buy.

p1 9:34 am 10 Dec 08

I am hoping to enter the property market for the first time in the new year. If prices keep falling it can only be good for me. Unless no one is selling that is.

54-11 9:33 am 10 Dec 08

2604, you say that there are negative consequences for those who bought at peak prices. This is somewhat true, in that some may be moving toward negative equity, but that will only be reality if they sell. When things pick up again in a couple of years, then they move back into positive territory very quickly.

As a boomer, I’m also somewhat sceptical of the whole concept of housing unaffordability. At the risk of inviting some derision, when we bought our first house, oh, many years ago, it was a small 2-beddy (en suites didn’t exist back then) we had sheets for curtains and furniture was all second-hand and very basic. We used public transport, because of the two mortgages and a loan from the olds, and a non-existent social life for several yaers until we got rid of the second mortgage.

I look at kids now, no problem having a good car, buy their toys, a full-on social life, expectations of the 3-bedroom en suite home, and then claiming lack of affordability.

Whatever happened to perspective and balance, and accepting that life-styles will change if they want it all.

justbands 9:32 am 10 Dec 08

Why would people now have no choice but to sell?

Don’t get too excited about affordability….house prices are always on the way up & up long term.

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