Monday, January 31, 2011

Spruikers change tune

The tide is starting to turn on property spruikers in Brisvegas. The spruikers are always the last to one to admit that a negative return could be at all possible - and it's always when it's to late. Today we see in the brisbanetimes that:
Brisbane property analysts have said prices are expected to fall a further 10 per cent in the next 12 months, in the wake of the flood, before a resurgence in the first quarter of 2012.
What is interesting is that they first try and lay the blame on the floods and then just two paragraphs later we get this:
However RP Data research analyst Tim Lawless said interest rates would be the primary determining factor of Brisbane's housing market in the year ahead.
So in other word - the flood only helped bring the price falls on, but the real cause for the fall is interest rates. Funny how there is no mention of overvalued property or excessive debt being the cause.

The problem with all spruikers is that they always exaggerate the facts to best suit them. For example Riskmark said:
national dwelling price-to-income ratio has already fallen from 4.7 to 4.4 times
However the independent study conducted by Demographia (7th Annual International Report) shows that our national price-to-income ratio is actually 7.1 times. (Brisbane is 6.6 times) So Riskmark is spruiking to the tune of -38%.

If we carry this spruiking ratio of being under the real figure then we get a closer look at what the real fall in house prices could be -16%. Not at all technical I know, but the purpose is to show that Property Spruikers,... well they spruik! The 10% fall that they are admitting to is more then likely going to much larger then what they are willing to let on. 10% is the extremely optimistic view.

Time's up for Brisbane Property. No one will want to buy now if they know that their property is going to be worth 10% less next year, and what bank will give a loan with a 95% Loan-to-Value Ratio (LVR) when it will be 105% LVR next year? And when a bank reduces it's LVR from even 95% down to 90% it halves the available money to purchase a property with the same deposit.

I'll do another post on how this works over the next few days. All in all it's very bad news for Brisbane property.

1 comment:

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