When can we expect house prices to bottom?

Aided by generous sofas and an oncoming tax, are house prices, adjusted for inflation, since 1982 tripled.

Result, an average house is now € 250,000, – and the total cost private mortgage has risen to € 632 billion, which the Netherlands is the frontrunner in the world (107% of GDP).

That does of course not a problem, as long as employment, large credit, tax deductibility and, not least house prices are maintained.

A substantial change in one or more of these factors, however, the vulnerability, which now once associated with a high debt position, mercilessly exposing.

With the lowest unemployment in Europe and the political taboo that rests on the discussion of the tax deductibility of mortgage interest, about these two factors in the Netherlands temporarily well.

The generous credit, however, the last time a real problem to be. That’s not so strange when one considers that The solvency of the banks themselves under suspicion.

The debt crisis in Europe has at least made clear that banks have lent too much money to poor countries and their inhabitants and their fate depends on the political willingness of the resulting threats to shift to the taxpayer.

To the stagnant real estate market that pulling out of recession, the transfer tax is temporarily reduced from 6% to 2%. That makes at least the financing of the buyers a bit smaller. It does appear from this unique action that the government is really worried.

That’s not surprising, with an expected price decline for 2011 of around 6% (according Hans Andre de la Porte of the VEH) And strong sales stagnating. The number of homes now up for sale has doubled since 2008!

This massive supply of houses is probably not only due to the reduction in funding, but certainly also due to the unwillingness of sellers to the price to drop, driven by the expectation that recovery of housing prices around the corner.

Whether this expectation is real, is widely doubted. Expects emeritus professor Hugo Priemus the next five years drops of 5% per year.

In the U.S. property market has been attempted with various support measures afloat. This has had an impact for some time, but now the trend is downwards, and again after an average decline of over 30% from the peak of the market.

ING Australia provides mortgage headaches

Since the 2008 crisis trying ING Bank ING Direct Australia for his daughter, a suitable takeover candidate.

Discussions have so far come to nothing. The reason is that candidates have reservations about an important part of the deal. Because the mortgage is estimated at AUD 37 billion and is well geared.

To finance this portfolio to ING regularly to the market for mortgage bonds put away. Until now it has always worked well and so has the bank in October 2010 and last June are respectively 900 million AUD and AUD 800 million to pick out.

So why the worries?

This is probably best explained by a video of 60 Minutes Australia The Big SqueezeIn which some typical Australian families report their struggle to keep their heads above water.

The stories resembling those of their American cousins, for example, California and Florida, who also thought their home ownership to make a career by always moving on to more expensive homes with ever-increasing mortgages.

As long as house prices rise and there are enough jobs, it works great. But the situation in Australia starts to change rapidly:

* The housing bubble has exploded, prices are falling rapidly and the number of transactions has declined dramatically, while the housing stock by 44% up flown
* the number of defaulters is skyrocketing, partly caused by rising mortgage interest rates (90% of mortgages are variable!)
* Employment drops suddenly now the Chinese economy begins to cool
* bankruptcies are soaring: in one month, 85 perished contractors

This are some myths debunked. The enormous price of the property in Australia would result from the housing shortage and the “boom” in commodities related employment was not broken by continued growing pains of the Chinese dragon.

It appears therefore that the recent developments in Australia a nasty setback of the ING put. Parties are reluctant to now to take a heavy mortgage, and thus has an opportunity ING to pass up two birds with one stone:

1. Because of the bad loan / deposit ratio of its mortgage portfolio, ING Direct Australia runs the very real risk heavyweight struck by the rapidly deteriorating economic conditions. Think also possible refinancing problems. A sale was that risk of course immediately neutralized.
2. The sale was also, according to expert Cor RABOBANK Safe, approximately € 1.2 billion in capital freed up, that given the voortsudderende euro crisis, a welcome strengthening of equity had meant.

Dad, we want to buy a house. What do you think a good idea?

That question was not an invitation for a bit to contribute financially, but a sincere request for advice. Own research into the advantages and disadvantages through the usual channels of his son does not really convinced.

Together with his fiancee, he was in any case be concluded that the once-cozy apartment rental lot of appeal was lost and that successful two-income families with a very strong savings were ready to move up the housing market.

At first it seemed a house is most obvious. The savings in the bank was more a concern than a source of joy investment. Low interest rates, inflation lurking and even the possibility that the bank may be insolvent may be, can not compete in a safe investment in stone, which only increase in value.

According to the Homeowners Association the benefits of an owner-occupied:

• A house is yours.
• As a homeowner, you build in the long run almost always at capacity.
• You can use the property at its discretion – the law allows – grow or change.
• In the long term is usually cheaper to buy, because the rise in mortgage is often more moderate than that of charges.
• Under certain conditions, financial help available.

The National Institute for Budget Information sees wealth as the main benefit of buying a home.

So many advantages overshadow natural disadvantages easy as costs for maintenance, building insurance, home ownership value, while the lesser mobility of the two solid base of people involved was not a problem anyway.

The catch, however, lies in the assumption that buying a home almost automatically leads to wealth. Had they’re not the article of July 27 jl “When can we expect house price bottom in?” read, then it was simple.

Was the article of June 12 j.l. Trends in the real estate still on a drop of 2% of the housing market in 2011 (based on estimates by Rabobank), and a half months later, gave new evidence already that this estimate was far too optimistic.

A decrease of 6% in 2011 now seems inevitable, worse, fall seems set to continue in the coming years according to some experts. They assume that the housing market over 5 years at least 30% of its value will have lost.

The reaction of my son, this was one of disbelief. His search for a house had not been in contact with a crowd of desperate sellers and the prices seemed to him especially under pressure.

This shows once again that on the one hand and limited personal research can be deceptive and that the old real estate adage other “location, location, location” still applies. The current market segment, where he seeks a house, hold the longest stand in a declining market.

Not entirely convinced our prospective buyer gets two arguments emerge, which may be decisive:

• the Temporary reducing the transfer tax and
• the historically low mortgage rates are still

Roads such arguments, coupled with the peace of mind that the savings in a safe house is invested at the prospect of a long slump in the housing market?

The answer to that question depends on the ability to safely invest the savings other than in a house. What are, among other things Safe alternatives?

• Equity markets are in the process of disappointing economic developments of recent times to calculate and there is much uncertainty about the duration and extent of the slowdown. According to many “gurus” is a test of the low of 2009 is not excluded. Investing in shares is currently certainly not good for peace of mind.
• The same can be said about corporate bonds. The interest rate on junk bonds recently started to rise sharply and that is usually a harbinger of a broader decline in the bond market.
• Gold and silver have shown incredible price. It seems a bit late in the race to still get on. Especially since this government right now stick to their property and even gold are expanding. History shows that governments do not have lucky timing and show the same herd mentality. Policy decisions are usually taken in broad consensus.
• The real estate business is currently still in a downward trend and has to cope metor high vacancy rates. It is a market that it is probably better to leave to the experts.
• What is left is cash and short-term government bonds from solvent countries. The inflation argument against this is probably premature. Ongoing low credit bubble and economic slowdown will lead to deflation, which cash-in value. In a continuation of current trends, the bargains in the various markets in the near future by themselves.

The decision to buy a house requires it looks deep macro-economic insights, knowledge of trends in specific markets, knowledge concerning political policy decisions, certainty about their own working conditions, structural knowledge, sense of social trends in society, in short the is the simple mortal is well above the cap.

It seems that our prospective buyer will offer a little resistance to the emotional needs’ own stones “to own and rent the alternative once again see what goes.
A reasonable rent allows us an opportunity to affect capital accumulation through savings!

There are a lot of assumptions in this article, which many people probably will cause crooked toes. Prospective buyers were constructive input from readers as particularly appreciate in order to perhaps better informed decision to be taken.

Spanish property at bargain prices?

In 2006 the property market in Spain its peak. In eight years time, house prices have quadrupled in some locations and the annual production of houses and apartments rose to over 700,000 units. By comparison, this is more than the total production of Germany, Britain and France combined. Since then, prices according to official sources declined by about 12%, while unofficial sources, however, speak of an average decrease of at least 30%. The question is, from the last estimate, whether the time is an investment in property in Spain to consider? First some facts:

1. The offer
Estimates of the number of houses and apartments that are vacant vary considerably. Again, official sources speak of a stock of about one million units, while nationally operating agencies of the double speak. In addition, certainly 300,000 units under construction. At the current sales pace, even the official stock brokers enough to 7 to 8 years trying to keep.
2. The price level
The messages that buying real estate prices have fallen about 30%, causing potential buyers to the appropriate course for jitters and some of them already enough to get on. Calculating back from the record prices of 2006 seems to be a discount of 30% natural lot. Prerequisite for this thinking is that the premise of 2006 is reasonable and healthy eight. The latter is now very difficult, since the peak of each cycle is created under the influence of extreme optimism, backed by an irresponsible banking sector, coupled with historically low interest mortgages to 120% of the purchase price.
3. Houses Cycle
Supporters of the 18-year business cycle that the last cycle started around 1992, culminating in a peak in 2006/2007, after four years of the recession cycle perfect. This implies that in 2011 the starting year for the new cycle. Economist Fred Harrison 300 years history has been studied to verify this theory and discovered that only under extreme circumstances such as war, the normal 18-year cycle is interrupted. The crisis of 2008, however, is often compared to war.
4. Accredit
Each tree house is accompanied by broad and flexible loans. The crisis of 2008 abruptly put a stop to it and it does not appear that the restoration of credit around the corner. There are indeed increasing capital requirements for banks. Reason is partly that Spanish banks particularly exposed to the consequences of further price declines and thus require a larger buffer.
5. Strong hands?
Much of the housing stock is owned by banks and supervisors, with the help of the government and the ECB has so far been able to keep the prices slightly. The festering crisis sovereignty (insolvent countries) that can sometimes support a rapid end. Banks and their supervisors will have difficulty renewing credit, which sale is necessary.
6. Customers
To what extent one can expect a strong recovery in demand? Foreigners in the past could rely on the strong domestic market, for example, second mortgages possible. The credit lines are tightened internationally. In domestic demand due to the persistent high unemployment can not expect much. Only at a dramatically lower price level homeowners weather the liberty costs.

In summary, we can say that given the huge reserves, still historically high prices, difficult credit conditions and the absence of willing buyers a restoration of the property market in Spain is still far away and that further price reductions are needed to recovery. The cycle in this difficult time argument is a weak argument. Time for bargain seems to have not yet arrived. See what our further instructions Tips for asset.

Trends in the real estate

Importance

Real estate is considered the most important sector of the economy. It is the collateral for most part of all funds worldwide.

In fits and starts the rising prices of real estate made possible an expansion of credit, but ultimately ended in a veritable explosion of credit many negative side effects.

In 2006, a historic turning point occurred in the property sector, while falling prices since the collateral of the credit market under pressure.
The resulting credit crisis has temporarily put an end to the debt for 60-year cycle. ( see blog article of 05/11/19 )

The expectations of property price movements, given the importance of credit and related economic growth, not just important for investors and buyers for their own use.

The government and banks have their policies and strategic location depend on it.
Ultimately, the prosperity of everyone directly or indirectly influenced by!
The impact of the crisis of 2008

Until the crisis The property was nice the wind in the back:

1. Favourable economic environment
2. Favorable financing conditions
3. Attractive interest
4. Big gains in real estate
5. Fairly strong rental market

After the crisis The situation changed adversely:

1. Emergencies aside, must be reckoned with low economic growth over the next 5 years
2. The role of government will not support the cutback trend (perhaps even hostile: think of the discussion on the mortgage)
3. The movement of the average consumer is limited by its high debt
4. From a historical perspective, interest rates will remain low, but the financial terms will be tightened, for example:
* stricter selection by banks
* higher advances
* periodic review of the value of the collateral (whether or not additional payments?)
5. The trend points to more than depreciation in value of the property
6. The rental market is under pressure

Market trends by sector

1. Office

The cold numbers tell a large part of the story: a total inventory of 48 million m2 of office space is 14% empty. At normal frictional vacancy rate of around 4%, there is a huge oversupply of 10% or 4.8 million m2. ABN / AMRO expects that this oversupply In 2015 another doubled will be.

Why the high vacancy rate? There are many reasons for this:
1. Economic growth remains below expectations
2. aging reduces the labor
3. The “new works” (flex points, ZZP, s, combination home / office) reduces the need for office space
4. the “upward” move leaves less competitive buildings behind
5. communities feel the need to encourage new construction, especially in terms of employment
6. NVB (association for developers and building contractors) perform an effective lobby for its members with the main argument that qualitative scarcity

This amazing offer on office rents are the last 10 years and are now down an average (nominal) at the level of the early 90s. Also the constant value increases has ended.

From various sides is therefore a complete freeze called and called for conversion of vacant buildings into senior housing, youth housing, temporary housing and commercial space.
Crucial here would be a more dominant role for the government!

Conversion rather than new construction does not impose unnecessary pressure on space and materials, but is often hampered by partial vacancy. Over 60% of the vacancy is because in buildings that are partially in use.

The freeze cuts in particular wood because of two very strong underlying trends: the “new work” and aging. Both trends in the coming years will only increase in strength.
2. Retail

The figures for the retail market are less depressing than those for the office.
The total retail space in the Netherlands is more than 28 million m2, with a vacancy rate of 6%. There are 800,000 m2 per year, however, when, as here also some negative trends in the market under pressure:
1. aging provides an overall decline in purchasing power as 65 and over 20% spend less
2. Internet shopping eaten more and more revenue from shops
3. The weak growth in consumer spending slows down

Most vacancy rate is below the concentrations and peripheral centers. The main shopping areas and inner cities continue to be well up, as long as sufficient attention is paid to accessibility, safety, complete range and cozy furnishings.

Nevertheless, here too the underlying trend appears negative and the planned new building is too optimistic and restraint required.

Retailers in good locations, that is getting ample attention to their web presence need not fear for the future.
3. Commercial Market

The statistics of this market is similar to that of the office. The vacancy of the total stock of more than 16 million m2 and 13% despite the improving global economy is still growing.

Much of this offer is on bad sites, consisting of old buildings. That kind of structural vacancy is not easy to solve.
Here too the government reluctance to allocation of land required to be greater to avoid oversupply.

Much will depend on the logistics sector in the Netherlands.
Long as the Netherlands as a distribution is gaining in importance, negative factors such as more efficient inventory management and “move up”, be compensated.
4. Housing

Rabobank gives three reasons for the projected 2% decline in the housing market in 2011:
1. The new funding rates are lower
2. The repayment terms are tightened
3. mortgage rates will rise

After house prices in 2008 reached their peak, they fell by 7% and so does the number of transactions dropped sharply. If one can believe the Rabobank, this trend continues.

How long this trend will continue strongly depends on the development of the global economy and whether the political advice of the IMF, to reduce the mortgage, will take to heart. The IMF expresses concern because the high indebtedness of the Dutch homeowner, including created by the generous interest deduction.

So much is clear, from a potential downturn in the economy, the politicians will certainly fail even once throw salt in the wounds by partial elimination of the mortgage.

Investments Properties

The net yield of the entire property sector in 2010 was 4.6%. Of all the retail sectors scored the highest with 7.8%, the office market accounted for 3.5% and the market for industrial and residential dangling down by only 2.9%.

Given the negative trends, it seems unlikely that the returns in the near future will improve. This “yield compression” forces investors to focus and take into account the new reality.

More attention will be given to cost, but with good locations and sustainability of buildings.

In cooperation with municipalities provides conversion of vacant buildings have reasonable chances of returns. Think of responding to the recent trend in which older people move away from the “green sites” and choose a safe urban environment. Remember that the number of people over 65 in the next 20 years from 9% to 25% of the population will grow!

For those that are more internationally oriented, there are probably better opportunities. The famous economist N. Roubini sees the glass as half empty the developed countries, but instead of emerging as half full. As an example he cites Rio de Janeiro, which spot has risen to fourth place among most expensive cities in the world. Last year the property prices there by 47%!
Or is that race already over?

When can we expect house prices to bottom?

Aided by generous sofas and an oncoming tax, are house prices, adjusted for inflation, since 1982 tripled.

Result, an average house is now € 250,000, – and the total cost private mortgage has risen to € 632 billion, which the Netherlands is the frontrunner in the world (107% of GDP).

That does of course not a problem, as long as employment, large credit, tax deductibility and, not least house prices are maintained.

A substantial change in one or more of these factors, however, the vulnerability, which now once associated with a high debt position, mercilessly exposing.

With the lowest unemployment in Europe and the political taboo that rests on the discussion of the tax deductibility of mortgage interest, about these two factors in the Netherlands temporarily well.

The generous credit, however, the last time a real problem to be. That’s not so strange when one considers that The solvency of the banks themselves under suspicion.

The debt crisis in Europe has at least made clear that banks have lent too much money to poor countries and their inhabitants and their fate depends on the political willingness of the resulting threats to shift to the taxpayer.

To the stagnant real estate market that pulling out of recession, the transfer tax is temporarily reduced from 6% to 2%. That makes at least the financing of the buyers a bit smaller. It does appear from this unique action that the government is really worried.

This is not surprising, with an expected price decline for 2011 of around 6% (according Hans Andre de la Porte of the VEH) And strong sales stagnating. The number of homes now up for sale has doubled since 2008!

This massive supply of houses is probably not only due to the reduction in funding, but certainly also due to the unwillingness of sellers to the price to drop, driven by the expectation that recovery of housing prices around the corner.

Whether this expectation is real, is widely doubted. Expects emeritus professor Hugo Priemus the next five years drops of 5% per year.

Given the developments on the foreign housing markets, such a gloomy outlook may be justified.

In the U.S. property market has been attempted with various support measures afloat. This has had an impact for some time, but now the trend is downwards, and again after an average decline of over 30% from the peak of the market. (See this Video of Yale Professor Robert Schiller)

In China, 64 million seems vacant apartments, while millions of Chinese workers are housed in appalling conditions. The reason that these two facts can coexist, can be found in the following graph:

The chart opposite you can see (click to enlarge) where the problem lies.

As the bubble in the housing market was growing, thereby simultaneously increased the affordability of the houses down, partly because wage growth could keep pace impossible.

The latest reports now the bubble begins to deflate slowly. This changes the bubble, however, a driver of the economy in a brake, with the usual nasty consequences for the promoters, homeowners and banking sector.

This boom / bust cycle is abroad in what is generally heavier than in the Netherlands. Despite the many investigations into these cycles are predictions about its duration and intensity difficult.

The work of economist Fred Harrison In this regard much acclaim. Already in 1997 he predicted the crisis of 2008 and that prediction he made after extensive worldwide research into the behavior of real estate markets during the past 300 years.

From his research he concludes that a full boom / bust cycle lasts 18 years, starting with a modest 7-year growth, followed by a brief recession, then another 7-year growth phase comes, which is significantly stronger than the first, resulting in a recession for four years.

Only in the event of major disasters and wars, this regular rhythm is interrupted. The cycle has little play. The 18 years is an average time that a year shorter or longer fail.

If correct, means his forecast for the current cycle, which The recession and thus the price declines in housing for at least two years to go. He considers the economic revival of the moment, as temporary.

Economist / Analyst P. Q. Wall contrast, focuses not so much on real estate, but be there at 16-18 year cycles, but based on socio-economic grounds.

That is, the general mood in society determines the state of affairs. Optimism prevails generally, but which is inevitably interspersed with negative moods. Man is now once torn between hope and fear.

His cycle ends sometime in 2012. Also not inconceivable that the massive intervention by governments after the 2008 crisis, has disturbed the normal market forces, reducing cycle time it takes a bit longer.

Yet another, the Russian economist Nicolai Kondratieff, Developed a model, the Kondratieff wave that looks like this:

His golf has its low point in 2012.
(One could almost Mayan Prediction to believe. Problem is that they know in 2012 is no house standing.)
After 2012, so again the Kondratieff “spring” breakWith renewed optimism and growth, but not after the “winter” pessimism once to have been silenced. The following chart shows what that might mean for, in this case, U.S. stock market:

For now the major international stock exchanges not to notice much of this “winter offensive”. That is remarkable given the voortsudderende euro crisis and the fiscal challenges in the U.S..

If financial markets can withstand such pressures, what is the predictive value of the above theories? Governments will have the effect of deflating bubbles through huge stimulus to compensate? Can build mountains of debt remain without consequences?

For example, this is what is currently the U.S. national debt of $ 15 trillion U.S. dollars in $ 100 bills out where next to the Statue of Liberty would be stacked. Remember that the U.S. budget deficit is still around 10% and that pile is growing.

The answers to these questions will largely depend on the financial markets have confidence in the solvency of the major debtor countries. Loss of confidence in the turnips are cooked, as was the case for including Greece, Ireland and Portugal. Interest rates will soar and the deflation of the housing market significantly faster.

The spirited view of Hugo PriemusThat prices will drop further five years, is therefore only partly supported by the cyclic theories. They are there because more or less agree that the “winter” will be over sometime in 2012.

The coming months will show whether the effect of government intervention “winter” has shifted further into the future, allowing the prediction of Hugo Priemus still true.