Australian housing bubble

[Guest]

Already moving the goal posts to places like moranbah? Haha another flag fail...

 

So timeline on this 30% drop on the big 3 cities please? So we can revisit...

[Gbye grey sky]

Several things as if you really need to ask.

The government making speculation less attractive through changes however small to the present policy. Remember speculators are 60% of the market.

 

China restricting flow of money being sent abroad.

 

A tightening up on interest only loans by banks, some 40% of loans I believe, way out of whack with reality.

 

Self funded retirees feeling the heat with property investment and disengaging and/or less likely to partake in first place.

 

Ever more First Home Buyers unable or unwilling to partake in the rip off, as already record high in numbers not buying, becoming an increasingly political force over time.

 

Less immigration to Australia as the big money fades, along with the resource boom and wages stagnate.

 

Stagnating wages. A question of unaffordability. Sydney is already out of the average citizens reach.

 

I have not been predicting for several years. I haven't been on this forum that long. If you can't see the signs your business. You may well see changes to the super entitlements favouring the rich changing as well. I reason you migrated here, if I'm not mistaken.

Money will certainly need to be sourced by the government from avenues not expected a couple of years ago.

 

Anyway I'm close to done with this forum. Think and do what you all want. I know I'm keeping the powder dry.

 

That is quite a few ducks that need to be lined up in a row and many of those would only give rise to stagnation or a minor correction. But they may all happen though many are within the remit of the Australian government who fear a collapse in house prices and the resulting lost votes.

 

The main risk is high LTVs. So Long as they are kept in check then the market can effect an equillibrium. When they spiral out of control there will be a hard landing for many including the lenders.

 

I am just an interested observer of this debate. I own a house, fortunately without a mortgage as I paid mine off in the UK and transferred my equity here, but we plan to live in it long term so rising or falling value is immaterial to me. I don't have sufficient funds to buy an investment property and probably would not if I did.

 

I came here for the sunny, warm climate. I don't have a Super but if I did manage to transfer my really quite small private pension from the UK the amount would be really too small to provide much income so any changes to super entitlements will not impact on me. I will largely rely on an employment pension and a UK state pension which should be adequate for a modest standard of living.

[Rallyman]

Friends just sold their place in Sydney 2 weeks before auction date for well above the guide price ,it was on market for 2 weeks with 9 contracts given out , it's still crazy in Sydney ,I feel Sydney is very similar to London it's some what in its own mini economy.

[newjez]

Property boom and bust due to a surge, followed by a fall, in mining activity in a localised area is somewhat different to a more general collapse in the housing market which is what you are predicating and have been for several years.

 

There are tipping points where properties become plain unaffordable but this tends to lead to price stagnation or a small correction. For a major correction of 30% or more nationwide there needs to be some significant external trigger. What are you anticipating the form this trigger will take.

 

 

 

It would be ironic if it was brexit. The world's markets are an avalanche looking for a loud bang!

[Parley]

Or not.

[Parley]

China now has more billionaires than any other country in the world.

Probably a lot of wealth with a lot of people.

 

50 million very wealthy Chinese wanting to invest outside China.

[HelensvaleHoward]

[HelensvaleHoward]

http://www.goldcoastbulletin.com.au/business/skies-filled-as-building-sector-booms-on-the-gold-coast-number-of-cranes-has-more-than-doubled-in-a-matter-of-months/news-story/5aa3a3f68a3d61da63e1445a69297d50

[BacktoDemocracy]

Yes the usual head in sand stuff with prices still rising. The question should be is it too late for a managed decline in prices, which should have happened years ago, or will vested interests, politicians included, allow the bubble to further grow, putting the financial system at risk?

A 30% correction, would likely be catastrophic for the system. But that is likely the conservative estimate of how inflated the market is.

Just hope not, the GFC was triggered by similar stupidities, overpriced housing, indiscriminate lending and over extended banks with too low an asset base / financial reserves, it only needs for property prices to tumble, as they may be doing in Perth and it could trigger a progressive crash, no wonder the Fed govt isn't keen on cutting back migration, I doubt there will be any move on taxation relief on rentals or restraint on overseas buyers.

Edited March 3, 2016 by BacktoDemocracy

[Tutankarmun]

This type of thing happened in the UK not too long ago, the result was a serious drop in the housing market prices. Owners found themselves in negative equity, buyers faded away and waited for the prices to drop. Unless the property market is in line with peoples income the future could be dire. Already you can see rents are well beyond many peoples income

[Sustain]

When in doubt you start asking how many of the so called high earners can survey for more than 12 weeks if they lost their jobs

 

 

They in turn ask for the figure to be lowered to 4 weeks in line with their pay

[Gbye grey sky]

Predicting that house prices will at some point fall is really like predicting that everyone is going to die. Of course at some point houses, like every other asset will fall and rise.

 

For it to be a catastrophic fall affecting an entire country it requires some major economic event to occur (which can happen of course) but the reality is that it is normally just basic supply and demand. If a region loses a lot of jobs then potential buyers are outnumbered by sellers so prices fall in that region. The opposite occurs if there is a housing shortage though this is limited by affordability and, so long as lending policies do not get out of hand, a brake is applied on increases sooner thereby limiting the damage of a future downward correction.

 

Some posters get a distorted view of the market because of the area that they inhabit. In SE Queensland at least house prices are pretty stable and I sense this applies to Adelaide, Tasmania and many places outside of the main cities.

[rammygirl]

I got this in my inbox

 

http://www.realestate.com.au/blog/equity-access-it-or-lose-it/

 

Basically inviting you to use threatened equity to invest in more property. Madness...................although I bet the banks will allow it. :nah:

[Sustain]

At different ends of the spectrum you have those thinking the growth will go on and on and people will just have to pay. At the other end you have some in cant believe the disconnect between income and pricing and logically foretell a correction.

 

The middle see the disconnect but also see that if you don't have to sell you can ride out the correction - in what form this will take may be different from before with so many ingrained in a basket of house hold eggs.

 

There are also sub sects within these spectrums - those with logical thought and ability to enter the housing market and those with no ability just frustration. Like wise the people in property who were smart and not just following the market but buying the right property ie location and land value not a mcmansion miles away from instrastructure and with land of little real value.

 

Have I been buying land? Yes? Residential = Hell No, income generating commercial and agriculture yes, am I looking at it from a capital gain perspective - No, Income generation Yes. The future will be great for those with passive income, for those working 60 hours + say good bye to weekends as you start needing 80 hours to keep up.

[Parley]

I got this in my inbox

 

http://www.realestate.com.au/blog/equity-access-it-or-lose-it/

 

Basically inviting you to use threatened equity to invest in more property. Madness...................although I bet the banks will allow it. :nah:

 

I supposed it is threatened to the extent than any asset being a share, land or dwelling could go down in value.

But the logic is true because if you borrow against the property and then the value goes down the bank doesn't ask you to do anything.

 

Unlike margin lending for shares where the bank will insist you top up your equity or sell some shares when the value declines, the don't with real estate as long as you keep making the payments.

 

Many, many people do borrow against their equity to buy another property.

Some even take it to extremes do it againg and again with each new property.

 

There is some risk of course but if you know you can service the new loan it is not a bad strategy.

[Que Sera Sera]

Ultimately house prices do increase though, there are blips where they dip but no one has a house they've owned for 25 years and at the end of the mortgage the house is worth less than they bought it for.

[Phoenix16]

I've read the first few pages and skipped to the end.. I personally feel WA is on the edge of a big recession and with that a property bubble burst. My hubby's industry is doing well now but there is concern for the forthcoming years and lack of projects on the horizon, one friend of mine went on holiday recently and her FIfO husband got a text (whilst on holiday with his family) to say don't bother to return, you're redundant. My daughter goes to a private school, the number of family's removing their children because of financial difficulties is extraordinary, you can just feel the decline to be honest.....

[Guest]

wrong thread

Edited March 5, 2016 by Guest
wrong thread

[srg73]

The above picture sums it up perfectly to some people......storm clouds brewing.

 

S

[Wooba]

Ultimately house prices do increase though, there are blips where they dip but no one has a house they've owned for 25 years and at the end of the mortgage the house is worth less than they bought it for.

I'm sure many people in Detroit would disagree with you.

[Pommie]

Predicting that house prices will at some point fall is really like predicting that everyone is going to die. Of course at some point houses, like every other asset will fall and rise.

 

For it to be a catastrophic fall affecting an entire country it requires some major economic event to occur (which can happen of course) but the reality is that it is normally just basic supply and demand. If a region loses a lot of jobs then potential buyers are outnumbered by sellers so prices fall in that region. The opposite occurs if there is a housing shortage though this is limited by affordability and, so long as lending policies do not get out of hand, a brake is applied on increases sooner thereby limiting the damage of a future downward correction.

 

Some posters get a distorted view of the market because of the area that they inhabit. In SE Queensland at least house prices are pretty stable and I sense this applies to Adelaide, Tasmania and many places outside of the main cities.

 

 

This was exactly the same logic used in the US sub prime mortgage lending (The Big Short) - the assumption that any economic problems and subsequent impact on the housing market would be regional and not at a large macro level. The assumption was and continues to be totally flawed.

 

The banks, like people are exposed to economic ripples. All economies respond to confidence... A shock to the economy hits people (jobs) and businesses (investment) which undermines confidence. As investment falls and unemployment rises, loan defaults increase and the banks also take a hit... This makes them pull back on lending and BAM, the circle is complete.... so begins the spiral...

 

All that is happening in Australia is that government policy has kept the bubble growing for longer as they are addicted to the short terms benefits it brings (debt fuelled investment and spending).... So taxation encourages more spending which further inflates the bubble.... This is further compounded by allowing overseas buyers (again, because they want the investment in new build apartments and infrastructure)..

 

Everywhere, at this point in the cycle those with a vested interest (realestate, banks and government) claim there will be no massive bursting of the bubble.... that things will naturally settle down whilst wages catch up.... and maybe this will happen... but history so often proves them wrong...

 

Migration is slowing... Australian building approvals are falling.... commodity prices have structurally weakened... unemployment has risen and once the pipeline of current buildings begin to be completed we will see unemployment rise further. Also importantly, employment in well paying jobs is falling...

 

It's not game over for Australia by any means - but ultimately the laws of economics will prevail. Post 2008 investment was driven by a debt stimulus... in China and Australia... there is only so much gas in the Stimulus tank and at some point the asset bubbles need to deflate...

[Tutankarmun]

Of course a lot will depend on personal debt and the Banks ability to control it. In the UK at one time the finance people were happy to lend 100% mortgages, and to those with maybe a 10% deposit. Personal debt rose and was left uncontrolled. Home prices shot up almost double in 5 years, then the Banks got into trouble, people unable to pay their mortgages. It came to light that some people had mortgages for a period of 25 years and the cost was 75% of their income. 2008 came, the Government had to step in to liquidate the Banks, people lost money, their jobs, and this led to mortgages not being paid back. People had their homes reclaimed by Banks etc, the housing market plummeted. Even now 8 years later, house prices are not up to what they were in 2008. Many now will not buy, they rent, it's more secure. So when prices outstrip wages, and job insecurity takes hold, the first thing to cool is the housing market.

In the UK now you need to have saved around 33.3% of the value of the house you are buying before you get a mortgage. So for example a 300,000AD home would require a deposit of 100,000AD's Daunting to say the least.

[Que Sera Sera]

I'm sure many people in Detroit would disagree with you.

I wouldn't have a clue about Detroit as I've only experience of the U.K. And Auatralia and this is a Pomsinoz forum , however I get your meaning.

[HelensvaleHoward]

http://www.goldcoastbulletin.com.au/realestate/gold-coast-property-market-booms-for-first-time-since-gfc/news-story/21cf74f5a7dfede7f593b67a8e75e215

 

[h=1]Gold Coast property market booms for first time since GFC[/h]

THERE is more evidence the Gold Coast property market is heating up, with some suburbs that enjoy waterfront views experiencing an unprecedented 25 per cent spike in land values.

 

Queensland’s Valuer General has released annual valuations for more than 141,000 properties in the city, showing land values on October 1 last year had increased by 14.4 per cent.

 

 

According to the latest figures we got in the post

 

Ours Site valuation as risen $45,000 in a year

[Que Sera Sera]

I've read the first few pages and skipped to the end.. I personally feel WA is on the edge of a big recession and with that a property bubble burst. My hubby's industry is doing well now but there is concern for the forthcoming years and lack of projects on the horizon, one friend of mine went on holiday recently and her FIfO husband got a text (whilst on holiday with his family) to say don't bother to return, you're redundant. My daughter goes to a private school, the number of family's removing their children because of financial difficulties is extraordinary, you can just feel the decline to be honest.....

 

The nature of Fifo work is that it's temporary and you work with that in mind, the contracts clearly state that you can get the tap on the shoulder at any point with little or no warning. He will have signed a contract agreeing to this. When FIFO workers are let go they are often more times than not let go on R&R as its less costly and avoids the worker doing any damage if they feel aggrieved , this process in itself isn't an indication of the economy though, but clearly there is a slow down happening, however it's not affecting everyone just as previous ones didn't affect everyone. All we can do is save for that rainy day and keep fingers crossed it doesn't last that long.