Are house prices set to tumble in Oz?

[Guest burgledad]

Totally agree with what you say, Im Irish myself and I def think here there is more houses than demand and the builders are still building but there is so many houses sitting on the market for ages, house we are in is a rental but its up for sale but

what happens when we move out now in Jan, no one is going to move in cos its up for sale and who wants to rent a house with home opens! its either landlord pull house off the market and rent it out which they dont want to do or else let it sit until it does sell which it hasnt this last 10 months. Same for a lot of houses that are up for sale now with tenants in they will find it impossible to get tenants in whilst house is on the market.

 

I dunno I wouldnt feel personally comfortable buying here at the min but thats a personal opinion (diff if you have kids to consider and schools to consider). I think the market here will def drop more but I dont think it would end up ever as bad as Ireland but then I never thought Ireland would go as bad unfortunately as it is now.

I can't see WA hitting the buffers anytime soon. Mining feeds China & Japan and there's always demand for oil & gas. Let's face it, the world has just been through the deepest of recessions and Aus sailed on practically unscathed. If they can survive that, they can survive almost anything.

The Irish or UK problems can't happen in Aus because their banking sector did not take so many risks and so are not in a massive debt hole. Also (as many on PIO have seen), Aus has not lost control of immigration.

[ducktape]

australia's foreign debt is something like 60% of its GDP. Thats greater than americas when it went POP. If the aus economy slows then it could very very get problematic because it could find itself unable to service this debt, which will cause a big problem.

 

It is this foreign debt that has serviced the housing boom in aus, if it struggles to pay this debt it will have to increase mortgage rates for new and existing customers just to service it's exisiting debts.

 

Whilst no one has enjoyed the global financial crisis it may have been prudent for aus to follow the rest of the world in 'having a reccession', because whilst australia have implemented many measures to reflate the housing/credit bubble it only delays the inevitable deleveraging that will follow. by further increasing housing values and debt, the authorities have likely made the problem much worse, and ensured that the pain on the way down will be more severe than if they had let the bubble deflate on its own accord.

 

just my 2 cents this is a huge subject and subjective at best...

[Guest burgledad]

I didn't appreciate the size of Australia's debt which does leave things a bit more delicately balanced. There will probably be a housing market correction but if unemployment doesn't rise, they should be able to service the debt. Aus still has the option to devalue its currency to stimulate exports, so plenty of options.

[ducktape]

I totally agree it does have options, I never realised the size of it debt until last week. I've started to try to get an understanding of Australia since I m planning to move there and it's amazing what you find out. I wrote this on another thread yesterday....

 

I m no expert but in 2008 it was 2.6 to the pound, now its 1.6 a big difference in two years all because australia hasn't suffered like the rest of the world but the big question is will it continue?

 

With such a strong dollar they are going to lose out in some way or another at some point whether that's through tourism or from overseas investors. It can't last and from what I understand my Australian friends what it to get back to where it was as they feel the country benefits more than with a strong currency.

 

The housing market in Aus simply can't continue as it has done and with 50% of property being owned by 25% of the population which are the 'baby boomers' they're going to be retiring soon and cashing out because Aus operate negative gearing on property, they need the capital gains on the property for retirement because the rent doesn't cover it!

 

I've read a far bit about this and of course no one really knows its all speculation, but like they say what goes up must come down sooner or later... time will tell.

[Petals]

Australia is much better placed economically than most other nations so I do not think we are going down the pan any time soon. I also think that housing prices will remain high maybe stabilise for a bit but with the pressure for housing its a no brainer that its going to cost more.

 

Have a look at the Reserve Bank report and it will set your minds at rest about the debt. RBA: Speech-Aspects of Australia’s Finances

 

Also the big four Banks even without gov guaranteeing them were judged to be four of the strongest in the world and that is to do with the way things are done here in Aus.

[Joebloggs]

I think it comes down to peoples expectations.

 

For example say you were selling your modest home in Liverpool UK and buying something similar in a popular area for Brits in Sydney.

 

Modest UK house

 

You get the asking price £99,950 and you own it out right (no Mortgage)

 

So you have about $160K capital to buy something similar in Dee Why in Sydney with out really downsizing your living space.

 

Similar house in Dee Why

 

So you go from owning your own home outright to owning a similar property but requiring a $600K home loan.

[NZStidz]

Then that area is not somewhere you can afford. I don't think you could compare living by the sea on Sydney's North Shore with Liverpool. Maybe a modest house (if there is such a thing) in West London, or Malibu?

[olly]

I suggest you read this: [ATTACH]2428[/ATTACH]

 

 

Very interesting read indeed.

 

I subscribe to this (Sayce) newsletter too, they are spruiking the shares vs property argument of course, it's been going on for a while and for some people shares have more value over time. The property has been overheated, but it is already starting to soften with the last interest rate rise, as a family member's house was sold yesterday in a well heeled suburb here, and she did not get what she was hoping for. For that reason, she is thinking of renting for six months to see if they fall further.

 

 

[Joebloggs]

Then that area is not somewhere you can afford. I don't think you could compare living by the sea on Sydney's North Shore with Liverpool. Maybe a modest house (if there is such a thing) in West London??

 

Thats the point I was making, its peoples expectations. They seen Dee Why on TV like Wanted down under etc... so thats what they expect.

 

They could try Liverpool NSW Similar house in Liverpool NSW and they only would require a $200K home loan.

 

But how many people on PIO 1st choice is to live in Liverpool NSW?

 

I agree if you had a house in London sold for £1m and managed to walk away with £500k then you could do it, but lets face it majority of people on PIO are from all over the UK so only a lucky few are going to manage it.

[NZStidz]

I'm not sure why someone would think that the cost of a semi in Liverpool would equate to a house near the beach in Sydney? Surely they do their research? If you live in an area where housing is still (relatively) cheap, as the house you have shown is, then one would surely only assume that you would get the equivalent property anywhere else in the world in an area where property is still cheap - these areas are usually less than desirable and far from anyone's first choice.

 

Do your research people, if you live in a **** area in the UK, chances are you will probably only be able to afford a **** area in Australia, unless you win lotto at the airport on the way here.

[Joebloggs]

I'm not sure why someone would think that the cost of a semi in Liverpool would equate to a house near the beach in Sydney? Surely they do their research? If you live in an area where housing is still (relatively) cheap, as the house you have shown is, then one would surely only assume that you would get the equivalent property anywhere else in the world in an area where property is still cheap - these areas are usually less than desirable and far from anyone's first choice.

 

Exactly.

 

But who really wants to move to a shit area? I thought most people want to move to Australia to improve their lifestyle?

[Guest Joff]

i just wanted to offer my opinion. We have been here for 3 months on a 457 visa and have been renting since we got here. I heard a great bit of advice on the TV programme Moving Down Under that said take a long time to decide where to live and look and live in a few different places. This is a lot easier to do if you are renting. We have our house rented out in the UK and when and if we get PR we will sell up, but with the Aussie dollar being so strong we would never send large sums out here now. We are just going to wait for the UK economy to recover and the pound to get stronger so that we have a better deposit to put down.

[NZStidz]

Exactly.

 

But who really wants to move to a shit area? I thought most people want to move to Australia to improve their lifestyle?

 

But if they can't afford it, then it isn't an option. There are many other less expensive parts of Australia than Sydney - my point is no-one seems to be comparing apples with apples. I'm sure there is a better lifestyle to be had coming from Liverpool but it won't be in one of the most expensive cities in the world...

[ducktape]

I think that's prudent advice joff, I expect it to take me two years to find somewhere to settle once I arrive.

[fish.01]

australia's foreign debt is something like 60% of its GDP. Thats greater than americas when it went POP. ....

 

I assume you are talking about total private and public debt as our govt debt is very good:

 

[ducktape]

 

This is what I was refering to... at the end of the day I don't want to see the country I m coming to going down the toilet or having problems, actually I don't want to see any country in trouble...

 

I m only a humble tradesman but I suffered in the UK reccession, I had ten people after 4 new flats I had renovated all offering above the asking price and all but one had to pull out within the space of a week because their mortgages got pulled and I lost alot of money, the bubble can burst for many reasons and very very quickly, being prepared and understanding the influences that can bring it about are just as important as actually buying and renovating properties to a high standard.

 

Having low gov debt is good if the economy did pop or slow down, because they can help the private sector...

 

But private debt is high in australia and a slow down would hurt. As I understand it aus has negative gearing on property and this can be offset against income, this is OK if property increases. As I understand it many have invested in property, then rent at a loss and will make their money if the property increases in value. When people come to retire to release their retirement money they need to sell their property, problem is as I understand it 50% of property investors/owners are the baby boomers. Surely this situation would mean a plentiful supply of property on the market, would this then make for a buyers market?

 

I don't have the answers and I hope to be moving to Australia to build a prosperous new life I don't wish to see it struggling.

 

My situation is probably very different to most here as many of you are families, I m single and planning on establishing my career first and worrying about property later, but property and the prosperity of the country is important for my work.

[landv]

Yeah I agree. The average house is certainly way out of reach of a home buyer on average wages with little deposit. But I guess it should be.

 

The current market prices are being supported by new mortgages averaging $286,000. I suspect the average household income taking out these mortgages is well above the average wage level.

 

 

 

It might be a naive question, but then how anybody who is on avarage wage can afford to buy at all? In Perth, the avarage mortgage is considerably more than 286K.

And I don't mean those who bought in the early nineties or so when the wages/mortgages ratio was more realistic and house prices were 3 times of someone's salary, therefore built up a considerable equity in their properties, but those in their late twenties/early thirties on "avarage" wages trying to buy now.

[Guest burgledad]

I'm coming to Aus from Cheshire and have turned down a well paid job in Sydney because it is so expensive and commuting is a nightmare. Try elsewhere.

[mickjthom]

I suggest you read this: [ATTACH]2428[/ATTACH]

 

 

Very interesting read indeed.

 

 

I work in property and alongside some folk who know the business inside and out. Several of them have sold recently and stuck the money in the bank. They're renting now and dont think they'll go back into the market for several years.

 

Plus the US/UK hedge funds are shorting Oz banks, property companies. These guys saw (some also say caused) the GFC coming and made billions out of it. They're rarely wrong.

 

The bubble will burst, hopefully its a slow process rather than an overnight thing:cry:

[fish.01]

It might be a naive question, but then how anybody who is on avarage wage can afford to buy at all? In Perth, the avarage mortgage is considerably more than 286K.

And I don't mean those who bought in the early nineties or so when the wages/mortgages ratio was more realistic and house prices were 3 times of someone's salary, therefore built up a considerable equity in their properties, but those in their late twenties/early thirties on "avarage" wages trying to buy now.

 

It's tough. Those on an one average wage and no savings really have to just aim at the starter houses rather than average houses. Even then they are a stretch. A lot of younger couples use two incomes to fund it and move to the outer suburbs or buy an apartment.

 

How high is the average new mortgage in Perth BTW?

[Guest guest30038]

Buying the land and building my home cost me 320K exactly 5 yrs ago. Current valuations range from 660k to 720k. The bubble, if set to burst, would have to spread a helluva lot of crap around for me to start worrying.

 

That said, I really feel sorry for those trying to enter the market now but OTOH, I envy those who entered it before me. There's been a helluva lot of money made on property by simple folk who bought in at the bottom end 10 to15 yrs ago and are now sitting at the top end.................sub-divisions galore atm in Brizzy.............simple fibro cottages on a couple of acres of land and the owners are retiring early and doing the gey nomad thing...........they never even dreamed that they would be "affluent"............it's the land, not the houses, that are making them money. Something's got to give sooner or later.

 

kev

[Joebloggs]

 

The bubble will burst, hopefully its a slow process rather than an overnight thing:cry:

 

You mean like a deflation? Would have to agree that probably what I think will happen a mixture of a catch up/market correction.

 

I know plenty of Aussie friends who are in their 20's & 30's and are not struggling at all in the housing in Sydney, their parents bought a few properties in the 80's & early 90's when it was still possible to buy something for 5 figures. Funny they don't say their folks just give them a house but they now have a home without much of a hit on the financial situation so you would have to assume the place is fully paid out or comes with a very low homeloan attached.

 

Certainly if there is a property crash it will not be uniform across the nation might be 10% in one area and 2% in another.

 

First places to be hit are those sleepy little coastal towns where the city slickers own a holiday home, any sign of a crisis and every second house will be up for sale as they are usually only used at the weekend and everyone will be wanting to protect their main assets in the city.

 

Even if the was a 10% crash on a $800K house is now worth $720K... is this really going make it more affordable? Like it might be a difference of $25 a week on a homeloan.

 

I think for some people its wishful thinking.

[Parley]

Probably the only reason it would crash would be as a symptom of something very bad happening in the economy.

If interest rates went up very high or unemployment went very high or we go into recession.

 

If the economy continues to bubble along nicely, housing is very unlikely to crash.

There may be a small correction of say 10 to 15 %, but not a crash.

[Guest burgledad]

Probably the only reason it would crash would be as a symptom of something very bad happening in the economy.

If interest rates went up very high or unemployment went very high or we go into recession.

 

If the economy continues to bubble along nicely, housing is very unlikely to crash.

There may be a small correction of say 10 to 15 %, but not a crash.

I think you are correct. Prices tumble if unemployment rises and they ease if interest rates rise. As far as I can see, not much else affects the supply/demand balance.

[landv]

It's tough. Those on an one average wage and no savings really have to just aim at the starter houses rather than average houses. Even then they are a stretch. A lot of younger couples use two incomes to fund it and move to the outer suburbs or buy an apartment.

 

How high is the average new mortgage in Perth BTW?

 

 

I read that the median house price for Perth is $485000, to top $600000 by 2012 appearently.

 

Down my street, tiny townouses (if you can call them that), an open living/kitchen area plus a bathroom downstairs, bedroom upstairs and a tiny courtyard, selling for $355000. May I also add that we are 40 k's out of the city.