Aussie Housing Market - To Buy or Not to Buy

[Guest TheLege]

There's been some concern over the past few months about house prices and the existence of a bubble here in Oz. The jury's still out, it seems, but for new arrivals wondering whether to take the plunge or not I came across this blog which admittedly has a SE Queensland flavour, but may have broader relevance:

 

http://thewesternburbsblogger.blogspot.com

 

It's a little opinionated in places but there's some useful info in the posts which could give you a flavour for what's going on out there and save you some legwork.

 

Good luck either way!

[Addy]

This article was published today

 

http://www.prosper.org.au/2011/04/12/pop-the-real-estate-bubble-has-burst/

 

I have been dubious about the market for quite a few months, but it really does seemed to have tipped from uncertain to falling in the last few weeks.

[Guest TheLege]

Yes, the evidence is really beginning to stack up - but only if you get out there and see it for yourself. The mainstream media are always reluctant to take this up because it's news their readers simply don't want to hear and it potentially imperils a large source of revenue -- advertisements by companies connected in any way to the property industry.

 

So much for a truly independent press in our great democracy - the news we hear is ultimately controlled by press barons and our large industries. All very Orwellian

[kernow43]

I feel that prices will drop a bit more, but I don't believe there will be a bubble burst like the USA

[Guest TheLege]

I hope for all our sakes that you're right. That said, if the bubble does deflate gently as you suggest, then apparently it'll be first time in world history that a soft-landing has followed a bubble. Not my opinion - just repeating those who are students of bubbles.

 

I just hope the RBA don't leave it too late to respond if there is trouble

[fleabo]

Yawn...

[Addy]

Not looking good

 

MELBOURNE'S property bubble is bursting, with $400 a day wiped off the average house price in the past three months.

 

After peaking at $601,000 late last year, the median price has fallen to $565,000 - down $36,000.

 

http://www.heraldsun.com.au/news/melbourne-home-property-prices-plunge/story-e6frf7jo-1226039922655

 

Not sure how this translates to other states.

 

Good news for migrants who haven't bought yet and a drop in the housing market should bring the exchange rate back to more favourable levels too.

[spottydog]

 

After peaking at $601,000 late last year, the median price has fallen to $565,000 - down $36,000.

 

Not sure how this translates to other states.

 

Not always good to rely on medians as they also depend on the type of properties being bought. These are the approximate annual median changes for a suburb in Sydneys inner west where I live:

 

2011 +80%

2010 -35%

2009 +20%

2008 +20%

2007 -20%

2006 +35%

2005 0%

2004 -20%

2003 +55%

 

If you took any one of those on its own the median could report boom/bust but if you live here you will know that it depends on the year, some years lots of expensive waterfronts are sold, other years tiny 1/2 beds suited to Downsizers and First Home Buyers are the main things sold.

[KIRK AND CO]

BOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOM

Banggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggg

[Addy]

BOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOM

Banggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggg

 

It does look that way...

 

Nationwide residential land sales dropped to their lowest level in at least a decade as the cost of blocks increased, a new report shows.

The Housing Industry Association – RP Data residential land report showed that the volume of land sales dropped to about 11,500 lots in the three months to December 2010 from 12,500 in the previous quarter.

 

http://www.smh.com.au/business/new-land-sales-slump-to-lowest-in-a-decade-20110418-1dkm3.html?comments=69#comments

[DannyCoyles]

I wouldnt buy right now to be honest. We bought land in 2008 and fixed our building costs at the same time, plus we qualified for the $32k first home owners grant in Victoria. Since then the land prices have doubled and the building costs gone up about 15% and the grant has been reduced again. It took a while for the land to be released and our house was only finished in July 2010. We couldnt afford to buy our house now the prices have gone up that much. I have been reading a lot about this more in relation to Melbourne and the fact that Victoria is still growing and new money is coming in will keep the prices high for the near future.

 

The problem is with the growth there are more houses being fitted into smaller blocks in most of the new areas. We bought a 750sqm block and now the biggest you can get in the same area is 450sqm. The builders are putting 3-4 bedroom homes on these blocks with no garden but they are priced very high. I feel that this type of property will fall the hardest when the bubble bursts but is keeping the prices high for now. I dont think there will be a massive drop as demand is still high enough but they will eventually fall. For anyone selling in the UK its not a great time to bring money over either. I would recommend waiting for properly to do whatever its going to do and hope for a better exchange rate over the next year or two.

[Guest sieglinde00]

I work in the real estate industry in Melbourne. There is no doubt it takes longer time to sell properties now (compared with a year ago when any properties got sold within a couple of weeks). Personally I feel that the market may stay weak for a while. But the stamp duty cut in Victoria for first home buyers may revive the market a little bit in the second half of the year, well, who knows....

Here's the announcement from Victoria Premier's office.

http://www.premier.vic.gov.au/media-centre/media-releases/772-coalition-government-delivers-the-keys-for-first-home-buyers.html

[Addy]

No wonder it takes longer to sell in Melbourne;

 

http://www.sqmresearch.com.au/graph_stock_on_market.php?region=vic%3A%3AMelbourne&type=c&t=1

 

There's a huge supply of properties on the market.

 

NB you can use this graph to put in the name or postcode of any suburb in Australia and see how many properties are on the market.

[newjez]

Need I say interest rate rises?

 

It's all over the press at the moment. Plus there is a lot of uncertainly in the worlds financial markets. I'd at least sit back and watch how the market goes over the next few months. I always feel that you have to spend a long time looking to really get a feel of what's good value anyway.

[Petals]

There are still bargains around, ex rentals in established areas with larger blocks of land. 20 - 30 year old houses are on larger blocks. I know here in Somerville there are a lot of houses in this category they are small and get sold as investments and when they come back on the market they are snapped up.

 

Went past one the other day used to be a small nondescript house on a good block, now its a two story wonder house. Someone bought and renovated big time and it looks fabulous.

 

Frankston also has such houses. The beauty of these areas is that all the services are there, schools, ADSL, docs everything all that is needed is to roll up the sleeves and do a bit of work.

 

Who knows what the housing market is going to do, most of my work was in this area and to be honest we were waiting for the bubble to burst back as far as 2002. The bubble has burst to some extent but good property always holds its price.

 

New areas tend to be worst affected as its the highly geared first home owners who buy most new homes and they get into trouble with repayments once the interest rates rise. These homes go into negative equity due to the fact that they are in competition with the builders building new homes where stamp duty savings can be made by buying the land and then contract to build house, this way you only pay stamp duty on the land value.

[DannyCoyles]

There are still bargains around, ex rentals in established areas with larger blocks of land. 20 - 30 year old houses are on larger blocks. I know here in Somerville there are a lot of houses in this category they are small and get sold as investments and when they come back on the market they are snapped up.

 

Went past one the other day used to be a small nondescript house on a good block, now its a two story wonder house. Someone bought and renovated big time and it looks fabulous.

 

Frankston also has such houses. The beauty of these areas is that all the services are there, schools, ADSL, docs everything all that is needed is to roll up the sleeves and do a bit of work.

 

Who knows what the housing market is going to do, most of my work was in this area and to be honest we were waiting for the bubble to burst back as far as 2002. The bubble has burst to some extent but good property always holds its price.

 

New areas tend to be worst affected as its the highly geared first home owners who buy most new homes and they get into trouble with repayments once the interest rates rise. These homes go into negative equity due to the fact that they are in competition with the builders building new homes where stamp duty savings can be made by buying the land and then contract to build house, this way you only pay stamp duty on the land value.

 

I would agree, if you have a bit of time and some prior experience buying an older house on a bigger block in an established area is a good move (I had neither). I can’t see these smaller homes on small blocks holding value long term. The land sales people in the new estates are very good at their jobs using lines like, "no one needs/wants a garden these days", "big gardens will put people off buying your house if you try to resell", "be smart and use the parks and free BBQ areas when friends come to visit" yeah right all 1000+ homes use 2 BBQ areas! I also found out that it was the government/council that decided the block sizes were to be reduced where I live not the developer. Scary sign of things to come.

I read an article once about this very subject, I can’t remember what state it referred but it stated that anything below 600sqm was too small for a family (4 bedroom + study etc) home and it gave it a very clear warning about not having a garden. Most of us 30+ grew up with some space in the back garden to play and we mostly spent our time outside when the weather was good. We have not seen the effects of a generation growing up without a garden to kick a ball in or have a tree/cubby house. The writer predicted a backlash against the suitability of such homes as family homes and therefore their value in the future.

I have noticed since moving to Melbourne that there is an attitude of no one wants a garden, I asked a few people who said that to me what their family home was like and most of them had a garden but deemed it not important for their kids! Where I live all the big blocks were bought by people from the UK who had not been subjected to the attitude long enough to feel the same way. Just be careful, really do your homework and think ahead.

[Petals]

I would agree, if you have a bit of time and some prior experience buying an older house on a bigger block in an established area is a good move (I had neither). I can’t see these smaller homes on small blocks holding value long term. The land sales people in the new estates are very good at their jobs using lines like, "no one needs/wants a garden these days", "big gardens will put people off buying your house if you try to resell", "be smart and use the parks and free BBQ areas when friends come to visit" yeah right all 1000+ homes use 2 BBQ areas! I also found out that it was the government/council that decided the block sizes were to be reduced where I live not the developer. Scary sign of things to come.

 

I read an article once about this very subject, I can’t remember what state it referred but it stated that anything below 600sqm was too small for a family (4 bedroom + study etc) home and it gave it a very clear warning about not having a garden. Most of us 30+ grew up with some space in the back garden to play and we mostly spent our time outside when the weather was good. We have not seen the effects of a generation growing up without a garden to kick a ball in or have a tree/cubby house. The writer predicted a backlash against the suitability of such homes as family homes and therefore their value in the future.

 

I have noticed since moving to Melbourne that there is an attitude of no one wants a garden, I asked a few people who said that to me what their family home was like and most of them had a garden but deemed it not important for their kids! Where I live all the big blocks were bought by people from the UK who had not been subjected to the attitude long enough to feel the same way. Just be careful, really do your homework and think ahead.

 

I agree with you to a point but the first thing I was ever told was by as much land as you can as the value is ultimately in the land. We can see this happening now in older suburbs where people are selling larger lots to developers as they can build units on them. Corner blocks with land are favourite as developers can build two units and they do not need a body corporate and this is a great selling point for purchasers.

 

I can understand having smaller blocks in the centre of the cities but never understand why they have to be small on the fringe. There is an estate here in Somerville, the blocks are average size I suppose for the present day, the houses are better than average and sell well but the streets are so narrow and the courts so small that if you had visitors over I do not know where they park their cars. Ambulance and fire trucks find these types of estate a nightmare as with cars parked they are unable to gain access.

 

I was also told to by the cheapest house in the best street I could afford.

 

Our first house was on what was considered a very small block now bigger than the norm. We lived there for 11 years and then sold and bought much bigger acreage block and we love it. Yep its work but who cares because we are not so jammed in people tend to be more friendly and our kids had a wonderful time as they grew up, outside not on a computer. Although once the net arrived and we have been on it siince the word go they did spend a fair bit of time on it as mid teens do.

 

Buy with as much land as you can it on sells as people can extend houses, put in pools all that stuff that land requires.

[newjez]

I hate the new areas where the gardens are so small, noise from neighbours becomes an issue. Especially with no double glazing to block the noise out. (There's a business opportunity!). Plus, you have no view and feel very closed in. It's like living in a prison. I prefer a decent block. I would buy less than 650 sq mtr.

 

I spoke to my mum on the weekend, and she said there is an identical house in her street which has been on sale for 9 months, and they have just lowered the price to below what she paid three years ago.

 

So it sounds like prices are dropping, but of course all areas aren't the same.

[KIRK AND CO]

Looks like the bubble is starting to leak in oz I just hope most or all of you held out & did not buy in the last few years as your time to buy is not long off. That dream house will be a reality for you very soon.

[Addy]

Looks like the bubble is starting to leak in oz I just hope most or all of you held out & did not buy in the last few years as your time to buy is long off. That dream house will be a reality for you very soon.

 

We have been thinking of buying for about a year but 6 months ago became very nervous about the market and held off. I am so glad we did. We went through some of the crash in the UK and do not want to lose what we salvaged from that in another bubble burst. Once the investors start moving towards the exits which they surely will in greater numbers, I think it is inevitable.

[Guest Bullion Baron]

There's been some concern over the past few months about house prices and the existence of a bubble here in Oz. The jury's still out, it seems, but for new arrivals wondering whether to take the plunge or not I came across this blog which admittedly has a SE Queensland flavour, but may have broader relevance:

 

http://thewesternburbsblogger.blogspot.com

 

It's a little opinionated in places but there's some useful info in the posts which could give you a flavour for what's going on out there and save you some legwork.

 

Good luck either way!

 

I think people are right to be concerned.

 

One year ago there was utter denial the housing market was in trouble at all. Now the realization is starting to dawn on some smarter thinkers that something incredibly serious is underway, but as usual their belief (faith?) is that they can manage the fabled short lived 'soft landing'. Well good luck with that is all I'll say. The larger the boom, the larger the crash. The real estate boom that started in the late nineties began long and slow and over its course turned into the greatest housing bubble the world has ever seen. This bust that's unfolding will be exactly the same. Hold on to your hats real estate speculators. As the year unfolds you'll come to realize real estate in this country is dead for a generation or more. This bust will be a doozy.

Maybe a bit over the top but the message is clear enough.

[rockola57]

I agree with you to a point but the first thing I was ever told was by as much land as you can as the value is ultimately in the land. We can see this happening now in older suburbs where people are selling larger lots to developers as they can build units on them. Corner blocks with land are favourite as developers can build two units and they do not need a body corporate and this is a great selling point for purchasers.

 

I can understand having smaller blocks in the centre of the cities but never understand why they have to be small on the fringe. There is an estate here in Somerville, the blocks are average size I suppose for the present day, the houses are better than average and sell well but the streets are so narrow and the courts so small that if you had visitors over I do not know where they park their cars. Ambulance and fire trucks find these types of estate a nightmare as with cars parked they are unable to gain access.

 

I was also told to by the cheapest house in the best street I could afford.

 

Our first house was on what was considered a very small block now bigger than the norm. We lived there for 11 years and then sold and bought much bigger acreage block and we love it. Yep its work but who cares because we are not so jammed in people tend to be more friendly and our kids had a wonderful time as they grew up, outside not on a computer. Although once the net arrived and we have been on it siince the word go they did spend a fair bit of time on it as mid teens do.

 

Buy with as much land as you can it on sells as people can extend houses, put in pools all that stuff that land requires.

Dead right,top post Petals.

[stevemalbec]

I think people are right to be concerned.

 

 

Maybe a bit over the top but the message is clear enough.

 

The signs are that its already started. But I would say that, I don't work in the RE industry!

[Exile]

Australian property is held up by too many crutches that have distorted the price.

In an ideal world all grants and incentives to purchase would be removed, negative gearing (and tax breaks associated with invetments) would be removed and it may be possible for generations below to buy a reasonable house.

 

The effect the FHOG has had has been dire for those trying to get on the property lader.

 

I believe that Australia has far too many landlords with enormous investment property portfolios.

[stevemalbec]

Australian property is held up by too many crutches that have distorted the price.

In an ideal world all grants and incentives to purchase would be removed, negative gearing (and tax breaks associated with invetments) would be removed and it may be possible for generations below to buy a reasonable house.

 

The effect the FHOG has had has been dire for those trying to get on the property lader.

 

I believe that Australia has far too many landlords with enormous investment property portfolios.

 

Agree totally with all these points. The correction in prices is inevitable, unless the govt. interferes again.