The future of Australian property prices

[luutzu]

I'm seeing the same, the frenzy is over and Agents are ringing me, as an investor, instead of me ringing them!

The property market is not going to end well. The oversupply and the debt will crash it so hard the grandkids will feel it.

Builders, tradies, home rennovators, handyman... they're all busy and overcharging.

It's not just the new houses and apartments, it's the granny flats boom too.

I know a few who bought a house or two recently and immediately take out more loans to build a granny flat. Those who bought a decade or so ago also take out loans to also build granny flats, extension and other creative stuff to make the rental yield meet the interest repayment half way.

A typical 60m2 GF now cost $150K to $200K. At such prices, tradies and half-baked builders still can't find enough time to accept the work.

 

[moXJO]

I'm seeing the same, the frenzy is over and Agents are ringing me, as an investor, instead of me ringing them!

It begs the question: Is our high immigration going to keep house prices going up?
High cost of living must be making Australia less attractive to live in.

It also comes down to how many dwellings we are building a year (in places people want to live) as opposed to how many we are letting in.

We would have corrected long ago if not for immigration numbers. I personally don't think it's sustainable.

 

[luutzu]

It begs the question: Is our high immigration going to keep house prices going up?
High cost of living must be making Australia less attractive to live in.

It also comes down to how many dwellings we are building a year (in places people want to live) as opposed to how many we are letting in.

We would have corrected long ago if not for immigration numbers. I personally don't think it's sustainable.

Interest rate increase, oil prices upping a bit more... those would do it far more effective than immigration figures.

I don't have the stats of how many properties are bought by foreigners or new immigrants, but going by anecdotal evidence, there are plenty of OZ-born Aussies buying plenty of properties around areas I know.

They might look Asian, might be Chinese... but Asian/Chinese Australian buyers. Not always foreigners.


Given the current level of crazy-high mortgage and personal debt, over the next few years the only ones who can afford their own home would be new immigrant and refugees, and of course working Australians who's currently not in too much debt.

Immigrants or refugees, on average - we're not talking the rich and well connected ones, are probably renting or have enough to just buy one property to live in. So their debt level are either zero or quite manageable... zero debt because bankers are less likely to lend to refugees, and refugees are unlikely to even think about getting a mortgage.

When the crash happen, those who are currently overleveraging will get screwed. Properties will be cheaper and so those without financial trouble then can buy at cheaper or more affordable prices.

I've withnessed this pretty much first hand in the late 80s to early late 90s.

 

[Smurf1976]

Taking a few steps back and looking at it:

Wages haven’t kept pace with rising costs of living including housing.

Consumers have borrowed to fill the gap and carry on spending particularly on housing.

In the absence of ongoing falls in interest rates this approach of debt growing more rapidly than income is unsustainable and will thus end at some point.

How long it lasts is anyone’s guess but if something is unsustainable then ultimately it will end.

The rest is detail. Will we see a wages boom which effectively replaces growing debts and keeps everything else going? Or no wages boom and consumption spending is forced down?

Suffice to say I don’t see any real sign of a wages boom for the majority of the workforce. Could happen but it doesn’t seem to be happening at the moment.

 

[luutzu]

Taking a few steps back and looking at it:

Wages haven’t kept pace with rising costs of living including housing.

Consumers have borrowed to fill the gap and carry on spending particularly on housing.

In the absence of ongoing falls in interest rates this approach of debt growing more rapidly than income is unsustainable and will thus end at some point.

How long it lasts is anyone’s guess but if something is unsustainable then ultimately it will end.

The rest is detail. Will we see a wages boom which effectively replaces growing debts and keeps everything else going? Or no wages boom and consumption spending is forced down?

Suffice to say I don’t see any real sign of a wages boom for the majority of the workforce. Could happen but it doesn’t seem to be happening at the moment.

Saw some news report a few months ago stating that for the average worker to be able to afford an average property in Canada, US, their current average income will need to increase by some 30% to 40%.

Try walking into the boss's office to ask for that kind of raise. Or any kind of raise.

A typical "professional" would be lucky to get 2% a year "raise". When I was starting out, a new graduate friend was over the moon when he got a 3% raise after two years' work.

Companies and businesses know the likelihood of their employees being deeply mortgaged. That kind of knowledge mean no raise negotiation, possibly more work for no extra pay too.

Worker insecurity by design.

 

[sptrawler]

Taking a few steps back and looking at it:

Wages haven’t kept pace with rising costs of living including housing.

Consumers have borrowed to fill the gap and carry on spending particularly on housing.

In the absence of ongoing falls in interest rates this approach of debt growing more rapidly than income is unsustainable and will thus end at some point.

How long it lasts is anyone’s guess but if something is unsustainable then ultimately it will end.

The rest is detail. Will we see a wages boom which effectively replaces growing debts and keeps everything else going? Or no wages boom and consumption spending is forced down?

Suffice to say I don’t see any real sign of a wages boom for the majority of the workforce. Could happen but it doesn’t seem to be happening at the moment.

I think you are on the money, prices slide, wages growth, currency devaluation and migration.
This will end up with a soft landing of property prices, and "my gov" will sort out the rest. lol

 

[luutzu]

Soft with a THUD.

The current price level is either the new norm or the same old crazy mania.

It can't be the new normal because real wages hasn't grown with prices on anything but maybe electronic gadgets. And you can't eat gadgets.

Pretty much everywhere you look in Sydney you see apartments being built. Built in places I just don't see the benefit of living that high and that crammed.

On top of that, just about everyone I know with a property are putting in a Granny Flat out back to rent. Some even extend their house up or back a bit, then add a granny flat.

Council used to decide what land and what parking spaces etc. get to have a granny. Now that NSW has their SEPP CODE in... people with a block above 450m2 can have get a 60m2 gflat.

So not only are people indebted with one or two investment property, they're also indebted from the extra $120-$150K for that additional Granny Flat.

Extremely high private debt the likes of which Australia hasn't seen before; record low interest rate that's about to follow other countries and get a kick up a bit; new apart and affordable granny flat about to glut the market...

If the RBA and myGov can bring this to a soft landing like other times, they deserve a few Nobel Prizes for miracles.

 

[sptrawler]

Don't know about the Eastern states, but W.A has had a soft landing, I'd say house prices are post gfc level at the moment.
There are mortgagee sales, but generally things have bottomed without mass hysteria.

The thing is, there may be as many first home buyers sitting on the sidelines, as indebted speculators who may have to sell.
It isn't as though there are only people in debt, up to their eyeballs, who have a house.
My daughter just sold her house, for $75,000 below asking price, she built it 6 years ago so still came out in front.
But someone got a bargain, the people next door to her, bought their similar house for $120,000 more, just two years ago.
So someones loss is someone else's gain, life goes on.
There will be a fall in house prices in Sydney, they are stupid, people will get burnt.
Life will go on.
A few will lose everything, others will loose their investment egg, others will jump in and pick up what they percieve is a bargain.
The thing is, I don't think prices will go below, the price they were pre boom.
Wages will rise(they have to), interest rates will rise(they have to) and the wheel will start moving again.
Just my opinion.
I tend to think, the plan is, the dollar will go down and wages will go up.

 

[greggles]

interest rates will rise(they have to)

They do, but my guess is they won't be going up much anytime soon. I think they have bottomed out for now but with so many people mortgaged to the hilt, an interest rate rise of any significance will put an enormous amount of economic stress on a lot of borrowers. That effect of that sort of stress will be felt at the ballot box.

Interest rates will follow wage growth up IMO. It appears to be the only way to avoid a hard landing.

The Sydney and Melbourne property markets are overheated. However, I think there is still growth to be had in cities like Brisbane and Adelaide.

 

[sptrawler]

Interest rates will follow wage growth up IMO. It appears to be the only way to avoid a hard landing.

Absolutely, the only problem is, affluence and laziness follows wage growth, as was proven this boom.
IMO the only way they can counteract that, is with major currency devaluation, then as the wages go up the mortgage stress is relieved.
The down side is the consumer stress is increased, but as long as it is gradual, the economy adjusts.
You can only do without a fridge, or a cooktop, for so long.
Maybe the rent to buy companies will do well.

 

[luutzu]

Don't know about the Eastern states, but W.A has had a soft landing, I'd say house prices are post gfc level at the moment.
There are mortgagee sales, but generally things have bottomed without mass hysteria.

The thing is, there may be as many first home buyers sitting on the sidelines, as indebted speculators who may have to sell.
It isn't as though there are only people in debt, up to their eyeballs, who have a house.
My daughter just sold her house, for $75,000 below asking price, she built it 6 years ago so still came out in front.
But someone got a bargain, the people next door to her, bought their similar house for $120,000 more, just two years ago.
So someones loss is someone else's gain, life goes on.
There will be a fall in house prices in Sydney, they are stupid, people will get burnt.
Life will go on.
A few will lose everything, others will loose their investment egg, others will jump in and pick up what they percieve is a bargain.
The thing is, I don't think prices will go below, the price they were pre boom.
Wages will rise(they have to), interest rates will rise(they have to) and the wheel will start moving again.
Just my opinion.
I tend to think, the plan is, the dollar will go down and wages will go up.

WA might have had a soft landing because those without a job there can migrate to the East to send money back to the bankers there while they rent here. Then there are investors from the East coast going over to pick up a few bargains.

What would happen if the East coasters are also stuffed?

Yes, true that there are people with savings sitting on the sidelines; or people with money, period. Just I don't see how there could be too many with savings of $200K+ just sitting there waiting.

I don't know how anyone on an average wage would have any savings to be honest. The rent alone would eat up most of an average wage.


The last (few) times Australian property "corrected" itself, Aussies aren't as indebted as they are now. No where near where we are now.

The Chinese weren't in too much debt then either. There weren't capital flight control from Beijing etc.

The maths just don't add up.

 

[greggles]

And on a lighter note, High school girls at Sacred Heart College in Geelong have discovered that house prices are cheaper in streets with silly names.

http://www.abc.net.au/news/2017-11-27/house-prices-lower-on-streets-with-silly-names/9197366

So if you don't mind living in Butt Street, Wanke Road or Grogan Court you might be able to get into the property market at a much better price.

 

[satanoperca]

Ah, the truth finally comes out.

Unbelievable growth in property while inflation low, interest rates, low, wage growth f---kd, GDP crap, but property to the moon in the last 5 years.

Couldn't be foreigners buyer our shelter and land.

No, said all, govnuts and polies lied? No.

Foreigners have had no effect on shelter prices.

"Foreign buyers will account for 18.1 per cent of residential sales in NSW in the three months to March 2018, down from 23.6 per cent in the same period a year ago, the latest ANZ and Property Council quarterly research found.

in Melbourne, foreign buyers are expected to cover 21 per cent of residential property purchases in the first quarter of 2018, compared with 25.2 per cent a year ago, according to the report."

This bit is just a pisser.

"But experts say the drop in foreign purchases is coming off such a high base that there’s no immediate danger of a substantial shift in market dynamics."

I am just a numbers man, but a 5% drop is significant but if the overseas raiders stop buying, lets see who is standing naked.

Homes are for Australians, if foreigners want to invest in Australia, try the ASX, sh--t it has done nothing for year.

 

[luutzu]

Ah, the truth finally comes out.

Unbelievable growth in property while inflation low, interest rates, low, wage growth f---kd, GDP crap, but property to the moon in the last 5 years.

Couldn't be foreigners buyer our shelter and land.

No, said all, govnuts and polies lied? No.

Foreigners have had no effect on shelter prices.

"Foreign buyers will account for 18.1 per cent of residential sales in NSW in the three months to March 2018, down from 23.6 per cent in the same period a year ago, the latest ANZ and Property Council quarterly research found.

in Melbourne, foreign buyers are expected to cover 21 per cent of residential property purchases in the first quarter of 2018, compared with 25.2 per cent a year ago, according to the report."

This bit is just a pisser.

"But experts say the drop in foreign purchases is coming off such a high base that there’s no immediate danger of a substantial shift in market dynamics."

I am just a numbers man, but a 5% drop is significant but if the overseas raiders stop buying, lets see who is standing naked.

Homes are for Australians, if foreigners want to invest in Australia, try the ASX, sh--t it has done nothing for year.

Property prices is, still, just unbelievable in Australia.

Weren't long ago that with $200K you could pay half the house off. Now, the same $200K barely covers the deposit and stamp duty.

 

[DB008]

I've always maintained that the laws should be reciperical

Here is an example of Thai/Aussie laws simplified....

Can l purchase land in Thailand as an Aussie?
No
Well, guess what, Thai nationals can't purchase land here.

Can I purchase a condo/unit in Thailand as an Aussie?
Yes, provided l set up a shell company and appoint 51% on the board as Thai's. Well, guess what? It will be the same for Thai nationals here (51% Aussies on the board)

Why are we giving this country away?

 

[Value Collector]

I've always maintained that the laws should be reciperical

Here is an example of Thai/Aussie laws simplified....

Can l purchase land in Thailand as an Aussie?
No
Well, guess what, Thai nationals can't purchase land here.

Can I purchase a condo/unit in Thailand as an Aussie?
Yes, provided l set up a shell company and appoint 51% on the board as Thai's. Well, guess what? It will be the same for Thai nationals here (51% Aussies on the board)

Why are we giving this country away?

I think it would be far better to just develop foreign investment laws based on our need for capital, rather than based on some tit for tat law.

If we need foreign investment some where why deny it just because that country would deny us?

 

[Value Collector]

Why are we giving this country away?

We aren’t, we are selling it to the highest bidder.

If they want to over pay for an asset let them, they can’t take it overseas, it has to stay here, and if they are truly overpaying then eventually the market will correct, and there capital injection would have helped our economy.

 

[luutzu]

Paper presented at RBA workshop show cutting Negative Gearing will be good for the economy and owner-occupier. Freed up to 30% of properties currently being rented out at a loss so that people can buy and live in it without the taxpayers having to pay landlords for their losses but have half the eventual profit be taxable only.

The Liberals says... no way!

http://www.smh.com.au/federal-polit...commissioned-study-finds-20180112-h0hjwz.html

 

[Smurf1976]

If we need foreign investment some where why deny it just because that country would deny us?

One thing’s for sure.

We don’t need foreign investment in existing residential real estate.

New builds might be OK but there’s no national benefit in having foreigners buy what we’ve already got. It just pushes the price up but adds nothing tangible at all.

 

[luutzu]

One thing’s for sure.

We don’t need foreign investment in existing residential real estate.

New builds might be OK but there’s no national benefit in having foreigners buy what we’ve already got. It just pushes the price up but adds nothing tangible at all.

Nothing tangible for the Aussie buyers but how else will the gov't get people on an average $80K a year being more than happy to get a loan for $1M and keep on smiling as they pay the equivalent of one year's wage on interest alone?