The future of Australian property prices

[Toyota Lexcen]

They can experience what shareholders get up too

 

[Smurf1976]

The reason that everything is centralised around Sydney, Melbourne, is because that is where the executives want to live.
The problem is, they drag middle and lower management with them, then the plebs have to compete with them for properties.

Interesting. Hadn't thought of that aspect previously but it makes some sense.

 

[Wysiwyg]

Bank disclosures suggest that 30 per cent of households with an owner-occupied mortgages have an average income of at least $200,000 a year, an extraordinarily large number of high-income earners.

What's more, the bank data suggests a whopping 42 per cent of customers earning at least $500,000 per annum took out a mortgage last year.

That would be the whole family. Husband, wife and their parents equity.

 

[McLovin]

The reason that everything is centralised around Sydney, Melbourne, is because that is where the executives want to live.

Partly true, which is why it's easier to build satellite cities and a commuter belt around Sydney, Melbourne and SE Qld than expect companies to want to start opening offices in Adelaide and Cairns.

 

[luutzu]

Some sellers in Sydney reportedly have to drop prices up to 30%.

Seems these pockets are in the richer suburbs. Which is either strange or could be scary as I was told that the richer suburbs are ones best able to hold their prices during a correction/crash.

I noticed that there are a bit more ads showing a fixed price rather than auction. It's just my observation here but that's usually a sign that the auctions aren't going well and property is beginning to cool.

Got a long way to drop though. I mean, I seriously don't know how anyone on that average $80K could afford that average $800k to $1.4M property as housing.

News.com.au

Home sellers drop listed prices by up to 30 per cent in pockets of Sydney
SYDNEY home sellers have had to accept GFC-level price declines due to a weakening market that has given buyers more bargaining power, but some suburbs have been more affected than others.

HOMEOWNERS in pockets of Sydney have been selling properties for up to 30 per cent below their advertised price after a steep fall in buyer demand.

Property experts claim sellers have been forced to accept GFC-level price declines due to a weakening market which makes it difficult to achieve the inflated sums properties were fetching six months or even a year ago.

Sydney’s median home price fell 1.3 per cent over the three months to December and by another 2.5 per cent in the following three months to March, according to property research group CoreLogic.

The latest three-month decline was the largest since August 2008, near the height of the GFC, and helped push the typical price of a home back down to $880,743.

Further falls are expected — CoreLogic forecasts the citywide median home price will drop a total five per cent over 2018.

The soft market means sellers are facing rising competition from other homeowners also vying for buyer interest.

There are currently about 25 per cent more homes for sale compared to a year ago and only 80 per cent as many people actively looking for property, industry figures reveal.

Buyers have capitalised by dragging sellers to the negotiating table.

The average house seller in the inner city suburb of Darlinghurst had to cut 30.6 per cent off their advertised price to sell.

Bellevue Hill sellers dropped their prices by an average of 16 per cent before selling, while in Vaucluse the adjustment was 13 per cent.

Down south, sellers in nearby suburbs Sutherland and Alfords Point slashed an average of more than 15 per cent off their listed prices prior to selling.

Other suburbs where sellers discounted their prices by more than 10 per cent included Narrabeen, Cammeray, Tempe, Coogee, Mascot, Belfield and Matraville

“Sydney prices have hit the point where they’re unaffordable for a lot of buyers. The prices some sellers are setting initially are not what buyers are prepared to pay,” Mr Kusher said.

Recent listings with high prices relative to the condition of the homes include a terrace on Harris St in Balmain listed with a guide of $1.65 million.

The three-bedroom home is uninhabitable with caved in ceilings and other damage.

etc....

 

[sptrawler]

Perth is back to GFC levels, I would expect Sydney and Melbourne to do the same, once the market reaches saturation.

 

[CanOz]

Each city in Australia is different. Perth retraced due to the end of the mining boom. The economic drivers of the east coast are different. The catalyst will be different. I spoke to a guy yesterday, real estate agent, was saying how many places he sells to Chinese that never live in them. When the music stops, they'll need thier cash, that will be the telling moment in Sydney, Melbourne and maybe even brisbane by then....

 

[Smurf1976]

Perth is back to GFC levels

In what way?

Actual prices?

Sales volume / time it takes to sell?

Amount of new construction going on?

Just seeking clarification

 

[sptrawler]

In what way?

Actual prices?

Sales volume / time it takes to sell?

Amount of new construction going on?

Just seeking clarification

Perth prices, speaking generally have retracted to near GFC levels, I'm talking generally.
There will be some pockets that have done better some worse.
For example in an area near where I live approx 10klm from the City, I will use that area due to the fact it is a middle of the road area, 3x2, 4x1 on non development blocks.
Post GFC, they were in the low $400,000, at the peak they went to about $600,000 give or take, now they are back to low $400,000. A friend of mine, is looking in that area for a house, which his daughter can purchase.
My daughter and her husband bought a house and land package 7 years ago, in a new suburb, sold it 3 months ago, made $60k

 

[luutzu]

Perth prices, speaking generally have retracted to near GFC levels, I'm talking generally.
There will be some pockets that have done better some worse.
For example in an area near where I live approx 10klm from the City, I will use that area due to the fact it is a middle of the road area, 3x2, 4x1 on non development blocks.
Post GFC, they were in the low $400,000, at the peak they went to about $600,000 give or take, now they are back to low $400,000. A friend of mine, is looking in that area for a house, which his daughter can purchase.
My daughter and her husband bought a house and land package 7 years ago, in a new suburb, sold it 3 months ago, made $60k

That $6oK before or after stamp duty?

No one I know believe properties in Sydney would drop that much. If it does, it'd be 5%, maybe 10%, they say. But it'll most likely just stay at this level for 10 years then pick up again.

If that's the case, an average house in Sydney would be $2m in 20 years time. I just don't see how the average wage could increase enough by then to afford that.

 

[sptrawler]

That $6oK before or after stamp duty?

No one I know believe properties in Sydney would drop that much. If it does, it'd be 5%, maybe 10%, they say. But it'll most likely just stay at this level for 10 years then pick up again.

If that's the case, an average house in Sydney would be $2m in 20 years time. I just don't see how the average wage could increase enough by then to afford that.

There is no stamp duty when you sell a house in W.A, it sold for $60 more than it cost for the house and land originally, that is not including improvements.

 

[Wysiwyg]

If that's the case, an average house in Sydney would be $2m in 20 years time. I just don't see how the average wage could increase enough by then to afford that.

Yes the double ups and triple ups become unsustainable affordability wise. Easy to double/triple/quadruple/quintuple 100k house and find buyers in the old days but as you note, 500k to 1million and then onto 2million is unaffordable.

 

[luutzu]

There is no stamp duty when you sell a house in W.A, it sold for $60 more than it cost for the house and land originally, that is not including improvements.

Oh yea, no stamp duty when selling here as well.

 

[luutzu]

Yes the double ups and triple ups become unsustainable affordability wise. Easy to double/triple/quadruple/quintuple 100k house and find buyers in the old days but as you note, 500k to 1million and then onto 2million is unaffordable.

Yea. True, it's a very high base to grow from.

On top of that, houses that were built back then are a lot stronger than today's. There's the hardwood on even the very modest of houses. Solid brick on slightly pricier ones.

I mean, most of those houses you could repaint or re-gyprock and they're quite liveable. It'll cost some $100K to completely re-shell but that's not too bad if the structure are alright and you're living in it.

Nowadays, unless it's owner-built, all master-built houses are not designed to last more than 30 years, if that. They're nice and comfortable enough. And 20 to 30 years isn't a bad idea seeing how housing style and new tech/material make most old ones obsolete anyway....

But if a young couple were to buy today's houses in 20 years' time, and bought them for $2m... chances are they're just buying the land. Then add on top at least $500k to have it knock down and rebuild.

So either the average Australian are going to get a lot richer, or housing become completely unaffordable, or property will have a very bad couple of decades.

 

[Smurf1976]

And 20 to 30 years isn't a bad idea seeing how housing style and new tech/material make most old ones obsolete anyway....

Truly terrible environmentally though.

People make a fuss about regular household garbage and recycling etc but the volumes are nothing compared to what's involved building and demolishing things. Even a minor renovation will produce far more solid waste than you could possibly dispose of via your normal wheelie bin.

As someone who's planning to move soon and thus paying some attention to real estate at the moment I do find it all rather interesting though. Looking at an area that's had progressive development since the 1960's with houses still being built nearby today (obviously this isn't an inner city area), it seems that anything pre-1980 is being sold with at least a hint that you'd want to knock it down and that you're really only buying the land.

It could suit me rather nicely though since I couldn't give a damn if it's a bit out of date and I'm capable of doing most work around the place myself anyway.

 

[Smurf1976]

This could be of some importance:

http://www.thebull.com.au/articles/a/73363-banks-probe-may-make-home-loan-hard-to-get.html

 

[sptrawler]

This could be of some importance:

http://www.thebull.com.au/articles/a/73363-banks-probe-may-make-home-loan-hard-to-get.html

I would say that is highly likely, otherwise the Royal Commission will be seen as a waste of money, which in reality it probably is.
But it gives the outcome a degree of credibility, for the masses.

 

[luutzu]

Truly terrible environmentally though.

People make a fuss about regular household garbage and recycling etc but the volumes are nothing compared to what's involved building and demolishing things. Even a minor renovation will produce far more solid waste than you could possibly dispose of via your normal wheelie bin.

As someone who's planning to move soon and thus paying some attention to real estate at the moment I do find it all rather interesting though. Looking at an area that's had progressive development since the 1960's with houses still being built nearby today (obviously this isn't an inner city area), it seems that anything pre-1980 is being sold with at least a hint that you'd want to knock it down and that you're really only buying the land.

It could suit me rather nicely though since I couldn't give a damn if it's a bit out of date and I'm capable of doing most work around the place myself anyway.

Yea, reno and construction produce crazy amount of waste. Even the packaging could take a few of weeks if it goes through the wheelie bin.

Which reminds me to never, ever get free "clean soil" as fill. Or buy a farm. I guess unless I know where all the bodies are buried.

Some demo guys would buy farmland or hire it out with the owner's permission and tip their waste there. I don't know how they're not caught but yea, layered the truck with clean soil on top and real nasty stuff under, head for the farm.

They used to do that around the fringes of residential areas, on bigger blocks. Dumping asbestos and topsoil over. I heard of an owner who bought one some 15 years ago... got permit to build his dream home then Council dropped by for the first inspection. Saw that the land is higher than his neighbours, kick a bit and order the owner to clear the site of asbestos.

He can't sue the previous owner because apparently Council only care who the current one is. Cost him some $100K. Back when a similar lot goes for no more than $400K.

-----

It's great that you're handy around the house. Unless a person has lots of money and don't mind being generous with it on tradies, it'd be a nightmare to have anything done by tradies nowadays.

I swear it's almost like winning a lottery when a trade does what was agreed, and does it properly.

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Oh yea, just saw a listing of a newly built house asking for $1.8-$1.9M.

Land is probably no bigger than 600m2. House itself is modern and new but nothing special.

Downside... It's on the border of an industrial zone. Right behind its fence is literally a factory; to its left a small creek and before that a massive rail depo I think Aurizon was planning to do something with. A million is still a lot of money right?

 

[luutzu]

I would say that is highly likely, otherwise the Royal Commission will be seen as a waste of money, which in reality it probably is.
But it gives the outcome a degree of credibility, for the masses.

They should also crack down on how they define home "equity". It's almost like "the Big Short" kind of play at the moment.

Apparently even if you bought your house 2 or 3 years ago, paid nothing back but the interest... the bank would lend you more if the property has gone up in prices, which it certainly has.

Say you borrowed $1M for a $1.2M property. You can top up, get more equity out of the property if the valuer comes back with a higher figure.

If it's been a decade or two, I can understand that. But during a booming market and the bank would lend you 80% of whatever the value is, year on year? That's nuts.

 

[sptrawler]

They should also crack down on how they define home "equity". It's almost like "the Big Short" kind of play at the moment.

Apparently even if you bought your house 2 or 3 years ago, paid nothing back but the interest... the bank would lend you more if the property has gone up in prices, which it certainly has.

Say you borrowed $1M for a $1.2M property. You can top up, get more equity out of the property if the valuer comes back with a higher figure.

If it's been a decade or two, I can understand that. But during a booming market and the bank would lend you 80% of whatever the value is, year on year? That's nuts.

There are plenty of people doing that, all they are doing is spending any equity they have gained, to support their lifestyle.
Then in 10 years time they will be wondering why they haven't got ahead, and blaming the banks for letting them do it.
I know someone who bought a property 20 years ago, and still hasn't paid anything off it, because of the tax advantage.
I asked him what he had done with the savings, he hadn't invested any of it, so he hasn't paid anything off the investment property or his principal residence.
But they have had a great time.