The future of Australian property prices

[greggles]

Nearly half of new apartments in Sydney and Melbourne are now valued less than what the buyer paid off-the-plan.

https://www.news.com.au/finance/bus...t/news-story/4abe890c87a405964057f74af9d6f166

 

[sptrawler]

Nearly half of new apartments in Sydney and Melbourne are now valued less than what the buyer paid off-the-plan.

https://www.news.com.au/finance/bus...t/news-story/4abe890c87a405964057f74af9d6f166

It will certainly be interesting if people try to sell out of their position, they could well be carrying a fair bit of debt, when offloading. That is if there are buyers, as investors will be scarce, the price fall may well accelerate. IMO
With these off the plan apartment purchases, can you just forfeit the deposit and walk away?

 

[satanoperca]

With these off the plan apartment purchases, can you just forfeit the deposit and walk away?

NO you cannot, developers has the right to take you to court for any loses.

Ie Purchased for $1M, 10% Deposit $100K, you walk away, Dev keeps the deposit, then Dev puts property back onto the market and sells if for $800K, they come chasing you for the difference $100K.

But the real issue is the banks, in the above case say the property is valued at $900K at time of completion. You the purchaser now have 0% equity and the bank will not loan you 100% so you default.

To complicate things further, say the bank required you to have 20% deposit on purchase. On settlement the value is $900K, you still have $100K left, but bank requires you to have $180K/20% of the value of the property at time of completion, you need to come up with another $80K.

This is in reverse to how everyone who bought thought it would work.

In the above example most buyers thought it would work like this:
$1M Purchase price 10% deposit, bank LVR 80% - at the time of purchase buyer did not have the other 10% required, however they thought on time of completion the property would have gone up %10, hence when it came to settlement they had the 20% equity in the property (10% deposit + 10% instant equity)

You can see how this can unwind fast.

 

[sptrawler]

It sounds as though the manure, will really hit the fan. Also from memory, if a new build is sold within 5 years of completion, someone is up for GST to the tax office.

 

[Junior]

N

$1M Purchase price 10% deposit, bank LVR 80% - at the time of purchase buyer did not have the other 10% required, however they thought on time of completion the property would have gone up %10, hence when it came to settlement they had the 20% equity in the property (10% deposit + 10% instant equity)

I very, very briefly worked for a group who sold OTP properties in the outer suburbs of Melbourne. One of their big selling points was that you get "12 months of free capital growth" whilst the property is being constructed. I used to cringe whenever I heard it.

 

[sptrawler]

https://www.smh.com.au/business/the...nding-across-the-country-20190319-p515eb.html

Next, wait for the Labor hit.

 

[jbocker]

I very, very briefly worked for a group who sold OTP properties in the outer suburbs of Melbourne. One of their big selling points was that you get "12 months of free capital growth" whilst the property is being constructed. I used to cringe whenever I heard it.

12 months FREE capital losses.
Some super slimy salesperson would try to sell you that as a good thing.

 

[jbocker]

NO you cannot, developers has the right to take you to court for any loses.

Ie Purchased for $1M, 10% Deposit $100K, you walk away, Dev keeps the deposit, then Dev puts property back onto the market and sells if for $800K, they come chasing you for the difference $100K.

But the real issue is the banks, in the above case say the property is valued at $900K at time of completion. You the purchaser now have 0% equity and the bank will not loan you 100% so you default.

To complicate things further, say the bank required you to have 20% deposit on purchase. On settlement the value is $900K, you still have $100K left, but bank requires you to have $180K/20% of the value of the property at time of completion, you need to come up with another $80K.

This is in reverse to how everyone who bought thought it would work.

In the above example most buyers thought it would work like this:
$1M Purchase price 10% deposit, bank LVR 80% - at the time of purchase buyer did not have the other 10% required, however they thought on time of completion the property would have gone up %10, hence when it came to settlement they had the 20% equity in the property (10% deposit + 10% instant equity)

You can see how this can unwind fast.

Thanks for that advice. I daresay there must be a quite a few people waiting out this miserable experience.
It makes me wonder what happens to those who bought off a plan and the building does not go ahead or is subject to long start up delays.

 

[Zaxon]

It makes me wonder what happens to those who bought off a plan and the building does not go ahead or is subject to long start up delays.

Most apartment builders have "sunset" clauses. If they're not able to finish the building by a certain date, they just refund your deposit. During the property boom, some unscrupulous builders deliberately delayed their build, hit the sunset date, so they could relist the same properties at a new, higher price.

 

[sptrawler]

During the property boom, some unscrupulous builders deliberately delayed their build, hit the sunset date, so they could relist the same properties at a new, higher price.

Developers did that at some apartments near where I live, just prior to the GFC, they still have a lot of unsold apartments 10 years later.
Now they will be hit again, for every winner, there's a loser.

 

[moXJO]

Almost 10 years from this thread and about 4 years from the previous and we are finally here!

Well maybe.

Like I said before I think we will float till after the election and we get a better idea of government direction.

 

[sptrawler]

Almost 10 years from this thread and about 4 years from the previous and we are finally here!

Well maybe.

Like I said before I think we will float till after the election and we get a better idea of government direction.

Well affordability is back, here is a post on some prices, in the State capitals.

https://www.msn.com/en-au/money/hom...our-capital-cities/ar-BBUYSU4?ocid=spartandhp

 

[moXJO]

Well affordability is back, here is a post on some prices, in the State capitals.

https://www.msn.com/en-au/money/hom...our-capital-cities/ar-BBUYSU4?ocid=spartandhp

They went from about $150k to
$1million in my area over 20 years. I'd like to see it well back under $500k.
A lot of stuff needs to go wrong for that to happen though.

 

[sptrawler]

They went from about $150k to
$1million in my area over 20 years. I'd like to see it well back under $500k.
A lot of stuff needs to go wrong for that to happen though.

As usual, some areas will go back, some wont.
If your area is well located, there will still be demand, as always.
20 years ago, people realised it is land value that matters, not the house.

 

[Smurf1976]

20 years ago, people realised it is land value that matters, not the house.

Compare two houses.

One is 50 years old on a big block of land and currently valued at $500K.

The other is brand new on a third as much land just across the road and currently valued at $600K.

The former looks a bit shabby but is perfectly OK to live in. In due course it will be worth more than the latter and all the owner needs to do for that to occur is to continue to own it.

That aspect is one which most seem to have overlooked. Well located land appreciates but buildings always depreciate.

 

[qldfrog]

Fully agree, and so for me a house is always better than a flat, and even without considering the ripoff of body corporate vs self managed repairs and maintenance
But i own both

 

[basilio]

Detailed analysis of what is happening to property prices around Australia.
House prices keep dropping – and there's no end in sight
Greg Jericho

https://www.theguardian.com/busines...ices-keep-dropping-and-theres-no-end-in-sight

 

[sptrawler]

Prices in Sydney wont stop falling, untill buyers believe fair value has been reached, and prices wont fall further. I think there is a long way to go before that point is reached, a further 1/2% cut in interest rates wont do a thing, but it will help the banks balance sheets.
Just my opinion, but once the herd is running for the doors, it is hard to turn them.

 

[moXJO]

Some houses I was looking at in 2014 for average of $250k (one area) still over the $500k mark. Seems to be holding up atm. Its one of those areas that the bottom should drop out of as well.
Kind of my bellwether for the broader area.
I think it can hit $250k again.

Something completely irrelevant:
I noticed lotto jackpots are hitting highs a lot quicker. I wonder if it could indicate the numbers struggling and getting desperate.

 

[sptrawler]

Some houses I was looking at in 2014 for average of $250k (one area) still over the $500k mark. Seems to be holding up atm. Its one of those areas that the bottom should drop out of as well.
Kind of my bellwether for the broader area.
I think it can hit $250k again.

Wait for the next hit when the NG changes come.

Something completely irrelevant:
I noticed lotto jackpots are hitting highs a lot quicker. I wonder if it could indicate the numbers struggling and getting desperate.

Royal Caribbean are increasing the number of cruises from the East Coast next year, due to excessive demand, people have just changed their focus from housing to enjoying the moment.
Once this happens, it takes a long time to change peoples focus, because money they had for a deposit, gets spent on something else.
We just did a cruise from Sydney on the Ovation, I chatted to a lot of people, the boat was packed to capacity with families and age pensioners.
The housing situation in Perth has been in free fall for five years, and it doesn't look like slowing.
The house next to us sold 5 years ago for $700k and is on the market ATM, so it will be interesting to see what it eventually goes for, the owner has gone O/S so it should sell.