Society/Culture Australian Property Prices to Crash?

[Simon_Nesbit]

Here's everything wrong wirh Australia's market in a few sentences:

The number of new loans being taken out by first home buyers has fallen by 11 per cent in a year, according to ABS lending indicators.

But the amount borrowed by them is up 1 per cent (because house prices are going up).

The value of investor mortgages rose 83 per cent.

Until there is tremendous change in the assessment of loan eligibility between investment and owner-occupied this rampant speculation will continue and whole generations will not be given the opportunity to own their own home.

FINANCE
Remove ability to use LMI for Investment lending (capping lending at 80% of value) would be a good start and over-time start to build an insulation against volatility in the housing market.
Reducing income from rental properties used for servicing to 60% of market rent (or tax return profits, whichever is lower) would reduce risky speculation even further.
This would dampen the market considerably, so to counter there needs to be an increase in owner-occupied allowance - either lower servicing buffers, or greater access to >95% lending.

GOVERNMENT
Separating Property losses from PAYG income for Tax (as they do for business losses) would be something relatively simple the Government could do through ATO. Stops Negative Gearing being used to offset PAYG income (instead carry-forward losses for when property does generate income).
Significantly increasing Land Tax and reducing/removing CGT concessions on sale would further reduce the incentive to speculate in the market.
Remove Stamp Duty on purchases for Owner-Occupied properties.

 

[Kwality]

Remove ability to use LMI for Investment lending (capping lending at 80% of value) would be a good start and over-time start to build an insulation against volatility in the housing market.

That was the setting for investment property in the 70's when inflation hit the housing sector. It only resulted in thriving 2nd mortgage lending (2-3x the rate of the 1st mortgage).
Didnt do a thing to the rampaging market.

 

[Bombermania]

haha fall by 40% - yeah dont think he was good at his job, not even close.

Do people expect if/when there is a downturn that $1m properties will be available for $600k? If so, then ive got bad news for you

A crash of that size is unlikely but there have been property crashes of that magnitude.

 

[juss]

My prediction is a slowed growth rate in 2022 and then a slowed again growth rate in 2023 or potentially a slight drop in certain areas, but not across every area.

"Crash" just won't happen.

 

[Frank Grimes]

My prediction is a slowed growth rate in 2022 and then a slowed again growth rate in 2023 or potentially a slight drop in certain areas, but not across every area.

"Crash" just won't happen.

I just gave up on predicting what's going on in the property market.

Though I'm not confident of being right, but it looks to me the main items that's going to influence the property market in the coming year or two is the increase in interest rates and the increase of immigration once the Covid situation is resolved. I personally think interest rate rises will have the bigger impact of the two.

I doubt there will be a crash unless if one of either 2 things happen:
- a fair proportion of the home owners can't make the loan repayments due to the rise of interest rates (I don't think this scenario will happen); or
- if there is a sudden surge of high unemployment.

 

[Pessimistic]

The pandemic was not a recession. It was artificial.

although you can reflect on past recessions, booms and see demographic factors at work.

so if the market wen up 22% (probably a high quote) in one year then crept up at inflation two more years (2023 when the crash won’t have happened and the forecasters will have a new story to peddle) it will be a flat market, but the trend of 7% over decades will still have happened, and the person who bought in year zero will still be ahead

 

[juss]

The pandemic was not a recession. It was artificial.

although you can reflect on past recessions, booms and see demographic factors at work.

so if the market wen up 22% (probably a high quote) in one year then crept up at inflation two more years (2023 when the crash won’t have happened and the forecasters will have a new story to peddle) it will be a flat market, but the trend of 7% over decades will still have happened, and the person who bought in year zero will still be ahead

Even if there was a dip in certain markets, if you can afford to hold and don't need to sell, then a temporary dip won't harm as over the long term there'll still be capital growth for sound property.

 

[Pessimistic]

Problem is you can’t ease in and out of property like you can other investments, and it’s also emotional in that it’s is usually your residence.

the difficult years are just before and after purchase, but there’s usually employment cashflow to ease the bumps

 

[juss]

Problem is you can’t ease in and out of property like you can other investments, and it’s also emotional in that it’s is usually your residence.

the difficult years are just before and after purchase, but there’s usually employment cashflow to ease the bumps

This is true. It's not something you can "give a go" or "dabble in" like you can with throwing a bit of the monthly pay cheque into shares, ETFs, crypto or gold for example.

Most of the time you're talking a multi decade commitment and hundreds of thousands of dollars over the life of the investment.

 

[Pessimistic]

This is true. It's not something you can "give a go" or "dabble in" like you can with throwing a bit of the monthly pay cheque into shares, ETFs, crypto or gold for example.

Most of the time you're talking a multi decade commitment and hundreds of thousands of dollars over the life of the investment.

I always thought about rental properties but the turn off was needing to keep all the balls in the air so to speak, and I have a larger aircon unit at home which has needed fixing for seven years now. I don’t think I’m cut out to be a landlord.

we moved to Canterbury eastern suburbs leafyworld where even modest properties are multi million dollars now. A reverse mortgage or the availability of one will help last out theretirement. Don’t regret it at all now

 

[Twoslabs]

Just give me 3 to 4 months please.

Offloading my Aunts estate, 5 terraces in Richmond and I want to pimp my acre in Pakenham to the max been here for 20 and intending to stay for good, over capitalising ??? for sure but the kids will get a nice pay day in 25 or so when it'll be a standout.

Before the trolls yes I'm investing a s**t load for them, they will not have HECS debts, I just want every bedroom with a full "spa" ensuite, big arse pool and a friggin fountain somewhere (recycled water of course). That'll be my pay off for dealing with a hoarder.....

In all seriousness though I think we'll see 4 to 5 % fluctuations depending on area but a crash? Nope too many vested interests, if we were looking a more than a 10% drop banks would not be loaning a bloody cent so whilst first home buyers might be excited they will not be able to borrow, source ????? been doing this for 35+ years, we'll have to shut down to home buyers or small business, we'll get a kickback to keep business afloat and home buyers can cop latte and smashed avo jokes

 

[juss]

Just give me 3 to 4 months please.

Offloading my Aunts estate, 5 terraces in Richmond and I want to pimp my acre in Pakenham to the max been here for 20 and intending to stay for good, over capitalising ??? for sure but the kids will get a nice pay day in 25 or so when it'll be a standout.

Before the trolls yes I'm investing a sh*t load for them, they will not have HECS debts, I just want every bedroom with a full "spa" ensuite, big arse pool and a friggin fountain somewhere (recycled water of course). That'll be my pay off for dealing with a hoarder.....

In all seriousness though I think we'll see 4 to 5 % fluctuations depending on area but a crash? Nope too many vested interests, if we were looking a more than a 10% drop banks would not be loaning a bloody cent so whilst first home buyers might be excited they will not be able to borrow, source ????? been doing this for 35+ years, we'll have to shut down to home buyers or small business, we'll get a kickback to keep business afloat and home buyers can cop latte and smashed avo jokes

What do you mean won't have HECS debts? You don't want them to study?

 

[Pessimistic]

Banks forecasting a moderate rise in 2022 and a moderate falllin 2023

Looking at their predictions, given a 22% in 2021, the three year 'per annual' rise is between 5.5% (CBA) and 7.5% (westpac) yearly. The latter is also my estimate over the past 30 years, an eight fold increase. I think my salary would be around threefold over the same time

Median Sydney house price tops $1.6m, market expected to peak this year

The median house price in Sydney increased by around $1,100 a day in 2021, to be more than $1.6 million, according to a new report, but surging growth is expected to slow this year.

www.abc.net.au

 

[juss]

Banks forecasting a moderate rise in 2022 and a moderate falllin 2023

Looking at their predictions, given a 22% in 2021, the three year 'per annual' rise is between 5.5% (CBA) and 7.5% (westpac) yearly. The latter is also my estimate over the past 30 years, an eight fold increase. I think my salary would be around threefold over the same time

Median Sydney house price tops $1.6m, market expected to peak this year

The median house price in Sydney increased by around $1,100 a day in 2021, to be more than $1.6 million, according to a new report, but surging growth is expected to slow this year.

www.abc.net.au

Banks are notoriously bad in their predictions.

I think there's a bit of juice left in 2022, although slower than 2021.

Then in 2023 I predict either low growth or a little stagnation.

Worth noting that there are so many markets, some will still do well or poorly against the trend.

 

[hamohawk1]

Until interest rates rise property prices wont fall. RBA has no intention of doing the former.

 

[Gigantic]

Either way, house prices will not crash at the first sign of a rate hike.

My prediction is we might see prices correct during the middle to tail-end of the rate hike cycle, so probably 2024, especially if the RBA continues to be dovish.

 

[ChampRevesby]

The rate hike is necessary but it will hurt a large number of families that are struggling to pay the mortgage.

 

[juss]

The rate hike is necessary but it will hurt a large number of families that are struggling to pay the mortgage.

Which is not really the situation right now. Overall households have hoarded more cash than they have in a long time due to COVID, money is as cheap as its ever been and even if rates did rise, it's not going to be sudden and dramatic. It's a long time before rates start challenging the majority.

House prices still on the up in 2022.

 

[ChampRevesby]

Which is not really the situation right now. Overall households have hoarded more cash than they have in a long time due to COVID, money is as cheap as its ever been and even if rates did rise, it's not going to be sudden and dramatic. It's a long time before rates start challenging the majority.

House prices still on the up in 2022.

I'd like to see the breakdown of that $200 billion in savings by household income. Not everyone with a laptop and a guaranteed income did well in the last 2 years.

Having said that the RBA not doing anything is going to cause more issues.
Projected cost to consumers of:

• 0.25% rate hike = ~$6 billion
• Inflation 1% above the RBA target = ~$10.9 billion
• Inflation 1.5% above the RBA target (where we are now) = ~$16.4 billion

 

[Pessimistic]

House price corrections if they happen do not happen uniformly across the land

Tree and see change areas have seen close to 40% growth since covid and wfh, but over 20 yrs? Those areas have a long way to go to match the gains made in prime suburbs in Melbourne and Sydney

 

[juss]

House price corrections if they happen do not happen uniformly across the land

Tree and see change areas have seen close to 40% growth since covid and wfh, but over 20 yrs? Those areas have a long way to go to match the gains made in prime suburbs in Melbourne and Sydney

Corrections won't mean much.

What's a 15% correction in 2023 going to do on a house that's risen 60% in 3 years?

This "correction" some are predicting will still be expensive real estate in desirable areas, particularly if a buyer is looking for a detached house.

The graph will still be trending up overall.

 

[Pessimistic]

Corrections won't mean much.

What's a 15% correction in 2023 going to do on a house that's risen 60% in 3 years?

This "correction" some are predicting will still be expensive real estate in desirable areas, particularly if a buyer is looking for a detached house.

The graph will still be trending up overall.

it’s only a shrinking population that turns the graph to trend down

 

[hamohawk1]

Still pessimistic a 'crash' will happen in the short term but the more prices go up the bigger the burst will be.

The issue will be if interest rates go up, people can't afford so sell/ default and this leads to a glut of all properties (houses, townhouses, apartments). For the latter i am also concerned what happens to body corp type arrangements if we start seeing big defaults and there is little money going into upkeep maintenance of these buildings.

 

[Scotland]

With any correction those who suffer most will be those with the least equity and those closest to their borrowing limit. Often those overlap.

I know a few people who have bought and sold recently and it's mostly been quick changeovers. Instead of say selling for $500k and buying for $600k with conditional finance etc., it's selling for $600k and buying for $700k with each sale wrapping up quick smart. If things drop back to pre COVID levels they aren't really affected because of the equity buffer. First home buyers paying $50k, $100k more than a year ago for places are the ones who will be in trouble if s**t hits the fan.

 

[Mordecai]

Looking at the leafy green suburbs of Melbourne at the moment. Not a lot there right now in my price range. What are the top 5 blue chip suburbs of Melbourne.