Society/Culture Australian Property Prices to Crash?

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Again, I agree almost entirely with your post - but think it's (FAR) too late to start that now. Affordable housing should have started a generation (or more!) ago, along with proper infrastructure investment in regional transport, health and services. Our last 30 years of (relative) economic prosperity has left us with very little to show for it.

The damage has already been done. Crashing the market now will just compound the issue.

Rates should never have been used as such a drastic method of economic stimulation to counter COVID. Actually even that's not fair - this cycle of stimulation stretches back to mid 2019, before Covid-19 even meant anything. The COVID economic stimulation packages led to a unique situation - what happens when you give money to the rich? They keep it. Give money to the "poor"? They spend it and everyone benefits - increased sales, more employment, bigger profits. We are now reaping the fruits of that "bottom up" economic decision through higher inflation.

From the perspective of property, prices were already starting to fall in the Sydney/Melbourne markets, and stagnate in other capitals, before rates were increased. We had reached the 'peak' of the economic boost. Even without any adjustment for increasing rates, I think we would have naturally seen a nationwide 5-10% fall over the next 12-18m purely as a result of the ongoing "supply shortage" driven inflation limiting capacity to save.

To now attempt to "artificially" freeze the property market >30% via rapidly increasing rates could end up destroying the entire economy (and still not fix the inflation issue!) If a 0.25% rise (with ~3 months of warning) can clip 6% off the top immediately, then you would think another 0.25 would more than double that effect (maybe 15%?). To even consider the effects another 2% on top of that would have on the market suggests to try to "fix" prices in this way appear foolish.

There's no quick fix available here and it's going to be a long road ahead, however IMO committing to a target of long term neutral (+-5%) capital growth is far, FAR better than a sudden 30-50% drop, triggering mass loan defaults and forced sales (as much as 30% of property sold in last five years), bankruptcy (debt > value leaves virtually no option) and significant (>5%) increases to unemployment rates.

We have the most perfect example of how to control property prices - Supply vs Demand. Increase supply to suppress prices.

Therefore, a very simple solution - capital values increasing? Release more land, incentives for new, cost-effective housing, increase infrastructure spending in regional areas, increase costs of holding capital city property.

Yep i agree with 95% of what you say. But my view has always been that supply is not the issue, it never was. it is over investment. The market needs a serious correction and finally the RBA & government seemingly can no longer artificially keep the housing market afloat. I have always said in this thread housing was a ticking time bomb, and it looks like we have no more room to kick the can. I also noted also the carnage that would be caused by a rise to 2.00% and that's why i said we will see 15%-20% falls this year alone, not in 2023.

Homeowners cant always be winners.

The RBA and Governments lack of action of a number of years in controlling house prices has lead too it being so over inflated that Australian citizens are carrying just about the most amount of housing debt in the world.

Inflation comes and goes. Having your over indebted citizens in a position to be unable to handle it without causing mass economic risk exposure is what the real issue is here. And that blame lies squarely at the RBA and Government.

We are about to enter a recession most of us have not seen before.
 
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When are they going to return to .25 multiples

Oh well, at least RBA has made a clear admission that they are well behind the curve.

How Phillip Lowe even still has a job is beyond me.

Less than 6 months ago this dumbass was publicly telling people RBA will not raise rates until 2024. Now look at it.
 
I've heard of people who are selling up now before the rate rises make servicing the loan unworkable, which sucks for those people working to get a start as the people who already hold property are going to be waiting to buy up those opportunities and the rich will get richer.

I have zero sympathy.

Banks are supposed to ensure people have a 2%-3% buffer.

If they are selling up after 0.85% RBA rise they clearly could not afford the property they bought in the first place.

People need to crash and burn to ensure the housing market is sustainable long term.
 
How Phillip Lowe even still has a job is beyond me.

Less than 6 months ago this dumbass was publicly telling people RBA will not raise rates until 2024. Now look at it.
What shocks me is the lack of accountability and transparency from this mob. There was next to no indication they were going to increase by 0.50% this month going by their communications.

Part of their mandate is financial stability, how is a surprise like this meant to help them achieve that as opposed to being a bit clearer in their communications.
 
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Was that bigger than expected?

It was. But if you want to actually shock the market then it is pointless doing exactly what the market expects because it will have already prepared for it.

The RBA waited far too long and now needs to make big changes quickly.

People should remember that despite the rise, rates are still the 3rd lowest they have ever been.
 

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I have zero sympathy.

Banks are supposed to ensure people have a 2%-3% buffer.

If they are selling up after 0.85% RBA rise they clearly could not afford the property they bought in the first place.

People need to crash and burn to ensure the housing market is sustainable long term.

They are selling up because they expect that buffer to be blown out of the water with rises above 3%.

The rich will get richer.
 

HPKS

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I've heard of people who are selling up now before the rate rises make servicing the loan unworkable, which sucks for those people working to get a start as the people who already hold property are going to be waiting to buy up those opportunities and the rich will get richer.
The rich will buy their property to rent it out back to them.
 
The rich will buy their property to rent it out back to them.

And as long as wage growth remains under the rise in cost of living (as CPI basket of goods swaps out everything down to bread and milk to keep the inflation figure low) the value of one home in dollar figures will rise and rise and those renting will never get into the market
 

HPKS

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And as long as wage growth remains under the rise in cost of living (as CPI basket of goods swaps out everything down to bread and milk to keep the inflation figure low) the value of one home in dollar figures will rise and rise and those renting will never get into the market
Exactly. It’s why so many are so desperate to buy a house. We have conditioned the public to believe property will continue to grow at these huge rises they have over the years so they think if they don’t get in now they’ll never get a look in and will be 62 years old still renting with sfa to show for a lifetime of working.

How do you fix it? We had the chance to start fixing it but the public wouldn’t vote it in. So this cycle will pick up again in a couple years time and we’ll be in exactly the same place again.
 
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They are selling up because they expect that buffer to be blown out of the water with rises above 3%.

The rich will get richer.

that is a different argument to rate rises.

The rich will always get richer as long as people are allowed tax breaks to invest in property. That has nothing to do with rate rises.

This is why generally the people who benefit of things like negative gearing are the top 20% of income earners. Rising rates wont change this.
 

Blue1980

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I have zero sympathy.

Banks are supposed to ensure people have a 2%-3% buffer.

If they are selling up after 0.85% RBA rise they clearly could not afford the property they bought in the first place.

People need to crash and burn to ensure the housing market is sustainable long term.
Agree 100%, if you can't handle RBA putting up rates to 0.85% you shouldn't have a mortgage, simple.
 
that is a different argument to rate rises.

The rich will always get richer as long as people are allowed tax breaks to invest in property. That has nothing to do with rate rises.

This is why generally the people who benefit of things like negative gearing are the top 20% of income earners. Rising rates wont change this.
The rich aren't paying more with this rate rise, just the regular poor people who didn't get the benefit of the cash injected into the market.

Now the rich will also swoop in to pick up the poorer peoples assets at discount prices greater than other poor can afford and the nightmare gets worse.

The interest rates pushing people out of their homes ad everything in life gets more expensive isn't hitting the big end of town.
 
The rich aren't paying more with this rate rise, just the regular poor people who didn't get the benefit of the cash injected into the market.

Now the rich will also swoop in to pick up the poorer peoples assets at discount prices greater than other poor can afford and the nightmare gets worse.

The interest rates pushing people out of their homes ad everything in life gets more expensive isn't hitting the big end of town.

You are not understanding.

Rich people en masse would not be buying poor Peoples homes if they did not get tax benefits to do so.

Tax benefits fuel housing growth. Without them housing doesn’t grow as fast thus there is much less benefit for someone to buy them.

They are 2 different issues.

Investment loans are already much higher than OO loans. As long as you can claim a loss on property people will use it.
 

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