Society/Culture Australian Property Prices to Crash?

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Kwality

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"By comparison, the previous increase of just over $1 trillion took 15 months, rising from $7.2 trillion in the December quarter 2019 to $8.4 trillion in the March quarter 2021."

The ABS residential property prices index shows house prices rose 5.7 per cent in the September quarter, while attached dwelling prices rose 3.1 per cent.'

The only way house values will fall is if the cost of borrowing increases.

 
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Pessimistic

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I mean you are absolutely right.

The government has over the period of 20 years allowed housing to now be worth in excess 9 trillion dollars. Let that sink in. 9 TRILLION dollars. This is almost 5 x our national GDP for gods sake.

It is worth more than the ASX and Superannuation combined and better yet there is ZERO Housing policy in relation to affordable housing. Let that also sink in. There is effectively zero policy from State and Federal ensuring housing affordability for people in 10, 20, 30 years time. Australia biggest monetary value has ZERO bus driver.

It is absolute insanity what is occurring and you are 100% correct that vested interests are at play. Any common sense country would be making this issue numero uno yet here we are with the Australian Government doing absolutely sweet fu** all about it, if anything they are actively ensuring it continues to increases.

how much is blue chip (or maybe better described as gravity defying) such asparts of melbourne and sydney
They seem to have a lot in common with other similar hot markets around the world
And does the tree change acceleration due to wfh acceptance have a part to play

also in the UK recently they reckoned only less than 10% of loans were for tangible assets such as property. The rest was derivatives
 

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yodellinhank

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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
I think Darwin had a crash around that a decade or or so ago. But yeah.
 

Pessimistic

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I just did some rough spreadsheet calcs Since 1993 my house has averaged a 7.5% annual value and my salary 4%

may 1993 salary was 12% of the purchase price and I estimate about 5% now. The paper returns now being not that much below mineand partners take home combined. Before getting too excited, we haven’t had SGL most of our lives so super balances are quite modest, although the flexibility of the home equity will allow us to keep the super on max investment settings instead of going conservative.

my daughter graduated and will start on 3/4 my current salary

I can see the difficulty in raising a deposit but where is the argument for a crash or even much deviation from the ongoing 7% annual average rise?

theres negligible immigration and it seems the market is as hot as ever $2m house set to be $4m inside a decade. Sounds improbable but it did ten years ago too
 
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Frank Grimes

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I remember reading reddit threads on this topic in around 2011. I wonder how many people have been “holding out” for the crash.
I found a youtube video of a presentation 10 years ago I remember seeing. Effectively telling people to "hold out". In hindsight if people took that advice at the time they would probably be regretting it.

What I find wrong with his advice is he appears to be advising first home buyers to "play" the market. For people to try to buy at a time when the prices are lowest. While he may be having good intentions in advising this to save people money, it can actually be bad advice as we have seen with house prices over the last ten years.

The time to buy a house imo is when you can comfortably make the loan repayments factoring in increases of interest rates. Admittedly it's harder for a lot of people to meet this criteria these days.

 
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Pessimistic

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I found a youtube video of a presentation 10 years ago I remember seeing. Effectively telling people to "hold out". In hindsight if people took that advice at the time they would probably be regretting it.

What I find wrong with his advice is he appears to be advising first home buyers to "play" the market. For people to try to buy at a time when the prices are lowest. While he may be having good intentions in advising this to save people money, it can actually be bad advice as we have seen with house prices over the last ten years.

The time to buy a house imo is when you can comfortably make the loan repayments factoring in increases of interest rates. Admittedly it's harder for a lot of people to meet this criteria these days.



Even this thread from 2018 is enlightening. Same arguments.
 

Kwality

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Long time since we faced inflation - tough time if you have a mortgage or aspire to home ownership.
 

Deliverance

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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.
 

Simon_Nesbit

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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

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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.
 

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Bombermania

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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

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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

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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

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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

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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.
 

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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

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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

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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
 

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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 :D 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
 

juss

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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 :D 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?
 

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