Society/Culture Australian Property Prices to Crash?

[Number37]

More proof that property investors are stupid.

Most believe that property prices will fall.
Most believe that NOW is the time to buy property.

 

[Scotland]

More proof that property investors are stupid.

Most believe that property prices will fall.
Most believe that NOW is the time to buy property.

Every real estate article in the news is either sponsored content, written by someone with a vested interest or referencing someone with a vested interest.

There's a big difference between buying and telling others to buy. As far as I'm concerned if you think it's a great time to buy, then buy. If you are in a position to buy and aren't, then your opinion on how good a time it is to be isn't worth s**t.

Personally I'm not buying (because I am not in the position to anyway, but I wouldn't be encouraging people to anyway) but the fact that houses around me are still selling for comparable prices gives me comfort that my house isn't suddenly worth nothing,

 

[Scotland]

CBA has predicted a lowering of house prices on a best outcome (10% lower) worst case (33%) lower. I'd like to think it would sit somewhere towards the 10-20% mark, but they might've also fudged the figures to not scare the sh*t out of some of their investors.

10-33% down from when or what?

I'm wary of these across the board things. Houses have been going to crash since about 2007 or so. Hasn't happened yet.

I know people who own property that is already down 20% from its sale/peak. I'm pretty confident that if I knocked off 11% from the sale price of my house and put in on the market it wouldn't even make it to a home open. If I knocked off 33% then you are getting close to half what its peak value was. Percentages are only meaningful if you have a meaningful starting point. If there are 10 houses in the street and the only one to sell in 2020 is the shittest one it doesn't mean that the median value of the street has crashed.

AFAIC the govt cares more about house prices than it does about roofs over heads. They'll increase immigration, let the Chinese buy what they want, print money etc. to try and keep prices high.

 

[Bombermania]

Australia's economy has always been tied to immigration with all great economic periods being matched by large increases in immigration.

 

[Number37]

Every real estate article in the news is either sponsored content, written by someone with a vested interest or referencing someone with a vested interest.

There's a big difference between buying and telling others to buy. As far as I'm concerned if you think it's a great time to buy, then buy. If you are in a position to buy and aren't, then your opinion on how good a time it is to be isn't worth s**t.

Personally I'm not buying (because I am not in the position to anyway, but I wouldn't be encouraging people to anyway) but the fact that houses around me are still selling for comparable prices gives me comfort that my house isn't suddenly worth nothing,

The 'most people' reference comes from one of many long running Westpac surveys. (Consumer confidence etc etc)

The best clue that mortgage stress is going to be a real issue comes from the fact that the Big4 banks have recently squirrelled away $10bn for a rainy (maybe that should be rainy-er) day.
(1) That is a heck of a lot of money that people like self funded retirees aren't going to have to spend.
(2) Most mortgages have defaulted to effectively interest only. Larger debts + lower values = a vicious circle of sorts.
(3) The Australian property market is massively overvalued, a correction has been brewing for many years. Coronavirus might be the straw that breaks the camel's back.
(4) Worst case scenarios are predicting 30% falls. That is huge and has severe consequences for the construction industry..which has consequences for jobs....which has consequences for us being able to dig ourselves out of recession...which has consequences for house prices.
(5) There will be nowhere to run, the equity markets are living in fantasy land. It could get very ugly.

 

[Kwality]

mortgages have defaulted

FYI, todays Aus

...... ballooning line of deferrals ... the figures were insignificant a year ago. (The next biggest category - business loan deferrals are roughly half the home loan figure at 70,700).

What percentage of the 144,000 households will end up in negative equity?

NoCookies | The Australian

www.theaustralian.com.au

 

[Nuggs Bunny]

I don't see a proper correction in house prices coming through Covid-19 more than I do a shock drop followed by a sharp recovery as was seen in the last 36 months.

The four things that have caused house prices to jump drastically since the 90's are:
1) Howard's tax reforms
2) rock bottom interest rates
3) increased foreign investment
4) increased migration levels from the decades prior

Out of those four things, Covid-19 affects one. Less migration coupled with the economy contracting will no doubt drive prices down over the next 24 month period but without further structural change, things will go right back to where they left off. It's a phenomenon that's been seen before; look at US or European housing prices before, during and after the GFC.

 

[Power Raid]

CBA has predicted a lowering of house prices on a best outcome (10% lower) worst case (33%) lower. I'd like to think it would sit somewhere towards the 10-20% mark, but they might've also fudged the figures to not scare the sh*t out of some of their investors.

the 33% figure they gave was in the case we shut down for two years

I'm thinking along the range you quoted (12% as a best guess) and Westpac is calling 20% (as a worse case)

 

[Port Adel Proud]

10-33% down from when or what?

I'm wary of these across the board things. Houses have been going to crash since about 2007 or so. Hasn't happened yet.

I know people who own property that is already down 20% from its sale/peak. I'm pretty confident that if I knocked off 11% from the sale price of my house and put in on the market it wouldn't even make it to a home open. If I knocked off 33% then you are getting close to half what its peak value was. Percentages are only meaningful if you have a meaningful starting point. If there are 10 houses in the street and the only one to sell in 2020 is the shittest one it doesn't mean that the median value of the street has crashed.

AFAIC the govt cares more about house prices than it does about roofs over heads. They'll increase immigration, let the Chinese buy what they want, print money etc. to try and keep prices high.

In assume you live in Perth.

No one has made money in property ( residential and commercial) in WA for over a decade. Nor will anyone make any money for the foreseeable future.

And I don't think that is a bad thing. Affordability is a by product and that is good.

 

[Deliverance]

This is rather negative

‘Biggest shock Australia’s had’: The cities where house prices could fall 50 PER CENT

Financial commentator and US author Harry Dent has a sober warning that Australia is set for ‘the crash of a lifetime’.

7news.com.au

 

[hamohawk1]

I don't think we will know how badly the market is until job keeper/ seeker is wound back and we see employment numbers 6 months after. If unemployment is still shouse, could be grim

 

[Number37]

I don't think we will know how badly the market is until job keeper/ seeker is wound back and we see employment numbers 6 months after. If unemployment is still shouse, could be grim

I would bet that the LNP will wind back Job Keeper/Seeker too early and tank the economy for at least 2 decades.

 

[douglyzia]

I had a rental property with absolutely shocking tenants. In retrospect, I must thank these unscrupulous tenants for giving me the shits and making me completely fed up with the whole idea of property rental, whereby I decided to sell my property for a nice profit right before the pandemic due to being sick of all the bullshit that idiot tenants put their landlords through.

Thank you shitty tenants for saving me a bundle! It's funny how things always seem to work out in life. "Connect the dots!" as Steve Jobs would say.

 

[Deliverance]

I don't think we will know how badly the market is until job keeper/ seeker is wound back and we see employment numbers 6 months after. If unemployment is still shouse, could be grim

Who knows. We never got back to pre GFC unemployment levels. Post GFC, it took about 2 years to get us back to about 5%

 

[Ned_Flanders]

Who knows. We never got back to pre GFC unemployment levels. Post GFC, it took about 2 years to get us back to about 5%

a better comparison if the countries who went into recession

USA took 8 years to hit 5% again (peaking at 9.9%)

UK took 8 years to go from 5.3% in 2007 back to 5.4% in 2008 (peaking at just under 12%)

Canada took 9 years to return to 6% (peaking at over 8.5%)

 

[Port Adel Proud]

Who knows. We never got back to pre GFC unemployment levels. Post GFC, it took about 2 years to get us back to about 5%

Obviously enough, unemployment levels feed into economic activity generally and, therefore, very often property prices.

It is very likely that unemployment will increase substantially post covid19. But perhaps to an alarming extent given the huge numbers of business which were showing signs of distress even before covid19. Those businesses will shed workers of they survive.
SA, WA TAS and Qld are backwaters in a modern economy, which were already struggling, and will suffer disproportionately including their property prices.

 

[Simon_Nesbit]

Obviously enough, unemployment levels feed into economic activity generally and, therefore, very often property prices.

It is very likely that unemployment will increase substantially post covid19. But perhaps to an alarming extent given the huge numbers of business which were showing signs of distress even before covid19. Those businesses will shed workers of they survive.
SA, WA TAS and Qld are backwaters in a modern economy, which were already struggling, and will suffer disproportionately including their property prices.

Interesting take - a lot of our expert models are showing the opposite effect, with these areas more resistant to declining prices than centralised high-population centres (ie Melb/Syd).

 

[hamohawk1]

Interesting take - a lot of our expert models are showing the opposite effect, with these areas more resistant to declining prices than centralised high-population centres (ie Melb/Syd).

It depends on how many apartments/ houses have been constructed, and are now considered 'vacant'. You would think with the amount of apartment towers, sprawling suburbs that there would be a glut, but for years everyone keeps hearing of an undersupply.

 

[Number37]

It depends on how many apartments/ houses have been constructed, and are now considered 'vacant'. You would think with the amount of apartment towers, sprawling suburbs that there would be a glut, but for years everyone keeps hearing of an undersupply.

Don't believe anything that comes from the real estate lobby, they're as bad as tobacco companies in lying by omission.

 

[hamohawk1]

Are we thinking the proposed stimulus for construction of housing is the last throw at the stumps the government has of rescuing the building industry, and keeping property prices stable?

 

[Bombermania]

Are we thinking the proposed stimulus for construction of housing is the last throw at the stumps the government has of rescuing the building industry, and keeping property prices stable?

More like Morrison is playing to his tradie base.

 

[hamohawk1]

More like Morrison is playing to his tradie base.

hopefully not these tradies....

 

[Nuggs Bunny]

Are we thinking the proposed stimulus for construction of housing is the last throw at the stumps the government has of rescuing the building industry, and keeping property prices stable?

On the contrary this will probably tank property prices in the suburbs if 100,000 new houses go up.

 

[hamohawk1]

On the contrary this will probably tank property prices in the suburbs if 100,000 new houses go up.

Boggles the mind doesn't it that people are prepared to like on a 300m2 square lot, with a 285m2 house, located 48km from the CBD with no public transport in site besides the one bus that runs 3 times a solar eclipse.

 

[Number37]

Are we thinking the proposed stimulus for construction of housing is the last throw at the stumps the government has of rescuing the building industry, and keeping property prices stable?

The govt has been propping up the construction industry for at least 20 years.
At the same time they will tell us that they can't/won't prop up the car industry (for example) because it's not the govts role to prop up industry.