Housing market 2021

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You can be sure that when these rate rises pause/cease there will be a flood of interest in the market. Picking the bottom for your ppor is a fools game.

That is unless Oz does a Japan and all faith is lost in the property market. I feel like the govt would step in before that happens.
 
Mordecai said:
You can be sure that when these rate rises pause/cease there will be a flood of interest in the market. Picking the bottom for your ppor is a fools game.

That is unless Oz does a Japan and all faith is lost in the property market. I feel like the govt would step in before that happens.
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This

With unemployment so low, GDP crashing, inflation looking like it’s turned and banks starting to come out with commentary about rates falling in 2024, if inflation can be tamed prior to substantial wage growth, there’s a real chance house prices head north, reasonably quickly and reasonably soon

Perfect storm required however I think that perfect storm is closer to happening than it was 3-6 months ago

I’d say in 3 months and no more than 6 months is probably your best buying opportunity

I picked up a few apartment blocks in the US during the GFC at 80% below previous highs, starting a thread on here about it at the time, and that window was equally short.

Edit, here it is - Purchasing Property in the US
 
www.abs.gov.au

Building Approvals, Australia, January 2024

Provides the number of dwelling units and value of buildings approved
www.abs.gov.au www.abs.gov.au

The January 2023 seasonally adjusted estimate:
  • Total dwellings approved fell 27.6%.
  • Private sector houses approved fell 13.8%, while private sector dwellings excluding houses fell 40.8%.
  • The value of total building fell 18.6%.
  • The value of non-residential building fell 25.6%
1678523039425.png

Every single time there has been a housing boom it has been preceeded by a drop in the number of housing permits allocated to new home buyers. This is one of the key metrics that anyone who invests in the stock market professionally looks at (and one of the data points the RBA looks at to set interest rates). The idea that Australia is in a housing bubble is predicated by the fact that it spent a lot of time in the green 'overheated' area since the GFC due to policies like the first homebuyers grant etc. and the closest it has got to a recession was in 2019.

So my advice if you're looking to buy a home is keep an eye on the new housing permits data. When it starts to turn around, that's your sweet spot.
 

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Mordecai said:
You can be sure that when these rate rises pause/cease there will be a flood of interest in the market. Picking the bottom for your ppor is a fools game.

That is unless Oz does a Japan and all faith is lost in the property market. I feel like the govt would step in before that happens.
Click to expand...

Agreed, home ownership is so ingrained in the culture regardless of the carrying costs, returns, and financial credibility. The government's favorable treatment of homes as an asset is an issue all on its own.

But is the single asset (all money shoved into your home) investment strategy the right one for most people? Particularly with all the issues that are now inflated
  • Historically high prices vs family income
  • Illiquid
  • Reverse mortage traps
  • Rental return - carrying costs vs other investments

The flip side to all the above is Australia is one of the most enviable places to reside on earth due to employment and lifestyle advantages, so property ownership is a no-brainer long-term.
 
sabre_ac said:
Agreed, home ownership is so ingrained in the culture regardless of the carrying costs, returns, and financial credibility. The government's favorable treatment of homes as an asset is an issue all on its own.

But is the single asset (all money shoved into your home) investment strategy the right one for most people? Particularly with all the issues that are now inflated
  • Historically high prices vs family income
  • Illiquid
  • Reverse mortage traps
  • Rental return - carrying costs vs other investments

The flip side to all the above is Australia is one of the most enviable places to reside on earth due to employment and lifestyle advantages, so property ownership is a no-brainer long-term.
Click to expand...
If Australia had a better culture in relation to renting (longer rental periods with more rights to retain the tenancy at renewal) then owning property would not be a wise investment. Often people stack the returns of domestic property against the sharemarket and say it performs better. But they don't include all the costs to maintain property that are already accounted for in the sharemarket.

The issue is the lack of security in not having somewhere to reside at the whim of the landowner.
 
Nothing said:
If Australia had a better culture in relation to renting (longer rental periods with more rights to retain the tenancy at renewal) then owning property would not be a wise investment. Often people stack the returns of domestic property against the sharemarket and say it performs better. But they don't include all the costs to maintain property that are already accounted for in the sharemarket.

The issue is the lack of security in not having somewhere to reside at the whim of the landowner.
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Agreed. People don't also include the cost of accessing the equity (reverse mortgages etc) when they stack up the share market with their home from a return perspective.

The assumption that people will downgrade the level of their housing significantly in retirement is false as well, people may go smaller but they often go to more luxurious or better locations.
 
sabre_ac said:
Agreed, home ownership is so ingrained in the culture regardless of the carrying costs, returns, and financial credibility. The government's favorable treatment of homes as an asset is an issue all on its own.

But is the single asset (all money shoved into your home) investment strategy the right one for most people? Particularly with all the issues that are now inflated
  • Historically high prices vs family income
  • Illiquid
  • Reverse mortage traps
  • Rental return - carrying costs vs other investments

The flip side to all the above is Australia is one of the most enviable places to reside on earth due to employment and lifestyle advantages, so property ownership is a no-brainer long-term.
Click to expand...

Home ownership is a forced saving like employer funded Super. Whats left is more often seen as your standard of living.
 
Nothing said:
If Australia had a better culture in relation to renting (longer rental periods with more rights to retain the tenancy at renewal) then owning property would not be a wise investment. Often people stack the returns of domestic property against the sharemarket and say it performs better. But they don't include all the costs to maintain property that are already accounted for in the sharemarket.

The issue is the lack of security in not having somewhere to reside at the whim of the landowner.
Click to expand...

Build-to-rent is booming:
'The Australian arm of US accommodation giant Sentinel Real Estate is set to develop Adelaide’s first institutional-grade build-to-rent project, after striking a deal with Renewal SA for a site in the city’s inner north.Its local arm, Sentinel Fund Manager Australia, will develop and run about 250 premium and sustainable rental apartments on a 4000 square metre site at Lots 49 and 50 on Third Street in Bowden in Adelaide’s inner-north.'
www.afr.com

US housing giant Sentinel takes build-to-rent to Adelaide

The $100 million residential project in Adelaide is the latest addition to Sentinel’s growing Australian holdings.
www.afr.com www.afr.com


'The dramatic upswing in the build-to-rent industry is bringing in fresh foreign capital and commitments to new projects from local billionaires. They are being drawn by the promise of rising returns amid the country’s rental crisis and shortage of new housing, which is forecast to persist throughout the decade.

In one of the largest plays, Japan’s Mitsubishi Estates Corporation is poised to take a stake in Mirvac’s build-to-rent operation and will back the 5000 unit portfolio being assembled around the country.

The move shows the growth potential of the emerging asset class at a time when traditional apartment construction is lagging and other big investors are making more moves in the sector.'
 
Lyyynnnchy said:
IMO it’s still the best way to make a significant amount of money from a young age
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I certainly respect that opinion and believe it is true for a lot of people, though I think there are some caveats that I'd certainly tell my children.

1. A mortgage will limit your ability to chase a career or a life in other countries and cities. Important for some, not so for others.
2. If you come at the end of your working life and all you have is your home, I believe you would have been better off renting and pumping money into super.
3. The era of stimulus that we've been living through since 2008 is coming to an end, recent history should not be relied upon as an insight to near future..

If I had a 21 yo child with a brand new degree/apprenticeship under their belt, I'd caution them against getting a mortgage, there is too much life and lessons to learn.

If I had a 31 yo child with a degree/apprenticeship, work experience, travel, and some relationship experience under their belt, I'd be, common now, lay down some foundations.
 
Kwality said:
Not meaning to 'nit pick' but home buyers are acquiring an asset. Most often the alternative is to spend that money on rent.
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To also be clear though, it's very rare that the entire cost of home ownership in the first few years would go to rent, the rent in most situations is less with the excess able to be invested.

That's not factoring in that people often buy too much house, while renters usually rent the appropriate amount of house.
 

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sabre_ac said:
To also be clear though, it's very rare that the entire cost of home ownership in the first few years would go to rent, the rent in most situations is less with the excess able to be invested.

That's not factoring in that people often buy too much house, while renters usually rent the appropriate amount of house.
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Well put. There is not only one formula to getting onto the first step to home ownership.
 
sabre_ac said:
I certainly respect that opinion and believe it is true for a lot of people, though I think there are some caveats that I'd certainly tell my children.

1. A mortgage will limit your ability to chase a career or a life in other countries and cities. Important for some, not so for others.
2. If you come at the end of your working life and all you have is your home, I believe you would have been better off renting and pumping money into super.
3. The era of stimulus that we've been living through since 2008 is coming to an end, recent history should not be relied upon as an insight to near future..

If I had a 21 yo child with a brand new degree/apprenticeship under their belt, I'd caution them against getting a mortgage, there is too much life and lessons to learn.

If I had a 31 yo child with a degree/apprenticeship, work experience, travel, and some relationship experience under their belt, I'd be, common now, lay down some foundations.
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I think thats generalising a fair bit

I’ve had mortgages since 20. Born in Perth and have lived in Melbourne, London and now have settled in Sydney while also having done a fair bit of other travel. Mid 30s, property here and in the US and a good career where I love going to work every day & get paid very well for it

I think telling your children the points you mention above will mean that they think it can’t be done any differently and they’ll potentially miss opportunity, though they may not listen. My parents told me similar to what you mention above, both conservative accountants, and I am glad I didn’t listen

You’re right that stimulus probably wont be the same for a long time but that will be replaced with significant population growth, among other things, bringing about opportunities for those that can capitalise on it
 
Lyyynnnchy said:
I think thats generalising a fair bit

I’ve had mortgages since 20. Born in Perth and have lived in Melbourne, London and now have settled in Sydney while also having done a fair bit of other travel. Mid 30s, property here and in the US and a good career where I love going to work every day & get paid very well for it

I think telling your children the points you mention above will mean that they think it can’t be done any differently and they’ll potentially miss opportunity, though they may not listen. My parents told me similar to what you mention above, both conservative accountants, and I am glad I didn’t listen

You’re right that stimulus probably wont be the same for a long time but that will be replaced with significant population growth, among other things, bringing about opportunities for those that can capitalise on it
Click to expand...

I'm definitely generalizing, it is a complicated topic with multiple outcomes driven by many variables.

I'm sure the one thing we can both agree upon and it's backed by statistics is that property ownership is a cornerstone of wealth or a comfortable life. I'm just suggesting that two opinions

1. Having all your net worth in one illiquid asset is not a good idea, if you can't have super and a house, go with just super.
2. A mortgage is a long-term commitment that will likely close a number of doors, be careful when you make that commitment.

Fair play to what you've accomplished, I'd suggest that your story is more the exception than the rule, I don't think the majority of young Aussies who above abroad for an adventure have a mortgage. Like you I moved around a lot, I'm happy I didn't have a mortgage to worry about early though satisfied with having one now that I'm older.

I'd also suggest that the conservative advice is to buy a house as soon as possible, though we can agree to disagree on that one.
 
Was just reading about how common low interest rate fixed 30 year loans are in the USA. Crazy. I'd own 10 properties if I had 2% locked in for 30 years lol
 
HirdyLannister said:
I can't foresee a large drop with prices, with builders going under, the increase price to build and immigration expected to be a million over the next couple of years.
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Recipe for increased rent - lots of demand, limited supply.
Not to mention the poor bastards with half finished homes trying to get someone to make them habitable.
 
Engimal v3 said:
Was just reading about how common low interest rate fixed 30 year loans are in the USA. Crazy. I'd own 10 properties if I had 2% locked in for 30 years lol
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They don't have the capital gains-free tax-haven rule that Australia has and you can also claim the interest on your mortgage off your home loan.
 
Engimal v3 said:
Was just reading about how common low interest rate fixed 30 year loans are in the USA. Crazy. I'd own 10 properties if I had 2% locked in for 30 years lol
Click to expand...
is this you ?
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Curious to know when they're planning on changing the serviceability buffer on the stress test for new mortgages as that's potentially going to add several hundreds of thousands to the purchasing power of most borrowers. Doesn't seem to be any chatter about it, APRA also said a month ago that they weren't changing it but surely when rates plateau they'll revisit that.
 
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