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Rocket Salad

Housing Bubble thread.

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Rocket Salad    1,055

Will it burst?

The dooms dayers have been saying prices will tumble for the last 10 years now.

Instinct tells me to sell up and rent.

Every day we get another expert in the news telling us doom and gloom. Here is today's by some Muppet from the OECD.

http://www.news.com.au/finance/economy/the-oecd-has-warned-australias-housing-market-could-collapse/story-fnu2pwk8-1227382767545

 

Do you think it will happen?

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Mike Honcho    209

I just don't know how people afford Aussie houses. I sold my place in Brisbane recently and if I went back to my old job in OZ I would not be able to afford to buy it back.

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Ex-Hasbeen    3,740

They're talking about another rate drop later this year. With that in the air, I don't think it will burst just yet.

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ratdog    577

Its going to burst. I just hope when it does everyone who has entered it in the last 3 years has paid off a heap from the mortgage.

 

I sold my house 2.5 years ago in Sydney for close to 600k, now its selling for 800k. I am not sure who can afford at these prices. This is not sustainable.

 

Check out this place.

 

http://www.realestate.com.au/property-house-nsw-quakers+hill-119943685

 

This burst is going to hurt a lot of people.

 

When? who knows.

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Rog    1,546

Only if interest rates go up.

 

Our area has gone up about 30% in the last 12 months. We bought our place 18 months ago and there's no way I could afford it now. Place down the road bought for $720 sold 12 months later at Auction for $910 with no work done.

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Cottoneyes    737

I'm seeing some softening of prices at present in homes at the $1 mill mark, few areas we are keen to move to as next house with mind to high school of the kids, many that usually had $1 mill + for the size houses we need to go into are going down into the $800s for asking prices now

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Rocket Salad    1,055

Its not just interest rates. Employment would be huge driver. No job = no income to service the $700/week mortgage.

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Ex-Hasbeen    3,740

This happened in areas close to Brisbane about 3 or 4 years ago. We weren't looking at that price-range, but the real estate agents kept showing us stuff just under the $1M that had previously been $1.3M or more.

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XCom    34

Currently, 25% of Sydney's new housing is purchased by Chinese foreign investment. I don't have the stats on what the total foreign purchase of Sydney housing is, but clearly, it's a significant %age. This provides a degree of separation between purchases and local financial conditions.

 

However, the thing that is really driving Sydney prices is the shortage of land releases and development approvals for new housing, which, combined with an increasing population, is placing a premium on the existing stock.

 

Unless the govt dramatically changes their policies for land release and dev-approvals, I can't see how or why this will "burst".

 

A recession might stall it, and curb some of the more excessive over-bidding, but the basic shortage of existing stock and the shortage of land releases & development approvals for new housing, will continue to apply pressure to prices.

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Roman    100

the wife and I were looking for an apartment for our first home. We drove past a townhouse instead that was open for inspection and had a sticky beak at it. It was basically our dream home. 2 level townhouse with 3 bedrooms, small backyard and 1 car garage out back. That was a few years ago, and it went for 750k. We really wanted it but didn't want to overextend ourselves, and understandably we were cautious as it was our first home purchase.. so we opted to give it a miss and go with something cheaper.

 

It sold last year again for over 1 million. We really should have jumped all over it, but hindsight is 20/20 as they say....

 

So now we're stuck in a 1 bedroom apartment that we have outgrown, where we can't have pets, but are effectively priced out of the same area now without taking on huge mortgage which we're not prepared to do. At least we have a foot in the door of the sydney market.....

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TryTriB4Forty    640

I dunno whats gonna happen - whether the bubble will burst, dflate slowly, or whether house prices will simply remain stagnant for a decade whilst everythint else catches up.

 

But I do know that house prices (in Sydney in particular, which is the area I'm most familiar with) are not sustainable.

 

I look at the building I work in (around 300 people) in northern Sydney. There are maybe halfa dozen staff that earn in the $200k to $350k range - so pretty decent money. Apart from these half a dozen people no one in the building could afford to buy a house within 20kms of where we work. Even those of us on the decent money would stuggle to buy anythign more than a one bedroom apartment unless we had significant savings or equity in another property.

 

Basically, in Sydney, 95% of hte population aged under 30 will never be able to buy a house, unless they have the backing of wealthy parents or happen to win the lottery.

 

I don't see how that is sustainable longer term....

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TryTriB4Forty    640

the wife and I were looking for an apartment for our first home. We drove past a townhouse instead that was open for inspection and had a sticky beak at it. It was basically our dream home. 2 level townhouse with 3 bedrooms, small backyard and 1 car garage out back. That was a few years ago, and it went for 750k. We really wanted it but didn't want to overextend ourselves, and understandably we were cautious as it was our first home purchase.. so we opted to give it a miss and go with something cheaper.

 

It sold last year again for over 1 million. We really should have jumped all over it, but hindsight is 20/20 as they say....

 

So now we're stuck in a 1 bedroom apartment that we have outgrown, where we can't have pets, but are effectively priced out of the same area now without taking on huge mortgage which we're not prepared to do. At least we have a foot in the door of the sydney market.....

 

I don't think it matters whether your first place was a one bedder of a ten bedder, many are in the same boat.

 

About 5 years ago we bought the 3 bed, 2 bath, single garage place with a nice courtyard and deck with valley views. 100m away a very similar property is now listed for DOUBLE what we paid for ours 5 years ago and other (almost identical properties) have been selling for more than that ....

 

Its insane!

 

I can't see how it can continue .... I actually don't see how it got this far without the arse falling out of the market.

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XCom    34
Basically, in Sydney, 95% of hte population aged under 30 will never be able to buy a house, unless they have the backing of wealthy parents or happen to win the lottery.

 

Realistically, the only thing that is going to stop it is mass approvals of high-rise development, which can be funded by foreign (Chinese) investors looking for somewhere 'safe' to put their money.

 

Until there is sufficient stock to meet the demand, prices will continue to climb.

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Ex-Hasbeen    3,740

We bought acreage on the outskirts of Brisbane 3 years ago. The market for expensive properties was not good at the time, and we got it for $60k less than the list price, as it had been sitting for over a year and they wanted more sold to fund stage 2. They are now at stage 4, which was 90% sold before the asphalt was laid, and prices are up to $200k higher than we paid, for blocks not as good. Glad we got in then. :)

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Chookman    202

I'm glad I don't have a mortgage, and I really feel for the first home buyers (especially the young) having to buy in this market! The increase over 20 years has been staggering! My wife and I purchased our first home at Kings Park in Sydney's west for 129k and paid it off in 3 1/2 years! Our 2nd home was a villa backing onto bush at Picnic Point which we purchased for 265k. It is supposedly worth more than 750k now. Our current home is on 1600 metres of land and we purchased it for around 850K. Smaller homes without the same level of reno's or outlook are selling for well over 1 million!

 

A couple of interest rate rises and I get the feeling there will be a lot of foreclosures!

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Mr Flower    208

I think each market is different. Then there are markets within a market. I don't think prices in Sydney will tumble. They may slow down, but history shows that the Sydney market is always pretty strong. This is because of migration and as Xcom mentions, a lack of supply. There may be some areas in Sydney that will be softer than others and maybe the top end will suffer for a year or two. However, a good position in a good suburb will keep going strong.

 

Other markets may be different. I know that up north at the Gold Coast there have been some spikes and then drastic falls. I suppose it is a supply and demand issue. I would also think that Canberra may be the same. Lay off 12,000 public servants and then all of the sudden the prices for housing gets a lot softer.

 

What is happening in Perth these day with the mining downturn?

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Cottoneyes    737

Question needs to be asked will the baby boomers retiring to tree / sea change ease some of the pressure over the coming decades. Personally we're already looking for our sea change block for retirement now, as I think in 20 - 30 years time they will be too expensive.

 

For those thinking the current prices are unsustainable, wonder if the same conversation was occurring in New York or London 30 - 40 years ago?

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XCom    34

Question needs to be asked will the baby boomers retiring to tree / sea change ease some of the pressure over the coming decades.

 

That would need to be a lot of sea-change seekers.

 

Last year, Sydney's population grew by about 90,000

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TryTriB4Forty    640

For those thinking the current prices are unsustainable, wonder if the same conversation was occurring in New York or London 30 - 40 years ago?

 

I think the difference is now the price in some areas compared to average wages.

 

Average Australian wage is about $79,000 before tax.

 

Median Hosue price in Sydney is approachign a million dollars. So we are talking 10 or 12 times the average wage .....

 

Given that banks used to lend up to 4 times your salary.....

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TryTriB4Forty    640

 

That would need to be a lot of sea-change seekers.

 

Last year, Sydney's population grew by about 90,000

 

Between now and 2031 Sydneys population is expected to grow by 1.6 million people....

 

Just happened to be with some government people yesterday going through some of this stuff....

 

other interesting facts like more houses needed due to smaller households (people not marrying until later and living alone, divorced/separated couples, older people living longer etc....

 

Sydney would have to build a 5 storey apartment bulding every day for the next 15 years just to keep up with demand :shocking:

Edited by TryTriB4Forty

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Alex Simmons    494

Housing demand is driven by those who actually live here and exists no matter who owns/purchases the property. Foreign ownership only adds to housing demand if the purchased properties are left unoccupied.

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Cottoneyes    737

 

That would need to be a lot of sea-change seekers.

 

Last year, Sydney's population grew by about 90,000

 

Take into account that the average baby boomer could be in a 4 bedder on the half acre block or just under. They sell, developer buys and puts up 3 or 4 townhouses.

 

Other factor as well is remote working increasing means alot of people are going to be able to decentralise from the major capitals.

 

Overall though, I can't see an overnight bubble burst in the housing alone. It would be in a major financial crisis as a segment of the overall

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XCom    34

Housing demand is driven by those who actually live here and exists no matter who owns/purchases the property. Foreign ownership only adds to housing demand if the purchased properties are left unoccupied.

 

Yes, despite the Xenophbic hysteria about foreign ownership, this is actually not a bad thing, as it is essentially restricted to new housing, which means that we not only get the economic injection into the building industry, but then alos get the needed housing capacity. Personally, I'd be happy to see more foreign investment into high-rise housing - assuming that it could get through all of the current NIMBY development restrictions.

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Will    142

Even if it pops, it will have to go down about 50%, otherwise it goes down 10-20%, people will just think - well i lost 1 or 2 years growth - that isn't too bad. Move along.

 

Once unemployment goes up, i see that as being the prick. Once people start feeling insecure in their jobs, they are going to start thinking twice about taking out a mortgage, then the market will slow.

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