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Housing Bubble thread.

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

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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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we sold up a couple of years ago. We looked at some places when we were in Sydney in 2013, places I wouldn't have even considered Sydney 15 yrs ago were now in the 'possible' bucket. (Asquith, Berowra etc). The more I look at it though, the more I fancy Melbourne on a housing vfm front.

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Our neighbour recently added $100K to the value of our property.....well, for me anyway.

 

He said "Hey, your wife says you're into fly-fishing. I put some bass in my dam about 10yrs ago and don't know what happened to them. Maybe they died in the cold, maybe they got washed out in a flood, but I could never catch one. I can catch the yellow-belly, but never a bass. Why don't you have a go".

 

Happy Dayz. A wee private fly-fishery 200m away, perfect when I can't be bothered driving an hour to the rivers :)

 

I confirmed the bass are alive & well........

 

 

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Kiddies, if you want to take a look at where and how fast Sydney is likely to grow (you have to believe the government's policy belief system which I'm never entirely convinced of) take a look here:

 

http://visual.bts.nsw.gov.au/tz

 

I work with this stuff all the time. There's a treasure trove of information on that site if you're interested in transport stuff.

Edited by tortoise

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Drop the tz/. Click on the Travel Zone Explorer.

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Kiddies, if you want to take a look at where and how fast Sydney is likely to grow (you have to believe the government's policy belief system which I'm never entirely convinced of) take a look here:

 

http://visual.bts.nsw.gov.au/tz/

 

I work with this stuff all the time. There's a treasure trove of information on that site if you're interested in transport stuff.

 

Gillian, do you reckon they get these projections from the NSW Dept of Planning? Same source said our town would grow 24% by 2030, had me scratching my head. I asked them how they arrived at such a growth rate and got a fairly unconvincing answer about comparative birth and death rates and lots of young people here who would have kids. There are lots of young people here because of the large regional university. But most go elsewhere to have kids.

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What are the growth industries that will support the population growth?

 

Are wages going to rise at the same rate of housing?

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Comparing the boom here with what happened in the UK (boom-to-bust), is that it seems lending is still under control in Australia. In the UK mortgages were being offered well above people's means, so people were buying dream house++. Interest rates changed, loads of defaulters, housing crash.

 

I agree with some of the above points, the foreign money coming-in will probably keep driving prices. As an n=1, the neighbours had an open house today, I was in my front garden doing some paving work, and every single person who visited was of Chinese origin (and driving damned nice cars)! Wifey was talking to the neighbour as the viewing was going on - expected price is above what is considered the market rate for the area - the upward drive continues it seems.

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Again, the demand comes from those actually occupying homes. Who pays for the home isn't the driver. I seriously doubt investors (foreign or domestic) are buying stacks of homes to be left unoccupied.

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Sorry Alex, don't follow your thinking, could you explain?

 

This is my thinking: if the owner sets a reserve, and it goes to auction, surely it's the buyers who then drive the price-up above that reserve, which influences the prices in the area as a whole. What am I missing?

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Newcastle home sellers are living in dream land. Visited a absolute shit hole of a place (trees growing in the pool) psycho wallpapers in the room etc etc g and they want 410 for it!! They need a bull dozer in that place.

 

Visited couple more places - both of them haven't been sold for a while and prices reduced on them.

 

Don't know if the bubble will burst anytime soon but the sellers expectations on the price is astronomical!

 

I'm prepared to wait and sus it out and then bargain the crap out of it

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The forecasts match ABS nationally and Dept Planning at SLA level. The fine area are mix of land release timing but controlled to the higher totals. Yeah, births deaths ageing fertility rates and internal migration all come into it. My experience is that it's often an over estimate in Sydney. And a serious over estimate in rural areas.

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Off topic.....more a side topic...

Remember the Japanese investments in the 80s and 90s? It all went pear shaped. Resorts and shopping centers were sold for a fraction.

Will the same happen with all the Chinese investment?

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Sorry Alex, don't follow your thinking, could you explain?

 

This is my thinking: if the owner sets a reserve, and it goes to auction, surely it's the buyers who then drive the price-up above that reserve, which influences the prices in the area as a whole. What am I missing?

 

Prices are mostly a function of supply and demand of housing and not so much on the source of finance.

The demand for homes comes from people needing/wanting a dwelling to live in. If there are not enough tenants in the market looking for dwellings to rent, then investors don't buy, or cap their price limit accordingly as the rental yields are not there.

 

Bubbles come about when too much housing is built compared with the demand from people to live in them. UK, USA, Spain all had mad building activity which still sees today lots of unoccupied dwellings. same in some Chinese cities.

 

Where in Australia's major cities are there large sections of unoccupied buildings?

 

Yes there are normal price movements up and down over time at the moment we are above the long term (100+ year) trend. The big price crashes tend to be at the top end of the market when the top end of town get hit big with financial market fluctuations.

  • Like 1

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Sydney prices are silly because demand exceeds supply. Surprise, surprise, not everyone is rushing to live in a 1-BR shoebox, which is what government and developers think we want out in the burbs.

 

We live at Beecroft and the blocks nearest the station have been zoned for apartments, which is fair enough as close to transport is where this sort of densification should be happening. I've looked at the plans and there are two apartments in each of the developments that would realistically allow us to move from our 4BR house and still not fall over each other. The rest are just tiny.

 

Around Carlingford, with no good public transport, there will be an extra 10,000 people within the next 18 months, all in small multi-storey flats.

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More doom and gloom.

 

http://www.news.com.au/finance/superannuation/gfc-was-merely-the-beginning-of-the-end-what-do-you-do-when-the-iceberg-hits/story-e6frfmdi-1227386809222

 

"A major crash would obviously wreak havoc not only on asset values and the net worth of everyday Australians but cause major stress to the financial system itself. But if prices keep skyrocketing at five or six times the rate wages are growing, thats going to have a huge impact on the economy as well.

The more money that is tied up in property either through rental, home deposits or mortgage repayments the less will flow into the real economy. And the RBA, while well-intentioned, is only causing more problems by slashing interest rates.

Its the old saying, when all youve got is a hammer everything looks like a nail,....."

Edited by Rocket Salad

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More doom and gloom.

 

And the RBA, while well-intentioned, is only causing more problems by slashing interest rates.

Its the old saying, when all youve got is a hammer everything looks like a nail,....."

One issue being that self funded retirees are getting stuff all return on their money through term deposits etc and are turning to real estate for better gains, further increasing demand.

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We need to close this thread now , as our fine treasurer mr hockey said today thAt housing prices in Sydney and melb arnt unrealistic to the "normal" person

 

I'm not really sure where this blokes lives but it's not in the real world

 

Not sure how anyone is gunna afford to borrow up to $1mil just for there first home espually when they are paying $600 plus a week rent

 

Glad I own a house , I couldn't afford to buy one now

Cheers

IVP

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What does a small house on the outskirts of Sydney cost these days? And by small, I mean 110sqm. You know, without the pool, aircon & European appliances, like our parents built on the outskirts of the city. It's just the outskirts are a lot further out now.

 

Would honestly like to know, but then does anybody build a small affordable home any more?

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What does a small house on the outskirts of Sydney cost these days? And by small, I mean 110sqm. You know, without the pool, aircon & European appliances, like our parents built on the outskirts of the city. It's just the outskirts are a lot further out now.

 

Would honestly like to know, but then does anybody build a small affordable home any more?

I have a small house outskirts canberra 500 k

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What does a small house on the outskirts of Sydney cost these days? And by small, I mean 110sqm.

3 bed, 1 bath, 1 car "villa" in Mt Druitt (You know, Struggle Street) for $410 k.

$750 k + for a 2 bed fibro house in Revesby

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3 bed, 1 bath, 1 car "villa" in Mt Druitt (You know, Struggle Street) for $410 k.

$750 k + for a 2 bed fibro house in Revesby

Does anyone work in mt druiit ???

Serious Q?

Cheers

Ivp

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