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Housing Bubble thread.

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I have a small house outskirts canberra 500 k

That's nearly the outskirts of Sydney these days

Cheers

IVP

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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

The ones in Revesby are all being bought knocked down and made into duplexes. It's where I work so watch it happening almost daily.

 

Block of land at the new Cronulla estate is 2.5 mill if you want beach views.

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I have just built a new house and moved in earlier this year. Mine is a retirement decision for 4 years time. I am 60 kms from Sydney in a great estate with the minimum size block being 700 sqm (they are up to 1400 sqm). We have access to pools, gym, tennis courts, trails, exercise equipment and security around the area.

 

Despite all this, I cannot fathom the price of some of the houses our way. A house 4 doors down sold for $1.1M and on the other side of the suburb, 1 sold for $1.4M. how the hell do you afford this or keep your investment value ?? They don't rent much in this suburb as you pay a levy for all the facilities.

 

We got in a bout 18 months ago (land) then locked in a price for the house. Not huge but well enough for us to live in. We owned our old house so haven't got much owing with the changeover.

 

I feel sorry for my kids, although my son bought into a duplex 5 years ago. At least he is in there.

 

FM

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Soon this thread will slip down the pages. I have a feeling it will bumped back up within 2 years with a lot of...."we seen it coming but did nothing"

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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.

 

Funny, I am helping my Mum with buying a property for this exact reason.

Edited by Parkside

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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?

 

 

 

We are as south as you get without being in Wollongong. Median 3 Br House price in Engadine is $800,000 Prices rising every quarter. demand driven by people from out of the area. they have a choice of buying a 2 br unit in eastern suburbs or a 3 bedroom house near national park and train to city. Lots of boomers keen to cash in and downsize.

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I suppose it's the price of land (supply/demand) that has led to the increase in house sizes over the years. People don't want to undercapitalise the house. In the 50's/60's, you built a 120sqm, 3 bedroom home with 1 bathroom and 1 car space for a family of 6. These days you build 350sqm, 5 bedrooms, 3 bathrooms & 3 car spaces, for a family of 3. You just never know who's going to buy your house after you get sick of cleaning it all.

 

At least if you were overseas, you could get someone in to clean it for you. :)

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So, what did you put on your oversized city fringe block, EX? :)

I'm as bad as the rest, but it is only 4 bed, 2 bath & 2 car. :) And it's the 4th house we've had, not a first.

 

Though it is smaller than a lot of the houses there. Some of them are over 500sqm.

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I'm less concerned about market price fluctuations than I am about the stupidly high transactional costs involved in selling/buying. Those are some bad taxes and act as quite a disincentive to sell.

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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 certainly don't think that household debt in Australia is anywhere near under control. A lot of economists have commented that it is the level of personal debt in Australia that is a real threat to the economy in the medium term.

 

The government (particularly in the lead up to the election) where harping on about 'Australias debt' and the 'national credit card' - but realisitically government debt is well udner control - its private/household debt that is the potential problem..

 

Houshold debt is somehting like 140% of GDP .... I think most advanced countries are like 75%.... Australians have accumulated LOTS AND LOTS of personal debt, and a big part of that would be the loans requierd to get into the housing market in the capital cities.

 

This figure is a couple of years old, but you ge the picture:

 

 

Keen-Aust-debt-to-GDP1.png

 

 

Here is our personal debt against the rest of the advanced world:

 

Barclays2.JPG

 

Some reading:

 

 

http://www.smh.com.au/business/the-economy/australian-households-awash-with-debt-barclays-20150316-1lzyz4.html

 

 

https://au.finance.yahoo.com/news/australian-households-have-largest-debts-in-the-world-053528607.html

 

 

 

I know this is not exactly evidence, but anecdontally a lot of my friends will be in super hot water if there are any shocks that impact on their ability to pay their mortgage...

 

I'm in my late 30's and lots of friends have got into the housing market in the last couple of years. many of them have done so with teh assistance of big mortgages (just to get 'onto the ladder'). They are essentially maxed out. They were able to do this on the back of big pay packets in mining and infrastrcuture etc.

 

Problem is, they are currently in pretty much as good a situation as it gets - super low interest rates, strong economy and decent pay packets over the last few years.

 

Problem will come if:

 

  • Loss of income ... already seeing lots of job losses in resources so this is a possibility for some of them.
  • Interest rate rise - well, in the short term its prob not going anywhere but its not like it can get much lower really ... so eventually it will have to go up.
  • Some other economic shock? who knows.

 

It won't take much for lots of people to be in deep trouble (in my view) especially if they are mortgaged to the hilt just to get into the market....

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It is hard to fathom the prices these days.we had a house at the top of our street last week 4 bed reno fibro shitter done up go for just over $1.6m

I really worry about my kids getting a start when their older so hence ive just built a big house ,forward thinking they are going to be here for a while .

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So an hour after I posted my thoughts on Australias level of household debt this was published on SMH:

 

"RBA way of pushing up house prices, household debt"

 

http://www.smh.com.au/business/the-economy/rba-wary-of-pushing-up-property-prices-household-debt-20150610-ghkjrz.html

 

Interesting that the Abbott government have been prmoting household spending as a way of driving the economy (remember Hockeys comments about "not letting santa down" and "go out and spend" and "have a go" ...?)

 

However, the RBA are saying its the household budget that can least afford additional spending:

 

 

"....of all the three broad sectors – households, government and corporations – it is households that probably have the least scope to expand their balance sheets to drive spending"

 

 

Interesting now that the head of the Reserve Bank appears to be not just hinting, but coming out and saying that perhaps the government should do exactly what Rudd did and stimulate the economy (i assume this means using debt to pay for it?)

 

Comments such as:

 

"RBA governor Glenn Stevens told an Economic Society of Australia lunch that more infrastructure spending might go some way to addressing Australia's sub-trend growth rates."

 

and

 

"Mr Stevens suggested the Federal government could step in with a more ambitious long-term national infrastructure program, financed and managed jointly by the public and private sectors. This would address slack business demand outside mining while enhancing productivity and lifting business and consumer confidence, he said."

 

 

Although I'm pretty sure BOTP doesn't have anything to worry about - its not as though the Abbott government has listened to any type of expert advice or knowledge for any other decision, so I'm sure they are simply going to ignore this as well ...

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We live in a different world to you poor ole capital city folk.

 

$560K got a brand new MBA award winner with 4/2/2 on 1000m2 18mths ago (no debt needed). We rattle around in it, except on Uni hols when the girls come home, but 4/2/2 is good here for future saleability. I reckon it's lost value since we bought and will for a while (8 new housing estates being developed in a city of 25,000). Just aiming to get our money back in 10yrs, that'll do. They reckon the long-term growth on RE here is about 5.2%pa, so a bonus if we get that, in the meantime a nice relaxing and warm house to live in - the new building standards esp re insulation are amazing (need it here with -7 or worse mornings).

 

Agree with Alex, the transaction costs on property are ridiculous. As far as property for investment, better make sure you get good capital gain (which prob means capital cities are the only place worth looking) and even then, it is hard to beat a good industry super fund for set and forget ease and performance.

 

Don't get me started on real estate agents. Here, the collusion, game playing and BSing are a real eye opener - the funny thing being most of them aren't smart enough to remember the story they told you 3 weeks ago. The good news is they no longer have the monopoly on sale price info, with several websites now listing recent sales prices. We really put this to good use this time around.

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Doing some price comparisons I'm thinking about moving Transitions HQ to Noosa and escaping the cold.

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Soon this thread will slip down the pages. I have a feeling it will bumped back up within 2 years with a lot of...."we seen it coming but did nothing"

will there be a massive adjustment of housing supply

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Doing some price comparisons I'm thinking about moving Transitions HQ to Noosa and escaping the cold.

 

 

How are the lottery laws in Qld?

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Doing some price comparisons I'm thinking about moving Transitions HQ to Noosa and escaping the cold.

Me too

Noosaville though

Just need to find another $1mil

Cheers

IVP

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Block of land at the new Cronulla estate is 2.5 mill if you want beach views.

Best I get a better job

Lol

Cheers

Ivp

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One day I might move north, but still in NSW. Where do people like?

 

I like good hassle free cycling, variety of rides, good Internet, good local services. Don't like typical outer suburbia landscape/McMansion style homes.

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One day I might move north, but still in NSW. Where do people like?

 

I like good hassle free cycling, variety of rides, good Internet, good local services. Don't like typical outer suburbia landscape/McMansion style homes.

 

I actually reckon Port Macquarie would be a good place to live.

 

Big enough to have all the servies you want (big hospital, schools, jobs, etc).

 

Diverse enough to have a mix of housing types (units, acreage, McMansions...)

 

Busy enough to have some decent restaurants/cafes

 

Good outdoor lifestyle - decent riding and some nice runs/coastal walks - probably helped by having more cyclist/fit people getting around so people are used to seeing thema and infrastructure is improving.

 

That would be my pick - although I reckon in 20 years from now it will be so over-run with retirees you might go mad!

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What is the swimming like at Port Macquarie? What I like about Forster and Byron Bay is that you can swim at the main beach. It is easy to do a couple of kms at most times of the year.

 

Like Alex mentions, I am always thinking of places to go to live once we give up the life of a busy city IT worker.I really like Huskisson, but I suspect the water temps are a bit cool at this time of year.

Edited by Mr Flower

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Long but interesting read...

 

http://www.macrobusiness.com.au/2015/06/the-housing-crash-we-had-to-have-a-gen-y-perspective-on-the-bubble/?utm_medium=twitter

 

Best part is the 'Brickie' poem in the comments.

Thanks for that. It was an interesting take on it. How old is the author? Mid 20s?

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What I saw today confirms that the Sydney market is seriously over heated! Friends of ours sold a 4br, weatherboard home (fully renovated)on an average block with no outlook at Sutherland for 1.3 million. 6 months ago they would have been lucky to get over 900k.

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If/when... the bubble bursts, how will it happen and what will we see?

Auction rates fall first? Bids not getting near the reserve?

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http://www.news.com.au/finance/real-estate/economists-claim-australia-in-midst-of-largest-housing-bubble-on-record/story-fncq3era-1227410053643

 

AUSTRALIA is in the midst of the largest housing bubble on record and when it bursts it will be a bloodbath.

 

They predict the epicentre of the collapse will take place in Melbourne where, they say, rents have not increased substantially for the past five years.

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So is there also a similar risk to US regarding the housing loans - Does the aussie banks also have gone into the risky sub prime mortgages like the american banks ?

 

with interest rates so low - I doubt the bubble will burst with a bang. RBA is still trying to devalue the currency with lower interest rates - until that starts to tighten - I doubt we will see any bubble bursting.

 

Theses bubbles are also very localised - how much impact can that have for the state's economy let alone the countries economy ?

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http://www.news.com.au/finance/real-estate/economists-claim-australia-in-midst-of-largest-housing-bubble-on-record/story-fncq3era-1227410053643

 

AUSTRALIA is in the midst of the largest housing bubble on record and when it bursts it will be a bloodbath.

 

They predict the epicentre of the collapse will take place in Melbourne where, they say, rents have not increased substantially for the past five years.

I read this article yesterday - it's a worry! Edited by Chookman

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If/when... the bubble bursts, how will it happen and what will we see?

Auction rates fall first? Bids not getting near the reserve?

abolish negative gearing... that'll do the trick! There are several braniac politicians pushing for it!

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So is there also a similar risk to US regarding the housing loans - Does the aussie banks also have gone into the risky sub prime mortgages like the american banks ?

 

with interest rates so low - I doubt the bubble will burst with a bang. RBA is still trying to devalue the currency with lower interest rates - until that starts to tighten - I doubt we will see any bubble bursting.

 

Theses bubbles are also very localised - how much impact can that have for the state's economy let alone the countries economy ?

 

I'm no expert on housing finance but anecdotal evidence would suggest that there is a slight risk - I would say nothing like the a few years ago in the US though....

 

In Australia we have lots of young(ish) people earning big money (lots of my friends have been out in the mines, earning $180k to drive trucks etc). Many of these people have now got big mortgages off the back of their decent incomes (if they want to buy anywhere near a capital city then its likely to be a hefty mortgage....)

 

Problem comes for these individuals if:

 

a) they lose the big income; or

 

B) interest rates go north.

 

There is already a decline in the mining sector with some articles suggesting 10,000 jobs per month being lost in resources. There was media this week about resources contractors in the Hunter being offered new contracts on half the salary they were earning 6 months ago. Other articles suggest people returning to the eastern states following slowdown in mining jobs in WA and Qld.

 

What happens if you have a $500k mortgage but no longer the job to make the repayments?

 

Not sure that this counts as evidence, but just observation from people I know.

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abolish negative gearing... that'll do the trick! There are several braniac politicians pushing for it!

 

 

I really think it needs to be a holistic look at a whole range of policy implications -

 

  • reform of tax system,
  • reform of stamp duty,
  • review of counting family home as an asset in means testing pension,
  • planning reform,
  • review of overseas purchasing
  • Policy levers to grow employment in rural areas and large regional towns (and therefore encourage people to move from cities),
  • review of negative gearing
  • review of capital gains tax
  • review of council rates (charge people for having unoccupied homes)
  • etc

My view is that none of these will ever happen - I think at the federal level politicians own an average of 2.5 homes each, with only two federal politicians NOT owning atleast one investment property...

 

What are the chances that a hundred people who all own investment properties will take steps to reduce housing prices and or limit the advantage of having negative geared properties!?!

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Latest stats show that Sydney prices increased by 13% in a year. The next highest was Melbourne that increased by 4.7% in the year. Followed by other capital cities with Perth and Darwin actually falling by a small amount. So I don't think this is a national issue. More a Sydney issue that should be dealt with by looking at local solutions (i.e. supply and demand). I am sure it will correct itself without a huge fall. It will just have a flat period.

 

When this was raised at my work the other day I asked my colleagues to put up your hand up if you want house prices to fall by 20%. No one put their hand up. So as mentioned above, which politician is going to 'solve this problem' in Sydney and then piss off a large number of people whose net worth just fell by 20%.

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Latest stats show that Sydney prices increased by 13% in a year. The next highest was Melbourne that increased by 4.7% in the year. Followed by other capital cities with Perth and Darwin actually falling by a small amount. So I don't think this is a national issue. More a Sydney issue that should be dealt with by looking at local solutions (i.e. supply and demand). I am sure it will correct itself without a huge fall. It will just have a flat period.

 

When this was raised at my work the other day I asked my colleagues to put up your hand up if you want house prices to fall by 20%. No one put their hand up. So as mentioned above, which politician is going to 'solve this problem' in Sydney and then piss off a large number of people whose net worth just fell by 20%.

 

Couple of points (not that I have any answers, just thoughts really):

 

Supply and demand is an interesting argument - people saying that there is no bubble becaue people keep buying - and that the issue is a 'supply' one. However, these were exactly that same arguments made in the US just before the huge crash - they went from arguing about a 'lack of supply' to having literally streets of abondoned homes....?! Some economist have recently noted the observation that people say 'there is no bubble' and 'there is a shortage of supply" right up until there is a crash which shows both to be false.

 

I agree about the 'flat period'. I can't see a huge drop - just a decade of price stagnation ...

 

The last point about people not wanting price falls is interesting, because (in my experience) people don't actually know what they want. As an example nobody wants apartments built 'in their neighbourhood', but then complain about the lack of small houses nearby for their kids to buy. So depending on how you ask the question depends on whether people want new, smaller houses built...

 

Same with house prices. If you asked people about whether they want prices to fall, they might not really grasp the full repercussions of their views. Everyone wants their own property to go up in value, so long as the property they want to buy next doesn't go up in value or that the value of property doesn't negatively impact their kid being able to buy...

 

I agree though that politicians will not want to piss people off by having a wholesale fall in house prices - cause people that own an existing property won't see this as good - although these people will forget that all the other houses nearby are going up as well, so increasing house prices might look good on paper, but doesn't help them buy the enxt property if it is also going up by an equivalent amount...

Edited by TryTriB4Forty

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surely the answer is to rent. If negative gearers who lose money are willing to supply houses that is what we do for a loss in the hope of long term capital gain, then a bunch of people directly benefit from that subsidy.

 

Real example you can rent a house in Yaralumla inner south Canberra for $500 a week, you could not buy it at anywhere close to that. So the model works as the cost of buying would be in excess of $50 K per year

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I don't mind if the bubble bursts, we are lucky enough to own our home, but that's what it is, its "our home", its not an investment. I've a son who's about to turn 20, he'll probably get one of Joe's "good jobs" after uni in a year or two and his girlfriend will be a successful scientist (the pay of scientists is another issue but not lets get to that one), but I'm stuffed if I can see how they could buy in Sydney. I want the bubble to burst big time so that they can one day not too far away buy a home, where they want to live, but more imnportantly near where their jobs will be.

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I don't mind if the bubble bursts, we are lucky enough to own our home, but that's what it is, its "our home", its not an investment. I've a son who's about to turn 20, he'll probably get one of Joe's "good jobs" after uni in a year or two and his girlfriend will be a successful scientist (the pay of scientists is another issue but not lets get to that one), but I'm stuffed if I can see how they could buy in Sydney. I want the bubble to burst big time so that they can one day not too far away buy a home, where they want to live, but more imnportantly near where their jobs will be.

They can live in Sydney:

 

http://www.allhomes.com.au/ah/nsw/sale-residential/61-maxwell-street-south-penrith-outer-western-sydney/1317038425211

 

Two more in penrith found almost immediatley under 500 K

 

If you want to buy your on the edge, if you want to live closer rent until you can afford to buy or just rent take the free subsidy

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Clearance rates at home auctions in Sydney and Melbourne are starting to cool, faster than the usual winter seasonal conditions dictate, and Sydney posted its lowest non-holiday strike rate for the year.


Even with an 82 per cent clearance rate on the weekend in Sydney where $500 million worth of homes changed hands, Domain senior economist Andrew Wilson said that the market was showing signs of easing.


"I don't think this is just seasonal - I think there is a clear sense that sellers expectations on price might have overreached," Mr Wilson said.


"In May Sydney reached a clearance rate of 89 per cent, but it has tracked backwards since. This is not a one off scenario, it's a clear trend."





With Sydney house prices labelled "crazy" by the Reserve Bank of Australia governor Glenn Stevens, and ample warnings from other prominent economists including Treasury secretary John Fraser, some potential buyers have started to reconsider the market.


Mr Wilson said that Domain's forward tracking showed clearance rates would continue to fall in the lead up to the Spring selling season. However there may be some stand out sales as the market starts to ebb.


In Melbourne, where the clearance rate hit 79.6 per cent, the most expensive home sold at auction was a five bedroom house at Kew for $4.58 million.


The property at 20 Studley Avenue was snapped up after nine bids and fetched $580,000 over its reserve. The property had sold for $3.1 million just 18 months ago and has had about $500,000 worth of renovations since.






"The auction was one of the quickest I have seen," selling agent Ray White's Belinda Van Suylen said.


"The purchaser had bid at a few other auctions and missed out and I think he was a little more aggresive at this auction."


Ms Van Suylen said that while the weekend's result was strong she had started to get a sense that the market was cooling.


"I think we must be at the top now. There are buyers but it does get a bit patchy - I think the talk of the bubble in the media means some buyers are just sitting back and waiting now."





Melbourne and Sydney's auction clearance rates have been, on average, about 10 per cent higher than over the comparable weeks one year ago.


CoreLogic RP Data recorded the strongest clearance rate in Melbourne was across the North East region at 85.8 per cent, followed closely by the Inner East region with 85 per cent. In Sydney the strongest region was Ryde with 90.6 per cent of the reported results clearing at auction.




from todays Financial Review


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First time surfing trannies in ages and see this thread.

Interesting.

 

There is no bubble.

There will be no crash.

Simple supply and demand.

If interest rates rise or enemployment rises, some will be forced to sell, taking some pressure off demand, but the pent up demand is so high, that prices wont drop much (remember a 20% drop will only take prices to what they were a year or so ago) and the cycle will continue and until governments get there shit together and release large tracks of land for housing.

 

Having said all that, only Sydney and surrounding areas (Illawarra is stupid at the moment with ZERO land available and knock downs fetching a premium) and some parts of Melbourne have any growth. Much of the rest of the country is flat or falling.

 

Orange is the new black. Get used to it.

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There is no bubble.

There will be no crash.

Simple supply and demand.

 

 

Look, I'm not saying that there will or wont be a crash.

 

Just pointing out that the three things you said here are EXACTLY what is said during every bubble and before every crash ...

 

In the US during 2009 was perhaps the most notable ... commentators saying there will be no crash, demand is outstripping supply, if there was an oversupply people wouldn't be buying. Like I said in an earlier post, they went from 'huge undersupply of homes' to literally streets of empty houses.

 

Similar thing happened in parts of the UK during the GFC - now London, in particular, is in the midst of a mega boom.

 

So anyway, there is never a bubble and always a shortage of housing .... right up to the point that there was a bubble and an over-supply ...

 

I think the shovel sums it up best:

 

http://www.theshovel.com.au/2015/07/13/house-prices-set-to-skyrocket-plummet-flatline-expert-warns/

Edited by TryTriB4Forty

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If the whole country was growing like Sydney, then yes I would agree, the shit is about to hit the fan.

But thats not the case.

 

The HIA has been warning the state government for the best part of 20 years that this was going to happen unless they allowed the development of more land for housing.

There has been an undersupply of many thousands of homes for many years in Sydney, and this is the result.

 

The will be no crash as there is too much pent up demand.

Im not saying prices wont come off the current highs (they already have in some suburbs and there is signs of weakness elsewhere eg auction clearence rates starting to trend down), just that the downturn wont be as large as you would expect with a bubble.

 

Banks have already started to tighten lending to investors (restricted interested only loans and requiring 20% deposits) so Id expect this to start to bite in the new year with price growth dropping bank to historical levels.

Id even expect some suburbs to come off upto 30%, but that is still only 2 years growth.

Prices certainly arent going back to the levels of 5 or 10 years ago, so anyone waiting for the big drop will be disappointed.

 

Growth needs to go back to historical trends. This is unsustainable and not in anyones long term interests.

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I would have thought the demand is artificial, with Chinese investors inflating the Sydney market and pushing people outwards in search for affordability. Engadine prices are just stupid, local agent tells me every place is selling within a week to people from outside the area who are spending 750-1 mill on a house on a bit of land instead of a 2 bedroom flat in the Eastern suburbs. Boomers are cleaning up and swapping their 3 bed red brick for a new apartment with water views at South Cronulla.

 

Another patient runs a successful property investment business (one stop shop, finds the property, organises the finance etc) and seems to be very good at it. They happened upon a Property Investment Expo at Town Hall a few months back. There was not one bit of promotional material in English and none of the stall holders would/could speak with them when they tried to introduce themselves. Selling off the plan massive unit blocks etc.

Edited by Parkside

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The will be no crash as there is too much pent up demand.

 

 

Again, this is exactly what is said right up until the poit of collapse in every housing bubble situation...

 

Here are the quotes from 28 US real estate pundits, economists, finanical types etc that were saying "good old fundamentals of supply and demand" will prevent a US house price crash ...

 

there are hundreds of examples of people saying this .... over and over ....

 

Right up until there was a housing price crash ....

 

http://economicsofcontempt.blogspot.com.au/2008/07/official-list-of-punditsexperts-who.html

 

I'm not saying that there is or isn't a bubble, but the fact remains that people SAYING there won't be a crash is consistent with what happens just before every crash .....

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I could be wrong but isn't America's loan system different or was different to ours?

 

In that if things go belly up the can just walk away from the debt/loan and go rent if they want?

 

Therefore it's very easy for things to go off the cliff?

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I could be wrong but isn't America's loan system different or was different to ours?

 

In that if things go belly up the can just walk away from the debt/loan and go rent if they want?

 

Therefore it's very easy for things to go off the cliff?

 

That's my understanding too Nealo

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