Sydney house prices

Property has been seen as an investment since long, long.. well since forever. The idea of someone owning their own land, and not renting it from a lord or an Egyptian god or whatever, is very new.

Mortgages were invented within living memory; early 20th century.

If the vast majority of people become renters we would be returning to the status quo.

I don't know any facts, but I am not sure others do as well. Saying that only a small amount of people really want to rent. Where is that info from? I am not sure if it is true or not. Owning a house is a different lifestyle to renting. Not everyone wants that. There is a myriad of bills and time for maintenance etc. Housing is not a very liquid asset. It costs a lot of time and money to change location.

I don't actually think (note think... no facts here) that much has changed in terms of laws or motivations for Australian to invest in property. I think it is very much down to supply and demand with demand being driven by lots of local and international economy factors. I think 50 years ago it was much more difficult for internationals to invest in the Australian property market. This is because of laws, but also simple accessibility. Technology has enabled people from China and other countries to come here more easily or to buy from a distance via communications and money transfer technologies. Also, there are a lot more people internationally looking to invest money outside their own locality than 50 years ago. There is a lot of demand and the laws do not do much to stop it. Sure factors such as interest rates and economic growth in certain countries will also have an effect..... but I don't think Australians buying investment properties in Australia has changed that much over the years.... and I don't think as many people want to get out of renting and into buying as some think.

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evlPanda said..

AUS1111 said..

evlPanda said..

Interest rates will not go up unless there is an economic upturn, in which case people can afford the higher interest rates.

This is a dangerous attitude to take. Interest rates will rise in line with inflation expectations, and this can happen in the absence of an economic upturn. Inflation is the issue, not economic growth.

If many people are complacent based on the misguided belief that interest rates won't rise then we have a all the makings of a bubble. Whenever price rises are based on collective psychological factors rather than economic fundamentals, that screams danger, as sentiment can and does change very quickly.

I live in a city where property prices have been falling (in real terms) for ten years. The bubble never burst - it has just slowly deflated over ten years, which may be hard to comprehend for a Sydneysider. Ten years of slow declines.

Perth is a nice place to live - is it underpriced?

That's an interesting point. I will have to reevaluate.

Perth, let's face it, for good or bad, is at the end of the Earth, is unknown, and doesn't have as much going for it the way Sydney or Melbourne does. Yes, it sure is a nice place to live for some people. Hell I'd quite prefer it if I could find any work there. I know of one person that does what I do in Perth, and they work from home, in Sydney.

There is little to no overseas investment in Perth. That could be a good thing.

I have reevaluated.

I do not think the RBA would put us into a recession to keep inflation within it's arguably too tight brackets. At lease I hope they wouldn't.

...not sure which is worse : \

Inflation is actually one way to reduce debt; we could inflate our way out of all the debt we are in.

I know; the genie and the bottle.

Man, they've painted themselves into a corner in a few different rooms.

With a hot topic like this, there will always be knockers and kickers. Property investment is not a get-rich scheme, and it is a commitment to your own financial stability that led many to get involved. I am one of them.

I could have had a jolly good time spend as quickly as I earned and worry about the "what then...' when I get old, or older. Ot I can park my money in properties hoping that if the time comes, I still have a bit of fat left and not having to ask or beg for a pension rise.

The fact is that a commitment to a property also teaches you how to manage your finances. No more rushing out and but a fridge that has Internet built in, or those latest cars with 15 stack CD player armed with technologies that you forget which one is for ignition.

Is it a get rich scheme? Hardly. Most of my tenants stayed no more than 2-3 years. They moved on after buying their own. So it was a stepping stone for them. Then there were the workers from interstates. You can't expect them to commit and buy their own while on a short term employment. They can't live in hotel for 2-3 years either. So it is a service. It can be a get-rich scheme in a hot market but you can also get burnt when buying at the peak.

so..... what is everyone's take on the next few years for property where you live? Values likely to continue to go up, down or sideways? I appreciate some areas do better than others / markets within markets yada yada

and rents?

what a F//k up that was ...

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evlPanda said..

evlPanda said..

AUS1111 said..

evlPanda said..

Interest rates will not go up unless there is an economic upturn, in which case people can afford the higher interest rates.

This is a dangerous attitude to take. Interest rates will rise in line with inflation expectations, and this can happen in the absence of an economic upturn. Inflation is the issue, not economic growth.

If many people are complacent based on the misguided belief that interest rates won't rise then we have a all the makings of a bubble. Whenever price rises are based on collective psychological factors rather than economic fundamentals, that screams danger, as sentiment can and does change very quickly.

I live in a city where property prices have been falling (in real terms) for ten years. The bubble never burst - it has just slowly deflated over ten years, which may be hard to comprehend for a Sydneysider. Ten years of slow declines.

Perth is a nice place to live - is it underpriced?

That's an interesting point. I will have to reevaluate.

Perth, let's face it, for good or bad, is at the end of the Earth, is unknown, and doesn't have as much going for it the way Sydney or Melbourne does. Yes, it sure is a nice place to live for some people. Hell I'd quite prefer it if I could find any work there. I know of one person that does what I do in Perth, and they work from home, in Sydney.

There is little to no overseas investment in Perth. That could be a good thing.

I have reevaluated.

I do not think the RBA would put us into a recession to keep inflation within it's arguably too tight brackets. At lease I hope they wouldn't.

...not sure which is worse : \

Inflation is actually one way to reduce debt; we could inflate our way out of all the debt we are in.

I know; the genie and the bottle.

Man, they've painted themselves into a corner in a few different rooms.

Your right about the painting into a corner panda but reevaluate this too -

Australian mortgage rates are not in reality determined by the RBA. Out banks rely on overseas funding (and interest rates) for around 60% of their loan books these days. Just look at the responses to the last few rounds of RBA official rate cuts where only around half were passed on....

Australian economy is in danger of being out of sync with global interest rate markets ie global rates are rising while our economy is pretty much stalling. Its completely likely we will see mortgage rates rise into a recession here and since we are already at 1.5% officially there aint a damn thing the RBA can do about it.

ie Your faith in the official monetary policy cushioning effect we have seen in past cycles is misplaced this time around...

Just imagine how much better the economy would be if all that capital wasn't tied up in wasted interest rate charges for a never ending race to improve one's property portfolio and instead it was put into consumption, national savings, infrastructure, community projects and tourism.

That's an agile efficient economy. All this capital going towards usury on immobile assets is waste that benefits an elite few only.

Cue funds manager's rant....

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Adriano said..
Just imagine how much better the economy would be if all that capital wasn't tied up in wasted interest rate charges for a never ending race to improve one's property portfolio and instead it was put into consumption, national savings, infrastructure, community projects and tourism.

That's an agile efficient economy. All this capital going towards usury on immobile assets is waste that benefits an elite few only.

Cue funds manager's rant....

With respect, would you suggest some "credible" investments that I can be sure of I won't lose the bloody lot?

Tree plantations? Suppose to be good for the environment, and general a good return. What happened to them?

If I am to look after the country's financial interest, at my expense, who is going to look after me if the country stuffed up ?

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Haircut said..

Main said..

Haircut said..
Gold Coast suburbs have only sold half per month of what they were selling in 2015 and 2016, stocks for sale have not dropped or are higher. It's now been going on for a few months in a row. Surely this will see some kind of a change in prices?

winter !

sales will pick up in Summer

it didn't drop in winter 2015 or 2016 and ran quite consistently each month. From what I've observed, we don't usually experience a winter drop like the other states, at least not the suburbs around me, and have not halved until now

Interesting... GC does normally pick up in summer though. You get the tourists and then the interstate people relocating to start the new year.

Other thing Ive noticed is that first home buyers are really struggling on the GC for the first time in a long time. Even heard of couples buying out at Yarrabilba.

That said a Westpac banker said they are putting lenders through the wringer when it comes to providing evidence of capacity to repay. Not like the good old days when they'd take your word for it. Apparently the bank is very worried about defaults at the moment should something go wrong.

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Haircut said..
so..... what is everyone's take on the next few years for property where you live? Values likely to continue to go up, down or sideways? I appreciate some areas do better than others / markets within markets yada yada

and rents?

All depends on China... if the USA and Chine were to have an economic war, Sydney prices would fall 10% a year until they lost 70%.
If Chinese stop buying Sydney's looking at -5% a year for 5 years.
Given then governments going to lose their stamp duty sooner or later, the economy's going to implode 2-5 years.

We have the whole world telling us we've been drinking the coolaid for far too long.

The only thing keep rating agencies from downgrading us is our fictitious/massaged employment numbers... and even then they're not so good (~OECD avg.) but the Poms and Yanks fudge their numbers too.

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Cambodge said..

Main said..

vosadrian said..

bazz61 said..

vosadrian said..
At what point in time did Adriano and the other bubble crash proclaimers here start saying the Sydney property market was in a bubble and was about to pop and was therefore not a wise buying decision? this year, 5 years ago, 10 years ago?

Ever since I bought my first property 20 years ago, I have kept an eye on the property market and there has almost always been a vocal group of people on various forums saying that property is about to crash. In that time there have been a couple of blips where it lost a little value (<20%) for a short time (
While I mortgaged my residence, I bought two investment properties. I sold one earlier this year for double what I payed for it 10 years earlier and I have kept the other. 5 years ago I sold my residence for more than double what I payed for 15 years earlier and bought another residence that is now valued about double what I payed for it 5 years ago. Around the time I upgraded the residence, the cries of a collapse were the loudest I can remember.

Could the market collapse tomorrow? Sure it could. Could it collapse to a level to make any of my purchase decisions as bad as the vocal bubble pop cryers of the time claimed? Not impossible..... but very unlikely. Using my current residence as an example, if the value halved on a bubble popping, it would be worth what I payed for it. I can live with that. I like living there, I can afford to pay the mortgage the same way I could when I took the mortgage 5 years ago.

Of course if the price drops a little there will always be someone who bought at the wrong time just before or after the peak and they will lose out. Some may be forced to sell at a loss or whatever else they do to save their financial life. But most are in a position like me where they did not buy at the peak of the recent boom and therefore will still be ahead even if sizeable losses are made.

So I am curious when all the bubble popping people here started their chant? How much has the market increased since then? How much would the market now need to lose to validate your position on the property market had you decided not to buy when you started your chant? It is possible.... maybe even likely that your call for a crash may be right this time... but what have you lost out on in the past when you made similar calls but were wrong?

yes a lot of people as yourself have done well from the price rises ..but at some point the ability to service a large mortgage ,the casualization of the work force , interest rate rises ,falling disposable incomes the ability to pay rent etc will impact on property prices ,the actual rental return % is low, how many 1st home buyers are out there now ..? not many I hazard to guess its only overseas buyers and speculators that are propping up the market...

I'm just curious how many people who think Sydney housing should now fall have thought this for some time and if they did not buy or gave advice to others to not buy, what position would those people be in if they had instead bought?

I am not saying whether Sydney housing is about to bust or boom or deflate or stagnate..... I am just saying that a call for a crash or adjustment of Sydney is nothing new. Many people have been predicting it for 20 years.... most (all?) of those people have either acted upon poor advice or given poor advice as people would have been better off had they ignored this advice.

If you continually say Sydney housing prices are overpriced and going to crash for a long enough time, you will eventually be right and gloat about how you were right and all those people bought were not as clever as you. A broken clock still reads the right time twice a day.

So when is that point when all the factors you mention come to a head? And when did you first think this? I agree that there are many factors that look unsustainable... but they have been "unsustainable" for some time and yet people have done very well in capital growth in that time.

You've just summed up the problem perfectly and that is that nobody knows.

For every analyst saying UP there are just as many analysts saying DOWN.

Each analyst is either working for, or employed by someone trying to sell you something. Analysts are "for sale" to build you a story to support your product -unfortunate but thats how the financial world works.

I know some pretty smart economists who can explain in great detail why the Western Banking system should have failed completely and collapsed decades ago but somehow governments and bankers keep creating something out of nothing to keep the machine chugging along. How long can they keep doing this ? No-one knows....who would have thought a federal reserve bank could just print money and lend it out with no gold in the vaults...!?

Sydney property market is the same - its too big to let fail. If it collapsed the side effects would be horrific.

That said I have always suspected the federal govt. has intentionally restricted land supply to make sure we don't see a crash. And while net migration remains high those cities will do well.

The problem with economists is they have absolute faith in their models and then blame the real world when it doesn't act in line with their models. They're stuck 'cos the foundations of their entire "professional" discipline and career are based on the fiction of humans as rational and utility maximising.

Constantly having different analysts being bullish or bearish at any one point in time isn't due to corruption, bribery or conflict of interest. It's because no-one has any farking idea about the future. Analysts just weave a retrospective story to fit the apparent facts. Humans love a story and love the false confidence that it gives about the certainty of the future.

Yep agree with all of that as well but they are also for hire and get used by developers every time they launch a new project.

Simple strategy - employ Bis Shrapnel to do a study to show a shortage of townhouses in the $800-1.2M price bracket in Hope Island. They produce the research paper to support the Hypothesis. Engage a PR firm to start writing editorials about families moving to hope island and the shortage of townhouses. Then another story about empty nesters downsizing to town houses on Hope Island. Then another story about Hope Island being called the NEW North Shore and how popular it is becoming. Throw in supporting quotes from Bernard Salt, Michael Matusik, local councillors and various other local agents and personalities.

Then drip feed these stories into the GC Bulletin, Courier Mail, AFR and Australian over the next 4 months. They are always seeking newsworthy stories to publish and because they are pretty lazy they love well written editorials. Then do the major launch of your project which has been undertaken due to all the demand in the area.

The equity fund managers do it in reverse and get the editorials that its incredibly risky buying property in your SMSF and you should be investing in a diversifies equity portfolio and heres Morgans Stanleys latest research to support this strategy....

The only time they have to scramble is when theres a correction and as you say they have no problem telling us why they are still right but the market had behaved irrationally.

Its all manipulated. Its not corruption, bribery or conflicts of interest, its just the way it works. Lets face it the analysts have to get paid by someone as they are not a free public service. The best analysts go to where they get paid the most. Guess who pays the most... ? There are dozens of research houses full of analysts out there who can build a robust research paper to support just about anything - even why you should be buying units in inner city brisbane...!!!

Some of the most successful developers and property investors are the not so smart ones because they don't over analyse the information and get stuck in indecision.

Back on Sydney - there are industry groups that want prices to go up and there are industry groups that want prices to go down. There are research houses out there building cases for both and those stories get fed to the media as editorials. Look at a few Harry Triggerbof stories in the local media and see which research house is providing some stats to support his view.

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Jupiter said..
Despite the fact that I have done reasonably fine in properties, I don't like what is happening in NSW and Victoria. Over-inflated prices can potentially bring a rapid fall. That crushes the confidence, with confidence gone, we are in very uncertain territory.

Government of NSW and Victoria are laughing all the way to the bank thanks to revenues raised from properties. WA and NT are crapping metal chips right now. Promises are broken. The proposed raised gold tax will bring revenues, but thanks to the strange GST arrangement, quite a bit will end up in NSW and Victoria and all other states. Stevie Wonder for PM ?

Re the GST ..most gold producers export ..export companies are GST exempt ..that is they claim a credit and a big fat cheque( direct deposit ) from the taxpayer ..every cent of gst that is payed in the producing cycle of gold or ore or lithium or in the case of Gina with her cattle stations which now export ... is claimed back ..iron ore etc is not sold at 95$ a ton plus gst ..if it was Aust dept would be wiped out tmorow ...so all those big export producers in WA actually generate zero GST in the tax system .

@ Haircut:

The upcoming Commonwealth Games are more likely to push prices up than down.

The vacancy rate on the Gold Coast is next to 0. It's actually a problem.

Historically a boom in Sydney and Melbourne carries over to Brisbane and Gold Coast a year or two later. Circa 2002 was the last time, and if my memory serves me correct prices went up 40% in about 18 months. I suspect it hasn't happened this time because the demographics are different.

The "problem" with the Gold Coast is that wages are very low compared to Sydney and Melbourne, and the excuse is often given "But you make up for that with lifestyle!". This seems to be keeping prices low, which may be a good thing depending on whether or not you're a half full or half empty person.

There's no way I'm going to offer financial advice so make of that what you will.

Exactly. Your financial gain in the property market is someone else's pain.

But hey, who cares when the only thing that matters is ME, ME, ME?