Last nail in the coffin of property doom and gloom

[essence]

http://www.news.com.au/business/money/story/0,28323,25027332-5013951,00.html

Of course, news.com still managed to get it wrong . 71% clearance rate was in Sydney just before Christmas (when news.com said it was 42%)
Now it is 78%. Look at:

http://www.homepriceguide.com.au/saturday_auction_results/sydney.pdf

It is far beyond definition of property boom (60% clearance rate.)

Hope I do not have to explain here that all normal property booms start from Sydney (Not from Perth) and then ripples spread to the rest of the country.

 

[chilliaa]

http://www.news.com.au/business/money/story/0,28323,25027332-5013951,00.html

Of course, news.com still managed to get it wrong . 71% clearance rate was in Sydney just before Christmas (when news.com said it was 42%)
Now it is 78%. Look at:

http://www.homepriceguide.com.au/saturday_auction_results/sydney.pdf

It is far beyond definition of property boom (60% clearance rate.)

Hope I do not have to explain here that all normal property booms start from Sydney (Not from Perth) and then ripples spread to the rest of the country.

I have no idea in the short term, but if you agree that property performs at a longer term mean, then given the number of years of underpeformance in the sydney market, it may suggest that when things return to normalicy, sydney should be one of the first to benifit (and i say this without knowing the sydney property market, only that assets tend to correlate around a mean return).

 

[nonrecourse]

http://www.news.com.au/business/money/story/0,28323,25027332-5013951,00.html

Of course, news.com still managed to get it wrong . 71% clearance rate was in Sydney just before Christmas (when news.com said it was 42%)
Now it is 78%. Look at:

http://www.homepriceguide.com.au/saturday_auction_results/sydney.pdf

It is far beyond definition of property boom (60% clearance rate.)

Hope I do not have to explain here that all normal property booms start from Sydney (Not from Perth) and then ripples spread to the rest of the country.

How many properties were listed for sale compared to 2002, 2003.2004?

NR

 

[ziggy2214]

Essence

I agree that the market has turned.

It's good news and this could be common occurrence from now on
because the number of listed properties on the market is low.

cheers

 

[joeExpat]

Dead cat bounce before the inevitable decline continues. same thing happened in the UK last month.
Too early to buy yet, maybe in 1 or 2 years time, depending on how fast things deteriorate, and how tight finance becomes. It's la-la land thinking another property boom is about to start.

 

[BayView]

Dead cat bounce before the inevitable decline continues. same thing happened in the UK last month.
Too early to buy yet, maybe in 1 or 2 years time, depending on how fast things deteriorate, and how tight finance becomes. It's la-la land thinking another property boom is about to start.

I tend to agree.

I met with my MB last night and we discussed the market.

I suggested the bottom end was still going along o.k - he said not really.

A few sales from the FHB's with the grants, but in outer suburbs in the cheaper estates; no - prices going down if anything, was his view.

Higher end was taking a bit of a hit too, but the middle market seemed to be doing not much.

It is very hard to have a property boom when there is limited, and very restricted credit.

Many people will be currently unable to get serious finance levels.

 

[sparky23]

Maybe this is just your MB or your area, I network on a weekly basis in my area and they are all flat out and have been since FHOG was announced.

 

[evand]

Auction clearance rates are provided by RE agents and they're voluntary. If they don't want to submit results if it makes things look bad, they dont. And if they want to to make things look good, they do submit.

Auction clearance rates are easily manipulated by the REI's and RE agents and not worth considering.

Beside that the stock market over the last year or so has shown quite a bit of volatility. What this does is continue to pull the suckers in (suckers rally) as its not an orderly decline but a lot of little spikes which causes inexperienced punters to think its rising and buy back in. It prolongs and increases the losing of funds in the market.

Same thing is happening in the property market lately. A clear suckers rally. You need to look for a medium, long term rising major price trend (say 3-6 months). Not a few spikes on a flat or declining price graph.

 

[RumpledElf]

I'm still extremely dubious my house will sell for what I want it to sell for in this climate so that will be *my* personal benchmark.

 

[Witzl]

Evand,

the lower end of the sydney market has been becoming more and more competitive since about Nov 2008. That's 3 months so far - another few months and your definition will be met.

On top of that, there have been some areas that have been experiencing strong sales performance: the hills, outer west, south west, annandale, etc etc.

I know it might seem anectodal - but in my area, houses are selling quick smart. Sales volumes are still extremely high (have a read of Castle Hill, NSW stats n your latest API mag). My fiancees family are selling their townhouse at auction in Annandale, and already they have had 3 strong offers... but are holding out for the auction before selling.

This past weekend in the outer west of sydney I saw competition the likes i have never seen (i admit my experience is only short).... but people are buying houses, even junk houses, at or very close to asking price, and there are so many people at open homes.
I drove past an auciton in Quakers Hill on saturday... and there was about 30 people there (i was looking at a house around the corner). Both properties sold at what i would consider high prices.

It's at a point where im pulling back on my searching to see if i can pull more equity before making the next purchase. I just cant compete with home buyers offering the asking price and competing with each other to buy a property.

 

[evand]

Witzl,

I understand what you're saying but i don't think government artificially created activity is a great basis for long term property investing. Or short/ medium term for that matter.

The FHB bonus will end some time, interest rates will rise, unemployment will increase, this credit crisis has a long way to play out............

 

[Propertunity]

I just cant compete with home buyers offering the asking price and competing with each other to buy a property.

Witzl,

You might be better off getting a BA like Jacque to source you a property?

Or possibly taking a gamble that the FHB grant will not be extended past June 30 and the feeding frenzy will die down after that.

I know it is very difficult to negotiate good prices in the sub-$350K market when you are surrounded by FHBers throwing money at the vendor. I was speaking with a REA yesterday who listed a good cheapie at $219K believing the value to be around $210K and leaving room to negotiate down. The OFI drew out lots of FHBers 3 of whom bid up the price at the OFI and demanded to sign a contract then and there, end sale price was $226K - but all made a scene. Vendor very happy of course.

 

[MichaelW]

Essence,

While these look like a great result for Sydney and I am fundamentally upbeat about Sydney's mid-term prospects, I wouldn't be calling this the bottom just yet. Despite perceptions otherwise, I am not in the die hard blindly optimistic camp, but I am still upbeat.

I spoke to one of my key local REAs the other day about my local area of Sydney's Northern Beaches and got the following guidance from her on the state of the market:

• Anything under $600K is solid. Going pretty much at asking price, sometimes a touch more, sometimes a touch less.
• Anything over $1M is under real pressure. Top end stuff is taking a big hit. She's quoted properties coming on to the market at $1.5M and getting sold at $1.2M. She had one property list at $1.2M recently which got offers at $850K which they knocked back.
• In the middle is OK too but harder to move and spends longer on the market. If you want a quick sale from $600K to $1M you'll need to give a little on price but its still holding up OK if you're patient.

Its a great time to trade up if you're equipped to do so. My PPOR would list at $850K and I'd sell it quickly at $800K if I wanted to drop it to meet the market. That would be a bargain, but I'd then be able to buy a previously $1.2M property for around the $950K mark and get something really nice. So, a $150K trade-up cost + stamps etc instead of $350K previously. Something to think about... I've actually got a report from her showing my postcode and what stuff listed for and sold for and the above analysis is pretty consistently played out in the actual figures achieved.

Cheers,
Michael

 

[BV]

Witzl,
I was speaking with a REA yesterday who listed a good cheapie at $219K believing the value to be around $210K and leaving room to negotiate down. The OFI drew out lots of FHBers 3 of whom bid up the price at the OFI and demanded to sign a contract then and there, end sale price was $226K - but all made a scene. Vendor very happy of course.

This is not hard to imagine in a market which has been falling since 2004 and when interest repayments are lower than paying rent.
I've stopped looking because I can't compete with FHB's and I don't want to pay top $ because interest rates won't stay low forever

 

[evand]

The Sydney market fell or stayed flat after its peak in late 03 but then rose significantly on the resources/stock market boom of 07.

The only place where it just maybe cheaper to buy then rent is dodgy ex housing commission houses in Tregear, Coyton etc and who wants to buy there.

People conveniently leave out all costs of home ownership when doing a rent/buy comparison.

Lets stick to the facts in this discussion please mate.

This is not hard to imagine in a market which has been falling since 2004 and when interest repayments are lower than paying rent.
I've stopped looking because I can't compete with FHB's and I don't want to pay top $ because interest rates won't stay low forever

 

[MichaelW]

People conveniently leave out all costs of home ownership when doing a rent/buy comparison.

And people conveniently leave out the impact of inflation when looking at the total cost of ownership too.

But despite the so-called "hidden" costs of ownership, the equation is starting to look good for buyers. If you also allow that inflation is running at 3% and assume rents will rise at this rate, then your total cost of ownership over 5-10 years should be much lower from buying versus renting.

Remember, the loan principle remains fixed when you buy so your interest charge remains pegged to this amount regardless of what inflation does. That "loan" amount remains in today's dollars and not indexed to inflation. Rent on the other hand is not so kind...

I did a quick calc on my own IP in Mona Vale as follows:

Loan amount (100% lend) = $720K including stamp duty etc.
Rent = $650pw TODAY! and indexed at 3% pa.
Mortgage interest rate = 5.11%

So, this year, to buy it costs $36,800 in interest only. To rent it costs $33,800 in rent payments. So, yes, its cheaper to rent than buy by $3K. But if we fast forward only 3 years and index rent to inflation at 3% then the buy cost remains $36,800 but the rent has jumped to $36,900! In only 3 years its better to have bought than stayed on the rental rollercoaster.

If I look at the total cost of ownership over the next 10 years then interest charges are $367,900 and rent is $387,400! i.e. Its $20K cheaper to buy than rent if you plan on holding it for as little as 10 years. If you look at a 20 year loan period then the benefit clearly moves to buying over renting. $970K vs $770K or a total saving of $200K by buying over renting!

I'd argue most would-be buyers aren't just thinking about the year 1 equation when making their rent v buy decision. Its all about getting off the landlord rent hike roundabout. If that's your concern then your thinking long term. Long term, buying way outperforms renting, period.

Cheers,
Michael

 

[Witzl]

The Sydney market fell or stayed flat after its peak in late 03 but then rose significantly on the resources/stock market boom of 07.

What sydney market are you referring to??? Sydney is a pretty huge place you know.
Virtually none of the areas i look at had ANY rise in 2007.... Most have gone backwards slightly or stayed flat since their 2003 peak.

The only place where it just maybe cheaper to buy then rent is dodgy ex housing commission houses in Tregear, Coyton etc and who wants to buy there.

I want to buy there.
In fact ive put my money where my mouth is - i just bought in Colyton in nov for $226K. Today, you are hard pressed to buy ANYTHING in colyton for under $260K. Dont believe me - have a look out there for yourself!
These areas are actaully performing quite well, and during the last boom they had some of the best CG of all the sydney suburbs. Sure they've gone backwards a little from their peak - but so long as you are buying at or near the bottom and you're in it for the long term, you're on a winner IMO.
Buying in these suburbs also allows me to accelerate my start into the property market, as my holding costs are minimal, and my risk is spread across a number of properties - so if i lose rent for a couple of weeks in one property, im less likely to have a financial heart attack (as opposed to if a $600K IP lost rent for a few weeks).

People conveniently leave out all costs of home ownership when doing a rent/buy comparison.

I havent.
Once the 5.06% interest rate kicks in later this week with CBA, it will cost me ~$55.00 a week to hold onto my colyton property..... look at my rough numbers below if you dont believe me.

Based on numbers like this - why wouldnt people buy instead of rent??

NB: all of the below is worked out without any tax deductions applied. These are raw pre-tax numbers

Lets stick to the truth in this debate please mate.

Everything ive mentioned so far is factual as per my personal experience.

 

[essence]

Essence,

While these look like a great result for Sydney and I am fundamentally upbeat about Sydney's mid-term prospects, I wouldn't be calling this the bottom just yet. Despite perceptions otherwise, I am not in the die hard blindly optimistic camp, but I am still upbeat.

I spoke to one of my key local REAs the other day about my local area of Sydney's Northern Beaches and got the following guidance from her on the state of the market:

• Anything under $600K is solid. Going pretty much at asking price, sometimes a touch more, sometimes a touch less.
• Anything over $1M is under real pressure. Top end stuff is taking a big hit. She's quoted properties coming on to the market at $1.5M and getting sold at $1.2M. She had one property list at $1.2M recently which got offers at $850K which they knocked back.
• In the middle is OK too but harder to move and spends longer on the market. If you want a quick sale from $600K to $1M you'll need to give a little on price but its still holding up OK if you're patient.

Its a great time to trade up if you're equipped to do so. My PPOR would list at $850K and I'd sell it quickly at $800K if I wanted to drop it to meet the market. That would be a bargain, but I'd then be able to buy a previously $1.2M property for around the $950K mark and get something really nice. So, a $150K trade-up cost + stamps etc instead of $350K previously. Something to think about... I've actually got a report from her showing my postcode and what stuff listed for and sold for and the above analysis is pretty consistently played out in the actual figures achieved.

Cheers,
Michael

Michael,

I am a bit tired to explain basic primitive things on this forum, and I do not know why I have to repeat blatantly obvious.

1. Property booms NEVE start from the top of the market. They always start from below median, then spread.
2. Property over $1M is twice median for Sydney. This one does not have anything in common with property market dynamics. This sector is purely driven by bubbles - resource bubble, sharemarket bubble, property bubble. It will start moving from late 2010-2011, when property investors accumulate some wealth and start moving into "effluent" suburbs. Normal people do not buy there - property over $1M is not place to live - it is a statement. And statement is "My life sucks, I have self-esteem problems and I want to impress people I do not like". For the investor, buying above median is a mortal sin - lets get over it. Unless property above median price does not exist for you - you are not property professional.

3. If you think about upgrading your PPOR so you get nice place to live - I am worried about you. You commiting second mortal sin in property investment. Real professionals never think about property as a love nest. Property is money making machine.Any othe rpoint of view is wasteful and ill focused.

4. I do not give a damn what econodictors (and especially arrm chair economists) say. I trust only what I see. And I see in November we had frenzy at under $360K market, December it spread to under $450K, January -$550K. In February I started to see what I call "herd". People with no foggiest idea whatsoever about the property, knowing only two things:
a. They can get mortgage less expensive than rent
b. They are sick of waiting for property crash promised by media

Those who are still deluded by ideas of imminent "crash" are in for ultimate disappointment

 

[evand]

Ok, that's your experience, its not everyone else's. You are talking about a small suburb in the outer west. Possibly the lowest income suburb in Sydney.

Lots of Sydney property increased in 07 on the stock market/resources boom.

I'm still not convinced its cheaper to buy then rent when all costs are taken into account. I'm not talking about holding an IP, i'm talking about a renter deciding to buy a PPOR.

What sydney market are you referring to??? Sydney is a pretty huge place you know.
Virtually none of the areas i look at had ANY rise in 2007.... Most have gone backwards slightly or stayed flat since their 2003 peak.


I want to buy there.
In fact ive put my money where my mouth is - i just bought in Colyton in nov for $226K. Today, you are hard pressed to buy ANYTHING in colyton for under $260K. Dont believe me - have a look out there for yourself!
These areas are actaully performing quite well, and during the last boom they had some of the best CG of all the sydney suburbs. Sure they've gone backwards a little from their peak - but so long as you are buying at or near the bottom and you're in it for the long term, you're on a winner IMO.
Buying in these suburbs also allows me to accelerate my start into the property market, as my holding costs are minimal, and my risk is spread across a number of properties - so if i lose rent for a couple of weeks in one property, im less likely to have a financial heart attack (as opposed to if a $600K IP lost rent for a few weeks).



I havent.
Once the 5.06% interest rate kicks in later this week with CBA, it will cost me ~$55.00 a week to hold onto my colyton property..... look at my rough numbers below if you dont believe me.

Based on numbers like this - why wouldnt people buy instead of rent??

NB: all of the below is worked out without any tax deductions applied. These are raw pre-tax numbers

Everything ive mentioned so far is factual as per my personal experience.

 

[Nathan]

There is money to be made out there...

i never buy anything overvalued, doesnt matter what... even my groceries, so i would not be one of the buyers buying at a peak, however there is a lot of momentum/ under contracts out there in sydney... lower end is holding up very strong at present... it is very exciting to see the results coming through...

wouldnt mind buying few more cheapies atm, however not fussed either way