Lower end of Market....looks okay

[natedog]

Hi All,

I have been watching a couple suburbs in outer melbourne where i invest, and basic houses listed for between $220-$270k have been getting snapped up very quickly.

On realestate.com.au in one area, the first 7 (cheapest) listings all had contracts on them within 1 week!

Now whether its first home buyers taking advantage of the grant, or some investor confidence returning with lower interest rates....seems to indicate that some of the lower end of the market may do okay.

Even if this is only a temporary rush to buy in these areas, it may help to support a new baseline level in these areas i guess.

Just thoughts,
Cheers,
Nathan

 

[sk280]

Hi natedog,

Yes. I'm a FHB in Sydney looking at the lower end of the market (sub $400K, Western Sydney) for my first home. I see houses geting snapped so quickly that most open houses get canceled. Its really frustrating for me. One of the agents I spoke too tell me, that home owners who want to upgrade from units to houses are out in big numbers competing with FHBs and investors. The REAs have no time to even return your calls and most decline appointments during the weekend. Its a mad rush out there. Lucky for those got in and bad and unlucky for others who keep missing out (eventually raising prices slowly).

I can only attribute this to Interest Rates and such low supply of houses with demand outstripping supply. With demand continously outstripping supply, with these kinda interest rates I don't expect things to change unless people start losing jobs and we see effects of those cascading.

Interesting times to be in.

 

[sash]

Nathan, SK280

A floor has now been set for the low end of the housing as a result of the FHOG.....my bets are the govt. will continue this till at least 2010 which should fruther stabilise and give support to the low. This means hat there is likely to be "irrational exhuberance" at the low even with unemployment goingup as there are still a lot of people with safe govt jobs. So the trick is not to buy at the top of market for this stuff.

There are a lot of people on this site waiting for the classic upturn which is the better end of town price rises and this flows out. I think this time around it will be different due to the following reasons:

1. White collar professionals in the financial services and professional services industries are the hardest hit. They tend to live in the North and East in Sydney or the East and Southeast suburbs of Melbourne.

2. With the exception of mining....blue collar trades staff are holding up well

 

[Propertunity]

Now whether its first home buyers taking advantage of the grant, or some investor confidence returning with lower interest rates....seems to indicate that some of the lower end of the market may do okay.

Hi Nathan,

This kind of experience is being repeated all over the place. It is mostly FHB's falling over each other to take up the grant before 30 June.

This will (has?) place a floor under the housing market. 2nd & 3rd home buyers then upgrade after the FHBs buy theirs. It has already seen increases in the lower quartile of prices.

IMO, the government cannot afford to announce any continuation of the FHB grant past 30 June as this would halt the urgency to buy NOW. They need $'s to flow into the economy immediately. Come 29 June they may announce something - but I would not like to put money on it

It is interesting to see the different FHB price ranges in various areas.
Beach places like Terrigal & Avoca where we regularly buy for clients it is under $600K. Around Gosford, Blacktown etc it is under $350K. In Wyong shire it is the $200K - $300K range where you see FHBs.

Most canny investors will either stay out of the price ranges of FHBs - it is just too hard to compete when they offer listing price and above. Or they'll wait till the feeding frenzy dies down post 30 June. Or (as we've seen) they engage a Buyers' Agent to source property before it comes on the market to the general public.

The conditions are all perfect:
IR's at there lowest for 40-50 years
Cheaper or same to buy rather than rent
Affordable housing
$'s handed out by govt. - so no need to have much of a deposit

The only possible exception is employment or more accurately the fear of unemployment.

 

[Jacque]

Similar story where I work- in particular the lower end NorthWest suburbs like Parra, Baulkham Hills and Blacktown LGA's all experiencing 2-3 times the normal enquiry rate in the lower price brackets.
Clear indications are less days on the market, cancelled opens (due to properties going under contract) and lines of ppl inspecting when before you were lucky to encounter 1-2 others. Time are achanging...

 

[Peter_Tersteeg]

In this kind of price range it's getting expensive to rent, but with low inerest rates it's cheap to own. You only need the deposit & purchase costs which the FHOG goes a long way to covering. It's no supprise that this market sector is doing well.

 

[Player]

The investor market is also driving this lower end with falling interest rates. The owner occupier component of this lower end is being fuelled by increased FHOG and further enhanced bonuses for new and regional on top of that.

The concern is that those who are not saving savvy and use the grant for most of the deposit and purchase costs may baulk when interest rates climb again. If our economy is over-stimulated, I don't anticipate the softly, softly rate rises of 0.25% as we were accustomed to. The RBA may (and can) raise rates as aggressively as it reduced them. Hard to fathom from where we are now.........however, no one knows what's around the corner.

Also they are not familiar with having to pay water rates (aside form consumption in some states), council rates, building insurance, etc.

Some valid points along these lines in this thread:

http://www.somersoft.com/forums/showthread.php?t=49712

Also if job losses hits this lower end owner occupier sector, the rapid rate of property acquisition may reverse. Not saying it will. Just a possibility.

 

[keithj]

If our economy is over-stimulated, I don't anticipate the softly, softly rate rises of 0.25% as we were accustomed to. The RBA may (and can) raise rates as aggressively as it reduced them. Hard to fathom from where we are now.........however, no one knows what's around the corner.

I think the RBA is unlikely to raise rates aggressively. The economy will remain fragile for a couple of yrs yet. People are more likely to be focussed on paying down debt rather than spending & driving up inflation. But no-one knows what's around the corner....

 

[natedog]

Hi All,

I have been watching a couple suburbs in outer melbourne where i invest, and basic houses listed for between $220-$270k have been getting snapped up very quickly.

Just an update,

One of these suburbs now has nothing listed under $290k. (i am only reffering to freestanding houses)

Real shortage of real cheapies.....

 

[sash]

If that is the case...then a new floor on the bottom for that suburbs has been set. You usually do not go down again......this also tends to affect the median prices even if the stuff at the median or higher end for that subburb does not move.

I noticed this in Werribee and Hoppers Xing in VIC.....

Can I ask which suburbs this is?

Just an update,

One of these suburbs now has nothing listed under $290k. (i am only reffering to freestanding houses)

Real shortage of real cheapies.....

 

[BoatBoy]

If that is the case...then a new floor on the bottom for that suburbs has been set. You usually do not go down again

Just thought that needed emphasis.

These are not necessarily usual times.

Dave

 

[sash]

Yep....thus the word usually.

Having said that.....the lower end took a battering in most markets when interest rates rose. Now due to the FHOG...prices in sector of the market is firming.

If the Feds keep this FHOG in any or form.....then it is almost a dead cert of prices in this market rising.

Bear also mind that bulding is down to 140k homes per year...underlying demand is running at 180k per year. So the law of demand and supply applies......Australia has also a high household formation in the 25-40 group (peak home buyer market) compared to even countries like India, China, Vietnam...

Just thought that needed emphasis.

These are not necessarily usual times.

Dave

 

[Belu]

my favourite suburb at the moment is Glenroy - if you can buy at the right price.

I picked up a 700sqm development block for $348k. currently there are ~630sqm blocks going for exactly the same price, but that extra 70sqm is the difference between a 2 unit and a 3 unit development block.

i think the lower market - whilst strong - is still open for bargains, just need to line them up with your strategy and execute

 

[Witzl]

I'm going to agree with Sash... most of these suburbs (that I have looked at in sydney) that are rallying now with massive FHB demand took a massive battering after the 2003 peak.
The current "boosted" prices arent back up to their 2003 peaks yet in many of these suburbs, so i *feel* that it is unlikely for them to fall back over again.

For example - a 3bed/1bath fibro/clad house in St Marys, Sydney has been priced as follows:
1996: under $120K
2003 Peak Times: ~$300K
2007-2008 Hi IR times: ~$220-240K
TODAY: ~$290K

... thats just what i've seen in my limited knowledge of western Sydney. I have no idea about melbourne though!

 

[RumpledElf]

Bah, FHBs. I want to sell my house for about $85k (its totally, utterly renovated, inside and out) but the house opposite my backyard is for sale for $65k (unrenovated) and its been on the market for 3 months ... I fear mine won't sell.

 

[natedog]

Can I ask which suburbs this is?

Sure Sash, it's Mornington that ive been watching the closest....

Cheers,
Nathan

 

[Bayside]

What part of Mornington? I like the look of Tanti Park..... cheap and in a very good location. Kinda like The Pines on Mornington lol

 

[josko]

Hi Nathan,

This kind of experience is being repeated all over the place. It is mostly FHB's falling over each other to take up the grant before 30 June.

This will (has?) place a floor under the housing market. 2nd & 3rd home buyers then upgrade after the FHBs buy theirs. It has already seen increases in the lower quartile of prices.

IMO, the government cannot afford to announce any continuation of the FHB grant past 30 June as this would halt the urgency to buy NOW. They need $'s to flow into the economy immediately. Come 29 June they may announce something - but I would not like to put money on it

It is interesting to see the different FHB price ranges in various areas.
Beach places like Terrigal & Avoca where we regularly buy for clients it is under $600K. Around Gosford, Blacktown etc it is under $350K. In Wyong shire it is the $200K - $300K range where you see FHBs.

Most canny investors will either stay out of the price ranges of FHBs - it is just too hard to compete when they offer listing price and above. Or they'll wait till the feeding frenzy dies down post 30 June. Or (as we've seen) they engage a Buyers' Agent to source property before it comes on the market to the general public.

The conditions are all perfect:
IR's at there lowest for 40-50 years
Cheaper or same to buy rather than rent
Affordable housing
$'s handed out by govt. - so no need to have much of a deposit

The only possible exception is employment or more accurately the fear of unemployment.

Totally agree with you Propertunity.

I hope these FHOB's have secure jobs.

Regards JO

 

[sash]

Thanks Nathan......I can still more progress there...

Sure Sash, it's Mornington that ive been watching the closest....

Cheers,
Nathan

 

[atti]

Bah, FHBs. I want to sell my house for about $85k (its totally, utterly renovated, inside and out) but the house opposite my backyard is for sale for $65k (unrenovated) and its been on the market for 3 months ... I fear mine won't sell.

why not if i sell mine i might consider moving to country, what are jobs prospects like in ur town ?