With rates in AU being historically low, and people being able to borrow more, demand for real estate can only be increasing. And since the supply in Sydney is lower than demand, it will be pushing the prices up. For how long? Until the rates start going up I guess. With the current inflation being at around 2.2% (healthy inflation is from 2% to 3%) I don?t see RBA increasing the rates just as yet. Also, unemployment is still growing, and Australian dollar is still strong. In my opinion, the economy is too fragile for RBA to start increasing the rates now, more likely in a year or so. And until the interest rates start going up, the property prices will be increasing.
State of the Property Market
- Thread starter amativus
- Start date
With rates in AU being historically low, and people being able to borrow more, demand for real estate can only be increasing. And since the supply in Sydney is lower than demand, it will be pushing the prices up. For how long? Until the rates start going up I guess. With the current inflation being at around 2.2% (healthy inflation is from 2% to 3%) I don?t see RBA increasing the rates just as yet. Also, unemployment is still growing, and Australian dollar is still strong. In my opinion, the economy is too fragile for RBA to start increasing the rates now, more likely in a year or so. And until the interest rates start going up, the property prices will be increasing.
Shock, horror!
Surely this has only just started happening?
Sydney market - I reckon it will creep along over next 2 years, slowly going up incrementally....not the hysterical gang-busters that some here have been recently saying.
Job market is still bad, still lots of business closures on the news to keep folks a bit tentative, etc.
Just because rates are low; doesn't mean swarms of folks will rush out and buy.
It'll take about a year before any real change in sentiment - if any - from the recent Election result.
If the job figures from this last quarter are not good; it'll put the brakes on.
Investing is not about predicting, waiting or wanting for something to happen
but make sure you can dance in the storm and can withstand all type of weather events.
There is a thing called black swan event, it is highly improbable but very destructive if you are not prepare you can get wiped out...
a black swan event for properties would be interest rate heading up 9%+
properties value decline 20%+ etc...
No one can predict that, no one knows but it is a small probability it can happen
can you dance in those situation?
GFC repeat 10x and shares market drop 50%+ I can dance in it and profit greatly from it.
Warren Buffet used to say High tides lift all boats and you only find out who swim naked when the tide goes out
but make sure you can dance in the storm and can withstand all type of weather events.
There is a thing called black swan event, it is highly improbable but very destructive if you are not prepare you can get wiped out...
a black swan event for properties would be interest rate heading up 9%+
properties value decline 20%+ etc...
No one can predict that, no one knows but it is a small probability it can happen
can you dance in those situation?
GFC repeat 10x and shares market drop 50%+ I can dance in it and profit greatly from it.
Warren Buffet used to say High tides lift all boats and you only find out who swim naked when the tide goes out
Don't forget increasing expenses and inflation.
The RE industry is very gung ho about touting any type of increase, but never increases in holding costs.
The RE industry is very gung ho about touting any type of increase, but never increases in holding costs.
In such a situation, most property investors would be ruined. Rents would go through the roof. Any investor still standing could clean up.
Fixing your interest rates could provide some temporary relief....until crunch time...unless the storm blows over before the fixed term expires.
Having a large cash reserve would also be handy.
that is wishful thinking, there is limit on how much rent you can increase by law to existing tenant, there is also the risk your tenant just default all together if the rent is too high
not sure if there is a clause in bank lending about when asset drop exceed certain %, they can recall loan and force revaluation and if you over 80% LVR due to revaluation LMI start to comes in so you get hit on multiple fronts ... it is wise to check the fine prints contracts
Having a large cash buffer and low LVR I think is a safer bet than banging on
increase rent and fix interest...as banks move interest before the market move
on the way up they move before and on the way down they move behind...
banks rules to maximise profit for shareholders.
The only investors that benefit are the one with lot of cash, as most investors cant refinance during a market shake out, all their asset going to be revalue a lot lower than they think they can get.
as you can see the guys that make the most out of the stock market shake out are the deep pocket investors with cash, everyone on high margin get wipe out ... I cant see it much difference during a properties market shake out...
This is of course assuming there IS a property market shake out.....
Many things would need to occurr in OZ for there to be a BIG decline in property values in the capital city markets anyway....some of them....
-big hike in unemployment
-interest rates increasing dramatically
-a falling population in the major capitals
-lack of access to any sort of reasonable finance
- people deciding NOT to live around our major capital cities.
- a massive oversupply of dwellings is created by building too many
- a massive mindset shift away from the great Aussie dream of owning your own home and sacrificing other stuff to do it
If a combination of any of them were to occurr at the same time then maybe we would have something to worry about, till then we are all good.
I actually dated a black swan once....
Natdog
Yes, and will add another one to the list - negative media reports, which can influence the property market as it creates fear, when this happens people sit on their hands and do nothing.
However, as we know, it is quite the opposite at the moment, very much positive reports on property markets Australia wide.
Yes, and will add another one to the list - negative media reports, which can influence the property market as it creates fear, when this happens people sit on their hands and do nothing.
However, as we know, it is quite the opposite at the moment, very much positive reports on property markets Australia wide.
You forgot to add spiralling living costs (which is happening).
Add that to points one and two and a big handbrake will go on.
So far; we have two out of three - unemployment is rising; don't be fooled by reports.
My ear is on the ground every single day and I can promise you; things are still not good.
The retail figures might say otherwise; but folks are buying more and more online - less from yer local shops etc; so there is one sector which has stalled - retail.
I know for a fact (not because my joint is tanking) that the automotive industry is in freefall. (Sanj reported otherwise just recently, but that's a customer talking to his retailer - not the retailer to his reps). More car jobs to go, and this affects a myriad of other linked businesses.
So, that's two sectors.
Mining; three.
Residential building and repairs (from tradies); still weak -that's four.
You can also add lack of finance to that because the Banks are still mostly in post GFC mode; despite the cheap money right now.
You're wrong here. It hasn't stalled, it's changed! Online stores are still stores. Just because they're not renting a retail space does not mean they are not in retail.
My own experience here. I operate an online store, and I do it from home. If I rented a shop and didn't sell online my turnover would plummet and my costs increase. Sure, the locals would know where to buy my product, but I would only get sales from locals.
Sitting here this morning, looking at where I'm sending my packages to, they are going all over Australia & (rarely) NZ as well. There are quite a few places that would not have access to these products if it were not for online stores.
I know the retail spending is still there, but the volume of retail store spending will continue to decline as folks become more internet focused. Each generation will be moreso than say; our parents and theirs.
This will mean jobs gone. On it's own; not a discerning factor, because those folks may get other work, but it is still a factor.
See, I think you're wrong there. Yes, traditional jobs will be gone, but operating an online store is still a JOB. I'm self employed, while being at home, rather than working for someone else in their facility. More & more, those that are enterprising will move this way.
The beauty of it is that I can work when I want to work (except Christmas, when it seems I'm working most of the time). I'm sitting here, in quiet suburbia, basically invisible to anybody, not relying on customers to walk through the door. I can go take a nap in the middle of the day, if I want, or go to the movies, or have lunch with friends. It's a much better lifestyle than working for someone else, AND I'm bringing in an income.
I'm glad you have an online business and that it is going well.
But, not everyone can - or wants to run a business; the vast majority of folks are wage earners; many in retail.
The volume of folk needed to run a business online would be - in most cases - less than a retail store, I would say.
It'll be interesting to see how the retail sector goes - shop front retail stores - for jobs in the next few years.
Being able to attract and sell to all those customers is a benefit now. But it's a benefit every online store gains. So you might get a larger market but over time you'll have more and more competition (who could be anywhere in the world).
The major reason people buy online is price (lower overheads means they can offer a lower price).
But suddenly you are all competing on price, which will over time lead to tighter margins. From there you'll see more and more consolidation, similar to what's going on in the physical space (think bunnings, masters, Coles, woolworths, petrol stations, etc.).
Already you have places like Amazon which are just massive distribution centres, using automation and cheap unskilled labour to compete. The thing about the internet, it is a great price equaliser and will highlight, who has greater costs and standards of living.
You only need one or two of the following really - below is what happened in Ireland to prompt a 50% price drop nation wide:
big hike in unemployment YES
-interest rates increasing dramatically NO
-a falling population in the major capitals NO
-lack of access to any sort of reasonable finance YES
- people deciding NOT to live around our major capital cities. NO
- a massive oversupply of dwellings is created by building too many NO
- a massive mindset shift away from the great Aussie dream of owning your own home and sacrificing other stuff to do it NO
By far the biggest drivers of the price drop were lack of available credit and consumer sentiment. Rising unemployment and increased taxes were obviously also contributors but in my view a smaller contributor than the overall atmosphere of fear and uncertainty, combined with banks refusing virtually all credit requests.
No significant increase in rental incomes.
big hike in unemployment YES
-interest rates increasing dramatically NO
-a falling population in the major capitals NO
-lack of access to any sort of reasonable finance YES
- people deciding NOT to live around our major capital cities. NO
- a massive oversupply of dwellings is created by building too many NO
- a massive mindset shift away from the great Aussie dream of owning your own home and sacrificing other stuff to do it NO
By far the biggest drivers of the price drop were lack of available credit and consumer sentiment. Rising unemployment and increased taxes were obviously also contributors but in my view a smaller contributor than the overall atmosphere of fear and uncertainty, combined with banks refusing virtually all credit requests.
No significant increase in rental incomes.
Mixed reports though
Bayview says that on the ground that things aren't rosey.
I on the other hand work for one of the top 5 melbourne volume residential free standing house builders and 2013 has been out biggest year of sales EVER.
We build small first home buyer homes and top end knock down rebuild stuff inner suburbs.
Bayview says that on the ground that things aren't rosey.
I on the other hand work for one of the top 5 melbourne volume residential free standing house builders and 2013 has been out biggest year of sales EVER.
We build small first home buyer homes and top end knock down rebuild stuff inner suburbs.
It's critical to take notice to the right people. The 95% who can only judge the future based on the recent past deserve a much lower weighting than those who are more forward looking & see the bigger picture.
It will take time for the macro effects to filter down to the 95%. Only then will they realise that the big picture has already changed & they've missed the best bit of the upswing/downswing.
I agree,
The sales we have had this year will only hit the permit data on average 6-9 months after a client initially pays a deposit to start the process.
My thinking is that if there are more people than ever before (obviously only using a builder that builds about 800 a year as an example) willing to make a massive commitment to build then their own personal future outlook is less than gloomy
I think the volume builder market did really well when the Vic Govt were giving out $32k to build a new house, so I am quite optimistic given what natedog has said for those new build areas. It might also have something to do with the scrapping of the FHOG for established houses - pushing people to go for new builds.
