Time to sell Melbourne housing?

[MichaelW]

An interesting article supported with a nice factual analysis of the Melbourne market but with charts of all the national capitals.

Make your own conclusions...

Time to sell Melbourne housing?

Melbourne has long been considered one of Australia's best property bets – it lured my wife and I, among many other buyers – but the city's increasingly costly housing market is now showing signs of weakness that are hard to ignore...

Sydney is looking good from both a GDP to land values as well as a dwelling price growth lagging perspective...

Cheers,
Michael

 

[zed_kid]

Time to sell Melbourne was early to mid 2010.

Melbourne is a totally homogenous market, so yeah time to short MEL, also please sell at a heavy discount. Thanks

 

[Bigtone]

Excellent article, enjoyed that.

So good to see someone just stating some facts rather than ridiculous sweeping statements.

I agree with much of what he said.

personally i am not going to sell anything as i believe the long term outlook for melb is still very good but i certainly won't be buying any more buy and holds here for as while. Just hoping i can snare a new ppor for a bargain this year!

 

[feihong]

Excellent article, enjoyed that.

So good to see someone just stating some facts rather than ridiculous sweeping statements.

I agree with much of what he said.

personally i am not going to sell anything as i believe the long term outlook for melb is still very good but i certainly won't be buying any more buy and holds here for as while. Just hoping i can snare a new ppor for a bargain this year!

Yep, just like hardly any investors (at least the somersoftans anyway) sold their Sydney IPs and/or PPOR in 2003 even though the valuation was really stretched back then.

 

[Monopoly]

Personally I don't see a problem.

The more people sell their Melbourne properties (and as zed_kid said) at a heavily discounted price please, I'll be more than happy help them rid themeslves of same. Sellers are then free to go buy elsewhere anywhere(interstate/overseas) but I'll be sitting here quietly ready and waiting for their impending return.

May take a while....but they'll be back

 

[Bigtone]

Yep, just like hardly any investors (at least the somersoftans anyway) sold their Sydney IPs and/or PPOR in 2003 even though the valuation was really stretched back then.

so u are saying i should sell all my melb properties?

 

[Aaron Sice]

i see melb and syd like bullion.

you buy.

if it dips, you buy more.

you never sell.

 

[feihong]

so u are saying i should sell all my melb properties?

No no, I meant to agree with you and my post was more like a response to the title of the article that Michael posted. sorry for the confusion!

 

[MichaelW]

so u are saying i should sell all my melb properties?

I actually read that as "but don't worry, history demonstrates people don't sell even when valuations are stretched" so prices will hold up.

I didn't post that article to suggest selling as a strategy, just thought it showed an interesting dynamic for Melbourne relative the other capitals.

Cheers,
Michael

 

[feihong]

I actually read that as "but don't worry, history demonstrates people don't sell even when valuations are stretched" so prices will hold up.

I didn't post that article to suggest selling as a strategy, just thought it showed an interesting dynamic for Melbourne relative the other capitals.

Cheers,
Michael

Thanks for the clarification Michael. Like Bigtone, I actually agree with the content of the article, and have been telling my friends/families that for investment, it is better to look elsewhere such as Sydney for now. Having said that, it is a good time to buy a place to live in for Melbournians though!

 

[Deltaberry]

Now is just about the worst time to sell. Bet this guy sold his shares during te GFC

 

[sash]

I have my stuff in the West of Melbourne....the market there is steady as it is affordable.

Not selling...the market will recover...just the time in the cycle.

 

[tom32]

I think the most telling statistic for Melbourne is the completions.

Victoria doing more dwelling construction then NSW and QLD combined (nearly...) means price is at a level supporting an unsustainable amount of new stock onto the market.

Australia has not seen this level of home construction for a long time a cause of which in Victoria has been the Brumby governments special grants on new construction not all dwellings allowing first home buyers to buy new but not necessarily get over the line on existing even if the price of existing is better! It is not very good sustainable policy.

We saw it in Sydney in 1999 - 2000 pre GST, Perth in 2005 - 06 (still seems to be punching above its weight on land release even as prices fall?) in Brisbane and other places where prices overshoot costs of production and every time you have the residential construction boom prices fall back afterward or at least taper off and flatline.

I suspect based on completions in isolation, Melbourne will play out like Sydney did post 2003. I know you should not look at anything in isolation but it seems to be as good an indicator as any of an overvalued market, a rise in housing activity...

Another potential for weakness around overbuilt markets is that people have moved there to cater to this higher level of activity and while it is all good while the building continues it is a difficult thing to move from a home building frenzy back to a sustainable housing market. Its a bit like the likes of Karratha. If it was not growing at such a rate many of the people would not actually need to be their so the state government (more liberal now) tries to hold off on developments so they do not end up with a lemon down the track but in the short term a massive shortage of dwellings persists while many are tangled up building more dwellings...

Don't expect it to go like say the gold coast where a large proportion of the locals are in the local building game so when the music stops it can stop for a long time, but I do think it could be another factor driving prices in Melbourne as the activity in housing tapers off.

If I was to buy somewhere in Australia from an investment perspective it would be Sydney. While it overbuilt early last decade it has been underbuilding since so at worst house prices are currently sitting at the sustainable price to have new construction just serving the market. The only risk in Syd is the liberal state government liberalise land release on the fringe and roll back developer levies and council rates which to achieve they would have to bring in new regulation to allow local councils to up rates above inflation which would be political poison... Of course suddenly developers could then be able make a quid against the general house price market and for the short term an activity boom would follow. Long term this is not good for house prices. I do personally think it is good for our broader economy long term, competitive advantage and all that having an efficient development process meaning our real wages will be higher at a lesser cost to business, but it appears our governments in this country are hell bent on keeping this as difficult as possible, Sydney being the worst hence the best for house price support.

From a PPOR perspective i.e. my own position Perth is a hell of a good place to start out. I would not go back to Sydney with out an accompanying 30k pay rise. The irony is the pay is better in Perth!!! Then in Perth when you have a mortgage of say 300k on a pretty nice near new house you can go on spending on other things perhaps even invest a bit. If I was to buy in Sydney a family home I don't know that I would ever feel as comfortable...

 

[natedog]

Hi All,

Working in the building industry in melbourne, i have witnessed the amazing growth in prices of vacant residential land released onto the market all over Melbourne over the last few years.

I always thought prior to this that land here was good value compared to other capital cities....maybe not so much now.

as the prices continued to rise, people kept on buying the blocks, camping out for days to secure some dirt!

i figured that as melbourne had a high population growth over the last few years, that this made sense, after all, people have to live somewhere.

It's now at the point where you have to pay $190k for a 375 sqm block of land in Pakenham...$200k for 300sqm in cranbourne...$350k for 400sqm in Keysborough....$380k for 650sqm in point cook...etc etc

All over the fringes of melbourne land prices are higher than ever.

so where does this leave us now?

I am now seeing decreasing demand for vacant blocks, could lead to less construction activity, but having said this...alot of the land that was purchased over the last year or so has had such long title dates (some 12 months out)on it that there may infact be a bit of a backlog on housing starts.

Are high land prices on the fringes going to push people back to looking at good old established, not so new homes, creating some demand back closer to the cbd, or established homes around the new fringe estates?

Will people just sit on thier hands and say..."lets keep renting, prices are crazy out there" creating some pressure on rents.

Will who have listed thier homes on the market, decide to take it off and put off thier plans for a while, rather than slash the selling price to get a sale?

thats a big question i think, do the people who have thier homes on the market right now HAVE to sell, or can they hold tight?

i dont know the answers to these questions in the short term, but i will continue to blindly hold Melbourne property long term and believe that rents and values will rise...boring old buy and hold.

suits my deep down lazy investing approach...Yawn...im going to bed now, wake me up in 10 years when my equity has quadrupled

Nathan

 

[buster]

There is still demand it has just shifted. Like a ripple effect. People are waking up and building were they can afford like Bendigo Mildura and Swan Hill prices are trending upwards. Talking to some builders they said, they are vey busy and land supply was getting short, and councils would take to long to releasr more for devolopment. FHBers rushin to build while the vic grant is still available. Can buy land for 70k or less and build for 200k with the grant building is still affordable.

 

[buzzlightyear]

It's now at the point where you have to pay $190k for a 375 sqm block of land in Pakenham...$200k for 300sqm in cranbourne...$350k for 400sqm in Keysborough....$380k for 650sqm in point cook...etc etc

Yet Sydney land is still far more expensive than Melbourne.

 

[FelixL]

Thanks for the article, pretty much shelving my plan to invest in melbourne now, all the data all point to a sydney like 2003 scenario. Apart from population growth, all the key indicators like rental yield, new building supplies and extraordinary price increases in the last couple of years are not looking good.

Even on population growth, traditionally people from overseas migrate to Sydney and Sydney locals migrate to Melbourne because of the price gap. Now that the gap has closed in dramatically, there will be less people moving from Sydney to Melbourne now. I have a couple of collegues actually moved to to Melboune and now back to Sydney

 

[jingo]

Would have to agree with the article. Yields are absolutely terrible in Melbourne at the moment. However, if you have been in the Melbourne market since 2006 you will have made substantial capital gains and if you have prepared your finances and set up lines of credit against the rising values in 2010 you would be in a position to reinvest again in other markets or asset classes. (Sydney etc)

Regards Jason.

 

[Deltaberry]

Thanks for the article, pretty much shelving my plan to invest in melbourne now, all the data all point to a sydney like 2003 scenario. Apart from population growth, all the key indicators like rental yield, new building supplies and extraordinary price increases in the last couple of years are not looking good.

Even on population growth, traditionally people from overseas migrate to Sydney and Sydney locals migrate to Melbourne because of the price gap. Now that the gap has closed in dramatically, there will be less people moving from Sydney to Melbourne now. I have a couple of collegues actually moved to to Melboune and now back to Sydney

Pretty surprised. Sydney - and admittedly comparing CBDs with CBDs - is far more expensive to rent.

 

[Melbournian]

All these are all very macro views of melbourne in general.

there are areas where property is still selling and many inspection attarct a lot of people. Just came back from an auction where they were 25 people and 1 bidder with many other interested parties. Currently in negotiations. Even the bidder's price is above what it was last year and the year before and a record price in the buliding. If you're too further out - it limits your target market and therefore in the event if you are forced to sell, it limits your ability to do so.