will the melbourne market crash soon?

[.toe]

Prices move up on decreased supply and increased demand right? And we have a booming population base because fed and state governments believe we need a larger tax base to support baby boomers, so the demand side wont change direction.

Increasing interest rates will decrease supply (by decreasing new starts), which will ultimately increase prices.

If the government review on supply finally brings them to their senses and they do something about land banking and government supply and developer finance etc, then maybe prices will come off the boil. Otherwise I think its more of the same over the long term.

 

[The Donners]

Is this not a sign that Chinese investors will increase their property purchasing abroad - i.e. Australia?

http://online.wsj.com/article/SB100....html?mod=WSJ_hpp_MIDDLENexttoWhatsNewsSecond

Hong Kong's Hang Seng Index edged 0.3% lower to 21454.94, with property counters losing ground after Financial Secretary John Tsang on Wednesday said the government may raise the transaction tax on properties valued at or below 20 million Hong Kong dollars (US$2.56 million) and also announced a plan to auction two parcels of land in coming months to prevent a potential asset bubble.

"The announced measures are not really harsh, but the indication is clear as the government is committed to curbing rising property prices," said Tanrich's investment manager Jackson Wong.

http://online.wsj.com/article/SB100....html?mod=WSJ_hpp_MIDDLENexttoWhatsNewsSecond

 

[The_Bludger]

Fair bit of steam left in the Melbourne market. Just another normal property cycle. Nothing new really. What's next? Prices to increase another 5-10%, Interest rates go up, media reports of sky falling, people stop buying, property stagnates for a while, rents go up to a point where it's cheaper to buy again. Same ol', same ol'.

Best bit of advise I ever got was buy when you can afford it and wait. Worked real well so far.

 

[tobe]

Not sure about the crystal ball stuff, but one assumption I'd like to look into is the supply side all the macro economists use. Most of the migrants are on student or work visas. Most do purchase a house as soon as they can after arriving, but who is to say the migration will continue, or that the ones here will stay? If there was some factor that slowed down migration, or even made people move out (like the early 90s) perhaps to the resource states, then the supply side argument falls away, Moreover once people start leaving, it would theoretically feed in on itself, less supply = less money for homes etc etc.
Im not saying prices are going to crash, just the migration argument is a tenuois, and perhaps transient argument for prices to continue upwards.

What would be the verdict on Melbourne's prospects without a growing population?

 

[The_Bludger]

Most do purchase a house as soon as they can after arriving, but who is to say the migration will continue, or that the ones here will stay?

The ones here will stay. They love Australia! And so do the Indians, Sudanese, etc. Not a chance they will go back. Australia is the lucky country for a reason and this is very obvious to migrants.

 

[The Donners]

The ones here will stay. They love Australia! And so do the Indians, Sudanese, etc. Not a chance they will go back. Australia is the lucky country for a reason and this is very obvious to migrants.

I thought we were all racist? Interesting...

 

[tobe]

They love it now, but in the future, when the things they left their country for settle down, I reckon a lot will move back. The capital gain from Melbourne property goes along way to establishing your family in many other countries. Research on previous waves of immigration shows a fair proportion dont stay here forever....

 

[BayView]

I thought we were all racist? Interesting...

If we were all racist there would be no immigration policy.

Or, at best; it would be as hard as hell to get in, and we wouldn't tolerate non-English signs, given that our main language is English..and so on.

Incidentally, on the subject of why Aussies are so concerned about whether the rest of the world thinks were are racists; why should we care?

If they think we are, they won't come here. Suits me. Let 'em think what they want from thousands of miles away.

If they don't think we are; they will come here, and that's fine. We need the tourist dollars.

Do you think China gives a toss that we are all horrified at how many prisoners they execute each year? Not a racism issue, but definitely a human rights issue and they couldn't care less what we think.

Same with the whaling disguised as "scientific research" and so on.

I could not care less what the world thinks of me, or our Country, and I can assure you - having done a decent amount of O/S travel; they don't care about us either.

Most of the world knows next to nothing about our Country.

It's only the media and a few pollies who have this fixation about what the rest of the world think of us.

 

[.toe]

I've posted this before but it might be more appropriate here.

 

[aussierogue]

Lets see what the governments NEW RULES (as of yeasterday) will do to chinese damand and hecne property prices.

Im expecting a 10 percent drop...lets see.

 

[Wibbly Pig]

Interesting times indeed. I am glad the government has finally come to its senses and reversed the insane relaxation of FIRB rules for foreign buyers. I believe this will have a MAJOR impact on house prices, particularly in Melbourne's Eastern suburbs and we will see a definite plateau or more likely decrease in house prices over the next 6-12 months.

 

[craigb]

why is there a specific relation with victoria, and the FIRB, doesent these new (proposed) rules apply to the rest of Australia too.

 

[Wibbly Pig]

why is there a specific relation with victoria, and the FIRB, doesent these new (proposed) rules apply to the rest of Australia too.

The tightening of FIRB rules applies to the whole of Australia, however is likely to have the greatest impact in Melbourne and to a lesser extent Sydney where prices in blue ribbon suburbs (the target suburbs) of foreign investors have increased by 30-50% since the initial relaxation of the rules.

These changes will have a MASSIVE stabilizing or negative impact on house prices in these areas which will be reflected in the ensuing months.

 

[craigb]

thank you , why do you think the O/S investers targeted melbourne, more, or is it just the way they have targeted the area.

 

[aussierogue]

I think it will have an inpact over the next month or so until the o/s buyers get their paperwork in order. The limit of max 300k has been taken out and thats fairly significant. Most Chinese buyers are in the for the long haul i suspect.

Wibbly - I think 30-50 percent is a massive overstatement!

 

[craigb]

they only have to sell when they leave the country, yeh! that will happen.

 

[Wibbly Pig]

thank you , why do you think the O/S investers targeted melbourne, more, or is it just the way they have targeted the area.

I think Melbourne has been affected the most due to the high number of overseas students studying here. Education of overseas students is a major industry in Melbourne (perhaps more so than any other city in Australia) and I believe many cashed up parents of these overseas students have been taking advantage of the relaxed FIRB rules to buy Melbourne/Australian property as as they see it as a relatively safe haven due to the seemingly good economy (which of course is directly tied to China's economy). There has been no doubt a significant degree of speculative buying as well. Unfortunately, speculation only leads to price instability and encourages a boom/bust scenario.

This would explain the significant price rises occurring in Melbourne and to a lesser extent Sydney rather than in the booming resource states of W.A and QLD where you would expect the house price recovery to be the strongest. (In fact, I understang the property market in these states is still quite fragile and still 10-20% below the peaks of 2007 in many areas).

Further evidence of overseas buyers artificially inflating our market is the fact that the volume of home loans to locals has been steadily dropping over the past 5 months since interest rates have been rising which usually correlates to a plateauing or even slight decrease in house prices. We have seen the opposite with continuing price rises despite falling home loan volumes. The only explanation for this is foreign money entering our market.

Now that the FIRB rules have been tightened (along with removal of doubling of FHOG), we will start to see the true market emerge over the next few months. Unfortunately many people will have bought into the mania over the past 6-12 monhts in fear of forever being priced out of the market and in many cases have taken on a loan bigger than they really should have. This will start to hit home particularly if interest rates continue to rise to more normal levels.

The big 4 banks know this, and as a result they have been tightening their LVR and lending criteria over the past few months as they are heavily exposed to the residential property sector. With the cessation of overseas credit and tightening of local credit availability to buy houses, I think we are in for a long period of price stagnation or a period of decreasing prices. This will accelerate to a 'bust' scenario if the 'miracle' China economy unexpectedly has a hiccup or if they go into recession which is a real possibility. A China recession will spell the end of the resources boom and have major negative effect on the Australian economy AND house prices.

 

[aussierogue]

I would also say that we wont see immediate drops att all - there is a new level and this will be maintained. Unless we see the foreighners trying to ofload which I dont think will happen.

 

[Wibbly Pig]

Wibbly - I think 30-50 percent is a massive overstatement!

No unfortunately this is true, for suburbs like Camberwell, Kew and Balwyn in Melbourne.

 

[aussierogue]

Its not true - these suburns have not increased by 30-50 percent in the last 12 months.