How is the real estate market.

[xelasnave]

What is the real estate market doing in your area.

A friend of mine was showing me a list of properties that had sold near him in Ryde.

That market seems to have gone mad with ordinary home selling well past the million dollar mark.

I noticed a semi on a main road sell at auction and having been a real estate agent selling in that area can say that once upon a time that property would have been on the books for months. Now no problem.

Have you noticed anything like this.

The prices seem beyond belief.

Alex

[JB80]

I have been watching the market for the last few years and have been saying that the market is dangerously overvalued and more to the point getting more and more unaffordable.

My Nans home was sold last year, a 2 bed house on a plot of land and in a condition that was for the most part unliveable for nearly $400,000 to a developer who tore it down immediately and is building 3 sub plots on it and he stands to make a killing.
Shame that because had it been in a normal market I probably could of worked something out to keep it in the family.
To be fair the land was the selling piece there.

And this is suburban Adelaide. I look in the areas I grew up and we couldn't afford the sort of houses we lived in growing up or would be looking to buy now and more to the point the houses have long since sold off their yards and just aren't as desireable to me anymore.

That said I can find some extremely well priced(for now) and amazing properties in rural areas but of course that has other problems like work availability.

I don't foresee a rosy future for the housing market, something will give eventually.

[Atmos]

5 years ago I was looking at buying a house in northern Melbourne, would have cost me about $300,000, looking nearer to $450,000.

5 minutes up the road from me a very standard house went for $960,000, this is in Watsonia!

[jenchris]

If they rezone my place, I'm on a winner . I'm on acreage on the M1 between gold coast and brisbane.
Near shops and a pub, rail link and schools.

[casstony]

Warragul is a popular town an hour away from Melbourne and a standard house here is about $400,000; that's still expensive but those city prices are insane.
I feel sad for the younger generation who've been taken for suckers in this real estate boom - banks doing very nicely.

[Atmos]

The property prices are said to fall for my generation within the next 12 months... Not sure if I see it happening though.

[xelasnave]

I have noticed up north prices for "life style" properties are going crazy as well.
A small acerage that you could not farm but have a horse etc seems to be very expensive.
I think folk sell up in a major city get a huge price and think the country stuff is cheap. The properties sell quick supply falls prices move up.
A neighbour of the mate from Ryde sold at 1.8 mil He may well move out to the country and see a 100 acres with a house for $400,000 and be very happy he still has a million in the bank. If he had to pay another $100,000 he would not object and I suspect that is the way it goes.
I am near Epping and the talk is 25 storey blocks are going ahead causing prices to go thru the roof. I have heard of main road dumps going for 4 mil cause of high rise.
I once thought it was a bubble but I now think that we aint seen nothing yet.
And a lot of the market comes from or via Hong Kong where a shoe box costs a fortune.
For those folk Australia must seem very cheap.

Alex

[casstony]

It's always hard to see a bubble from within and justifications abound for why it's different this time, but historically every market bubble has ended the same way (whether it's real estate, commodities or tulips).

Over the last few decades bubbles have been blown in various markets around the world propelled by cheap money (low interest rates, easy loan terms, government stimulus) effectively stealing from future generations who will have to pay for our excessive spending.

[xelasnave]

Ah yes the tulip bubble.
But this time it is different:D

Alex

[xelasnave]

The market economy will not work if you take away the boom bust part.
Alex

[UniPol]

What's the old adage? Your house is worth nothing until you sell it. Where do you go if you don't want to spend any more money than you got for it?

[GeoffW1]

Hi,

I'm in Mortdale, Sydney, and prices here are just crazy. I saw a feature fibro 3-bed single story place sell for $1.2M over a year ago and thought 'Ah yes, demolition and a project home there', but no, the buyers settled in.

I am fond of saying I could now not afford to buy my own home from me at the price I would ask me.

My son and his family have been shut out of the market, I think they will be renting for a very long time.

No Cheers

[gregbradley]

The property market peaked a little while ago in Sydney. Its already showing signs of some pullback. 10% pullback would not be unrealistic in some areas.

I have seen several real estate booms but this is the first time I was concerned it was over the top. Mind you its been 12 years since the last boom so immigration, wage rises have added pressure plus interest rates are at all time lows.

What is most concerning though is the fact that Australia has 175% debt not including financial sector. I believe that is mostly personal debt from mortgages and credit cards. Its the 2nd highest in the world after Sweden.

Couple that with the fact that our national debt has been in the red now for quite a long time since the Howard years when he somehow had us in the black and paid off the national debt. With deficits now seemingly locked in for the foreseeable future plus more manufacturing shutting down (no more cars made, steelworks in SA under threat, mines weaker now) its hard to see much of a case for high real estate prices.

If interest rates go back to historical averages of around 7% how many of these 2 income $1 million plus mortgaged couples will be able to cope financially? I'd say a lot will go back on the market and could cause a big drop from oversupply.

Getting rid of negative gearing even if for only existing properties could also cause problems. Keating did that in the late 80's and that and other factors had interest rates going to around 16% plus. Stopped a lot of houses from going on the market because they would lose their 12% mortgage and stopped apartment construction overnight.

Greg.

[AussieTrooper]

Same story where I live. You can’t get a house for under $1M, and even flats go for $600K. Just a few months ago, someone bought an old house near me, knocked it down, cut it in half and sold the two (attached) houses for $900K each.
This may level off, but I don’t see the boom ending any time soon. The vast majority of buyers are wealthy folk from overseas, and that’s not likely to change any time soon.

[w0mbat]

Well I have a different story to tell. I recently had a couple of real estate agents value the 15 acre property I live on in East Gippsland and was shocked to discover that the asking price today would be at most the same as we paid ten years ago. We could not even rebuild the house we have on it for the suggested sale price!
Frankly I simply don't understand why more city dwellers don't consider moving to regional areas (especially those into astronomy). Clear dark skies, safe healthy environment for kids AND adults. No traffic, no noise, friendly people and community. Having lived in both the city and country it amazes me how much MORE community activity there is than in the city. Across the road some Melbourne people recently bought a small property and they are already remarking on how many more visitors they get than they ever had in the city and how their neighbours actually offer to help them.
We have better TV than in the city via satellite. And when the new NBN satellites are up and running we will also have good internet.
So much to gain and so little to lose.
Ian

[JB80]

This is exactly the truth of it.

Here in Spain the bubble blew in 2007 in a huge way and the market is at rock bottom still. Worse still it was the underlying cause of what they call "The Crisis" here which when the housing market went everything else in the economy did as it was reliant almost entirely on this perceived wealth and the construction industry to prop it up.

Some of the similarities are striking to the Aussie bubble, terms like foreign investors, 2nd or 3rd investment properties, negative gearing, subprime mortgages, huge levels of household debt etc....
Maybe because I am not on the inside I can see this clearer but it is hard to miss really.

Do I think the Aussie bubble will burst as hard as Spain's?
Probably not, or at least you would want to hope not.
For example I know what losses the previous owners of our house made as we have all the receipts from them building and they took a 150,000 euro hit, nearly 50% and they got off lightly.

I have no idea what is in store for the Australian market but this statement is bang on the money.....

"but historically every market bubble has ended the same way (whether it's real estate, commodities or tulips). "

[xelasnave]

How many houses to get a good tulip these days?

[casstony]

I heard the tulip market is heating up - better get some while they're still cheap.

[xelasnave]

https://en.m.wikipedia.org/wiki/Tulip_mania

The above link will help anyone wondering about tulips and economic bubble colapse.

[xelasnave]

Hang in there real estate agents can be wrong.

[JB80]

I totally agree with Ian's post and if we could that would certainly be the approach to take, the big problem and main reason people don't do that is jobs or lack of them.

[casstony]

I grew up in Orbost and left for education and job opportunities and I think many teenagers do the same. I wouldn't shift back to a small town because of the lack of opportunity for my kids.
At the same time I despise city traffic and over crowding.
I think regional cetres offer a good compromise between the two.

[csb]

Thankfully, my suburb Para Hills has been catching up and sold prices are where I think they should be.

A house across the road, very similar style and condition to mine, up for $285K. This surprised me so I went to the open inspection and the agent said offers of $260 been made. I was expecting mine to be $200K, so very happy about this listing as planning to sell in a year.

In many parts of Para Hills there are tree lined gullies behind our properties (we are situated above the Adelaide Plains with lots of parallel gullies) and views to the coast.

So looking good for sellers. Agent also said turn arounds of 4 weeks average.

[DavidH]

Well, this is an interesting topic. I'll do my best not to make this a rant, but will probably be unsuccessful.

Here in Mackay, we are experiencing a definite bursting of the bubble. The banks probably won't talk about it openly, but the end of the mining boom has left many properties worth less than the amount that the owners owe on them. Big incentive for the owners to declare bankruptcy and leave the bank with the fallout. Moranbah? We won't talk about that.

Can't help thinking that we are seeing the tip of an Australian iceberg similar to that which the rest of the world hit 8 or 10 years ago. Except that in our case, capital city prices are being held up for now by foreign buyers and low interest rates. If foreign cash dries up or domestic interest rates increase, look out below...

As a nation, we have squandered the spoils of the mining boom on extravagant spending at the expense of the future. By now, we could have been in a position to have weathered any economic downturn for quite a few years, but we find ourselves in a situation of deficit spending with little savings to back up our (bad spending) habits.

Both major parties point to each other as the cause of our situation, but in a democracy, we get the government we deserve. If the nation as a whole was looking to live within our means, the government would respond accordingly. We have ourselves to blame, and I am afraid we are going to learn the same lessons as Japan, the US and Europe, even though we have been warned by their experience. The greatest part of Australian debt is private, not government debt. However, another financial crisis could easily transfer the private debt to government via a bank bailout. And who is the government? We are a democracy, so it is you and me, and we will have to pay for it.

We were cushioned from the worst effects of the GFC by stimulus from China, which appears at least partially to be continuing, but distortions in the Chinese economy are surfacing, and the opaqueness of the Chinese situation makes the outlook uncertain. Continuing money printing in Japan and Europe is keeping the world economy from collapsing, but cannot continue forever. The world has to face up to a mountain of debt, and try to work out who is going to pay for it. Unfortunately for anyone who has saved money, a government which is facing a crisis has only one place to plunder. That is, from people who are not in debt. Take a look at what happened in Cyprus for an example of a "bail in" rather than a "bail out".

Think about the domino effect of a real crisis in the Australian real estate market:

Real estate market crashes (caused by increased interest rates or exodus of foreign buyers).
Home owners default on their loans.
Bad loans put banks in crisis.
Depositors look to extract deposits from banks en masse.
Banks in crisis cause government to bail out banks.
Government in crisis looks to savers (i.e those with money in the bank or superannuation) for cash to "save the nation".

So effectively, anyone with money in the bank bails out the bank's debtors.
Still think that money in the bank is as "safe as houses"? Maybe it is, but only because houses aren't safe either.

"That can't happen here", you say. Well, that is what they said in Iceland, Ireland, Italy, Spain, Greece etc in 2006/7. The governments of those countries may not have overtly stolen their citizen's (or foreigner's) cash, but they are trying their hardest to make it worthless by printing money to inflate the debt away. Either way, savers suffer.

To date, Australian governments have relied on the Reserve Bank to keep the situation stable. But the RBA is in a cleft stick. Lowering interest rates means exacerbating the housing bubble. Raising rates deflates the bubble, but causes the Australian dollar to increase in value making our industries uncompetitive with the rest of the world. The only other alternative would be to restrict lending for housing in some way, but this is unlikely to be electorally unpalatable.

So i'm afraid that there isn't a good solution to our situation, but to buckle up, enjoy the ride, and use our view of the universe to realise that this is only "small stuff".

Regards,
David. :screwy:

[alan meehan]

Here in Newcastle prices have risen over the last 2 yrs theres nothing you can buy under $400,000 most of the older houses are being brought up and townhouses by the ton are going up everywhere .just west of me there are new estates going in but all the new blocks are small a large house just fits on and not much yard ,but go further west from here out towards the mines area just hr from me properties not so old you can pick up places out there on large blocks of land massive houses for less than you pay to build them.miners where spending up big time out that way now its not so good.

[Merlin66]

At least we should be thankful the mortgage rates are not up around the 18% some of us had to suffer in the 80's.
If that ever came back I think you'd see a lot of pain and suffering from the X generation......

[xelasnave]

Yes and it was not easy to get a loan.
I worked in a solicitors office doing mainly conveyancing and it was tuff.

Alex

[sn1987a]

When the AI's start to nibble away at all those "good jobs" the whole system is gonna go Karratha.

I think some savers and retirees wouldn't mind 18% interest rates. Back then a 3 and 1 first home in Perth was around 55-70k and you could get a good income stream from a couple hundred grand in the bank.
oh and education was free back then too.

Yeah its way better now :P

[casstony]

Low interest rates are preferred by borrowers, high rates are preferred by savers, somewhere in the middle is a rate that's healthy for the economy as a whole.
Around 8% provides an income for retirees and puts a cap on house prices such that home borrowers don't end up with enormous loans.

[sn1987a]

Hey Meru I've got a job for ya! :D


http://www.3ders.org/articles/20160331-winsun-3d-prints-two-gorgeous-concrete-chinese-courtyards-inspired-by-the-ancient-suzhou-gardens.html

[AussieTrooper]

I'm not sure it is a bubble. There are few large cities (3+ million people) in the western world where you can get a block of land in the inner suburbs for under $1M. There will always people who are catch the train past these places every day, and want to move closer to the city.

The one part of it that I can see going south is the glut of shoddily built blocks of flats. Exorbitant prices are asked for tiny flats.
I can't see the market maintaining that a 2 bedroom flat is worth $500k, where a 3 bedroom house on 700m2 the same distance from the city goes for $1M.

[Tandum]

Last nights 4 corners covers this topic. Check it out on iView.

The guts of it shows the market is way over valued, yearly income to house price is around 12X in the southern capitals, (Ireland popped at 8X and the US at 5X), about 50% of all sales are to negative gearing investors and banks are falsifying loan applications to make them look better. POP.

[dimithri86]

Without going into specific numbers, I earn around the 100K mark, and every major bank was willing to lend me over 900K, only requiring 10% deposit. After tax and living expenses I don't see how I would be able to pay that back.

[ThunderStorm]

Basically no bubbles at all. Immigration department does not stop migrants from China, I have specifically say China. They are rich (no matter where did their money came from...corruption, business etc), especially the "children" of those "rich" Chinese Government officials they need to send their children overseas for political insurance. More and more houses will be needed, old or new. They do care the prices.

[ab1963]

we live in Sydney and are looking to sell to make a move to Tasmania so we have had our house valued recently and when she gave us the figure i nearly passed out ,it was valued at nearly 7 times what we paid for it 20yrs ago so it looks like retirement is coming earlier than i thought ,you can buy in Tassie a similar home for a third of the price

[casstony]

May as well sell while prices are in the twilight zone - main house in Tasssie, winter house Qld or Fiji? :)

[OICURMT]

This was a great show... sadly true. :(

http://www.abc.net.au/4corners/stories/2016/05/02/4451883.htm

If you missed it... http://iview.abc.net.au/programs/four-corners/NC1604H014S00

The only way my kids are going to afford housing is to move back to the USA...

OIC!

[xelasnave]

Before you get too excited may I suggest be careful taking an agents appraisal. Some are incompetent, some lie and some are desparate for a listing and pick a happy figure out of thin air.
I was in the business and say I am not being dramatic.
If you want to go to Tassie try and buy before you sell, I mean years before.
Never buy expecting the proceeds of the sale will cover the purchase.
I have witnessed many disasters where folk have purchased and I have not been able to sell their old home for what they expected or indeed get it sold in time forcing them into bridging finance.
However if you can buy a house in addition to your home and rent it until you need it you can enjoy the further(hopefully) capital gain on your Sydney home.
While renting the new place any improvements or refurbishement may be tax deductible.. And dont forget you can take advantage of negative gearing opportunity.

Further make sure things are as cheap as you expect. I had a recent purchase and had to go up 100k on where I thought the market was... The market was moving and I could not see it... And given my experience you would think I should have seen it moving.
When in the business prices would jump 25% within a matter of weeks and we would not see it until it was over.
Once prices were around $150k. Things began to move and we just thought we were selling well. We listed one for auction thinking it would stop in its tracks at$155k but at the auction 6 weeks later it sold $237,500... As I said it jumped so fast... It was after this that we started to notice it was happening all over.
I predict next spring another take off... Maybe.. But things used to go slack during winter, as people prepare to sell in spring, and we get a fall of in supply. Demand builds up.
Also up to elections once saw a fall off in listings.. So maybe after elections moving into spring things could jump again.
I have been in Sydney looking after my father where we shop we are the last Australians.
It is so busy money money money.
I was at the bank today, next to me change this 10k of fifties to 100 s, then next banked 5k, next 10k of 20s to 100 s. The other day sitting next to me lady pulled out 20 k (by my eye which is good with cash) and another guy banking 5k cash.
Pity my legs are crook.
My point is there is a lot going on that tells me we may see things hot up more.
I have always said it is the top of the market that pulls the bottom up. Not the way we would like it but thats my observation.
Even the place I grabbed recently since getting it I cant see anything as good and listings are drying up such that I recon I could relist in spring up 100k...not that I will cause I would have to find something no longer available at the price.
I showed the manager photos of the property her eyes lit up when I told her the price and the number of acres... Could I have started them buying in this area?

I heard about 13 or 14 owners selling for high rise somewhere here in Sydney bht did not take notice to give you details but they got 7 mill each.

All I am saying the bubble thing is always with us but its different to anything I have seen and my experience covers fifty years.

Alex

[casstony]

It does look and feel different this time and I think the reason behind that is the degree to which governments and central banks of the developed world have stimulated their economies. Recessions have been banned for the last few decades with governments favouring soaring debt levels as the way to prosperity. I don't know how long they can keep it up but history suggests we face tough times down the road. All that debt has to be repaid, defaulted on or inflated away.

[xelasnave]

It is a massive juggling act with many balls in the air and it does not seem to be a worry if a ball here or there drops.

I do think the real threat could be any hold up in supply...food oil even internet.

Inflation is our friend without it the system would fail.

Alex

[wavelandscott]

Not in my neighborhood...it is not particularly affordable in this area either

[OICURMT]

East Coast / West Coast aside, on a percentage basis, the US offer far more opportunities for young couples to own a home.

Also, the simple fact that the IRS allows a direct deduction against income for the interest on the loan for the primary residence and the FHA downpayment of 3.5% (for credit scores over 580). The downside to FHA of course is having to purchase default insurance (though tax deductable), but even with this kids can at least get into starter homes, even new build ones. The transaction fees, including commisions are also deductable.


This is what I did in 1990 in Colorado. FHA, 3.5% down, fixed rate at 5-3/8% for 30 years. Sold the house 6 years later when the Californians came in due to CA being too expensive and moved to Texas where I could then afford a commercial loan (20% down)...

Here in Australia, the situation is very different. I live in a nice, but small home (compared to American standards). Variable rates are the dominant package here, so I purchased a home assuming a max rate of 12% so that I could afford the mortage no matter what happened. Also, the "Stamp Duty", which is a form of penalty for being able to afford a home, is complete nonsense as it stiffles both the new home buyer and investors.

I'm now retired, but still paying a mortage. Will sell the house within the year and move back to the USA, where I will start to build my home on some mountain acreage I have. :thumbsup:

[wavelandscott]

You are correct on all accounts...if you are willing and able to live in a more rural part of the USA it is a completely different story in terms of affordability but salary and wages are also markedly lower too.

Back closer to topic, one of the biggest financial mistakes I have made was not buying a house in the Sydney area during our nearly 8 years there. Between the exchange rate change and the increase in home prices we could have pocketed a tidy sum. Oh well, I would probably be bored if I retired now anyway.

But the night sky down under is spectacular. Clear Dark Skies to All