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The Great Australian Housing Bubble

The Great Australian Housing Bubble

Old Sep 28th 2010, 1:16 am
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Default Re: The Great Australian Housing Bubble

Originally Posted by Rod-Helen-Poppy
we all have heard stories like that.

after spending time in both places i've found that what i pay per week in rent now would cover my mortgage back home.

renting in sydney is expensive - if you can prove otherwise then i am all ears
Sure - if you move to Sydney then it's another ball game altogether - but then we all know this in advance, right? It's like moving to London or NYC. I mean, no one gets to move to Sydney then complain about property prices! It's like moving to Rome and complaining about bad driving.
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Old Sep 28th 2010, 1:17 am
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Default Re: The Great Australian Housing Bubble

Originally Posted by Seneca21
For along time I was of the opinion that a massive crash beyond infinity was about to hit the Australian housing market, but now I am not so sure. Look at the UK. People don't realise it but the UK economy was effectively crunched into **** in 2008 - 2009. It's one of the most dangerously indebted countries on Earth, its currency has been turned into toilet paper, its skilled population are in exodus from the place and unemployment is rising stadily all the time.

And yet house prices are not falling because sellers are simply refusing to sell. If UK can keep house prices inflated to their current suicidal level than Australia certainly can. I would not expect a housing crash in Australia any time soon, even with rate rises. I'm not saying they shouldn't fall - because their high prices are really damaging an entire generation, but that they won't.
Good points, but I think what you're saying about sellers not selling is a classic sign of a housing bubble in a slow deflationary cycle.

What happens is that sellers fix their mindsets on prices at the peak of the bubble, then when the market wont pay that, they refuse to sell and "wait for the market to come back up". I have seen this behaviour going on recently in Melbourne also.

Buyers on the other hand see that properties are not selling, because sellers value them too high and wont drop prices. So they think, "well maybe I'll wait a while and see if the market comes down further, they'll have to sell eventually".

Volumes drop, then sellers get nervous, especially if they are investors and want to realise paper profits, and get out of their current rental loss situations.

Then the market comes down, and the cycle feeds itself again.

I am convinced that the UK will come down in the next few years, triggered mainly by the increased unwillingness of banks to write morgages except on terms very favourable to them (eg low LTV), and because the economy sucks and is going double-dip, or close.

Aus is a different situation, banks are willing to lend more and much higher LTVs. But at some point, the banks will stop "doubling down" on residential property and start reducing their exposure (for example, 60% of CBAs loan book is residential mortgages). The only way they can do that is to write fewer new mortgages (as banks in the UK, US, Ireland, Spain have done). That together with a change in the market psychology could trigger a softening.

As someone pointed out earlier, many Aus mortgage-holders are in comfortable positions, and many homeowners actually dont have mortgages at all. They got in at the right time. But anyone who entered the market in the last 2 years, or the upcoming period, will be highly vulnerable to rate rises and value falls. And this includes a large number of loss-making investors. These are the people who will not be able to hang on and who will trigger the deflation. And they will be followed out of the market by investors who have been in there longer but see their equity topping-out or eroding, as well as baby boomers who now need to cash in to fund their retirement.

JMO.
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Old Sep 28th 2010, 1:21 am
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Default Re: The Great Australian Housing Bubble

Originally Posted by littda01
Good points, but I think what you're saying about sellers not selling is a classic sign of a housing bubble in a slow deflationary cycle.

What happens is that sellers fix their mindsets on prices at the peak of the bubble, then when the market wont pay that, they refuse to sell and "wait for the market to come back up". I have seen this behaviour going on recently in Melbourne also.

Buyers on the other hand see that properties are not selling, because sellers value them too high and wont drop prices. So they think, "well maybe I'll wait a while and see if the market comes down further, they'll have to sell eventually".

Volumes drop, then sellers get nervous, especially if they are investors and want to realise paper profits, and get out of their current rental loss situations.

Then the market comes down, and the cycle feeds itself again.

I am convinced that the UK will come down in the next few years, triggered mainly by the increased unwillingness of banks to write morgages except on terms very favourable to them (eg low LTV), and because the economy sucks and is going double-dip, or close.

Aus is a different situation, banks are willing to lend more and much higher LTVs. But at some point, the banks will stop "doubling down" on residential property and start reducing their exposure (for example, 60% of CBAs loan book is residential mortgages). The only way they can do that is to write fewer new mortgages (as banks in the UK, US, Ireland, Spain have done). That together with a change in the market psychology could trigger a softening.

As someone pointed out earlier, many Aus mortgage-holders are in comfortable positions, and many homeowners actually dont have mortgages at all. They got in at the right time. But anyone who entered the market in the last 2 years, or the upcoming period, will be highly vulnerable to rate rises and value falls. And this includes a large number of loss-making investors. These are the people who will not be able to hang on and who will trigger the deflation. And they will be followed out of the market by investors who have been in there longer but see their equity topping-out or eroding, as well as baby boomers who now need to cash in to fund their retirement.

JMO.
But how long can the "Mexican stand-off" beteeeen buyrs and sellers last? It could be a long time. What really gets things going is mass redundancies and forced sales, but I don't see those anywhere either. The sellers you describe are simply not prepared to let their homes go for anything other than 2007 peak - and if they don't have to move then they're not going to until they get it, nominally at least!
- look at how much UK property has fallen against gold, for example.
This could go on a longtime, is what I am saying. Are people prepared to rent for the next 10 years?
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Old Sep 28th 2010, 1:39 am
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Smile Re: The Great Australian Housing Bubble

Originally Posted by Seneca21
I think the opposite is true. In Australia rent is much cheaper than in the UK, but in both countries house prices are suicidally high.
I am not saying renting isn't cheaper than buying; I am simply saying it would not be cheaper for me. Obviously it would be cheaper for most people.

And also, with respect, how many FTBs could get a decent property in Australia by borrowing 157k?
Not many! But we didn't borrow $157k; it was more like $200k.

We bought our current house (in Adelaide) for $225k several years ago (while we were still in the UK), using a small deposit and the equity in a Tasmanian investment property I had purchased before I moved to the UK. We later sold the Tassie property and tipped the profit into the Adelaide mortgage, which reduced it considerably. We still own our UK house, which we are currently renting out.

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Old Sep 28th 2010, 1:49 am
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Default Re: The Great Australian Housing Bubble

Originally Posted by Seneca21
I think the opposite is true. In Australia rent is much cheaper than in the UK, but in both countries house prices are suicidally high. And also, with respect, how many FTBs could get a decent property in Australia by borrowing 157k?
whos complaining?

i was responding to your post above ^^ and merely stating that i believe the opposite to be the case.
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Old Sep 28th 2010, 1:58 am
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Default Re: The Great Australian Housing Bubble

Originally Posted by Rod-Helen-Poppy
whos complaining?

i was responding to your post above ^^ and merely stating that i believe the opposite to be the case.
Rent is cheaper in Australia by a country mile in terms of average price. I'm not sure there is any debate about this. If one's personal circumstances involved moving from Truro to Sydney and renting in both places that person might be under the impression Australian rental prices are higher. They are not.
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Old Sep 28th 2010, 2:01 am
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Default Re: The Great Australian Housing Bubble

Anyone got ideas on how to go about getting a mortage in Australia??
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Old Sep 28th 2010, 2:02 am
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Default Re: The Great Australian Housing Bubble

If we were going to have a bubble burst it would of happened by now.

Perth for instance is about to hit Boom mach 2 I can't see property prices going down especielly if people keep migrating here.
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Old Sep 28th 2010, 2:10 am
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Default Re: The Great Australian Housing Bubble

a 4 bed home in mosman is anywhere over $5k per week; a 4 bed house in a 'nice' suburb of london eg kingston upon thames is anywhere between 3 and 5 k a month or approx $8250 a month at todays rate.

bit of a difference, but we're comparing rats to mice so quite pointless in all honesty.
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Old Sep 28th 2010, 2:16 am
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Default Re: The Great Australian Housing Bubble

Originally Posted by Weebie
If we were going to have a bubble burst it would of happened by now.

Perth for instance is about to hit Boom mach 2 I can't see property prices going down especielly if people keep migrating here.
That would be boom mach 2 where Perth's property market has dropped in the last 2 quarters, will be interesting to see if anything changes for this one, and is the worst performing market in the whole country? That's what all the ABS figures say anyway.

I don't see significant falls anywhere however, without the mass unemployment and or really high rates. As someone who will probably buy in the next 6 months, I am all to aware of the potential for losing money, however like most blokes my housing needs are not dictated to by my mind, but my wife's and her want of a home for children. This will always be the case, so whilst investor froth may come and go, houses will always be bought by FTBs because it is another one of the facts of life.

Last edited by jimbo_d; Sep 28th 2010 at 2:19 am.
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Old Sep 28th 2010, 2:40 am
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Default Re: The Great Australian Housing Bubble

Originally Posted by Drinky
Anyone got ideas on how to go about getting a mortage in Australia??
Learning to spell it would be a good place start.
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Old Sep 28th 2010, 2:43 am
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Default Re: The Great Australian Housing Bubble

Originally Posted by iamthecreaturefromuranus
Learning to spell it would be a good place start.
Awww thats not very nice
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Old Sep 28th 2010, 2:48 am
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Default Re: The Great Australian Housing Bubble

If unemployment rises then we may see problems in the housing market due to people having too much debt.

Interest rates are rising and when its borderline time its easy to tip over.

Personally I think houses are for people to live in not things to be bought and sold to make money.
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Old Sep 28th 2010, 3:02 am
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Default Re: The Great Australian Housing Bubble

mate just rented his house in geelong this morning for more than he asked for.
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Old Sep 28th 2010, 3:14 am
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Default Re: The Great Australian Housing Bubble

Originally Posted by Seneca21
But how long can the "Mexican stand-off" beteeeen buyrs and sellers last? It could be a long time. What really gets things going is mass redundancies and forced sales, but I don't see those anywhere either. The sellers you describe are simply not prepared to let their homes go for anything other than 2007 peak - and if they don't have to move then they're not going to until they get it, nominally at least!
- look at how much UK property has fallen against gold, for example.
This could go on a longtime, is what I am saying. Are people prepared to rent for the next 10 years?
There are a LOT of things that could break the stand-off, either in Aus or UK.

IMO, we are witnessing globally a period where asset-backed, debt-based growth is unwinding.

Once sellers see that the era of ever-increasing house prices is coming to an end, you can be sure they will head for the door in droves. Market sentiment can turn very quickly. The other thing to look at is banks valuations of property when they're considering loans. If banks decide that the market is overvalued, then they will be more aggressive with both their LTV ratios and the valuations they place on a property when writing a loan. This becomes self-fulfilling, because as they lower their valuations, they send the market lower. This is 100% what happened in the US - the subprime crisis would have been much lessened had people been able to refinance after their teaser rates ran out. But they couldnt, because banks tightened their valuations massively, meaning everyone was underwater, so they had to sell, forcing the market down and leading to the cycle repeating.
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