House prices in relation to building
 

OK, so there's a bit of debate as to whether the housing market has crashed or not and, if so, to what extent. Fine.

If I were to be considering building a new home, is a housing crash, or the state of teh housing market in general, likely to be as much of a concern/interest to me as opposed to trying to find an existing house?

In other words, does the state of the housing market affect new builds just as equally as it does pre-existing homes? If there is a huge bubble (inflated house prices), does this automatically exist for new builds just as equally?

- CDM

Re: House prices in relation to building
 

Land is the answer and there is a shortage of good subdivisional land well I think so in Melbourne. Also if you build then you need to be sure that you will not move in the near future as building in a new area you are always in competition with new builds which have benefits with them. So its harder to sell a new home I believe. Until the area is established and building finished it applies I think.

New builds here in Melbourne now tend to have very small blocks of land unless you can afford a lot of money for larger blocks of land. Ultimately its the land that is worth the money in the end. I was told a long time ago to buy the biggest block I could afford.

House prices are stagnant I believe, some have gone down in the more affluent areas as there are more of them on the market at the moment. As we have a shortage of housing in Australia I cannot really see them dropping that much unless everyone moves into a tent or caravan park.

I believe there is very good second hand housing to be had especially if you look at the building and it is sound and in good position and need of renovation. The gardens are established often there close to public transport and the area is well established and there is not such a demand on the schools and other facilities as there is a cross section of age in the community. The newer areas tend to have people of similar age with young children and this puts a strain on resources and the schools.

Of course this is only my opinion for what it is worth.

Good luck.

Re: House prices in relation to building
 

If you were running a business and interest dropped 80% overnight would you be concerned? what reaction would you take to keep your heavily overhead ridden business?

[1] mixture of:
Incentives (Metricon $42k less $28k FHBG)?
Drop prices or be more forthcoming with discounts etc

or [2] nothing?

or [3] put the prices up

Big commercial developments are heavily linked to residential property costs.

Reason relates to cost of building materials and supply/demand economics. In April there was a huge cost increase for concrete due to the large demand. This demand is now being taken away. Suppliers heavily geared up to supply a hot market are now finding they have to cut margins to fund their basic running costs.

Developers have also been told to reduce their LTV rates from 80% to 60% to secure future funding. Therefore land banks are being sold off to consolidate their holdings. Look around at the level of land with permit for sale.

Re: House prices in relation to building
 

I feel it is often the new houses that are more expensive, as they tend to be larger (4/5 beds, not 3 beds : 2/3 Bathrooms etc ) and with better fittings etc.

And it is those houses that are pushing up the median price for the area, whilst established houses increase at a lower rate.

In my area, established houses have gone up an average of 5% per year during the last 6 years. (based on a few sales that I know of recently)
But the median price rise has been higher than that 5%.