Following on from the thread about what is causing house prices to continually increase here
If the housing price bubble were to burst what do you think the real outcome would be on house prices or even our economy?
What percentage drop in house price would you expect?
Would those who cannot afford to buy now actually be able to buy?
I know there's potentially a lot of factors and players at hand to stop it from bursting right now but let's imagine they all failed.
1989?
Bits of the market fall quite regularly.
Cameron Kusher from Core Logic recently tweeted this.
The top 10% of properties have recently fallen 2.7%.
https://pbs.twimg.com/media/DU7ZwpHUQAUnUAC.jpg
His twitter account is worth checking out and Core Logics stuff in general.
He also recently retweeted this. Darwin is down 6.4% in the last 12 months.
https://twitter.com/DGPetrie/status/958844236589232128
Real home values in Perth have been down from their previous market peak for 45 months
if it dropped even by 10% that would be huge - and no one (credible) seems to be predicting that
Check Perth prices in real terms since their last peak:
Interesting, but not indicative of a national housing "bubble" popping.
WA is a special case, because of the (abrupt) end of the mining boom.
Also, word is it's already starting to recover.
No, it's not indicative of a national bubble bursting.
The point is that a place with 1.7 M people and the surrounds could suffer quite a big price drop and the impact on the Australian economy has been very mild.
Australia's banks have handled that without a blip.
Well we haven't had an increase to the cash rate since 2010, wage growth is looking like a wet sock and median housing prices are at an all time high. There definitely has to be a percentage of home owners out there who wouldn't be able to afford a substantial increase in the cash rate, and I don't think anybody expects low interest rates to last forever.
I'd be interested in any data that would point to the number of people in Australia who would be at risk of default following a 1% increase to the cash rate. If the number is significant, then there's no doubt that would negatively impact values.
Thank you! My god that infographic was satisfying.
And the data says it all. If economic conditions require tighter monetary policy, there are going to be a number of foreclosures.
Cheap debt + record prices = Grief in the medium term.
Interest rates are not going up any time soon. In fact the next move could well be down again with wages only creeping up by 2% and (real) unemployment closer to 7%. Furthermore the only major industry left in Australia is construction and they ain't going to prick a hole in that one.
For prices to drop people need to be needing to sell houses. There is far too many rich people with money coming to Australia looking to enter the market. Soon as the prices drop a fraction they will snap it up. Prices will stagnate at best but they will never drop.
"rich people" = Chinese
What market are you even talking about? Sydney and Melbourne? Darwin? Perth?
People voting for 40% are delusional. A drop of that magnitude in Sydney or Melbourne would not be isolated - it would have to coincide with a catastrophic economic downturn that would result in huge unemployment and recession. Banks won't be lending money. Houses are 40% cheaper and you have no job.
House prices will probably stagnate and stop growing a such dramatic rates, and allow wage growth to catch up to price growth somewhat.
Whilst I tend agree this is exactly what happened to the most over-priced property market in the world - Tokyo.
It was also based on cheap monopoly money
So dont rule it so quickly.
If the Chinese find reason for mass exodus you wont find the bottom too soon. But that aint happening any time soon.
for a drastic drop in value in the property market will surely have to come from sort prolonged economic downturn. to which most people wont have a job to support the purchase of a house anyway.
If the Chinese find reason for mass exodus you wont find the bottom too soon. But that aint happening any time soon.
Those full of confidence have a read of this
https://medium.com/@matt_11659/matt-barrie-australias-econom…
pfft, it's only Matt Barrie, CEO of Freelancer with some clout, what does he know about housing? Australia is different.
"XYZ is different"
I've heard that one before….
That's actually a well written article.
This artical is absolute RUBBISH!
Facts have been twisted to suit the author.
Especially this claim:
"What makes this especially dangerous is that it is unwinding in what increasingly looks like a global recession- perhaps even depression"
What a load of baloney! All the evidence points to a global expansion right now.
And furthermore China is well on top of this. They can prop up thier banks any time they want. For those that have not heard, China has a 20 year growth plan called "one belt - one road"
This means a whole lot of infrastructure spending with Australia the main supplier of raw materials!
Thats why this artical is absolute rubbish!
I don't think there wil be a dramatic drop in prices unless there is a big and deep recession.
Right now (most) people still have jobs, and are able to service those loans at low interest rates. You may get a slight increased rates of loan deliquency but not major to trigger a total price collapse.
Take Perth for example, once the boom finished there was a marked drop off in employment and while prices did go down its not a collapse.
Generally people won't sell unless they must, especially at a loss. They can still service their loans and keep their heads above water. Low interest rates are a significant 'help' here too. Unfortunately this means the government is losing or has lost the option of montary policy to control the economy. Even .25 increments mean significant pain for many constituents.
Contrary to popular belief, property prices have gone down in the last 20 years, during the gfc in 2008 they dropped between 5-15% for 3-6 months, and in 2012 they dropped 5% on average in a 3 month period.
Either there needs to be a correction, which can be caused by perceived weakness in the market, or interest rates rise causing people to lose their jobs, which in turn puts pressure on the property market as a whole, through people not being able to pay their mortgages with no income, and people being forced to sell, creates a spiral effect crashing the market It will first affect residential then hit commercial soon after. If the worst came to pass expect drops of 40-60%, and then it would basically bankrupt every major bank triggering the savings deposit government guarantee, costing the Australian government 100s of billions.
The great depression is a blip compared to what i described above, the whole world would descend into chaos, everything would fall like a house of cards.
It aint happening but yes, prices have dropped in parts of Sydney from time to time (2003 to 2012) by as much as 40%. So it is entirely possible.
Not Housing Bubble, it's currency printing bubble.
Not exactly - its artificially low interest rates here in Australia (and everywhere) but many of those freely available printed US and EU dollars have also helped.
No way I can see prices dropping hard, and even if they did there'd be cashed up Malaysian, Indonesian, Indian, not to mention Chinese nationals who would scoop up properties.
nothing will change.
rich getting richer. poor still cant afford down payment because of their lifestyle buying iphone and drinking beers
you forgot to mention smashed avocados lol
Depends on the location
My perth home is still worth the same it was 6 years ago when i purchased, which is also the same price as far back as 2008.
I've seen sale histories in Vegas for as low as $5000 in 2008.
But wait that's right, prices only go up….
I think it will be a withering decline by 15% to 20% lasting 5 to 7 years. I also expect Governments will also cut back on the generous tax concessions so RE investments are treated the same as other investments. To there is too much money being made and not enough tax being collected.
If prices fell 41% or more do you think investors will stand back and say "oh, let first timers have a go first"?
Lots of comments on here based upon stable society.
Mr Trump wants war with N Korea and many experts say it is more likely than not to happen.
What will happen to our economy then?.
"There is no bubble"
Wow, I mean, no matter who you are, your circumstances, or what you think, to actually believe there is no housing bubble in Australia is pretty delusional. I can't believe it's the most highest vote here.
You might think it's not as bad as people say, but to think it doesn't exist at all? Really?
When is a property bubble not a bubble……
There is a property bubble but you got to look at the cause - all the Chinese buying up most of the new stock - hence its not hitting the streets - so nothing left for us aussies to buy. Also with more than half of the existing city stock. yep.
So if the Chinese arent going to be selling too soon and are not affected by any move in interest rates the upward squeeze will remain on Sydney and Melbourne prices.
Any decline in Sydney and Melbourne will only be minor and temporary
41% lol 😂
Will be interesting to see what happens when mortgage rates go higher and even more restrictions are put on investors and interest only loans
Lots of people want to come to Australia to live, it's a growing country. As long as there is population growth there will always be demand for housing, that's why so many people here invest in housing, they know that in the long term they are almost guaranteed to make a return.
I think you're all too young. In the 70s under Whitlam Labor govt home interest rates were17-20% IF you could get one land prices in northwest Sydney (Castle Hill) dropped 30%.
Short Answer: Mixed
The construction sector as a whole (MEL/SYD) is still largely experiencing growth, especially as other sectors such as high end residential and commercial real estate are increasing.
Recent historical demand has been chiefly in low end housing/subdivisions and mid-range apartments, driven by growth in property investors (inc. foreign buyers now somewhat excluded from the market), but now winding down. The overall outlook is upward as housing demand still far outstrips supply, and this situation is unlikely to change without a nationwide depression, or major population decline event.
The prospects for first home buyers and renters are bleak, because rental prices are continuing to creep upward. Unfortunately, though there is a theoretical ceiling for the price renters can afford, we don't appear to have quite reached it.
There is definitely a bubble but the real question is will it pop or deflate?
I think the government is in it too much to let it pop so it will deflate slowly over the next years. I chose 10% (over 2 years) but that's really 20% if you take inflation into consideration.
The only time I can recall that there was a serious decline in property values was back in the great depression of 1930s.
Don't hold your breath hoping for another one any time soon.