I was reading a recent post by Economist Shane Oliver regarding the housing market. He has predicted 15% further drop in Sydney. Using Sydney as focal point, what are your thoughts?
I know it's sometimes a crab shoot to predict markets. Let's see if there are some optimists out there for what is proving to be the largest drop in house prices in decades.
POLL: House prices in Sydney in 2019 will drop by…
Oops :-)
In Melbourne I believe it will flatten this year, then start up 3% gains for a bit.
When Labor gets elected and brings in changes to:
negative gearing,
capital gains tax, and
banning SMSF'S from borrowing to buy property,
investors will desert the market. Throw in the already tighter lending standards and slowing economy and house prices will dive.
afterwards, you'll still find Labor voters despairing 'but Liberals can't run the economy!'
Labor does those and house prices skyrocket along China/India's rise and by 2050, most politicians are Indian/Chinese because the owners demand representation because they collectively represent most of Australia's assets.
I predict that prices will fluctuate, most likely in a downward direction.
He wouldn't be working for AMP if he could predict markets with statistical certainty.
Less than 15% in 2019 but continuing to fall in 2020 would be my bet, with a total drop over the two years of 20% from present levels.
Interesting take - a longer process. Recovery in 2021 then?
Provided the world economy holds together. - also with Australia's ludicrously high immigration rates it is hard for house prices to have an overly prolonged downturn or go too much deeper. High immigration means housing demand can only be paused very temporarily.
Oh one other factor > Labor's capital gains tax and negative gearing changes if passed will easily lower prices a further 10%. I don't believe they will get them through the senate however but this will require the right wing parties not getting totally wiped out at the next election.
so, will there be bargains?
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Housing Bargains, yes.
A correction is on the cards within 2-3 years IMO. Australia is no 2 in the world on house hold debt mainly because of the house prices in the two major cities(haven't dived in to the details). External debt is also very high and mining boom was not used effectively and we have gone from budget surplus to deficit under labour. Don't think current levels are sustainable and any global meltdown could make things far worse.Most likely Australia will be affected in a global recession unlike the last one. In a recession scenario prices could dive far more than 20%. I'm less confident on the current crop of leaders too(I'm not political but Labour seems to be worse than Liberal in general based on track record).
I don't have a crystal ball and I'm not an economist. Just my uneducated opinion.
Thanks for sharing your views.
Have you seen the hit Chinese economy is having? Perhaps those countries that largely dodged the last global crisis will take a bigger hit now. It seems handing out cash is not a long term strategy. China has spent so much on infrastructure without anticipating that US will pull the reigns on the tariff horse. Woah boy, ease up! Australia and China has an addiction problem - other people's money!
I am no China expert but I have my doubts on their political stability longer term. If the US wins the trade war then it can affect all other countries export to China.Going forward China, India etc could trigger a global economic meltdown too
Shane Oliver, is he like the Naked Economist?
Australia is entering it's first real recession in a long time, the problem is that interest rates are close to historical lows - the RBA will lower interest rates this year, but it won't be enough. A very rapid drop in interest rates saved us last time, but it is not possible this time.
Sydney house prices will drop 15-20% from the recent peak, it's just a matter of when.
A little unrelated, but I think the world economic outlook is weak, especially US sharemarket will likely fall dragging down most others.
So, if right, prosperity will be dampened including house prices, for a few years.
So, Sydney house prices from this perspective will flatten or fall. They have the furthest to fall in Oz I think.
Of course as said above it's a crap shoot. Donald could become our great and glorious leader, who knows in todays world.
Crapshoot, as in the game of craps. Not to be confused with crib sheets or shooting fish in a barrel. ;)