I am finding it hard to decide if it is wise to buy a property in the current FOMO fueled market or if its better to wait for things to settle down a bit. Its hard to tell if we are in a short term peak or the start of the next leg up.
It might be interesting to do a poll and look back on it at the end of this year to see if OzBargainers got it right.
I agree with that statement. They’re never going to be as high as they were but something along the lines of a 2.5-3.0% cash rate isn’t unreasonable.
You talking about RBA cash rate? Than add another 2.5% margin for banks (big 4 variable is around 2.6%) then you're talking about 5.5%. Did we even get to that before COVID?
At 3% cash rates the government is going to go bankrupt given the high level of debt.
Short of a world war or something more angry than COVID, no. Buckle up and get in, now.
I’ve been insisting it can’t keep going up for a decade, so now I am saying it will never fall in the hope the gods prove me wrong again (for the benefit of my kids who will need a house).
You might as well at in at the ground level in Thailand a retirement property. Give the house you are living in right now to your kids and retire overseas.
I can't see how retirees in inner city sitting on $1.5m property paid in full and trying to survive on government pension.
No, it might slow down in future but not going to go down unless there's some sort of massive financial crisis
GFC 2.0?
Never financial crisis interest rates will go negative and banks will be paying your mortgage.
Only thing that people won't be able to get into their head is paying $3m for a house now and in 30 years having to sell it for $2m.
You presume it's incorrect because you can't afford to buy where you want to live. But that's not how the market works. If someone is willing to pay more for something, that's what it's worth.
The only things that need correction are your expectations.
Depends where you're buying. Unfortunately many of us vie for the same set of suburbs and the price keeps increasing.
“Correct itself” could just be slow rising, rather than you are hoping it’ll go down / crashed type scenario.
If everyone knew the future, people would act in ways to “game” it. Therefore, the result could very different then “predicted”.
What makes you say that the price right now is not correct?
If people are willing and able to purchase property at the price right now then the market is correct as at now.
Buy now before border open
We were contemplating to buy a house for some time now, but I personally feel like current property market is highly inflated.
I'm an academic economist who used to study housing prices (but not anymore since it's become a hot-button political issue).
FWIW, there is an argument that there is a "local" hotspot right now with property prices - most people saved more than usual during the COVID-19 lockdowns and a lot of discretionary spending on things such as travel have drastically decreased, allowing people to pay more for property.
However, my view on it is that the support for high property prices is extremely strong. Population is still growing very quickly and there is likely going to be an influx of people once borders are open again. There are a whole bunch of people in the outer suburbs who will be looking to move in closer to the city with WFH likely ending soon and not being as widespread and popular as once expected.
It makes people uncomfortable, but the biggest drivers of property prices are population growth and density preferences. No amount of "tweaks around the edges" are going to make property more affordable. The simple truth is that we have almost 50% more people vs. 20 years ago whilst localised living densities have not drastically changed due to strict zoning, particularly in the inner city areas. If you're not building up or putting in more people per area, then you have to build out and as you build out, the main driver of property prices will become how much you are willing to pay to save time. The richer you are, the more you can pay, increasing the prices in prime locations.
There is no evidence of property prices going down, particularly in MEL/SYD - the share of MEL/SYD population vs. the rest of the country (in proportionate terms) is actually going up, population will continue to grow, peoples' density preferences will continue to stay the same. You can figure out the rest.
The simple truth is that we have almost 50% more people vs. 20 years ago
Are you sure you are an economist?
Add 50% to the population in 2001, what does it give you?
@serpserpserp: To be fair, op didn't say they were a demographer. But I don't think they are too far off in saying +50%
To be fair, op didn't say they were a demographer. But I don't think they are too far off in saying +50%
Could be why he/she was academic economist only?
@Timeismonet: You don't need to be a demographer to work out how much more 50% is right…in fact if anyone can work with numbers I would have thought an economist could wouldn't you?
and yes 50% is far far off, especially when you're talking about population
@cloudy: Eh, I ball-parked a figure that sounded about right - I treat forum posts as conversations, not well-researched publications. Similar to how I would ball-park a figure if we were just chatting about the topic over a beer. Always happy to stand corrected over the details, but it doesn't change the broader point IMO.
@p1 ama: Not sure why you would round 25.8 to 26 but not 28.8 to 29…
Either way, calling it 30% is a whole lot more accurate than 50% right? I mean, it is kinda a big difference. No?
Like, if we suddenly had 3mill more people house prices would be a whole lot more different wouldn't it? It's more than the size of Perth!
@cloudy: I wasn't sitting around looking up population numbers, so I had no idea whether it was 25.8 or 26 (or 28.8 or 29 for that matter) - I just got the 28 from a previous post. Completely agree 30% is more accurate.
To be honest, I just find it strange that there's so much obsession over one number whilst ignoring the entire context.
To be honest, I just find it strange that there's so much obsession over one number whilst ignoring the entire context.
Lost credibility on the easy stuff i guess.
Some of the other points have merit, but don't cover the gamut of the issue. Being an economist you understand that government policies have a massive contribution to price and that interest rates also have an effect. But the density point is correct. Everyone want a house and yard less than 10-15km from the city.
Wow an economist who doesnt think that interest rates have any effect.
Its affordability.
Low interest rate means more affordability. (obviously those richer get more benefit than the poorer)
Then again academics dont always deal with reality do they?
Effects of interest rate will cancel out as most home buyers are income capped, not equity capped. Therefore, yes, property prices will be lower with higher rates, but so too would your borrowing power, meaning that, on average, what you can afford to purchase will be relatively the same.
This is exactly why I've stopped studying housing markets and writing about them, because people who do not have any economics background (or at least have not looked at the data in any meaningful way) become self-proclaimed experts on very surface-level analysis and somehow act as if they've stumbled upon something genius.
Population is still growing very quickly and there is likely going to be an influx of people once borders are open again
You've split pop growth into two.
One you are saying population growth is "very quick" Do you mean our birthrate relative to death rate is high? Because i can sure as hell remember reading our birthrates in isolation are the lowest its ever been. If not, maybe you can clarify what you mean?
and Two, we'll see if there's an influx once borders open again….can anyone really tell if we'll open up immigration like free movement will return back to 2019?
One you are saying population growth is "very quick" Do you mean our birthrate relative to death rate is high? Because i can sure as hell remember reading our birthrates in isolation are the lowest its ever been. If not, maybe you can clarify what you mean?
If you have a look at the annual percentage growth rate (e.g. https://www.google.com/search?q=australian+population+growth…), it's been hovering around 1.5% p.a. since the mid-2000s, much higher than the ~1% or so it had been sitting at in the 10 - 15 years prior to that.
Comparatively, Australia's population growth is quite rapid at around 1.5% p.a. (compared to the US at 0.5% p.a. for instance - https://www.google.com/search?q=us+population+growth+rate - which has actually been trending downwards). Similarly the UK is around 0.6% p.a.
As you correctly point out, Australia's birth-to-death ratio is low and the "children per woman" metric is around 1.74, but this is a bit of a moot point given that population growth in Australia is largely driven by immigration (and has been for a while).
https://www.abs.gov.au/statistics/people/population/migratio…
Almost 30% of Australians are born overseas and that will continue to rise.
FWIW, the conclusion of the point I made above is that we need to think about the whole housing affordability debate differently. Tweaks around the edges (e.g. stamp duty concessions, handouts…etc. from a fiscal standpoint, or even interest rate changes from a monetary standpoint) are all just plugging leaks here and there. The fundamental issue is that we simply cannot have more and more people every day and still live like we did 20 years ago.
Whether it be that people have to accept higher density living (as per the big European/Asian cities), or government policies which actively encourage movement to other cities aside from SYD/MEL, or changes to zoning to allow for pockets of CBDs outside of the main CBD (i.e. more of a hub-like model, e.g. similar to London), or at least the "spreading out" of the CBD, I don't know, but I do genuinely believe that there is no way that we will change the metrics around the housing affordability (note I said affordability, not prices) debate without fundamental and structural changes to how we are living.
OP do you want to buy a house in Glenelg? Then yeah, prices will never come down. There are many many places in Adelaide which are dirt cheap compared to the rest of Australia. Buy there.
I bought my place over 5 years ago now. The bank thought I was crazy to spend my limit on a house that was close to a record for the suburb at the time for a 3 bedder. Now the same houses further 1 to 2km further out from me sell for +20% more than I paid (most houses around my area have been tightly held over the last 5 years). I thought I was buying at the peak too and was prepared for the house to lose 20% of its value in a correction that I thought could last 10-15 years. How wrong was I.
I don’t know how every Tom, Dick and Harriet is coming up with all this cash - the banks should be subjected to stricter lending criteria - absolutely ludicrous. The average house price is heading over $1 million and the average wage is under $60k. Looking forward to greedy people getting absolutely squashed when interest rates jump up
Well people on 60k a year (even if it was a couple earning 60k each) won't get a loan for million dollar house even at 80% LVR I'd say.
But is it really greedy if people are just buying their own PPOR?
I don't know how people do it either. The amount of money I put into my mortgage every week would have paid off a house in the same suburb 15 years ago in about 5 years from first mortgage payment. Wish I could have bought back then!
Yeah well it appears we could have a generation of people who could fail to pay their mortgages and their parents who went guarantor will be screwed - just removing guarantors for home buyers would cause house prices to drop because as you said, no bank in their right mind would be lending this much people unless there was a plan B
their parents who went guarantor will be screwed
I dunno about that. If they went guarantor they probably own their own place outright with money to spare. If their kids can make the minimum repayments for 30 years they have a house. Get a kid in early enough (say 21 or 22) and they'll be ok. 10-15 from that time you'd expect some sizable wage growth and if the parents pop off then maybe some inheritance will help.
Those people are very lucky. My parents were never rich enough to help with my mortgage and given they own no property I doubt I'll see any inheritance. But I would be in a minority.
@serpserpserp: There’s been many stories however when that’s all they’ve had and they’ve got screwed over, then they try to take the banks to court - but it’s game over
The average house price is heading over $1 million and the average wage is under $60k
Rich people flipping $1m+ property amongst themselves to create paper profits. It is their favorite scam. Like the one Westpac got scammed
The property market is not a single entity. It will go up in some places, and down in others. It really is as simple as supply and demand.
Nothing short of war will cause Australia's housing market to fall substantially, and even then I'm not sure.
Governments of all colours are completely dedicated to making sure people don't default on their mortgages. Therefore the supply of grants, loan deferrals, and low rates will never stop.
Property will always go up over time on average, however it may not provide return on investment compared to putting money in simple ETFs. In that sense you've lost opportunity cost.
Property market won't correct itself. Either people fail spectacularly or learn some financial acumen. Crypto is like property market playing out 1000x speed and you can see people don't / won't learn.
Crypto isn’t supposed to be a speculative investment though, it’s just an experiment
The Internet was an experiment that never stopped growing.
Before the current iteration of the Internet, long-distance networking between computers was first accomplished in a 1969 experiment by two research teams at UCLA and Stanford. Though the system crashed during the initial attempt to log in to the neighboring computer, the researchers, led by Leonard Kleinrock, succeeded in creating the first two-node network. The experiment was also the first test of “packet switching,” a method of transferring data between two computer systems.
https://www.britannica.com/story/who-invented-the-internet
The technology that supports digital assets is the next evolution for the network that connects the world. It continues to grow bigger and better every day. It will be fully integrated or replace the current protocols in the backend without normies realising it.
People should get used to the fact that the technology and the digital assets that run on top of it is here to stay.
People should get used to the fact that the technology and the digital assets that run on top of it is here to stay.
People who invest in crypto should realize that new technology and digital assets are around the corner and can very easily replace it. Crypto normies have no idea what the digital asset space will look like in 10 years.
@serpserpserp: Not knowing is what makes this industry so exciting. How boring would the journey be if we could just skip to the last page?
Working full time in an industry that is changing the world is both profitable and rewarding on a personal level. People can work from anywhere in the world at any time 24/7 365 days a year. There is no clock in, clock out and lunch is anytime they want it to be.
depends where you are, houses in my area were more expensive 15 years ago.
Where do you live?
It might be interesting to do a poll and look back on it at the end of this year to see if OzBargainers got it right.
Here is the half time scores -
Home owners who bought property six months ago are up to $180,000 better off than if they had invested their savings in the stock market or a term deposit, new analysis reveals.
New research undertaken by Canstar shows that if a Sydneysider bought a house for the median price of $1,112,671 in March with a 20 per cent deposit of $222,534 they would have seen the value of their property rise by 16.3 per cent – or by a massive $181,365 – by September.
@netjock:
For a private sale, the bank uses 3rd parties to physically value as they need to gauge whether the transaction price is fair and if the property is in reasonable condition. They usually are pretty lenient and use generally accept anything within 15-20% of the recommendation (rpdata is a good proxy).
They aren’t short changing themselves, and actually doing that to create a buffer against stupidity. They’re always happy to lend to what ever limit they deem is appropriate to you (I.e $1m), but that doesn’t mean they should lend to you based on that amount when a property realistically is worth less, but unfortunately for auction houses they are.
I.e with a limit of $1m and a property worth 700k most banks currently would happily stretch to $800-$850k for a private sale. If you bought that place at auction however and paid $900+, banks are currently happy to take it no questions asked, which is part of the reason we’re having an over-inflated market now that investors are piling in.