I am hoping that house prices drop dramatically over the next two years. Is anyone else with me on this?
The global economic outlook is weak.
https://www.forbes.com/sites/williampesek/2022/05/26/chinas-…
What are your thoughts?
Hoping House Prices Crash in Next Two Years
BluebirdV on 20/07/2022 - 12:46
Comments
A softening (say 10% fall) is the most likely at this stage, sure. But a really big drop is still an outside chance of occurring.
People keep forgetting that at the end of the day how affordable a house is depends on how many new houses there are each year compared to how many new households there are in Australia each year; it's supply and demand. And we have effectively stopped taking migrants for the past two years while building new dwellings at a furious rate (its why the tradies have been making a motza). Those housing price increase were always totally unsustainable because of those fundamentals and there is a saying the economists have "something that cannot continue forever - won't".
10% average maybe.
Problem with a 10% fall in capital values doesn't compensate for interest rate increases. I was playing around on the mortgage repayment calculator. If you are paying $1450 per month on $340k at 2.5% if it goes to 6% (markets think 3.5% official rates + 2% margin) you'd be paying $2000+ per month, to get back to $1450 you'd need to knock off $80k in capital.
Then come the next problem. Banks tighten credit. Unless you have a mountain of cash (a small % of people if we're lucky) and a secure job the bank won't lend to you. Even if you got $700k of cash for a $1m house banks won't lend they won't lend. You could go to high interest rate lenders but that defeats the purpose of sitting on so much cash in the first place.
My take is who knows. People been calling for a fall since forever but it seems like prices aren't going back to 2000 levels. It is like every stock market crash people have been talking about the great depression like they were there and know all about it.
A property will only sell for what buyers are willing and able to pay. Of course a lot of sellers will refuse to sell. But some will be forced to. If banks are no longer willing to loan a trouser-load of cash to every punter who asks for it, then inevitably sellers will have to take what they can get.
Of course a lot of sellers will refuse to sell. But some will be forced to. If banks are no longer willing to loan a trouser-load of cash to every punter who asks for it
Here is the point. How many are actually in this position? I would say it would be those outer suburb with single income barely able to get on the housing ladder in the first place kind of areas. Are they the areas that most people would want to buy in the first place?
If house prices go down 20% then assume people who borrowed in the last 2 years go to $0 why would you sell and crystallize the loss? It isn't like it is cheaper to rent and the bank isn't checking on your employment.
If people can't afford higher interest rates they deserve to lose their money but I'd suggest that you might be imagining a number of people in trouble bigger than it really is and in areas that you won't like.
@netjock: A spot price, by definition, is the most recent instance of a seller being willing to sell and a buyer being willing to buy at the same price.
If your next door neighbour sells their comparable house for 20% less than what you paid for yours, then that is, for better or worse, the best indication of what the contemporaneous value of your own house is. I hold gold and personally hopes that its value increases. That doesnt change the fact that it is only worth its current spot price now.
A spot price, by definition, is the most recent instance of a seller being willing to sell and a buyer being willing to buy at the same price.
Wow you sound like an expert! Or you just playing dress up.
Does it reflect the intrinsic value of property? If it is a foreclosure you have to sell on the day. So what is the price of a pass in auction with last vendor bid.
Fat finger flash crash on stock exchanges?
In both of these instances only a small fraction sell at large discount and usually impaired properties such as foreclosed and non habitable properties that need to be knocked down.
I think you are just arguing some vague point that just sounds good but in practice only happens to 5 in 100 properties and during extreme market conditions (but then it is what happened to LTCM, Celsius, Lehmans etc)
yeah, nah. it won't happen, but I'll buy if it does
.
If you still have a job and the money. There is some correlation in such scenario.
3) China Virus.
Sorry?
It infects the plates and bowls.
Sorry?
You understand the virus to come from????
What was that line from The Castle?
Oh yes, you're dreaming.
How do you define dramatically?
Because, IMHO, if you are magically expecting to prices to fall by 20 or 30 per cent (or more) I think you will be disappointed.
Right now, the major capital city markets in Australia are likely to see some pull back over the next 18 months or so while interest rate uncertainty abounds, but I suspect it will look more like the movements from mid-2017 to mid-2019 than a "crash" scenario.
expecting to prices to fall by 20 or 30 per cent (or more) I think you will be disappointed.
There might be the odd crappy block. Plenty of bad blocks coming on the market. You know the ones that aren't square or rectangular, they look like a dust pan and you can't really do that much with it. Low value because developers don't want it.
Agree there will always be exceptions … inevitably these will get picked up by the media to point to a crash and beat up fear amongst the uneducated and hasty.
But, as ever, quality assets will revert to their "true value". The current (recent) market value has likely outstripped their "true value" and we'll now see a retrace.
That will see the ridiculous prices come to an end (from my read they already have). You'll then have those who "need" to sell coming to market and needing to accept market price, but otherwise many who "might" have sold will simply sit tight and await a return to solid price growth.
The market will (likely) be characterised by modestly to moderately lower prices on dramatically lower volumes. When demand returns, so too will supply that may keep price rises modest initially (particularly where those who've been hanging on decide to sell), before returning to more typical returns in the medium term.
Keep dreaming. Maybe a little dip. Haven you seen all the builders getting bankrupt. So who is going to complete those backlog of builds?
Sadly, because I think lower property prices would be the best financial news for our country, I don’t think this is likely.
The doom and gloom about at the moment is a bit of a scam from the Goldman Sachs et al. of the world to give themselves a buying opportunity.Inflation is up because the economy is going strongly globally, so even with interest rate rises, the best I think you will see is maybe a bit of a dip to undo the last couple of years of high growth.
Is the economy really going strong globally? They are talking about a recession in the US and slowing growth in China. COVID continues to disrupt supply chains. Putin is reputedly of ill health and there is talk of him using steroids. Hence his aggressive behavior. He might not have much to loose himself if he uses nuclear weapons.
Prices will definitely crash in the areas where those nukes land. Good buying opportunity for those with the gumption to put in a bit of elbow grease and take on a fixer-upper!
I've never seen a report in the paper saying the economy is going great and there are no risks.
A recession in the US and slower growth in China would help with inflation, and lower our dollar for our exporters. Or maybe things won't be very bad. Or maybe they will.I think it pays to remember that everyone is working towards growth, wealth etc. If we get contraction and poverty instead, it is despite everyone's efforts, so it is usually worth a punt on things going OK.
Putin might hit the button, but so what? If there is a global apocalypse, I'll be more concerned about my next meal than my super returns.
lower property prices would be the best financial news for our country
It will only go lower when the sheep and muppets stop focusing on borrowing much as they can, capital gains and negative gearing (very few people look at yield, except for apartment investors).
Houses that are so expensive, when owners try to rent it out at 3% gross yield renters can't afford it and they have to try to Airbnb it out. Someone will figure out the next start up, the Celsius of property where they will offer high yields and you find out you lost your investment because they got a second mortgage on it without you knowing.
Agreed
I think when house yields and savings account returns become on par you'll find that investors will start to desert the housing market when you can get a guaranteed 3% from a savings account vs 3% plus a crapload of stress and dealing with RE agents and tenants on a rental.
The smart investors will see this and capitalise
The ones who aren't switched on will cling to the dream of a capital gain on a property going backwards/sideways.ING offering 2.6%, the exodus is not far away!
If only someone had written a big "I told you so!" about property price crashes… 😁
still cant afford 30% drop in price for a $5 million house.
locations where prices will likely to fall significantly are places you cant afford anyway or don't want to live,
Hoping House Prices Crash in Next Two Years
I'm hoping petrol prices go back to less than $1
Are you ok jv? I'll fix up your sentence for you…
I'm hoping petrol prices go back to less than $1
Remember all it took to stop house prices crashing in the past was: record low interest rates, a government hell bent on getting everyone with a pulse in a house, irresponsible lending, dropping deposits required by 75%, free super withdrawals for your deposit, use your super to save for a house, Share equity schemes, Negative gearing, Capital gains tax concessions, First home owners grants and first home owner stamp duty concessions.
Maybe they'll come up something else to prop it up this time?
We haven't even scratched the surface of their creativity yet! First Home Buyer Grant of $1 million anyone? Fifth home investor grant of $2 million? 100% of super allowed for deposits? Multi generational loans / 60 year mortgages? 2 million 'skilled visa' positions each year? But only for those who have over $10m to buy a house
Whats the silliest thing you can come up with, they are probably discussing it already!
Personally I would like to see a scheme to trade lettuces for a house.
In 2010 it was bananas for a house
I hope so too.
Best to look at NZ for how we might track. I doubt we will "Crash" like you read on news.com.au etc (click bait). The other thing is the "20%" decline is in luxury markets where most people are not buying, it skews the data.
They are dropping ~100bps per month on the back of MUCH higher inflation than us and their Reserve Bank starting the raising cycle from Oct/Nov last year.
This is translating to about 5% decline but the rates take about 12-18months to really have an impact on people, might be more so based on the fact that a lot of people also locked in their rates so they are okay for about another 18-24 months.On top of this, if the economy looks to start going down, the RBA will probably cut the rates and by the time these people come off from fixed onto variable, they won't be impacted as much as you think.
I personally think the RBA needs to take cash rate to about 3% to 3.5% for it to have a big effect on house prices in anyway (banks at about 6%)
Just my thought process.
Ready to buy more if that happens but i don't see a big crash. Maybe just a soft landing.
Hoping to win Lotto in the next 12381504590763419576013561305741034569134659871435768139487 years.
Coincidentally that's exactly how much I want to win on the lotto.
It's prob how much after the decimal point of cryto I have too.
If it does crash, the people who keep hoping it will crash will most likely not be buying anyways. It takes great courage and insight to purchase during a crash, because you are going against widespread negative public sentiment (which is what drives the crash).
Many will always hope and complain when property goes up and down, but never take the risks and efforts to actually purchase.
Too many people want in and have money, crash is when no one has money and no one wants in.
the way to generate more wealth is if more people produce more goods/services for less inputs
Demand will always remain, prices won't crash as you can't walk away from your loan here without claiming bankruptcy. Yes a correction is definitely in order though. Having said that they could let immigration rip and screw any aspiring home buyer over again.
HOW GOOD IS BATTLING CASHED UP FOREIGN HOME BUYERS!Depending on how hard the RBA want to let rip i'd say 20% in NSW/Vic is in order.
Everywhere else maybe 10%?
That'd be my estimate of what's most likely too, though the outside chance of a much harder crash is still present. Of course short term economic forecasting is a mug's game - I know, I've done it professionally. It's a very humbling job - no matter how clever, thorough and economically literate you are markets will regularly make a fool of you. Something ANY investor should remember.
Boom and bust are always most pronounced at the top of the market, so prestige properties will drop harder. Especially as most of those "cashed up foreign buyers" are not likely to be as cashed up as they were.
Dont hope for house prices to crash hope bitcoin hits 500k
all i want to do is for ETH to get back to AUD 5000 so I can get out at break even …
Goodness me. Buy high, sell low?
buy high sell at 0% gp :)
Only a couple of months until the merge.
In general unreality in the expectations of people with existing massive debts tends to mean that house price falls take years to reach a nadir. Peak to trough is usually around 6 years with a combination of actual falls and inflation resulting in prices that are more realistic. Add to this the unfamiliarity of Australia that house prices can go down as well as up and you can't expect the idiocy of the last few years to unwind swiftly.
However, with interest rates returning to a more long term level (though still with many basis points to go), what you might potentially see are bank repossessions and consequent sales as people who got silly mortgages being unable to refinance (cf US 2007). They can sometimes lead prices lower as the bank looks to get some of the money back. They are less interested in fantasy prices and therefore are often the best bet for 'bargains'.
In the end its going to take the government to step in and require more realistic house valuations for real change to occur - pushing prices down to something people can afford, rather than trying to keep the thing inflated. That, however, is political suicide - so don't hold your breath.
What is a crash? 20% or higher? I see a correction of 10-15% but a crash is highly unlikely. This government will probably let you withdraw 100% of your super as deposit to rescue their property Ponzi scheme.
Nah - our govt will go back to the record immigration levels as soon as they can to drive up demand whilst holding down wages.
And they’ll tell us that it’s good for us because it’s “growing the economy”.Our Government will find a way. One way or another. This is the reason why talking about "affordable housing" is a joke and it will never happen. They would need to crash the housing market for that to happen.
If housing crashes, the economy crashes and OP is out of a job
Is a 20% fall a crash? History says so. And CoreLogic data shows Australia is clearly on track for a national average fall over 20%, with Sydney & Melbourne to fall more than 25%, in real terms.
The RBA has themselves stated a few months ago to brace for at least a real fall of 15% (so Sydney & Melbourne ~ 20%) with a 2% interest rate rise.
Interest rates are forecast to rise over 3%, so even more than 15%.
House prices are expected to keep falling until roughly mid-2024This will be a good news…. if it s true/realized. Hopefully not same ppl who predicted 30% crash in 2020
No, one guy who forecast this fall of 15 to 25% for a 1% increase in interest rates, actually forecast the boom during the pandemic that came after mid-2020.
FYI, Sydney has already fallen 4% in 3 months - historically this is a very big fallLinks? As someone mentioned below, if they dun need to sell they won't sell n ride.
@Bargain-er: CoreLogic data as used by the ABS:
https://www.corelogic.com.au/our-data/corelogic-indices
Click on the 'Daily Back Series' tab & deselect whichever city you're not interested in viewing on the chart. Sydney & Melbourne's acceleration of price falls pretty much coincides to the day of the May interest rate riseThis guy forecasted the pandemic boom & now forecasting the crash:
https://www.livewiremarkets.com/contributors/christopher-joy…
You can also research his history of forecasting accuracy before the pandemic (IIRC back to the mid-2000s)He actually had to revised his house price falls from 15% to 25% national average to over 30% because he didn't think the RBA would hike interest rates as much as they have stated they will:
Aussie house prices could fall by more than 30 per cent if the Reserve Bank of Australia’s fulfils uber-aggressive market expectations for an increase in its cash rate from the post-pandemic nadir of 0.10 per cent all the way to 4.25 per cent. This would translate into an increase in the cheapest discounted variable mortgage rate from around 2.25 per cent to 6.50 per cent, or possibly higher given bank credit spreads (or funding costs) have widened sharply.
This newly published research represents an effort to further refine our Australian house price forecasts, which since October 2021 have anticipated a 15-25 per cent decline in dwelling values if the RBA lifts rates by more than 100 basis points.
https://www.livewiremarkets.com/wires/aussie-house-prices-co…Sydney house prices now crashing at more than 20% annualised rate
https://www.livewiremarkets.com/wires/sydney-house-prices-no…@Boogerman: Hmm ok, yea time will tell. I hope homeowners don't need to sell IF that day come. Speculative greedy gamblers on the other hand…
@Boogerman: Yeah, atm I can't really see it played out in Australia. We don't have that jingle keys rules. Property is high remand, land is scarce. Regardless what ppl said abt going remote during covid, that has stopped alr and good suburbs close to cbd is back on demand. But never say never. We should bookmark this and revisit in a year or so :)
@Bargain-er: Forced sales will make little impact on house price falls, its reduced borrowing capacity that has the biggest impact
Don't forget a 20% fall over four years at 5% inflation is actually a >40% fall in value - I'd call that a crash.
Residential housing prices in Australia are "sticky" downwards because, unlike the US, our loans are not non-recourse so people can't just drop the keys off at the bank and leave the mortgage as the bank's problem, not theirs. So our property crashes are slow motion - this is the reason for the RBA guesstimate on timeframes.
You're dreamin'.
We will be so lucky if we go back to 2018 level…
No.
Not now, actually.Government bureaucrats and their families own about half a trillion dollars in declared property assets. Imagine the real figure, with the undeclared bits!
Don't expect them to let their wealth go.As I said, not now. Not until they sell and move their funds to other areas.
Yeah, the rea market is too rigged by personal interests of people who can pull the lever. One can just hope the price will go back to "normal"
Folk on internet chat forums been “holding off buying” or “waiting for the crash” since 1999.
10 million plus home owners, 100 000 prospective new home buyers. Those looking to enter the market collateral damage
Interest rates are going up (when will they stop increasing??); Values of properties are dropping; builders are going broke; some off the plan units have massive building faults.
Banks have been riding high on profits from mortgages, but eventually there will be news of bank foreclosures, and bank shares will drop too.
People will eventually cotton-on that you CAN lose on property, and then who will they blame?
I suspect that the same people who wanted mega-mansions don't truly understand how to 'tighten their belts'. Post WWII home owners had very humble little cottages, and truly knew frugality. No dining out, no coffee shop, no takeaway, wearing the same clothes year in, year out, no buying and updating electronic equipment, gifts to children only on birthdays and Christmas, and more.
"No dining out, no coffee shop, no takeaway, wearing the same clothes year in, year out, no buying and updating electronic equipment, gifts to children only on birthdays and Christmas, and more."
That sounds like my life already.
Interest rates are going up (when will they stop increasing??);
When the economy slows down.
builders are going broke; some off the plan units have massive building faults
Problem with this is that it might just increase price of houses. Just look at 3 year old cars costing more than new cars.
People will eventually cotton-on that you CAN lose on property
Of course you can, usually as a result of losing your job or ability to work
I suspect that the same people who wanted mega-mansions don't truly understand how to 'tighten their belts'.
Good for the rest of us that do. They'll fall like dominos and the RBA will have to back off.
"usually as a result of losing your job or ability to work". I disagree. People with jobs struggled when rates were 18% and some had to sell into a falling market.
People with jobs struggled when rates were 18% and some had to sell into a falling market.
You get those stories. Bad news always stick better in the memory than good stories. If you closely I can guarantee it is a small proportion of the population and they can always find a good selection of hard luck stories.
You don't find that many millionaires or billionaires go to zero with a good hard luck story. In fact people would be overjoyed. Where as you have a already poor person who got on the property ladder with their 6 kids just to lose it and live in their car. You'll find thousands of those stories to choose from.
I too enjoy some sensationalism but lets not think that it is like in The Big Short there like 10% of all home owners default, throw their towel in and walk with empty suburbs shuttered up.
People struggled even more when they lost their jobs as a result of those 18% interest rates, with unemployment going to 12%. It was mainly the cost of business, not property, loans that drove "the recession we had to have".
Even if house prices drop, unless they’re up for sale, it’s all academic. New houses to be built will not go down, if anything will increase due to material/labour shortages.
Lastly, as long as people can service their mortgage, no one in there right mind will sell when prices are low. At minimal you ride out the storm and wait for the 7 year cyclic process. Economists, media, doomsday naysayers bring this up every 12 months and means diddly squat.New houses to be built will not go down, if anything will increase due to material/labour shortages.
Most people don't understand the replacement cost. Even if you got free land to buy a 12sq property which is basically a cottage by modern standards it will cost you $250k - $350k.
Losing your home is usually due to people losing their jobs, getting health issues causing them to be unable to work. People will sell all manner of assets before their homes because they know they'll have to move into a rental which probably cost more per month.
Wrong.
Investors aren't given leeway (like owner occupiers) & retail bank mortgage rates will hit circa 6% by next year.
Also tens of thousands of mortgages taken out during the pandemic are about to shift from under 2% to around 6% over the next 18 months, resulting in typical repayments increasing by $250 to $500+ per week.
Borrowing capacity is significantly reducing, meaning less demand at each pricing tier which hits house prices
Sydney down 4% in 3 months (16% annualised) & we're not even halfway to the peak central interest cash rate of circa 3.5% to 4.5%No one should ever sell a house, ever, because its value will only ever go up. Only mad people actually sell houses, the smart people hang onto them.
I wish but no chance. It'll drop as a correction to the sudden rise over past 2 years. It won't drop dramatically beyond that. Property is still a demanded asset.