Property Market Has Bottomed?

A higher clearance rate is due to shortage of stock. Anectdotally, I am noticing fewer for sale in Melbourne at least, so what gets listed and has reasonable vendors, will sell.

We haven't bottomed as a market collectively, although there are sub-markets such as fringe FHB suburbs. The large development houses (Delfin, Devine, Stockland, etc) are laughing with the enhanced FHOG, encouraging young ones who haven't lived thru any economic slow down to go full bore on instant gratification by buying an (affordable) brand new box on land in places with no ( or little) amenity. Some have barely saved for the closing costs………expect some pain to be delivered to them.

These people fund the whole purchase with FHOG as deposit and whilst DSR may be OK for now, wait till they lose a job or take a pay cut or  as will be inevitable interest rates rise again.

Some more pain to come………these are opportune times to be cashed up with folding stuff or equity (with skinny LVR's) and pounce when the deal is good.

It is always darkest before the dawn…….I expect a little more nightfall and then the cycle will again begin with daylight.

Let the games begin.

Hello 888,

I totally agree with you … yesterdays paper said it all about OUR FHOG being likened to the American sub prime …

read read read and get educated … the market at the bottom hasn't bottomed but the market at the top and middle is coming down further.

D

W4L, I found the link to the article I believe you were talking about.

http://www.news.com.au/business/money/story/0,28323,25223797-5013951,00.html

Australian housing market holds sub-prime danger

Regards
Daniel

I agree. I feel that a lot of people are not selling into this sort of market at the moment, adopting a wait-and-see approach. So the turnover should be smaller. Would the clearance rate be more reflective of new suburbs like Hoppers Crossing, where all the young guns are diving into the market for FOHG

If you want to upgrade an entry level PPOR, you have from now to June. Beyond that, you won't get a truly profitable sale for 5 years at least.

And for that to happen all you need is a plague to wipe up half of the population. 
How will the bottom fall out of a $400K market if you need $500K to replace it and because of increased population numbers there is an increase in demand ? 

Some ideas follow. Some could be prolonged but some are impossible to avoid in the short term. I will note those with an *

1 – FHOG boost gets taken away.
2 – Unemployment keeps increasing. *
3 – Immigration keeps decreasing. *
4 – Stock increases as BB leave work and sell both PPOR and investment property. *
5 – Negative gearing is reassessd.
6 – Bank lending criterior is tightened further. *

As for the 500k replacement cost, that can easilly decrease.

1 – Land is in a bubble because state govt and developers have been maximizing revenue but soon they will realise that 10 sales @ 250K is worth more than 2 @ 500K.
2 – Commodoties have already dropped so building materials will end up costing less.
3 – Overpaid tradies will become increasingly desperate as construction decreases and work for less.
4 – REAs will start talking vendors down in bids to stay employed.

It's all tightly connected Harb. Already, near me, 4 bedddys on reasonable blocks are getting close to what I would consider worth buying. And they are only 40K more than a tiny townhouse is worth??? Yeah right. The buyers that have been supporting the market these past few months have little to no deposits and have had finite amounts extended to them as a mortgage. Poor buggers have been sucked in by some pretty evil federal policy. That is the only real floor at the moment.

Guess they did sell for 500k sometime ago.

the guy who told  the storey of the banker who is evaporating before our eyes made the front page of the Fin Review once when Kerry Packer (rest his soul) made the quote of  "he'll never work in this town again", Kerry thought they should tear up a deal he signed and redraft it more equitably, and that was around 10 years ago, and he never has. However he is probably one of the few people in Sydney with an Olympic size equestrian area complete with full sand dressage, within 40mins of the city.

why I mentioned him is that he makes our SMH title deeds pages often, the first time when he sold, his Mosman home in mid 90s for 950K, he had paid only low 400s for it 5 year before. Great deal, especially if you did not know that he spent 600k on it after the sale, only deal he has lost in.

he had one in Palm Beach as well, paid low 2M for it probably 2003, sold it for 6.7M in late 2007 (the peak), sounds good, and it was, the indoor swimming pool with sliding glass wall opening to the 180 deg view of the Ocean, was something the  Olsen twins enjoyed,  but those renos were over 2M, which makes the profit very good, but not exceptional like yours..

people never include the "improvement costs"  when quoting profits, so often very misleading

glad to see your end holding up, but maybe you should keep the tissues handy just in case..

So FHB won't afford to buy it and will have to rent it, how is that going to to cause the bottom to fall out ?

Again, even the unemployed have to live somewhere.
Btw, single digit unemployment rates were considered low 20 years ago and even the most rabid bears only suggest that rates will only go up to around 7%-8% as worst case scenario. Only a few years ago the current unemployment rates were considered impossible to achieve.

From record highs, construction approvals are still below immigration intake.

And they going to leave on a park bench ? Come on, you can do better then this.

Oh goody, I remember the time when they removed it completely. Two years later they were begging investors to come back after house prices and rents skyrocketed. Since most investors are now positively geared or near it they can lock in the low rates for 10-15 years  and keep putting rents up every 6 months.  

Last time they reassessed the NG all the major banks were requiring a 25% deposit minimum. Didn't stop prices going silly.

1 – $250K ? There is plenty land available at $150K if you are prepared to travel. The only developers near the city are the small developers carving up their own backyards or buying 2-3 older houses on larger blocks and turning them in 6-7 townhouse lots.
2-Steel may be slightly cheaper but bricks went up. Not sure about Canberra but here in WA electricity prices are going up so guess which way the material prices are heading when energy cost are going up. Add to that the mandatory anti-GW and water saving devices that are added to the materials costs so we can pretend to help stop the GW. – ops, I meant climate changing.
3 – Compared to what , the Indian tradies ? That's just a rumor started by grossly overpaid executive to justify why the company is not making enough profits. Nothing to do with the $millions paid to executives for doing absolutely FA for most of the year and them handing them even more $millions in golden handshakes to get rid of the useless ones. Then move the jobs overseas because the labour is cheaper there. And what is our government doing other then handing them more of the taxpayers money ? SFA.  
4 – In case you haven't noticed the under $500K market is flying out the door and the REA's are doing alright. Besides, how is that going to reduce the replacement cost ?

You sure its not you who have been conditioned to see the 4 beddys as reasonable priced ?How much for that 4 beddy 3-4 years ago ? 
As long as they can afford the repayments now they can always lock in the fix rates when rates start to move up and be set for life. In 5 years time they will very likely pay a lot less in monthly repayments then you will to rent it out.  You can ridicule the poor buggers now for buying a house with little to no deposit but if in 5 years or so they decide to buy another place as PPOR and rent this house to you then we'll see who is going to have the last laugh.
Rent it for 20 years and you've just paid off the poor buggers IP