NSW market- PLATEU or CRASH?

My .0000000002cents worth

Okay, so we all know by now that we are(metaphorically) sleeping with Mr Carr and his Mini-me, Mr Egan.

The market has moved from mass histeria to waiting on the sidelines

Huge oversupply of units, part. inner city are currently being built, which must go to completion ( they are past the point of no return)

For sale signs are popping up everywhere, all wanting to sell prior to June.

Mr Triguboff is vendor financing his meriton apartments (?to get at least 80%)

Almost no investors are out buying at pitiful yields, the same houses are in the paper month after month, most houses out of the price range of first home buyers, so there is no support at higher prices.

Yes, some people desperately want to buy another place, but will need to sell their place first, etc, etc.

The long term fundamentals have also changed to make the fair price of a property instantly less than it was prior to the announcement.

Dont believe me? Lets say a company, floated on the ASX, had a price of $15, and had a dividend of $1.

If there was a profit upgrade, say it doubled, the price would be bid up, and it would probably double, and vice versa.

If there were taxation changes to owning that particular share, such as a .7% holding tax, and a transfer tax, the fundamentals would have lowered a fair price down significantly.

I was talking to a friend at the height of the frenzy, who was saying how unit prices had to keep going up. He had bought stage 2 of a development, which was up to about stage 5. Forgot the actual numbers, but he paid 450k, and they were now selling at about 700k.

My point was that with a rental yield in a rising market, investors may be happy with a 3% yield (which was what it currently was)

What happens then, if investors go conservative in a down market, and want 6%. Unit prices would halve. If they want cash positive, they would fall by even more. If the mortgagee sales happen by auction, then god help us.

And the valuers, who drive this game, allowing us so much equity? I think they will be much more conservative in their valuations in future, particularly when they see some of the sales prices, and the great drop in sales.

On a happier note, sydneys population increases by 50k people per year, and they are all after something (land) which has a (relatively) limited supply. Thus, i reckon that house prices will hold up better than units.

As for townhouses, they are almost a dime a dozen, and all builders are now trying to flog them off yesterday, to no buyers. Three months ago in the local paper was a story about all the freebies that agents were offering to move into brand new units/townhouses.

How long till the public finds out about the intricate details of Mr Kaye, and King Con from qld? The ranks of the investors will shrink, dropping demand even further.
Mr Jenman will be rubbing his hands in glee over the massive “I told you so” publicity, and a few wrappers will be fed to the media wolves.

So, heres my prediction- a viscious dropping in price for all units, a hammering in the townhouse market, and a good drop in the residential market. Stagnancy will set in, and people will reno, and in particular, add extensions/raise roofs/fill in under their qlders to get a bigger house.

So what to do? Everyone wants to retire ‘up the coast’, and go where it is warmer.

Still, I cant think whether qld property will be, compared to Sydneys.

No VTT, cheaper holding costs push their fundamentals up, population increases dramatically every year, Beattie will be loving all the publicity he will get.

But will qld weather the storm?