When will Sydney property market crash?

Derek read your piece and understand your points but, still disagree. Until now public sentiment has been positive and interest rates are at all time (last 30 yr lows) yet the market, by your own account sliped 12%.

Public sentiment last week had the largest drop in 15 yrs. Hmmmm…. Paul help me here what happened in 1991???

The pain in Syndey is not well spread but localised in the West, where petrol and interest rates are hurting the aspirational “battlers” that swept “honest John” to power at the last election.

Many have been holding on properties in areas where prices have slipped, in my street alone about 33% (2M down to 1.5m after 200k on reno…sorry thats 33+%). many thought that the market will recover, because that is the news, and if public sentiment is that the market is recovering next year, then a artificial ceiling was put in place.

Think that ceiling has cracks and as rates rise world wide (and I know you and me fixed for 5 years and we are laughing… but they did not…they are hoping they go back down) they will hurt more.

As more have to accept whatever bid they can get in a quiet market, then the price percetion will not be “wow how cheap was that”, but you paid “that Much !!!!” .

And Tony, Sydney had negative pop growth last year, so the ” need more land for the growing pop” may be smoke mirrors and more hype.

… Mortgagee prices being the most realistic representation of market values HERE AND NOW! These are the only auctions where the property will sell to the highest bidder. There are tens, perhaps hundreds of thousands of houses in Melb and Syd where the vendor is not currently under pressure, and refuses to lower their price expectations that were set 2-4 years ago.

These people are withdrawing their properties from auction, ‘resting’ their properties from regular sale (for fear of ‘overexposure’), or leaving the ‘For Sale’ signs fading on the front fence. They all say “well, I’m not going to give it away!” or “I know what it’s worth”. Many of them have had these price expectations cemented by bank valuations… and have borrowed against values that no longer exist…

Second point. The erosion of values will continue to work through the tiers of the market in the same way as price rises did – from cheap houses in undesirable suburbs, through to more ‘effluent ereas’. During the boom, rising prices for rubbish houses enabled owners to ‘withdraw equity’ and leverage it into more expensive houses, driving up demand, and prices. Rinse and repeat.

During the bust, the falling prices of low to middle-tier houses (due largely to 2 factors – affordability constraints, and the plugging of the mortgage equity withdrawal spigot) will decimate a whole generation of buyers. These are the upsizers, and aspirational buyers. People who have a house and feel they need to move to another that better suits their lifestyle, or the image they have & wish to project of their lifestyle.

These people normally account for around 40-50% of the market (with 20% FHB, 20% Investors and 10-20% downsizing or dying). They normally increase their mortgage, and normally move to a house with a higher value. In recent years, these people have been relatively unaffected, save for false notions of ‘how much their house is worth’ (uh, let’s see, 1 house equals…. Oh, 1 house! Same as 300 years ago!). So, once this large portion of the market has been stripped of their buying power, you’ll see houses in the $500k – $1,500k bracket in Sydney plunge. Fast. Same for the $400k – $1200k bracket in Melbourne.

I think you’re being overly optimistic. As I pointed out on another thread, the last great real estate boom in this country wasn’t so forgiving. At the end of the ‘Melbourne land boom’, prices halved in the space of a few years, and didn’t surpass their peak levels (in actual, nominal terms, not even adjusted for inflation!) for over 20 years!!!

Now I believe house prices in Australia deviated from their underlying values not in 2001, nor in 1996, but in the 1980s. My ‘bubble-o-meter’ points to the current bubble being a more significant event than the one that began 100 years earlier, because the miracle of CB-sponsored inflation has allowed it to re-inflate every time it looked set to burst under its own pressure.

Cheers, F.[cowboy2]

Hello gmh454, where are did you get this statistic on growth?

Plan released to cope with Sydney’s population growth
New South Wales Premier Morris Iemma has announced a plan to manage Sydney’s growth over the next 25 years.

The city’s population is expected to grow by more than one million people by 2031.

Called ‘City of cities: a plan for Sydney’s future’, Mr Iemma says the strategy is designed to ensure infrastructure is provided as new suburbs develop.

That is 40000 people per annum , with the average household numbers decreasing due to more people delaying relationships over work , or marriage break ups this increases the pressure.

For example if it 2.0 people per household we then require 20000 homes, but if that number drops to say 1.8 (no more peple than before) the requirement becomes 22222 . The March ANZ residential research shows building approvals in NSW is 30000 and demand at 46000 . This trend is only sustainable for a short period of time. But all of these experts couldnt be right with their figures.

Another interesting fact is that building approvals are seasonally adjusted at 5% , menaing they discount 5% for projects that never proceed . The deferred or abandoned projects are way above this at the moment , in the vicinity of 15%.

These idiots must be wrong , i will listen to you from now on gmh!!

Tony that was nice analyisis. I have absolutley NO FAITH in NSW govt when it comes to Urban planning. Our peak hour roads prove that. and you have not improved that faith one bit.

Now as to my statistic.

It is a 500k price for a fibro in late 2003 that should have quadruled in 14 years (2017) so in 11 years it is worth 2M. Wonder what I could rent it for, maybe 600 a week ????

Bad attempt at humour, Foundation does that to me, though I always enjoy his posts…seriously I really do..

Funny things these medians (alright, so I know that the ABS/APM figures are ‘average composition weighted median prices’ or what-not).
The median price for 11 properties at $500k each is, unsurprisingly, $500k. If 5 of those properties fall in price to $150k each, the median is still $500k. If demand for properties falls and turnover is 5 properties, 3 valued at 500k and 2 at $150k, the apparent median price for all 11 properties is still reported at $500k. Even though half the vendors are unable to sell.

Now what if demand is 5 houses, with a preference for better houses? Three houses sell for $600k, 2 for $150k. The median price is now $600k, a 20% increase. And the bank valuers will lend 20% more to each of the 6 vendors with a ‘good’ house, even though only 3 are able to be sold.

Cool, huh?

F.[cowboy2]

[thumbsupanim] liked your comment

I am glad to have had the insight of living on the east coast to see the boom in 2002-2003 first hand. “I just cant see an end to it” everyone was saying….

Now i am seeing all this repeat itself here in Perth. I am not the most savvy investor out there but my gut feeling when I see some dump in Bayswater asking 600k (surprisingly still on the market a few months later) is that the value is just not there.

Worth considering is that there has been a spike in the number of properties for sale in the last month, some say the market is just taking a breath due to the recent rate hike. But we’ll see….

I have heard this sort of talk several times recently. There is a real mood of arrogance in WA at the moment. Keep in mind we are being propped up by ONE sector of the economy. Now that one sector is obviously giving us a massive boost, and yes it may last a while, but I would hate to see WA come grovelling back to the eastern states because the demand dries up. Nothing lasts forever….

I think its more like the other way round. Eastern staters having a “we” and WA mentality of “who wants to live there”. Well this resources boom have firmly put them on the map. How many times does the media throw in WA or Perth when they talk about housing. When I started buying, they were still reporting on what 80% of sheeps were doing – providing reasons why Eastern Stater’s fall will be soft and keep extending their projections of a recovery. So now they are saying its all over. Who writes this crap?

If anyones been looking in Syd recently, you still can’t buy a decent piece of dirt for under $600k within 15km of CBD or 5km of beach. Terraces in Paddo are still askin $1M+ with <300m2 land. Balmain and Glebe aren’t any better. Forget the eastern suburbs, East side on the north shore or even Strathfield. NSW yearly growth 0.1%, WA is 12% and Qld 7%. And the median price of Perth is still only $400k. Better buy some more.