No Housing Bubble in Australia…is there?

Hi,

I think that Melbourne and Sydney may have a stagnation period but Perth and probably Brissy (after they get all the roads fixed in a couple years) will probably only start to see a beginning of a boom over the next year. It is a crock saying that all property, everywhere is identical in identical markets with identical conditions. Melbourne inner city has about a million differences from something in a Perth mining town or Brisbane by the beach or even inner Sydney. So a huge dip everywhere all at once is very unlikely.

The thing that everyone forgets about is if you value add on a property with a nice margin you can outlive a downturn in a market, and anyway we are talking residential. It is a buyers market for commercial property………the silence about that is deafening…shhh nobody talk about that.

D

60% auction clearance rate in Sydney this Saturday. Fairly ominous sign imho.

DWolfe,

Most of the properties get sold in 1-2 weeks post auction. I think the auction rates should include all the properties being sold up to 1 weeks post auction to reflect the true clearance rates.

Been to auction.. but prefer not to bid…and bought it 1 week after that with all terms and conditions in favour of buyer

You are dead on GOM. The amount of times you see an auction and the people are furiously wheeling and dealing after the event. Or in Melbourne where there is plenty of dealing before auction. The auction is to give a set date for the vendor and for the purchaser. Everyone knows the property is on the market and is pretty likely to be sold. Our latest deal we bought private sale. Development sites don't tend to do the best at auction funnily enough.

Auction rates are not the be all and end all of sales data, just the only figure ACA and the papers seem to know about.

D

My friend's house was up for auction on Saturday, was passed in, yet sold half an hour later. I have personally only bought one property at auction, yet have bought 8 properties (and counting). I think that what GOM and DWolfe have said is very true, auction clearance rates are not the be all and end all. Yet both written and electronic press make such a big deal about  it. I prefer to have a bit more control when both buying and selling and not get caught up in the desire to purchase a property and go over budget, or alternatively make a rash decision to sell, when you may be able to get more thru a private treaty sale.

Sonya

I went to an auction 1 month ago, I will not bid….. I cannot ensure all my finances are in order (takes two big weeks) only to go to auction to be out-bid by $1000 or like. I agree with above, in that many people will not participate at auction, yet have the cash.

This is how my story played out. After the auction was passed in I approached the agent twice, to let him know I was a serious buyer and was asking for a price from the vendor that they where happy to settle on….. I phoned 3 hours later only to find the property had sold for $1.25M. The agent had not told the vendor I existed. I was willing to pay $1.3M…… (only $50k) hmmm.

http://www.birchcorp.com.au

Back in the days when the market was super duper crazy, private sale might have been a good way to get the highest price. As an example, consider a 3BR/2bath weatherboard house we were looking at in outer-east Melbourne (28km from CBD). It was advertised at 380-420K. Ordinary FHB sort of stuff. Land was a flat and regular 1250sqm with single dwelling covenant.

The offers were astounding. Many around the 430K range (obviously), a good deal more at 440K, still two at 450K and finally, the thing sold to the next guy up who offered 488K.

If this house went to auction I think there would have been a bidding war between the top three parties, but I doubt if you would have seen such a great disparity in what they were really prepared to pay. Private sale is all about buyers taking a shot in the dark. In a hot market there's plenty of desperate people who will pay anything to secure a house if they think its the best one they've ever seen. They'll draw out all their cards and put down a slam-dunk offer.

On the house I eventually ended up buying, the top offer was a full 40K above my own (and we're talking about a house worth less than 500K, and probably should only be worth 380K if not for the growth spurt, but anyway…), but thankfully, their finances fell through and the house literally dropped into my lap.

I've noticed most people talking of prices in capital cities, and the conclusion being that prices will not fall by 40%.

We invest in regional Victoria and I predict that prices will not fall by 40% here either. Our town has a population of 7692 and with the new Aldi store opening recently and a new KMart and Coles supermarket currently being built along with the train line
re-opening to connect to Melbourne, I'd say we'll soon be expecting a boom rather than a bust. Big businesses don't go to regional towns without first doing their research, which is what the the people who predict doom and gloom should also be doing!

Stellar / Devo76 ..House prices stagnant or moving sideways for 5 – 10 years wont work with an investment asset that has a negative return & relies solely on  capital gains in excess of CPI & interest holding costs to make a return / profit. After a couple of years of negative returns & no capital growth residential property investment becomes unattractive. With a CPI of 3% & interest rate of 7% & rental yield  of 5% a property would need to have a capital growth PA of at least 5% to stay neutral (Yesthere are tax deductions that reduce these holding costs but there are also other holding costs Rates/Maintenance/Insurance etc that I have not included) The point I make is that property investment in Australia relies solely on strong capital gains offsetting negative rental returns it is simply not viable to hold the asset for 5 or 10 years if you suspect no capital growth? Why not sell out now invest in other investments  for 5-10 years  then entry back into property market when you can see capital growth going forward? It is difficult to understand why an investor would sit on their hands when they see or think there will be no capital growth for 5-10 years. Are you seriously saying sit on a loss for 5-10 years & miss the opportunity to cash in at the top of the market & use the money in more profitable investments until property shows prospests of better capital growth?? WOW I cant see the logic