Hmmm reviewing the weekends auction in Sydney…..crash what crash.
Somehow i get the feeling that people in Sydney are living pretty good lives with pretty solid income (well at least 500 of them are).
– http://www.homepriceguide.com.au/saturday_auction_results/Sydney_Domain.pdf
We’re going to have to see one of two things happen (possibly three)
Either Australia finally starts to get the sniffles on the global cold (you think its bad in Moranbah, I can show you 20/50/100 similar locations in the USA that have been that way for a decade).
Basically unemployment starts to nip at the heels. Its one of those ones where someone you know got laid off, then you see a news article about XYZ shutting such and such a factory, then you start to think maybe we should save some money and not splurge, then your next door neighbour is washing their car in the driveway on a Monday morning and you think….time to sell. Possibly 2016/2017?
Or
Someone in government decides to bring down the hammer. Will negative gearing do it – nope. Will APRA tightening do it…possibly (and the best way to manage it). But most likely it will be something like Jonathan Tepper etc – http://www.afr.com/real-estate/residential/sydney-property-dont-believe-the-aussie-big-short-20160224-gn32hj having a discussion to some politician who overreacts and does something stupid with capital gains but ONLY for property (which will cause equities to shoot up like we have the in the USA eg 20 times earnings being “new normal” – of course no politician will point the finger at themselves and understand this is what happens with ‘global slush’). Possibly election time 2016?
Or
Interest rates go back up to 6-7%. Considering you can currently get low 4’s even though Australian banks are blood sucking profit making machines (it still blows my mind that the big 4 are worth 30% of the ASX – mush mush my little sheepies) they’ll be the first ones in the world to move up with a moments notice.
However considering that you can get a 10 year mortgage for 1% in Japan and 3.5% jumbo 30 year fixed here in New York (hell yeh we fixed at that rate……easy to sleep well with this locked away – and I thought 4% fixed in 2014 was a bargain) this being said I’m not sure how long before we see rates push up in Australia give govt bonds over the last few years and the number of new countries going NIRP.
Though I can guarantee its coming no one knows when etc….and when it does going to be lots of rushing for the door AND lots of bargains to be picked up as no way current incomes can support a return to 6-7% interest on the current multiples. Pretty much a given but 2018….2019…2020? who knows?
Useful info with international perspectives. THank you mate
Thanks for the perspective – really interesting.
I find it hard to imagine interest rates going up to ‘normal’ levels anytime soon. The UK, US and EU have been banging on about a raising rates for the past 5 years and we’re only just starting to see some movement. Also interesting that banks are trending towards decoupling themselves from the RBA’s rates. Could this be a possibility… real borrowing rates rise regardless of the RBA?
I feel as though we may be heading towards scenario one (global financial pressure, rising unemployment etc) but this time round Australia has far less resilience to absorb the shock…
Do you think the asset rich cash poor baby boomers looking to downsize has the potential to accelerate selling?
Thanks again for the perspective.
Mike
Email MeProperty is cyclical…..the question is when interests rates will rise not if.
At some point….when they do go up…people need to be prepared.
Lots of people are also punch drunk from the Sydney increases….the market in Sydney overshot….at some point there will be a correction. Again a question of when not if.
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