18 reasons why property prices will fall further

18 reasons why property prices will fall further - Google Search

Five-stage bubble burst
Along with falling rental income particularly in Sydney, the rising rate of mortgage rejections, construction defects such as the Opal Tower and the impending changes to negative gearing, the increasingly vulnerable market is now moving into the "third stage" of a five-stage bubble-bursting process, LF said.

The first two stages surround price falls and cancelled projects while the third stage refers to a deflation of property prices falling past "thresholds that owners are comfortable with".

"With many pressures mounting throughout 2019, we are confident that house price declines will accelerate in Sydney and Melbourne. In our baseline scenario, we anticipate nominal house prices to fall between 15 to 20 per cent in 2019 alone in both cities," LF said.

"If the finance and housing markets deteriorate more than expected, it is possible house prices could fall by up to 25 per cent in nominal terms."

 

Geez ... I only came up with 4

 

Bubbles or reasons?

 

I still dont get why ppl obsess over Syd and Melb. If there's no value there atm then look elsewhere .

I actually think SA and NT is worse. If I was forced to buy in Syd/Melb now or NT/SA I'd easily choose Syd/Melb as the medium term less risky choice.

 

Me too

 

IO Loan reset - Not a new issue. It's already well underway. We've been calling it to the P&I cliff on these forums since 2015. Yes, there's quite a lot still to come in 2019 and 2020, but this is already 3.5 years into it's 5 year timeline , so it's effects are already well understood.

Expense Benchmark Crackdown - also not new. We call it Living Expenses on these forums. Interestingly, when I called this in 2017, saying it would become a big thing in 2018 - I was met with a lot of disagreement and resistance here. No one's arguing now. 2018 saw this introduced pretty much industry wide... and it wasn't introduced softly. It is standard operating procedure just about everywhere now, and resulted in big slow downs to credit flow... as well as a big increase in loan decline rates. Unless it gets even stricter, I think it's effects are pretty much done though

7% minimum - this is the big one. But hardly a new issue. Has been since day one back in 2015. If this stays at 7 ( they forget to say 7% P&I ) , you can forget any material improvement to borrowing capacity and any prospects for material growth wherever median prices extend well past 7 x income. If it is reduced a touch ( say 6%) that's really the best chance of seeing borrowing capacity improve enough that it would create the possibility of some growth...

Property Developer and Builder Credit tightening is old news as well. It as been in full effect since early 2016. Seems these people are almost always 2-3 years behind in noticing these things. Private funders have been the only real source for most developers for at least 2-3 years. Banks have only lending to developers with extremely large amounts of cash at bank for the last 2-3 years . So there's really nothing new here - other than to explain to readers that it means there wont be anywhere near as many cranes in the sky for quite some time after the current pipeline of new builds is done in 2019 and 2020 . This is why construction work will start falling off a cliff in mid 2019, and it's also another reason why those arguing for SYD and MEL recovery is starting - are probably premature in their predictions.

Foreign Buyer Exodus - old news. Chinese loans were banned a couple of years ago... Chinese Govt crackdown on cash out China - also a couple of years old now.


All the other stuff is relatively immaterial. Comprehensive Credit Reporting may - when fully rolled out, result in increased decline rates.... but I think the banks current levels of scrutiny are already taking care of that anyway...

 

Seams to be more and more news filtering through each day that the construction industry is about to be hit pretty hard with job losses in Melb and Syd and with a worsening jobless rate , the RBA may be forced to drop interest rates to try and stop the country going into recession.
Retail may even see more job losses as property investors and home owners become more thrifty.

Interest rates set to be slashed as jobless rate rises, banks warn

 

https://www.rba.gov.au/monetary-policy/rba-board-minutes/2015/2015-06-02.html

That's a link from a few years back, when you look deep,and compare it too today then combine a change in government later this year we may already been in recession for the past year..

 

This is a pretty asymmetric look at the property market. Lot's of valid points, to be sure.

But I would have preferred to see a column of head winds and a column of tailwinds or mitigation: such as population growth, infrastructure spend, and the sharp decline in new construction starts.

Euro73 captures it well above, that a lot of the headwinds are already baked into the cake.

 

Adelaide house values soar as other capitals plummet

“Adelaide and South Australia as a whole is still sitting there as a very, very stable place to put your money,” Mr Roenfeldt said."

Am curious as to what you specifically perceive as the risks in the SA market?

 

Isn't "Property Developer and Builder credit tightening" ultimately a tailwind?

 

Don't shoot the messenger but have a read.

South Australia: dragged down by demographics | Greg Jericho

 

Lol, quite the contrary. I like to be challenged on my positions and bias, thanks for the link

 

All good. Personally for me it comes down demand. My gut tells me you can take 100,000 ppl and ask them rank in order from the most desirable to least desirable state you'd choose to live in. I don't think SA would rate high probably for some of the reasons the article states. Not saying its a bad place to live and i hear its quite beautiful. But for investing when compared to other options ? Not for me at this stage .

 

Old news. He could have written that article in 2016

 

it is, eventually, but before that one has to consider the excess supply past boom has created and how long will it take before its absorbed and results in shortage.
Rents and vacancy rates are a good leading indicator for supply shortage,
Rents has started to fall/stagnate in sydney/mel, what does that tell you?

 

• infrastructure spend:
  already baked in as a lot of it is past peak job creation phase,
• the sharp decline in new construction starts:
  we have plenty of excess supply already and many about to hit market in 2019/20, it will be while before we face shortage, but before we hit real shortage which i think is beyond 2021 in (syd/mel), we have the headwinds of job losses due to slowdown in construction section and the resultant periphery areas.

 

reasons.... but as we know you probably only need 1 serious indicator for markets to tank

APRA worked

 

18 is not good enough .. I need 88 reasons before I blindly believe anything!!

 

Syd/Melb downward trends are the flavor of the month. Once the dust settles in a year or so, It'll be back to NT/SA etc.

Regardless of the sensationalism, the trend is clearly downward in the near term. Not unexpected at all.