Australian housing market facing 'bloodbath' collapse: economists

Having read the whole of their submission, it concludes with ....

Enough said ?

 

Not sure where one would fit in on that list,and that submission can be broken down to about 5 pages then one,because most not all money academics only write to impress everyone down the line..

 

Where is that located mate ? is it in Parramatta area ?
if you buy for PPoR or to live in, I guess it shouldn't be a matter.

 

Lane Cove....not way it will hold on those values.....if you are paying that much in Pazza ...you have rocks in your head!

 

Ah yes, that does make sense Sash.

Well, some people in Parramatta West Point apartment (OTP) 2 bedders starting from $900k
the thing that I don't understand is that, the agent who happens to be my friend, told me that the first stage is sold to the Overseas buyer, so I cannot buy it because I do not have overseas address.

hence I was under the impression that if 2 Bedders in Parra can be that expensive, then I should be buying the existing 2 bedders quickly in Parramatta for a Cashflow positive potential for the next 5-10 years.

 

http://www.abc.net.au/radionational/programs/rearvision/the-history-of-housing-bubbles/5696496

 

Are Sydney and Melbourne overheated? In some areas, yes. In a bubble? In my opinion, no. I am seeing some commentators talking about the bubble starting to form in 2000. i.e. a 15 year bubble. I wasn't following the real estate market in 2000, but would the changes since then be partly related to the globalisation of the Australian property market?

If so, then would the 'bubble" only "burst" if the Australian property market was "unglobalised"? It doesn't really make a lot of sense to me.

I find it easier to consider property markets in terms of a boom/bust (peak/decline) cycle. In 2000, the Sydney market started to heat up after a 12 year period of steady growth. It hit a peak in 2003 then a decline/growth cycle of around 5 years. I think that cycle was intterupted by the GFC. I think it is nearing a peak again. Maybe later this year/early next year. After that, I would expect declining values and flat growth for that part of the cycle. I certainly wouldn't predict 30% decreases across the board. I don't any evidence for that quantum of price declines anywhere since 1986.

 

Yeah, it is revealing, although there are some interesting data. Below is an extract that caught my eye:

"The generous scope of tax expenditures has served to further increase housing prices. Tax expenditures are defined as a deviation from the commonly accepted tax structure, whether it is a tax exemption, concession, deduction, preferential rate, allowance, rebate, offset, credit or deferral.6 Australia has the highest rate of tax expenditures among the OECD nations, at more than 8 per cent of GDP.7 Tax expenditures are vulnerable to lobbying, and often compromise the fairness and efficiency of the tax system. Existing home owners capture the most benefit, ahead of FHBs, investors and tenants.

{Table 1: Estimates of Housing Tax Expenditures ($Billions) shows comparative figures from negative gearing for investment properties ($2.4b) to home exemption from pension asset test ($7b) }

These tax expenditures provide a strong incentive to speculate on housing prices, and are reinforced by already low property taxes. Investors perceive net yields as secondary to expected rises in capital prices, while FHBs over-leverage themselves to enter a bubble inflated market. Tax expenditures, combined with the ongoing deregulation of the banking and financial system, has transformed the housing market into a casino. Residential property is commonly viewed as a speculative asset to flip, rather than shelter to raise a family in."

Interesting research and useful, although it has regrettable generalisations and perspectives, which compromised its integrity and conclusions.

(Is 8% of GDP referring to all tax expenditures, or just housing tax expenditures? On what basis are international tax expenditures comparable? On what basis, is flipping common in Australia? Is NG a deviation from accounting and tax principles? Never mind, it is more fun and spectacular to make sensational statements ala Keen! )

 

http://www.firstnational.com.au/med...2015/June/The-truth-behind-affordability-talk

Article Relating to the real picture.....maybe. I have always thought that australian capital cities on a global scale are different in that the bulk of our population is trying to squeeze into only a few, therefore demand will always be there, add some overseas money and high immigration rates to the equation and it could be supported indefinitely because of it.

 

yeah.......nah.

 

Assuming it's a bubble and assuming that prices do fall by 30-40%... In the past 3 years, i believe Sydney average price went up by 45% so even at a loss of 40%, it doesn't look that bad really so it would be more like reverting to mean and not a bloodbath or anything like that.

 

Agree. Same with Perth really. In the areas that overheated and eased back, the price now is still a lot higher than a few years ago. It only really catches out people who buy at the peak and then have to sell at a loss. But that can happen in any market, it doesn't have to be as the result of a "bubble" bursting. There are stats on how many properties are sold at a loss. It's surprising there are so many really.

 

that was true for some areas, but for a lot of areas that are currently 25% or so under 2006/2007 prices and facing further decline it can spell ruin. Anyone that bought on an 80/20 LVR loan after say 2007 in these areas would have been in negative equity for 7 years now and by the time prices have finished dropping say another 10% in the current cycle, they will be in about 15-20% negative equity after holding for 10 years, plus stamp duty, holding costs, agents fees. Hegney is suggesting that from the end of this year Perth may just grind along at 5% growth for some time before it does a Sydney. So despite the hype of property doubling every 7 years it seems just stick in there, prices may drop and if you can hang in long enough you'll score a doozy boom, but it could be 10-15 years in the making

BUT... to apply the concept that the collapse will just give up some of the boom then that is correct. In 2002 my benchmark Subiaco house was worth $700k, in 2006 it was $2m, in 2008 it was $1.2m, and now is probably $1.5m, so still double what it was 15 years ago.

 

Yes, that is true. Because I follow the areas that boomed and busted already, I keep forgetting the areas that still have no recovered to '07 prices. In some areas, anyone who bought around '07 would likely sell at a loss now. Very tough times for some people.

 

Bloodbath??

What is this..greece?

 

funny you should mention that. With what is happening in Greece and China we should potentially be preparing for the next wave of economic shock. This time we don't have mining to cling too. Anyone else have raised blood pressure?

 

Good write up in the news of a BIS Shrapnel Report into the property market, the "Residential Property Prospects 2015-2018 report". Seems to be a lot more reasonable than the "bloodbath" theory.

“It will be more of the same for the next 12 months, but things start to slow beyond that.
“It’s a regular function of the market, it’s economics 101. Market booms, people jump in and start building and market gets oversupplied and corrects.”

“We expect prices will be pretty soft or fall in some cities,” he said.

http://www.news.com.au/finance/real...y-prices-to-fall/story-fncq3era-1227416605503

I can buy that. But what about our 40% crash? For Sydney, once the boom ends:

"But once adjusted for inflation the BIS Shrapnel report argues it will see a 6 per cent decline in real terms."

Sounds more reasonable to me. I wouldn't call a 6% drop a "bloodbath".

 

I think I've dropped turds with more accurate real.estate predictions than BIS shrapnel.

How they're still in business is a mystery to me

 

Likely! ;-)

Still, I find it a more reasonable write up than the world ending apocalypse of a 'bloodbath' across Australia, wiping 40% off the value of properties across the board.

 

LOL! Someone clearly doesn't like anyone to get rich, or to get ahead, or to not be a burden on Society.

I really can't understand the thinking of these types of idiots.

"Rent Seeker"....makes me feel guilty....

Actually; no it doesn't

How about these deeheads say for a change; "Dear LandLords; thankyou for providing properties for everyone in which to live".