Bloomberg: "Runaway Australian Property Market Shows First Signs of Cooling"

Thoughts? How does this impact your strategy?

Australia's Property Market Is Showing Signs of Cooling

 

Says from my reading that the growth of the boom cycle is unsustainable and that we won't have a crash, but flat growth at some point (maybe soon).

No shocks for me.

 

It doesn't affect my strategy, it confirms it. My plan was always to finish my current build then save up/offset/pay down debt to be ready for the next upswing. I believe there is a lot of money to be made in the next boom for those who are prepared.

 

PERTH.....my darling Perth...just hold on a little longer..

 

Already aware of this that is why I have been selling stock.
There have been some clues along the way

 

I feel the same way... not yet! not yet!

 

According to the ABS (and Domain, which gave very similar results) year on year national growth is already pretty paltry at 3.5%, down from 10.7%. Sydney has stalled to about 2% (after peaking at 19%). So the market has cooled. Whether it will cool further remains to be seen.

 

Syd and Melb been booming since 2013, it makes sense to cover your bases. Regardless of what you read in the papers etc. need to focus on your own patch and the signs.

Clearly the interest rates have risen, many will say it aint enough, wrong to assume this because as it continues to rise it chips away at the investor/buyer psyche and market sentiment can work the other way. We are also now hearing news about the economy and its not all rosy another sign. Not saying the sky will fall, but why ignore these that would be foolish especially if you plan to make money moving forward.

MTR

 

Yep...which is why you need to have a diversified portfolio....if you only concentrated in the Sydney market....you will be waiting a while..and some will sell out of sheer frustration.....

 

Diversification for the win. Post the last boom when Sydney went sideways for 6 or so years, Brisbane pretty much doubled. The good times will roll if that happens again. Not sure I see it though.

 

One of the particularly worrying things about Australia's market is negative gearing. Demographically speaking, the vast bulk of negatively geared investors are 1) baby Boomers and thus 2) very close to retirement and likely uncomfortable a period of protracted financial loss.The thing about negative gearing is that, in order to make it work, you need your capital gains to offset your losses. So, while negative gearing probably helped extend Australia's residential boom, it may well also become its pin.

In a bubble, a lot of investors are inexperienced and in over their heads, and they're the real danger. On a forum like this it's easy to think "we've got this" but the problem isn't savvy investors, it's the hordes of idiots who thought property would be their get rich quick scheme - the ones who've bought recently, indiscriminately, blindly and expensively. Many of those investors, if they see their capital gains and profitability dry up, could be out of pocket tens of thousands a year in costs. Oversupply has made the rental market quite loose in many areas, which adds to the panic potential.That's my concern anyway.

 

This should not be a concern, should be seen as profit

 

Looks like Boomers (56-70?) are only around 30% of Neg Gearers

 

In a bubble, a lot of investors are inexperienced and in over their heads, and they're the real danger. On a forum like this it's easy to think "we've got this" but the problem isn't savvy investors, it's the hordes of idiots who thought property would be their get rich quick scheme - the ones who've bought recently, indiscriminately, blindly and expensively. Many of those investors, if they see their capital gains and profitability dry up, could be out of pocket tens of thousands a year in costs. Oversupply has made the rental market quite loose in many areas, which adds to the panic potential.That's my concern anyway.

There is enough real estate agents out there clumsily trying to sell you something..But just do the simple numbers on any area does not matter what city--what small area --but the few i look at over 65% own the property outright ,they would not care less about the price some will stay there for over 25 years depending on school and local uni locations..

 

That's one important factor we look at, we try build stock in areas of higher family/ppor buyers as opposed to investor areas/stock.

 

That's probably true for Melb/Syd. In Perth/Adelaide/Brisbane since 2010 median prices have only risen by inflation.

 

True.

 

Keep in mind your not buying into the median price of Brisbane, but certain surburbs that show opportunity.

just my opinion.

 

.... but highlighter it is also investors that buy at peak regardless how savvy they are, booms have a way of making people think they are invincible and they actually become convinced that the good times will keep rolling, they lose their heads.

I have read a number of posts on PC from investors who think that the boom in Sydney will never end or that it wont correct significantly ... why ???because its Sydney and its land locked and just so desirable, how crazy is that

Boom/Bust cycles are all about supply and demand, if people stop buying because -
interest rates start rise, affordability FHB pull out, economy goes sideways, Lending starts tightening etc etc people stop buying and more stock comes onto the market. Therefore we go from low stock to too much stock and prices go south. This is how its been working for generations I don't think anything is going to change anytime soon.

MTR

 

Rates have risen? Mine haven't...