Headwinds for the housing markets especially Sydney/Melbourne

Btw I don't disagree with you regarding the challenges of finance new investors face. However I do think there is more than 1 way to skin a cat and while debt reduction will be a good option for many, there are other options , especially for those who have little debt and good income/ serviceability .

Ultimately a wall will be hit but if your holding great assets in the mean time then I think you'll do well. Can also add value then realise profits, reduce debt and repeat again. Not for everyone but there are other options.

 

SUrpise surprise Leo says to buy Sydney, dont worry be happy about credit changes

 

Where in my post did I say buy in Sydney ?

You clearly need to take more English comprehension classes . Desperately .

 

I dont think thats a fair interpretation. Yes he loves Bondi and its surrounds, but I dont think he's oblivious to the changed credit environment

 

The #MaxTotalDebtCap and #ReducedBuyingpower will affect high price segments first then it will slowly trickle down to lower price segments. If I was FHB/PPOR buyer in Sydney/Melbourne I would defer my buying by 24 to 36 months to get better value for my bucks and rather concentrate on saving a 20% deposit.

 

Possibly, let's see. Boat Arrival said:

There is nothing about income on that chart, so I am not sure how the claim that median house price fairly well correlates with median household income x median interest rate with movements within fairly tight range is backed up by a chart that does not take into account household income. That's on this chart, which shows prices and incomes are out of step.



Admittedly the claim is house prices are correlated with income x interest rates and the above chart does not take into account interest rates. I just took a wild guess that adjusting for interest rates would not bring the full time earnings line into line with house prices. Facts should not stand in the way of an ambit claim.

 

That's not what he said.

 

LOL x 2

Vested interest ? Nah....surely not.

Also, in your scenario, a bald man would be asking....

 

Huh ?

You keep seeing things most regulars have not seen, you dont have to like what he advocates, nor how he does things, nor where he lives, but that does not mean you can just make things up.

So stop with this, make sensible counters if you like, but not rot.

 

Some people make excuses, others make opportunities.

 

Well, savings in bank accounts is a source the banks use for funding loans, if I was to compare with other funding sources I’d imagine this domestic funding is relatively cheap and not too volatile so the banks can lend out money relatively cheaply and without too much risk of sudden cost blowouts. It’s all interrelated??

 

No need to panic! According to Michael Yardney, if we extrapolate the prices rises in property that we've seen over the last 25 years, Sydney will have a median of over $6 million in 2043, and Melbourne won't be far behind.

 

May someone could also overlay median wages for the last 25 years onto that graph and then see what they can afford based on borrowing 6 times their annual income.

 

The median household income is currently about $90K.

If wages rise by 2%, which is about what we're seeing at the moment, it'll rise to about $150K in 2043. So borrowing capacity will be around $900K.

If wages rise by 4%, which is the sort of level seen during the mining boom, it'll rise to about $240K in 2043. So borrowing capacity will be just over $1.4 million.

I'll leave the snarky comments about Yardney not understanding exponentials to others.

 

Highly unlikely but if we see increased immigration and more demand for development a median of over 6 mil for detached housing could very well be achievable

 

Adding to the list of stiff headwinds facing investors,
. Potential SMSF borrowing restriction
. Potential Negative gearing impact



Discussion on impact of valuations during downturn is largely missing,

Just like 'rising price' leads to 'rising valuations',
'Falling price' leads to 'falling valuations' creating further pressure on prices?

 

Are valuations relevant for a long term investor with a portfolio who is just going to keep what they have? Maybe that's why it's not being discussed. Because most investors are planning to hold.

 

If one has the ability and willingness to hold for long terms, none of the headwinds matter, but we are talking about at-risk investors and
'falling valuations' are quite relevant to them.

 

Perhaps there are less "at-risk investors" than you imagine?

In any case, falling valuations are being discussed.

Negative equity starts to bite

Sydney Price Correction - post examples

Melboune Price Correction

 

With a DIR of 6,7 or even 8 x income.... no chance

We would need to see APRA allow "actuals" and remove the IO quota and allow DIR's back to 12 - 15 x income for this to occur.

In other words, we would need the same ingredients of the last 25 years to be available for the next 25 years. That is not likely

Prices will do well to double in the next 20 -25 years in Sydney and Melbourne ... forget them multiplying 5 or 6 fold.