Headwinds for the housing markets especially Sydney/Melbourne

That's not my position. It depends on the asset. It depends on the location. It depends on supply and demand. It depends on a lot of things.

I agree.

Agree with all of this.

Maybe. It depends where.

As I said before, for Sydney:

Sydney is growing much faster than this, averaging 1.8 percent per annum for the past five years. It will add almost two million to its population by 2037, which is the equivalent of adding a new Perth into Sydney."​

Under what scenarios do you see the population of Sydney increasing by two million by 2037 but there are not significant price increases in Sydney by 2037?

 

1) downsizing
- new units / houses can be smaller and smaller (and higher)
- house to townhouse, townhouse to units conversions
- rent a room instead of unit
- high % of children living with parents/grandparents like in many countries

2) multiple job centers instead of a few existing CBDs

3) change in working conditions/environment - more people are allowed to work permanently or partially from home - no need to live closer to the center

4) no or marginal wage/income growth

5) migration of Sydney residents to other cities / countries

6) better transport infrastructure - higher avg speed, no probs to live far from jobs

7) autonomous cars driven by global AI - optimised commute time, ability to entertain / educate / communicate while driving to job/home, no probs to live far from jobs

8) heavy taxes for empty homes

9) full restrictions for foreign investors

... and dozens other possibilities.

The most important factor is economy. All other factors related to supply & demand are derived from it.

 

Good list. I would add shared home ownership too, although it doesn't seem likely.

> 5) migration of Sydney residents to other cities / countries

So other cities could see price increases?

I agree under this scenario that prices would not increase as much as without. It is possible but, based on your assessment of government, how likely do you think this scenario is in reality?

 

Other cities may benefit, but again - it depends on wage/income growth in those cities and economic conditions in Australia / ROW

I think the chance the Sydney prices won't reach the peak prices (2016/2017) within next 10 years is 20-30% (in USD). But I give 90% chance that it won't be above 30-35% from the recent peak

 

Interesting. I am also expecting a flat market for around 10 years but that is only based on instinct, not analysis. Population increases and building commencements become important over time. If Sydney is building an oversupply now, it takes years for the oversupply to be soaked up, an undersupply to become apparent and for prices to recover. That's only one factor of course.

Perth building commencements have reached a 20 year low. That is going to impact on prices down the track.

 

What is the evidence its building an

What is the evidence its building an oversupply?

 

None that I know of. Which is why I said "If Sydney is building an oversupply now"

 

Anyone hoping that the Chinese will come to the rescue should be aware of non-performing loan that is becoming more and more apparent:

China crackdown on bad debt forces wave of loans on the market | Financial Times

 

Exclusive: Business groups slam 'disappointing' skilled migration cuts a sharp drop in overseas immigration might have a significant impact on the two cities. Almost a 30k drop in the last 2 years and looks like more to come if this trend persists.

 

Never get between a politician that wants to get re-elected .
If they dont start getting some good figures for wage growth before the next election , they stand a very good chance of getting thrown out of office.
Cutting back on skilled immigration just might be the "get out of jail" card that they are looking for to push up wages.
Not good for those that have bet that high immigration will keep house prices and the rental market ticking along.
But if you see some big falls in rent and downward pressure on house prices in Sydney ,it will eventually stop many from moving to places like Brisbane .
Although rental yields might take a hammering if construction is in top gear.

 

“If you are bringing people in, like Labor did, that don't have the proper qualifications, that don't have the documentation that satisfies the examiners within my department, if they're worried about fraudulent documentation, those outcomes are not going to be productive for the economy.”


What’s he talking about, mass immigration has been at record highs under the liberal government for the last 5 years.

 

Paywalled

 

Over the long term, house prices will rise when people gets better wage. The cut might have short term negative consequences for properties with less demands, but will make price rise more sustainable in the long term. Cities in Switzerland is a good example of that.
I think politicians are too concerned with the big numbers such budgets deficits and fail to understand the stresses that ordinary people is going through when they stuck for hours in the traffic or waiting for emergency treatment. My personal view is that infrastructures has bit of catchup to do.

 

Weird...I pasted a link specifically for free distribution...

 

Last decade price action

 

That is one beautiful chart - might get it framed for my living room wall.

Captures how it all happened - especially that acceleration after 2014.

Just be nice if that blue line could spike up a bit to "complete" it.

 

that only happens when the other two are on the trajectory they are on now, but the lending has to also impact there, but that is where investors and home owners will start heading, or, rather, are heading already it seems.

 

December retail tumble worse than thought

With low wage growth it seems that a lot of people are asset rich and cash poor atm.

 

The problem is much of those assets that make us feel so wealthy are backed up by large amounts of debt.People are very cautious about changing jobs,especially if they are carrying large amounts of debt.
To really benefit when wages are rising means you have to be prepared to leave one job and go somewhere else.
With more permanent jobs disappearing and being replaced by casual and part time roles with no entitlements, many workers are unwilling to make the change, it also creates a vicious circle as those with high debt ,will spend more servicing that debt and less on other areas , which in turn can hurt profit margins for companies .They in turn trim back on staff and cut back on wage rises.
For a worker on an average wage , around 80k ,they might be short around 10-15k yearly after 6 or 7 years of dismal wage growth.
In years with reasonable inflation and good wage growth, that mortgage that you took out a few years ago becomes easier to service with steady wage increases , some would pour more into the home loan , others would increase their discretionary spending and start to spend more in retail, and the wheels of the economy would keep on turning around .
The effects of inflation would make that mortgage taken out years ago look smaller and smaller, and that was even before you looked at the effect of rising house prices.

 

Don’t totally agree with this people leaving jobs allows companies to re advertise and fill at a lower salary high turn over may be actually forcing salaries down. As an individual yes it will be an increase if they go to a higher position but at the same time a downward trend for average salary