Headwinds for the housing markets especially Sydney/Melbourne

Make that 11.03%.
The % change Qtr on Qtr has improved though. Prices should stop falling soon.

 

"The number of houses and apartments built in Sydney will continue to increase over the next five years above already record highs – according to forecasts from the state government.

Forecasting shows about 192,000 homes are expected to be built over the next five years. That figure is an increase from a record 185,000 five-year housing forecast made three years ago - a rate of change that helped trigger concerns about the scale and quality of development across many Sydney suburbs.

Parramatta will be the fastest-growing council area, with 22,100 dwellings built by 2023. The second fastest will be Blacktown, with 18,300 dwellings, followed by the City of Sydney (14,850), Liverpool (11,950) and the Hills (11,700)."



https://www.smh.com.au/national/nsw...23-but-not-evenly-spread-20190516-p51o1o.html

Current Vacancy rate in Sydney

 

Rising rental vacancies will be followed by lower rents and that is never a good thing.

 

I think the rate of fall will reduce. But i still see falls for at least 12mths more

 

Concerns about quality for sure.
These high rises off the plan apartments built in the last few years are going to be notorious. They are going to look so ratty in a few years time. What a liability

 

Time to revise "Headwinds for the housing markets especially Sydney/Melbourne" originally posted in June 2018,

on the positive side

• No changes in NG
• CGT discount to remain same
• IO quota limit removed
  
• Improved Borrowing capacity due to
  • Assessment rate of 7% lowered
  • IR likely to fall at-least by .50 percent
• FHB LMI giveaway.

On the negative side

• Assessment based on real expense
• Total debt to income limit for investors
• Tighter migration (big city restriction on new migrants)
• Excess supply at-least till 2021
• SMSF borrowing highly restricted
• Remaining 300bn IO2PI rollover by 2022
  (not sure if recent APRAS assessment rate change will help investors to qualify for fresh app IO extension with ease then a month ago?)
• OTC settlement issue due to fallen valuations
• Potential slowdown in jobs
• Rising rental vacancies followed by lower rents
• Stagnant wage rise in the face of rising gig economy

anything missing or wrong?

 

Yep, the most important thing- Sentiment

 

@TheSackedWiggle are you looking to buy in Sydney or is your interest purely academic?

For what it's worth I think the trifecta of the election, a rate cut or three, and a rapidly backpedalling regulator will see the bottom of the correction come before the end of the year.

 

Yes...you are missing owning a property while talking about property all day on a property forum.

 

I am keeping an eye on Sydney/Melbourne but no rush,
I think the current loosing may put a floor on price and then stagnate for few years, rental yield is still quite low for my liking.
not sure if market will spike in a hurry with some of the headwinds still applicable. Let see how it turns out.

 

Nice little summary @TheSackedWiggle. The biggest factor (and most important by a distance) is rate cuts. There’s also an 0.3% improvement to net disposable income and consumption coming via a relatively large fiscal stimulus in a few months. Also major local economies are still performing very well and close to full employment.

In general, I think the combo of changes mentioned by @Blueskies may be seriously underestimated (particularly three rate cuts). I’d probably be an outlier here, but that is a massive stimulus. Big enough to suggest that Sydney and Melbourne will get very close to a new peak, very quickly (by year end, and reflected in data by mid next year). I.e prices won’t stabilise. They’ll boom. Fast. Confidence and investor mentality will completely change and drive demand. It’ll be early 2016 like again.

 

“The hallmark of a great investor is having everyone agree with you...later.”

 

I think demand is easier to predict. This all (three rate cuts!) is a game changer to demand at a time where demand was already beginning to recover. Supply of new listings has dried up too.

Supply side may raise more surprises...I think there may be some ‘ghost supply’ around. A lot of people who are probably willing to sell but are waiting for market conditions to recover a bit. Both developers holding stock and existing dwellings.

This supply factor, if large enough, may be able to contain and stabilise the market after some price recovery.

 

I feel the same but dont think all suburbs will experience this then QLD should take off...

 

Big call. Do you think the borrowing capacity is really out there for that?

 

Yes I think there's plenty of spare capacity from borrowers cross Australia.

In general, I think these markets adjust relatively quickly. Maybe its different now...but when demand lifts, prices often rise in relatively short but quick bursts...than stabilise. I think there's a relatively quick burst about to come if there's two rate cuts by August and assessment rates near 6%. The size of it - I'm a little unsure of as I think the supply side will respond faster now and more people will list. I.e. there may be an equilibrium with far greater activity overall thats reached once 'ghost sellers' who are waiting in the wings to sell come in after a bit of a spike in demand.

 

Our mortgage rates now are even less/equal to Mortgage rates in US (when FEDs rates was close to zero),

Our total house hold debt is still where it was aka almost all time high and now regulators idea is to increase this debt even more?
is ever increasing Household-debt the new mantra for growth?

@Redom for all the talks of strong economy and jobs,
isn't this loosening of credit followed by back to back rates cuts looks desperate?

 

For housing, it becomes about the strength of local economies. I.e. whats happening in WA doesn't impact the Sydney housing market. Whats happening in the Sydney job market matters a lot. While slowing, the NSW & Vic jobs market in particular are at cyclical strong points overall. Unemployment is ~4.3% here (up from 50 year lows though).

 

Yes I tend to agree with this - its definitely a cost of this.

You want the real economy to grow and more activity. Rate cuts drive nominal asset growth, which in turn should create more real activity as it responds to higher prices (e.g. construction kicks off after prices begin to rise/activity, etc).

 

Rise in borrowing power due to rate-cuts/assessment-rate increases the leverage even more,
If this extra leverage is used to buy an existing dwelling, we still get increase in household debt with out much economic bang for the buck.

What is it that regulators wanted to avoid to begin with when all this clamp down began? was it not high household-debt?