House prices - where to from here (sydney)

Discussion in 'Property Market Economics' started by skuzy, 29th Sep, 2015.

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  1. Graeme

    Graeme Well-Known Member

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    I don't know how the banks compare either. However:
    • The Big 4 have a lower risk weight for mortgage assets than the other banks. It was 25%, and has now been bumped to 30% by APRA. The smaller operations are at 30%.
    • I think that the capital buffer they were required to hold in reserve was around 8%. APRA have been pushing this up.
    • I also have a feeling that they were allowed to self-regulate their risk weightings to a degree.
    My understanding is that a bank has to hold a certain amount of reserves to cover themselves if things go badly wrong. The calculation is basically:

    Reserves = Loans x Capital Buffer x Risk Weighting

    Given the 8% capital buffer, and a 25% weighting, then that corresponds to about 2% of the mortgage book. So for the $1.5 trillion or so outstanding in Oz, the banks would have to keep about $30 billion in reserve.

    (The above might not be entirely accurate. If someone knows more, then please correct me.)

    APRA have decided that the banks weren't as well capitalised as they should have been. They're in the bottom quarter of the G20's ranking, and to get them into the top quarter they need to raise another $30 billion or so. That's probably why it suddenly because so much harder to borrow in recent months.

    The other thing to bear in mind is that roughly 60% or 70% of borrowing in Australia is for mortgages. The banking sector is massively exposed in comparison to other countries.
     
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  2. sash

    sash Well-Known Member

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    Well here is my thoughts.....

    Lets use Mt Druie as an example...if you bought a house for $250k and say it is worth $500k...it is likely to be worth around 380-420k when the booms ends. The Druie has more of a boom bust cycle.

    However lets say you bought something in Quakers Hill for $375k post boom and it is now worth $650. It will be worth around 580-620k when the boom ends. The drop is less pronounced
     
  3. bob shovel

    bob shovel Well-Known Member

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    Agree with these guys.
    Last boom penrith hit say 330k backed down to 300k. From (circa)2004-2012 creeped up 10-15%. Then gang busters to now
    The last few years there were times Mt Druie, St Marys, St Clair were up in line (people paying to much) with penrith prices!
    Going by the madness in Mt Druitt still (I haven't been following closely) is either going to come back down or penrith and co further out still has more to go.

    Seemed like the ripple was blacktown then Mt Druitt then St Marys, then the penriff
     
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  4. Phantom

    Phantom Well-Known Member

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    Spot on with your prices between 2004 and 2012. I missed out on a 3/1/1 in South Penrith in 2013 for exactly 380 (330x15%-your calc) now worth mid 500's. Will drop prob 5% after boom. Don't think this area will lose more than that. Just too much happening there. So close to transport, sporting stadium, river, social activities, huge shopping centre with several smaller centres scattered around plenty of schools, easy access to M4 linking to M7 then M5 for South side trekking or straight down M4 for city, Parra, Homebush etc, decent industrial area.
    Mt Druitt and St Marys on the other hand although have done well thus far, I think might feel the heat a touch more when the boom is over. I say Mt Druitt to drop about 15%.
     
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  5. bob shovel

    bob shovel Well-Known Member

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    Where was it? I remember going to one and laughing at the re for about that price... Silly me. It jumped quick while I want watching!

    I'm wondering if it will be a delayed drop with the airport and the stuff going on in the area
     
  6. Graeme

    Graeme Well-Known Member

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    I've just been reading an article from The Guardian about Barangaroo. It includes the following quote:

    The tallest tower – which will house apartments and the hotel – is now proposed to be 275m, which would make it the tallest building in Sydney.

    Haven't they heard of the Skyscraper Index? We're all doomed! :eek:

    Actually, the oft quoted comment that record breaking buildings predict financial downturns isn't necessarily true. But rising heights are an indicator of a growing economy.
     
  7. Phantom

    Phantom Well-Known Member

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    This is it here:

    http://www.onthehouse.com.au/sold/history/3657711/27_Christine_Street_SOUTH_PENRITH_NSW_2750/

    By the way take a look at the previous selling price in 2004 compared to the 2013 price. Interesting isn't it? :eek:
     
  8. bob shovel

    bob shovel Well-Known Member

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  9. RetireRich101

    RetireRich101 Well-Known Member

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  10. bob shovel

    bob shovel Well-Known Member

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    "Mr hegney" just happens to be the west coast guru, where else would he promote ;) there's a lot in between syd and Perth though
     
  11. JDP1

    JDP1 Well-Known Member

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    I usually agree with the opinions of Afr.com, but don't in this case...Perth is fairly high buy in price for what you are getting which is a tough economy still severely reeling from iron ore prices; and they don't look like going up anytime soon nor does perth have significant impetus (political or by the private sector) to develop non mining industries unlike what is happening in brisbane.
     
  12. Tenex

    Tenex Well-Known Member

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    Having seen the previous boom, here is my opinion:

    The previous boom happened around 1998 / 1999 and lasted (with a small hiccup during 2001) until around 2002. It was a massive boom to the degree that my cousin who was a gainfully employed chemical engineer went and studied real estate part time to get into the game.

    I remember very well at the time finding a rental was very easy and you could negotiate prices. It was so easy that agents would give you the key to the property of your liking to inspect and would negotiate on rent (thats how I found my first rental).

    Then towards the end of 2002 the market started to dive and I believe the real bottom of the market would have been around 2005/2006. The prices did not recover until at least around late 2008.

    During the lower cycle I remember finding a rental was a nightmare. There wasn't much to go around and if you wanted to find anything you would be bidding on price against another 50 people.


    At present the Sydney market Divide into 4 categories

    First category are the brand new "houses" in established but not as expensive (inner west) and to some degree up and coming suburbs (some of the western suburbs). The reason is the Asian market loves these types of properties and views them as a safe way of taking their money out of uncertain areas and invest in these types of properties. These houses should keep their value more or less as the supply will cool down over time. Although they wont go up, they more than likely wont go down by much if at all.

    Apartments and units. These in my opinion are going to be the biggest losers. There is so many apartments going up and many of them sold off the plan to investors, it's not funny. In the next few years I think some of these apartment units will drop greatly. Very high vacancy rates and the fact that the owner wont be able to pay the mortgage coupled with the fact that in a cooling markets buyers prefer to buy land rather than air, is going to be the main reason behind it.

    The third category is the older houses or newer houses in suburbs that recently had an exponential growth but are considered outer suburbs of Sydney (outer west and southern suburbs). These houses in my opinion will have a price adjustment but it shouldn't be a great one.

    The Fourth category are the eastern / highly expensive suburbs. These will have a greater price adjustment because even during the boom some of them did not go up. In cooling market they should present better buying opportunities as the million dollar buyers are going to be very picky.

    I think some great buying opportunities are to be had in apartments and units in coming years in Sydney. I would more than likely stay away from house and land packages.

    As pointed out by others, employment is going to be a big factor which greatly concerns me about buying in QLD and WA. They are going to be hit the hardest in the coming years if employment does not improve. Those states are well and truly broke at present.
     
  13. Perthguy

    Perthguy Well-Known Member

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    I'm a Perth investor and I agree with you and @Tenex. My estimate is that Perth has at least 12 months before prices even look like stabilising. Probably more like 18. We will know more by then but with the rental market severely oversupplied and rental return plummeting, it's really not a good time to jump into the Perth market.
     
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  14. jins13

    jins13 Well-Known Member

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    I have noticed that the price of some homes in the Sydney area has the flat price instead of "offers over" suggestion and stock seems to slow down. I have an OTP property being completed next month but thank god that this is not being completed next year because not sure what kind of state the market is going to be like or the lending environment.

    http://www.realestate.com.au/property-house-nsw-kings+langley-120661009
     
  15. D'Mo

    D'Mo Well-Known Member

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    As of October 1st, agents aren't allowed to use the term 'offers' over

    It was deemed as misleading
     
  16. See Change

    See Change Well-Known Member

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    Not coming in them . Has been announced , but start is next year some time .

    Cliff
     
  17. D'Mo

    D'Mo Well-Known Member

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    I spoke to a REA agent yesterday in Sydney who said they came in already on October 1 .. I don't think any new listing will have offers over now
     
  18. See Change

    See Change Well-Known Member

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  19. Phantom

    Phantom Well-Known Member

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    They certainly are still being advertised with O/O. Here is an example:

    11/66 Brigalow Street Marsden Qld 4132 http://www.realestate.com.au/property-house-qld-marsden-120886673.

    @See Change is correct. Under the Property, Stock and Business Agents Amendment Bill 2015 (Underquoting Prohibition).

    There is no set commencement date as per the bill.
     
  20. See Change

    See Change Well-Known Member

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    The changes relate to NSW . There is some confusion out there , obviously with different agents giving Differing opinions

    Cliff