Housing Bubble Prediction

I agree!

 

Think about what happens in reality. A FHB saves a 20% deposit buys a property at ~4x his income. Waits 10 yrs, it doubles in value & he wants to upgrade. He now has a 50%+ deposit for his next property & can comfortably buy a property that is 8x his income, as he's only borrowing 4x his income again.

Average income/house price ratio is ONLY relevant to FHBs, every 2nd home buyer has a massive deposit & only borrows 50%. The other minor benefits are that his income has increased over the 10 yrs & also hopefully he's paid down a little principle.

So house prices growth is coupled with income growth & also investment growth (ie his PPOR).

A net result is that only the 1st FHBs in their 1st few years of ownership are mortgaged to the hilt. Everyone else has > 50% equity in their PPOR. I don't see wages catching up with property prices any time soon.

And as we all know, the only way to get to be in the privileged position of a 2nd home buyer, is to be a FHB first.

 

But there isnt an oversupply of OTP apartments in the west mate.. They may be overpriced but there certainly aint an oversupply... You mention oversupply of OTP and then say how do u justify the rents for old houses? I don't get where you're coming from tbh..please explain

 

New study states that it takes over 9 years to save a deposit for your first home in Sydney.

 

there is always exceptions to the rule. For example my colleagues complain about not buying a place when they have poor spending habits such as Foxtel connection, x2 massive holidays every year, buy all the latest iphones, ipads, iwhatever, go out every weekend and buy coffee, breakfast and lunch instead of bringing it from home and etc.

 

The reason why I link OTP with old houses is because of the extra supply of housing available to the public will cause an overall down force on the rental market especially for old houses when all these new home and land and units finish.

With regards to your point about sydney not seeing signs of oversupply, it is true that we don't see signs of over supply in the 40km radius YET, but try some forward thinking mate, I'm not sure where do you live but I used to live in Liverpool and now Quakers hill, often I stay in Carlingford as my family live there, and I can tell you that in Liverpool there are loads of units being built, if you go there its almost like a developing country with heavy earth moving trucks everywhere and construction site everywhere. In Quakers hill near Schofields on Schofields road, there are construction sites every where and they are still expanding the ponds area, since you are also an investor would you rather have more demand less supply or more supply less demand? I'm not too sure if you're just trying to have a dig at me or you just simply can't see the overall picture the impact of these OTPs on the overall market in the future. And my point was really around my concern of the ability for the majority of the population that bought at this cycle when in the future there are heaps more supply coming up but they aren't receiving a reasonable rent to cover their cost.

 

This is not surprising at all, I've seen so many of my customers that are in the senior management level or in the medic professions and it's shocking how they have no saving habits, they earn a lot but they spend WAY more than they earn at the same time.

 

Hey sumterrance, what's your opinion on buying in Brisbane then? Since everyone is against Sydney and seems like there are no other place apart from Brisbane..

When I look at things there are lots of land available there and also lots of apartment is being constructed. Keen to hear what your thought.

I would prefer to invest in established suburb for an old unit these days like coogee if I can afford it. Price has gone up, but not overly crazy. And most importantly it has high scarcity factors

 

Regarding Brisbane I would look at 10-15km outside of CBD as I still see some good buys around, I personally will stay away from Redcliff area at this stage because the bus has gone in my eyes. I could be wrong because my brother just bought one near that area but his one is a house with plenty of sea view so could be a market within market for him. I just personally would stay away from it.

I've always liked redbank plains as last year you can still score some early 200k properties with roughly 300/wk rental return, but now the market there has moved as well and the rental market had slightly hit by the NRAS market (that's what my property manager told me)

 

Always worth treading with caution (though Pete Wargent is as reputable as they get) but in this case, you can ignore the words and just look at the ABS-sourced data; the picture is pretty clear



The average household size in Sydney is 2.5 persons. (ref: http://www.abs.gov.au/AUSSTATS/[email protected]/Lookup/1338.1Main+Features15Dec+2010 )

Look how many years we completed 2.5x or more dwellings for every 1 person of population increase.

Not to mention a disproportionate number of those dwellings are in high rise apartments which are not typically a 2.5 person household.

 

There's some serious catching up to do. It would take years to fill that void and population is just going to keep growing.

 

I absolutely agree and am not going to deny these data however I personally would love to see this margin of housing vs population remain the same or even depart further away in order to keep the property market in demand (look at 2008 and we all know how much property market has risen since 08), but also keep in mind that these data are past data which already happened, what I'm trying to do here is to predict what is going to happen in the future with the existing observations that aren't captured in these data report yet.

I just watched Terry W's video of the economic cycle and it is very clear to me that Australia has entered a very interesting economic cycle where the housing market has formed it own bubble cycle while the overall Australia economy cycle is the opposite.

 

I'm looking forward to the syd meet up next Wednesday with you guys!! it's always good to have instant respond during a face to face conversation than posting on a forum

 

Hence what's happening to property prices in Sydney

 

this is the video I talked about which was tweeted by Terry W and I find this very inspirational and a quick way to recap my economics knowledge

 

I have watched this video its very good!

 

The key is cashflow - you can have 100 properties for all you know but if you dont have the cashflow to fund it you will have 0.

The key problem here is the unknown interest rates unless you can fix your mortgage for 30 years.

 

How's that crash working out?

tagging @Barny

 

The only thing in them thar hills is gold

 

Do you think Lindsay's book sales will plummet if 2017 ends with no bubble popping?