Housing Bubble Prediction

Not at all. There is a whole generation (or three) that love buying into catastrophism. Remember these blokes have been around since 2014 selling books about the impending collapse of the Australian property market. It doesn't matter whether it happens or not, so long as they keep selling their books. The buyers don't seem to care that the predictions never come true. Well, I guess there will be a correction some time but all of their predictions have been way off so far. Have book sales suffered? Actually, I wouldn't know.

 

I'm going to email and ask him in 2018 if sales are down.

 

Remember this?

Do you think they have any "credibility" left?

 

I think we should wait till 2017 ends to be fare. I reckon that was him responding too

 

Apartments are a joke anyway... you've got to have rocks in your head to have bought apartments in any of those 4 locations you mentioned. But I thank the developers, because I've upped commercial rents in these locations. Imagine a street originally with 1000 residents now having 20000. Guess what happens to the businesses there.

 

Perth sure did correct big time. Sydney and Melbourne still going strong. Brisbane? Not sure but it certainly hasn't crashed.

 

I'm pretty conservative on the whole crash prediction, but I do think Sydney is showing classic signs of a bubble in the "eurphoric" stage, as I have seen through many investment cycles. It seems so familar now, once you have seen a few ...

• people amazed at the prices being fetched for properties in their area/certain areas
  
• people chasing ever rising prices, afraid of "missing out"
• media coverage everywhere - stories of instant millionaires, etc, those that made big money. this encourages other less experienced buyers late in the cycle to think they can achieve the same
• valuations way out of whack in terms of achievable returns

Going to be quite a few caught with their pants down when rates rise 1-2% I think. What doesn't make sense now will make even less sense then and people will start questioning what the heck were thinking at the time..

 

One thing I havent seen/hear of a lot is people who purchased OTP 2-3 years ago, and are cashing in just prior to settlement with $$ profit - without actually ever owning it.
I remember this happened a few years ago in perth. Ppl had purcased off the plan, then sold for 6figure profits prior to settlement.
People tried to replicate, and ended up with OTP properties coming due for settlement, which valuations werent even close to the PP price.

Blacky

 

Boom or bubble? From my point of view, late stage boom, yes. I remember Sydney 2003, scrappy properties reaching record prices at auction weekend after weekend. People thought the boom would never end... until it did!

To be a bubble, prices would have to crash back to the price when the bubble started forming. Do you think this will happen in Sydney?

 

Hence "I'm pretty conservative on the whole crash predicition" It does look like many of the signs, but I thinking picking an amount is a mugs game.

Here is an interesting recent CoreLogic chart:

State economies also go in cycles, and Melb and Sydney have had a pretty good run. In fact they drove half the GDP growth of the entire country over the last couple of years.

The three Sydney districts generating a quarter of Australia's economic growth

"The report showed 10 relatively small geographical areas – mostly in Sydney and Melbourne – contributed more than half of Australia's GDP growth in 2015-16."

However these things have always pulled back at some point...

 

The real question is if Sydney properties did crash 20%....then you've only lost 1 years worth of growth and if you own the property over a 7 to 20 year period....will it even matter by the time it comes to selling.

Look at the end of the day the long term property growth in Australia is 7%....yes some years higher and some years lower but with costs of acquisition/disposal at around 10% do you really want to time the market? better sticking with equities if trading is your game.....

- http://www.LivePoliticalChat.com/dean.collins

 

This is what people seem to forget though when dismissing predictions of a significant correction. If prices can rise 20% in a year, and if prices have risen 50% in five years, why in the world would people then doubt prices could correct by such a degree - especially when we have recent precedents in the form of other housing bubbles. What goes up 20% in a year can go down 20% just as quickly, and sustained rapid growth can be countered by sustained rapid falls.

And the other problem is in phases of very rapid growth, you get high numbers of inexperienced investors, who've bought high and in many cases don't have the sense, patience or often even the ability to hold. If those who bought to drive prices up 20% in a year were to see a 20% reversal, what would they do? What would other very recent investors do?

It's these bandwagon jumpers who crash financial bubbles of all kinds. They're the sorts of flooded in to buy baby formula, pokemon go stocks, US mortgage securities, crappy semi-ds next to the airport in Dublin. Bubbles happen all the time, and they tend to end with large corrections. It's nuts to think that isn't at least a possibility here.

 

Good to see more discussions around this topic as I haven't logged on for a while.

It is very obvious that in Sydney and Melbourn, property prices are forming a bubble. However, with all the recent regulatory changes and banks switching to a proactive approach towards home loans. Our current bubble will soon turn into a solid trend. As I also don't see how a 2nd GFC could be replicated given our much stronger regulations now compare to back in 2000 to 2007.

However, I still stand strong on my prediction with our major CBD unit price fall, with more OTP coming on its way. Just because the social media don't broadcast the horrible stories of people failing to settle OTP or needing to come up with extra cash to fill the valuation gap, it doesn't mean it's not around. Any finance brokers/ bank lenders will be able to relate to this.