Is it Time to Put the Brakes on Property?

All pointing to peak.......

Is It Time to Put the Brakes on Home Prices?
Date: 28/03/2017
By Jason Staggers

Is It Time to Put the Brakes on Home Prices? - PropertyInvesting.com

This week’s preliminary auction results point to a spike in demand, even as the number of homes for sale across the country increased. The combined capital city clearance rate came in at 77.1 percent, and auction volume was 3,147. Last week’s final tally showed that 74.1 percent of 2,916 auctions were successful.

Over the same weekend last year, we were celebrating the Easter long weekend, so volumes were substantially lower, with only 554 homes taken to auction.

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What It Means For Investors
At the same time, our reserve bank governor Philip Lowe is pointing to the risks of rising home prices in Sydney and Melbourne brought on by artificially low interest rates. The higher property prices run, the greater the likelihood of a sharp pullback.

Considering its conundrum, the RBA will be leaning strongly upon APRA to redirect the flow of cheap credit away from the housing market, and hopefully into capital investment by businesses. Their hope is this would lead to more productive investment and a boost in the labour market, rather than ever-inflating home prices. As I reported last week, thanks to APRA, some investors may see their interest rates rise by as much as 3 percentage points, even as the RBA cash rate remains steady.

If I was a betting man, I’d say home prices in our two largest cities will peak sometime this year, then decline as much as 10 percent by the middle to end of 2018. Even after such a pullback, investors who bought in Sydney in mid-2012 would still be up around 60 percent in Sydney and 40 percent in Melbourne.

 

Awesome post once again Einstein

 

Not sure Melbourne will peak this year but I take the point of the article. Then again, every year we call for Sydney to peak and every year it just goes up more. Maybe this year we will be right?

 

Never knew ADL is on peak? It seems like it hasn't moved much since 2010, probably only 10% for most stocks, lucky ones prob get 20-30% since 2010.... but no where near as in early 20's. My guess is it will stay at 2%, 3% annual growth for next 5 years...

 

What markets or price range are we talking about here. So all of Melbourne and sydney? That would be awesome as I'm still hunting for that new ppor. But I'm not waiting if I find it cause I've heard it's peak so many times now and everyone has been wrong again and again and again. When rates rise enough around 2% then I'll call peak. Till then these houses I'm looking at, have not stopped increasing one bit, and still increasing. Look at Sydney for example just a couple years ago peak was called again, but good luck buying now with those increases.
If prices drop 10% on a million purchase, 100k loss perhaps. I bet it increases more than 10% before 2018 comes, which means we're back were we started today.

 

https://research.commsec.com.au/Loa...tMTA2MzM2NC0xIiwiZmlkIjpudWxsLCJkdCI6bnVsbH0=

 

I think investors on PC already doing this from what I am seeing, so many posts on this strategy

 

Fair call, lets see what happens this year 2017.

 

Quote..
Households held a record $1,046 billion in cash and deposits at the end of December. Cash and deposit holdings represented 22.4 per cent of financial assets, up from 22.3 per cent in the September quarter and in line with the long-term average of 22.2 per cent.

 

I call it keeps going up till rates go up at least 1++%. If it does drop though, I can't see anyone having the right to complain as we've all seen huge gains in the last year alone.

 

Sure interest rates are on the way up and might end up being 3% higher but by when ? 3% higher by 2018 or 2019 or 2020? Also, keep in mind that negative gearing is still in place so that would cushion down the losses(depending on portfolio stats).
Also, Melbourne for example still has very strong immigration numbers and also massive infrastructure spending so don't see how it will peak by 2018. So really hard to generalise on this one.

 

Australians sitting on mountains of cash as wealth outpaces debt

 

Just my two cents worth....

It's time to stay away from Sydney for sure
Melbourne also....

I think there are still good opportunities in regional centres with a mixture of drivers for Yield and Capital Growth (albeit less than metropolitan areas).

Opportunity in shares via debt recycling strategies if you haven't paid off your PPOR yet.

Debt reduction / increasing offset balances is also on the agenda in 12 months or so time when the RBA commences rate increases that's when the banks will really raise rates so time to get on the front foot now and be prepared

 

If you are making money it's very difficult to stop

 

There is no Sydney market or Melbourne market....there are thousands of smaller markets within these areas. Sometimes across the street is a different market. In order for a correction or decline of 10%, thousands of vendors would have to choose to sell their houses below current market value. As long as demand is strong, there will be no need to discount. Now if tens of thousands suddenly experience cash-flow or mortgage stress, well then that's another thing entirely. Houses flooding the market or (increased supply) is the only thing that will bring a correction in prices. In fact recent Government meddling will further increase prices.

 

If property in Melb continues to rise what happens in terms of affordability????

 

What does this even mean. They are low, what's artificial about it?

 

Not surprising

 

for sydney and melbourne investors - yes.
Certainly not for the rest of the country!

 

We have "anaemic economic growth nationwide...[an] increase in the RBA cash rate could have painful and far-reaching effects."

Thus by definition we cannot have..."artificially low rates" - unless it means globally.