Not enough money available for this crazy growth to continue in Melbourne?

Hi all

I have for a long time been telling every man and his dog that the crazy Melbourne property price growth simply cannot continue, but I keep getting proved wrong especially when it comes to Christmas lunches!

Yes Sydney is seeing a little bit of a quiet patch and apartment prices in Melbourne seem to be struggling in some pockets, but house prices in Melbourne as far as I am aware are at a huge peak. The property clock seems to be at midnight but my property clock is now in dog years so this last part of the clock is going for a long time.

Is my current justification that their is simply not enough availability of finance from future buyers to continue this massive increase in housing costs? Surely the banks aren't going to lend $1m to a first home buyer to purchase a new house and land package in Officer by the year 2019? And I no way expect a new house and land first home buyer to have this sort of cash lying around to buy it outright?

I know, this is just another post about crazy property prices, but what is going to make it slow down, stop or reverse?

What will break the cycle that we are currently in?

What has got my mind boggling is relatives calling me a naysayer at christmas lunch and also the crazy increases in asking prices for properties that I have kept watch of:

1) Lot 11 Fergus Lane Cranbourne West, I could have purchased this for $130,000 in June 2016 and now they are asking $210,000 to $230,000.

2) Lot 3014 Marriott Waters, Lyndhurst which is an off the plan townhouse were asking $564.900 back around March/April this year and now the same property is asking just over $800,000 and still hasn't been completed yet.

These gains are nuts.

Regards,

alicudi

 

I'll take that as a comment.

 

Melbourne houses 35mins out still have good momentum and I expect them to keep going for another 12-18 months

 

I suspect first home buyers will keep things ticking along for Melbourne in 2018 thanks to the Stamp duty abolition/reduction and the pullback from investors.

 

Yes, I agree with @Air_Bender . My best research says outer Melbourne is pretty hot and has another 2-3 years of growth left (not >10% thought).

 

In a fast growing area, '3 months ago' is a history.
You are comparing the land price with 18 months ago price.
130k to 230k... it didn't go up much compared to other areas.
That is the cheapest land available in Cranbourne West
373m2 for $400K in a new estate! Crazy.
Compared to surrounding areas, Cranbourne west is still really affordable.
In 6 months time, it may not be as affordable as now.

 

The craziness will continue until they all reach 600k median.
So another 20% for Cranbourne West/Cranbourne/Hampton Park/Pakenham

 

That's assuming first home buyers have money (traditionally they keep things affordable). With interest free loans abolished for most home owners I wonder whether that will happen. The market seems to be reliant on investor debt and I personally question whether interest free loans will continue after the royal commission for that segment of the market.

 

For young couples with 2 stable incomes, they can buy any house under $600k with just $30000 if they want. There are tens of thousands potential buyers in Melbourne.

 

Well.. 2 of my nephews and 2 of my friends bought their houses in last 2 months with 5% deposit in Cranbourne, Garfield and Ferntree gully unit. Was all easy for them.

 

...mmmm... so a serious question...... if prices are soaring in outer burbs and I don't doubt it....how long will it be before this entry level will no longer exist, and FHB hit the affordability wall.

When this happens more supply will come to market and FHB will not be able to soak up the stock... so we go from low stock to oversupply.

Not trying to rain on anyone's parade, but Melb is having a great run, hope everyone makes pots of money but the reality is booms can and do not last forever. Its not hard to read between the lines, investors are already out.

MTR

 

Ali, relax. All this phobia about where the money is going to come from will only cause undue head ache.

People will always find the money. They resort to BBS (beg, borrow, steal). In the Druitt there is a lot of the latter going on lol.

On another note I should have taken your advice several years ago regarding Frankston. I would have made some serious coin.

So, just relax, talk about politics instead at festive lunches and enjoy your property bubble! (When it bursts, sure, then rip into everyone about how nuts the property prices were).

 

We have record low home ownership in Australia. Either this continues and the country's stability is placed at greater risk due an unsettled and unhappy population or prices reduce and first home buyers enter the market. Most of my peers in their thirties are not in two income families, at least one parent works part time. The ABS statistics suggest that 65 per cent of mothers work but this is based on one hour a week plus. Most work twenty hours or less a week which on a standard income makes paying a mortgage difficult.

 

This - the massive population boom in Melbourne I believe is likely to continue to push new product prices along. If this population growth slows / reduces I suspect it will cause a flattening of price growth similar to prices in inner areas.

 

but you can not look at this on its own, sure immigration/pop growth can help prices go north, but there will be a point where buyers can no longer support this as they become priced out of this market. We are also talking FHB market. Remember incomes are not rising, bank criteria has tightened.

Affordability will always be a game changer

 

Yes, this is what I think will do it.

Re: affordability, what people don't realise is the new immigrants (mostly Indian but also Chinese) are getting very good paying IT jobs, $100-130k++ per year (by far the largest % of new arrivals work in IT) and a $600k+ property on this wage (even with just one worker households) is very do-able, especially on a low expense lifestyle (driving a Camry, not an Audi, bringing lunch to work instead of eating out and so on).

There are also some couples both earning this type of money. This high rate of increase has been going on for some time, and after renting in Aus for a few years initially many are now starting to buy.

The idea of signing up for a 30 year mortgage to live in a brand new McMansion and land package in Australia is a very good deal indeed for our new Australians, even if the house prices are an extra $100k and repayments are higher.

I think this will cause the boom in the west (Point Cook, etc) and the outer SE (Cranbourne/Narre/etc) to continue until medians are $600k+ (which is only another two years of 5% growth give or take).

 

I'd agree with you on most points except one: the majority of new arrivals don't just walk in yo jobs that pay that kind of money. But yes you did infer that they rent for some time (presumably whilst on a lower salary) then look to buy when salary increases. I'll agree that the immigrants on that kind if money are almost exclusively in Sydney and Melbourne. And yes, as you correctly say, it is doable, but only lifestyle and expenses are low eg lunch from home, no coffees out, certainly no smashed avo etc.. Both Indians and Chinese are good at this..personally, I wish I could take a leaf out of their book...multiple expensive coffees and smashed avo and lunch out everyday is my staple