One of biggest housing bubbles in history

When the crash is in progress I don't think you would honour that offer.. peoples mindsets change completely when prices are going the other way.

 

Yes if you bought in early you should be ok....but there will still be a large dip. Same thing with my Peth properties...because I was early I am ok.

Just have a look at some of the banks views/vals on the West...anyone who thinks it is smooth sailing..has rocks in their heads.

 

Well I was really joking with the whole offer thing but to answer you honestly, Your right. I wouldn't accept 20-30% at the time of a crash if I could get a better price. Its purely just business.

 

Well it will be interesting to see how it play out @sash. I think many of the OTP units that people paid ridiculous prices for is going to be a bloodbath.

@sash are you predicting a large dip across all markets, or only certain ones?

 

I think the fact that construction costs haven't risen significantly while the average house price has, actually supports my point. Construction costs are generally measured on a per square metre basis, while average house prices are simply based on the number of houses. If the cost of building 1 square metre of house hasn't risen, but the number of square metres has, then that will account for at least part of the higher house price.

 

Yes the vals are coming in very bad in OTP.....across the board....the valuers are going very conservative in Sydney.

It is also affecting new House and Land packages....there is also further tightening on the way from a finance perspective mostly via higher IR. The ratio of capital which banks need to keep is increasing funding costs. As a result it will affect how much people can borrow and add to this lower demand in Sydney and market cycle things will move down quickly.

 

Well I agree OTP units in many areas will be hit hard, prestige markets will be affected as they always are, and markets with lower demand but where people paid ridiculous prices for will also be affected.

But I do think the markets which have very strong demand from both owner occupiers and investors wont correct too sharply, certainly not 40%. That's what makes sense to me but anything and everything is always possible.

 

In 2011. "If you're a young couple, DO NOT BUY A HOUSE..for another 3 years"

Predicts 50% crash within 2 years.

Good call, Harry.

Good call.

How many lives changed for the worse the day they saw Harry on telly trying to boost his book sales, and decided they'd better not buy their first home in Sydney, Melbourne etc?






Harry Dent Prediction on the Australia Property Market

 

Yes...but the other thing is banks are attaching risks ratings to suburbs...they know Sydney has had a huge boom as such in place like the West they will ensure that they take a more conservative position.

In places like Adelaide (well outside of Playford)...they are very flexible......because it is a lower risk market. They are also doing this in outer Melbourne for H&L....but in some areas land has gone up from 145k to over 240k....those suburbs will also slow down also...

 

That was 2011...blind freddy could have seen that was incorrect.

Now it is different story...the Sydney market is past its peak. Cyclically we will see a correction as house prices have overshot mostly in areas which are quite a distance from the CBD. Add to this ...increasing capital costs...no RBA increases but cost of IP loans have already moved 50 basis points. At least another 15 basis points is on the horizon.

 

@sash lets see how it plays out. Will definitely be interesting. Personally I think a lot more of the risk lies with what the investor has bought, price and location, than the actual overall thousands of markets.

 

Inflation over 10 years is roughly 30%. A decade of stagnation and you'll have your drop

 

The failure to address the offset accounts is by far the biggest oversight in this whole thing.

I will always borrow as much as the banks will allow me that is the most cost effective for myself (meaning no LMI). Why do I want to give the bank my own savings?

So in there eyes yeah I will have a large debt but of course I have this severely offset with years of hard work. For anyone with a good grasp of money and savings then I personally believe this is the best approach and likely so do many other Australians.
I am not an expert on the GFC and no very little of the US lending market prior to the crash but if they had the same approach would we have seen the property crash we did? If unemployment was high but loans could still be repaid with offset money would there have been the foreclosures there was?

I think if they took offsets into account these graphs would be looking very different.

 

The authors of the article are a hedge fund manager and an economist. To an extent they're selling their own positions, and it makes for a dramatic headline in the press.

But...

Sydney and Melbourne property prices are a long way ahead of earnings.

• Against a median individual income of around $60K, the median Sydney house is nearly 17 times earnings.
• Against a median household income of around $90K, the median Sydney house is around 11 times earnings.
  
• Against two median incomes of around $60K, the median Sydney house is around 8 times earnings.

Sure, "the average person doesn't buy the average house", but a top 10% income ($90K in 2012) doesn't get you very far in Sydney. You need to be in the 1% ($230K in 2012) to be comfortable buying one.

Secondly, the allegations of lax lending standards are a bit worrying. OK, an anecdote doesn't prove anything, but problems tend to come to light when a market goes south, not before.

 

Whilst I can't see a whole market crash I definitely think some sub markets are currently over priced.

Affordability is definitely an issue that shouldn't be ignored too.

For Melbourne and Sydney investors I personally think now/ soon is the time to lock in rated and to start deleveraging portfolios to ~60% LVR.
The downward slump of the property cycle in these areas is coming (albeit not yet in Melbourne) and nobody knows exactly how much correction will occur.

 

ASIC found some fairly bad stuff when they looked at I/O loans: http://www.smh.com.au/business/bank...-interestonly-home-loans-20150819-gj39fj.html

 

These graphs are prepared by these guys. The information doesn't even look right to me.

I checked their hedge fund. They seem like a joke. Probably haven't even made any serious money.

There's no doubt Aussie properties is in a bubble, but it takes a few things to align to prick it (rising rate, rising unemployment, slowing growth, change in consumer and investor behaviour, falling rents, falling migration). Look if you get the wrong guy in power these things could align, but unless they do, the bubble will stay irrational longer than you can stay solvent betting against it.

If you want to prick the bubble, vote Shorten in. And then turn negative on Asian migration and investment. Done.

 

Australia is most definitely not in a bubble. Prices around the country are starting to correct and continue in their usual cycle. Sydney included. I mean look at the recent clearance rates- the resilience just warms the heart. Every time prices rise you have people screaming "bubble" and that prices are 'crazy'. Yet prices continue to rise and everyone wishes that they didnt fall for all of the scaremongering and purchased more properties. Look at this article from '05'
Sydney's median house price $505,000 - National - www.smh.com.au
and this one from '09'
No Cookies | Daily Telegraph
Its always the same, its always crazy, it can never last, the crash is always coming.

 

I call BS on that one, I did not look at the presentation, but did they have loose offers in hand from banks, or just engaged in some banter that brokers played along with ?

Lending is tighter now than decade or more ago, simply is, of course there could be a few fraudsters, but that would be the exception, not the rule, now with APRA changes........

Wish they would put up or shut up about easy money where there is any sort of reasonable rate offered.

 

If it crashes there is a buying opportunity. Do the opposite of everyone else is the old motto.

Just knowing when or if to sell is the tough question.