Property could fall 30%- LOL

for melbourne:
high/higher vacancy rates CHECK
COVIDs come back CHECK
economy has been in the poo for a while now CHECK
Unemployment high CHECK
Lending tightening CHECK

and yet prices are holding up/reaching exceeding reserves/expectations

 

If thats what the land is currently worth than thats what it is currently worth. The guy says the land without the house would probably be worth even more. Nobody said property prices are currently 30% lower?

 

I see all that, but the big ones for me are jobkeeper ending September and no immigration for who knows how many years. We are living in a bit of a false economy and it is not sustainable while there is no vaccine. Banks can't deffer payments forever.

 

As someone mentioned, investory/buyer mindset is powerful, but usually sensitve,
and yes, lets see what will happen when job keeper ends and job seeker goes back to normal

 

I’m not saying that, nor am I arguing against the land value. It’s worth whatever the market is prepared to pay, for the right property. My point is the market is doing different things in different places - some properties inexplicably languish for weeks while well-located dumps with no parking like this are snapped up by people willing to embrace huge mortgages. I think the takeaway is that it’s still a very active market for owner occupiers with stable incomes buoyed by low rates but hard for investors to buy negative geared properties in an oversupplied rental market.

 

That is literally the only house that anyone bid on in the 6 auctions that I went to in recent weeks and guess which one got into the news.

 

Haha because we’re suckers for crazy auction stories?

While we’re on the topic of insane auctions, flashback to April 2019 when a couple bought a $3.15m “fixer upper” in north Newtown:
'An impulse buy': Couple snap up Newtown terrace for $3.15 million at huge auction

 

I agree with you insofar as vacancy rates in Sydney and Melbourne likely to soar even worse than their current 15-year highs; whilst rental incomes are corroded away. All the while, any improvement in immigration is unlikely for a while, and the cranes continue to build apartment towers all the while... added together these elements are quite alarming.

So, let's go there for a moment. Circling back to the very topic of this thread, lets assume a moment that property prices in most cap-cities plunge the 30% figure from that 2017 high-point value-rate.

This will take a few months' lag period to realise/observe as a "thing".

The questions from this assumptive moment in time are then two-fold:

1) will that point in time be the low-point and will that in fact be the best buying opportunity/time, to snag a bargain before things start to rise again? (for those few in the priveleged position to be able to swoop in with the means to purchase whilst most others cannot - meaning you either need to be fully employed at that time with no risk of job loss WITH your deposit+stamps ready to go, OR you had already siphoned out your equity releases during the 'good times' when there WAS equity to release and a bank let you grab it and you stored it in an offset account all the while; waiting for your moment to strike, and buy a bargain cash-outright-no-mortgage); and;

2) Even if you snag a bargain - when feasibly will things start to rise again? That is the more important thing. A bit philasophical here but I'm learning about the concept of impermance at the moment and isn't it so that (and please, just go with me on this metaphor for a moment...) after the clouds have rolled in and it starts thunderstorming, and the rain is hitting the roof day and night for multiple days - isnt it so, that in that peak rainstorm it really does feel like the storm will never end? Like there is no way sunshine could conceivably poke through any time soon? So you go to bed in day 3 of rain feeling this way, only to wake up to sudden sunshine and clear skies. It passed before you knew it, even though just 8 hours prior it seemed very unlikely that could happen.

I know this pandemic thing economically is unprecedented; I get that. But if it's just a recession it triggers; history suggests recessions usually only last a couple of years at most. So, buying a dirt cheap bargain could be wise if the storm shall pass in a year or two.

And hey, even in the event of this triggering a global depression - as horrific as the great depression was; things did recover (some parts took to as long as the late 40's to recover; other countries showed signs of recovery in the 30's but then WW2 corroded that away).

No one can predict the future but if the drops are severe and buying opportunities present for the few who are able to take advantage; my money's on the mid- long term opportunity.

 

Great post, but my question is: who is selling their properties at a 30% discount? Where is the supply going to come from?

The real estate market is a graveyard of people who think there is a buying opportunity just around the corner.

ps agree with you on immigration though. This will weigh, but mainly on rents and vacancy. I think all of the headwinds that you mention are real, but I think the impact will pop up in the rental market rather than the sales market.

 

divorces

 

You never know. They may hold on to the property for an even 50/50 share of the 30% lower rental returns to wait and see if the market goes up in the next 5-10 years.

 

Australia set to offer safe haven visas to Hong Kong

https://www.smh.com.au/politics/fed...haven-visas-to-hong-kong-20200702-p558c9.html

There goes the immigration factor.... Property prices are going to go up...

 

That may be true,but property market prices is significantly driven by the marginal buyer. A house with 3 bidders will command a good price, probably above reserve in Syd/Melb. A house with one bidder will pass in. The difference in price can be 20% peak to trough easily.

 

Might go some way to alleviating the glut of high rise in Sydney and Melbourne.

 

Not necessarily so! What you gain on one side you'll lose on the other. If Australia-China relations were previously worsening, Australia meddling in Chinese domestic matters won't go down well.

 

Can you back up the comment that prices are holding up / reaching / exceeding expectations?

I have been following inner northern suburbs in Melbourne (Essendon, Brunswick, Pasco Vale, Thornbury, Preston, Reservoir and a few others) over the last 6-9 months and can absolutely tell prices have started to come off here by purely looking at actual sales results (generally in the $650k-$900k bracket).

As I've noted in another thread, really Sydney seemed to be holding up very well, but over the last two weeks I've started to see a few properties go less than what I expected - hardly enough to make any huge calls on trends at this stage though.

 

ive been looking at inner city north melb, kensington, flemington,
eastern from bulleen, doncaster,
a little of south eastern areas
ignoring last weekend with the 54% auction clearance rates,
im seeing most reserves being exceeded, multiple bidders,
nothing so far that has little interest unless its unrealistic expectations,
agents still underquoting, still a lot of auctions (but this number has dropped off)

 

Hey folks, just on the rapidly developing HK situation. In that SMH article there's a sentence:

"Hong Kong is also home to the second largest group of Australian expatriates in the world, with more than 100,000 living in the semi-autonomous region."

I mean, I'm stereotyping here but one would assume that the bulk of the 100,000 AU expats are mostly SYD/MEL derived. I say this because the bulk of industries (final services, media, software etc.) that lead HK's economy; are likely to be where the bulk of AU expats are working in. It goes to assume that the bulk of these profession-types/seniorities would predominantly originate from Syd, Mel, and maybe Brisbane.

Even if we conservatively assume 60,000 of the 100,000 are from these 3 cities, how many of them are likely to return to their home-cities given the circumstances developing in HK? 30,000? More?

Even just 30,000 returning home will make a big difference to the economies of these home cities.

 

Or would the businesses these expats work for just move their offices to safer/freer market hubs in the region? I.e. Singapore? Taipei? Bangkok? If so, maybe the expats will wait for the corporate office move and just move to the new city?

 

Wonder how Dutto feels about this..
In all seriousness I think expats have moved from Australia because they prefer the lifestyles on offer in these other countries, and probably making more money.
Think most will move to a new city? But I really have no idea on this topic.