Property prices beginning to drop

Discussion in 'Property Market Economics' started by Property Baron, 18th Jun, 2020.

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  1. Property Baron

    Property Baron Well-Known Member

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    For the first time in my area I'm starting to see advertised property prices dropping. Regional town Northern NSW. Wonder if this is the sign of things to come.
    Anyone else seeing this yet?
     
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  2. Peter2013

    Peter2013 Well-Known Member

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    Interesting to see the RBA documents released today under FOI.

    Looks like the RBA is at panic stations, wanting to shutdown the housing market and prevent price discovery.

    The RBA is certainly a lot more bearish that what it says publically, and quite rightly so. Australia has record levels of household debt, and rating agencies are asking if Aussie households can service all this debt with surging unemployment.

    The unemployment rate hit the highest level in 19 years today. Hundreds of thousands of jobs have gone, many of those jobs were required to service our mega mortgages in the Sydney and Melbourne property bubbles.
     
    Last edited: 18th Jun, 2020
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  3. Waterboy

    Waterboy Well-Known Member

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    could be nice buying opportunity
     
  4. Property Baron

    Property Baron Well-Known Member

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    Maybe, Have been keeping an eye on the market for a while now as I'm looking to buy and up until now I have not seen any evidence of prices decreasing.
     
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  5. Kangabanga

    Kangabanga Well-Known Member

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    Yep there's no two ways about it. There will be a lag though from people losing jobs, running into arrears, trying to sell, then banks taking it all away. And once jobkeeper ends, even landlords wont be spared as all the previous part time workers/renters give up looking for jobs and go back to live with mom and pops. Stock market will probably crash first though.
     
    Last edited: 18th Jun, 2020
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  6. MikeyM

    MikeyM Active Member

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    Absolutely seeing this in Melbourne. Looking for a PPOR and prices are starting to slip noticeably. Asking prices are getting revised 2/3 weeks into a campaign and offers appear to be getting accepted at the start/middle of the indicative range. Interesting times!
     
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  7. SydneytoMelbourne

    SydneytoMelbourne Member

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    Have been going through the Melbourne and Sydney weekly results with a fine toothed comb for the past 6-9 months, mainly at properties in the $700k (Melb) to $1m (Syd) range.

    Definitely seeing more reasonable prices in Melbourne. I was looking inner west, inner north and inner north east (think Essendon across to Thornbury) and these places and surrounding suburbs are definitely looking much more reasonable than 2-3 months ago. The volume of sales in these areas has always been significantly higher though, so not entirely surprising.

    Sydney on the other hand (where I'll buy if prices actually do come down), I'm seeing very little movement. Seem to have sort of flatlined from late Feb. Really hoping for some bargains, as my strategy will completely change from Melb IP to Syd PPOR if it does, but yeah, nothing yet. A huge number of my friends are getting absolute bargain basement deals on rent though. $800 / week places for $600 etc. Madness.

    I feel like over the last week or so we are really starting to see some large businesses commence the redundancy processes, with JobKeeper also ending (and even if it is kept in some form), I don't see a fast rebound from this, and I can't see how Sydney prices will stay flat.

    (Disclaimer: I've got no idea).
     
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  8. Jacko

    Jacko Well-Known Member

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    Hey Mickey, which suburbs are you seeing the drop in Melbourne?
     
  9. Westie

    Westie Well-Known Member

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    Yes, yes, sell everything and head for the caves. The sky is falling. Civil war.

    </sarcasm>
     
  10. wilso8948

    wilso8948 Well-Known Member

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    Which town?
     
  11. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent

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    The crash is just not going to happen. There are countervailing forces, and the wind isn't just blowing in one direction.

    Interest rates are essentially zero, which means that real estate has never been easier to hold. And all of those cash flow negative properties in Sydney and Melbourne are being refinanced at the moment into cash flow positive properties.

    So I accept the unemployment argument, but countering this is the availability of credit, which frankly is a bigger driver to asset prices.

    Property prices should come down, but there is so much financial mischief that they won't.

    Supply of property will dry up (no forced selling when rates are zero). But the supply of credit will surge. Toxic mix, sure, but it will keep asset prices artificially high.
     
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  12. twobobsworth

    twobobsworth Well-Known Member

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    No idea on stats but on the ground in Sydney's North West Hills area houses are moving fast and if anything a slight increase on prices from last year.
     
  13. ttn

    ttn Well-Known Member

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    Absolutely. Been to a few inspections and there are plenty of people and properties sold in the last 4 weeks prices had been good

    Dont know about huge job losses or great depression coming but people are still buying with confidence
     
  14. SydneytoMelbourne

    SydneytoMelbourne Member

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    Some sound logic there. So is your argument (heavily simplified for a newbie like me):
    • You acknowledge the broader economic downturn, and the impact that will have on jobs
    • That impact on jobs will flow onto property, and there will be people that need to sell
    • The amount of people that need to sell will be limited, given banks are allowing concessions (e.g. IO payments).
    • You acknowledge that immigration will be down in the short to medium term, impacting rent, and holiday rentals (e.g. airbnb), impacting this very short to medium term attractiveness as IP's (weighed against the fact that they may be cheaper which will counter that for those with longer term views)
    • Whilst the above will lower prices, you think that this will be countered by the low financing costs at the moment, which will actually drive up costs.
    The last one is hard for me to get my head around, but I certainly understand it in principle. Could a more likely case be that in more blue chip suburbs (where people are less likely to lose their jobs etc.), we might not see significant falls (could even see gains), but in oversaturated areas in Sydney and Melbourne (think Ryde, Wolli Creek etc) these places could be much harder hit and see reasonable falls?

    FWIW (and like I said, I am a total newbie on this stuff) I still can't see how prices will go up materially, I have assumed flat to 10% reduction in prices depending on the suburbs.
     
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  15. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent

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    Great breakdown.

    Firstly, I agree some areas will be more affected than others, and there are always supply demand dynamics across regions where there have been over construction vs under construction.

    But let's stay macro.

    I am saying that there will be an an inflationary depression. Where supply shortages of everything from housing to beef, will be exacerbated by currency debasement (money printing).

    In an economic sense, governments can not stimulate. They can redistribute and they can debase, but they can't stimulate.

    The only stimulus would have been to say "everyone back to work" because this injects production back into the economy. But instead, they pumped the economy full of currency (in the form of both welfare and debt - lower interest rates). In a sense, they had to do it, because they created the injury in the first place by mandating a lock down.

    But back to property: central banks doubled the quantity of money in the economy in two months. Think about it. One hundred years of currency creation, nearly doubled in a few weeks.

    Couple all of these new currency units sloshing around with a reduction in the amount of housing available to purchase (people pulled their properties off the market in the downturn), and you have rising prices, and rising wealth inequality.

    Remember, there are significant factors driving property prices higher, even if it damages the economy overall. Put simply: 1) if property prices drop, tax revenues drop; 2) if property prices drop, the balance sheets of the banks need to be written down.

    So, yes, there will be unemployment, and yes, there will be a short term cut in migration.

    But these factors are less material than the nuclear bomb that was recent stimulus packages.

    To wrap up: I hold two views simultaneously: 1) I think property prices will surge over the next 6 years; and 2) I think there will be a long recessionary period.

    For charts and a better explanation for this view, I have some very short clips on Youtube from April 2020. Type "bridgetobricks" into a youtube search, and a few will come up.
     
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  16. Peter2013

    Peter2013 Well-Known Member

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  17. Westie

    Westie Well-Known Member

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    Yep, fan it. Property will be down 50% by December.

    Your money is much safer in BTC and Tron. Real advice.
     
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  18. Vertigo

    Vertigo Well-Known Member

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    think we might need to wait a couple more months before everyone starts getting excited
     
  19. Property Baron

    Property Baron Well-Known Member

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    Optimistic that's for sure and positive
    Not sure there's going to be a reduction in housing availability any time soon.With people expecting to lose jobs, or reduced work then they will be selling not holding.Also with all these new grants available there will be houses going up everywhere and then add the lack of migration. Some renters will be building off the back of these grants too.
     
  20. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent

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    I thought my picture of a high inflationary and recessionary economy was quite bleak actually.