Scope of Australian Housing and its value

The Australian Market overall will drop over the next 1-2 years, there will be certain markets that gain back but higher end properties like CBD Sydney will fall.

there are a few very clear reasons
1. Increase in rates (I know a lot of forecast are not on the RBA raising rates for at least 2 years, I see a raise possible within that time frame as well)
2. the strictest lending restrictions to date in this country (in my opinion)
3. Restrictions on foreign investment/China having its own outflow of cash issues
4. no major growth compared to the rest of the top growing economies of the world

there are many other factors, the one thing that can and would offset this is a lowering of the Australian dollar which stimulates growth especially in the mining sector which are some of the areas that may see some growth over the next 5 years (so many variables)

I think long term these are all positives and negatives but I do feel stagnation is very likely although
"one card can bring the house down"

Love to hear your thoughts and reasoning for or against.

 

While I agree with on most of the points, i think one thing that you didn't mention is there are so many markets within Australia. There's no sense in grouping the whole Australia as a single market.

Places like Perth, Brisbane and Adelaide has not grown much or at all for the last 10 years so they are at its most affordable for at least a decade if not more if you factor in wage growth, record low interest rate and inflation.

I think those are places with real opportunities for home buyers and investors to get properties with great value for money. The sky is not falling, there are good opportunities to be had. Seek and you shell find.

 

Interested to know what makes you come to that conclusion

 

"there will be certain markets that gain back"

mate there are great deals to be had, a good investor makes money when things are going higher or lower.

I agree with what your saying and actually see this as opportunities mate.

 

Always opportunities in the Australian market since I started investing 18 years ago. Problem lies with the investors, not a lack of opportunities.

 

Are you suggesting interest rates will only go up in Sydney and Melbourne. Banks will only comply with prudent lending practices in Sydney and Melbourne?

 

Of course not Pete, the above are factors that are playing parts, the RBA didn't lift rates again but the banks have raised rates due to their bottom lines, Its very likely to me we see a drop in a lot of markets such as Sydney and Melbourne not due to different rates at all but moreso due to tighter lending and the price.

I do see certain rural areas really recovering if the dollar continues to drop

and I do see overall the market dropping moreso than consistent growth which is what we largely have had since 2010 (yes this is hugely debatable, but overall)

my only word of caution is what I would say to anyone, move forward financially while creating a safety net for calculated unforseen's.

I hope this all made sense Pete.

 

the lending practice and reduced borrowing capacity will affect more expensive properties, that's why you see Syd northshore dropping by as much as 10% in a year. Say an average white collar worker was able to borrow 1m for ppor or investment prior, now they could only do 600k. A 600k loan will not be an issue to get into most suburbs in Bris but inverse is true for Sydney and to lesser extend Melbourne.

 

We brought our first two Sydney properties after the GFC. Some relos and friends around us told us not to and worry that the sky is falling despite most of them had much better income and more stable jobs. We calculated and when ahead anyway. I think we are in a much better financial situation now in comparison.

 

You bought at a great time for Sydney. I've had people tell me for the past 18 years not to buy this, that or the other as prices are going to collapse. If I'd listened to them... well....

 

Everyone around me told me not to get into the housing market since I started earning my own money! Regretfully listened to these people during 2015-2016, but ended up doing my own research for once and bought a great IP last year in Geelong. Now I am loving it and only regret not doing it earlier in 2015-2016.

Ah well - point is that everyone thinks they are an expert because they read a few columns off MSM and think the whole housing market will collapse by 50-60%. More for us I say!

 

There are people pre Sydney boom who refused to get into the market (even though they asked for my advice and I told them its a good time and they had the money) because they refused to pay stamp duty. Called it a stand against the government.

The simple fact is if one follow the masses and mediocre (forum isn't really included), they will become much of the same. Need to be surrounded by a different group of people. They think differently, act differently, research differently, strategize differently and execute differently.

And their mindset is night and day different from the masses. That's the key imho. If you have a f*ked up mindset and philosophical framework (like the anti stamp duty bunch for eg), Nothing can help you until that's rectified.

 

A true investor makes money when the sky is falling by selling sky proof umbrellas and beach side drinks when things are good.

do what you can with what you have and question what you've done and use that as a tool for tomorrow.

 

Some great sentiments in this thread.

If I can offer another thought; if you buy as well as ypu can find; during the best market cycle times as you are able to see / foresee; something that offers scope for some kind of value-add (light reno, heavy reno, added bedroom within existing floor plan footprint, subdivision opportunity) then this manufactured-growth opportunity can then be your 'get out of jail free card' to save up and use during times of stagnation or even mild market decline.

I say this because no matter which of the able value-add strategies you are able to execute (e.g. across the entire spectrum of cheap and cheerful new paint/carpets only; right through to kitchen/bathroom reno, to room addition, to house extension/level-add, to grannyflatting, to full on bulldoze and townhouse-build); the costs to do any of these dont change greatly just because of market cycles.

Sure, some tradie costs may oscillate bit based on the overall construction industry cycles; however; on the whole if you buy smartly something with any of the above opportunities attached to it, then this can become your go-to during tougher market times

 

@C-mac you are spot on. I would personally never purchase anything without scope for improvement. This is why I am dead against new purchases for investment. Your simply at the markets will for your results and to me that’s not the way you do business.

 

Thats what I think too.

For instance, when you buy stocks/shares, most people buy (outside of index funds i spose) based on not only what company X is doing right now, but what new products/advancements/services that company X WILL be doing in the future.

Same thing with property IMHO. Sure, off the plan gives you some still-hefty depreciation benefits, security of minimal maintenance costs over at least say the first few years; bit there is such limited scope for adding value and that is where the bulk of CG-manufacture and/or jumps in rental income growth, will probably come from.

 

A few told me not to invest in Brisbane and should instead be investing money in Sydney back in 2015 saying Brisbane will never grow as much as Sydney. At the rate Sydney is going, for another year it will be back to the same spot. Although Brisbane hasn't boom yet, I think it does have better short to mid term prospects, atleast now that market has been holding up.

 

If you can buy below market value then everything changes, as well as if the land was likely to be rezoned, has a CF+ structure, I know this is unlikely but can and has happened.

 

Lets see how the change to lending affects it over the next year or two in Sydney.

It’s Easier to Look Back Than to Look Into the Future