NSW Sydney 2020 "Megaboom"

Isn't the RB separate from setting monetary policy in Oz since it was deregulated? It has very limited control and powers.

Is the loss of control by the central banks an indication that capitalism is failing BM or that the model is broken?

 

Central banks holds the monetary governing power from government of the day. This wasn't always the case and may not be in the future.

 

I’m very conflicted on this and a lot of people disagree. Whilst I don’t have the data in front of me I’ve always been u der the impression that investors don’t drive the market, they are not emotional enough, it’s owner occupiers that see value along with cheap credit. They upgrade, they pay more at the higher end of town, and investors are the heard that comes in behind, often at the middle/lower quartile where yields make sense.. for a short period of time. @John_BridgeToBricks @Redom

What’s your opinion on this? Does OO drive price growth due to scarcity & OO appeal, or do investors?

I’ve always bought with the former in mind, as it’s essentially the biggest & safest portion of the market.

 

Personally, I think what's more likely is laid out in the other thread.

I don’t think there’ll be another mega-boom given current circumstances. It’s not the same as in the past.

- We're currently experiencing boom conditions. Clearance rates are through the roof, price growth is rapid, and there's far more buyers than sellers.

- IMO It won't last anywhere near as long as the recent boom - which had double digit growth for a few years. Supply is far more elevated than previous cycles. I think current expected supply slowdown will be short term & will catchup relatively quickly now that rates are falling and there's increased confidence. This should keep a lid on price growth vs previous cycles.

- Activity will be elevated, and it should mean the overall economy hums along again for the next few years (similar to 2016-2018).

- Credit environment is tight, particularly for investors. Agree with @mickyyyy - this segment needs to go gangbusters for a mega boom to play out. I think there’ll be a lot more, but not nearly enough to constitute a mega boom.

If there are a couple more rate cuts, then I think I’ve undercooked it and national price growth will be in the 10-15% range to end of 2020 - with Sydney and Melbourne dragging it there (I.e leading the charge). I don’t know if that constitutes a mega boom though. Historically - this would be more like a mini boom than a mega one.

 

Dead cat bounce anyone?

 

Great post as always Redom. I suppose we haven't defined what a mega vs mini boom actually means.

We could have a small breather from here, but remember, that we have almost made up all of the losses since 2017, since the election.

I agree with your mini boom prediction, but that only goes out to 2020.

I am predicting a larger boom that this, which would take us out to 2025/6 with strong annual moves to the upside, yes lead by Sydney and Melbourne.

Of course, we have a much weaker AUD, so you can decide for yourselves if this is a real boom or just inflation....

 

You're suggesting that 2 + years of corrections have been clawed back in just 3.5 months? Sure, there have been some select properties getting overs at auction ...but we are a long way off the highs of 2017.

#alittlelesshyperboleplease

I dont see how the AUD has any impact on the prices Australians are willing to pay for real estate. Their $1AUD is still worth $1AUD because they're not exchanging Euro's or USD or Yen or any other currency for their AUD. Events in Hong Kong may change that a little, as it may drive thousands of expats home , but right now what you are suggesting is a bit of a stretch I would suggest ..

Things are better for sure, but a few weeks of good auction results on low listings and people are losing their minds with booms , mini booms, mega booms ...it's a boom-a-thon all of a sudden .... I find it difficult to see how those sorts of predictions can be supported by the facts, particularly when the cold hard reality is that lending hasn't changed all that much ... and while there's no doubt that some people can get some additional dollars.... none one is disputing that things are better in that regard ..... credit is still strict when compared to 2013,14,15 and 16 , wage growth is still a non event and living expenses are still being studied forensically by most lenders.

 

I think the buying is from all those left out buyers due to FOMO.
But there is no denying the fact that the 7i0k properties are now sold at 830k and 800k properties around 875k approx.

I see about 6 to 8% hike in property pricing around western and north western sydney.

 

Bears call it a 'dead cat bounce'

Bulls call it a 'mini boom'

 

Common sense says it’s better than it was , and that’s all there is to see here ...

 

Thanks Euro73.

Re the AUD decline: it's not about foreign buyers, it's about relative value and underlying purchasing power.

To take an extreme example - in the naughties, the best performing stock market in the world in nominal terms was that of Zimbabwe. But that is because asset prices rise when currencies die.

So yes, it matters that are looking at rising nominal prices when our currency is declining. That what inflation means. And if I am right, property is doing what property does perfectly, as an inflation hedge.

 

How about more overseas money I think that's a big factor and that doesn't suffer from the same affordability issues

 

But realistically why would they get a multimillion-dollar mortgage?

 

Can you please post this data because from what I can see Sydney is still too expensive compared to the long run relative Sydney Brisbane price

 

if the buyers are mostly domestic, they borrow and earn in same currency and the wages are not getting a jump, so how does $ decline help this segment?

Controlled Currency devaluation works for an export economy only if they are the one doing it amongst its trading partners. The problem we now has is every other currency is also getting devalued, lets call it relative devaluations, so the net effect is near zero.

 

Today's GDP print is interesting. We're not even close to a recession...and next quarter has 2 rate cuts + tax cuts feeding into them. So far, recession talk appears to be far from reality.

Interestingly, i think if it did come in much lower than Sydney/Melbourne housing markets would've actually performed better given there'd be further rate cuts (while the employment market remains strong in the two major capitals).

These are facts:
- Sydney & Melbourne auction clearance rates at ~75-80% mark, consistently for the past 6-8 weeks
- Sydney & Melbourne price growth ~1.5% MoM now...and accelerating. The pace of growth is rapid at the moment.

Both of the above facts are very much in line with what is observed during booming property conditions.

These are not facts, but observations from most on the ground:
- Sydney and Melbourne buyers are paying materially more (much much more than 2%) in relatively more premium areas

But yes, definitely, these are ALSO facts.

IMO, along with elevated supply levels (near double 2013 levels, even with the drop off), the above are the main reasons why chances the likelihood of current conditions being sustained into a 'mega-boom' are quite slim (without further rate cuts).

 

Overseas investors may have greater access to capital than locals hence the FIRB controls over who can purchase properties in Oz.

When inner city houses are costing >$2m, (& median prices over $1m) then buyers are needing that sort of capital to purchase.

 

Even with further rate cuts, servicibility is still a major roadblock, isn't it? The building boom is just starting to taper off. My bodgy prediction is that once construction really slumps we will see a lot more pain in the economy.

 

Lowest GDP print since 2009 though....

 

Thats media reporting a headline. It's similar to bogus reporting about Sydney/Melb house prices falling because median ABS house price data is super lagged.

This 'print' is a quarterly data set. It came in at 0.50% for the Qtr. We've had plenty of quarters well below this print over the past 10 years.

Interestingly, its the highest Qtr data set over the year.

The reason why the YoY figure is low is because the bumper H12018 growth figure was stripped out (now over a year ago).

Last Qtr was revised up 0.10% too. Its definitely not great, but no where near recession. The actual breakdown can be a bit concerning - consumption down, biz investment weak. Net exports driving it (low dollar working). Since then, there's been big moves to fire up consumption & biz investment via rate cuts.