Sydney/Melbourne: Property plunge ‘like GFC’ - John McGrath

Discussion in 'Property Market Economics' started by Pete Arendt, 21st Oct, 2018.

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  1. Pete Arendt

    Pete Arendt Well-Known Member

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    The weekend Australian is running a story with quotes from industry veteran John McGrath

    Property plunge ‘like GFC’ - The Australian, 19th October 2018.

    However, he expects the downturn to ease in the latter months of next year.

    Smart property punters might be best to delay buying in the Melbourne and Sydney property bubbles until the latter months of next year.
     
  2. jazzsidana

    jazzsidana Well-Known Member

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    My take-
    2018 is clearly being shaped by availability of credit..

    2019 is going to be impacted by cost & availability of credit. Which means further price drops can be expected (esp. in Melbourne and Sydney)..

    2020 we will see market in Sydney and Melbourne plateau, unless external events trigger further falls (like GFC).. And speaking to and reading on some of the economist predictions, it can surely happen due to trade war, inflation bla bla which will have impact on Aussie market.

    Famous saying - Prepare for the worse and hope for the best!!...

    Good thing is Australian property market is made up of multiple markets. Hence, now is the time to become borderless investor!!..

    Cheers,
     
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  3. Pete Arendt

    Pete Arendt Well-Known Member

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    It was interesting to see job figures this week. We now have full employment, which at any other time would mean rising interest rates from the RBA.

    But I don't think the RBA can raise rates because of the extreme level of household debt we have (2nd highest in the world), so inflation it is. Trouble is the RBA will probably lose control, they will be too slow to raise rates that it will be hard to keep a lid on inflation. Then it will be catch up, a rapid rise in interest rates.
     
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  4. Toilandtrouble

    Toilandtrouble Well-Known Member

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    Many economists are convinced that the relationship b/w unemployment, economic growth, inflation and wage growth are not the same as we all knew. Many interesting theories that the super large companies and technology are driving efficiencies keeping prices and inflation down. I am not convinced inflation is about to skyrocket.
     
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  5. jazzsidana

    jazzsidana Well-Known Member

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    Inflation in Australia won't be an issue, but in USA it's a possibility which means USA start raising interest rates and cost of funding for Australia goes up, which subsequently will impact interest rates that end oz consumer gets!..

    Biggest risk to Australian market is external factors which are not in control. China slowing down or USA starting trade war bla bla...

    And if that happens, with RBA cash rate at 1.5%, only so much bullets RBA can fire!!... Other option is quantitative easing, and that takes us back into the zone of inflation..

    As said before, hope for the best, prepare for the worse!!...
     
  6. kierank

    kierank Well-Known Member

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    I don’t think property will crash as much as his share price has since listing.

    If it does, a house bought for $1.8M this time last year will be worth around $350,000 in two years time :eek:.
     
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  7. marmot

    marmot Well-Known Member

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    Its been mentioned a few times by economists but for workers to really enjoy good wage growth they need to leave their current job and go somewhere else.
    For people sitting on high levels of debt ,not having a paycheck coming in for a month might be to much to bear ,and they might be leaving a permanent position.
     
  8. TheSackedWiggle

    TheSackedWiggle Well-Known Member

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    500 bn IO loans and high household had the potential to become systemic risk for entire financials. RBA is trying to preemptively avoid this risk by targeted attack on households with high debts via Credit tightening before it goes totally out of their hands. So credit tightening is here to stay for some time to come.

    Current problem is not 'price of debt' its the 'availability of debt', so even if RBA ends up firing the remaining monetary bullet, under current credit environment with potential DTI cap it will not mean much for the serviceability issue.
     
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  9. werdna

    werdna Well-Known Member

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    Haha the media seems to manage the property market in Australia...
     
  10. Ben John1

    Ben John1 Well-Known Member

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    Just by observing Melb East property recently, the good one (location, potential, etc) will always sell. Also to mention competition from overseas buyers with unlimited fund
     
  11. sash

    sash Well-Known Member

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    Hmm.....,,,looks like panic is taking hold in Sydney....

    Panic Setting in Sydney

    Channel 9 ran a story on the 6 pm news.... people are losing money...anyone who bought post late 2016 will make no money or lose money...
     
  12. TheSackedWiggle

    TheSackedWiggle Well-Known Member

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    can we see 2015 prices by 2020?
     
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  13. sash

    sash Well-Known Member

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    More like early 2016 prices....... a lot of people got too emotional about Sydney.....now like clock work...2019-2020 seems to be the year when mortgagee sales come to light....
     
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  14. Perthguy

    Perthguy Well-Known Member

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    Do you think prices may stabilise in 2021?
     
  15. sash

    sash Well-Known Member

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    Yes they will....but Sydney and Inner/Middle Melbourne are now exposed....they went up too much.

    The safest markets will be Brisbane, Adelaide....Geelong/Hobart are okay till about 2020-2021...
     
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  16. Perthguy

    Perthguy Well-Known Member

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    Cheers @sash. I don't know where my next IP will be, or when. I'm looking at 2020 or 2021. It won't be Sydney or Melbourne. More likely Brisbane
     
  17. sash

    sash Well-Known Member

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    No worries....its is interesting...how people keep thinking that Sydney will stabilize it won't....the falls in Sydney might exceed the GFC.....that says it all......

    Melbourne will also take a hit but historically outside of the Inner suburbs it flatlines...

    Cycles do matter.....
     
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  18. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    ummm yes ?

    the media manages who is in government too

    ta
    rolf
     
  19. TheSackedWiggle

    TheSackedWiggle Well-Known Member

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    This is core logics one year old chart for Sydney, house peaked at 182

    [​IMG]

    As per their latest figure, Sydney houses are sitting at 169 at end of Sep 18.
    Its already close to late 2016 prices and we are probably in first quarter of the game.

    Its not the extent but the rapid pace of fall which is alarming.
    It still has the worst of headwinds due in next 2/3 years.

    Sydney was at 140 in early 2015,
     
    Last edited: 22nd Oct, 2018
  20. berten

    berten Well-Known Member

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    I need a PPOR in melb bayside, but I think I have to sit it out for at least 12-18 months. Clearance rates are abysmal out there and most sales seem to be units/townhomes. The 1.5m + market seems dead.

    Anyone active in the area?