NSW Sydney Price Correction 2019 - post examples

No one cares about $20 less a month (or whatever marginal saving they'd be making) holding costs when they could continue to lose tens of thousands off the value of the home

 

Nup, would not buy in Syd or Melb even if they started giving money to everyone again, RBA -= does not matter, apart from showing we are in more trouble with each cut....APRA = more important.

 

Look at this 133 Tweedmouth Avenue, Rosebery, NSW 2018

Wants $1.25-1.32. Sold in 2014 for $1.165

 

Agree. APRA is more important. And the latest consultation is not a major change in my opinion.

 

It is a major change in position.

It's also a reversal if previous position. This started 6+ months ago with other rules being removed.

Although no one is asking any one to Buy in Sydney or Melbourne.
If one does not see value Australia is a big market.

 

Could.....
Or market sentiment and rules change.and tragectory change happens. Bo one has crystal ball.

Simplest way is to wait and see.

 

17 Burren St, Erskineville

Sold July 2018 1.705 mill
Sold May 2019 1.350 mill

355k loss in 10 months + transaction costs...

Property Report for 17 Burren Street, Erskineville NSW 2043

 

Ooof.

 

4 beds wth no car seems a pain. I am thinking that the no car aspect contributed to such a big fall when things were booming people ignored flaws like that. The mentality was just about getting 'something' at any cost. Now that things are dropping those things like no parking or no natural light or a busy road actually count for a further price reduction

 

Yes it's definitely a heavy loss. The buyer bought it as an IP and put it on the market for $1200 a week.

 

Yep. Rate cuts are a big sign the economy's in trouble, especially the jobs market. It is NOT a positive sign for growth in housing. Yes when rates were cut in 2016 prices kept going up, but they were already very strong and supply was very low. Now we've got an apartment glut. A tiny saving in monthly payments or even an improvement in borrowing capacity is not going to convince buyers to pay a premium for a tiny box if they have 100s of identical ones on offer at a cheaper price in surrounding suburbs. Perth and Darwin have kept declining, even during rate cuts, for the same reason.

 

Yeah, but your forgetting....neg gearing benefits....and it does not matter when you buy, just see how many here use that line....sigh....

 

That looks really painful.

Sold Nov 2013 $827K
Sold Jul 2018 $1,705K
Sold May 2019 $1,350K

Great for whoever sold it in 2018 - doubled their money in under 5 years.

Still also a good result if you held it from 2013 to 2018 - but a disaster if you purchased at the peak. Wonder what the story will be for the new purchaser.

 

More pain for them if selling in short term is the likely outcome......

 

Thats because 3 of the big 4 were still using "actuals" or "actuals + 18% " in Westpac's case, or "actuals + 20% in NAB's case" , well into late 2016. Pipeline pre approvals from those lenders lasted 90 -180 days beyond the dates when they all finally reeled in their calcs....

On 13 June 2015 NAB went to an assessment rate of the higher of 7.4% or 2.25% above the effective borrower rate for NEW money . They went to actuals + 20% on EXISTING Money



I links dont work anymore unfortunately and I cant find their email about changing their assessment rate to 7.2% for new money and also existing debt, but it was sometime around mid 2016 that they made the change. I know this because they were a preferred lender of mine for NRAS deals specifically because they allowed "actuals" and up front vals free of charge - I used them and Westpac A LOT right up until the end of NRAS which was mid 2016 . They were the replacements for Macqaurie and AMP who used to do actuals. They were the 2 best calcs from mainstream lenders until at least June 2016 because NRAS was still running strong until then...

Even if Im out by a month or three, the point is. May, June , July 2016 or thereabouts.... add 90-180 days for pipeline approvals and that calc carried value right through until late 2016. Thats why prices were sustained that late.

CBA was the last to wind back their calc.... early 2017 I think. I couldnt believe they thumbed their nose at APRA for so long...

ANZ went to an ultra conservative calc immediately in 2015 - they are always ultra conservative. They went to 80% LVR after the GFC while the other majors stayed at 97% INC LMI .... so no surprises they rolled up into a ball when APRA asked them to.

Point is.... If NAB, CBA and WBC had gone to 7.25% on existing debt from the mid 2015 date that everyone else went, you would have seen the correction start at least a year earlier than it did. They were keeping the wind in investors sails for that last 12 months. When they disappeared everything came to a screeching halt ...

People will respond by saying Liberty, Pepper and Bluestone kept making that level of borrowing available but you have to understand they cant replace even 5% of the volumes the Big 3 were funding .

 

More pain if someone buys in the peak. Need 10 years to book profit.....

 

Most people not only would not know who most of them are, if they did hear of them, would not be using them.....

Most people would not even look into Suncorp etc, let alone these non banks lenders...

 

Absolutely, I think this nails why the 2016 rate cut appeared to "help" house price growth. Supply was also very low, as this was right at the start of the construction boom, and new project starts hadn't yet been completed, translating to a boom in stock.

And if the RBA cuts rates more than once in the coming months, we'll very likely see the slowdown accelerate fast, just as it did when USA, the EU, etc cut rates in 2007/2008. These market crashes took off in each case right after rate cuts (though not because of them).

Looking back, the pick up in these slowdowns happened almost immediately, within a couple of months, after each economy cut rates to "fix things". They send currencies down, they spooked markets, job losses kept rising, house prices fell faster.

The reason is these economies were doing badly and that is why rates were cut in the first place. Unemployment also spiked up fast after rate cuts (it had already been rising slightly). In each economy a lot of construction projects started a few years prior were winding up, settlements were struggling too, starts had dropped so new projects weren't getting underway to fill the gap of those record high numbers of projects that had caused the glut.

If the RBA cuts just once I think we'll see a milder slowdown but we certainly won't see a return to the boom based on current oversupply, or an end to price falls, simply because of a rate cut. Any rate cut is an economic red flag. It also makes the deposit hurdle higher, even with the slight relaxing of lending standards we're possibly going to see. If they cut more than once, I doubt we'll avoid recession within the next 6 months, and this is based on the progression of downturns in multiple economies. Rate cuts can't fix downturns or make oversupply disappear. That's just not how they work. If central banks could magic away economic issues in this way, there would never be recessions.

One of the biggest worries we should have is falls in the value of off the plans don't get reported in the most widely reported house price indices, as OTPs are excluded. This oversupply issue could hit us like a freight train.

 

Although i don't agree with the end conclusions as to what will happen to the market @highlighter - great post and insightful viewpoint. Thanks for sharing. I think you're right about the supply side of the equation and this will be a stabiliser on price growth (/drag).

I'm not sure the RBA cutting environment is similar to the US pre-crisis cutting at all. I don't think Aussie mortgages are poorly underwritten and that a deeper issue is about to come to light (as in the US sub prime crisis). I personally think its trying to stick to their economic narrative more than a sign that things are in dire shape. I.e. that they need growth to pick up further to remove slack from the economy, wage pressure to build and inflation to come. Rates are too high to get the above outcomes. Their narrative is built on relying on relatively significant economic and employment growth, and hence they're cutting. Unemployment is still very low and near the lowest its been in a relatively long time (~5+ years), and even Evan's suggests unemployment will peak around 5.4% after his three rate cut prediction.

 

What percentage of that 70% (is that made up?) are going to sell and upgrade this year?