Sydney Price Correction - post examples - part 2

Discussion in 'Property Market Economics' started by BoatArrival, 11th Nov, 2018.

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  1. PandS

    PandS Well-Known Member

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    not yet, you see bottom when banks bad debt are rising and they provision for larger impairment for a few earning cycles.
    CBA result so far shown none of that sign
     
  2. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent Business Member

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    You might be right, but all of the data we have is rear vision mirror stuff. So that doesn't tell us if the market is bottoming or not. It just tells us that in the market went down last quarter.

    When the market bottoms, there will be nothing you can point to to confirm.

    So you will need to take an educated chance. Like jumping in when the market is 12% down, for example (ahem).

    Now, if you are happy to wait and miss the bottom so that you ensure that the confirmation is in, that is a perfectly acceptable approach. Nothing wrong with that. All i know is that the big successful investors prefer investing in falling rather rather than rising markets.
     
  3. JB40

    JB40 Well-Known Member

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    In the areas I watch in North/ North West Sydney I'm seeing a lot of movement under 1.4m already this year, in particular the 1.2 and under range. Even homes that sat late last year. Above that price range I still see property that I believe is quite good value sitting (others definition of good value may vary).
     
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  4. Redom

    Redom Finance Strategist Business Plus Member

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    Property data's always 3-6 months behind, reflecting settlement period delays/etc. Data's going to show the market moving backwards well into its stabilisation period. For long run investors, doesn't really matter too much either way, as we're talking margins of <5% here. In general, if you're a buyer attempting to buy at or near bottom, waiting for positive data is likely going to be a tougher buying environment as the supply/demand balance will switch again.

    A lot of the Dec transactions which were low are going to appear in Jan/Feb/Mar data as settlements begin to happen. If you went to auctions during this period, its probably one of the worst market most borrowers would have ever seen (at least in 10-15+ years). The first quarter data in housing is going to be poor if you look at indices solely. This is last years activity which was incredibly weak, not the current market (which is changing relatively quickly given price movements are quite fast).

    Not too sure where its at as of Feb 19, already seems noticeably a bit better, but probably not enough to call a stabilisation yet. A lot of the green lights are starting to appear (no RC, easier credit, rate environment turning, no IO rollovers this year, supply peak coming off), definitely in relation to credit environment. Obviously there's a supply glut/housing tax/state election weighing on confidence too, so some issues still to play out. In saying that, affordability & supply/demand catchup means that even in stabilisation, market isn't going to run away at a rapid pace (so investors can follow the herd and be slow reactors than leaders).
     
  5. berten

    berten Well-Known Member

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    Ahhh, and yet there is 42.3% more inventory on the market in Melb now than same time last year... no lack of stock.

    *correction of my correction, 42% was right. 42.3 to be exact.
     
    Last edited: 8th Feb, 2019
  6. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent Business Member

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    42% more? Really?
     
  7. berten

    berten Well-Known Member

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    John, this smells a bit to me, mate. We can see clear as day that last quarter was the biggest drop yet for Syd and Melb, price falls are accelerating and spreading to all markets and price brackets in those cities now, with inventory soaring. RBA turning neutral and economic indicators like retail and credit deteriorating. Nothing points the market stabilizing or becoming competitive any time soon, quite the opposite.
     
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  8. berten

    berten Well-Known Member

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    Sorry, 25%!!! . As of Dec.

    So Melbourne listings up 25% yoy
    Sydney 16.5% yoy

    It's because stock isn't clearing as oppose to more people are listing, to my understanding. More info here
     
  9. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent Business Member

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    Thanks berten,

    You may be right. I don't think it is unreasonable to suggest that after a 12% drop, the Sydney market is starting its "bottoming" formation, which will take several months. Many on this forum, myself included have suggested an increase in buyer activity recently, but that could just be people holding back from December / January.

    I would just note that real estate isn't a financial asset. So it doesn't perform like stock markets, paper derivatives etc. Real estate is more closely correlated to population growth.

    Also, I wouldn't say "inventory is soaring". The number of sold properties in Sydney (volume) went down by 17% in 2018. Now you are right that many of the new developments are coming on line this year.

    However new approvals are plunging (down over 25%, and falling), and Sydney's population continues to absorb new stock.

    So let's say we get to the end of 2019: - the funnel of new projects has dried up, and all of the new stock is being absorbed by population growth. We would be nearly 2.5 years since the peak, and we would be moving into "shortage" territory.

    Is that not how the bottoming process works?

    We are further along in this correction than many people think.
     
    Last edited: 8th Feb, 2019
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  10. TheSackedWiggle

    TheSackedWiggle Well-Known Member

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  11. berten

    berten Well-Known Member

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    Okay, 42% was actually correct!. Stock didn't reduce at the rate it normally does end of year, so as of Janurary, Melbourne has 42.3% more stock than this time last year.

    John, that is decent insight, but it's all speculation but the bottom line is people need money, they don't have it, and unless we go back to irresponsible lending or higher wages they're not gonna have as much any time soon.
     
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  12. aving1001

    aving1001 Well-Known Member

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    I see stock pilling up in the market i am following.
    Lots of inventory still getting sold with Price withheld tag.
    Vendors may like to get out of uncertainty as what if it does not pick up for another 6 years. Since most of them have bought 20 years back ... they will still make a lot of money on current sale. A dip of 10% from peak is not that much of a deterrent for them.
    A lot of buyers are looking at current time as time to upgrade to bigger houses. Sell current one at discount of 50k while taking discount of 100K on new property they buy.
    Plus imho oversupply against demand is not completely dictated by individual sellers . It is more due to outburst of developer's delivery and i doubt they would want to hold and bear holding costs.
     
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  13. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent Business Member

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    Monthly Housing & Economic Chart Pack | CoreLogic

    "Our estimate of settled sales is down 13.2% nationally year on year, Darwin and Canberra were the only cities in which sales volumes rose over the year."

    Will try to find the exact number.
     
  14. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent Business Member

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  15. TheSackedWiggle

    TheSackedWiggle Well-Known Member

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  16. berten

    berten Well-Known Member

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    Last edited: 8th Feb, 2019
  17. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent Business Member

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    The 25% drop is approvals of new dwellings. It won't affect rents yet.
     
  18. TheSackedWiggle

    TheSackedWiggle Well-Known Member

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    Neither will it reduce the supply side yet,
    Sydney has a lot excess supply hitting this year and next, wait for OTC drama unfolding in all its glory this year and the next.
     
    Last edited: 8th Feb, 2019
  19. TheSackedWiggle

    TheSackedWiggle Well-Known Member

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    A quick one on my favourite topic :)
    when you say "no IO rollovers this year"
    do you mean old loans(based on imaginary expense) set to expire this year will be auto renewed without fresh assessment(based on real expense)?


    "supply peak coming off"
    there is huge number of development supply hitting this year which started in boom time, how do you think OTC settlement issues will play out this year based on falling valuations and continued assessment based on real expense?

    "easier credit"
    are you already seeing this?
     
  20. Redom

    Redom Finance Strategist Business Plus Member

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    1. IO rollover was massive in 2018, will have little to no macro impact this year assuming IO stabilises at around 25%. Its already here. The big macro adjustment is done. Current level. I.e. there's no additional liquidity being dragged out of the market so there's no macro price impact associated with this now. Sure some limited borrowers can't refi, but on the whole, every old IO loan is being replaced with a new one. When it all washes out, no stock of IO debt adjustment anymore.

    2. Supply is definitely an issue this year, in an oversupply stage for a while. Nonetheless, its falling of peak levels and quite fast too. Within 12-18 months, there'll be a noticeable undersupply again that starts building up. Basically construction falling off a cliff. Standard cyclical behaviour here.

    3. Yes. Quicker loans now, less hair brain decisions now. Only the beginning of this though really. This year will see this continue to ease and a flood of overseas money injected from non-banks competing with each other. Among other things.