Sydney property price declines tipped to halt next year (Prediction 423000xxxx)

Suprising is the bullish prediction in regards to apartments for me.


Sydney property price declines tipped to halt next year, report suggests


Sydney’s falling property prices could come to a halt next year as the market hits a turning point, new modelling shows.

House prices are forecast to hit a peak-to-trough fall of 12 per cent by mid-next year, according to the Domain Property Price Forecastsreport released on Wednesday.

“We’re expecting prices to keep falling in 2019, before turning around mid-year and seeing some modest growth towards the end of 2019,” said Domain economist Trent Wiltshire.

 

Quite on the optimistic side I would think - but it's not like Domain has a dog in the fight ;-)

 

In predictions, we tend to suffer from "recency bias", and our opinions tend to confirm whatever is happening at the moment without being able to see turning points.

The Sydney property market has only ever declined by more than 10% twice in the last 70 years: once in 1985 when the ALP ditched negative gearing, and again in 2008. So 10% falls are very rare.

Sydney is down 7.5% this year, and I struggle to see a situation in which it falls another 7% next year. Sydney is a very resilient residential property market which does have its ups and downs, but is otherwise very stable.

So I do agree with the sentiment of the article and think a peak to trough decline of about 12% is correct. Which means that most of the declines are behind us, not in front of us.

 

Sydney house price will be down close to 10% from its peak based on Corelogic index nov numbers,
The rate of falls are increasing, If one extrapolate this months CL number, the rate of fall is close to 14%.

Not sure how sound a strategy is if its based on extrapolating past to see future and discounting the clear headwinds ahead?

 

Neither of us know what is going to happen, but we know that Sydney residential real estate is low risk, generally speaking. I also agree that the market has further to move to the downside, so no qualm there

But curious: why would you annualise one quarter's declines and extrapolate that that is the real state of play?

You could make a case that the falls are worse than reported because a lack of transparency around auction results, but I am not sure we can say one quarters results annualised means anything.

 

10% fall from peak is not extrapolation it happened as per CL nov figures,

Extrapolation of Nov figure (14% ROF) was to emphasise that the 'rate of fall' is neither decreasing nor stabilising given that you were struggling to see a total fall from peak of (7.5 + 7)% in Sydney by next year.

How is Sydney market stable / resilient given the rate and extent of its fall already and no signs of stabilising yet?
Have you noticed a lot and lots of recent sale prices in Sydney are not disclosed? why is that?

 

True -7.5% isn't peak-to-trough, it is the annual figure. Peak to trough losses would be higher, but this statistic would be relevant to very few people.

I assume that the lack of data is that vendors are not getting the prices they want and do not want to publicise. I am not saying prices aren't going down.

That said, we can only use the data we have, and not overly speculate.

Sydney is a low yield, low risk market. It's stable, because it's volatility range is about 8% generally speaking. That doesn't mean it doesn't go up or down. However, relatively speaking it is a fairly boring asset class by returns. For example, the Dow has quadrupled since 2008, whereas Sydney property has only doubled. This is a sign of relative stability and resilience.

 

Are you discounting the 'margin call' free, low cost leverage IPs can provide?

let say an investor timed it perfectly and bought a property with an initial capital of 15% down payment.
Assuming its neutral cashflow, and in 10 years that property doubles,
that investor is now sitting at close to a return of 13x of his initial capital.

 

So that begs the question...what will be the turning point?

I get that population will grow...but finance is the issue......we saw population grow in 2004-2007 but house prices still fell in Sydney.

I can't see Sydney growing substantially for another 6-8 years.....a combination of falling prices (2019-2020) and inflation 2020-2006 should bring things back to balance that is how cycles work.

 

I can see it falling 10% next year.

 

its low yield..true that,
but its low risk and stable?
not so sure lets see how far we go in this phase till 2021,

Shouldn't volatility range be based on initial capital and not on leveraged value of asset?

 

I'm not sure that makes sense if you're talking about the asset class itself - everyone is going to be leveraged by a different amount. What about stock market investors that are fully funded from margin loans? Volatility = Infinity?

 

Had to read that twice.

Not sure how sound a strategy it is to discredit using extrapolation for the optimist case via extrapolation for the pessimistic case...

 

There is only leverage in property precisely because it is a stable asset. If property and shares had the same risk profile, you would be able to get 80% LVR on a share portfolio - but you can't. Banks will only allow you to leverage 30% on shares, because property is a less risky (not risk-less) asset.

Also, residential property is 70% owner occupier, and 30% investor. So the majority of the asset class is not even investable.

Contrast that to commercial property, which is majority investment related, which yes, is relatively risky and reflected in the amount of leverage you can get from banks.

Again, we are talking about Sydney realestate now. Contrast to Darwin which has bigger moves to the upside and downside and is more risky. Sydney will of course move up and down, but the amplitude is lower than other places.

Not that controversial a statement.

 

* Price falls gathering pace
* inventory rising
* government falling apart
* credit tightening
* buyers and investors retreating
* foreign money gone
* interest rates rising
* auction clearance rates at record lows

Anyone saying Sydney is going to go up next year, is selling something

 

Yep. Inflation aka wage growth will fix things in due time. 20% decline from peak + 16% decline in relative terms (6-8 years of inflation with 0 housing price growth) will bring Sydney back to sane levels. Or we can do 35% decline from peak and then bounce back with 2-3% growth per year. I wouldn't be surprised that Sydney will have combination of these two. Some areas will drop and stagnate, some will drop a lot more but will start growing inline with overall economy right away.

 

it wasn't a statement in isolation,
please read that post in context.

optimistic case is already close to be wrong based on what has happened and extrapolation of what is currently happening was to emphasis this very point.

 

But you can get 100% LVR loans to invest in shares with non recourse loans and put options all you have to lose is the interest which is paid up front and about 1.2% for the put option and about another 1% to the advisor for facilitation.

 

Or....taking a ride along the longest river in the world..... De nial

 

Are you telling me Domain isn't a trustworthy, unbiased source?