Sydney - the coming correction 2018-2022

Discussion in 'Property Market Economics' started by sash, 3rd Dec, 2017.

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  1. Sackie

    Sackie Well-Known Member

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    That sentence sums it all up. Succinct and to the point.
     
    Sackie, 7th Jan, 2018
    #241
  2. HGM

    HGM Well-Known Member

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    Ireland didn't have a recession either. When it did have one, it was the result, not the cause of the housing bubble popping.
     
    HGM, 7th Jan, 2018
    #242
  3. HGM

    HGM Well-Known Member

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    At the peak of the Irish boom, immigration was much larger than it's been in Sydney recently.
     
    HGM, 7th Jan, 2018
    #243
  4. Sackie

    Sackie Well-Known Member

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    I don't know the supply/demand situation there though. I know in many places in Australia demand is very strong with limited supply. Australia also has an obsession with real estate and wanting to own their own place as well as multiple places if possible.
     
    Sackie, 7th Jan, 2018
    #244
  5. Noobieboy

    Noobieboy Well-Known Member

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    Even in basic economics supply and demand is not everything. You can have stacks of demand, short supply but a price that customers are not willing to pay for (for whatever reason: affordability, substitutes or whatever).

    Sydney might be approaching affordability barrier.
     
    Noobieboy, 8th Jan, 2018
    #245
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  6. Perthguy

    Perthguy Well-Known Member

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    I have seen this happen on the ground in Perth. I attended auctions with genuine sellers and genuine buyers but properties passed in at record prices. There is a price ceiling in the market, which you identify as an affordability barrier.

    There is also a price floor where sellers won't sell. A seller told me last week that she wouldn't sell unless she got at least $x. There are exceptions with forced sales of course.
     
    Perthguy, 8th Jan, 2018
    #246
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  7. TMNT

    TMNT Well-Known Member

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    Hmm I'm still sittinghere trying to work out if this is part of a normal. Cycle or we are seeing a little bit more unusual.

    Obviously Sydney has started slowing down.
    According to cycles Melbourne should be next.

    But will we see 10% drops in Sydney and Melbourne metro....

    I really have no idea as I can't see them dropping that much. Maybe a couple of years of virtually zero growth.


    I'm just rambling here though
     
    TMNT, 8th Jan, 2018
    #247
  8. Journeyman

    Journeyman Well-Known Member

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    Macro Prudential changes are a prime example of a factor other than simple supply and demand affecting markets. Made borrowing less fun....
    I just can't see a massive correction. There are too many people wanting to enter that market for it to soften too much.

    If I am wrong, I will be buying another in Sydney.....
     
    Journeyman, 9th Jan, 2018
    #248
  9. Simon Hampel

    Simon Hampel Founder Staff Member

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    Ireland keeps getting trotted out as an example of how far markets can fall and try to build parallels to Sydney.

    The problem is that most people here have no idea what the situation was like there or exactly why the market fell.

    Ireland in the leadup to the GFC, as well as many parts of the United States - both had massive construction booms. We're not just talking about a few high rise apartment developments, we're talking about entire towns being built in areas where there was little employment and no real infrastructure.

    It was very much a case of "if you build it, they will come", but once the GFC hit and the economy started taking a battering, nobody did come - and that had a massive impact on housing prices due to a huge oversupply.

    I recall reading articles about entire towns in the US being bulldozed because nobody wanted to live there.

    I was at a conference a couple of months back talking to a guy who had moved over from Ireland a few years ago and got to talking about real estate. He described the situation in Ireland during the GFC and said there was one of those massive property developments near where he lived and the locals were all incredulous about why it was being built - it was a long way from any jobs, there was no real infrastructure, and as it turned out - nobody wanted to live there.

    We're not just talking about a new subdivision - we're talking about thousands of new homes being built in an area where there simply wasn't any real demand for them.

    That's one thing we haven't had in Sydney - a construction boom. Sure, construction is up a lot - but mostly that's just soaking up the built up demand over recent years of high immigration. If we continue building and slow immigration levels we may eventually lead to having a huge over supply problem - but right now, I don't see that for Sydney - at least not to the point of it causing an Ireland / US style property market crash.

    If I was concerned about Sydney property prices crashing, I would be focused on stats about housing demand - we've had shortages for quite a few years now (ie much higher demand than supply) and I suspect that supply is only just starting to catch up now. The question is - will we get into an oversupply position? That's when the real danger comes in regards to falling prices.
     
    Simon Hampel, 9th Jan, 2018
    #249
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  10. Simon_S

    Simon_S Well-Known Member

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    Have to disagree with your assertions.

    We have had a massive building boom.

    [​IMG]

    The availability of Cheap Money is what created demand.

    Raise the cost of said money and Demand will disappear as the increase on investor loans just proved.

    Loan clampdown helped cool housing market, but investor risks could rise: RBA

    Sydney House prices will Crash because the Economy that sustained it will no longer be there.

    Australia's economy is being cushioned by a big increase in government spending
    The Govt was the greatest contributor to our GDP in the Last year.

    Budget 2017: Infrastructure spending to avert next downturn
    Booms always lead to Busts no matter how hard Central Banks try to prevent them.

    This time will be no different.
     
    Simon_S, 9th Jan, 2018
    #250
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  11. Simon Hampel

    Simon Hampel Founder Staff Member

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    I'm not sure how your chart shows a "massive building boom" I see in that chart a steady growth in GDP from construction as the population has increased during that period - followed by a drop more recently? If anything, it shows that building activity has eased somewhat more recently?

    The problem will come if they continue the construction activity beyond the point where demand has eased (either because population growth has stagnated, or because there is now a genuine surplus of housing) - at which point we get into oversupply and that will have a huge impact on prices because it is absolutely a buyers market.

    Based on past experience - that over supply is likely to happen eventually (assuming demand actually eases) because you can't just turn housing construction on and off like a switch, large development projects take years to complete (or else you get the ghost skyscrapers like what happened during the Asian crisis in the late 1990s).
     
    Simon Hampel, 9th Jan, 2018
    #251
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  12. Simon_S

    Simon_S Well-Known Member

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    That chart clearly shows a big ramp up from 1992 especially from the early 2000's

    Don't forget we had the Olympic Games in 2000 and yet the lead up to that is nothing like the run from the early 2000's after it.

    The easing part is exactly the point. What will now drive Growth in Australian GDP?

    Govt's can spend but where will the money come from......
     
    Simon_S, 9th Jan, 2018
    #252
  13. Befuddled

    Befuddled Well-Known Member

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    There's definitely a construction boom: This unbelievable statistic shows the scale of Australia's apartment building boom

    Digging a bit deeper, 51% of the cranes across Australia are in Sydney: http://assets.rlb.com/production/2017/04/12001856/RLB-Crane-Index-Australia-Q2-2017.pdf

    In Sydney, chronic undersupply for a decade + high population growth are combining to offset that supply. Vacancy rates still hovering around 2% which is healthy

    It might still tip into oversupply eventually though
     
    Befuddled, 9th Jan, 2018
    #253
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  14. Simon Hampel

    Simon Hampel Founder Staff Member

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    I think you'll find that if you overlay a chart of Sydney's population during the same period, you'll get a line that largely matches the ramp up during that period.

    That's exactly my point - yes, there is a lot more construction, but there has also been a huge growth in our population at the same time - thus supply has never exceeded the demand - indeed, there have been plenty of periods in the past decade where we have had a "housing crisis" due to a severe housing shortage.
     
    Simon Hampel, 9th Jan, 2018
    #254
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  15. Simon_S

    Simon_S Well-Known Member

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    Just like the Debt?

    When have we had a Funding crisis?

    [​IMG]
     
    Simon_S, 9th Jan, 2018
    #255
  16. Bill Williamson

    Bill Williamson Well-Known Member

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    Many will change their mind if prices are falling.
     
    Bill Williamson, 10th Jan, 2018
    #256
  17. Someguy

    Someguy Well-Known Member

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    from FOMO to the fear of dropping prices, there a some people who will always find the negative and never buy but you are right those that are waiting for a 'crash' and then smugly buy at cheap prices have in there head that prices will start to climb again once they buy, if there are no signs of future growth these people will stay out of the market
     
    Someguy, 10th Jan, 2018
    #257
  18. sash

    sash Well-Known Member

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    Yep...it is called the "herd" mentality...this what sorts the experienced investors from the inexperienced....just like people on the forum saying it is too early to get into Perth or Geelong has peaked....
     
    sash, 10th Jan, 2018
    #258
  19. Ted Varrick

    Ted Varrick Well-Known Member

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    Perhaps all the "prudent" investors are moving from risky Sydney property to Bitcoin to amplify their returns.

    Let's see how that works out.
     
    Ted Varrick, 10th Jan, 2018
    #259
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  20. sash

    sash Well-Known Member

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    that is exactly what i am doin'

    1m in bitecoin...come on spinner!

     
    sash, 10th Jan, 2018
    #260
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