Sydney - the coming correction 2018-2022

Had a crack at a north shore property on the weekend. Clean block, regular shaped, no easements or sewer, clean 149, clean b&p, 550sqm, high slide, level block, double brick 60's construction, freshened up, ready to move in, plenty of potential to add val. Every box ticked could not fault it.

No one opened, so I did at 1.6, bidding was between me and another dude, we countered each other quiet quickly, I was trying to break him with some aggressive quick counters but he wouldn't break lol I reached my number at 1.75, old mate bid 1.76, I let it go.

Similar property would of sold for 2+ 6 months ago with 5+ bidders. A house on the same street, smaller crappier house, low side sloping block with sewer at the back sold for 1.83 two weeks ago.

Maybe it's the December dip, who knows, but what I do know is there’s a tonne of stock waiting to come one in Jan 2018, I won't be hanging around for late 2018-2019 hoping for the market to crash or bubble to pop or nuclear war to break out as I see good buying in that market in the 1.6-1.7 mark and my wife is getting p1ssed at not having her house. Would be lying if I said I wasn't excited. What I was hoping would happen 1 year ago is playing out nicely.

 

Are you arguing a small number of buyers exiting the market has the same impact as a large group of buyers exiting the market? I don't agree.

I have already explained about 3 Gatton Way. I was a potential buyer for 3 Gatton Way. However, I exited the market on that property because there was too much competition. Me exiting the market made no difference to the end price. The sale price was $100,000 above my maximum price. That's a real example of a real estate transaction in Perth. It is not a theory. In theory one buyer exiting the market should impact the price. In reality, it does not work like that.

Remember the example of the X Box? I said:

to which you replied:

Theoretically you are correct but that is not how things work in the real world. At JB Hifi, an X Box is $289. Five customers line up to buy the X Box. There is one left in stock. The price is still $289. Four customers leave, leaving one customers. The price is still $289. That's how things work in the real world vs theory. Neither is right or wrong, it's just a different perspective.

You have a different perspective to me and that is ok.

I have a different perspective to you and that is ok. You don't need to keep telling me I'm wrong. It's just a different perspective.

QUOTE="AlexV_Sydney, post: 507254, member: 9328"]so why do you really think the group is small?
we had 40% IO loans! (including investors and home owners). HOs need a buffer as well, and many of them wanted to be investor. FHBs who think to take IO loan and pay IO indefinitely now think twice and build a buffer to cover future P&I. Etc...[/QUOTE]
Why do I think the group is small?

You are arguing that a group of IO loan holders electing to save a cash buffer instead of purchasing again will impact the market.

Think about all of the people who are holding loans. This is a large group.

We are only interested in IO loans. Our group is now smaller.

Now look at the holders of those loans. Some have maxed their borrowing capacity and have been forced out of the market by APRA. Remove these from our group because they have no capacity to buy again. Our group is smaller.

Some IO loan holders already have a buffer. They don't need to choose between buying again or saving a cash buffer because they already have a cash buffer. Remove these and our group is smaller.

Of the group that is left, some will have enough income from employment, rent or other investment income that they don't need to save a cash buffer. They can buy again if they choose. Perhaps this time with a low interest P&I loan. Remove these and our group is smaller.

The group that is left has IO loans, borrowing capacity, inadequate cash buffer and insufficient income to cover P&I. I don't feel this is a large group.

I would be interested to hear your reasoning why you think it is a large group?

 

On a beautiful summer day a grasshopper hopped around lazily in the grass. He was warm, happy and well-fed, and he was chirping and singing to himself because life was good.

Suddenly he heard noises coming from some taller leaves, something being dragged along, then soft panting and a sigh.

The grasshopper hopped closer and pushed aside the leaves with one of his front legs so that he could see what was happening.

AntAn ant was slowly dragging a large ear of corn, its back legs bent under the weight. Every step was an effort and the ant was breathing hard.

The grasshopper hopped in front of the ant. “What are you doing?” he asked. “It’s much too hot to be working today.” The ant stopped and looked at him. “I’m moving corn to our nest” he answered, panting again.

“Come and hang-out with me,” invited the grasshopper, “instead of wearing yourself out. We can sit in the cool and chat.”

The ant sighed. “I can’t. We’re storing food for the winter and I’ve got to do my bit. You should be doing the same.”

“Oh, I’m not bothered about winter,” laughed the grasshopper. “There’s plenty of food around. It’s been such a good year. Come on, rest in the cool for a while.”

Ear of corn“Can’t,” muttered the ant as he started dragging the corn ear again. “Moving this corn is really important.”

“Okay then,” said the grasshopper, “see you around.” And he hopped back through the leaves and started singing again while the ant kept working.

Summer turned to autumn. The days were cooler but the grasshopper still found food easily so he was happy. But when winter arrived the snow fell earlier than usual and finding food each day was more difficult for the grasshopper. He didn’t sing any more and he felt cold all the time.

He had to keep moving and looking for food, but some days he found nothing but snow to eat. He got weaker and weaker until one day he couldn’t move at all. Several ants came by as he was lying in the snow. “One of their nests must be close by” he thought. “The ants will give me food.”

But he was too weak to move and the ants didn’t know he was there. He called out: “help, please help me. I need food,” but the ants were too far away and too busy to hear him. They were running around in and out of their nest, bringing food to each other and making sure everyone had enough to eat.”

GrasshopperThe grasshopper knew then that the ant he had met back in summer had been right. He should not have wasted all his time when food was plentiful.

He hadn’t thought that this winter might be worse than usual. And because he hadn’t stored food for himself or helped anyone else to do it, he would not live to see another summer.

 

Where was that and how much was it at peak?

 

You should of bought if you could of put in a little more money! The market will start bouncing back from April next year I expect.

 

Western sydney, 950 at peak now 850'ish

 

I could have paid much more but don't see the point paying at or over market value in a cooling market when agents are telling me there is a lot of stock waiting to come on after the holidays. I do agree all the doom and gloom particularly in northern suburbs might wear off slightly next year (if we don't see any interest rates hikes) but I feel a similar sentiment and amount of buyers will be around Jan to Feb 2018 when a lot of stock is coming on.

If a property that ticks all the boxes only had two bidders, and it was the only property in that suburb that ticked all the boxes, there's going to be better buying in Jan-Feb when more properties come on IMO

 

https://www.businessinsider.com.au/...housing-market-just-hit-a-30-year-low-2017-12

"While most Australian economists still have a cautiously optimistic view toward 2018, any extended declines in house price growth will need to be closely monitored.

Here’s Morgan Stanley on why it’s important:

“Australia has not had an official recession for 26 years and built into that narrative is also a perception that housing has not faltered either.

There have certainly been parts of the economy that have seen slowing housing conditions over the last 20 years but the weakness has often been short lived.

If this is a sustained slowdown – our caution towards banks, consumer and housing-linked sectors will prove warranted.”

 

if a theory is correct, it will give you same results as in reality. This is why we can launch the rockets into the sky.

the probability the price for a property will be affected by 1 missing bidder is 2/N * 100%, where N - is number of bidders, considering all bidders have different max bid.

So for 4 bidders, it is 50%, for 3 bidders it is 66%, for 10 bidders it is 20%. You were just unlucky, in my case I bought the property before auction to have less bidders and I won it (Agent told be after signing a contract how many bidders I had). If I go to the auction, I would need to pay $35-40K more because I also knew how many bidders such properties usually have at that time and I knew the expected sell price for that property.

I don't like your maniulations... example with X Box was about failed expectations about a price needed to play to compare it with expected costs to buy a new property when a new law is introduced, it's not about X Box price. And my next reply was not about X Box at all, but about your other statements.

If you want an example about changed price when demand is low, look at oil price, you can't set the price $200 as on one will buy it. To produce iPhone, they need only $250-300. If comparable competitors reduce their prices to that range, Apple will follow. Same is for cars... when there is reduced buyers activity, car dealers may give you up to 10%-15% discount (I got it easily).

No! That's not only about that group. You (for some reason) ignore my other statements.

That's also about people who wants to buy using IO loan.

when you subtract 1 from 1000, and then 1 from 999, then 1 from 998, the group becomes smaller but that doesn't mean it is still not large after subtraction.

I already said that multiple times.... people with debts do NOT have large buffer - that's ABS/RBA fact - compare $1.6T mortgage market with their $150B cash, and that cash is not distributed equally, 80/20 rule, most of it is in a small group with debt, when a loan size is near offset size, so we have a large group with debt with very small buffer, and 40% of loans are IO. Plus add all potential buyers without debt who wanted to buy with IO but now they can't.

In total APRA changes affected below groups:
- people who can't refinance to P&I and get another IO loan and increase income - they will sell it
- people who can refinance to P&I, they will pay more, their money is removed from the market
- people who can't refianance to P&I at the moment, but they still use IO - they pay more due to higher rates - money removed from the market
- new buyers without debt who wanted (and could only) to buy with IO
- loss of confidence, assuming these changes are not final and more changes are coming
- loss of confidence when a buyer doesn't believe anymore 'prices can only go up'
- loss of confidence when economists forecasts were totally wrong.
- people who can't refinance from P&I with high rate to P&I with low rate due to new servicability calculations - money removed from the market
- people with foreign income - can't either to buy or refinance
etc

In overall, APRA affects both new buyers and existing.

 

@AlexV_Sydney, I appreciate your perspective and that it is different to mine but that doesn't make me wrong. You keep comparing property with shares and oil but what you fail to understand is that property is different. With property, people make an emotional and financial decision, not just a financial one like oil and shares.

I can give you an example.

Recently, Comedian and radio host, Dave Hughes, paid a ridiculous sum of money to purchase one of The Block houses. This is what he said:

“Josh and Elyse has done such a good job and I fell in love with it and here we are,” Hughes said after his victory.​

I'm outside of Australia. Why can't I watch 9Now?

If oil is trading at $90 a barrel, you never hear someone say: I paid $100 a barrel becase I fell in love with it.

If CBA is trading for $90 a share, you never hear someone say: sure, but I fell in love with it.

Property is not a commodity and property is not a share. Understand this and you are on your way to understanding the property market.

 

But there is no rush Colin, when markets tank it can go for 7 years, we know this from past boom/bust cycles... I will sit back and watch.

I expect some deals also in inner Melb.

MTR

 

again manipulations...
my argument was to support my idea that reduced competition reduces the demand. you said, it can increase it... then you said it won't affect as group is small (without any reasoning - it's small because it is small, because you subtracted someone) ... comparing with X Box. BS.

if you say property market is emotional, why don't you think the market will crash because people can be scary about APRA? Do you really think emotions apply only when they can raise the price? ))

 

Keep it civil mate. That kind of language is not acceptable.

If? What? I just linked you to an example that a housing purchase can be an emotional decision. Are you denying that?

I have never said anything even remotely like that. You don't represent my views accurately at all.

Of course there are emotions when housing markets fall. Housing markets are driven by fear and greed. These are emotions. Fear can drive a market down for sure.

 

Look at the mirror. I just use same language that you use with your opponents. If you don't use "BS", but use personal attacks/trolling/manipulations/etc when your arguments are weak, it doesn't mean your language is better.

so if you agree emotions can affect prices in both down and up directions... why did you move the conversation from 'demand & supply' component of price change to emotional component??

just say that you were wrong saying that a denial of purchase pushes prices up because you put your money to saving account and bank can give someone else a loan to buy a property... and we'll finish that conversation. It's nothing wrong to accept the fact that you're wrong, everone can make a mistake and everyone can learn something new.

 

I'm not wrong. That's the point. You have tried to prove me wrong but you have failed. The when you failed you got abusive. I don't mind finishing the argument because I have found it a pointless waste of time. I didn't start this argument and I didn't want this argument but I do want it to end. We can agree on that and end it.

 

oh really?! thats about 10% but you'd probably bought it at 300k..

 

@Perthguy

Your are trying to explain to Alex. Alex is trying to get into the Sydney market he has said that before. He in every post is extremely negative. Every one. Every post I talked to him he is bashing market. I feel it's resent he didn't get in.
You listen to Warren Buffet he is always optimistic on American economy and future. You May say he Is silly but his credentials speak louder than your keyboard.

Alex I believe Perthguy is a more experienced investor from what I judge on this forum.
Instead of confronting him me and a heap of others. Why not look at @Perthguy and ask him how he built his portfolio.

Not everything is as logical as you make it out.

If it was. We. Would. All drive Toyota corollas or Hiluxs forgive choice in cars. Humans are not logical and equating things the way you do work. Not in my opinion anyway.

Not trying to have a go just expressing myself

 

Dear Santa, please make the world a better place in which The Thoughts of Chairman @Perthguy replaces economics and everyone can drive a Corolla or Hilux.
Not trying to have a go just expressing myself.

 

Yeah! How dare a property investor on a property investment forum express their opinion on the economy. It's outrageous! If he ever does that again you make sure you tell him he's wrong. Every. Single. Time.

 

In my view, for good or bad, purchasing by the new Chinese middle class will sustain high Aust house prices

Generally I see this investment as positive for the economy if 100% is put into new construction