"The Crash" has been called... end of 2017.

Never try to catch a falling knife

 

Another month gone where barely half the quantity of dwellings settled in my IP suburbs on the Gold Coast, compared prior months. That's now 3 months in a row.

Quantity for sale is also up by around 30% in Coombabah alone.

 

Yep huge fall in the number of listings sold in Carlton/Kogarah/Allawah in Sydney.

I only check it once a month or so but in the last few domain PDF's its like a ghostlad with the number being sold.

I think people have just decided to stay where they are and no rush to sell (or buy).

 

Interesting. I don't monitor those areas. Do the domain PDFs include private treaty sales? Or only auction sales?

 

Is anyone considering the possibility that the RBA will be forced to keep rates low to protect people? I could see a scenario like this playing out long enough to allow people to pay back debt and for incomes to rise. Banks might cut out investment lending + interest only loans on all lending for several years or other parameters being tightened to curve more borrowing. It could be a way of avoiding an actually crash.

 

Yes, hence banks offering the low P&I escape route. Vested interest there too.

 

Yes I think the current stance of RBA's jawboning, banks tightening credit and and raising IO rates but keeping P&I at sensible levels is a perfect combo to moderate the landscape - not too hot, not too cold. Hopefully a soft landing in store - can't ask for more than that.

 

Excellent

 

No infact the opposite, the rba would love to be in a position to start raising rates to protect and buffer. but under current conditions there hands are tied. The rba also have a clear understanding on the core fundamental which is currently chocking the economy:

Reserve Bank boss Philip Lowe urges workers to push for pay rises - ABC News (Australian Broadcasting Corporation)

There is a specific reason why the rba are desperate to return rates to trend levels. As explained by Jim Rickards in regards to the fed, but applicable to Au.

"My take is that the Fed is desperate to raise rates before the next recession (so they can cut them again), and will take every opportunity to do so. I believe the Fed will raise rates 0.25% every other meeting (March, June, September and December) until 2019"

We are currently in a very precarious position. If a global economic downturn were to occur today, we have lost our primary and most effective defense, that of rate easing.

 

6/21 Florence Street Mentone Vic 3194 - Unit for Sale #126131446 - realestate.com.au

Just watched this go for $428k, was price ranged $330-350k. There was a comp a few doors up about a month ago that went for $340 odd, pretty similar size.

13/75 Barkly Street Mordialloc Vic 3195 - Unit for Sale #126241290 - realestate.com.au

This was on the market a week, total dump, asbestos sign on the mailbox next to the body corp sign.

There is first home buyers falling over one another at the minute.

 

Can people handle these increases though? I feel they won't - based on talking to the average Joe. Assuming they can't and rates are raised then that would be a poor economic decision wouldn't it?

 

.. this is the FHB market, not necessarily the case across Melb, I heard a post recently, stating that Hawthorn and Prahran showing signs of softening.

 

Can people afford to service their debt? That's the test our property market will be faced with early next year IMO... as pointed out, we're in a very precarious situation and as a whole I believe the RBA should look to raise rates as soon as possible, and it now seems possible based on economic recovery the mining states are starting to see

 

The problem that I can see with a soft landing is that it's going to take a very long time for rents and wages to catch up with property prices.

Let's say prices in Sydney need to halve in order to restore some sanity to the market. If inflation remains low, and wages grow at 2% to 3% a year, it might take twenty or thirty years.

If properties in Sydney tend to be negatively geared, then an investor would have to wear a loss for a prolonged period, with no capital gains to put them in the black. Would they hold properties under those conditions?

My guess is that the RBA is hoping that wage growth picks up to erode the price / earnings ratio of property, and that there won't be a major slide. The system can probably cope with a few homeowners and investors getting burnt, rather than an Irish style meltdown.

 

In short NO
There is little "common" sense in most of the people i know
Sure the RBA sets the banks loan conditions, that interest serviceability is set at 7% or
But these "people" get a loan, make a few min repayments and think WOW look how much money i still have, and go spend it all on lifestyle
YES they could afford the original loan, and likely still can if rates rise to 7%, but they are scared because it will cost their "lifestyle"
They'd sooner be homeless than give up dinning out, clothes and hols

Rule 1 of Property Chat, build/have a buffer, & an exit strategy

 

These people have a trillion dollars in cash, delinquency rates are stable, credit card debt is falling and most mortgages are ahead in payments.

 

If the media uproar and scaremongering over a $350 a year hike in utility bills is an indicator, nah we're not in a position to deal with a couple of basis point moves in interest rates which make $350 a year look like.... what's that Terri Scheer tv ad tagline? "Peace of mind for for less than a dollar a day"

 

As pasted SMH:

Why the RBA's hands are tied on interest rates

Australia is stuck in an economic disconnect.

Business is regaining its strut and has begun investing, but debt-laden households are struggling with stagnant incomes and substantial hikes in power prices. Juggling the two is the Reserve Bank of Australia, which has kept its benchmark interest rate unchanged at a record-low 1.5 per cent for the past year, and has little option but to do so again Tuesday.


Policy makers are blowing on the embers of the consumer in the hope of some sparks -- though in truth it's the strengthening business sector that needs to boost wages. As a result, traders are pricing in virtually no chance of a rate increase this year, but see about a 50 per cent chance of a quarter-point hike in June 2018.

Governor Philip Lowe summed up the predicament during testimony to lawmakers last month, noting wage growth in Australia has slowed more than productivity growth: "The consequence of that is that the share of national income that is going to capital is at a five-decade high and the share going to labor is at a five-decade low."

That discrepancy will have to change for strong, sustained growth to emerge Down Under, given consumption accounts for more than half of gross domestic product.

RBA policy is running a balancing act: trying to bolster financial stability amid precariously high east-coast house prices while encouraging firms to invest and hire through low rates. While Lowe last month said it would be reasonable to expect the next rate move to be upward, he also signalled that was some way off and there was no rush to follow the stimulus withdrawal of global peers.

 

Complaining about paying more doesnt mean not able to pay more.

 

As pasted SMH:

Two full-time jobs now needed to service a mortgage on a typical Sydney home

Sydney's housing crisis has reached an alarming new threshold with a key measure revealing it now takes more than two average full-time wages to affordably service a loan for a typical city home.

The Housing Industry Association's housing affordability index, which measures the capacity of households to service mortgages, shows Sydneysiders must fork out $4,729 per month, or nearly $57,000 a year, to service a standard mortgage on an averaged-priced home in the city.

That is more than 30 per cent of the earnings of a Sydney household with two average full-time wages – the portion of income widely accepted to be a manageable housing repayment.

"House buyers in Sydney now require more than double the average income in Sydney to be able to afford the averaged-priced house in that market," the report said.

"This quarter's result is a further widening of the affordability gap between Sydney and everywhere else. It has the lowest affordability in the country by a large margin."

The association's affordability index for Sydney dipped to an all-time low of 48.7 in the June quarter.


"These are concerning figures," said HIA principal economist Tim Reardon.

The findings come as opinion polls show an unprecedented level of public anxiety about the cost of housing in the wake of a Sydney property boom that has lasted nearly five years.

The quarterly Ipsos Issues Monitor, which asks respondents to select the three most important issues facing their state, shows housing now tops the list of concerns in NSW.

It found 47 per cent of NSW respondents identified housing as an important issue facing the state in the June quarter, just shy of the record 50 per cent in the previous survey. That is compared with 29 per cent in 2013.

David Elliott, head of the Ipsos social research institute in NSW, said housing was the "clear No. 1 issue" that people in NSW felt their state was facing. "The results [for housing] in 2017 are the highest we've seen in the last 10 years," he said. "The increased concern is not overly surprising as housing affordability and availability seems to be one of the hot topics in the community and in the media. Perhaps this growing concern is reflecting a desire to hear from government and how they plan to tackle the issue."The combination of soaring property prices and sluggish wage growth has contributed to the decline in housing affordability. This deterioration has occurred despite record low interest rates.

Two years ago, it took 1.75 average full-time wages to affordably service a standard loan on an average-priced Sydney home, but that has reached 2.06 average full-time wages, the association's affordability report said. In the rest of NSW, it takes 1.39 full-time wages to service a standard loan on a median-priced home.

Melbourne was the least affordable city after Sydney. It takes 1.64 average full-time wages to affordably service a standard loan on a typical house in Melbourne.

Nationally, the affordability index showed a deterioration of 0.3 per cent in the June quarter and by 2.2 per cent over the year.

The association's previous report, released in April, put Sydney's affordability multiple at 1.74 full-time wages in the March quarter but that was revised up to 2.04 in the latest report, with the June quarter multiple reaching 2.06 full-time wages. It was the first time the report has shown an affordability multiple over two full-time wages.