The ways an Australian housing market could burst... Comprehensive article

Discussion in 'Property Market Economics' started by Bwinny, 1st May, 2017.

Join Australia's most dynamic and respected property investment community
  1. Bwinny

    Bwinny Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    69
    Location:
    Sydney
    Hi all,

    Thanks to all the valuable contributors on Propertychat and this is my first thread post.

    I'm not a "doom and gloomer" and I have been very fortunate with the Sydney property market (particularly not listening to people that told us not to buy etc.) but this article summarizes a lot of the potential scenarios that might cause a housing price correction that might be of interest to some...

    The ways an Australian housing bubble could burst

    A lot of these points have been discussed at length from members and I'm guessing that most people are continuing to try to build up cash buffers etc.

    But what does everyone else actually think will happen with each of these scenarios or will nothing happen at all?
     
  2. DowntownBlock

    DowntownBlock Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    484
    Location:
    Melbourne
    Large corrections in any market are by definition, unforeseeable.

    However history has shown for Australia that
    1) Interest rates are dependent on offshore issuers and their perspective of Australia (Eg 60% of funding from offshore).
    2) When interest rates go up, they go up quickly.

    Lot of people don't realise that if AUD drops 10%, inflation will instantly kick in and rates will have to be raised in response.
     
  3. paulF

    paulF Well-Known Member

    Joined:
    29th Jun, 2015
    Posts:
    1,065
    Location:
    Melbourne
    Good article and all these scenarios can materialise at any point in time for sure. But, no two investors/owners are in the same financial position so some will win in such events and some will loose.
    I think the economy tanking is the biggest worry and the other scenarios not so much, simply because if you keep your job, you can keep on servicing your loans and your rents will still end up in your bank account because your tenant is till working.

    As for tightening and government intervention, it would make things a lot harder but still shouldn't be catastrophic for most investors (80% of investors own 1 IP and 10% own 2 IPs) and add negative gearing to ease things out a bit more.

    In the event of a global crisis, who knows what might happen. Some events might be good for us and some might not.

    The other point is, say it all goes pear shaped and property dips back 40% in the next 2 years. You are pretty much back to the prices from two years ago around the country. Big deal if you can hold and service your loans.

    Be prepared for the worst and hope for the best.
     
    Chabs and Bwinny like this.
  4. pjames

    pjames Well-Known Member

    Joined:
    30th Jan, 2017
    Posts:
    127
    Location:
    NSW
    the most possible scenario to happen in the near future is a global crisis. No one wants that to happen and is unlikely but it really is out of our hands. The first scenario is the most likely to happen in the next few years I would say as interest rates rise.
     
  5. truong

    truong Well-Known Member

    Joined:
    10th Jan, 2016
    Posts:
    253
    Location:
    Everywhere
    Scenario #3 is already happening. It looks like the upcoming Budget will see measures to help young home buyers while leaving intact existing benefits for investors. This would put another rocket under Sydney/Melbourne prices which could destabilise the whole system.

    Sydney/Melbourne are in a precarious position right now. To go up or down too much are both undesirable. Best hope is for prices to remain flat for a number of years.
     
    ollidrac nosaj likes this.
  6. Bwinny

    Bwinny Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    69
    Location:
    Sydney
    Thanks for the thoughtful response's all.

    It seems like we have votes for all scenarios except that we will avoid a correction have been discussed and unfortunately I tend to agree!
     
  7. Otie

    Otie Well-Known Member

    Joined:
    26th Mar, 2016
    Posts:
    1,404
    Location:
    Vic
    Most would disagree but I think now is the best time to pick up a bargain whilst everyone is waiting for the "bust", and FHB waiting for July 1 for their stamps waiver. I can see FHB pushing up prices in the lower end of the market once their incentives kick in. L
     
    Cactus likes this.
  8. ATANG

    ATANG Well-Known Member

    Joined:
    5th Jul, 2015
    Posts:
    612
    Location:
    SA
    It smells like in coming years the condition is going to get cool down a lot. First we had this 457 visa removal thing, then the migration rate tightening, and now the raise of uni fees, which means less students coming into our cities....
     
    Kangabanga likes this.
  9. Gonx

    Gonx Well-Known Member

    Joined:
    18th Apr, 2017
    Posts:
    143
    Location:
    NSW
    finally, the politicians are waking up!
     
    Brickbybrick likes this.
  10. Ace Ventura

    Ace Ventura Active Member

    Joined:
    6th Feb, 2017
    Posts:
    36
    Location:
    Australia