This Housing Downturn is Over

Most experienced investors I know just invest according to their risk profile and look for value in any market. As @Morgs said, there is no such thing as an 'economically certain' time to invest. And often the best times to search for deals is when others are fearful.

There is always value somewhere out there.

 

If I've done the sums correctly, working it on 30 years P&I and keeping payments constant, going from 5-4 increases your mortgage potential by 12% ... 1-0, 16%. 5-0, 215%. But of limited help to first time buyers if they can't raise the deposit and falling interest rates may well lower confidence.

 

Every property I have bought has been bought in “economically uncertain” times.

What made it even more exciting and challenging is that I had no idea what I was doing.

Now I am selling a property in the same situation - “economically uncertain” times and I still have no idea what I am doing.

 

@Tony3008, I was referring to this post above by Redom....
Unless I’ve misunderstood what he said (???)

 

The only certainty is economic uncertainty

 

During the gfc, the only reason to buy was to be willing to risk short term losses and believe that, somehow, things would do well over the long term. Given the conditions at the time, this was stupid and illogical. There is no explanation that will satisfy the smart people. But then remember the old adage about professors and wealth.

Maybe you are right about further falls. But can you afford to be wrong?

 

@kierank
If all else fails, we'll share a bottle of red when I'm up there next and drown ourselves as we reminisce over our financial sorrows.
Maybe if we're really boozed up we can email Mr Dent asking for property advice. Though I suspect he then may wanna join us in a few more bottles.

 

For those on Twitter here's an interesting take on current prices:

"The Price to Income expansion in Sydney and to a slightly lesser extent Melbourne property was similar to that experienced in Japanese stocks in the late 80's. Anyone who thinks this is sustainable with our ********* economy is a bloody idiot and in time will proven to be one". Tony Locantro on Twitter

 

What's driving the recovery?
"Low mortgage rates, and the expectation that they will move lower, along with better affordability, a loosening in credit rules and improved housing sentiment are all factors contributing to the rebound," Mr Lawless said.

"A variety of other indicators ... are pointing towards further strength in the housing market, including auction clearance rates, which are continuing to track around the mid to high 70 range, with the results remaining high on larger volumes."


Property prices rebound, led by Sydney and Melbourne spring sales

 

Is that the same locantro who is Martin Norths best mate? Surprise surprise

 

Maybe there will never be a crash and they'll cut rates forever and ever

 

If we keep digging deep enough we will never be able to get out. What is the chain of events that could see interest rates revert to the historical norm?

 

BoJ rates through the eighties ranged between 3-9%. Today Australia reached an all time low of .75%.

The price to income ratio is less important than the discount rate. At current interest rates the hurdle for returns is far lower, so can justify higher prices.

Now as to how this will play out in the longer term, well that's another question...

 

SQM Research: "a new housing boom" is upon us - MacroBusiness

 

I initially felt macro business was informative but after a while it felt they lean towards negativety with their articles, so for these guys to think a boom is on its way either means they have taken their happy pills or they will finally get it right.

 

I can say that the areas I'm following I'm melbourne are booming, absolutely on fire and recording prices way above peaks of 2017. Stock is limited for quality homes from 1m-2m and many are turning up to opens. I had to go and see for myself as I couldn't believe people are asking 200-300k more for houses than I actually believe they are worth. I've spoken to agents and they reckon there's roughly 70% less buyers from last year so it's surprising that stock is doing so well. Although they have mentioned more buyers are starting to turn up.
I guess supply/demand is playing a big role along with cheaper credit and upturn in buyer confidence.

 

A couple more things are becoming clearer since this post:

- Additional monetary stimulus & leveraging ability: An additional rate cut, maybe another one or two to come. This is driving a much sharper response to house prices than anyone really expected.

- 'Ghost supply' comments made in relation to potential supply uplift that may have happened don't appear to be coming true. I thought that once some confidence came back, listings would have shot up (beyond seasonal changes). This doesn't appear to be the case. I.e. there doesn't appear to be thousands of Sydney sellers who were eagerly awaiting some price stability before listing. As the market booms & continues, supply should cyclically increase a lot in response (listings supply rises in boom conditions).

The narrative of the Sydney/Melb housing markets from 2017-2019 is one where a downturn>>recover>>boom has occurred. The downturn lasted 18 months (wasn't anywhere near crash levels), recovery period was very short & only lasted a month or two (April/May/June) and the boom has now been in place for a few months (and looks to be far stronger than a 'dead cat bounce' given the pace of rises).

 

Fresh capital city listings are now by some distance the lowest for this time of year since records began in 2007 (h/t CoreLogic).

 

could you explain to a layman such as myself what the possible reason could be for that pete ? potential effects from it ?

 

not sure if i'm allowed to post links, but it's probably just a time lag

Dusting off the cobwebs | Pete Wargent | International property buyer, finance & real estate expert