This Housing Downturn is Over

Also this would be the most severe and shortest downturn if it was to turn around... what a whiplash that would be

 

Hi @euro73 please correct me if I'm wrong, but isnt the reason investors are paying a premium on both IO loans and Investment P&I loans are because APRA put in place those guidelines for growth in investor lending and % of loans on IO?

If I recall correctly they have now lifted both of these restrictions, so the only reason investor loans are at a higher rate is basically because the banks can get away with it?

So surely there will be an incentive for some banks to start bringing investor loan rates back in line with PPOR loans? It would be a powerful combination for a lender to offer lower investment rates and then as a consequence be able to add 10-20% to the borrowing capacity?

 

Shortest downturn? Where's the evidence? Sydney is nearly at the longest downturn in terms of duration over the last 35years.

How Australia's housing downturn ranks compared to those of the past

Also note the O.P is not suggesting we return to boom times, merely a "mini-recovery" over 12-24months. Historical data actually backs this up. Between 1970-2016 every time Sydney, Melbourne, Brisbane or Perth had a median fall of at least 7% has been followed by a significant bounce:

1. 10% growth in Sydney median in 2012 after -8% in 2011
2. 10% growth in Melbourne median in 2012 after -13% in 2011
3. 9% growth in Perth median in 1985 after -7% in 1984

 

For Sydney I'm of the inclination it will stagnate or fall a further 2-5% - which could be classified as stagnating as it's not terrible.
I think it's too early to call for the Sydney market and it might just be the equivalent of a dead cat bounce

 

Mostly agree. Rate of decline is slowing but hasn't stopped so most likely a few % more falls left. Give it 3-6months. I envision by then the APRA serviceability changes will get enough media attention to propagate the awareness to the masses (PCers don't count...we're literally talking about it an hour after the announcement). Coupled with talks of/actual rate cuts and a mini-pop is likely. Probably a bit of a head-fake as affordability issues remain and would put a ceiling on things

 

These changes will take time (floor changes), so I don't expect material changes to servicing until September (giving time to take up new applications). If they can get those tax changes through for 1 July, plus the FHB slated for a 1 Jan 2020. I also think some further guidance for living expenses will be given.

Could be an interesting start to 2020 for borrowing

I have no idea about the floor in prices but will be looking to buy in Sydney in late 2020. Will prices rebound by then? Perhaps. At worst you miss 5% at best prices are stable.

No-one ever really knows the bottom

 

Every month in Spain's downturn the bottom was called by the vested interests ... and still it kept crashing. I bought in 2011, only the last year has it stabilized, lower. My 2015 purchase is climbing however. Property bubbles can take over a decade to correct.

 

Calling oran Park part of Sydney is hard to take. 1-5-2hours away +tolls and 800k for a house

 

that is crazy ,these people not thinking straight ,if you buy there
i remember here in Perth Tapping 2015 a guy told me he bought a house for 750k ,i said to him good luck ,he said is a very nice house with pool ,i wonder how much is it worth now at least 100k down

 

Ireland too, and especially around the first rate cut. The logic that previous rate cuts sent the market high, so this one will, was very strong. But in reality it was low supply that sent the market high, not necessarily just rates. All rate cuts do is make debt slightly cheaper. They don't create growth out of thin air.

I just quickly checked Spain's index compared to when the ECB cut rates, and it was down just 11% at the time, which is less than a quarter of the way through the crash. After the rate cut existing dwellings stabilised briefly, but new ones kept falling as stock kept being added, and this eventually dragged the whole market down. Same story with Spain's unemployment rate by the looks of it. No big rise in unemployment till after the rate cut. Looks like recession also hit after the rate cut.

Starting to think this rate cut will be a disaster.

 

If any place is at risk of becoming a ghost estate, it's Oran Park.

 

Yep dumb......some people are even sayin' that people llike living the cheaper areas like Mt Druitt?

That is just being emotional.

 

You know,
flipping properties to each other is our favourite past time whislt taking evermore debt which is our real passion.
Our magic sauce to achieve this is,
[Stagnent salary = low inflation = RBA magic cuts = APRAs dances = higher borrowing power = bigger loan = high house prices = inflation inching up = stagnate salary further = low inflation], keep repeating,
you get the drill?

I know some silly billy's will think what happens when RBA hits zero IR,
We have thought of it all, we go negative and once you are in negative there is no limit to cut IR, see quite smart isn't it.


So what you said about Spain Would never happen in Oz ,You Spaniards should learn from us.

 

That is a safe call, I would not disagree with that.

IF the APRA regulations for serviceability are lifted in 1 months and the (recommended) 2.5% buffer is loosely adhered to. Prices will stabilize. If people can borrow 50-$150k more who knows?

I have many clients and fiends who want to buy better or borrow more but are not able to.
They are not speculators just FH buyers.
Interesting I ahve a friend who is ot sure what to do now. he wants to borrow more as he can step from a 3 bedder to a Semi. The issue is his servicibility.

So he is thinking do I wait and try to reapply for a larger amount in 5/6 weeks or will prices go up as much as his new pre-approved limit?

I told him I dont know. Its a an educated gamble.

 

Why?
Nice town centre. As the airport pricinct ramps up their will be much more local job opportunities.

Industrial is very ehavily being pushed out of the city.
Eastlakes,Roseberry,Alexandria are becoming residential and many suppliers are moving west and South west to attain good size industrail warehousing.

So South West Sydney will become a greater employer especially blue collar but who knows the airport precinct may have high tech and white collar as well.


https://www.smh.com.au/national/nsw...rt-to-be-rezoned-by-2019-20180821-p4zyul.html

 

Lol @TheSackedWiggle - sounds like an accurate summary of what’s going on. An ongoing credit loosening process thats driven up asset prices in Australia and household debt over time. As soon as some of the 'froth' comes out (IO lending, slight deleveraging), the regulators turn the music on again.

Re Oran park, won't comment on its liveability/desireability, but rather its affordability in a revised credit climate - a couple earning 50k each with a child and a deposit can afford a reasonably nice large family home there at that price point. The extra ~50-60k in proposed borrowing from assessment rate is quite substantial in those areas and for these households too. Also if rate cuts do follow through, renting will be more expensive than owning (and fairly even on P&I repayment basis). In general, the above example is the 'incentive' mechanism behind rate cuts flowing through to nominal asset prices.

 

I'll throw my thoughts in here for no other reason than I can revert back to it in a few years and say 'I told you so' or I can be wrong with 50% of the other people and this post will be so old no one will remember it.

I think Sydney as an entire market still hasn't bottomed and there's not going to be any significant price growth for 3-5 years...

 

I'm loving the split debate going on, great points coming from both camps.

Personally I'm in the "not over yet" side. I don't disagree that price falls may be slowing/flat lining, but i definitely don't see upside yet for NSW and VIC. Supply is 2x what it was 3 years ago (even if listings aren't moving, the physical number of properties being built is huge) and with current construction levels will remain that for a few years. Population growth is already slowing in both states, and the rate at which new jobs have been created is slowing. Particularly concerning to me is that jobs growth was underpinned by a doubling in the size of residential construction industry and concurrent government spending. Vic govt tripling the annual infrastructure spend, with significant privatisation in both states stoking the fire. Both government spending and residentual construction spend are falling now, and will do for a number of years so not only will jobs growth slow, but in key industries they will be shedding.

IMO the next phase of the property market will be more broad balancing of markets. The mining downturn is essentially bottomed, so jobs growth across the country will be more evenly distributed and less focused on Melb and Syd as their construction markets cool. This will lead to population growth levels balancing across states, and the current pipeline of construction in NSW and VIC will continue to put a damper on growth for a good year more. Low levels of development in WA and QLD will very soon be challenged by increasing population growth (that we are aleady seeing), and their respective industries will get some legs. This will lead to demand and price rises, though anyone expecting 50% increases for those states to match the majors will be disappointed.

 

My gardener loves Mount Druitt and has been there for 30 years... #yasouuuuurayyyyyyyy

 

My take, they are cutting what are already emergency level rates because of very negative economic indicators. We might see a temporary lift in sentiment, and perhaps some further stabilizing, but I think overall we will see prices in melb/syd continue to fall, albeit very slowly, maybe another 10% or so over 18 months. Then low capital growth in line with wages for a few years.

Hope I'm wrong, bidding at auction tomorrow