What to Avoid in 2017

Here we go again, for those interested, its not rocket science.
Whether it actually happens time will tell, however one thing they did get right so far is interest rates, they have risen.

https://www.google.com.au/?gfe_rd=c...for+australian+commercial+real+estate+2016/17 (extract below)



What to avoid buying

• CBD apartments

• Off the plan

• In regional towns

• Properties in secondary locations and

• House in predominantly first home buyer locations

 

What exactly constitutes secondary, if not regional and first home buyer locations?

 

I believe secondary locations are properties on

1. On Main Roads
2. Opposite Schools, government buildings etc.
3. Near High power lines
4. Flood zoning area
etc etc etc

Can just keep adding to the list I guess.

I would classify secondary locations as properties which will limit your market when you want to sell and impact on selling price

 

I'd avoid new suburban developments. These were the first to go in Ireland - those and crappy apartments. With outer fringe suburbia there is often a long commute from work and a lack of decent infrastructure. New developments during a late boom are often chosen by families and investors due to the cheaper cost (inner suburbia at that point being unaffordable) however the flipside is that many of these buyers are financially vulnerable. Outer suburbia is often lower on the socio-economic scale. People have often bought high and are probably paying off huge mortgages. Even if they aren't stretched, some have chosen the area as a starter home, with the idea of upgrading down the track.

If prices fall, you can often see a few things go wrong all at once. Developers, builders etc might struggle to offload land packages, forcing prices down (this was extremely common in Ireland's bust - much of the price fall was due to developers in fringe suburbs slashing the price of new homes to attract buyers). People who can afford to move, often will, causing a de-gentrification of the area and a gradual downward shift in desirability as a location. Lower prices will often attract more low socio-economic residents, and low income residents are at higher risk of defaults and job losses in any downturn, which places even more downward pressure on prices.

Increasing supply compounds the problems above, which can in more extreme cases leave whole developments languishing. I recently visited Canberra, where the wife's family live, and several suburbs are showing worrying signs of this pattern. Moncrieff, Googong, Denman Prospect, Coombs, Wright - these areas are experiencing very low sales volumes from what I can see. Only a tiny handful in the whole Molonglo area (the latter three suburbs I listed) have sold in the last month. In fact if you look at Canberra as a whole, it's only the established family homes in established suburbs doing really well.

 

But all these points seems to be the case each yr, as u would not buy secondary houses u less u have limited budget

 

you are correct but in boom times risk is reduced

My developer friend on PC built/developed on a major freeway in Sydney got snapped up due to boom, it probably would not sell for premium price when market is flat

 

Sounds like what you see in Wagga - the bad areas don't get any better, and in fact get worse over time. There are too many better options for people with a bit of get up and go to chose not live there.

 

This is happening exactly as you describe right now in the sattelite City of Darwin (Palmerston). A new subhurb called Zuccoli has completely destroyed the palmerston market.

 

OK here is a snippet regarding our economy for 2017... some good, some bad and some good and some in between (The Adelaide Review)
Link below, and extract from article/Review

2017 economic forecast: an unspectacular year - The Adelaide Review


For housing, there are some dark clouds. There will be a further oversupply of apartments and some fatigue from investors who are dealing with rising vacancy rates and weak rental yields. While a proverbial housing ‘crash’ remains unlikely, there are likely to be pockets of price weakness, especially where the apartment oversupply is most apparent.

Th at said, any house price downturn is likely to be rather muted. Australia is still benefitting from favourable demographics. Every three years or so, there are an extra million people in Australia. These new Australians will need somewhere to live, and whether they rent or buy, excess supply will be mopped up in a relatively short time, especially if new construction starts to fall away, as seems likely.

The end point is that the economy is doing reasonably well, but is certainly not strong. There are a range of risks from the international economy but these are evenly balanced. It looks like another decent, but not spectacular, year for the economy in 2017.

 

• Mt Tom Price?
• Sydney
• Melbourne
• Gladstone

 

Awesome ...some of the best news I have heard for a while......a lot of people fear this sort of market...it is ideal for taking action whilst nervous punters sit on their hands... bring it....

 

I used to work in palmerston. A heck of a lot of land there. Could grow that place for miles. No impediment.

 

I've been to Palmerston (albeit years ago) to visit relatives, and (from the edge anyway) it's 30 minute drive from the CBD, a 30 minute drive from any decent shopping, a 30 minute drive from the hospital, and a 30 minute drive from most activities. In Darwin that's an eternity and if there are better, affordable options closer to beaches etc people will probably pick them over Zuccoli too.

 

Will people avoid Perth in 2017?

 

I will avoid Perth as prices are still falling and I don't see any recovery anytime soon. We are missing a major ingredient JOBS.

Plenty of threads on Perth and I think plenty of brave people jumping in, don't ask me why? with oversupply of rents to boot.

 

Yes. Never try to catch a falling knife. In Ireland people called the bottom for five years. Personally I think it's better to wait till prices are rising and jobs are growing than it is to try to time the bottom. I mean sure you might miss the best possible bargain, but personally I think Perth's crash is just getting started.

The anatomy of Ireland's crash, just for interest, went something like this:

• Rapid growth from 1995-2005, accelerating from 2001-2004 (growing 15+% per year).
• The peak - from 2005-late 2006; price growth stalled, plateaued, then fell very slightly but you couldn't be sure of the market's direction. As far as you could tell the bubble hadn't burst; experts were all predicting continued low-digit growth, a "soft landing", a "moderation".
• During 2007 prices fell slightly in cities, and significantly in regional areas. Fringe developments stalled. Apartments wouldn't sell. Experts picked the bottom.
• During 2008 prices fell, down 10% by this stage. Experts picked the bottom more insistently.
• During 2009 prices fell 25% - the proper "crash" year. Experts continued calling the bottom.
• During 2010 prices continued to fall but quality family homes had mostly bottomed. Inflation returned. Rents began to surge 5% per year as abandoned developments and unsellable apartments effectively "left" the market. By this stage rental competition was high as many had suffered through the recession, so couldn't buy. If you owned a quality detached family home in an established area, you were probably making money off rent by this stage even if you'd lost equity.
• During 2011-2012 prices fell a bit more. Total price fall was almost 60% however unwanted developments led these falls and many lost all of their value; detached and quality homes fell less, maybe 15-30% depending on area (and most have now recovered).
• During 2013 prices began to rise, exceeding the actual bottom.

 

Appreciate the Ireland snapshot.

Put it graphical, your highlight above resembles below
However I haven't seen any Australia state in past history that closely resembles Irelands fall, probably in for some mining towns.

Not saying Perth won't/will behave like Ireland, but yes exercise with caution.

 

I'm also going to avoid 'elephant snot', cars coming in the opposite direction and making thw wrong decision

 

USA followed a very similar course too - it had a peak from about 2004-2006 (varying a bit by city), slight falls 2006, about a 10% fall in 2006 then the steepest falls in 2007 and 2008. Their market bottomed in about 2011/2012, so the pattern was nearly identical, only set back a year. Growth there has been very strong since 2010.

 

This is true

Movie - The Big Short ? Great movie all about US sub prime fiasco