What will stop the BOOM in Sydney and Melbourne

Discussion in 'Property Market Economics' started by MTR, 5th Nov, 2016.

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  1. MTR

    MTR Well-Known Member

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    Clearly APRA did not work for these markets. They are both continuing to BOOM, in fact Melb out performed Sydney over the last 12 months.

    So what will stop the boom?

    Here is a link that may interest some pertaining to

    Investor lending growth too strong: APRA head

    The head of Australia's banking regulator says investor home loan growth remains too strong and the agency is open to further measures to clamp down on risky lending.
     
  2. Redom

    Redom Mortgage Broker Business Plus Member

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    Is that the right link @MTR? Thats over a year old. I would be very interested if Byres has said those words recently, but they seem to be old words.

    To my knowledge, investor credit growth has slowed significantly over the past 12 months. And for large parts of Sydney, so too has house price growth.
     
  3. MTR

    MTR Well-Known Member

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    Perhaps we are not seeing it and most are looking at stats which are old.
    What parts of Sydney cooling?

    Melbourne still very strong market from what I can see

    Here are some comments by Dr Shane Oliver.
    Sorry, yes Other link was 12 months old.

    APRA may still need to step in ???

    AMP, August 2016
    In this article, we ask Dr Shane Oliver, Head of Investment Strategy and Chief Economist, to give us an overview of how property is faring so far in 2016, and what his predictions are for the spring property market.

    Q: What are your thoughts on how the property market has performed in the first half of the 2015-16 financial year?

    A: It’s been pretty mixed. In Sydney and Melbourne, the property market slowed down initially when the Australian Prudential Regulation Authority (APRA) introduced measures to slow down bank lending to property investors. Then it picked up again around March this year, but it’s not as manic as the boom time we saw in property markets in Sydney and Melbourne during the first half of 2015.

    Overall gains have been around 10%. Other cities such as Brisbane, Adelaide, Canberra and Hobart saw gains of around 5% on average, while mining-related cities, like Perth and Darwin, have had falls.

    Q: In March last year, we published an article that discussed whether we are in a housing bubble. Would you say that we are?

    A: No, we’re not. A housing bubble is when properties are overvalued, but it also involves a level of mania where people are obsessed with buying properties. This fuels the increase in property prices and causes them to inflate into a ‘bubble’ which becomes self-perpetuating, and we are no longer seeing that.

    Overall, property auction sales volumes in Sydney and Melbourne are now down about 15-40% on what they were a year ago. I expect to see more moderate price gains in these two cities, as they will be affected by poor affordability, ongoing APRA measures to slow down bank lending and more cautious demand, especially given that there have been huge price gains over the last three years.

    Other cities, such as Adelaide and Brisbane, are expected to perk up a bit in coming months.

    Q: What do you think will happen with interest rates, and how will this impact the property market?

    A: I think there’s very little chance of rates going up in the next year or so–it’s more likely they’ll go down–so that provides a level of comfort, especially for owner/occupiers in the property marketplace.

    It’s also unlikely there will be a property crash in the near future. This usually happens after a period of high interest rates or much higher unemployment which causes debt servicing problems, neither of which is likely in the next year or so.

    Q: Is it better to buy houses or apartments in the current market?

    A: Apartments are a lot more vulnerable because there is a massive multi-dwelling building boom going on in Brisbane, Sydney, Melbourne and Perth. There’s a real risk of oversupply. I wouldn’t be surprised to see outright price falls in apartments in Sydney, Melbourne, Brisbane and Perth.

    So people are better off waiting until the dust settles to see if there are any opportunities to buy apartments with a lower price tag.

    Q: How will first home buyers be affected?

    A: There are more opportunities because auctions are less manic now. Banks are more interested in loaning to occupiers and we have seen the market slow down for investors due to APRA regulating bank loans. So this will make it easier for first home buyers.

    Having low interest rates also helps, but affordability is still poor. If you’re looking to get into the property market, consider getting an apartment, but wait for the surge in supply to hit the market first.

    Q: So what is your prediction for the spring property market?

    A: If there are further interest rate cuts by the Reserve Bank, it will add a spark to the spring property market. But if the market starts off too hot, APRA and the Reserve Bank could step in again to slow it down. Overall, I think the property market will be reasonable, but nowhere near as hot as it was in Sydney and Melbourne in 2014-15.
     
    Last edited: 5th Nov, 2016
  4. Redom

    Redom Mortgage Broker Business Plus Member

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    On the whole APRA changes have worked quite well to their intended aims IMO. Investor credit growth has slowed significantly. See the chart at the bottom of this article where it looks like its fallen of a cliff since the beginning of the year.

    The article posted above was right at the beginning of much of the changes (August 2015). AMP begun the move in early June 2015 from memory and the others followed in months following.

    August 2015 isn't really a good benchmark for whether it was successful or not, as it had only been implemented for a couple months and these measures take time to hit the market.

    Australian housing investor credit is growing at the slowest pace since 2009

    Re house price growth, most of Sydney isn't running rampant anymore.

    Parts are doing really well, seems to be the normal Sydney cycle with upgraders moving into premium areas with low stock levels. Those parts are doing very well. Outer areas where investors were very hot on a few years ago has seen a dry up in investor activity (still a fair bit of O/O demand given rates).

    Interesting to know about Melbourne - data certainly supports it, doing very well.
     
  5. sash

    sash Well-Known Member

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    Nah mate...you like I were apparently living under rock.... I heard it on the forum Sydney is "Bullet Proof" !!
    Blacktown is the next trendy suburb..........apparently the Tumeric caps have made it there....they are knocking the old Westfield is being refurbed to make it look like something like the Westfield at the Pitt Street Mall. Apparently Louboton, Chanel, Furla, Jimmy Choo and the likes are queuing to get a piece of the action via commercial property for their brands.

    I really is guv...know what I mean?;)
     
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  6. dabbler

    dabbler Well-Known Member

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    APRA was not about controlling Sydney or Melbourne market prices, that is 1.

    What will stop it, a sniff of rates going the other way.

    A financial crisis.

    Everybody has upgraded, downsized & bought what they want.

    Clearly, it has mainly been driven by the rates.
     
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  7. wombat777

    wombat777 Well-Known Member

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    Adding to that - the boom has also been driven by FOMO.
     
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  8. dabbler

    dabbler Well-Known Member

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    That happens every boom, it is a natural thing, I am not sure anything more than continual sliding rates and associated talk is what has kept it so strong for so long, it is def not wages growth or booming business.
     
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  9. wombat777

    wombat777 Well-Known Member

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    A big difference this time, compared to 2003 is that information is more readily available. Online research tools were certainly not as pervasive then. Makes it much easier for foreign investors to stoke the fire.
     
  10. euro73

    euro73 Well-Known Member Business Member

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    It slowed investors a lot. But it has created a last wave of owner occupiers who had cashed out to investors and are now back in the market looking to spend all that $$$$$ in more upmarket areas, as Redom said. My wife and I have been looking around West Pennant Hills area for the last few months for an upgrader O/Occ and properties that were 1.5 - 2 Million 18 months ago are routinely getting 3 - 3.5 Million + now. Lovely homes but crazy stupid prices. Has to come back to earth at some point ... It's not helping that there's also a real shortage of listings in those areas ... but it wont last beyond this Spring season .
     
  11. fols

    fols Well-Known Member

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    What will stop it? Interest rate rises.

    Chances of that happening in short term? Low.
     
  12. MTR

    MTR Well-Known Member

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    Many are calling end of boom mid 2017?
    Time will tell, batten the helms folks we may be in for a rough new year
     
  13. euro73

    euro73 Well-Known Member Business Member

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    I get the sense people are paying well over market value for anything they can get their hands on in the upper middle class suburbs...
     
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  14. Ghoti

    Ghoti Well-Known Member

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    Personally I see a lot of colleagues moving into SMSFs which entails moving from predominantly shares (retail super funds) and into property. I cant help but wonder how much impact the 'super salespeople' have upon investor lending.
     
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  15. Cactus

    Cactus Well-Known Member

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    Keep going!!! I honestly believe Melbourne will continue up for 2017. As for 2018 I am less confident, maybe plateau.
     
  16. humptydumpty

    humptydumpty Active Member

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    Do you think something will change based on a hypothetical scenario that Donald Trump wins USA elections , Shares market is already scared of that.
     
  17. Lacrim

    Lacrim Well-Known Member

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    Not sure how it is in other suburbs but in my neck of the woods, the buyers still paying astronomical prices are mostly Chinese. Money to burn.
     
  18. Lacrim

    Lacrim Well-Known Member

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    If the Govt ever allows one to move into a SMSF residential IP under certain conditions, that will put a rocket under the market.
     
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  19. wombat777

    wombat777 Well-Known Member

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    Lots of Democrats ( and some Republicans ) trying to find a way into Australia? :p
     
  20. MTR

    MTR Well-Known Member

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    No idea, that reminds best check out the Trump thread, mother of all threads:p
     
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