What will stop the BOOM in Sydney and Melbourne

so apartments only?

 

Read the article, don't just read the title and you will see NO evidence presented.

 

Yeah not seeing it on the ground. Vendors asking 100k+ more than they did last year in the areas I’m looking in. For standard 3bed houses

 

I just think Melb has the right fundamentals continuing to drive this market.

Are you looking in outer suburbs/areas.....

 

No. Looking inner north Brunswick/Ascot Vale/Moonee Ponds.

 

@MTR and @hungusyd , that wasn't an endorsement from my side. Sorry, writing on the run...
I do believe though that there is an over supply of apartments especially in Melbourne but not sure about Sydney. As for oversupply of detached housing, that's not the case and definitely no slowing down in my area but other way around as per @zed_kid .In some of Melbourne's northern suburbs that i keep a watcheover, prices are definitely on the up

 

Good markets

 

The main point they reference really is the 25% fall in listings which, granted, is huge. They also point a halving of Chinese buyer interest though the details are pretty vague.

On the question of whether the market has peaked, I think it's still very firmly in the maybe pile. Rental yields are at record lows, oversupply is a problem, you've got some questionable data from CoreLogic suggesting growth (they effectively include activity such as development and renovation as "price growth", assigning it to properties and suburbs with little to no evidence of sales - which is starkly at odds with other major data providers using actual median or mean sales values to determine market trends - this being rather more difficult to fudge), providers like ABS and Domain appear to be showing a sharp downtrend, which would fit better with a picture of reduced sales volumes, falling agent commissions, reduced approvals etc.

The thing is, we probably won't know for a long while. There's a saying that goes along the lines of "you can't be sure you're in a bubble" (you absolutely can - the indicia are easy to spot) which is likely a *******isation of the idea you can't be sure a bubble has burst without the benefit of hindsight. The reason is the peak is a protracted, vague period, often marked by volatility, stalling growth and uncertainty. It takes a good 1-2 years at least - just the peak. The crash takes half a decade or more.

In 2015 Sydney peaked at 19% growth year on year, and if you believe APM and the ABS it's own to around 2%. National growth according to the ABS has dropped in a year from 10.7% to 3.5% - a huge slide. This may represent the fabled peak, but it may not. In bubble markets large price drops are often foisted on the market as developers go bust and are forced to discount - so I would personally recommend watching fringe suburban developments and new apartments. These were exactly the sorts of properties that lost all their value in Ireland. They also dropped first. Between 2005 and 2007 different areas of the market stalled, and it wasn't until late 2007 that you could really be sure the market was starting to wobble - by this stage, developers especially of semi-d's and of new outer urban estates were finding it nearly impossible to sell for prices high enough to offset their costs.

If you look at some new suburbs there are potentially worrying signs.

One example is Springfield Lakes, the darling development of Ipswich - a nice place certainly on the outskirts of the city. There are 168 listings to 22 sales (in four weeks) Springfield Lakes Real Estate for Sale | allhomes and some rather nervous "offers considered", "below cost" language, especially with house and land packages.

Look at Deebing Heights - 44 to 3 here. Deebing Heights Real Estate for Sale | allhomes Again - "must sell", "no deposit" - developers are struggling to shift these.

Closer in you have suburbs like Indooroopilly - 116 to 18 sales Indooroopilly Real Estate for Sale | allhomes - extremely desperate language.

Brisbane City - 337 to 25 Brisbane City Real Estate for Sale | allhomes - that's what you call panic stations. "urgent sale, make an offer", "invites all offers" etc - again, worrying.

There are certainly suburbs where the imbalance isn't anywhere near so pronounced, typically suburbs dominated by owner-occupiers in middle income popular suburbs - Ashgrove is a good example. Still even good suburbs like Kedron aren't immune - that suburb has a mere 9 sales to 81 offerings (granted a lot of these are apartments).

You can see this sort of trend right now echoed in most if not all of recently developed Australian suburbs. Many areas have severely overbuilt - Parramatta, Oran Park in Sydney, the Molonglo area in Canberra - new suburbs offering house and land packages and new apartments just aren't shifting, which means their developers are at risk, as are the owners and investors who've bought into these areas.

I don't know if a correction is coming. But my advice, which is again entirely personal, would be to think very carefully about what's in your portfolio. If we are in the peak period this could be a very good time to consolidate and shift to quality detached family homes in good suburbs - even if they're expensive, they will retain value because what are families going to want on an ongoing basis after any correction? What they wanted all along: to live in nice houses in convenient, desirable locations. In Ireland a lot of outer developments and apartment blocks folded and buyers wanted them like a dose of plague - and these were the areas that lost most of their value and led the falls. Good homes in good suburbs tended to hold their own, or at least attract high rental growth as early as 2010 (when buyers can't buy and banks are reluctant to lend, the demand for good family homes remains competitive).

Well, phew that was a TLDR... again though, I say look for quality. Look for suburbs where the current listings do not outweigh sales - suburbs with high NAPLAN scores, mid-to-high incomes and a solid history of popularity as a place for families to put down roots. Those are the assets that perform best when markets do contract, and whether a major crash happens, a market adjustment of sorts at least appears to be underway in many areas. Bubbles can represent a great opportunity if you plan for them.

 

Great post highlighter and to be honest, this is what I did exactly: within +10km of Sydney CBD with top 50 schools without any cranes in sight

 

Good suburbs!

 

Can't be a third, they can only buy new OTP, maybe what you read relates to units OTP....we all know they could be in for a world of hurt.

 

I am still putting my money on Melb as the star performer in 2017....

 

Can you believe this? Some outer Melbourne suburb's capital growth for last 3 years has been less than 30%, with 20% gain alone in the last 12 month. Why? I will study this dumb deal!

 

Hilarious....... @MTR along with myself and others made a killing in Melbourne whilst others studied stats...I think your comparison of yourself to trump is very appropriate.

 

Good overall analysis however just looking at your analysis of Indooroopilly I would disagree to a point. It's a suburb with plenty of apartments being built but I would question your assessment of whether its a suburb of desperate (house)sellers.

It's a really diverse suburb with high land values, several houses are listed for $3-5 million.
34 houses only out of 118 listings from your link which includes land, townhouses and endless apartments. I didn't investigate these further but I suspect several may have actually been semi detached properties.

Of the 18 sales in the last 4 weeks 13 were houses so stripping out the white noise if this result was to apply to current house listings 38% would be sold in 28 days.

Not a booming market but hardly a depressed one for houses either.

Units, different story.

 

MAKE OUTER MELBOURNE GREAT AGAIN!

 

Wow.. You completely disregard what has been happening on the ground in the area over the last 18 months and base you opinion on a screen shot from RE.com? Have you even been out there?

Melbourne is a large city...and a fragmented market. The boom that started in 2013 didn't lift the entire city at the same time. Not all suburbs boom at once. I'm sure you know this.

Anyone playing in that suburb in late 2015 would have seen the suburb heating up and starting to move. Astute investors, when they see this, in addition to their DD, jump in. This process is really no different to any other suburb when it starts to move.

Yes, please explain to these investors about their dumb deal, and how they are not really making any money?

 

I will be on the ground with a mate that's looking to buy in Werribee/ Hoppers this weekend. Will be attending a number auctions so can report back on the "feel" of the market. Having purchased in Hoppers last year it felt like Western Sydney in 2014...lots of young families/ investors seeing the value in the established infrastructure

 

Hmm...thot i heard on radio yesterday they are planning to build a jail in Werribee for youths?

 

Perhaps not, and my analysis is certainly crude. However, if you read through the language in the current listings in Indooroopilly there is some concerning language.

There's this one, reduced to $325k 18/27 Station Road, Indooroopilly Real Estate For Sale

This one, "all offers considered" 4/12 Belgrave Road, Indooroopilly Real Estate For Sale

This one, "all offers reasonably considered" 53 Coverdale St, Indooroopilly Real Estate For Sale

This one with a dropped price 43/22 Riverview Terrace, Indooroopilly Real Estate For Sale

It's nowhere near as loose as some suburbs, I'll definitely agree to that. Houses seem to be selling well in most areas which seems very encouraging and I don't think we're at the point of desperation anywhere in terms of detached houses, with the exception of recently developed estates. Apartments right now though, damn. I think a correction will be largely contained to these, and to new developments.