What will stop the BOOM in Sydney and Melbourne

I heard its likely our next official rate rise would be next year after the US does 2 more rate increases. But I think we might see some additional out of cycle rate rises by the lenders because the cost of funding has gone up a notch.

 

I think so too

 

Absolutely

We are all borrowing US dollars

 

If you can get finance in USA (US $) you will be laughing all the way to the bank

 

I remember my grand uncle said the exact same thing back in the 90s, then came the 98 Asian financial crisis when the exchange rate went from USD $1=Rp. 1000 to about Rp. 18.000. It took down his bank and other companies he owned.

He is still a very rich man though.

 

Yes my comment doesn't apply to those states that haven't had that extreme boom

 

I'm probably asking a silly question but why is that ? Is it because it's difficult to get loans in the US but very easy to get an roi on money?

 

The Au$ 75-77 range today, so if you are buying property and bank funded you can LVR, so you capture any growth and US property markets are rising and when you bring the profits back to Australia today you are making 35% on your money (Currency Play)

 

Short of a global financial crisis, Chinese money will keep house prices afloat. Plus with so many areas marked for development, investors and builders will snap all those up

 

When developing no longer makes sense because land has risen too fast developers do not buy

 

I think this is also a good point, and something hard to account for.

 

update : chinese money has more or less stopped after last years clampdown
Developers are already trying to do discounts and chinese who bought last year are failing to settle. Give it a couple more months, there's usually a lag before everyone realises there's no more easy chinese money left...

 

Certainly foreign buyers have slowed down in Melb from what te agents have advised

 

I'm hearing the same thing; one estimate I heard is that about 80% contracts are failing because the Chinese investors are walking away.

They are pulling out because of the crack down on foreign investing in china and inability to get finance here.

I wonder what will happen to all the apartments they are not settling on...

 

The issue with OTP apartments is also end values on completion, due to oversupply they may come in significantly lower... ouch

 

Wouldn't that answer the question then? A decrease in population growth will stop the boom in Sydney and Melbourne.

But what will cause a decrease in pop growth? Lack of jobs. And what would stop lack of jobs? Economic downturn. And that's not gonna happen anytime soon.

So the boom is just continuing...

 

I think at some point that prices just hit a psychological barrier and people say enough is enough. Ultimately, for whatever reason, people start refusing to pay that price for that property and prices ease. It's the macro economic environment that determines how far and how fast prices fall.

 

Do you know anywhere that has hit a psychological barrier?

 

Yep. I was on the ground in City of Belmont when prices topped out. I attended auctions for 4 weeks in a row, lots of people attending, many bidders, genuine buyers. I knew at least some of them and these guys were legit. Properties reaching record prices in the bidding but being passed in. Punters walking away shaking their heads. Vendors got too greedy and buyers refused to play along. Prices simply got too high. Part of this is profit related. If the buy price is too high there is no point buying but part of it was simply that prices exceeded a barrier of what people were prepared to pay at that time. Prices now have dropped right back for those same properties, as much as 30% in some cases. In the next boom, that max price will be going up and a new barrier set.

 

I think it will be
Interest rates rising, tightening of finance, no loans no buying