What will stop the BOOM in Sydney and Melbourne

Wow. Melbourne median was $682k over the weekend auctions with 74% clearance, I know it’s only 1 week etc.

 

Another prediction, interesting.. states Brisbane will cool, I never thought it was booming???

http://www.heraldsun.com.au/busines...t/news-story/7a489a2b8e9a8c42d85bf5307c277d8d

 

I actually think with all the APRA tightening, it would hurt smaller cities such as Brisbane, Adelaide and Perth more than Sydney and Melbourne.

Sooner or later those investors who cannot refinance all, would need to choose to sell some of their properties. Even though Sydney and Melbourne are more expensive, I still think they will hold values far better than 2nd tier cities IP over long term.

Also someone like me, I would probably looking at buying at Brisbane, but couldn't now because of the APRA changes. I am tapped out for more finance, and I intend to keep my Sydney and Melbourne properties as long as possible. If I sell them, I may not be able to buy back.

 

The apra changes hurt investors the most, so it may actually help inactive markets like perth. With such low buyer activity for such a long time, there will be pent up demand of people looking for a first or upgrade ppor. The changes have resulted in lower principal + interest owner occupier loans, so the cost of ownership vs. Renting has actually fallen. It also fuether disincentivises investors, so the low dwelling completions are likely to stay subdued. This will mean less stock when the market does turn, so it will turn harder.

 

Unfortunately if the economy still stays in recession, people will find it hard to get jobs, let alone loans no matter the interest rate. Rents may also be falling much faster than interest rates as vacancies go up.

FHBs just buy what they can afford, and usually that depends on LVR which is going back up to 80%, a drop in rates of a few basis points is not going to increase their budget by much. Upgraders will just buy one property and sell one property, so wont do much in terms of changing supply/demand balance.

Most of the speculative buying that pushes prices up quickly is due to investors. If they are not playing in the Perth market then FHB/upgraders wont do much for the market.

There is probably lots of stock sitting there at the moment so that stock will need to be absorbed before any turning of markets.

If anything, Perth will need another big mining boom with influx of capital from big project investments plus maybe some infrastructure spending from gov when their GST special allocation comes in the next year or so to kickstart their housing market again. Then investors will start flocking in and pushing prices.

In the mean time, as I like to say, watch them iron ore prices =)

 

Watch the lithium prices while your at it.

 

Thing is Perth currently has lots of buyer activity, however its price sensitive.

 

@kamchatsky - went to a few auctions yesterday - still seems pretty hot. I think for your reservoir place - nothing to worry abt. Went to this auction yesterday 14 lane Crescent - this isn't exactly the greatest location - 100meters away is the biggest housing commission estate in reservoir with rundown flats and houses etc yet another high record price for the street reaching nearly 900K. and last year these places high 5s and 6s. (1 year) Some ppl keep talking about cycles etc in Melbourne - but these places didn't really move till end of 2016 to 2017. no one is asking anyone to buy in Doncaster or Balwyn which is at the peak of the cycle.


@willister - forget oakhill estate even these are places next to ex-housing comm estates are smashing through the 800K mark

Last year

72 Lane Crescent, Reservoir - 590K in May 16
28 Lane Crescent, Reservoir - 630K in June 16

Fast forward

33 Lane Crescent, Reservoir -846K April 17
14 lane Crescent - 880K July 17

Auction at 14 lane crescent between some mainland chinese (who lost out) and some Italian and some first home buyer pregnant wife. so the Italian won it

 

no doubt a boom, are they all GRZ2??

 

What are your current thoughts on Perth given you rode the boom there?

Do you think the worst is over or is there a bit more to go? Sure there is plenty of stock in the market at present, although prices are around 8% off the top a few years ago.

 

I think we are levelling out at the moment. Need to be very selective on purchases and I hate to say it but you should stick to suburbs that are close to the city and product that allows you to add value, could be an older style villa, could be a development block. Apartments absolutely no go at the moment.

The question you need to ask is whether it makes sense to buy property in Perth where yields have been hammered and there is an oversupply of rentals. Are there better markets in Australia?

I would personally not jump in until I see the signs of a recovery. I know many investors like to buy on the low, cheap, but you have no idea of knowing what will happen next, at least when you see the recovery, stock tightening you know something is happening and its an indicator that the market sentiment is changing.

Investors say you need a crystal ball, I say you need patience

MTR

 

Of course, houses with land close to CBD are my preference. By levelling out, I am presuming you believe it does not have too much further to fall? Perth is actually slightly cheaper than Brisbane now, the mining cliff has stablised and employment has actually improved yoy. In terms of oversupply of rentals, investor activity has dried up now so rental declines should also start stabilising soon.

In terms of other markets in Australia, I am not confident in any of them. All the capitals have had a decent run up. Canberra looks good but land tax is a killer. Hobart is the best bet for the next year but I am concerned about the long term given that when the government changes it may go backwards again.

 

You know what you are talking about, none of the fluffy stuff, just stick to the facts, that's how you make money

 

Yup grz2 as the they are not on broadway. Cycles or not demand is still there as bids started low and kept on going. Also mixture of owner occupiers not all investors - just calling it how I see it. Auction rates still 70ish percentage unlike some states. For other states - Not a hater lol and not rocket science and basic macroeconomics - It is not plausible to expect a boom when an auction rate is below 50% consistently throughout the year as ppl could buy passed in properties below ask which means "no boom"

 

The actual number of recorded sales overall is still not that high, particularly land. REIWA give a great snapshot of the last 5 years' sales

WA real estate market - Perth property & house prices - reiwa.com

 

This looks amazing figures. What do you think of the area around crevelli and kirby an area you know best. There have been no sales in the last 6 months of note with one going for 782k. I am sure this would have changed to have the area mentioned up to possible 750-800k. It is indeed exciting times for Reservoir.

As always thanks for the updates on the ground

 

there were sales 48 Crevilli sold 526K on Sat (we talking half the size of the block you have) - 300ish sqm . Also there was the 3/13 nisbett 2 bedroom one level villa townhouse which was super small that sold 480K. 526K for half the size you have on your block. Also based on the location you told me - for your place - you can basically walk to Latrobe University to the park in 15 min. if that was in clayton (that itself is gold) due to proximity to monash. There is no longer a "5" or a "6" in your area for the starting price.

Those 80 Tyler street are also selling nicely. and the plenty residences asking apartments for 800K for 3 bedrooms.

If you asked me that lane crecent area near the housing commission flats are a bit dodge. When I was driving out saw 3 crim looking blokes with booze in paper bags walking towards the flats. But yeah the areas are changing - gov selling off lots of the ex-housing comm houses. as you know 86-88 summerhill was sold last year (for 1.602 mil) which ranks it at 800K each. those blocks are sloping blocks and not flat and will be overshadowed greatly by the plenty residences below. And even that sold for 1.602 mil. nice models though they put out

 

That's great news. Well, I think the area of Reservoir is the last area to play a bit of catch up but I don't see it lagging behind for much longer looking at East Preston now houses going for 900k-1m. I think also it's tightly held currently with not much selling so hard to gauge the changes in price which is frustrating from a valuation side of things!

 

seriously the ambon St and albert st auctions - the houses there look like some run-down project places in US similar to Heidelberg West (and even those corners are smashing 900K marks). You were lucky you got in the "5" there is totally non-existent in reservoir as a whole since last year. I have to been to auctions throughout the whole or reservoir (so I know all the pockets well now) and these parts of the ones are selling not the ones closer to edwardnes lake. Even 3 Cameron st reservoir passed in on Sat when I was there - if you compare location to lane crescent that place is much better (closer to Coburg north) but due to zoning, block size - lane crescent sold 3 bidders fighting it out but Cameron st got nothing (and I had a voice msg) asking if I was interested during lunchtime today.

 

or..perth could attempt to diversify such that non mining contributes much more $$ to the local economy that what is is now.
That takes time, effort, and vision.
Sydney and Mel have it. Thats why they are the top 2 dogs.
Brisbane is playing catch up and only recently realized the world is not flat.
I suspect perth is a bit too far behind such that they may be better off trying to tread water till the cycle turns and commodities are in favour again.