When Crazy Becomes the new High

How much of a drop will it take for you to enter the market?

I see no sense in today's markets and people are crazy, I've seen crazy purchasing figures thrown around which continually shock me. And that's Melbourne prices, Sydney is on another planet.
In 18 years I've never seen prices rise as fast as they have these last 5. As much as I believe a correction is coming, the lower interest rates seem to push it up higher and higher.

 

I remember it moved pretty quickly in Canberra in the early 2000's.
Houses seemed to go from $100k to $300k in no time at all.

 

Would anyone still remember why property in Sydney did not go up much between 2004 and 2008? not because of supply vs demand like now?

 

Sydney had FHB buying from 2000... I believe by 2004 there may have been less FHB in the market. (Can someone confirm?)

2009/2010 it was announced the FHB grant was going to be removed from existing properties so the lower end got a big boost as FHBs rushed into the market and this boosted everything else that was more expensive. 2005-2007 interest rates were steadily climbing.
There must be other factors too but I dont know off the top of my head.
In 2016 there's still unmet demand from FHB as they continually miss out.
These days Sydney's a safe haven for investors from overseas. And if they can't do it directly, lots of people have a kid or relo here they can buy through. Just like a Chinese colleague of mine... her parents will give her money to buy a home here...

 

This is my view:

· Melbourne will reach tops as Sidney. This can happen even in the next 2/3 years and the only reasons are the low interests and migration.

· Low interests will stay like this for up to 5 years even more. This is the only way for the Government to keep the industry going. Mining, education and construction: this is the Australian economy. Mining is gone. If you take off also the construction, it will be deep recession for a while.

· Do you see the big picture? Have you ever compared AU to the rest of the world? Would an investor spend money in EU/US/CHINA/INDIA/UAE/AFRICA or Australia? Migration->rent/house, this is what is keeping the bubble going, at least here in Melbourne.

· There will not be a bubble burst, just a correction like all the markets, maybe 10%/20% and only for suburbs with crazy prices (e.g. Kew in Melbourne). This will happen when the economy starts again, interests go up and people who bought without any planning will not be able to service.

· When you go to an action and there are 10 people bidding, that`s a sign it is a seller market. You want to buy when there is no one bidding and a couple of people at the inspection.

· Doing something is better than not doing anything. There are opportunity in each cycle. RE is just a way to invest money. If you don`t feel comfortable with what is happening, turn to share, business or something else.

 

Good posts @Gockie , @Barny , @Azazel and @Luca .

I am new here and dont have much idea about shares. Do invest in India though with a target of 15-20% returns.

I do feel melbourne outskirts have strong FHB merket. Love the returns that one can get there. Entry level products and lower investments (at least until i have the money for deposits @10% nad my serviceability reaches to a point of no lend)

I am trying to figure out the numbers here in Sydney. Have been searching for new estates and areas. Somehow, dont see the numbers stacking up here and looking at the risks here,, turn to melbourne again and again.

I am a starter though and love the knowledge i get from the forum.

Regards

 

Great post and I agree with you.

 

Probably good to do some research on how some of the newer areas fared after the last boom.
People on here have mentioned some of the suburbs fell quite a bit after the last peak.

 

not surprised. was looking at maidstone similar streets around 1 year ago was high 500Kish to just over 600K. looking at it now it has touched 800K,900K that is like 200K movements in 1 year. (30%+ growth)

Same as reservoir -which still had 500Kish places last year - decent blocks size. Now it has moved to the mid 600kish to 700K. (20%+ Growth)

I think any corrections will be at the upper end - the brightons, Kews, balwyns, glen Waverley, doncaster. I saw one place sold decent block size in doncaster below 900Kish which going back 6 months would have sold for 1.2-1.4 mil. Also "the golden road where the mainland chinese buy - bogong avenue in glen waverley - a unit sold 700K is actually cheap when you considered one similar sized went for nearly 1.5 million couple months ago).

 

Curious why do you think only high end properties may soften?

 

Boom cycle in Melb 2008, however it started in inner city - units
Read old posts on SS .....

 

Upper end not as many buyers with so much serious cash (I watch high end markets but like seriously how can a 2 bed landed single villa unit sell for 1.1-1.4 mil only because of suburb name and school. Not many can afford to shell out 2.5 mil -3 mil. We have serious money earners in Melbourne but not to the likes of Sydney.

 

The peak of the market was around 2005 on Northern Beaches so probably 2004 other places in Sydney. Interest rates gradually went up after this. We fixed our rates at some point so I don't know how high they went but 2008-2009 they were definitely in the 8-10% or slightly higher territory. I remember consumer confidence being depressed at this time also as the GFC and global share markets crashed, sub prime mortgage stuff in US. This was around the time of the government tax cashback of $800? to boast consumer confidence (that a lot of people banked instead of spending!). Just a summary of what I recall. I have trouble remembering what I did 2 hours ago so I'm sure I've missed a lot

 

Fell?

 

I agree. This is generally what I see happen in terms of general after boom market reactions in most States. To some degree this is what we are seeing in Perth the correction - the markets in outer areas with plenty of supply together with high end correct the most. Well located areas with good schools and more white collar families aren't correcting as much and might only be seeing a 5-10% drop.
The reality is that most people won't sell a ZPPOR at a loss unless they absolutely have to - ie can no longer pay mortgage. Investors may take the hit more readily as they can wipe it off against future gains and they may need to sell the worst performer to keep the rest of the portfolio.
It is hard to assess city or statewide and say this ONE thing will happen. Which is why markets with markets always comes up in discussions One house selling WAY over reserve does not equal all houses in Melbourne being worth more.

 

I was skeptical too, but someone posted the numbers.
I can't remember the area off the top of my head, was it somewhere out near Kellyville?

 

On the ground at the moment as bro is trying to purchase. This is how nuts people are and how hot the market is. low supply, big demand.
Airportwest house comparable to other houses less than a year ago, 750k Max, just sold this weekend for 910k.
My 2 places I've held for years, Essendon north, valued at 700k in 2010, purchased in 2006 for 475k. Comparable to houses in same street this year, 1.5-1.6m. I reckon it might get more than 1.6 if we go to auction now.
Essendon, valued recently at 1,050,000 bank val and comparable, 1.2m right now no questions asked.
Lack of stock, cheap credit, and people drinking crazy water.

 

Nice

 

I bought in Melbourne in 2007 and definitely noticed prices in my area increased quite sharply from 2008 to 2010.

 

680-700k for a studio apartment in Redfern? Omg. Crazy.
This is not a recommendation or endorsement to buy. But if they sell for that kind of money, then that's good for me...