Whiplash, tell them they’re dreaming

Judging from the excitement levels on here... (and how much is just relief of mortgage brokers having their commissions and business values protected)

Sydney property market will stop declining on a dime after a severe and steep 17% decline... This conflicts with every previous market decline and rebound. Average length of cycle is 3-5 years...

May data still shows another 1% decline... the underlying reasons for cutting rates are more concerning for medium term outlook. Now fast forward 3-6 months and prices are still falling..wonder what sentiment will be then.. fast forward 12 months and Sydney is off 5% with another 2 cuts due to recession....hmmm

I’ll believe it when the Chinese return

PS: Congrats to all the brokers though, you guys add plenty of value for your $$.

 

That's phase 2 of the operation, after phase 1, the return of the FHB, runs out of steam

 

I think the positive vibe depends mostly on the upcoming (predicted) rate cut, and I think this is worrying, because 1. it’s not exactly a sign the economy and jobs market are doing well, and 2. despite popular opinion rate cuts in USA, Ireland, and Spain (as I was just saying in the other thread) all happened close to the start of these crashes, and before the economies tanked.

In USA rates were cut in late 2007. The housing market was down 10%. Banks hadn't failed. There was no crisis. Recession, the big rise in unemployment, almost the entire housing crash, happened after the rate cut. Why? Because of oversupply. The construction boom caused a constant flow of new stock coming into the market, which meant builders couldn't compete, and even if they had wanted to borrow more, buyers had no reason to pay more.

In Ireland, same deal. The feeling in Dublin around the rate cut was very much one of “it’ll be fine now” and there was a lot of bold discussion that the market had turned a corner, especially among the real estate industry. “Get in now while there’s a discount”, “this is the bottom” etc.

When the ECB cut rates, the Dublin house prices were down a similar amount to what Sydney’s is now. The big rise in unemployment happened after the rate cut too. Yes it had trickled up a little, from 5% to about 5.6%, in the few months before the rate cut (the similarity there is eerie).However the huge rapid rise happened after the rate cut. Recession too, was just a future worry, prior to the rate cut. And there was that prevailing feeling a rate cut could return the boom years. Supply, again, was the problem.

Same in Spain, which was less than a quarter through its slide at the point rates were cut, with almost all the rapid rise in unemployment, and the recession, happening right after the rate cut.

Making debt cheaper isn’t going to erase apartment oversupply. I think this rate cut will be a disaster.

 

Before phase 1 all the excess supply has to be soaked up.. also 10,000 new FHB’s buying entry level properties won’t move the needle

 

If anything it will bring prices down, as FHBs tend to buy cheaper properties. If greater numbers of cheaper properties are sold, the median overall can fall.

 

What? you must be kidding,
OZ is full of FHBs with 5% deposit waiting for years now for someone to hand them 10k LMI so they can pounce on whatever is on offer.
The point is some of them have been waiting for decades now,
hence these 5% deposit range anywhere from 50k to 5mn.
See for them its more of a principled stand against LMI,
finally they got heard this election,
I even know a few who boycotted their favourite 'Avacado on toast' till someone gave them 10K for LMI.
it was quite an emotional scene when the announcement came and this guy had his first 'Avacado on toast' in years, very beautiful.


So your are absolutely wrong,
This will definitely put the rocket under the housing market,
FONGO will soon become FOMO
and FOMO will soon turn to NBAC (Need 2 buy at any cost)

 

First home buyer activity has been rising since Jan 2017. It's already at a six year high, but it tends to go down when prices go up so this whole argument doesn't really work. As investors retreat from Australia's housing market, first time buyers are moving in to take their place If FOMO returned to the market, FHBs would reduce in number. Plenty "sitting on the sidelines" bought in the last 18 months. It also didn't prevent price falls.

This is because the number of investors has also dropped very sharply. According to NAB and the ABS, investor numbers have almost halved in NSW (going off the value of home loan finance). That and there's too much stock, especially in apartments.

FOMO's not coming back just based on recent developments. Shane's right.

 

I still think Australian property is ridiculously overpriced, and see no reason why Australia should be immune to the economic fundamentals that impact on every other nation's economy.

A bubble can go on for a looong time, but the longer it goes on, the uglier it's going to be when it (inevitably) bursts.

 

Hah this made me laugh thanks... yep those 10,000 sales nationally (7% of FHB annually) of around 3-500K price will have a muted effect.

 

I must have forgotten to underline sarcasm

 

It’s hard to tell sometimes with the excitement levels on here in last week

 

No, the number of FHB transactions has been falling. However, all other categories are falling even faster (particularly investors deserting the market). So FHB activity has fallen, but has only 'increased' as a % of all transactions.

I suspect FHB activity will truly pick up, even if only modestly, after Jan 2020 when the new deposit scheme starts.

 

https://www.smh.com.au/business/the...k-running-out-of-bullets-20190528-p51rty.html

 

Perhaps, hopefully they can extend the scheme to a more meaningful number of FHB’s each year.

 

I

Well siad. I see some smoke in sydney market too. It may look its bouncing back, but will have negative impact soon..

Its too early for banks to loosen the credit tightening.

 

Yikes, JP Morgan thinks we'll be in recession soon with a prediction of 0.5% rates within a year. I really think we're all underestimating what a dire sign rate cuts are going to be at this point. The RBA really are almost out of bullets, with a possible 6 rate cuts left.

 

Calm down...yeah..

 

Yep people don’t realise that the closer to zero the less impact rate cuts have, particularly when economy is slowing.

 

I dont think the RBA would drop the cash rate to zero (to protect depositors from negative rates). Alternative monetary stimulus (QE) would likely be used for rates sub 0.50%.

 

This will probably be the real ‘retiree tax’ that baby boomers thought they were avoiding at the election...

Economy slows further, rates get cut below inflation, incomes get crimped despite franking credits still being around.