Will we see another boom again?

Let's keep out emotion and mining/resource type boom

Have we learnt our lesson?

In the next 20 years or so will we see metro areas that are relatively blue chip boom like they have now in most major cities.

To me at this point in time areas thay were selling for 3 50k ish now selling for 1m.

Will the be a boom in this same area or will the boom if any hit the Areas that haven't boomed
I can't imagine these 1m props go in from 1m to 3m in a few years

I voted option 5

 

I vote 1.7. It's not 1, and it's not 2. Somewhere between them.

 

No option suits me because my feel is we are in a Kodak style moment

 

I don't see booms giving back as much in $ terms for a while, but then I don't see wages increasing the same amount either. It is all linked back to inflation, so if we are running low inflation we will be seeing anything $ related moving slower.

Without getting too technical, taking a $500k loan when the average wage is $40k is not really much different to taking a $1m loan when the average wage is $80k.

Probably the only thing that is going to be questionable is if Australia can go another 25 years without a recession sending everything backwards.

 

Voted 2. I don't think we can repeat the same sized booms (in real terms) as the past because I don't think we can repeat this level of debt accumulation...

 

Title reminds me of a lovely song

Fwiw property doubles every 10 years have you learnt nothing??

 

I thought your vote was an emotional one

 

Assuming we're talking about the Sydney / Melbourne boom, when I try to think about how people have contributed to the great capital gains in the past 10-15 years, I'm thinking the following factors played their part:

1. salaries increasing significantly compared to 15-20 years ago
2. easier credit (bank lending and low interest rates)
3. the increasing number of dual-income households
4. inheritance / bank of mum and dad
5. monopoly money (by that I mean foreign earned cash which are 'earned' under different earning/income environments - eg low tax, foreign wealth etc).

So looking at the above:

1. can't see salaries increasing at the same rate (and no more crazy resources boom)
2. not going to get any easier than now
3. can't see how this goes from 'dual-income' to 'triple income'...
4. this will continue (furthering the divide between the haves / have nots)
5. this will continue but will depend on level of control by government (eg Vancouver/Singapore)

So I vote 2.

 

Yes, but they will be smaller in percentage terms and further time between.

 

Definitely.

There have always been property booms and there will always be the these god forsaken (to the have nots and the politicians vying for extra votes) money churning machines.

The day property booms are finished will be the day when bogans get out of bed before noon and go look for work (so rest easy, booms will never stop lol).

 

Debt accumulation without a valid comparison to savings is meaningless. I don't have time to verify these figures so use them as a hypothetical:

Mortgage debt in the country stands at $1.7 trillion...

Australians have also been squirrelling away a pile of liquid assets. Cash and deposits alone topped $1 trillion last quarter for the first time on record, having more than doubled over the preceding decade.
​

Australians sitting on mountains of cash as wealth outpaces debt

Of course missing from this is personal debt: unsecured personal loans and credit card debt.

That said, I really think $1 trillion of cash and deposits is significant. We really don't know what people are planning to do with the cash but if they invested it into property at the right time, it could cause a significant boom.

I think it is a very early call to predict that Australia's boom/bust cycle is over.

 

I wouldn't say meaningless. Of course deposits will rise with loans, it's built into the very nature of money creation. High debt relative to income / GDP can create large imbalances, leads to higher probability that we end up with a group of borrowers who can't afford what they've taken on and due to the nature and leverage of our financial / monetary / banking system, they put the whole mothership at risk.

Is there any global precedent in history which shows a housing boom generated from (local) cash as opposed to borrowing?

The boom bust cycle will never be over. However while most property investors look back to the most recent cycles in the Australian property market for a glimpse into the future, they could certainly be missing a larger and longer term cycle (and bust).

I went with option 2. The cycle in capital cities is already showing signs of change e.g. only Perth has shown a higher AAGR (Average Annual Growth Rate) since the 2001 - 2003 era.

 

No way.. get f... f... off.

 

Baby boomers fall off the perch, Gen x inherits the $1m equity in the family home. Gen Xer rocks up at auction and bids on house Using 1 mil deposit plus 80% LVR. The boom continues perpetually,

As a counter argument, Elon musk starts the colonization of Mars. There's a huge migration out of Earth by the affluent. Those left on Earth are now considered low socioeconomic and rather boganish. Prices slide!

 

Not where I was going. If you look at $1 trillion as the deposits for loans at an 80% LVR, that is a lot of borrowing capacity. Of course that is subject to servicing, which is going to be the issue in the short to medium term. But all these borrowing restrictions are artificial and based on booms in Sydney and Melbourne. Once those markets calm down and are stagnate for a while, it would be reasonable to assume that lending requirements will be relaxed somewhat. Rule number 1 in a capitalist economy is that the cash must flow.

The other side of the equation is excess global capital.

Housing and real estate markets have been transformed by corporate finance, including banks, insurance and pension funds, hedge funds, private equity firms and other kinds of financial intermediaries with massive amounts of capital and excess liquidity. The global financial system has grown exponentially and now far outstrips the so-called real "productive" economy in terms of sheer volumes of wealth, with housing accounting for much of that growth. (1)​

Insurance funds, pension funds (superannuation in Australia), hedge funds and private equity firms aren't going to go away just because we want lower housing prices in Sydney and Melbourne. They have trillions of dollars to invest, the money will be invested and the funds will be chasing a return. While we may be able to stop the flow of capital into residential real estate markets temporarily, it can't last. There is simply too much cash looking for an investment to stop it. I have seen it described as a tsunami of cash. What this could mean is that Sydney and Melbourne markets stagnate until they are seen as undervalued and at that time they will boom again. With the amount of capital to be invested each cycle, it could be that the next boom is bigger than the last, followed by a bigger bust. Unless there is some way to limit the amount of funds being invested.

It's both an opportunity and a massive risk but I wouldn't underestimate the impact of global capital.

https://www.prosper.org.au/wp-conte...apporteur-on-finaincialisation-of-housing.pdf

 

All of that *could* happen, just would not be my base case, is it yours @Perthguy? I went with 2 because it's what I think we'll see, not because I know it will be the case.

I wouldn't underestimate the impact of a rise in protectionism / RW politics or of the next global economic downturn from which Australia is likely to be far less protected than during the last.

 

I voted 1, because I intend to live for a VERY LONG TIME
And see many more cycles

Everything depends on how old you are/how long you hope to live for

All things are possible, it will just take time.
In the next 20yrs, at least once.....

( @datto please return my hover board, am off home to Mars soon )

 

Sydney is still booming.
Young investor, just 28, nabs one bedroom-apartment for $825,000

 

I think it is too early to tell. The rise of the private pension fund (superannuation) should not be underestimated. Australia is small and the combined value of our super sits around $2.2 trillion. This is projected to reach $9.5 trillion by 2035. Extrapolate that across OECD countries and it is very large sum of cash to be invested. It is unknown how this will impact on Australian property values because there has never been that amount of money available for investing.

The other issue is linking global capital available for investing with local real estate markets. Most investment is likely to be indirect (through loans etc) which makes it more difficult to determine the relationship.

I have no read the whole United Nations paper but I believe it is making that case the these global funds are impacting local real estate markets.

I will be watching the Sydney market closely over the next 10 years with a view to invest at some point where it seems the market has been quiet for some time but looks like it is starting to move. I will let you know in about 15 years time if it worked

 

Ouch!