Will we see another boom again?

Discussion in 'Property Market Economics' started by TMNT, 15th May, 2017.

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Will we see a boom in blue chip metro areas in the next 20 years?

  1. Yes of course, 300% rises will be part of it. Like every cycle

    33.3%
  2. Yes, but won't be like we've had before. The market has changed

    33.3%
  3. Maybe

    10.5%
  4. No the times of huge booms is over

    11.4%
  5. I don't want to answer this question because I missed the last boom and am sulking

    11.4%
  1. WattleIdo

    WattleIdo midas touch

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    Hang on, not so fast .... while everything you say seems logical, I remember you said repeatedly only a few years ago that we wouldn't see booms like the past again :confused:- and then we did ;).
     
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  2. RetireRich101

    RetireRich101 Well-Known Member

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    similar to what BIS Schrapnel said about Sydney in 2013, and I have article SMH article here Sydney home prices forecast to rise by 19 per cent

    " Property forecaster BIS Shrapnel expects Sydney house prices to soar 19 per cent over the [total] next three years"

    BIS probably got Brisbane right
    "Brisbane prices 16 per cent [over the next 3 years]"

    But for Perth, totally wrong
    "Perth house prices are tipped to rise 17 per cent [[over the next 3 years]"

    So in reality 2013-2016( total 3 years), Sydney 50-70%, Brisbane 20-30% and Perth 0% ( a gain of 20% in 2013-2014, but lost it all 2015-2016)

    How wrong they got for Sydney 2013-2016...19% versus 50-70%
     
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  3. Perthguy

    Perthguy Well-Known Member

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    @RetireRich101 Perth, house prices are tipped to rise 17 per cent [[over the next 3 years]

    Hahahaha. Blind Freddy could have seen that was not going to happen. Way off... and we listen to these people? o_O;)
     
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  4. bob shovel

    bob shovel Well-Known Member

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    The common theme is that all property will rise! This is the carrot to dangle to keep people investing ;) @RetireRich101 is the only one who will go back to show how wrong they were:). The mum and dad investors have played their part by buying their one and only ip... and then the next wave of first time investors will come along :cool: and so on and so forth
     
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  5. euro73

    euro73 Well-Known Member Business Member

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    What's changed is lending. This is the first time since deregulation where we have seen any form of regulatory intervention to recalibrate the way lending works. We saw some market fluctuations post GFC, but those werent regulatory. The first round of APRA changes have reduced I/O lending from low 50% of total volume to mid 40% of total volume, and that occurred over 3 years give or take. And it didn't affect anyone with I/O loans already in place and who havent been seeking to add further debt or refinance debt during that time. Now the 2nd round of APRA changes requires that in one fell swoop an I/O reduction to 30% of total volume is achieved, which if you think about it is twice as big a reduction as Round 1 of APRA produced ( from low 50's to mid 40's ) and in one third of the time ( 1 year rather than 3 years) And unlike APRA Round 1 , this will affect many of those not affected previously (with I/O loans already in place and who havent been seeking to add further debt or refinance debt during that time) as their I/O terms start to expire.

    So you've got all new I/O loans trying to get a piece of a limited quota of available I/O lending, and soon enough you'll also have many existing I/O loans also trying to get a piece of a limited quota of available I/O lending.

    We simply haven't ever seen a situation like this during the last 3 decades since deregulation, so we are all guesstimating how it will play out, really.

    My view is that it doesn't change anything for PPOR P&I borrowers. It will have little effect on investors with mature portfolio's who aren't planning to accumulate any more, other than to make their holding costs higher. But if they have adequate yields they can manage that so it wont place them under any duress. It will however start to have a real effect on those who have plans to continue to accumulate, simply because they will be competing for a limited quota of available I/O funds. If they can afford to use P&I, they will be fine. So again, those with mature portfolios will still be able to access funding, even if only on P&I terms. Banks will be much less pedantic about that. But if they want I/O , they will face increasing difficulties accessing finance. My real concern is for those with less mature portfolios, several of whom have been championed here ... you really have to wonder how long it will take for the 20, 30,40K CF+ results they currently generate, to disappear or even start to bleed red ink when their loans are 1% higher AND P&I ? And I am even more concerned for those who are in the last category and are also carrying large PPOR debt.

    For all of these reasons, I suspect we will see a slow down in the speed of growth. And as a guy who works with lender calculators many hours each day, I dont see where the capacity is going to come from for prices ( in Sydney and Melbourne at least ) to continue their general surge. Its quite possible this will kick start a mini boom in more affordable areas around the country though... and if the RBA were to cut rates, and P&I PPOR rates fell say 50bpts, its even more conceivable that we'd see areas outside Sydney and Melbourne go on a run... we shall see. But whats unambiguously true is that multiple investment property owners will by and large, not be contributing to momentum very much... and the ones holding lots of low yielding stock may even find they are drowning ...
     
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  6. highlighter

    highlighter Well-Known Member

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    I don't know if it'll be 20 years before we see a boom like the current one, but after a bubble bursts, there honestly seems to be no particular reason why another can't occur quickly. So it's definitely a possibility.

    USA already has a new bubble in California. It's been less than a decade in that state, and LA in particular (which was about as pricey as Sydney is now and crashed 50%) has shot right back to just about as big a bubble as it was before. As long as you didn't own fringe estates or crappy condos, you're ahead in LA. London is another example, right back into a bubble (though it's bubble and correction were mild).

    Other bubbles don't see a rapid correction. Japan for example has just never recovered to its previous heights, but Japan was a developing economy when its bubble burst, which is probably a significant factor preventing a strong recovery. Japan is probably a better predictor of what's going to happen to China.

    With most advanced economies, recovery happens within a decade, and a new boom or bubble can certainly follow that recovery. Any boom can turn into a bubble.
     
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  7. Trainee

    Trainee Well-Known Member

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    how do you define developing country?
     
  8. Cactus

    Cactus Well-Known Member

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    Why dont banks come out and offer 60 year P&I loans for sub 40 year olds or something like that. It doesn't affect there IO cap and it's not as high impact on servicing as no expiry after 5 years and then jump in repayments etc to me if they started doing that it would create credit expansion and fuel for another boom.
     
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  9. Guest

    Guest Guest

    Look at rolling annual growth over the past 20 years, what do you notice?
     

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  10. WattleIdo

    WattleIdo midas touch

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    I see peaks and troughs with Australia represented as one complete market versus Canada as one complete market and the only time they align is during and after the GFC.
    And ...?
     
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  11. Perthguy

    Perthguy Well-Known Member

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    That it's a lie that this is the biggest boom in history?

    Ahem, apologies, "Bubble"
     
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  12. Guest

    Guest Guest

    Even if you break it down by capital they mostly trend together (timing of growth spurts).

    My point was the declining growth rate with each cycle.

    I guess if you held the view that Australians would let politicians sell out all the land from under us to wealthy foreigners then I can understand why you'd believe booms of past magnitude can continue. I think the political climate and recent changes in lending and foreign investment speak volumes.
     
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  13. Cactus

    Cactus Well-Known Member

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    I agree with @WattleIdo on this one, not a lot one can deduce from your chart. I know you love posting charts, but to interpret that one solidly as anything more than evidence of cycles and showing the gfc is a long bow to draw. You'd need to have a lot more years on the chart to evidence books are getting shorter, longer, smaller or larger.

    Anecdotally I anticipate booms to take longer and overal be less volatile as i expect more sophistication in the market to ultimately ensure supply and demand meet without as erratic behaviour as in the past. But I can't deduce that from the chart.
     
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  14. skater

    skater Well-Known Member

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    I picked option 2....but only because option 1 said 300% gains as normal. Like @Gockie, in reality I'm sitting around halfway.
     
  15. highlighter

    highlighter Well-Known Member

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    Not sure exactly what you mean, however something to note is 20 years isn't a long run in housing markets. Economists tend to measure them on a 100 year run because booms and busts (and certainly bubbles) are very protracted affairs. If you add our boom and bubble (there's no specifically defined point where boom turns to bubble, and so people often talk either in terms of when the boom departed fundamentals, in our case from about 2012, or more often from the beginning of the boom itself, which would put us back to at least 2000).

    The point though is bubbles take a very long time to form. They take five years or so just to correct in most cases. This means a 20 year run doesn't really tell you much about the overall direction.

    Also, the chart you've used shows the rate of annual house price growth. That isn't a good way to represent how prices have actually grown, because how quickly or slowly prices grow tends to fluctuate a fair bit.
     
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  16. Guest

    Guest Guest

    I'm overseas at the moment or would be putting together some charts of my own.

    Why don't you or @WattleIdo provide some evidence of your own that this boom has been as large or larger than in the past?
     
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  17. MTR

    MTR Well-Known Member

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    But we did see the end of the boom cycle in Perth, it was short and most probably did not even realise it happened, between 2013-14, only lasted 2 years, but it was a boom cycle and its over.
     
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  18. MTR

    MTR Well-Known Member

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    Voted 1, of course we will.
     
  19. Perthguy

    Perthguy Well-Known Member

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    You can buy a couple of books explaining how this is the biggest bubble the world has ever seen and when our whole financial system collapses, it will be devastating. I am sure those books go into great detail about why this bubble is bigger than the last boom and I am sure they are highly accurate ;)
     
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  20. HUGH72

    HUGH72 Well-Known Member

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    And written by your favourite authors apparently..:p
     
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