Ive been reading alot of conflicting information about whether the Housing Sector will crash or the Boom will go on.
Whats everyone elses thoughts on future property prices ?
Apparently building figures released this morning show another increase, but it was mainly attributed to appartments not houses. I think there is still some growth in the market though not at the same speed we have seen over the past few years. Interest rates are tipped to go up half a % over the next year, I don’t think that will slow things very much. At the moment I think that is the only thing that is going to really put things in neutral a huge increase in interest rates, people who are in over their heads will have to sell up quickly and supply will be more in line with demand. I think the key to the market crash is interest rates *states the obvious* I don’t know enough about our economy to predict when they will go up in a big way but from what I read it won’t be for a few years at least. The equities market has also had a good turn over the past few quarters, I don’t know how many investors are looking at putting more dollars into stocks………crashy???
I think though if the boom continues the way it is vacancy rates will end up to high to sustain. It looks to me like a lot of investors going for the negative gearing stragety and are going to making huge losses when they find they paid too much for their investment.
mcdeyess has summed it up very well-Interest Rates hold the key. If one looks at the banks and the fact that one can still obtain a fixed rate of 6.5% for 5 years on a mortgage, that gives us an idea that the banks dont really foresee any major movement in interest rates for some time. I would suspect that the US economy will take another 2 years to start growing at a rate that allows interest rates to increase. That is if there are no other wars, stock market crashes etc which unsettle the world economy. That also means that interest rates in Aus. should remain reasonably low for a while. The other big factors are the increasing oversupply of units and the affordability crisis in major cities. The reality that prices are not really backed by any true value because they are artificially high (like the tech bubble) seems to have little influence on buyers paying too much for their properties at the moment. To state it another way, the fundamentals of property values are not sound (in general). This will change in the longer term.
So in summary, it appear that the market is likely to go into a holding pattern for now (or maybe another year or two) with moderate to low growth but no major drop for now. When interest rates increase by 2 or more percent that will be the signal that a correction is on the cards. This correction is predicted to be anywhere between -5% and -30% and will depend on the quality of your properties.
i agree with all the above comments
only thing i would say is that although the usa is sluggish dont underestimate the huge impact of China.
our exports to china are huge as they undertake massive expansion.
All points above are very valid. A common concern is the “over supply” of rental properties. At the moment, this may be true. The First Home Owners Grant took a lot of renters away from the market…but the housing boom has pushed prices beyond that which the average person can fund, grant or no grant. Housing prices have sky rocketed over the last few years – well beyond the average wage. Wages simply have not kept up and this will cause an end to the spiralling prices. Sooner or later people will simply not be able to afford to buy. This will then turn current “hopeful” buyers into renters. Failing major interest rate hikes, not predicted by anyone, I believe the property market will go into a stagnant period until wages again catch up. There is already renewed interest in the share market showing, as it is clearly underpriced at the moment, and this will also take pressure off in the housing market.
Yip we all agree that China is a potentially huge market, but Aussie businesses have in the past and will probably into the future find it difficult and in some cases impossible to land business in China. Westerners have much to learn about eastern ways and about how to get into that market. Many big players like Telstra have tried and failed miserably. My company too has poured huge amounts of money into trying to win contracts (pots of gold) but have failed.
ref china – i agree housesonly. bare in mind however that the huge players are already there and in a big way. the likes of BHP, rio tinto,
MIM etc etcChina has kept the raw commodity market in shape while the USA and Eurpoe have floundered.
Ripp,
I think the housing boom as we know it, vast increases in prices across all types of property right around Australia is at or very close to an end.
The days where you can practically buy anywhere and anything and make a large cap gain in short period of time are numbered.
To make property profitable in the near future you will have to be extremely selective, and examine the sub market very closely. We have alraedy seen some markets beginning to fall (Melb & Sydney appartments) and a rise in interest rates or more favourable returns being found elsewhere (share market) may extend this fall to other parts of the market.
As is always the case the experienced and well financed will continue to do well while the inexperienced and over leveraged will be the ones who suffer.
Ben
Yeah thats true benson and i agree with you.
Im just going to hold out until prices come down because at the moment theres not much money to be made unless you alreay own the property or you come across one hell of a great deal, prolly because the poor owner has gone broke…
Ripp,
It’s amazing to see people crawling all over properties at home opens, it seems every man and his dog is into Ip’s at the moment and I must admit it kind of worries me as to where we will end up.
Ben.
Seems interesting that a lot of people are concerned about prices dropping. Personally, as a long term investor, I’d love to see them go backwards for a bit.
The people all over IP home-opens trying to get into the market now will work well for us when it turns… they’ll all be trying to get out. Think of the opportunities!
I love the Herd Mentality. [
]That’s why I am waiting, patiently and loving it.
I’m glad to hear that other people are waiting too.. I havn’t purchased anything all year and I am starting to feel worried that I am being left behind![^]
I’m afraid that today I think the prices are over-inflated, however, tomorrow, I will wish that I bought more today as they were soo cheap![
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Tomorrow, you might wish you started today.
#####################Hey All,
I am also waiting, but mainly due to Finances. This may be a blessing in disguise seeing what is going on with Overstated prices in Property.
I am waiting to see the Low end of all property markets take a downward turn.
Then buy up a bargain, and hopefully fingers crossed the Interest Rates don’t push higher than 8%.
Cheers
Teylu“Has anything you’ve done, made your life Better?”
(American History X)I am waiting as well.
A point to ponder. It wont matter too much if interest rates remain at these low levels if you get canned from your job and you begin to have more vacancies than you can tolerate in you IP portfolio. What we had better hope doesnt happen is that companies revenues diminish, because when that happens they have very few options, one of which is to lay-off staff! Likewise, if you have one or two IP’s that you cannot tenant then you also have little option but to try to sell. In that case you had better hope that there are not too many others in the same situation as you are.If the above scenarios sound extreme then you had better think again. This is all normal economic activity and has been happening like this for hundreds of years, it is just a matter of when.
Hi all
To you people that are waiting for prices to tumble i think you will be left waiting. the prices that will tumble will be the inner city unit prices in Melbourne and Sydney.
These are not the sort of properties you should be buying if you are after cash positive properties.
Regional areas prices i expect will hold. After being neglected for years suddenly people are recognizing the absoute bargains that were available. the recent regional rally has just been catch up. As the gov’t looks at housing affordability i expect there will be an increased push to get people to buy and relocate out of the two big cities.
regards westan
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