Australian Property Bubble

[Jesterarts]

This is a topic that in the news and papers basically on a daily basis so I thought I would see what peoples opinions on here are, and their reasons for them.

Is there a property bubble in Australia and is it going to burst?

I'm not talking about the 1M plus market. I'm talking about houses in the median price range of about 450K. The houses most average families would be inclined to buy and within the next 24 months as the timeframe so well into the apparent "pop" territory going on media and public opinion.

That stats I've been reading suggest that Australian properties are over priced by about 56% but it didn't indicate which park of hte market this is refering to.

Your thoughts?

[PaRaDoX]

In the long run property is not going to decrease in value. It won't belong before owning an "Average House" is out of reach for most people.

The average income to house price ratio isn't looking good and the gap is only increasing.

[minux]

The way this Labor government is going I would not even want to predict what will happen.

I won't say much on this, what I will say is the big players I know in real estate, now have zero properties in their portfolios. I hear in Australia the supply and demand argument, that is fine, but that same argument was being had in the USA and UK. Sure banks will not be hit as hard as the US etc. due to our lending laws, however, houses that are really only worth 250k on paper and are sellling for upwards of 450k+ means banks will still have some massive shortfalls.

Personally, I won't be buying any property any time soon based on financial advice given to me, do I think the market needs to give? Sure do, our wage to mortgage ratio is higher than what the US was before the collapse.

In the long run property is not going to decrease in value. It won't belong before owning an "Average House" is out of reach for most people.

The average income to house price ratio isn't looking good and the gap is only increasing.

The problem is, property prices are over valued, due to various factors such as government land release laws etc, kevin Rudds great change to allow foreigners to invest etc etc. Something will give, Australia is not in a good position financially, nor are many of its inhabitants. This Carbon Dioxide tax may just be what pushes things over the edge.

I think the elephant in the room is China...their market is not looking stable. Which in turn hurts our resource sector...then watch things go wild.

[ari666]

i voted "stay as they are" simply because i dont think the crash will be in 24 months. think in the next 5 years is probably closer, but then my vote changes to "when it crashes it crashes HARD"

[PaRaDoX]

i voted "stay as they are" simply because i dont think the crash will be in 24 months. think in the next 5 years is probably closer, but then my vote changes to "when it crashes it crashes HARD"

We can only hope. otherwise most of us (myself included) will be spending $400-500k on a shoebox.

[Jesterarts]

I personally thing the adjustment will be related to the location of hte houses.

Inner city 2 bedroom 15sq nothing tha cost $500K = price collapse as there is no way worth that.
New 26sq house outside the "Metro" that cost $450K = moderate price adjustment.

That's what I'm hoping for anyway as I have the later...

[minux]

I personally thing the adjustment will be related to the location of hte houses.

Inner city 2 bedroom 15sq nothing tha cost $500K = price collapse as there is no way worth that.
New 26sq house outside the "Metro" that cost $450K = moderate price adjustment.

That's what I'm hoping for anyway as I have the later...

Unlikely, it is the ones outside Metro that are over priced. Land and house are so jacked up it isnt funny.

[Reaper]

From another thread: Re: Home Loans

......... I can't see Victorian metro prices going substantially backwards in the medium/long term. Victoria has been under supplied in the housing sector for the past 5 years and there is a lot of pent up demand. Even if interest rates do skyrocket people will scale back their expectations - that 35 square premium mcmansion will be scaled back to a 20 square run of the mill (ie cheaper) house.

What that means is the top end of the "affordable" market will flatten out or experience a minor decline in prices and other sectors will flatten out. The top top end of the market will also flatten out a bit but I wouldn't expect wholesale drop in prices overall. It will take a major shock (such as the GFC) to affect this part of the market although it did recover quite quickly and we are experiencing a mini boom in that sector as projects put on hold are now well under way.

Of course there is always a risk that interest rates will skyrocket but we have plenty of world wide issues to keep demand in check. America seems to be showing some tentative signs of recovery however Europe still have a long way to go. I suspect there will be a few more shocks from European governments where the reality of overwhelming sovereign debt and excess spending will catch up with them.

The other clouds on the horizon is China and it's ability to manage both it's economy and expectations of the population who are seeing all this great stuff they manufacture for the west and want a piece of the action. This inevitably puts upward pressure on wages and threatens their competitive advantage. The natural adjunct to this is demand for our minerals etc however that market would likely shift to another emerging manufacturing power such as India and the like.

Reaper

[88GreenVN]

The market will continue to soften upto about 20% and not that much more if employment stays stable. If the economy continues to slow with house hold savings at very low levels, house prices may fall further still. It was reported last night on ABC that the temp job maket lossed heaps of positions this year. This is not good news for job hunters and perm't jobs are just holding ground.

If the banks cant find cheaper money lending will remain tight. The minor money lenders have been all but been sunk - no cheap cash to be had anywhere.

I see just a little pain to come I think.

[2DIE]

I don't know if it is still correct but a few years ago I read a article with graphs ect that showed the average price of a house in Australia doubles every 7 years.

Some places are even more ridiculous than that, 15 years ago blocks of land were selling "in the middle of no where" between Port Elliot and Goolwa for around $10,000 (my grand dad bought one about 20 years ago for less than $5000 and built his own house) and now that they have fixed the roads and all investors bought up all the propities and build 2 and 3 story mansions ect the average price of land alone is $250,000+ and hoses there sell for $750,000-1,000,000+

Also my brother put a deposit on 2 blocks of land about 7 years ago, for some reason it had a 5 year cooling off period before he could buy it in full. Initially the 2 blocks of land were $20,000 each, in that 5 years of the cooling off period the whole area had been developed and become and become a posh area (what used to be bush land by a creek and a trotting course). In the end they wanted $80,000 for each of the blocks, so then he wanted to buy just one but they said that it would break the contract. Unless he bought both he wouldn't get either of them. He ended up buying both and put one straight up for sale, it sold with in days.

I really hope it goes down though, like in USA where houses that were valued over a million dollars are now worth $250,000 or less. I know it would suck for investors or people that buy and sell houses for a living but the same people are the reason house prices are so expensive in the first place. When I have trouble paying rent from week to week I won't really care too much about the people that own 5-10+ houses that bitch about losing money on investments, maybe then houses will be worth what they should be instead of all the greedy pricks driving prices up making them unaffordable for average people.