The future of Australian property prices

[sptrawler]

Aussies turning bullish on property price? Well there's a surprise, haha.

I am actually in two minds on this.

To me, house prices in this country do not make any economic sense whatsoever; and haven't done since about the mid noughties. Apart from a few niche markets (hopefully one of those is where I have my ppor), I just can't see the economic sense of house prices rising any further "in real terms". And then there is the mortgage cliff, recession and all that sort of thing.

However there is the spectre of inflation, lack of supply, immigration, and the absurd increase of head costs on new property. There could equally be some version of a crack up boom in house prices as well.

Question I always ask myself when considering any trade investment, what is the upside, what is the downside?

I certainly wouldn't gear up into property at the moment, but I do have a lazy few hundred grand in cash that I am trying to find a home for. Popped a few offers in here and there but either expectations are unreasonable or we get outbid.

Hmmmmm

Aussies turn bullish on house prices

Westpac’s latest consumer sentiment report suggests that Australians have turned bullish on the housing market. Despite ongoing interest rate rises from the Reserve Bank of Australia (RBA), house price expectations have soared, suggesting stronger price growth (chart from IFM Investors chief...

www.macrobusiness.com.au

Well the Govt has basically given the real estate sector the thumbs up, no reduction in tax incentives, broadening the access to the first home buyers grants and brining in 700,000 new buyers and their families, why wouldn't the ponzi keep going?

Meanwhile the narrative will keep blaming the baby boomers and everyone in the kingdom is happy, except for those who can't save a deposit to get a seat at the roulette table. 🥳

 

[greggles]

Aussies turning bullish on property price? Well there's a surprise, haha.

I am actually in two minds on this.

To me, house prices in this country do not make any economic sense whatsoever; and haven't done since about the mid noughties. Apart from a few niche markets (hopefully one of those is where I have my ppor), I just can't see the economic sense of house prices rising any further "in real terms". And then there is the mortgage cliff, recession and all that sort of thing.

However there is the spectre of inflation, lack of supply, immigration, and the absurd increase of head costs on new property. There could equally be some version of a crack up boom in house prices as well.

Question I always ask myself when considering any trade investment, what is the upside, what is the downside?

I certainly wouldn't gear up into property at the moment, but I do have a lazy few hundred grand in cash that I am trying to find a home for. Popped a few offers in here and there but either expectations are unreasonable or we get outbid.

Hmmmmm

Aussies turn bullish on house prices

Westpac’s latest consumer sentiment report suggests that Australians have turned bullish on the housing market. Despite ongoing interest rate rises from the Reserve Bank of Australia (RBA), house price expectations have soared, suggesting stronger price growth (chart from IFM Investors chief...

www.macrobusiness.com.au

One of the primary drivers of Australian real estate prices in the last decade has been the huge increases in construction costs. I did some online home and contents insurance quotes recently and the "replacement cost" calculator estimated that it would cost $800,000 to replace a four bedroom, two bathroom house of approximately 250m2 in size. I know that insurance companies tend to over estimate and some of that would have been the removal of the existing destroyed house, but lets say the replacement cost is actually $550,000. Add in the price of land of say $450,000 and you have $1,000,000 just to build a four bedroom two bathroom house on an average block.

Yes, blocks are getting smaller and builders are cutting corners on costs, but the replacement cost of real estate assets in Australia is very high compared to other countries and I can't see them going down anytime soon. I can see them stabilising for a while due to a possible decrease in the cost of building materials such as steel, but not going down. So this is effectively a floor on residential real estate prices, and with supply tight it will take people selling at less than replacement cost to really drive prices down. This will normally only happen in a prolonged economic downturn.

 

[sptrawler]

Why would you prick the bubble that just keeps on giving. 🤪

Property jackpot: Roxy flips mansion for $9m profit​

A local family has snapped up the former celebrity PR agent’s family home in Vaucluse, helping her turn a $6.6m buy into a $16m property in four short years.

 

[sptrawler]

Well it looks like the NZ RBA has knocked some common sense into the housing sector over there, the amount of debt that buyers are prepared to take on has plummeted and with it so has house prices.
It's a shame it isn't allowed to happen in Sydney, Melbourne, I guess there are too many with vested interests here.
Then again the politicians here might ask the RBA to be more aggressive and cause a contraction. 🤣

Reserve Bank de-risks housing market

The latest lending figures from the Reserve Bank of New Zealand shows that new mortgage borrowers are borrowing far smaller sums relative to their incomes than they did during the pandemic. Overall, the debt-to-income (DTI) ratios of new borrowers in March 2023 were the lowest since the Reserve...

www.macrobusiness.com.au

As illustrated in the next chart, only 11% of new mortgage originated in March 2023 were at DTI ratios of six or above.

That’s down more than two-thirds from the 36% of mortgages taken out at those same high DTIs in November 2021 at the peak of the market:

A variety of factors have likely driven the sharp decline in DTI ratios.

The Reserve Bank has lifted official interest rates by 5.0% since late 2021.

In turn, house prices have collapsed by around 17.5% across New Zealand, thereby requiring less money to be borrowed:

 

[sptrawler]

Jeez this tells you Sydney's got a serious problem, way too much money guaranteed to make money, ridiculous is the correct word for it. If people were doing on the stock market, there would be something done about it.

‘Ridiculous’: Willoughby bungalow fetches $4.83 million at auction

The single-level home, renovated six years ago, was sold to a developer who beat parents bidding with their adult daughter.

www.smh.com.au

A single-level Willoughby house that traded for $2.35 million in 2015 sold again for $4.83 million at auction on Saturday, leaving onlookers shaking their heads in disbelief.
Bidding opened at $3.7 million. Bids quickly jumped in varying increments ranging from $5000 to $50,000. Two bidders pulled out when the battle reached $4.5 million, which was $200,000 above the reserve.

A trio comprised of parents and their adult daughter continued to bid rapidly against a developer, who eventually secured the renovated property for $4.83 million for a knockdown project.

 

[Warr87]

Jeez this tells you Sydney's got a serious problem, way too much money guaranteed to make money, ridiculous is the correct word for it. If people were doing on the stock market, there would be something done about it.

‘Ridiculous’: Willoughby bungalow fetches $4.83 million at auction

The single-level home, renovated six years ago, was sold to a developer who beat parents bidding with their adult daughter.

www.smh.com.au

A single-level Willoughby house that traded for $2.35 million in 2015 sold again for $4.83 million at auction on Saturday, leaving onlookers shaking their heads in disbelief.
Bidding opened at $3.7 million. Bids quickly jumped in varying increments ranging from $5000 to $50,000. Two bidders pulled out when the battle reached $4.5 million, which was $200,000 above the reserve.

A trio comprised of parents and their adult daughter continued to bid rapidly against a developer, who eventually secured the renovated property for $4.83 million for a knockdown project.

I find it crazy that there were parents looking to spend that on their daughter for her house ... i mean, nice to help out but thats one hell of a gift. Spending almost 6mil on a 'knockdown project' is also crazy.

Good 'ole Sydney lol.

 

[farmerge]

I find it crazy that there were parents looking to spend that on their daughter for her house ... i mean, nice to help out but thats one hell of a gift. Spending almost 6mil on a 'knockdown project' is also crazy.

Good 'ole Sydney lol.

What a way to learn how to stand on your own 2 feet and value what you have strived for through blood, sweat and tears.
Obviously there such a thing as a free meal. !!!!!

 

[farmerge]

Well it looks like the NZ RBA has knocked some common sense into the housing sector over there, the amount of debt that buyers are prepared to take on has plummeted and with it so has house prices.
It's a shame it isn't allowed to happen in Sydney, Melbourne, I guess there are too many with vested interests here.
Then again the politicians here might ask the RBA to be more aggressive and cause a contraction. 🤣

Reserve Bank de-risks housing market

The latest lending figures from the Reserve Bank of New Zealand shows that new mortgage borrowers are borrowing far smaller sums relative to their incomes than they did during the pandemic. Overall, the debt-to-income (DTI) ratios of new borrowers in March 2023 were the lowest since the Reserve...

www.macrobusiness.com.au

As illustrated in the next chart, only 11% of new mortgage originated in March 2023 were at DTI ratios of six or above.

That’s down more than two-thirds from the 36% of mortgages taken out at those same high DTIs in November 2021 at the peak of the market:

A variety of factors have likely driven the sharp decline in DTI ratios.

The Reserve Bank has lifted official interest rates by 5.0% since late 2021.

In turn, house prices have collapsed by around 17.5% across New Zealand, thereby requiring less money to be borrowed:

I know in a couple of areas around here smallish properties are only on the market for a very short time before the SOLD sticker is plastered across the sign.
The higher interest rates don't seem to be a factor for those buying in for the "tree change" lifestyle.
only bide well fo the larger acrages if and when they come onto the market

 

[IvoryWolf]

It appears that lots of people still have plenty of cash to splash around, I suppose? Great to see such abundance in the world! Gives the RBA more excuses to bring on more interest rate rises, I guess?

 

[qldfrog]

It appears that lots of people still have plenty of cash to splash around, I suppose? Great to see such abundance in the world! Gives the RBA more excuses to bring on more interest rate rises, I guess?

Different people affected..savers now able to get some returns and low expenses, tradies able to jump quotes Highers..and city people moving to the country

 

[farmerge]

Different people affected..savers now able to get some returns and low expenses, tradies able to jump quotes Highers..and city people moving to the country

I know that my quotes aren't being knocked back. The only retort is when can you start. Almost embarrassing some of the quotes I've put in recently. There is where I am working truckloads of moolah around at the moment.

 

[Dona Ferentes]

"To get projects approved  developers must be sophisticated, full of patience and be cashed up. In general, one said, developers are having to allocate a greater proportion of the total build cost to planning matters, than they did five years ago.

"In some cases, it’s affecting the viability of projects. Planning costs are “overall significantly higher given the process is more complex than years ago [and] a greater number of consultants are required,” .

“Smaller projects are impacted greater as they can’t absorb additional costs, combined with the possibility of going to the Land and Environment Court,” he said. “At the same time, we need to consider interest rate rises, building cost increases and market shifts ... which all need to be factored in.”

[For example, with some] recent Land and Environment Court approved projects, the total planning cost varied between 2 and 8 per cent of the total development cost. But court action often added another 40 per cent to the planning costs...."

... getting bogged down in the appeals process can stretch it out. As can any 'lease variation'. Around my suburb, (older, with some pretty rundown places and abandoned retail/ pub sites) places sit empty for years. Must chew up the dollars AND DRIVE UP COSTS.

 

[Warr87]

Why are so many cases going to court? i'm finding it hard to believe that costs are so high because of this tbh. sounds more like yahoo's just doing stuff and getting called out for it. if you plan properly, from the beginning, then there are less variations later on. in my experience, if you ask your regulator, council, fed department, about meeting their standards and what you're doing they'll give you advice. they would be doing a lot of this, so its also a bit of a piss-take to think that they 'just can't get it right'. maybe they shouldn't be developers if they find planning projects so hard ....