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Australia Faces Its Demons


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Just back over here in oz after being away for most of last year.  Check this out:

https://www.realestate.com.au/property-house-vic-frankston+north-127418806

56 Rosemary Crescent, Frankston North

I used to drive through this area every day until I got bailed up and bottles thrown at my car by some ex-cons (tattoos  'cut here' dotted across neck)which the place is infested with. In fact there is the biggest concentration of criminals, re-offenders, sex fiends and current prisoners who have this suburb as their address. It has been notorious for decades since it was built as commission housing (read council vs UK)  However prices here seem to have gone up 25% year on year for the last 5 years when prices were around $200k.

On one side there is a busy 4 lane road full of psycho drivers (on drugs/booze after 7pm) on the other is the border of a proper motorway and the other another flyover freeway.. It is described as convenient which for some people over here means 'I can get in my car and get somewhere', it does not mean 'I can walk to the station, proper shops' etc.   There is a bus that goes through this estate but full of anti social behaviour etc.

On any open day(30mins) when one is for sale there are quite literally scores of would be buyers, all of them so-called 'investors' ie speculators based on prices doubling every 5 years.  No real people buying of course and the the only people they can rent then out to is what over here we call 'ferals' .

Its not over yet, not by any means.  In fact there is no other investment on anyone's agenda. Bitcoin? whats that?  Gold? shares ? building a business?  no way  until you have a house or two paid off and besides the banks see these run down shacks as the foundation of sensible, sustainable, pension safe security.

We moved back to the UK and so far I am so pleased we did, it might be bad but not this bad.

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9 hours ago, steve99 said:

Just back over here in oz after being away for most of last year.  Check this out:

https://www.realestate.com.au/property-house-vic-frankston+north-127418806

56 Rosemary Crescent, Frankston North

I used to drive through this area every day until I got bailed up and bottles thrown at my car by some ex-cons (tattoos  'cut here' dotted across neck)which the place is infested with. In fact there is the biggest concentration of criminals, re-offenders, sex fiends and current prisoners who have this suburb as their address. It has been notorious for decades since it was built as commission housing (read council vs UK)  However prices here seem to have gone up 25% year on year for the last 5 years when prices were around $200k.

On one side there is a busy 4 lane road full of psycho drivers (on drugs/booze after 7pm) on the other is the border of a proper motorway and the other another flyover freeway.. It is described as convenient which for some people over here means 'I can get in my car and get somewhere', it does not mean 'I can walk to the station, proper shops' etc.   There is a bus that goes through this estate but full of anti social behaviour etc.

On any open day(30mins) when one is for sale there are quite literally scores of would be buyers, all of them so-called 'investors' ie speculators based on prices doubling every 5 years.  No real people buying of course and the the only people they can rent then out to is what over here we call 'ferals' .

Its not over yet, not by any means.  In fact there is no other investment on anyone's agenda. Bitcoin? whats that?  Gold? shares ? building a business?  no way  until you have a house or two paid off and besides the banks see these run down shacks as the foundation of sensible, sustainable, pension safe security.

We moved back to the UK and so far I am so pleased we did, it might be bad but not this bad.

PS if you did not click the link, this house is selling and WILL sell for more than the asking price of circa 300K GBP.   and is 1.5hrs door to door by public transport  to Melbourne city if you are very lucky.

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17 hours ago, CentrinoDuo said:

When?? are you based in U.K. right now and looking to move back to Sydney? I believe despite the broken housing market in the U.K. it's still better than Sydney. It's crazy, isn't it!

I'm in the same boat, can't afford to go back to Sydney.

 

Yes we moved back to UK a couple of years ago and am struggling to settle / forget our life in Sydney. But then when we look at prices back there we know we can’t  afford to move back. I agree, we live in a very expensive part of the UK, in commuting distance of London, yet could probably afford a home big enough for our family at a push but would be looking at a unit or townhouse in Sydney. 

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16 hours ago, mattyboy1973 said:

Yeah. We were there until 2012 and we left because we thought we'd never be able to buy there (OK - that was only one reason of a few). It has since gone up 75%, and certain areas by much more. You are really looking at 1.5-2m now for just a "reasonable" house in a half decent area, which defies any kind of logic. If they really do get rid of negative gearing for new investors then the rug is going to be pulled out from under this market as investors are really the only ones buying - I think even foreign buyers are swindling now for various reasons. Prices could halve in Sydney and they would still be expensive.. but if they did fall 50% and the AUD$ took a battering as well then it could be attractive again and we all have our citizenship.

We nearly bought in 2012 when we could just about afford something, kicking ourselves now that we didn’t but prices looked high even back then and now they just defy logic! 

Yes if everything went in our favour, Sydney price falls coupled with a lower $ we could perhaps go back but I’m a bit sick of not settling now and just want to get a house and say that’s us settled for the next 10 years, the unsettled feeling is driving me crazy now.

The NG change would be huge wouldn’t it, as everyone seems to do it. It’s like people want to lose money every money on an investment property just to lower their bills!

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http://www.abc.net.au/news/2018-02-01/home-prices-dragged-down-by-sydney-property-falls/9382270

 

'Australian property prices have continued to fall, led by steeper declines in Sydney prices, which have now fallen for a fifth straight month.

Key points:

  • National property prices fell 0.3 per cent in January, up 3.2 per cent over the past year
  • Sydney prices had the biggest monthly and quarterly falls of the capital cities
  • Hobart had the biggest rise, 1 per cent over the month, 12.4 per cent over the year

 

The nation's largest property market recorded a 0.9 per cent drop in prices over January, according to figures from CoreLogic, bringing up a 2.5 per cent slide over the past quarter.

Sydney prices have now fallen more than 3 per cent, having surged around 75 per cent between February 2012 and the most recent peak in July last year.

Melbourne prices have also recorded a second straight month of decline, although both falls were just 0.2 per cent.

Last will be first, and the first will be last

CoreLogic's Tim Lawless said that is indicative that the markets that did best over the past few years are likely to do worst this year.

"Clearly, Sydney is well into a downturn now, we're not expecting that's going to be easing or bottoming out over the next couple of months at least," he said.

"But also Melbourne's showing signs of slowing down.

"But some of the other markets that have been quite weak, such as Perth, may be starting to show some signs of bottoming out."

Although Mr Lawless does not expect a dramatic rebound for Perth, where prices eased a further 0.4 per cent last month and are down 2.6 per cent over the past year.

Darwin remains the nation's weakest capital city market, with prices off 0.2 per cent in January, but down a hefty 6.4 per cent over the past 12 months.

 

Brisbane and Adelaide continue to tread water, with home price growth roughly in-line with inflation and wage growth, while the Canberra market has also slowed down dramatically.

Hobart continues to be the nation's most inflationary real estate market, with a 1 per cent rise in prices over January and a 12.4 per cent increase over the past year.

However, Mr Lawless said that run is likely to come to an end soon.

"Part of Hobart's strength is its affordability, and that's being eroded now with such strong capital gains," he said.

'Lifestyle' markets bounce as boomers seek sea/tree change

Outside of the capital cities, the end of the mining bust and the renewed interest in baby boomer sea change and tree change has led to stronger growth in regional markets.

Overall, the combined regional price index was up 0.2 per cent last month and just 3.3 per cent over the past year.

But Mr Lawless said some areas were much stronger.

"Markets like the Gold Coast and Sunshine Coast, or any of the lifestyle markets around the country, seem to be behaving quite strongly," he said.

"That's coming after a fairly long period after 2008 when values did show a fairly substantial downturn in most of those coastal markets."

While regional markets are likely to outperform, Mr Lawless expects 2018 to be a subdued year for property values nationally as lending conditions remain tougher.

"Investors are paying a 60-basis-point premium on the mortgage rates now," he observed.

"Even though we're not expecting the cash rate to push higher in 2018, we could actually see mortgage rates for home owners being pushed a little bit higher, because there are some new requirements coming through from Basel III, for example, that could result in higher capital requirements [for the banks], particularly for investment properties.

"We may even see wholesale funding costs start to rise as well, which could affect mortgage rates without the cash rate moving."

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On 2/2/2018 at 11:24 PM, steve99 said:

Just back over here in oz after being away for most of last year.  Check this out:

https://www.realestate.com.au/property-house-vic-frankston+north-127418806

56 Rosemary Crescent, Frankston North

I used to drive through this area every day until I got bailed up and bottles thrown at my car by some ex-cons (tattoos  'cut here' dotted across neck)which the place is infested with. In fact there is the biggest concentration of criminals, re-offenders, sex fiends and current prisoners who have this suburb as their address. It has been notorious for decades since it was built as commission housing (read council vs UK)  However prices here seem to have gone up 25% year on year for the last 5 years when prices were around $200k.

On one side there is a busy 4 lane road full of psycho drivers (on drugs/booze after 7pm) on the other is the border of a proper motorway and the other another flyover freeway.. It is described as convenient which for some people over here means 'I can get in my car and get somewhere', it does not mean 'I can walk to the station, proper shops' etc.   There is a bus that goes through this estate but full of anti social behaviour etc.

On any open day(30mins) when one is for sale there are quite literally scores of would be buyers, all of them so-called 'investors' ie speculators based on prices doubling every 5 years.  No real people buying of course and the the only people they can rent then out to is what over here we call 'ferals' .

Its not over yet, not by any means.  In fact there is no other investment on anyone's agenda. Bitcoin? whats that?  Gold? shares ? building a business?  no way  until you have a house or two paid off and besides the banks see these run down shacks as the foundation of sensible, sustainable, pension safe security.

We moved back to the UK and so far I am so pleased we did, it might be bad but not this bad.

We moved from Oz in Dec 2016 - no regrets so far although 2017 a challenge in terms of getting settled back in the UK. 

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2 minutes ago, Kurt Barlow said:

I dunno -  the Aussie economy is picking up again going on the number of jobs I'm seeing. The resource price index is on the up again. 

To me, Oz looks like a financilised, more leveraged version of Nairu.

Look at Slater and Gordon buying Quindell.

Wesfarmers buying homebase.

These are the crem de la crem of Oz. And theyre idiots.

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  • 4 weeks later...

More and more articles in the news recently painting a negative picture for the future.

http://amp.abc.net.au/article/9500254

Key points:

  • Rising bond rates could trigger falls in share and property prices
  • Higher yields on US bonds likely to flow through to Australian interest rates
  • US 10-year treasury notes are now higher yielding than Australian 10-year bonds for the first time since the early 90s

These seem to be a lot more frequent lately but the general consensus of the masses is still "I have heard this before a million times and the market still goes up". I use Perth as an example of how a bubble can pop but after looking at the stats prices have only fallen by 10% from peak...hardly the apocolyptic crash and really nothing at all compared to the crazy increases seen up to 2014.

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On ‎2‎/‎03‎/‎2018 at 12:49 PM, leonardratso said:

Is this thread really 9 years old? might be time to retire it as a bad job

The explanation as to why the Australian Property Market has not crashed since this thread was first posted in 2009 is the rising level of personal debt. 

Compare 2009's level of personal debt for Australia compared to 2018. We are talking telephone numbers of private debt $$$ added per person here. 

Its therefore pure mathematics.

And when the borrowing slows down, and then stops, mathematics will produce something spectacular to behold in the Australian property investment environment. 

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And on that subject of Australian personal debt increase, let's see what kind of debt it is, and note how recent it is.......

 

Interest-only crisis time bomb ticking as repayments reset

Investors with interest-only loans face a big rise in payments Investors with interest-only loans face a big rise in payments

The trouble in the interest-only loan market is unique: we know it is going to happen, we know the numbers, and crucially, we know the regulators made a big mistake allowing the seeds to be planted in the past three years.

The question now is how will it play out.

To recap: interest only loans where you pay no principal and just interest for a fixed period made up less than 20 per cent of the total market for many years, but then between 2014 and 2017 they swelled beyond any forecasts.

Though the bank regulator finally moved to restrict the loans last March, they remain about 27 per cent of all loans on the books of the major banks.

At their peak around a year ago 60 per cent of new investment loans and a worrying 20 per cent of new owner-occupier loans were given out interest-only by the banks

Early this year the Reserve Bank flagged concerns about how investors were going to handle the natural termination of these loans in the years ahead.

Interest-only investors have been paying an artificially low amount on their loans — traditional principal and interest arrangements work out at roughly double interest-only arrangements.

The situation is all the more concerning because roughly one-third of all investor loans are on a fixed rate basis.

Some of those loans have terms as short as three years some, which means the problem will start to surface in mid-2018.

No wonder APRA this week reiterated it has no plans to change its ruling, which restricts banks to keeping interest-only lending at less than 30 per cent of all loans. “We want to see where it settles,” APRA boss Wayne Byres told a Senate committee on Thursday.

Why did investors rush into interest-only loans — especially at fixed rates? The simple answer is because at the time investors perceived that rates were at cyclical lows (which turned out to be correct) and many were being offered these products for the first time.

‘‘Back then fixed rates were often cheaper than variable rates, so they were inevitably popular, especially with wealthier investors who had multiple properties,’’ says Martin North of Digital Finance Analytics.

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For these investors the issue is going to be acute because when the term of their interest-only loans end they will also face higher rates. Perhaps facing higher rates after a few years should have been expected, but at this stage in the investment cycle there are two underlying issues that make it much more difficult than might have been expected.

• First, house prices are softening across most capital cities — the latest monthly figures for February again show price reductions in almost every city, especially Sydney. For investors who went interest-only relying exclusively on a capital gain, the outcome is uncertain.

• Second, rental yields have virtually stalled — in the larger cities they appear stuck firmly at around 3 per cent gross, while rates in regional centres range higher between 4 and 5 per cent.

A desperate scenario

The problem with interest-only loans is that they delay the inevitable. When an interest-only loan agreement ends, if the borrower moves to principal and interest (which may be required if they the bank does not extend the deal) then along with automatically higher repayments the borrower will almost certainly face higher ongoing interest rates.

It’s a double hit.

This may be a deal-breaker for many investors, because coupled with higher costs, there is virtually no rental growth. Put simply, if investors can’t raise the cash elsewhere then a desperate scenario emerges where forced sellers arrive on the market all at the same time.

And the risk a bank will not roll over a loan as interest-only is high — the regulator APRA may loosen overall lending restrictions, but as mentioned earlier, interest-only restrictions will stay in place.

In fact, in the latest half-year results it was clear the banks were pulling back from the market in dramatic fashion — ANZ, for example, issued only 14 per cent of its mortgage book as interest-only loans in the most recent quarter.

And just to make it all a little harder, most banks have recently split their lines of business between owner-occupier and investor, who until recently had been charged the same rate. Now most banks have a special investor rate which is up to 0.8 per cent on top of the standard variable rate. (Financial adviser James Gerrard says interest-only loans are now so expensive they may no longer be worth using — see below.

What to do? Interest-only loans just now look like a ticking time bomb for the stretched property investor.

The worst outcome would be selling property in order to raise cash to meet repayments — especially if the market remains as soft as is at present.

Facing up to the full cost of the loan may be the right thing to do from a prudential perspective but that too will be tricky for investors where cashflows are managed tightly.

One option that could be explored is the extension of the interest-only loans — but then again all the signs are that banks are going to continue to keep a tight lid on this line of business in the near future.

Some advisers have been suggesting the non-banks, which are not as stretched with legacy interest-only loans on their books, may offer a window to investors.

None of these choices are ideal — but then again, the investors took the risk knowing what they were facing ... or did they?

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  • 2 weeks later...
58 minutes ago, Sugarlips said:

https://www.mcgrath.com.au/buy/house/nsw/inner-west/newtown/368638

I’m reliably informed this complete dump in inner west of Sydney sold at auction this morning after multiple bids for $1,051,000 (so getting on for £700000)

Newtown must have changed a lot. Wasn't remotely a 'premier' area of $1m houses when I lived in Sydney (quite a while ago now). Edit - actually looks much the same on street view.

Edited by guest_northshore
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Further reading on this one uncovers it was bought by the vendor for $11k in the 70s and is 76sqm. 

It was bought by an architect company, not sure how to feel about that bit, it should have gone to a young family but then again thankfully it didnt given its derelict and the price, either way sadly Australia still hasn't "faced its demons" nearly a decade after this thread started :/

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Home sellers drop listed prices by up to 30 per cent in pockets of Sydney

SYDNEY home sellers have had to accept GFC-level price declines due to a weakening market that has given buyers more bargaining power, but some suburbs have been more affected than others.

http://www.news.com.au/finance/real-estate/sydney-nsw/home-sellers-drop-listed-prices-by-up-to-30-per-cent-in-pockets-of-sydney/news-story/dae2aaaad1596760ffaa06d5f0975337

 

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15 hours ago, Sugarlips said:

Further reading on this one uncovers it was bought by the vendor for $11k in the 70s and is 76sqm. 

It was bought by an architect company, not sure how to feel about that bit, it should have gone to a young family but then again thankfully it didnt given its derelict and the price, either way sadly Australia still hasn't "faced its demons" nearly a decade after this thread started :/

When this thread started I was living in Japan and reading about how crazy the house prices were in the UK, Australia and elsewhere. I moved to London in 2010 and thought that the game was up and things were going to crash only to see things jump by 30-40% in the 3 1/2 years I was there. Then when I came to Oz in 2014 I thought the same and yet again prices have shot up in that time. 

I have been here 4 years now and will likely be in a situation where buying makes sense (from the perspective of job security, family etc) in the next 12 or so months. Luckily the missus doesn't want a house on a big plot of land and a townhouse would suite us nicely. Also I am in Brisbane and not Sydney or Melbourne and so prices are not interstellar...but I still cannot see myself paying $650,000 for the small 3 bedroom townhouse that we RENT now 7km out from the CBD, especially with the risk of interest rates rising.

The big question is still do you buy now or wait? All of the stories we see on here are explaining how the fundamental economics of the country are going to lead to rate rises and the bubble popping but I have been reading that for nearly a decade and still the correction has not come. It now seems that the government cannot let the bubble pop because it is all that is left and the results would be catastrophic...once again the banks are too big to fail!

 

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1 hour ago, pepto said:

The big question is still do you buy now or wait? All of the stories we see on here are explaining how the fundamental economics of the country are going to lead to rate rises and the bubble popping but I have been reading that for nearly a decade and still the correction has not come. It now seems that the government cannot let the bubble pop because it is all that is left and the results would be catastrophic...once again the banks are too big to fail!

What's renting like over there? More rights or security of tenure than here?

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20 minutes ago, Eddie_George said:

What's renting like over there? More rights or security of tenure than here?

With the continuous year on year grown that they have seen for what seems like 25 years everyone and their uncle has multiple investment properties (you thought buy to let was bad in the UK?) and so the system is set up in favour of the owner.

I found that renting out a property here is kind of like going to tender...they usually wait until there have been a few offers and then evaluate and negotiate from there. It is not at all like what I experienced in the UK where generally the first person who makes an offer and can tick the boxes for paying the rent gets the property. Because the market has been tight and rents have been increasing for as long as most of the investment owners have been in the game they have a sense of entitlement about their property and we are quite often made to feel that this is their investment more than it is our home. I don't think it is as bad now but a few years ago we were seeing the rent increase by around 5-10% every time we wanted to sign a new 1 year lease.

The biggest pain is that the lease mandates inspections of the property every 3 months. This would not be a problem if they were just taking a look to check we hadn't knocked a hole in the wall but the letters we get go into the level of detail that that all skirting boards and light switches must be dust free. We keep out place generally pretty clean and tidy (the missus is Japanese and so no shoes in the house etc) but it gets a bit ridiculous when you have to do a 'deep clean' every time the estate agent wants to come around.

This is all in the Eastern states though, I have mates in Perth and I know that the marked dropped considerably there and they were able to negotiate rent down from $520/ week to $350. Just waiting for this to happen over here...

 

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1 minute ago, pepto said:

With the continuous year on year grown that they have seen for what seems like 25 years everyone and their uncle has multiple investment properties (you thought buy to let was bad in the UK?) and so the system is set up in favour of the owner.

I found that renting out a property here is kind of like going to tender...they usually wait until there have been a few offers and then evaluate and negotiate from there. It is not at all like what I experienced in the UK where generally the first person who makes an offer and can tick the boxes for paying the rent gets the property. Because the market has been tight and rents have been increasing for as long as most of the investment owners have been in the game they have a sense of entitlement about their property and we are quite often made to feel that this is their investment more than it is our home. I don't think it is as bad now but a few years ago we were seeing the rent increase by around 5-10% every time we wanted to sign a new 1 year lease.

The biggest pain is that the lease mandates inspections of the property every 3 months. This would not be a problem if they were just taking a look to check we hadn't knocked a hole in the wall but the letters we get go into the level of detail that that all skirting boards and light switches must be dust free. We keep out place generally pretty clean and tidy (the missus is Japanese and so no shoes in the house etc) but it gets a bit ridiculous when you have to do a 'deep clean' every time the estate agent wants to come around.

This is all in the Eastern states though, I have mates in Perth and I know that the marked dropped considerably there and they were able to negotiate rent down from $520/ week to $350. Just waiting for this to happen over here...

 

I should add that this is another big factor in wanting to buy even though property is way over priced. I am fed up of having to ask the estate agent if I can put posters up in my kid's bedroom and then worrying about how much of my deposit they are going to take when we move out if there is a small mark. 

A few years ago we lived in a lovely old sandstone house in Adelaide in an area notorious for walls cracking over the years due to the clay soil that expands/ contracts over the seasons. We had cracks in the plaster all the way down the 5m living room wall which we had requested to be repaired but to no avail. When we moved out they tried to charge us for a mark that was left from one of those adhesive picture hooks!

 

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  • 429 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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