Society/Culture Australian Property Prices to Crash?

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greyhound punter said:
People need to understand - we aren't going back to 0% interest rates, it is fantasy land stuff - we are going higher, there was a graph i posted on another thread that tracked US CPI from 2013 to now, compared to the US CPI from late 1960s to early 1980s.

It is strikingly similar - inflation is going to return with a bang, there is no doubt in my mind - the bond market suggests plenty of upside potential for yields.

Party is over.
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greyhound punter said:
Plenty of investahs looking to offload properties yielding less than savings accounts - the crash is already starting, i expect it to grind lower over the next 12 months before accelerating as inflation returns and interest rates eventually hit double figures.

I get the idea that people think the government won't let housing fall, but it is, and it will.

As the economy deteriorates, population growth will fall, and plenty of houses will hit the market.

The smart money has already left the property market.
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Even with 2Mn people coming into the country with a shortage of houses?
 
greyhound punter said:
Plenty of investahs looking to offload properties yielding less than savings accounts - the crash is already starting, i expect it to grind lower over the next 12 months before accelerating as inflation returns and interest rates eventually hit double figures.

I get the idea that people think the government won't let housing fall, but it is, and it will.

As the economy deteriorates, population growth will fall, and plenty of houses will hit the market.

The smart money has already left the property market.
Click to expand...

markets within markets within markets. Depends on where you are and where or what you want to buy.

i dont see any drastic reduction of housing generally. Apartments maybe, as investors start to offload, but not everyone has negative cash flow.

OCR will start dropping soon enough, combine that with more migrants coming in, can't see anything major changing.
 
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greyhound punter said:
People need to understand - we aren't going back to 0% interest rates, it is fantasy land stuff - we are going higher, there was a graph i posted on another thread that tracked US CPI from 2013 to now, compared to the US CPI from late 1960s to early 1980s.

It is strikingly similar - inflation is going to return with a bang, there is no doubt in my mind - the bond market suggests plenty of upside potential for yields.

Party is over.
Click to expand...

you are not providing any nuance to your statement.

  • The reason Inflation went drastically back up in the 1970's was because after the first dip in inflation, USA drastically reduced rates. They will very unlikely will do that again. 1970's economy is VERY different to the 2023 economy. You can see that the USFED and RBA have hawkish statements even whilst CPI is dropping drastically. Thats because they know what happens when you celebrate too soon, i.e. the 1970's.
  • The issues that caused high inflation in 1970's were completely different to the CPI we saw post covid.
  • You are probably right that OCR won't get back down to zero outside of some type of national disaster. But it will certainly drop back around to around ~2.5% which is our nominal CPI target number. Markets have changed to predict cuts no longer anymore raises.

I'd be cautions speaking in absolutes.

  • No one predicted a pandemic.
  • No one thought housing would jump 20%- 30% in 2020.
  • No one, including the RBA thought we'd be raising interest rates at record levels in 2022

I certainly agree property in this country needs to be fixed so it's more sustainable for future generations, we dont need property increasing 5%-10% a year, but property isn't going to drastically decrease in this country until government policy changes which impacts investments and taxation, which let's face it. Until the boomers die off and no longer vote. Won't happen.

Party is not over at all for those who have cash and good jobs and are in the property game long term.
 
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peetoo said:
THIS TIME…it really will happen.

It is all linked to demographics. Dur
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More people are dying than ever before ?
We baby boomers to ensure the funeral business booms over the next 20 years, freeing up housing stocks & pumping equity into our grandkids parents pockets.
Dying to help ....
 
HirdsTheWord said:
you are not providing any nuance to your statement.

  • The reason Inflation went drastically back up in the 1970's was because after the first dip in inflation, USA drastically reduced rates. They will very unlikely will do that again. 1970's economy is VERY different to the 2023 economy. You can see that the USFED and RBA have hawkish statements even whilst CPI is dropping drastically. Thats because they know what happens when you celebrate too soon, i.e. the 1970's.
  • The issues that caused high inflation in 1970's were completely different to the CPI we saw post covid.
  • You are probably right that OCR won't get back down to zero outside of some type of national disaster. But it will certainly drop back around to around ~2.5% which is our nominal CPI target number. Markets have changed to predict cuts no longer anymore raises.

I'd be cautions speaking in absolutes.

  • No one predicted a pandemic.
  • No one thought housing would jump 20%- 30% in 2020.
  • No one, including the RBA thought we'd be raising interest rates at record levels in 2022

I certainly agree property in this country needs to be fixed so it's more sustainable for future generations, we dont need property increasing 5%-10% a year, but property isn't going to drastically decrease in this country until government policy changes which impacts investments and taxation, which let's face it. Until the boomers die off and no longer vote. Won't happen.

Party is not over at all for those who have cash and good jobs and are in the property game long term.
Click to expand...

Always amazes me how people assume what has happened in the recent past will go on indefinitely into the future, even while the ground is shifting beneath their feet. Every single financial crisis/folly essentially, at its heart, is caused by this assumption.

If a first home buyer, buys a house in Sydney for $1.3 million dollars (the current median), once you account for interest and other repayments, the only way that loan is being paid back is if someone else comes along and is happy to pay more. That is a ponzi scheme.

Ponzi's can go on a hell of a long time; Bernie Madoff some say ran his ponzi scheme for upwards of 30 years before being found out.

Government have been able to juice the housing bubble - especially since 2008, because interest rates have gone one way....down.

We are now seeing the opposite, interest rates are going up - the technical on the bond charts suggest interest rates are going higher over the next decade (of, course, not in a straight line, but the trend is up). Fundamentally, aging demographics and the push towards renewables, that is going to induce inflation.

I'm not saying housing is going to crash tomorrow, but to me it is a matter of time. There is no sense in rental yields at 3%, when risk free savings accounts are at 5.5%.

It is going to be a beauty of a crash and of course, the usual suspects will beg for government to bail them out. That ain't happening with inflation above target.

Have a great weekend.
 
HirdsTheWord said:
markets within markets within markets. Depends on where you are and where or what you want to buy.

i dont see any drastic reduction of housing generally. Apartments maybe, as investors start to offload, but not everyone has negative cash flow.

OCR will start dropping soon enough, combine that with more migrants coming in, can't see anything major changing.
Click to expand...

Looking at the yield chart on trading view, for the 2 year Aus Gov Bond - my preferred instrument to gauge where the market is seeing things head.

It looks bullish to me on the long term time frame. Yields are going up.....we could easily see 10+% interest rates in the next 5 years imo, combined with falling real wages on top of low wage growth - going to be a bloodbath in the mortgage market.
 
greyhound punter said:
Always amazes me how people assume what has happened in the recent past will go on indefinitely into the future, even while the ground is shifting beneath their feet. Every single financial crisis/folly essentially, at its heart, is caused by this assumption.

If a first home buyer, buys a house in Sydney for $1.3 million dollars (the current median), once you account for interest and other repayments, the only way that loan is being paid back is if someone else comes along and is happy to pay more. That is a ponzi scheme.

Ponzi's can go on a hell of a long time; Bernie Madoff some say ran his ponzi scheme for upwards of 30 years before being found out.

Government have been able to juice the housing bubble - especially since 2008, because interest rates have gone one way....down.

We are now seeing the opposite, interest rates are going up - the technical on the bond charts suggest interest rates are going higher over the next decade (of, course, not in a straight line, but the trend is up). Fundamentally, aging demographics and the push towards renewables, that is going to induce inflation.

I'm not saying housing is going to crash tomorrow, but to me it is a matter of time. There is no sense in rental yields at 3%, when risk free savings accounts are at 5.5%.

It is going to be a beauty of a crash and of course, the usual suspects will beg for government to bail them out. That ain't happening with inflation above target.

Have a great weekend.
Click to expand...
Demographics drives economics not the other way round.

Corrections not crashes will continue. No doubt bigfooty will try to describe the former as the latter, sometimes at great length, but it’s all spin
 
greyhound punter said:
Always amazes me how people assume what has happened in the recent past will go on indefinitely into the future, even while the ground is shifting beneath their feet. Every single financial crisis/folly essentially, at its heart, is caused by this assumption.

If a first home buyer, buys a house in Sydney for $1.3 million dollars (the current median), once you account for interest and other repayments, the only way that loan is being paid back is if someone else comes along and is happy to pay more. That is a ponzi scheme.

Ponzi's can go on a hell of a long time; Bernie Madoff some say ran his ponzi scheme for upwards of 30 years before being found out.

Government have been able to juice the housing bubble - especially since 2008, because interest rates have gone one way....down.

We are now seeing the opposite, interest rates are going up - the technical on the bond charts suggest interest rates are going higher over the next decade (of, course, not in a straight line, but the trend is up). Fundamentally, aging demographics and the push towards renewables, that is going to induce inflation.

I'm not saying housing is going to crash tomorrow, but to me it is a matter of time. There is no sense in rental yields at 3%, when risk free savings accounts are at 5.5%.

It is going to be a beauty of a crash and of course, the usual suspects will beg for government to bail them out. That ain't happening with inflation above target.

Have a great weekend.
Click to expand...

you clearly have little idea of how economics nor the housing markets works.

You aren't the first to hope for a crash and won't be the last.

Only way a loan gets paid back is if someone else pays more for it? lol wtf? Plenty of people are able to pay off their loans by their income alone. Not everyone buys homes with unsustainable debt dude lol.

You really need to stop talking in absolutes.
 
greyhound punter said:
Looking at the yield chart on trading view, for the 2 year Aus Gov Bond - my preferred instrument to gauge where the market is seeing things head.

It looks bullish to me on the long term time frame. Yields are going up.....we could easily see 10+% interest rates in the next 5 years imo, combined with falling real wages on top of low wage growth - going to be a bloodbath in the mortgage market.
Click to expand...


the 2Y bond is dropping? Now that traders are predicting cuts, and not rises the bonds will just drop in accordance.

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I think people hoping for a property crash are dreaming. I remember having these same discussions at work on the other side in 2000. Since then we've seen downturns, slight corrections, Perth sat on a 7 year plateau where property markets stagnated but we haven't seen a crash.


Here's an interesting take on why property markets won't crash and big time investors won't allow it to happen even if it can't happen.

Too much demand, and no short term fix. People are already living in share accommodation, staying longer with family.

I won't speak for cities so much as I live in regional/regional city but even so Sydney has bounced back 8.8%

The house that I sold in May has already gone up 7-8% according to most recent sales, the house that I bought mid June has gone up about 6-7% on most recent sales.



 
Purple7x08_24 said:
I think people hoping for a property crash are dreaming. I remember having these same discussions at work on the other side in 2000. Since then we've seen downturns, slight corrections, Perth sat on a 7 year plateau where property markets stagnated but we haven't seen a crash.


Here's an interesting take on why property markets won't crash and big time investors won't allow it to happen even if it can't happen.

Too much demand, and no short term fix. People are already living in share accommodation, staying longer with family.

I won't speak for cities so much as I live in regional/regional city but even so Sydney has bounced back 8.8%

The house that I sold in May has already gone up 7-8% according to most recent sales, the house that I bought mid June has gone up about 6-7% on most recent sales.



Click to expand...

What happened in 2000, 2010, or 2015 has nothing to do with what will happen in the future.
At the same time, just because something hasn't happened - does not mean it won't. Nassim Taleb has written extensively of both of these fallacies that so many people fall into the trap of believing.

1) The valuation of property is one area where i see systemic risk. For example, if one house on a 12 house street is sold for an all-time high, then it is common for that price to set the market for similar houses in the area (or on the street). People will say, "my house has gone up 10% or 20%, indeed, banks will let owners borrow money against this 'paper value' increase. In reality, if all those property owners put their house on the market to cash in their gains, then the price would crater. Of course, all houses going on sale at the same time would be unlikely, unless of course, in the most dire of circumstances. Nevertheless, it is an illustration of systemic risk and the danger of the 'mark to market' metric.

2) The current Sydney median house price sits at $1.3 million. A fairly modest 10% year-on-year increase from now, would in 10 years mean the median price sits @ $3.5 million dollars. And that is MEDIAN. If you believe that will happen, at a time when real wage growth is cratering, good luck to you.

3) The immigration argument has some merit in the sense that increasing rents could well see banks happy to lend more to investors. However, it should be seen for what it is, the government throwing a hail mary to 'save' the property market - probably to allow the big end of town to cash out their gains before the fun begins - and the same big end of town will buy back their sold properties at 50 cents on the dollar in the years ahead. In reality, immigration will fall off a cliff if the economy goes into recession, as it has done at other times in history across the world during economic downturns. Furthermore, immigrants aren't going to come here if the current rental crisis continues to deteriorate.

This government 'hail mary' should embolden the housing bears - in the same way as the Bank Of England's desperate intraday interest rate rises back on Black Wednesday in September 1992, in an ultimately futile attempt to crush short sellers of the pound, only served to embolden even more short selling of the pound until the bank of england eventually capitulated in their attempt to save the pound.

4) The first leg down in any market, after such a run-up, is never the leg that will break the market's back. Many people will 'buy the dip' and what not. From a technical chartist's point of view, such market behaviour has lead to names such as "double tops" or "double bottoms".

5) At the moment, the number of transactions in the market is low - especially compared to the recent history over the last 10 years - any price gains in this environment are likely to be fairly weak. As a housing bear, what i am looking for is increasing sales in conjunction with falling prices. Until that moment, housing bulls can rest easy.
 
HirdsTheWord said:
you clearly have little idea of how economics nor the housing markets works.

You aren't the first to hope for a crash and won't be the last.

Only way a loan gets paid back is if someone else pays more for it? lol wtf? Plenty of people are able to pay off their loans by their income alone. Not everyone buys homes with unsustainable debt dude lol.

You really need to stop talking in absolutes.
Click to expand...

A crash will come at some point, whether it is 12 months or 4 years, it is largely irrelevant. Anyone who has bought a property since covid will find themselves well and truly in the red. Those who have roped in relatives to either go guarantor, or lend expansive amounts of money for deposits, will be in a world of hurt.

I am very well versed in how leveraged markets work. I am indeed hoping for a housing crash because I'd like to buy with my partner.

I view housing as an unsophisticated market, full of participants who have little to no idea and have grown up hearing, "housing only goes up". The inability to place a "short bet" against housing has allowed the bubble to grow to enormous heights.....but like Bernie Madoff, who ran the greatest ponzi of all time, they will soon get what is coming to them.

It will be a lesson they wont forget for the rest of their days.
 
greyhound punter said:
A crash will come at some point, whether it is 12 months or 4 years, it is largely irrelevant. Anyone who has bought a property since covid will find themselves well and truly in the red. Those who have roped in relatives to either go guarantor, or lend expansive amounts of money for deposits, will be in a world of hurt.

I am very well versed in how leveraged markets work. I am indeed hoping for a housing crash because I'd like to buy with my partner.

I view housing as an unsophisticated market, full of participants who have little to no idea and have grown up hearing, "housing only goes up". The inability to place a "short bet" against housing has allowed the bubble to grow to enormous heights.....but like Bernie Madoff, who ran the greatest ponzi of all time, they will soon get what is coming to them.

It will be a lesson they wont forget for the rest of their days.
Click to expand...
There are a number of factors that are also required for the scenario that you have laid out. However I have read a few of your recent posts and I can see what your saying about valuations etc.

Some of the issues working against a housing market crash is the lack stock, this will always be a factor. The stock issue will only get worse as we look to get more skilled migrants into the country. To really break this down you need a flood of stock to hit the market.

Unemployment really needs to kick up for this to happen, which is an issue within itself as the RBA has found that when you are already struggling for workers it's seems a hard thing to do.

Interest rates, with the current level of rates stalling the economy and economic growth current and forecast looking slow to perhaps negative, this would mean further rate rises are unlikely as it end up in that nasty R word that everyone wants to avoid. If rates went up about another 1 - 1.25% I reckon this would really do it.

Not sure if the scenario will play out and a full collapse happens. There just seems to be too much working against a full collapse at the moment.
 
greyhound punter said:
1) The valuation of property is one area where i see systemic risk. For example, if one house on a 12 house street is sold for an all-time high, then it is common for that price to set the market for similar houses in the area (or on the street). People will say, "my house has gone up 10% or 20%, indeed, banks will let owners borrow money against this 'paper value' increase. In reality, if all those property owners put their house on the market to cash in their gains, then the price would crater. Of course, all houses going on sale at the same time would be unlikely, unless of course, in the most dire of circumstances. Nevertheless, it is an illustration of systemic risk and the danger of the 'mark to market' metric.
Click to expand...

Just note that in this example the supply and demand doesn't change and therefore prices are unlikely change significantly. In the example given there if the are 11 houses go on sale, there is also 11 new buyers from the former occupiers of those houses. If one of those buyers bought one of those properties then there will be one less property for sale (10 left) but also one less buyer (10 left). It is just a zero sums game.

There are perhaps some nuance which can affect the supply and demand. A new house being built, one of the houses being a deceased estate (one less buyer), one of the sellers deciding to move back with their parents for example.

Ultimately the way I see it there are three factors which influences a property market. That is the supply, demand and the capacity to pay (which puts a a ceiling of how high prices can go).

I don't believe the property market is a Ponzi scheme. It may be the case if property investors are flooding the market with ever higher expectations of capital growth. However, there have been more properties sold by investors than investors buying since 2020 ( the last figure I heard was twice as many properties being sold are by investors (20% of stock) than properties being bought by investors (9% of stock). Despite this property prices haven't dropped in any significant way.
 
greyhound punter said:
A crash will come at some point, whether it is 12 months or 4 years, it is largely irrelevant. Anyone who has bought a property since covid will find themselves well and truly in the red. Those who have roped in relatives to either go guarantor, or lend expansive amounts of money for deposits, will be in a world of hurt.

I am very well versed in how leveraged markets work. I am indeed hoping for a housing crash because I'd like to buy with my partner.

I view housing as an unsophisticated market, full of participants who have little to no idea and have grown up hearing, "housing only goes up". The inability to place a "short bet" against housing has allowed the bubble to grow to enormous heights.....but like Bernie Madoff, who ran the greatest ponzi of all time, they will soon get what is coming to them.

It will be a lesson they wont forget for the rest of their days.
Click to expand...

You are clearly a young person frustrated with the property market and I get where you are coming from, but it won't happen. We just had a HUGE dip in housing values and even if they recover 20% from here, that will just put them back on their normal growth pattern.

If you wait for a crash to buy, you will just miss the boat even more. Buy what you can afford and work your way up the ladder.

The only way housing crashes in this country is if the government does a complete U turn on housing investment, and that simply won't happen until boomers are all dead and the new majority of voters are like you.

Inflation is basically done, and OCR will start falling in the next 6-12 months.
 
HirdsTheWord said:
You are clearly a young person frustrated with the property market and I get where you are coming from, but it won't happen. We just had a HUGE dip in housing values and even if they recover 20% from here, that will just put them back on their normal growth pattern.

If you wait for a crash to buy, you will just miss the boat even more. Buy what you can afford and work your way up the ladder.

The only way housing crashes in this country is if the government does a complete U turn on housing investment, and that simply won't happen until boomers are all dead and the new majority of voters are like you.

Inflation is basically done, and OCR will start falling in the next 6-12 months.
Click to expand...
Once again, using the past to predict the future eventually leaves every investor bankrupted.

I also note that Australia has never built more houses than over the last 10 years.

I also note, that Nassim Taleb, a trader who made his fortune betting on black swan events including the 1987 stock market crash and the 2007/8 GGC, is calling for a yuuggeee real estate correction.

Once again, make of that what you will.

All the best.
 
At the end of the day's, the housing bulls mantra is basically, "the gov won't let housing fall".

I mean, why hasn't any government thought of this strategy in the past?

Reading this thread has convinced me that a crash is a certainty.

Keep the belly laughs coming lads.
 
greyhound punter said:
Once again, using the past to predict the future eventually leaves every investor bankrupted.

I also note that Australia has never built more houses than over the last 10 years.

I also note, that Nassim Taleb, a trader who made his fortune betting on black swan events including the 1987 stock market crash and the 2007/8 GGC, is calling for a yuuggeee real estate correction.

Once again, make of that what you will.

All the best.
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completely incorrect but there's no talking sense to you.

good luck with whatever you do.

There are plenty of things to base investments on that grow over time. S&P, ASX, housing, even different superannuation's. All have corrections/downturns but over time they 100% always go up.

It is far better to look at past performance, than throw a dart like you are doing rofl. You havent said what will cause the supposed crash you think will happen. You are just saying it will happen. Wtf logic is that?
 
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greyhound punter said:
At the end of the day's, the housing bulls mantra is basically, "the gov won't let housing fall".

I mean, why hasn't any government thought of this strategy in the past?

Reading this thread has convinced me that a crash is a certainty.

Keep the belly laughs coming lads.
Click to expand...

wtf are you talking about?

Housing just dropped an avg 15% in value and the government did nothing to stop it.

I think you have watched the Big Short one too many times.
 

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Society/Culture Australian Property Prices to Crash?

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