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Party over for those who bet big on the property boom. Now what happens?; Most likely scenario is 10% drop in prices and then market to go sideways for eight years
Topic Started: 18 Sep 2017, 10:03 AM (666 Views)
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Property, now the question is what happens after the boom

After a five-year bull run, in which house prices have surged 75 per cent in Sydney and 56 per cent in Melbourne, the party may be over for those who have bet big on the property boom.

A combination of tougher APRA lending rules, rising unaffordability, new taxes on foreign buyers, and shrinking rental yields have all combined to take the heat out of the investor-led market.

The latest August Corelogic figures show capital city house prices rose just 0.5 per cent over the past three months, compared with peak quarterly growth of 3.7 per cent in the November 2016 quarter, with Sydney prices up just 0.3 per cent.

Other indicators like falling auction clearance rates, shrinking investor lending, more home selling prior to auction and rising numbers of auction listings in spring all point to a further cooling over the coming months and years.

With less competition from investors, first-home buyers like Melbourne RMIT economics student Jayk Gunton are brushing aside fears of buying after the boom and instead taking advantage of lucrative stamp duty concessions and cheap home loan deals to fearlessly plunge into the market.

According to the latest Australian Bureau of Statistics figures, first-home buyers' share of the market rose to 16.6 per cent in July from a historic low of 13.4 per cent at the start of the year.

Gunton, who still lives at home, intends to rent out the Frankston townhouse he has bought recently for $590,000. He believes that over the long-term property in good locations will continue to rise.

The part-time economics and finance student, who earns about $70,000 a year working in IT, is already thinking about buying his next property.

"I'm not worried about capital gains," he says. "I intend to hold this property for 10 years. I'm not looking to flip it."

First-home buyers agent Julie DeBondt-Barker, who helped Gunton negotiate his townhouse purchase, says most of her clients are desperate to get into the housing market and will do so with a small deposit if necessary.

"Most want what mum and dad have, they want it now, and they are willing to go into debt to achieve. It's risky for them if the market ever bursts or turns dramatically, or if interest rates go up and they don't have enough of their loan locked in at a fixed rate," she says.

DeBondt-Barker says many first-home buyers could face trouble if house prices were to fall as much as 10 per cent, leaving them in negative equity where their mortgages are worth more than their homes.

That's just the quantum of price fall Corelogic analyst Cameron Kusher believes could occur over the coming years.

"The most likely scenario is for about a 10 per cent drop in prices and then for the market to go sideways for the next five or eight years," says Kusher.

"That's how things have played after booms in the last 15 to 20 years and there is no good reason to think it will play out any differently this time.

Read more: http://www.afr.com/real-estate/residential/property-now-the-question-is-what-happens-after-the-boom-20170914-gyhjk2
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Ex BP Golly
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Warning: Kusher at work










10%
:re:
WHAT WOULD EDDIE DO? MAAAATE!
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herbie
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If that's it and it's over, it wasn't even much of a boom - Just not like 'tha good ole days' where I'd have expected to see prices double in a boom (or a bit more even) - Leastways that's pretty much how the last two booms in Brisvegas I've seen went. (Well on reasonably well located standalone houses that one just might have regarded as still being 'entry level' back in those days.)

Hmmm - When were those booms? : Mid to late 80s until early 1994 (which potentially interestingly [for Brisvegans anyway perhaps], included the period of Keating's "The recession 'we' had to have"); Then from the very late 90s until the GFC hit pretty much - Around mid 2008 as I recall.

"DeBondt-Barker says many first-home buyers could face trouble if house prices were to fall as much as 10 per cent, leaving them in negative equity where their mortgages are worth more than their homes." - Only if they lose their jobs and can't keep paying their mortgages I reckon.
Edited by herbie, 18 Sep 2017, 02:19 PM.
A Professional Demographer to an amateur demographer: "negative natural increase will never outweigh the positive net migration"
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