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Sydney Construction Boom Nearly Here; Construction growth of 15% is forecast in NSW over next two years
Topic Started: 8 Aug 2011, 12:56 PM (51,176 Views)
Elastic
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I'm not sure there are enough cashed up FHBs to stimulate a boom in construction. I know there is also a small grant to non FHBs for new housing as well. I think it will probably result in a larger number of higher density projects in inner city areas, priced at the $550,000 mark. I just don't think it will cause a boom. Hopefully it will help ease some of the excess demand in Sydney.
Only a rat can win a rat race.

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Enrico Palazzo
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Interesting that construction in the US is now recovering..

Is it because govts. threw money at it (or not)....

or is it because prices corrected and it now makes economic sense to build?!??
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miw
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Shadow
11 Oct 2012, 03:12 PM
I think we can look to Sydney in the early 2000s or Melbourne more recently for precedents.

The early to middle years of a construction boom are likely to be accompanied by stronger economic growth, and higher house prices as incomes rise and employment generally is boosted by the surge in construction activity. With increased construction activity you get flow on benefits to builders and other trades, building suppliers, real estate agents, conveyancers, solicitors, banks, also furniture stores, homewares and consumer electronics etc. as homebuyers kit out their new homes. This boost in incomes and employment across the board should feed into rising house prices.

But what often happens at the latter stages of a construction boom is the developers get greedy, build too much stock, and we're left with an over-supply leading to falling house prices, as seen in Sydney post-2003 and Melbourne post 2009-10.

The USA and Ireland experienced similar outcomes during and after their recent construction booms (magnified to a much greater extent obviously).
Where there have been real boom/bust instances, the peak of completions has typically lagged the peak in prices, for fairly obvious reasons. There has always been a considerable time during which both prices and construction have both been on an upswing, once again as one would expect. i.e. Construction lags prices right through the cycle.

The lag is about PI/4 radians. Not that that is very useful in making predictions, because omega keeps changing.

The truth will set you free. But first, it will piss you off.
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Yossarian
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Shadow
11 Oct 2012, 10:15 AM
I have only ever called one construction boom - i.e. the current one that is beginning now.
I should also point out that Sydney construction activity didn't fall off a cliff at any time since I first predicted, in 2007, that a construction boom would begin around 2011. I first made this call on GHPC in 2007, and Sydney construction had already fallen off the cliff at that time, and has been lying at the bottom of that cliff for many years, which is just one of the reasons why in 2007 I predicted the construction boom would begin around 2011.


Shad, you couldn't hit a cows arse with a banjo.




2008

Shadow;362901
 
I think this boom has already begun in several cities. My prediction, simply based on extrapolating the median price lines against the trendlines, following similar peaks and dips to previous booms...

Peak of boom: 2014-2015. Sydney Median Price: $1,250,000
Bottom of bust: 2017-2018. Sydney Median Price: $1,100,000

Something like this...

Posted Image

I could be completely wrong of course so don't go buying lots of property just based on my prediction!

Cheers,

Shadow.



Shadow;441496
 
Michael Yardney makes the following statement in his newsletter this month...



Now... I happen to agree with this. I believe the next property crash will begin sometime around 2016, and it could be a big one.

So what will cause this crash?

First of all, we need to consider our recent property boom, which in Australia was characterised primarily by the exchange of existing stock, rather than the development of new stock.

In other words, it was not a construction-led boom, unlike the recent boom in the USA (and also Ireland).

This means we now have a shortage of stock in many places as we move into the next growth cycle during a period of record population growth, record low vacancy rates, and rising rents.

As interest rates fall, the credit crunch eases, and house prices start rising again, I expect a new construction-led boom to kick off in Australia, probably around 2010-2011.

However, I think there is a good chance we will make the same mistake as the US... we will eventually build too many houses (there are currently 18.6 million empty houses in the US).

This oversupply will create a massive glut of property late next decade, just as the baby boomers start to die off, which will further increase supply and reduce demand. This is what will trigger the next big crash.

Anyway, that's just my theory. I would be interested to hear what Michael had in mind when he made the above statement in his newsletter, and also to hear what the other forum members think.

Cheers,

Shadow.


2009
Shadow;616593
 
I have always said that I expect it to really kick off sometime around 2010-2011. We're not quite there yet, but the construction boom is definitely brewing...


[url="http://www.domain.com.au/Public/Article.aspx?id=1260034323351&index=NationalIndex&headline=Rush%20of%20new%20builds%20points%20to%20housing%20construction%20boom"]http://www.domain.com.au/Public/Article.as...truction%20boom[/url]



Shadow;581661
 
Hi Winston,

Throughout 2009, house prices have been booming, but construction activity has lagged.

Now we can see construction is starting to take off too. The construction boom is in its infancy, but it will accelerate from here.

The government is encouraging increased construction. The RBA has stated it wants increased construction. Developers want increased construction. Three fairly powerful groups there. Are you going to bet against them?



2011

Shadow;776435
 
Hi TF, long time no bicker. :D

The construction boom is coming along much better than the old 'credit tightening induced crash'...

So far, we've just had a minor price boom in Sydney. I always said the construction-led boom will begin in Sydney around 2010-2011. We just had to wait for the incompetent state government to get kicked out first. I expect the new NSW government will shortly introduce new policies to encourage residential property development in response to the escalating public dissatisfaction with the state of Sydney housing, currently manifesting in extremely tight vacancy rates, rapid rent increases, and rising house prices. So watch out for the construction boom - starting this year in Sydney as predicted.




Shadow;813971
 
Well, we already have one in Melbourne, but my construction boom prediction was for Sydney to kick off by the end of this year, and in fact the wheels are already in motion...

http://smh.domain.com.au/real-estate-news/sydneys-growth-areas-to-get-13000-homes-20110712-1hbut.html



A gradual beginning, but this is just the start. No miracle needed at all, in the same way no miracle was needed for the Melbourne construction boom. All it needs is the right government policy, but I'm sure a money saving expert like yourself must know that. ;)



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peter fraser
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Yossarian
11 Oct 2012, 08:06 PM
Shad, you couldn't hit a cows arse with a banjo.


Can you tell me how far away from the cow he is standing?

Victoria certainly had a surge in construction when they offered a higher FHOG for new builds, and NSW is following in those steps at exactly the time we are likely to see our lowest rates since the sixties.

I think that Shadow might be right, mainly due to luck, but right nevertheless. An over supply of housing though will moderate prices, so it's not all bad for the bears.

Any expressed market opinion is my own and is not to be taken as financial advice
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Elastic
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Do people think that there is suitable land close to the city for high rise development in Sydney? I don't know Sydney well enough.
Melbourne has been fortunate in that the docklands area opened up a new area to high density building. We also have Fisherman's bend which will cater for more in the future.
It just seems to me that Sydney due to its geography may not be suitable for increasing its population by a whole lot more anytime soon regardless of demand.
Only a rat can win a rat race.

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Shadow
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Yossarian
11 Oct 2012, 08:06 PM
Shad, you couldn't hit a cows arse with a banjo.
LOL, I've been posting on these forums for half a decade. I must have racked up well over 10,000 posts across GHPC, Somersoft, Credit Crunch and APF, and you can only find two things I got wrong! I never claim to have better than a 80-90% success rate, but anyway let's look at your two examples...

Yossarian
11 Oct 2012, 08:06 PM
2008
In 2008 I was predicting a boom, and the bears were predicting a crash. Obviously the boom wasn't as big as I predicted, but prices did rise 20% in Sydney and 30% in Melbourne over the following couple of years, so I was a lot closer than the bears! I did very well out of the 2009-2010 boom too, so thanks for the reminder! :)

(had you forgotten about the 2009-2010 boom?)

Your other examples are all about the same thing - i.e. the construction boom...

Quote:
 
2009
Quote:
 
Shadow;616593
I have always said that I expect it to really kick off sometime around 2010-2011
Yes, in 2009 I said the construction boom would kick off around 2011 (I've been consistent with that timeframe since I first started predicting it (in 2007).

Quote:
 
2011
Yes, as mentioned several posts back, I expected the construction boom to begin around 2011, and now it's happening in 2012, so having first made that prediction 4-5 years prior to the event, I was only one year out in the end. Not too shabby at all! Certainly a lot better than those predicting crashes, especially crashes induced by huge credit tightening, LOL. How's the old credit tightening going, by the way? :lol
Edited by Shadow, 11 Oct 2012, 10:35 PM.
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
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earthsta
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Quote:
 

Peak of boom: 2014-2015. Sydney Median Price: $1,250,000


I thought your "approach $1m by 2014-2015" was stupid, yet it seems you were even more asinine earlier!
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Shadow
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Evil Mouzealot Specufestor

earthsta
11 Oct 2012, 10:33 PM
I thought your "approach $1m by 2014-2015" was stupid, yet it seems you were even more asinine earlier!
Despite possibly getting the magnitude wrong, I was a lot closer than the bears who were predicting prices would crash. At least I got the direction right, if not the magnitude (yet).

Sydney house prices will approach $1M by (an unspecified day in) 2015.
Edited by Shadow, 11 Oct 2012, 10:38 PM.
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
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earthsta
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Shadow
11 Oct 2012, 10:36 PM

Sydney house prices will approach $1M by (an unspecified day in) 2015.
LOL .... it's been done to death. How many times can someone get pwned, yet come back for more.
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