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Ania | How will the current financial crisis affect property prices in Australia? |
I want to buy property but not sure whether now is a good time considering what's going on overseas. How do you think it will affect property prices in Sydney? |
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bossw2006
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Forget about the crisis. Do your homework and research the prices and get yourself a reputable agent (selling) or you could get a buying agent but there are fees. Now is a good time to buy if you can afford it. It does depend on the area too though most places in Australia have just started declining after a really big boom. Houses wont get cheaper when you think about the long term. Think back to when our grandparents bought there houses for 5-10000 they thought that was expensive and, its the same for our generation. You have to get on board some time if you are after an investment but it has to be right for you.
Do lots of research get online and search topics about your area and surrounds, also research as much as you can about interest rates and that because that will be another you will need to decide weather to go variable or fixed.
There really is no right or wrong time as long as you be smart and know exactly what you want to do. ;)
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cosmick
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Don't worry about it. If you can get your property at a good price by all means buy!
The financial "crisis" will affect other countries more than Australia as we are fortunately more closely linked to the economies of Asia, China in particular (which is just booming), rather than Europe and America.
As far as property prices are concerned there may be some short term fluctuations as our banks and consumers react on a purely psychological level to what's happening in America and Europe but things will on the whole continue as they have... Over the long term prices trend upwards but in the process it cycles. Whenever there is a housing boom property prices are driven upward which in turn creates a housing crisis as properties become unaffordable and in turn brings prices down... which then creates another boom, etc, etc. It's all a matter of timing and being patient. |
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loudflyer
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Like any market, it cycles. At present, prices are low. Whether they go any lower is purely speculative, but they will certainly rise in the future. One way investors make money is to do what others are not doing. Look at the people that sell shares when they go down only to see them rise soon after they are sold. Suggest you buy your property, remembering that it is a long term investment. At the next rise in the cycle, you will either glad you bought it or be wondering why you hadn't. Hope this helps. |
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camillo
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of course it will. look at the housing market now, it is already falling. people in australia are up to their eyeballs in debt (this is at unprecedented levels) we're talking about car debt, credit card debt, personal finance, home loans, harvey norman nothing to pay for 2 years, kind of debt! and the sh*t has already hit the fan in the US, it's just a matter of time before it starts spraying all over australia. it is going to be hard to get a home loan and the bank wont give anyone as much money so no one is going to be able to bid like a madman at any auction, infact there will be fewer people in the buying market altogether while there will be more people selling trying to get out of trouble. =prices go DOWN.....
the RBA is going to cut interest rates as much as they can next week just to try and absorb the problem but the banks are not even going to pass on this cut! as soon as the banks need to lift rates because of financial crisis pressure, the RBA will not be able to do anything and the housing market in australia is up the creek!
do your research every week, hang around like a buzzard and between now and 6 months you will see some houses go for peanuts. just wait for an absolute bargain....there will be plenty of them. i bought one a few months ago at a good price, but i am spewing now because the mother of all recessions is about to hit our shores. dont believe anyone who says it wont affect us, americans were swearing there was nothing wrong with their economy only 8 months ago. HAHAHA what fools! dont mean to laugh but it is a huge joke and australians are not much better.... |
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abwoodford1968
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They will stay steady for a few years then they will continue to go up.
With property over a thirty year period the trend is always up.
Thats the way it has always been, thats the way it will always be. |
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David W
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I would advise you to look at http://www.jenman.com.au/news_article.php?id=244 . I do not own a house, so I cannot talk from personal experience that way, but I nearly got really sucked in by the various property spruikers. The spruikers say that property prices always go up. Property prices are driven by supply and demand. As best I can see, this is how supply and demand may affect your decision to buy a house.
There is a housing affordability crisis. This means that there cannot be another rise in houses because no one can afford to offer greater prices.
Houses are offering dreadful returns on the investment in terms of the incomes they provide. The income a house provides comes from its rent. It is not uncommon to find shares that will give its investors 5 % interest on the value of the share each year (from the shares dividends). For houses, the rent is more likely to give the investor about 2 % per year. The spruikers say that you buy a house because of its capital growth (because its price will rise), but the housing affordability crisis means that the bulk of the population cannot push the prices of houses further.
Houses are unaffordable for people who earn wages who aren't CEOs. However, for investors, houses are providing 2 % when shares provide 5 %. This means that wage earners can't push up the price of houses, because they can't afford it, and investors are likely to realise that they can put their money in better places, so they won't put it into housing.
As a result of this credit crisis, banks are going to be less willing to lend people lots of money. I have a friend who used to work in a bank and now does mortgage brokering work (and has done that for at least the last five years). She told me that traditionally banks lent people 3 and a half times their annual wage. From the way house prices have gone in the last decade, the banks inside of Australia well and truly abandoned that principle. It seems to me that the banks in Australia have lent money irresponsibly inside of Australia. Inside of America, it has been said that banks lent people money irresponsibly which led to their crisis. Do you remember all of the adds offering people 100% of the loan for a house? Do you also remember adds saying that if the banks said no to your mortgage application, try this, that and the other company? I think that this suggests that our banks and lending institutions are not as well regulated as we are currently being told, and I also remember that in Paul Keating’s day, deregulation was the big word of his government and that the property boom followed. The banks will need to return to their traditional 3.5 times a person’s annual wage to return to responsible lending. This would mean that the only people who can afford a million dollar debt are people who earn more than $285,000 per year.
If banks return to traditional lending practices, I think that even current prices of houses cannot be maintained. If our banks are dependent upon money from American banks, then our interest rates may well go up even if the reserve bank drops interest rates. If people have borrowed more money than they can truly afford, then they may be forced to sell their homes. This will put more houses on the market. This will push prices down because it increases the supply of houses. If the price of houses falls, the people who borrowed 90% of the value of their houses may be forced to sell their houses. This is because, traditionally, the banks are willing to lend 90% of the value of a house. If the house price drops, one way the bank can be sure to get their money is to force a home owner to sell if this 90% mark is breached, even if the person is meeting the repayments. This puts more houses onto the market, dropping housing prices even further.
I think that we are in a property bubble that is about to crash. There are many reasons to buy a house, and that it’s value will increase can sometimes be the least important of these reasons. However, if you want to buy a house at the moment, I think that you should put a really large deposit on it (so that if the price falls, you won’t be forced to sell) and give yourself plenty of room to move. Consider things like interest rate increases, what happens if you lose your job. Have money so that you can afford things like repairs to plumbing and wiring; have money to spare for all of those things you didn’t think about and weren’t expecting to happen.
I would also advise having a good look over Neil Jenman’s work. His web-site is http://www.jenman.com.au . He works to try and expose property scams and to prevent people from making dreadful real estate mistakes.
Good luck.
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sambora sista
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I can't tell you what to do. But I know what I'm going to do. I want to buy at some stage, I have the deposit, the job etc, but I'm waiting to see what happens with the economy. If we go into a recession in the next couple of years you will be kicking yourself that you bought now. You are in a great position because you can sit back and see what happens and then jump in when you need to.
The best time to buy is during or after a recession (obviously if you're still lucky enough to have a job) when prices are depressed and interest rates are low. That's what the situation was like in the mid-90's and you saw what happened after that....
We are due a recession, we have had 11 years of economic growth. Whether we go into one will depend a lot on how much the US crisis afffects China. Australians haven't been in as much debt as they are since the depression, so if the economy busts there will be A LOT of pain where people will lose their jobs and lose their houses. If a recession happens I imagine that Rudd would put a stop to the immigration intake that is currently a major cause of our housing shortages. If there are no jobs migration will not be needed as much.
We will never see a drop in house prices the likes of the US because mortgage holders in the US are able to just walk away from their houses with nothing to pay. We can't do that here because if we try to sell our house, we're still stuck with the outstanding debt. That makes people more inclined to work harder and hold onto their houses in Australia.
You've got to remember that the Reserve Bank are very wary. Interest rates to do not get cut in good economic times, they go up when the economy is going well, and they get cut when the economy needs a push along. The fact that they're looking at a half percentage point cut is a bad sign. But I don't think they'll go with the half percent because inflation is still high. I think the latest data showed inflation at 4.5%. But it is expected that will come down in the near future though.
Whatever happens I think we're in for a tough time and Australians will have to stop spending and borrowing. The whole idea of using the equity in your house to buy things like cars and holidays will come back and bite a few people on the butt methinks.
All the best with your decision. |
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robbiminator
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I think it depends on the reason for you wanting a property. If you want a HOME, can afford it and intend to live there for a long time then the house price cycle isn't that big an issue, since in the long run property prices will go up again. However, if you want an investment property then you've got to do your research and maybe hang fire. |
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Johnny Veismuller
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I have a few opinions about that. An article in the telegraph about 1 week ago said prices will go down. A psychic i spoke to a few months ago said prices will go down (and she seems to know as much as anyone) Rates will go down and people resist listing for fear of getting a bad price, so those 2 factors say prices will go up. Also a lot of immigrants are coming to Sydney but there is plenty of unsold houses for them to buy in Western Sydney at bargain prices IF they have the money to do so, and they might not, so the no's dont really count. So the last 3 factors normally would see a rise in r/e prices, but with the backdrop of uncertainty with the worst financial crisis, possibly ever! in the worlds largest economy - I dont think so.
An economy is not made of goods and services like a lot of people think, its made of confidence and trust. What we're seeing is an erosion of trust for the financial institutions esp on wall st and whats the difference here? The banks and co's on the stock market have been enriching themselves at a giddying pace for years. Are we cordoned off from the USA? I think thats a ridiculous statement. How many large US co's have branch offices here? If theres a credit crunch our banks have to pay international rates for their money as well, which is expensive right now. The world is all interconnected more than ever. We are stronger thanks to the mining boom and Paul Keating implementing super which means we have large reserves of liquidity. But let me tell you my 90 yr old uncle wanted to pull his funds out of the bank - he remembers 1929 - scary! These are uncharted waters and I think prices will be adversely affected in Australia and to our credit they seem to be holding up quite well, but for how long Im not sure. Theres a Chinese curse, "May you live in intereting times" These times sure are interesting and about to get more so. Fasten your seatbelt |
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NP
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There is no rule that says that land and real estate prices will go up.
In GB over the period 1987 to 2000 there were some radical falls in prices of real estate, up to 30%, as in the US now.
It may also be the case that prices stagnate in Australia for a substantial period which will equates to a fall in value.
Prices in Perth have fallen between 10% and 20% in some places in the last 10 months and are likely to fall a fair bit more.
The matters governing asset values have been made vastly more complicated by virtue of the developed economies of the world having (to a greater or lesser extent) abandoned the fundamental principal that for every unit of denomination in their respective currency there needs to be an identified asset supporting that pecuniary unit.
The usual principal is that of an equal and opposite reaction, we have had our super-boom and now its time for the crash.
The US was technically broke before it bailed out today, now it is technically bankrupt.
That will radically affect the mid term out look for OZ and debt finance with a corresponding effect real estate values.
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cqnude
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Its a dead certanty that the banks will not pass on any drop in official interest rates however they will use it as an excuse to lift their rates. |
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sparkie dude.
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Banks will be more careful who they lend money to. Less easy money means less buyers which means prices will fall.
House prices are about twice what building costs are. eg. a house that cost $100,000 to build on $100,000 worth of land will sell for $400,000 dollars. This was caused by three major events. 1, the $7,000 dollar first home buyers grant introduced in 2000,which meant that people who never saved two cents could now enter the housing market, pushing up prices. 2, banks and other lenders taking more risks and lending more money to people who maybe couldn't afford it. 3, people are greedy. They borrow more than they should to buy a house, not to live in it but hoping to sell it so someone else in the future, who they hope will borrow more money than they did to buy it.
This is all about to fall down in a screaming heap and prices will crash. Real estate agents know this, a few weeks ago there was a story released by the Real Estate Institute (which is a paid lobby group) saying that there were less than 700 properties for rent in Sydney, and people should but rental properties as the price is sure to go up. That week there was 22,573 properties for rent in Sydney.
So is short if I were you i'd wait for 24 months, saving like hell, and see what happens.
Footnote one. If you borrow $500,000 to buy a house that's almost $1,000 a week intrest. If you can't afford to make repayments, and the bank has to sell your house, and only sells it for $400,000 at auction, you will be given a bill to pay the difference, so you'll be homeless and $100,000 in debt.
Foothote two. If the bank/ institution you have your homelone with goes bankrupt, your house is their asset. You will lose it regardless of how much you owe on it. And you will not get a cent for it.
Look at the Pyramid collaps in Victoria and the USA Savings and Loans collaps. So always stick with the big four banks for homeloans. If they say you can't afford a homeloan, you probably can't. |
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Kimchirat
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Despite the approved bailout in the US today - credit for real estate will remain very tight worldwide - as banks and companies try to reduce and restructure their borrowings. Locally our banks have been aided by the move of investors and superannuation funds from stock market into savings - helping our banks to reduce their international borrowings to fund mortgages. The growth of mortgages is down to 5% pa versus 15+% pa in 2007. Loan terms will continue to tighten. But most importantly, the house affordability index in Australia is higher than the US or UK! Both countries are now in recession - led by the collapse in real estate prices and the sub-prime debt. Banks in both countries have gone under. Foreign investors are withdrawing funds from Australia - witness the 20% fall in our exchange rate in 4 weeks. The resource states have growth driven by an overhang of investment in major projects - with future ones threatened by the new producer levy - Carbon Tax. NSW is in recession. House prices will fall in Sydney. |
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Betty D
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leave your house and investments where they are and get out your cash from the bank and buy a good safe bolted to the floor and live on credit while the interest rate is low or use only cash |
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Harry S
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As people bail out of unsafe investments in the stock market (and at this stage of the game, everything and anything is unsafe - we still don't know how great the exposure of the banks to subprime is), it's only natural that they will flood to what are viewed as safer investments. That's why gold has, very recently, shot up: because it offers security in volatile times.
Property will likely do the same in the short term. However, as the recession continues, people will have less money to spend on property, and demand for it will decrease, and with it prices.
So, here's my advice: in the short term, wait until the market has somewhat stabilised so that people aren't bailing out and grabbing property. |
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ChavFanMan
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Like all markets property prices will fall in times of financial hardship. But Sydney is somewhat protected from massive drops because there are so few properties available in Sydney.
If you have enough savings and your financial situation is good, eg high earning job it would be good for you to buy now although it doesnt look like the banks will be passing on the reserve banks impending rate cuts in the immediate future, the fact is our economy has slowed and more rate cuts should follow which will be passed on the borrowers making your repayments cheaper.
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jimbocav65
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it won't |
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deslyn d
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One thing you can always count on is , if its not made in China, building materials will always go up in price. Therefore houses will always get more expensive. Also anything which is hard to come by will also get more expensive, like land close to services. As a long term investment you should never lose on buying property. Just review property prices progressively over the last 15-20 years. Just like the drought which seems to have a 20-30 year cycle, the markets seem to threaten a severe downturn roughly in a similar cycle. So you can't let that be your guide. Property always gets more expensive. The trick is to buy wisely and don't think of your first purchase as being your forever home, just a stepping stone. |
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secureretreat08
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I don't know the answer only what I am seeing at present on the northern end of the Gold Coast, Queensland. So many extremely valuable water front properties are for sale or auction at present. Its incredible to drive around areas such as Sovereign Island, Paradise Point, Santa Barbara, Hope Island- This has happened in the past few weeks. I am just an observer in my local area, nothing else. Wouldn't have a clue whats hapening in Sydney. |
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saltboxlane
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I have just got out of the property market. Basically buying a house is like forced saving if you are buying a house for the long term. I had two houses that I have just sold, and you do not make that much money from dealing in houses. Basically when you take into consideration interest, bank fees, the times the house does not have a tenant, repairs, maintenance and capital gains tax once you have sold it...there isn't much, if any, profit.
However, if you are buying a house for yourself and are happy to live in the one spot for the rest of your life, it is a worthwhile investment.
As someone else said, don't over extend your self. Make sure that you have enough money to live and do the things you like. Buying a house ensures that in your old age you have a home and something to pass on to your children. No one knows what is going to happen with super, so we can't all rely on getting that by the time we are old. And just think of how difficult life would be if you were on the old age pension and trying to pay rent...very difficult.
Good luck with your decision! |
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Oz S
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The answer is: according to most of the reviews I have seen, property values are about 50% over-valued in Australia. Given that we are seeing a 90% drop in home loan approvals in Britain, and that US house prices have dropped by about 49% on average (especially in the worst-hit areas, which have seen a 95% drop in house prices...witness that recent story where a house was sold for US$1.50 - about Aus $2) , we should expect to see house and property values (especially commercial real estate) drop like a rock, soon.
Keep out of the market, because there's some really good bargains to be had months from now.
Mind you, getting the loan to BUY the property could be difficult, as the world financial system is just about to collapse. |
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kim h
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Wait longer. Prices will drop a lot more. I am in the same situation but know if I wait a few more years longer then I will get more for my money. Remember people that are home owners dont like to think that the propery market will fall. A depression is coming and cash is best. |
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lewcollet
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sorry! This is not the time to make such an important decision.Besides, wait for the property prices to come down.Good luck |
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Kamikaze Watermelon
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They're getting more expensive as time goes on. I suggest that you should sell just as the prices are about to go down. Then, you can buy a house for less! The economic bubble is about to burst any time soon now, so just wait until it does, then buy. |
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fingrati
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In a nutshell - buy when house prices hit rock-bottom, and stick with it for the long term. Eventually they'll go back up again, and you can sell when property prices hit a record high because of supply and demand. You can't go wrong with bricks and mortar. |
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carpetimage
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ITS ALWAYS BETTER TO BUY A HOUSE THAN THREW AWAY MONEY RENTING, DONT GET OVER COMMITED FINANCE WISE PROPERTY IN MY EXPERIENCE ALWAYS ON THE WAY UP SOMETIMES IN FLATTENS OUT FOR A TIME BUT MOVES AGAIN I BOUGHT MY FIRST HOUSE 1973 BRICK 3 BEDROOMS ST MARYS NSW $22,000 TODAY YOU WILL PAY OVER $360,000 GET IN WHILE PRICES ARE DOWN COST YOU MORE TO GET IN LATER
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monkey butt
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Buy what you can comfortably afford and dont sell unless you really have to. On low salaries (cos i worked in community services for a while) i managed to buy 4 houses. I didnt do anything spectacular, just bought what i could afford and hung onto it. |
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Terry M
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The cost of housing will always go up, and never come down!!! That is what the "experts" were saying in the US a couple of years ago. Now a $70 Billion bail out for these experts on the backs of those that can ill afford it.
The credit crisis is world wide - we are not isolated from it as most here would like to think. September 11 happens around the world - and your insurance in Hobart goes up. Same thing here - we are in a world economy. If the US sneezes - the rest of the world gets a cold, that's the way it is, and yes they even affect China - our saviour supposedly.
1) Interest rates will not go down anytime soon - banks have no choice but to try to make back the billions they have lost - $70B doesn't cover it.
2) The brakes are coming on for the economy - how much it will slow - everyone would like to know
3) It most parts of Australia it is cheaper to rent than to own, and around 50% of people could not afford their houses if they had to buy them today. So with this rents will have to go up because investors can no longer just sit back and wait for the property to increase in value in the short term, hence a correction will take place. ie. rents will go up, housing will go down until a new balance is found.
If all else fails just remember real estate is governed by the law of the greater idiot - as long as you can find some idiot who is willing to pay more for it than you did, your alright.
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Stephen M
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Just arrived back from 3 months Europe/U.S.
Bearing in mind the current price averages in Sydney residential compared to say 18mths ago. If you are able to purchase 20% on average lower, you will see gains in the next 12/18 months. Sydney is bound for a strong recovery, and in comparison to similar overseas markets is still attractive, as is our economies strength...no matter that the current Government will remain , at best neutral, in economic stimulus. I suppose that the rule remains that the only losers in good quality real estate are those that are forced to sell in the short term. |
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Warren S
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In Melbourne, prices of houses are going up near the CBD but are going down significantly the farther away one goes from there.
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miss
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thr rich is getting richer |
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