I recently had an interesting conversation with a friend about the housing bubble.
Is it going to pop? Or is it going to pop?
A few articles out there are predicting it's going to happen in the next two years but they've been predicting that for the last ten years.
So it begs the question, do I just keep saving or do I jump into the market now?
Would love some insight!
Why do you doubt that it'll pop?
+1. I don't think it will pop. It will only pop if lots of people needed to sell urgently, like financial markets crash and lots of people get laid off. Or lots of people stop buying houses, which looking at migration figures for Australia capital cities, is unlikely.
At most it will flatten till people's income catches up.
If you see a good opportunity, then buy, otherwise hold on to your money.
It will only pop if interest rates rise sharply and there's no sign of that happening anytime soon.
As pointed out above, immigration is keeping demand high and new supply always seems to be lagging.
Someone mentioned to me that China's economy is starting to dramatically slow down and they're part of the reason of the housing boom.
True?
dramatically slow down how exactly, China economy has a 11 trillion base now, its only natural they slow down. When the US was at 11 trillion they grew at a modest 3-4%. China is still at 6-7%. (Ie, it adds another Australia every 2 years)
Compared to Chinese housing, the median in Sydney and Melbourne is still considered affordable . Given the AUD has depreciated greatly over the past year, it only fuels their demand.
buy of course. interest is so low.
rent will keep increasing as landlords are greedy
buy low…. sell high
Can't tell if serious…
It depends also on if you're buying to live in, or buying to invest.
How would that change?
But for argument sakes, lets say to invest!
I feel like if you're keen to stop renting, then buying your own place for the sense of security is a greater priority then say, you're living with parents and looking to invest. Surely investors can afford to wait a bit more. That's just my opinion though. Maybe if you are living with parents, and have saved a reasonable deposit, then you would have more money to pay off the mortgage anyway.
And it's very cutthroat out there at the moment, in Sydney anyway. I am sure Melbourne is similar.
You are the one to best judge your own personal circumstances.
But for investors rental yields are atrocious for many parts of Sydney and Melbourne. And negative gearing isn't as it was when home loans were 7/8/9%.
Banks are now implementing new conditions on loans to investors, such as no interest rate discounts etc…
I'm not a financial analyst but am also looking at buying. Personally - If investing, make sure you are prepared for any interest rise. Your loan lasts 30 years. The rise could take place 10 years down the road and you need to be able to absorb the increased repayments. Rent alone may not suffice holding the property. I've noticed new apartments being built, they will influence the market price when there is sudden increased supply. Will it pop - yes it is probable. When? In about
Warren Buffet said sell in a boom, buy in a bust. Or something like that.
From an investment point of view you always want to buy when the market has bottomed out and sell at the peak.
Picking the bottoms and the peaks is the hard part, but you'd have to think property is near to it's peak at the moment (in Sydney that is)
If you're talking about buying a house to live in, that's a lifestyle decision. Gives you more control, stability and certainty than renting, but is more expensive. From a purely financial perspective, buying doesn't make sense, but you need to weigh it off against what you need and want.
I used to think that the bubble would burst, but I doubted the resolve of governments who seem intent on keeping it going. Anyone can see it can't keep going at the rate it is, but I agree with some previous posters, in that the market will flatten out rather than go 'bang' like the US did. There are also different conditions here to the US which will prevent a similar crash (tighter lending regulation, undersupply of housing, net population increase).
I have just bought my 2nd house - previous one I sold during a previous boom (2010) at a profit, have rented for the last 5 years, and am now back in. My advice is to be sensible about what you can afford, and don't over-extend. And realise that your home isn't an "investment" - investments make you money, the house you live in is an expense.
Wow that is an extremely good way at looking at it.
Thanks for your insights.
I spent a lot of time researching this and came to 4 conclusions:
In the end, we decided to buy a place to live in, rather than continue to rent. We calculated the expected rent/buy financial outcomes to be roughly in the same ballpark. I would suggest being sceptical of anyone who claims to be particularly confident in predicting future property/rent prices.
Great insights!
I need to go back to the drawing board and decide what I really want.
Thanks for the advice.
Buy when you are ready.
No one can say for sure how the housing market will go, although I doubt it'll pop, maybe just flatten for a while (in places like Sydney and Melb).