Hi guys, i am after some advise on the housing market in melbourne. Basically there are lots of talk about it that property in melbourne (generally Australia wide) is over priced and will eventually cool off and we will see the downturn in prices. I am just another young australian working for his dream house, got fair bit of deposit as well but holding on to it, till the prices comes down to be reasonable enough. The question is when and how it will happen? (If it ever is going to happen) or will i just have to keep dreaming for the house? Looking forward for some info on this topic.
Regards
Sam
Bubble or no bubble?
LOSA on 25/05/2016 - 23:41
Comments
Ya i heard everyone saying something different so it is truly like n illusion.
The year was 1997, my Manager at the time said, "Jason, houses are too expensive - just wait for the prices to come down, that's what i'm doing".
You can guess for yourself how his life has played out vs ANYONE who actually bought a home in 1997
Ask yourself as a young Australian with time on your side to ride out the peaks and troughs - If I buy a house today, will be worth less or more than I paid for it in 10-20 years time?
That's right but i see myself already getting priced out of lots of suburbs due to the heavy overseas investments. There is nothing available for less than 500k around 20km of the CBD.
I can't think of an event that will cause prices to "come down". The market will definitely cool off, the 15% year on year growth was super unsustainable. But prices are much more likely to just stand still or grow very slowly for some years than fall.
Short of a massively catastrophic unpredictable event happening the "bubble" won't burst, it'll just stop growing.
All that aside, if this is your home first and foremost and not an "investment property" you need to make the decision more from a lifestyle point of view than a savvy investment point of view. The only thing to remember is we're currently experiencing record low interest rates and that won't be the case for the length of your loan, so don't get overexcited by the max limit the banks will lend you. If you like the lifestyle that owning a house gives you (mortgage is great for those who don't have savings discipline, security of residence, ability to upgrade and customise your home) then go for it, if you like what renting provides (ability to invest money in more diversified ways, freedom to move with little consequences) then stick with it.
It's a lifestyle choice more than anything for your home. Most financial planners seem to say the same thing in my experience.
don't get overexcited by the max limit the banks will lend you
This surprises some people, but banks will lend you about 2 to 4 times as much as you can reasonably afford to spend on a house.
What do they care if your life becomes a 24/7 grind of mortgage stress, or if you even have to give up and sell? They still get their money.
It's one of the reasons the market is so overpriced - a pair of kids in their 20's with jobs can "afford" McMansions.
Thanks the-mai for your input, i am factoring the future movements if needed and you also know that young buyers are already priced out of good suburbs and i am not a big fan of taking huge loans for own house as well. So its kind of wait and watch game i am stuck in, or should i move out further as i work in the CBD for the sake of cheaper home.
No one knows when
While we have strong migration and all of the jobs centralising in capital.cities, there is demand that supply cant keep up with. Coupled with people wanting to live close to the CBD, sprawl will be less desirable.
A couple of thngs i can see that may make it go down:
Public transport from outer areas is majorly overhauled so travel times to CBD is under 1 hour.
Technology advances so alot more people can work from home with good internet, thus not having to commute and people happy to live further out.
Interest rates go up dramatically.
Like it did in the past, people want to get out of the overpopulated CBD for a quiter suburban life (CBD prices drop, outer ring goes up).
I bought my house in a melbourne suburb 15km from CBD and it's gone up around 30% apparently. My decision isnt based on capital gain, it was simply that we both had stable jobs, with an ok deposit, getting close to having kids and we really liked the house and area.
Sorry left my crystal ball in my previous life
No one can accurately predict what will happen in the future. Honestly, do your calculations and if its at a comfortable level, just go for it. I was once in your shoes and I waited for years only to find out the prices have multiplied. If its your first house, doesn't matter if its an older or not your dream house. Slowly build up what you have and aim higher and higher as time passes by. Eventually you will get there.
^ This.
I waited and waited just to see property in my favorite area went from 400k to 700k. Sigh….
Read about the realestate bubble in Dubai, it may give you an indication
Ask any 10 experts about the housing market and you'll get at least 12 opinions on where it is going. Don't listen to the media too much, they overhype stuff and use it for other agendas too. Personally I think that while ever interest rates are this low the prices aren't going down by a significant amount so you are best to jump in ASAP. I'm not an expert, but am a home owner who bought and sold 12 months ago.
Save (sounds like you've started that). Find a house you want. Buy it. The longer you wait the higher the price will be.
Also consider that interest rates are very low, so paying a bit more will now is offset by not having high interest payments on a mortgage. If rates go up, the price miught come down but you'll be payng a similar amount anyway.
that's true that more people you ask, the more opinions you get, i understand that no one can predict the future, but getting input from the community members like yourself, always gives a new perspective for the things, food for thought, thanks for your input
Clearly and unquestionably a bubble, but the question is does that mean it will pop resulting in price declines, or a generation of sub-par growth, or both or neither.
Because of this, I think housing is a terrible investment, but housing provides a great place to live.If you buy a house to live in, with repayments you can afford, in 20 years you will own it. If the prices go up or down it doesn't matter much to you, as if you decide to sell and buy elsewhere the higher/lower prices will be reflected in both.
The only disastrous circumstance would be if you were forced to sell after prices had fallen, but if you couldn't meet your mortgage due to prolonged unemployment or illness/disability then you have problems beyond the real estate market.My only suggestion is that I personally think the newer high rises in Melbourne that have been heavily marketed to offshore buyers are more vulnerable to a downside correction than anything else. If you were considering living there, perhaps choose somewhere else for now and come back in a year or two and pick over the financial wreckage.
thanks for the input mskeggs,those apartments are in talks since the inception and do you think it will have some impact on the housing market in general, more specifically to the houses in the suburban areas.
They've been talking about a bubble ever since I was born.
For houses we may consider it a bubble, but I do not see prices dropping dramatically unless another big GFC comes around (if it does this time Australia may not be so lucky as it was in the previous one).
For apartments/units/flats it is certainly a bubble and in this case I think prices will drop in the near future due to the large oversupply (in any capital city really) and to the level of Chinese investment which could withdraw suddenly.Complaining about a bubble since 1836
“At last we anchored within Sydney Cove;… it is a good town; the streets are regular, broad, clean & kept in excellent order; the houses are of a good size & the Shops well furnished. — It may be faithfully compared to the large suburbs which stretch out from London & a few other great towns… the number of large houses just finished & other building is truly surprising; nevertheless every one complains of the high rents & difficulty in procuring a house…” - Charles Darwin's Beagle Diary, 12 January, 1836, Sydney.
https://ebooks.adelaide.edu.au/d/darwin/charles/beagle/chapt…
What a gem!
Australia is a gem of a place and Sydney isn't too bad.
I guess inner-city Sydney land is worth more than gems.
Define a bubble!
You find information that supports both sides, but its very hard to predict what will happen.