We’re living in the most upwardly-mobile real estate market since the late 80’s. Those who sold just six months ago are now in therapy—no-one saw this coming.
And, now, there’s just one certainty:
It has to calm down.
That’s easy. The harder questions are when? And at what level?
Our suspicion is that this isn’t a bubble, it’s a jumping castle: Frenetic leaps until it springs a leak and then a slow deflate.
What explains the frenetic? Take a look at The forces driving foreign buyers to Aussie real estate in today’s Business Spectator.
The short story: The view from Asia is that Australia is cheap and safe and there are large incentives for investments outside China, Taiwan, Singapore and Malaysia. It’s demand that looks solid, but may be cut short (see below*).
Add to that our home-grown negligible interest rates and hungry self-managed super funds and negative gearers.
ASIC’s Greg Medcraft ‘quite worried’ about Sydney, Melbourne house prices from today’s Fin Review.
The short story: “I am quite worried about the Sydney and Melbourne property markets. In housing, the long-term average income to average price ratio is four to five times but at the moment it is at historic highs,” according to Greg Medcraft, ASIC Chairman.
Add to that ASIC’s concerns that when interest rates are so low, there’s a double-whammy in falling values plus inability to pay when rates rise again. (And that’s against a background of some lenders offering up to 100% finance.)
*Foreign activity may be cut short by government action to preserve affordability for local buyers—except for some pale moves in Victoria, that hasn’t happened yet but there are murmurs.
Yes, it must shake out, but in the meantime it’s a buyer’s nightmare.
At the top end we’re seeing it in boardroom auctions and negotiations, mostly aggravated by the lack of choice.
Interest rates, too, are a factor. Not at the very top end, but there’s a bear pit at $2-7 million that low cost mortgages are fattening; so there’s some pressure from below.
Land in Camberwell at $330/ft? That was Toorak not so long ago.
“It will sell by 5pm.”
No. It won’t. And didn’t.
“I was right to hold out for my price.”
Hmm … three years later the market finally caught up with you. Congratulations.
Your bid, Mr Treasurer
A certain former Treasurer of Victoria (we won’t embarrass Alan Stockdale by mentioning him by name) had 17A Auburn Road, Armadale, passed in at $3,525,000 over the weekend.
realAs rocks on
There are agents who continue to insist that no mere algorithm could predict how much a home will sell for. That there are too many variables. That only an agent could really know.
Even in these turbulent times, realAs is still well ahead of the game (it listens to buyers), on average it is still coming close to within 5% of actual prices paid. When the market moves, so does the algorithm.
(And, yes, due disclosure: It was all David Morrell’s idea.)