Perth housing market correction
Discussion
To me the Perth housing market feels very much like pre-2007 UK. Things appear to be booming but that is based largely on the huge project home developments being filled with people who scraped together a $3k deposit just to own their own home.
What's going to happen when these people decide to move on? Who is going to buy their copy-and-paste house?
Surely in 5 years time the developers will still be offering the $3k deposit deals or similar so why would you want to buy one that's been built in 2013 when you could have a new one built-to-order?
There was something on TV the other night saying Perth's population growth is now 2% per year but they must be building thousands more homes than that? Who's going to live in them all, or is it just self-feeding? Get more tradies in to build more houses for tradies to live in whilst building more homes?
Everyone I work with seems to think things will keep going upward but I just dont see it.
What's going to happen when these people decide to move on? Who is going to buy their copy-and-paste house?
Surely in 5 years time the developers will still be offering the $3k deposit deals or similar so why would you want to buy one that's been built in 2013 when you could have a new one built-to-order?
There was something on TV the other night saying Perth's population growth is now 2% per year but they must be building thousands more homes than that? Who's going to live in them all, or is it just self-feeding? Get more tradies in to build more houses for tradies to live in whilst building more homes?
Everyone I work with seems to think things will keep going upward but I just dont see it.
First post on here since leaving the UK in '11, so I guess it's time to say hello!
Having arrived here 3 years ago (almost), and hearing nothing but 'we'll be fine for decades, there'll be work until your 60’ and the usual (chirpy) outlook people have in 'boom' time, which let’s be fair – is a great vibe, I always had a more cautious (gloomy) approach. In fact, I struggled to see much beyond 2014 when (to my knowledge then and now) the last of the major WA resource investments (boom) rolled from Design & Construction into production.
And, here we are in 2014 and I still struggle to see how things will continue to be on the long-term ‘up’, with rental and commercial vacancies on the increase, the job market (at least in resources / construction) has become extremely competitive, and generally ‘the good times’ do seem to be behind us.
Yet, I have read over the last 2-3 weeks (Urban Planning Paper) that the Government expects an increase of 70,000 people per year for the next 10 years or so (can’t recall the exact period), suggesting there will be a shortage of homes to meet demand. And another report on commercial vacancies (by a commercial body) that suggests the commercial vacancy rate will drop late next year.
Then I look at the friends I have made since arriving, and say 80% have either made their cash and headed elsewhere with no plan on moving back, OR recently bought a house - most on no more than 5-10% deposits and now ‘own’ a $500K home which they would never even be considered for in the UK! (All had to obtain mortgage protection so I’d be intrigued to see who backs the protection). Oh, and by the way - most of the people that I make reference to above are on their final 6-12months contract of ‘resource’ projects, or a major Government projects scheduled to last 8-12months – I think 12months ‘may’ be a tipping point, that said - I am a gloomy individual so let’s hope I’m wrong.
I keep a close eye on the forecasts, and I can’t help but wonder if the ones I read are naive and/or bias in the hope of providing confidence and stimulus in the market, OR, despite the drop in rental prices, tougher job market, increased vacancies across the whole letting sector and what I see in my circle - folk being approved for high risk mortgages, I am STILL blind to the bright future!
So, despite being in a position to be one of the people who ‘may’ be approved to purchase a $500,000 house with minimal deposit, I am hanging fire. As much as I begrudge paying rent, I’m simply not confident that jobs in the construction / resources sector (which employ me and a large portion of the WA population) are secure. Or that there won’t be a drop in the housing market in say 12-24months when the ‘lag’ catches up, jobs are likely to be even more scarce, the payments made ahead of the mortgage schedules run out and further payments difficult to make due to not having a salary, and people default, and… the cycle starts!
But then, in reference to new build – the developers control the supply to keep the demand high, although from my very limited exposure and knowledge this generates a ‘false’ market. Then, another issue is that the government subsidies losses (via tax breaks) on those who have made investments that are generating losses which I can’t get my head around!
How does it work that my landlord gets a tax break because he bought a unit that doesn’t cover its costs. I pay him rent – he gets a break on the delta of his mortgage payments… I (and any other tax payer) must surely be incurring the cost of this in someway!
On the plus side, I do think car prices have dropped (comparatively), so despite my reluctance to buy a house, I did purchase a previous generation Clio RS200 - being a French hatch (particularly in WA) I’m sure it’ll prove to be a worthy investment – right?!
Having arrived here 3 years ago (almost), and hearing nothing but 'we'll be fine for decades, there'll be work until your 60’ and the usual (chirpy) outlook people have in 'boom' time, which let’s be fair – is a great vibe, I always had a more cautious (gloomy) approach. In fact, I struggled to see much beyond 2014 when (to my knowledge then and now) the last of the major WA resource investments (boom) rolled from Design & Construction into production.
And, here we are in 2014 and I still struggle to see how things will continue to be on the long-term ‘up’, with rental and commercial vacancies on the increase, the job market (at least in resources / construction) has become extremely competitive, and generally ‘the good times’ do seem to be behind us.
Yet, I have read over the last 2-3 weeks (Urban Planning Paper) that the Government expects an increase of 70,000 people per year for the next 10 years or so (can’t recall the exact period), suggesting there will be a shortage of homes to meet demand. And another report on commercial vacancies (by a commercial body) that suggests the commercial vacancy rate will drop late next year.
Then I look at the friends I have made since arriving, and say 80% have either made their cash and headed elsewhere with no plan on moving back, OR recently bought a house - most on no more than 5-10% deposits and now ‘own’ a $500K home which they would never even be considered for in the UK! (All had to obtain mortgage protection so I’d be intrigued to see who backs the protection). Oh, and by the way - most of the people that I make reference to above are on their final 6-12months contract of ‘resource’ projects, or a major Government projects scheduled to last 8-12months – I think 12months ‘may’ be a tipping point, that said - I am a gloomy individual so let’s hope I’m wrong.
I keep a close eye on the forecasts, and I can’t help but wonder if the ones I read are naive and/or bias in the hope of providing confidence and stimulus in the market, OR, despite the drop in rental prices, tougher job market, increased vacancies across the whole letting sector and what I see in my circle - folk being approved for high risk mortgages, I am STILL blind to the bright future!
So, despite being in a position to be one of the people who ‘may’ be approved to purchase a $500,000 house with minimal deposit, I am hanging fire. As much as I begrudge paying rent, I’m simply not confident that jobs in the construction / resources sector (which employ me and a large portion of the WA population) are secure. Or that there won’t be a drop in the housing market in say 12-24months when the ‘lag’ catches up, jobs are likely to be even more scarce, the payments made ahead of the mortgage schedules run out and further payments difficult to make due to not having a salary, and people default, and… the cycle starts!
But then, in reference to new build – the developers control the supply to keep the demand high, although from my very limited exposure and knowledge this generates a ‘false’ market. Then, another issue is that the government subsidies losses (via tax breaks) on those who have made investments that are generating losses which I can’t get my head around!
How does it work that my landlord gets a tax break because he bought a unit that doesn’t cover its costs. I pay him rent – he gets a break on the delta of his mortgage payments… I (and any other tax payer) must surely be incurring the cost of this in someway!
On the plus side, I do think car prices have dropped (comparatively), so despite my reluctance to buy a house, I did purchase a previous generation Clio RS200 - being a French hatch (particularly in WA) I’m sure it’ll prove to be a worthy investment – right?!
Edited by CountingBricks on Wednesday 17th September 09:50
Negative Gearing.
As a business or investment owner in Australia there is a hell of a lot you can write off on your tax return...Basically anything you can think of that is a cost out of your pocket in running that business or investment you can put a claim against.
There is often noise in the press about sectors pushing to scrap negative gearing but the government maintains that it keeps people investing and spending.
It possibly needs some review, there are people that view negative gearing as an income stream or people use it as a means to justify something they cannot afford.
As a business or investment owner in Australia there is a hell of a lot you can write off on your tax return...Basically anything you can think of that is a cost out of your pocket in running that business or investment you can put a claim against.
There is often noise in the press about sectors pushing to scrap negative gearing but the government maintains that it keeps people investing and spending.
It possibly needs some review, there are people that view negative gearing as an income stream or people use it as a means to justify something they cannot afford.
Needless worry.
The US Fed will drop stimulus shortly and slowly hike rates. That'll strengthen the US$, which incidentally is already happening. This in turn will weaken the Aussie $ back down, I've been to two finance briefings in the last 6 months talking about as low as 70-75cents to the US$ over next two years.
So what does this mean if it does transpire?
Well imports are going to be hideously expensive, so goodbye many luxuries accepted as norm BUT exports will be more competitive globally as will local produce.
This will be a shot in the arm for anyone in export market industries such as the mineral game and eventually it'll knock-on to Perth.
Also, never forget Australia is growing in a controlled manner through indigenous (Birth) and migration growth. That in turn stimulates the economy.
Just as long as we get a decent Politician into power that can preserve and maintain our growth and balance a budget, we'll all be okay.
Doomsayers begone....
The US Fed will drop stimulus shortly and slowly hike rates. That'll strengthen the US$, which incidentally is already happening. This in turn will weaken the Aussie $ back down, I've been to two finance briefings in the last 6 months talking about as low as 70-75cents to the US$ over next two years.
So what does this mean if it does transpire?
Well imports are going to be hideously expensive, so goodbye many luxuries accepted as norm BUT exports will be more competitive globally as will local produce.
This will be a shot in the arm for anyone in export market industries such as the mineral game and eventually it'll knock-on to Perth.
Also, never forget Australia is growing in a controlled manner through indigenous (Birth) and migration growth. That in turn stimulates the economy.
Just as long as we get a decent Politician into power that can preserve and maintain our growth and balance a budget, we'll all be okay.
Doomsayers begone....
People have talked about the housing market correction for years on the basis its over done.
However:
- Incomes are high
- Interest rates are low
- A lot of cash in WA held on deposit
- Banks keen to lend
- Buying incentives for 1st home buyers continue
- Land releases still in progress
Even if houses did fall in 'paper' value there isnt yet a great pressure on people to sell and given many bought at a high point there would be insufficient equity and financial pressure to sell.
I think it'll just remain a little stagnant for a few years yet.
The rental market will cool off as more redundancies from Mining appear and the tourist workers move away and houses become vacant but the settled mass will stay, hence owned properties remaining as is.
As stated above, taxation means theres a real $ benefit to retaining houses where income is below cost.
However:
- Incomes are high
- Interest rates are low
- A lot of cash in WA held on deposit
- Banks keen to lend
- Buying incentives for 1st home buyers continue
- Land releases still in progress
Even if houses did fall in 'paper' value there isnt yet a great pressure on people to sell and given many bought at a high point there would be insufficient equity and financial pressure to sell.
I think it'll just remain a little stagnant for a few years yet.
The rental market will cool off as more redundancies from Mining appear and the tourist workers move away and houses become vacant but the settled mass will stay, hence owned properties remaining as is.
As stated above, taxation means theres a real $ benefit to retaining houses where income is below cost.
Aus$ to US$ down to 81cents.
Plus China Free Trade now in place.
The bigger mines will keep digging the stuff now.
We will probably see the general market plateau, hopefully stabilised by political pressure on the Federal Reserve to drop interest rates again.
Still as you were I believe.
Plus China Free Trade now in place.
The bigger mines will keep digging the stuff now.
We will probably see the general market plateau, hopefully stabilised by political pressure on the Federal Reserve to drop interest rates again.
Still as you were I believe.
Well, we've decided to test the reserve bank's theory that renting and investing the difference is just as good as buying. Add in the fact that we'd rather live near the beach in a decent house than a copy and paste new build in Ellenbrook and thats the reason we're not buying.
I'll report back in ten years and let you know how it's worked out haha!
I'll report back in ten years and let you know how it's worked out haha!
200bhp said:
Well, we've decided to test the reserve bank's theory that renting and investing the difference is just as good as buying. Add in the fact that we'd rather live near the beach in a decent house than a copy and paste new build in Ellenbrook and thats the reason we're not buying.
I'll report back in ten years and let you know how it's worked out haha!
I think that is very much the luck of the draw, & timing.I'll report back in ten years and let you know how it's worked out haha!
I owned my last property on 5 small acreage titles for almost 5 years. The value did not alter for 4 of them, then jumped. I got more for one 10 acre block than I had given for the whole place.
I have had my present place south of Brisbane for over 23 years now. In 15 years the value barely changed. It increased about 500% in about a year, then dropped back to 400% up on my purchase price, & has since remained stable.
I find property a real lottery, some has been very profitable, but quite a few have struggled to cover the holding & selling costs, even after a few years ownership.
The real advantage in property is, once you have some,. it tends to move with the general market, so you aren't left behind in one of those price escalations. I doubt prices will suddenly increase in the current climate, but perhaps buying & holding a block of land, in one of those cheaper areas you don't want to live in personally, would be good insurance against a boom.
Edited by Hasbeen on Wednesday 21st January 07:00
Well, it looks like the correction has started....
https://au.news.yahoo.com/thewest/wa/a/32787973/pe...
https://au.news.yahoo.com/thewest/wa/a/32787973/pe...
Pommygranite said:
Sorry to hear that. What's her skill set and where are you looking at buying?
She's a SubSea engineer in oil and gas. Company was bought out, and the new owners have closed about 25% of the worldwide offices. We were looking South Perth, Applecross, Mount Pleasant.
If she can't find anything, it might be Melbourne instead (as I could move my work there very easily).
200bhp said:
I dont understand who's going to buy all the copy-and-paste new homes they're building up there in Butler etc.
I was thinking the same 5 years ago.I'd expect the Zone1/2 areas to not *really* be effected. The more remote places, will probably take the majority of the downturn.
Hitch said:
I left Oz a year ago and was last working in Perth around Easter 2015 (around when the arse fell out of iron ore) and people were talking about the downturn affecting those areas then. Has it really held out this long?
Like everything else in Perth, it's taking it's time.200bhp said:
Well, it looks like the correction has started....
https://au.news.yahoo.com/thewest/wa/a/32787973/pe...
http://reiwa.com.au/about-us/news/housing-affordability-declines-in-wa-as-perth-s-median-house-price-increases/https://au.news.yahoo.com/thewest/wa/a/32787973/pe...
reiwa said:
Perth median house price
reiwa.com’s latest data for the three months to November shows that the Perth median house price increased by 0.8 per cent to $530,000.
“This is the first time since August this year that we’ve seen an improvement in the Perth median house price. This latest data, combined with the slight decline in affordability across the state in the September quarter, suggests that the worst may be over.
I doubt it .. but it'd be nice.reiwa.com’s latest data for the three months to November shows that the Perth median house price increased by 0.8 per cent to $530,000.
“This is the first time since August this year that we’ve seen an improvement in the Perth median house price. This latest data, combined with the slight decline in affordability across the state in the September quarter, suggests that the worst may be over.
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