Bloxo: Apartment prices to fall in 2017

From The AFR:

An oversupply of apartments in Melbourne and Brisbane could send unit prices down by as much as 6 per cent in 2017, according to HSBC…

“A national apartment building boom, which has been part of the rebalancing act, is likely to deliver some oversupply in the Melbourne and Brisbane apartment markets, which is expected to see apartment price falls in these markets” HSBC chief economist Paul Bloxham wrote on Friday…

Some commentators have forecast even larger falls in apartment prices in Melbourne, Brisbane and even Sydney.

AMP Capital’s chief economist Shane Oliver expects a fall of between 15 to 20 per cent over the next two years in apartment prices.

The highrise apartment boom is actually biggest in Sydney (see next chart).

ScreenHunter_16338 Nov. 25 12.21

However, because it has started from a much lower base (after a prolonged period of underbuilding) and is building far fewer detached houses, Sydney’s apartment market is less exposed than Brisbane and Melbourne.

Unconventional Economist
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  1. Perth reduction in demand as resources related investment and employment continues to redue and commercial real estate construction reduces?
    Increased mortgage stress through falling wages of FIFO’s laid off causing some selling pressure?
    Impact on demand for units and houses?

  2. If not next year, then the one after. And if not the one after then…etc

    Wonder why the market doesn’t price in the coming oversupply and investors start running for the hills, since it seems to have been forseen by just about everyone for years in advance?

    • I have noticed that the banks towards the end of the year, even Ando Wilson, suggest sluggish house price growth in the following year, anything more than 10% and we should worry, well 15% YTD, why no concern.

      • There’s a regular seasonal lull over summer that they like to use to start lobbying for a rate cut in the new year. Then when they get it, all bets are off.

      • My partners sister is a Mortgage Broker, says that CommBank is getting harder and harder to deal with lately. Seems they are tightening things up and she’s not even a dodgy broker. Does everything by the book etc..

    • Exactly.

      The only way prices are going down (in AUD terms) is if there is political will to make it happen

      Otherwise it will be the AUD that takes the economic pain, and immigration floodgates will open to protect house prices and the banking system.

      Unfortunately wishful thinking here

  3. As long as the A$ keeps apreciating against the Yuan , cant see any Chinese Owners selling.They are still hedged against any further falls in the Yuan wich wil be greater than 6%.

  4. It amuses me when they predict housing falls of 6 percent with a straight face. That’s hardly stamp duty and legals. In fact, show me one overbuilt condo market in the whole wide world that only fell by 6%. Look at Perth for instance; million dollar homes are standing empty for months and getting a third of that would be a cause for celebration. Funny how many blacklisted postcodes now require 30% deposits. Even that will not help lenders when thousands upon thousands of dwellings are thrown onto a glutted market and negative feeding loop cuts in.
    Check out what is now happening in our sister market of Vancouver.

      • A fascinating (well not really) thing happened here in Perth when the downturn began. The expensive glossy advertisements for luxury properties started to be dominated by “Auction” instead of a $value. Great way to avoid scaring desperate sellers into a quote war and sending prices downwards, just don’t advertise a price at all.

      • Exactly. It’s all about confidence, throwing in life savings and signing a 30 year commitment to give up a third or more of your gross family income requires unremitting faith.

    • 28% of GDP now real estate related, we are toast………. welcome back 1893 as soon as the US confronts China

  5. reusachtigeMEMBER

    LOLOLOL! Bullshit. Build as many new residences as you like and us smart investors, smsfs, and chinamen will snap up every single one of them at ever growing prices. It’s just how it works.

    • Yes and the routine predictions of the market cooling off “next year’ have been deliberately devised to give politicians and regulators an excuse to do nothing.

    • TailorTrashMEMBER

      No doubt about it Reusa ………you have distilled the sophistication of the Strayan property investor to their very essence …….and their good looks to boot ….

  6. Oversupply in Melbourne lol
    The Melbourne vacancy rate has fallen to 1.9%. The lowest Oct VR in 5yrs

    • reusachtigeMEMBER

      It’s hilarious! With such low vacancy rates, and interest rates this low, and only going lower according to the “lower teh interest rates” spruikers on this blog, there’s never been a better time to gear right up into more and more and more investment properties. It’;s such a winning strategy no matter what the doomsayers like Bloxo say.

    • I suppose it boils down to hope many empty adjustments not available for rent hit the market. If the report based on water usage is correct then we’re talking tens of thousands of them

      • reusachtigeMEMBER

        Never gonna happen. Hot chinamen don’t like their investments getting dirty! A lot of locals are learning these awesome investment skills from the chinas too!!

      • Reusa is even more upbeat than usual, he’s right though in China it doesn’t matter if you maintain a property, just so long as you own 1. It just goes up in value. No doubt about it. Up and up and up it goes weeeee…. Don’t be surprised if property costs $3M for a median home in Sydney soon.

  7. Reminds me of growers boasting of high wheat prices they’ve been getting recently in response to which thousands of other farmers are planting wheat to cash in on the bonanza.
    You’ll never guess what happens to wheat supply and prices in the next couple of years!
    P.S. wheat gluts are much easier and quicker to work off than houses and condos.

    • TailorTrashMEMBER

      Remember a few years ago the great wool stockpile that cost more to store than the wool was worth ……..I knew a few Australians who then learned how to work out the economics of the cost of a bullet versus the cost of trying to feed a sheep in a drought …………..but those kind of Australians now only live in our imaginations and they never knew the joys of cafe culture, lattes and smashed avocados …………but …….lessons come in various ways ………..bring on the lesson ……

      • I really do feel sorry for farmers, they get the shit end of the stick… I’m surprised they don’t hate us city slickers even more.

      • During the droughts it wasn’t only your stock died which was bad enough. A mate of mine decided he didn’t want to spend the money on bullets (too broke). So he got his old sheep fenced off in a temporary yard and set about killing them all with a knife. 400 of them! I had a terrible experience with my lambs – about 800 of them at the time. It was a damned hard heart-breaking life. During the drought it is not only your stock die. Everything dies. The garden you’ve planted and loved as a little oasis dies. It’s like it’s all just death.

  8. Flawse.
    The WA government calculate that 400 sheep die every day on the live sheep export market. Most die in the Middle East but
    also on the high seas. Who can forget the ship that sunk in the Indian Ocean quite a few years ago. 65,000 sheep drowned in
    that little fiasco. Worst of all the RSPCA don’t give a shit!