Broker: Apartment market “doomsday”

Via Martin North comes Chris Bates, mortgage broker:

I am still concerned about this binary market of rising existing and falling new property.

But I am even more concerned that Australian income is about to be demolished by a global shock. Outright recession risk is the highest I can remember. I can see the apartment meltdown turning nuclear to the extent that it stalls any broader recovery.

There’s probably enough fiscal ammunition to prevent a return of the bust but looking for gains is a fool’s errand and long term real declines remain the base case as the RBA runs out of ammo.

Comments

    • I know the MB comments narrative is shallow bogans, greedy speculators and dodgy foreigners are all about to get their comeuppance, but when this thing blows a lot of people (and their kids) will be in for a genuinely rough time. And I don’t see an end in sight. It didn’t have to be like this…if anything, it just gives me the sads. Uncool, right?

      • The Horrible Scott Morrison MP

        Well if those kids can’t even be bothered to go out and source top tier parents, they deserve all they get.

      • Nope. I have three children. The youngest has just turned 19. I’m very concerned for them, and bummed about the prospects for everybody and their kids. Our leaders have ruined us.

      • Mining BoganMEMBER

        What gets me is that in this time of insanity many, many people could have decided they had done well enough, dropped out of the rat race and led a happy, fullfilled life. But no, it had to be more more more. Doesn’t matter about the drain it put on everyone else, just more more more.

        I used to be worried about the wider effect but the more more more types have destroyed my empathy.

        Let the place burn and I’ll look after those near me as well as I can.

      • No doubt, but people had the choice, to either make a decision to protect their family first and foremost or to gamble, some chose gamble and will pay the consequences. ¯\_(ツ)_/¯

      • C.M.BurnsMEMBER

        take solace that only half a generation of Australians (circa those affected now in 2019 vs those that would have been affected in 2011/12/13) will suffer completely unnecessarily. The longer this is prolonged, the greater the pain and the more Australians that will be affected in some way.

        The hard way is the easy way; and the easy way is the hard way.
        Take the pain now, provide some optimisim for the future for everyone still to come.

      • Well that lot certainly had a go, now they’re gonna get a go alright. With a red hot poker. Thoroughly deserved for some. To be honest I’m more worried about us prudent types, who are likely to get bailed in and put on the hook via tax payer funded bail outs. Seems completely unfair to me, but what would I know? I’m not spending enough in the wider economy to matter. 😀

  1. Most of Australian income has been fueled by easy credit (over $100b per year during the last boom)
    Even if global economy stays fine there is nothing that can inject $100b per year into the economy

  2. Bring it on. Cue exodus of indebted guests and those unable to be supported by a cratering economy.

  3. Quieter inner streets of Sydney and Melbourne – lol – these areas specifically have had the biggest declines of 30% or MORE – what a load of trollop.

    Aagin here is the scenario he paints – young people with kids looking to get into these areas – sure. I live in these areas exactly, I have two kids at primary school in one of Melbournes most average “new family” inner areas – spanning Northcote through to Ivanhoe.

    House prices around here doubled from 2010-2015 going from $500k – $1million, then they doubled again to 2019 to $2 Million – those numbers are simply unbelievable. (Alphington).

    Now the average wage for that area is $80,000 – look it up. However in order to purchase a house in that area the absolute MINIMUM wage starts at $200k – you would realistically need a great deal more than that to get by.

    I live these areas and I can assure you they are almost 90% boomer – almost every single house is a geriatrics. It really is a disgrace.

    The people who have bought into these areas (developers, lawyers, doctors) are all struggling. No exceptions.

    So the basic fundamental reality is that these house prices are being held up by boomers who wont move on. I would implement an empty bedroom tax to get these people moving – easy to do.

    That said the deluge of BOOMER property coming onto the market around the northern Victorian weekender is absolutely staggering. Never seen anything like it.

    Interesting to see how things start impacting their shares, pensions etc. Plenty will start shifting soon if the dollar keeps collapsing – a share market crash will send these folks to the wall and that will be the property market done.

    • Hill Billy 55MEMBER

      Its interesting that the ABS and others have not got on the program regarding the change in the accessability to the pension from 65 to 67 (in 2023). I’m a 1955 vintage and my pension access starts at 66.5 years. Yet the statistics still assume 65 and over are pensioners.

      The other impact on the ability to move from the old home is the reduction of interest rates. People look at the interest rate and see its not worthwhile to move as they get next to nothing on their bank deposits. Not every 70 year old is diving into the share market! As you say, however, there is a time when those properties will hit the market, and its a time to avoid (unless you’re a buyer).

    • The long-term issue is that there are more million dollar properties than there are people who could afford (under any normal circumstances) to buy them. So all I’ll say is this: wages had better start rising soon (and sustainably) otherwise all those high values will never be fully realised. It’s an utter ponzi scheme.

    • The boomers not moving on will take care of itself. Over the next 10 years they will die off and those will become deceased estate sales.

    • SchillersMEMBER

      House prices in Melbourne’s inner north east have gone up roughly 2.5 times since 2010, not the 400% you infer. Nevertheless it’s still insane. I know, as I was in the market for a property in those suburbs then…and now. Demand in these inner suburbs far exceeds supply. It’s kept at nosebleed levels firstly by developers putting a very high price floor underneath any and all land that come onto the market, mid career professionals with big deposits (both from the bank of mum and dad and capital gains from the sale of their first home. Dual incomes of $200k+ total are not a problem for them) and crazy rich Asians. Alphington, Fairfield, Northcote (etc.) are no longer suburbs for first home buyers.
      Yes, there are many boomers rattling around these suburbs in homes with too many bedrooms. And every time their properties come up for sale they are snapped up by the the three classes of buyers I listed above. Negatively geared investors have fled as land prices are too high, rental yields too low and money (debt) is ridiculously cheap for owner occupiers with high incomes. When you add insane levels of migration destroying the amenity and livability of areas further out, pressure from the wealthy (either asset or income rich) to locate (relocate) to the inner suburbs is insatiable.

  4. I regularly go for bike rides around inner-city Brisbane. So many apartments in West End, the nimbys have their signs out in front of their houses “City planning, not City cramming” Need to make up some spoof signs: WE WANT CITY CRAMMING!.

    • But they loves them some ethnic food and supporting a local store owned by a foreigner who came into the country by buying said store.

  5. But but but a proterty lawyer told me emphatically yesterday that it is a buyers market and she is advising clients to buy (leave aside the fact that unless she has an AFSL …)

    • I didn’t think you needed a financial advisory licence to advice about Real Estate purchases?

      I used to have a series 7 US financial advisor registration when I worked in NYC to and worked in banking (as we were giving advice). That loop hole should be fixed in Australia in relation to all financial advice (including RE).