Sydney property prices are already up 20% in 2021!

With nearly four months to go this calendar year, Sydney’s dwelling prices today hit 20% growth for 2021:

Dwelling growth

Note: Perth’s index temporarily suspended.

Even with Sydney’ dwelling value growth slowing (see next chart), it is easy to envisage that Sydney property values will grow by more than 25% over the full calendar year:

Sydney dwelling value growth

Growth slowing.

We have not seen a property price boom like this since the late-1980s.

Unconventional Economist
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Comments

  1. Goldstandard1MEMBER

    What goes up, must come down. For some reason people think the ups are rational but not the downs.

    I find that part most facinating. Perhaps don’t go balls deep in debt.

    • Except the basic forces of gravity do not apply here.

      The entire apparatus of the Australian state will be used to make sure what goes up, stays up.

      • You really expect this lot to be able to juggle all the balls that are required to keep this inflated… up to now the market forces have helped them, but name something they have tried to do since coming to power they didn’t screw up?

        • Yes I do.

          It’s not just the mediocrities filling the duopoly’s front benches in parliament, but the Treasury, Reserve Bank, tinpot regulators and so on.

          Pretty much every arm of the Australian state will be used to prop up the housing market.

          It is what it is.

      • Goldstandard1MEMBER

        Nope. Almost out of tricks and it’s almost completely out of Australia’s hands now.
        Not the time to be leveraging up at all.

        About three to midnight now.

        • lol look at the bears getting all excited again. They’ve got plenty of levers left to keep kicking the can for a long while yet folks.

          • I’ve had my eyes open for 10 years and here we are. You will still be talking about the impending crash coming in 10 years time. Meanwhile the average property price in Sydney will be worth $2.5m, mate.

            NIRP
            Super raids
            More mortgage holidays
            Longer mortgage periods
            Mortgage Keeper
            Relaxed lending standards. Your dog can get an IO loan to buy a house.

            Plenty of levers left that they will pull before the music will ever stop on Aus housing.

          • Jumping jack flash

            It just so happens through sheer coincidence there is just about enough super to cover all the outstanding mortgage debt.

            just saying.

          • Goldstandard1MEMBER

            Not sure if you are being sarcastic but that’s not what I said.

            It might be a great idea to buy know if you are only leveraging 50%, don’t care if property falls quickly, and it’s maybe your dream home. I’m simply saying now is a very dangerous time to go all in on debt as if it’s about three to midnight.

          • I have agents calling me back, being polite, and appearing interested. Scary times indeed. Going to inspections, even though we’re booked in, there was one couple before and no one after with 3 inspections yesterday. Plus more appears to be hitting the market – we must be due some distressed sales soon. I’m gonna sit this one out for another six months (and maybe miss out on another 10% growth).

        • Nah; there’s as much room as the RBA is willing to print. As long as it channels into the banks it will hit houses first, before the money trickles down to other sectors.

          In terms of relative (localised) the money flows could trickle like this; with every step of the ladder getting less gains:

          – Housing bought initially by FHB/investors.
          – Banks and their properties
          – Tradies/Construction Workers/Real Estate/Renovators and their properies
          – Luxury items like 4WD/Jet Ski’s
          – Then slowly trickles to everyone else.

          If the RBA continues to finance bank debt and keep interest rates at zero the sky’s the limit. After all the inverse of 0% is infinity – money is worthless and so everything is worth a LOT (theoretically infinite gains are possible).

          People think that shares and other asset classes are better than Australian property are kind of right – they have their own reserve banks printing money (e.g. US tends to channel into the stock market vs the housing market so over there stocks may be better). In the end we are in a world of bubbles right now; or rather a big devaluation of money and consumer goods relative to capital goods.

    • Jumping jack flash

      “Perhaps don’t go balls deep in debt.”

      What is the realistic alternative?
      How else do you suppose you are to find the hundreds of thousands, and in some cases millions, of dollars to pay for houses?

      There simply is no other way than to become eligible for the debt you need.
      To save that much money up is pretty much impossible for the average person.
      Banks have successfully inserted their debt into the economy and the economic cycle, and made it an absolutely essential component.

  2. The much-touted “IO Reset” turned out to be a fizzer. Banks tightened their lending rules in 2017 and told investors that they would have to switch from IO to P&I when their current term expired. We all expected that investors would not be able to afford P&I and would therefore have to sell one or more of their properties. Instead, ultra low interest rates arrived at just the right time. Investors were easily able to pay P&I and nobody had to sell anything.

    • The RBAs role has to be seriously questioned in this case and going forward. They say housing is not in their mandate but internal communications were throwing up ideas of suspending property transactions.

      • Jumping jack flash

        Houses is not in their mandate but protecting the banks pretty much is.
        If the banks are around 60% mortgage debt, and the only metric used for determining risk is LVR, then protecting the values of the assets that debt is attached to is in their best interests.

        • Am pretty sure protecting the banks is not one of their mandates. So back to my point their role must be questioned and not by some committee who’s members have a conflict of interest.

          • Jumping jack flash

            Well.. more or less it is to provide financial stability. They do this through the banks.

            Look at it another way. If all the banks fell over because houses crashed in value and all their mortgages went bad, then would that be a good outcome for the RBA?

            That’d look great on Phil’s resume.

  3. What are the volumes looking like? If its 10 people fighting over 1 available property then the will bid higher than if its 100 people fighting over 90 properties…. and as they estimate all houses based on the median price of recent sales this would make it look like its going up quickly when overall its only the small number of transactions that rose…

  4. Is interesting that post every boom under Glen Stevens it prices were coming down then rates were lowered, this will slow down and start to decline at some point, can the RBA go negative? Probably, any reason why rates would rise? Don’t think so?

    • Jumping jack flash

      No need to go negative. There’s plenty of alternative and equivalent things they can do. Negative rates is such an ugly solution.

      For instance, a UBI is equivalent to a rate cut. Everyone gets money from heaven and uses it to pay their debt.
      QE and the TFF are equivalent to rate cuts – the banks get some of their interest bill paid by the government, or access to cheaper debt, and therefore can reduce mortgage rates for the people.
      Stimulus in the form of deposit subsidies is equivalent to a rate cut, especially since the main hurdle to debt isn’t the income eligibility, it is saving that deposit!
      And of course there’s early access to super, arguably the driving force behind this current boom.

      • We took 40k out of super last year to supplement the 80k we had saved (we qualified to do so). It’s the only reason we could afford a house in Sydney, 60km from the CBD.

        It’s worth 125k more now than when we bought it 9 months ago (bank valuation, not mine).

        We bought certain the market was about to go off a cliff, but our opportunity window was about to close.

        Turns out I underestimated the lengths govco would go to to prop up house prices.

        • Well played, takes balls to make the leap if you spend lots of time around here. But means you do so aware of the risks to weigh up against the rewards.

  5. I wouldn’t put too much faith in the data for August. In my area, only one house sold in the past two weeks. One.

  6. Jumping jack flash

    A big part of the problem was Scotty’s stimulus was a bust.

    Had they followed the rest of the world in actually providing a competent stimulus, we would have wage inflation return. Just think, no immigration due to COVID, and everyone gets a ton of free money to spend. What’s going to happen? What needs to happen?

    But no. If it can be done wrong, you can be assured that Scotty will find out how to do it the wrong way.

    Had wage inflation returned, then there would be no problem, it’d be 2007 all over again, but now all we can look forward to is 2019.

    And to top it off, if all the other countries’ stimulus actually works correctly then a global tidal wave of inflation will crash down onto Australia, and if we’re not inflating too when that happens, then there are going to be big problems.

    The doomsayers will get their wish, and Australia will be reduced to a 3rd world country.

  7. reusachtigeMEMBER

    Yeah, it’s ace. I’m just so wealthy and continue to grow my wealth massively through diversified property investments. Today I was doing the rounds in Newtown, one of the most diversified suburbs I’m invested in, and I saw the most farked up thing yet during this slight pandemic, and that’s saying something for Newtown. Bloke was walking along the relatively crowded street (I think it was a bloke but you never know in Newtown) dressed in shorts, a T, and thongs AND wearing a farkn gas mask. It was one of those full rubber head coverings that come down the neck. It was the most stupid things I’ve seen. If I knew that bloke I’d make sure to never know him again. Weirdo.

      • He’ll take it with him. A new type of burial service will be offered, where you’re burried in a 90cm thick, huge titanium melted shut safe. All your cash, jewelry, shares, bonds, property title deeds, 1 car only, 1 pet only, concubines, are all locked in with your mummified body, then you’re buried 50 metres under ground.

        The service will be called, Take it With You.

        In 50, 000 years time, when the world is repopulated and “civilised” again, your carcass will be discovered, studied with fascination and mysticism, revered, and the new world will know just how wealthy you were. It will compete and beat cryonics for the rich dead dollar.