I've been reading a lot on other forums and news articles about Aussie house prices.

So many people think houses are severely overvalued and due for a major crash. Nearly every day there's a report in the papers about auction clearance rates collapsing, rental vacancy rates going up, vendors being unable to sell etc etc etc.

The worst places seem to be Perth and Melbourne, with Sydney holding up a bit better.

Steve Keen was on the news last week talking about a crash of 40%. That would hit homeowners very hard and would be just as bad as the USA crash, and look at the mess they're in right now.

This has become a big talking point among my friends and family.

Are house prices going to crash like in the USA, UK, Ireland, Spain and other countries.

Or is Australia unique and able to maintain high house prices indefinitely?

I'd love to get the thoughts and ideas of other members here.

I'm renovating a home at the moment, but what I'm trying to figure out is should I sell or hold on when the reno is finished (should be done in two months). Maybe it's too late and prices will dive before I finish.

It's a bit of a worrying time to be perfectly honest.

BB.

DP and I have been keeping an eye on house prices around as we're looking to buy later this year. My interpretation of the articles, market trends etc are that house prices won't substantially crash as in lose value by 40% or whatever, but they may not increase in value as much as people would like. I've generally found that the houses that are not selling or have been on the market for months are over-priced and people just aren't willing to pay the asking price. It also seems that, from what other people are saying, that sellers just aren't willing to negotiate. There appears to be a shift from a seller's market to a buyer's market. It also depends on the area as well. There does seem to be movement outwards, so people are buying further out from the CBD.

This is all my speculation and observation btw, I'm no expert.

They already are crashing.

Go to Domain and search - houses for sale by a tick box section in a state. e.g NSW, hills

Then sort results by recent results. See how many many many are listed as 'updated'. These are all the ones who have coped a price reduction. In some areas there are pages of 'updated' listings.

When we bought our first house, Australia was in a recession. This was in 1990 we bought our house for 76000 and the interest rates were 8.75-9.5% the 7 years we had the house. We sold the house in 1997 for 76 000, the market just didn't move. When we bought our next house it was 110 000 and interest rate, I locked in, were 6.75% for the whole time we had that house. We sold that in 2005 for 270 000. I think the experience we had with our first house will be more the case. Although the issue now is that house prices have escalated so much in the last few years it wouldn't surprise me if there was a slight decrease in prices.

I agree with the PP that people may need to more realisitc about their sale prices when they put their house on the market.

edited to add I live in Adelaide.

Always a million dollar question. Steven Keen also said that house prices would drop two years ago at the start of the GFC. Some of the higher end houses did drop in price, however the lower and middle seemed to hold their own.

I think in some places they dropped a little, then picked up then stayed stable. Some houses around here were not selling for 6 months and then they all sold suddenly. Some houses hardly had the for sale sign up and they were sold immediately.

I think mostly outside of the popular Metro suburbs they might drop a little again.

Depends really on employment. If unemployment rises then people won't be able to pay their mortgages, especially those who jumped at the very generous Rudd 1st home buyers grants.

That's what I've been noticing too. The number of "for sale" signs in my suburb has shot up in the last 6 months, and if I look at these houses online, they've been reducing the asking prices and quite frankly I don't like the direction they're heading in. The prices they're asking seem low compared to a year or two ago, but even with that, they're having difficulty selling them

well they have certainly taken a nose dive around here - Central Coast NSW!! there are 3 housed in our street that are on for just over 300k - and they would have sold for 50g more 6 years ago - we bought at the peak and we would get no where near what we paid for it now! - tis very very depressing!!

DH and I think they are going the same way as the US and UK. We have followed Steve Keen's blog for a while and agree with his predictions, and can now see them coming about. We are waiting to buy, watching how the market is going, and it definitely has stalled and (hopefully from our point of view ) will fall soon.

Australian house prices are the most overvalued in the world, I don't know why people think we can sustain this? It's not like our incomes have matched the enormous rises in house prices and debt levels. House prices do go up over time but recently they have gone up too far too fast and I think the market is already beginning to correct...

We bought an apartment in the southern suburbs Sydney in August of 2009 (a year after the market 'crashed') and just sold it for $15k above asking price in 8 days.. It increased in value by over $60k in those 2 years. I dont see the market in Sydney slowing anytime soon, but it would be nice if it was a little more affordable.

Only one house has sold in my area in the past month, but every week about another 5 are added.

The oldest ones drop their price often several time. Some disappear only to pop up with a new agent.

Practically nothing (unless exceptional) is going to Auction as the competition isn't there. Some start listed as Auction and then closer to the date change to 'offers over'.

This is for Sydney north shore. The market has died here. I look at the listings every day as I am trying to buy the right house for me.

Still reasonably strong around here, although I will agree with PP that some sellers have very unrealistic expectations. There is a house very similar to mine 2 streets away.... they want 50% more then I would say my house is worth. VERY unrealistic.

Auction I went to last month (Sticky beak).... there were 6 people competitively bidding and the result had everyone .

I was looking at some map of melb which showed which areas would decrease significantly and which would go flat. I would say my area would be a 'flat' area rather then a huge decrease (and from memory this was what the map had).

Yes, that's the thing. All sorts of well respected international bodies have come out recently saying Aussie homes are the most overvalued in the world. I'm talking about people like Demographia, The Economist, Jeremy Gantham etc etc etc. And of course Steve Keen too.

They can't all be wrong, and the only people saying the opposite are those with a vested interest in rising prices so I take what they say with a pinch of salt. Just last week we had Residex frontman John Edwards saying we could be headed for a one-in-one-hundred-year property crash (see here..... Residex warns of 100 year crash) and if guys like this are talking about it then the risk must be real and serious.

I just wish I could get out now to be frank, but there's no way to sell while renos are underway and even then by the time you get everything sorted out and the advertising done it could be another 6 months before we can sell, and god knows where the market will be by then.

Would you have a link to that? My sis is in Melbourne and she reckons its even worse there than Sydney!

No I can't remember where I saw it, but I remember some of the outer suburbs were 20-40% hit by the predictions. I remember my area was flat (which to me makes sense).

I think prices will continue to drop. I think it's hard for those who have to sell.

I think most people will avoid selling until prices catch up again. Good time to buy in the next few years.

Iincome has to match mortgages. The house may have cost the owners 1 million to build (land plus build) but unless a buyer has the income and equity to buy it, it either has to drop or be removed from the market.

Mards are you talking roughly 2005? Because that certainly was the peak price for low to medium housing on the Central Coast and it was way over inflated. The house we are in was sold roughly in 2004/5 and it was then a two bed old fibro house, small bathroom and lounge and an old laundry up the back $280,000. They more than doubled the size with renos and cladding, now 4/5 bedroom, lounge/dining, huge bathroom, front and back deck, garage etc and certainly would not have got their money back from the renos. We got it 2 years ago for $330,000.

IMHO I think the areas that had massive growth in a relatively small period of time (like Western Sydney, many areas of Perth) will be looking at little or no growth in the next few years at best, or drop 10-30% at worst.

I don't really buy the whole housing shortage thing,I think it was/is a load of crap but I don't believe the horror stories either.

I think the bigger issue is when the baby boomers start downsizing, without a big increase in immigration I think we will really start to see oversupply of houses.

I have zero sources to back any of this up though.

Another question - if the market does crash what happens to interest rates? Do they stay the same, come down or go up? I'm not worried about what my house is worth as I have no intention of selling so I'd just keep paying my mortgage and doing what I do.... but if interest rates were to change greatly then life may become more and more difficult.
And, I suppose, if you can't afford your repayments and are forced to sell and you can't get what you owe THEN it would be a huge issue for us.
I've just had a look on realestate.com and there is a house around the corner for sale which was also for sale when we bought here 2 years ago - we wanted to go look at it but it sold before we had a chance. Now it's been listed about 2 months and the price is the same as it was 2 years ago (well still in the price range we were looking at and less than we paid here). Definitely looks like you get mroe house for your money now than 2 years ago.
A friend is selling his house 5 minutes south from us and had little to no interest at first... but it's increasing now stamp duty is due to sky rocket in August. If he hasn't sold by then he might rent it for 6 months and then try again.

Oh and I'm in northern Brisbane

My house is where I live, I don't consider it an investment. I can afford the mortgage and hope to be able to continue to do so in my very stable employment for many years to come. I hope to live in it for at least another 20 years, and if it happens to increase in value (above the interest I have paid), in that time, well that's a bonus - but not part of my financial plan.

It's my home - not my superannuation. I don't really care about "property values".

I agree with your statement but my concern would be if, for some god awful reason like the death of one of us, the house would have to be sold. What I don't want is this situation to arise and then having to sell for a shortfall because of falling prices and still owing money at the end (and yes, having worked in this field in the past, the banks may let you sell for a shortfall and leave it to their insurers to collect the debt)

I'll be dead. It won't matter.

ETA. My life insurance would well-and-truly cover the outstanding mortgage.

Like silverback, our super has a death benefit that would cover the mortgage if one of us died.

TBH I'm hoping so..... Our house settled today, we made a small profit on it in the three years we owned it and sold it in 4 weeks although it was renovated in those three years. I've convinced DH to rent for a year or two in the hope that prices will go down and we'll get more house (or land) for our money. We've moved from Adelaide to Brisbane and I've noticed prices are falling here and houses are on the market for a very long time so it looks that way here...

I am in the same area and haven't seen too much change really. Actually, things have gone slightly up since the 3 years ago we bought...or maybe just in our suburb, dunno.

Im with you, also in Brisbane. sold in 2009 and been renting ever since. The market here has slowed a lot.
We are keeping avery close eye on it waiting to decide what we do next.

I am in a relatively expensive suburb in Melb and I have certainly noticed that properties are taking longer to sell. On the other hand less stock is going on the market and less quality stock as well, so it is hard to tell. Good properties are still doing well. Some vendors are wanting crazy prices for stock that is not great, which explains why they are hanging around for a while and not selling.

I think that it will stay flat. There is no reason for a real crash unless everyone suddenly needs to sell and the only way that will happen is if there is a really major increase to the unemployment rate.

I don't care too much as we will be buying and selling in the same market anyway and will just hold on until we think it is the right time.

This is exactly us- we made $120000 on our first house- 3bdrm place (bought for $365000 in 2005 and sold for $485000 in 2009) and thought we'd rent for 6 months and then buy but by the end of 2009 the houses had gone up to near $700000 for a 4 bdrm place in the same area So we have rented for over 2 years now and have seen the same houses drop to around $550-$600000- massive drop! Still waiting to see if they drop even further??

Yep bought at close to the peak - but we needed too! we are north end of coast!! so the market has really taken a battering!! ahhhhhhhhhhhhh!!! Good time to buy up here now!!! not so good to sell

I am not currently concerned and have no plans to sell. If something were to happen to my DH (I am a SAHM) then we are covered insurance-wise. In fact I am quite liking the current market because we are looking to buy an investment property this year.

i dont think prices are falling... will be falling
i think the update thing is that people are over pricing their houses to begin with ( based on the prices i've seen around here - bayside bris in the last 12 months) and the updates are more where the price SHOULD be ( eg a 2bed 1 bath today is NOT the same in value as a fully renovated 5 bed 4 bath 18mths ago... those people were KIDDING themselves thinking they'd get the same price just because it was 18 months later)

and the issue is the banks- if the banks were willing to give money as readily as before there wouldnt be an issue
we've gotten bridging and then bought and sold the original 4 times in the last 6 years
our circumstances havnt changed... in fact income has gone up... but the bank is no longer willing for us to do this.. our ability to pay back said loans hasnt gone down

so if thats what the banks are doing for others then thats where the issue is, people may want to buy even at the higher price but they arent being allowed to .

i tend to have a simplistic view on this tho lol

In our area they have fallen. I have a mate who bought for $375k 18 months ago, a bit of a bargain but basically a fair price for the time, did a $10k reno and just sold for $345k. That's more than 10% down in 18 months plus the pain of a reno built in... yuck.

The market is definitely slowing in some parts of Sydney, not the inner city though. I'd see it more as a correction than a crash.

Ouch, that's like the place we're in. Just spent a fair bit on renos and now might have to sell in a down market.

Exactly this.

We are looking to buy and have been for a few years.
We have pre-approval on our loan but it needs to be reapplied for every 3 months.

2 years ago the bank was willing to lend us almost twice as much as they are now and nothing has changed in our circumstances. Therefore, we can't spend as much.

I don't think it's headed for a complete crash, but I think things will be pretty dismal for a while. I buy/renovate/sell houses, but was lucky to sell my last place on the tail end of the boom (plus it was a highly sought after location and type of house), traveled for a bit, and then bought this place at the start of the downturn. I intend to stay in this place now for at least 5-7 years, which would have been inconceivable to me before as it's not going to be worth continuing to buy/renovate/sell for quite a few years now. Those who are lucky enough to be in the market and don't have to sell will just have to ride it out. Prices will start to increase again eventually.

There is a systemic housing shortage. Unless the govt can suddenly create all of the housing that is needed, or immigration stops, or we start living in dwellings with a higher number of occupants, then there will not be a crash.

Demand exceeds supply. Prices go up in that situation, not down. Countries where there has been a crash had an oversupply of housing.

Agree with priv. Demand for both rentals and own homes will keep on raising as population rises. As houses become too expensive for first home buyers more units and townhouses will be built. Sydney will go up literally!

The banks are being more conservative due to the result of the GFC. And so they should.

Australia is a lucky country at the moment because we are in a good financial situation due to the actions of current and previous governments.

While I have no doubt there will be a correction to the market of up to 15% in some areas like Perth where the increase was due to lack of supply rather than actual land value, but I don't think it will be a crash as forecasted.

No. To put it simply....there is not enough supply in Australia.

I think the not enough supply is a myth.

Many of the houses currently for sale are empty. Some are investment properties but many look as though they are second homes.

Rentals too are staying on the market for some time in some areas - empty.

People like myself are renting and looking to buy. As soon as we have bought our rental will become empty freeing it up for someone else to occupy.

Take a look at how many empty houses there are on the market.

So I guess you're not within 100km of Sydney CBD.

The 2006 census data shows that there has not been a housing shortage at all, I will be interested to see the data from the upcoming census.

From the census data: there were 830000 unoccupied dwellings in Australia in 2006, From 2001-2006 the population rose 5.79% and the number of dwellings built rose by 8.1%.


If you look here (hope this works, haven't posted a link before) http://www.bubblepedia.net.au/tiki-index.p...HousingShortage you can see the they were spruiking a housing shortage in the US before the crash, just as they are here. Also I notice that a lot of the 'shortage' talk comes form those with a vested interest...

I don't believe in the shortage claims either. I live well within 100km of a capital city and there are many, many houses for sale and rent. There may be shortages in CBDs, but not outside of that narrow circle.

I think prices will stall in some areas and drop in others.

From what I have been reading lately, yes some markets will crash, some already have started to. Melbourne is apparently the most vulnerable with oversupply and slowing population growth. Brissy has already slowed right down and lost value mostly due to the floods, and WA seems to be copping it.

Sydney has stalled, but not dropped it gained just 0.6% in the past 12 months, where it has been gaining an average of 6.something% per year over the past 10 years.

It's interesting times, and I am glad we sold at the peak of the little bubble last year, and are now in the position to buy once the market hits the bottom of the cycle.

I don't believe the shortage claims either (and I live 5km from Sydney CBD).

I DO believe that there is a shortage of affordable housing (including rentals) - however there is not a shortage of homes. I think that these are different statements.

There are many vacant homes - in my circle of friends, I think I am the only person who does not own a holiday house (including several that own holiday homes on the Northern Beaches of Sydney, so within 100km of the CBD). Those houses are vacant 90% of the year. In my street there are at least 2 homes used only part of the year by their owners who own other houses in other states/countries.

So there are empty houses in this city. People hold empty houses because they believe they are a good investment from a capital gain perspective and they have steady income that allows them to afford to hold them without receiving ongoing rental income. If either of those things were to change - I think you would find a very different housing scenario here, including a moderating of rental prices and availability. Will that happen? no idea

I think the most likely scenario is a flat market for a few years.

Housing NSW and Shelter NSW both state that there is a critical shortage of housing. If someone can afford to hold 2 houses for their personal use, this does not mean that their second home is actually available to ease the housing crisis.

Likewise census data - how can they possibly know the dwelllings are vacant? All they can know that is during the time the census takers were attempting to contact the dwelling occupiers, they were not available. They may have been on holiday, away on business, or in hospital or other residential. None of which means their dwelling is vacant. Just unoccupied on census night.

I work in RE in Sydney CBD. We have met our 2010 sales quota $ wise in past 6 months, so doesn't so to be crashing or 'correcting' here. We have sold 4 x $2mill properties these past 6 wks, which is quite huge.. Vacancy rates across nsw are at an all time low June just gone.

Sydney's supply vs demand will hold house prices steady.

Those organisations are concerned with affordable housing. There are ample houses. Those houses are not available for sale or rent at the moment - however should they become available (due to a change in the economic climate) there will be a change in the supply of housing.

Water usage (or lack thereof) is the best measure of vacant dwellings.

I don't intend to argue the point of housing shortage - as an awful lot of commentators, industry real estate, investment professionals have strong views that there is a shortage. And I think those in the rental market will also concur as I know that it is difficult to secure rental accommodation.

However, in my opinion there are ample houses for our population - I agree they aren't available houses at this time - but the point I was attempting to make was that if circumstances change in the economy - I believe you could see a sudden change in this "shortage" of property.

Not in my area. House prices are staying very competitive and up.

Shortage or no shortage - a shortage is only a part of the equation and any actual shortage will only hold prices up for so long.

The whole 'supply and demand' equation is very simplistic.

Property continuing to rise exponentially is like a ponzi scheme - you always need someone else to come along and pay you more for the same house than you paid yourself.

Salaries are just not keeping up. Nothwithstanding any 'shortage' if people cannot afford the sale price on current salaries,they cannot make money appear out of nowhere and continue to push prices up.