Haha, I wonder how the agents spin that @Summer12?

I still bet those apartments are >$3m

There's a big back story to that. Basically, those apartments were built knowing full well they were going to be right next to a theme park (the park has been there since the 1930s). When the residents moved in they complained about the noise (oh we didn't think the rollercoaster would be that loud!!!) and managed to get the park shut down. The saga went on for a few years but eventually commonsense prevailed.

This was around the turn of the century.

Luna Park was purchased from SA to say thank you to the residents of NSW following the years of bridge disruption and noise. I know the irony, purchasing a fair ground as a thank you for accepting noise.

What got me was those apartments are new build/reno, but so is the roller coaster, Chicken and egg situation.

Not for me thanks.

Fun / Sad fact. 4 days ago was the 20th anniversary of the closure of Wonderland. :(

Always so much better than Luna Park

Always keen for some confirmation bias @Summer12!

Thanks for sharing, I'll definitely check it out

Yes, @Hands, the issue of relative purchasing power compared to other cities (comparable or more global) is frequently overlooked in the housing debate, and there seems to be a habit of comparing the present with the past.

Affordable housing is absolutely a basic human right. Owning an inner city house on a block of land on an average income in a global city is not.

It does seem precipitous @Nnyck777

If it wasn't for various interventions by goveremt, I dare say it would have corrected a long time ago. But that's the hard thing I guess, almost anything will be done to protect housing -- a classic moral hazard.

Whether or not it pops or when, I have no idea. But i think it's reasonable to say that the further process rise, the more it lowers future return potential. As is the case with shares.

In fact, if housing were looked at like a stock, in Sydney you're looking at houses on a PE of 40-50, whose earnings (rent) are growing at 3-5%pa. Seems expensive to me.

Anyway, it's delivered exceptional returns for a lot of people for a long time, and has proved lots of people wrong (including me). And these things can go on for much longer than what anyone thinks possible.

So who knows?

I am mindful that should Australian property suffer a big correction, the stock market will be hit just as hard and we'll likely have a nasty recession. So the best case scenario is a long period of sideways prices.

It is a frustrating situation being a non homeowner (would like to own a residence but not invest in property given the valuations). Any serious policy moves to address house affordability would simply make it:

a. A worse financial investment

and

b. Cheaper to buy your first home

Haven't seen any moves to address the first issue. Unfortunately because it's built on credit availability and record low interest rates it will eventually have some sort of nasty correction but I agree there is such implicit government support that this could be a very long time away.

Strawman I think you're right that the stockmarket will crash if the housing market severely crashes. This being said, what's the connection? Is the stockmarket overvalued currently? Housing market obviously is.

I think I'm trying to understand the link between the two. Why is one causing the other? How long is it going to take before the markets recover?

Very important for someone trying to save for a house.

I'd say its related to the fact that the big 4 banks make up such a large part of the ASX index. And given the strong relationship between the banks and the housing market, I'd say if there was a crash in the housing market, then the big 4 banks would follow and hence the rest of the Aus market / index.

I recall someone in the building industry or the like once spoke to me about it... i can't recall the quite exact details... but it was based off the FHOG and the effect it was having in WA over the last year.... basically how those who has rushed to sign on the dotted lines were finding issues jus trying to get a 'slab down' and to meet all the requirements to get the grant. Just so much backlog... quality of houses being built was rubbish. Littered with issues etc.

I built my current house back in 2015-17 period, and even then it was hectic, but manageable. I can only imagine how bad it must be now with all the money and work slushing around. Any tom dick and harry trying to get their money as a tradie working the tools.

I remember someone was then explaining to me either an article or their own knowledge (my memory is hazy) about why the FHOG was a rort. In short, the government keeps throwing grants at the problem, which only further increases the amount of money those have available on existing properties have to bid up the price of property even further. As a result they keep pushing up the same property higher, and it doesn't resolve any of the supply issues. At the end of the day land supply and the hamstrung red tape means more people are then pushed eventually to the outter circle: building brand new on what is a limited, red tape hampered supply. We then get the bullish conditions we're seeing and the rubbish tradies and contractor work that start to crop up.

In essence the solution to all this band aid 'throw money at it' by the government, would be to actually get off their seats and put some actual "effort" into reforming the supply side regulation and thereby responses. Getting this sorted could improve affordability and availability to all, but for some reason they just find it so hard to do.

Agree that the standard of building has been woeful in a lot of places. Opal towers got a lot of press, but there's been loads of other examples. There was a good 4 Corners episode on it last year.

Who knew that self regulation wouldn't work? ;)

They threw up some units near me a few years ago and already you see significant water damage and other issues. I feel sorry for the people these were flogged to.

In regard to your question @Stuey727 the reason the share market would be impacted by a housing crash is that, in part, it'd severely impact consumer confidence and spending. Think the wealth effect in reverse. Retail stocks would be hit especially hard.

At the end of the day, one person's spending is another's income.

And as @BoredSaint says the banks would he directly exposed, facing material writedowns.

Even businesses that didn't have a lot of direct exposure would probably see their valuations fall due to the hit to investor sentiment.

Still, even though I think a lot of property valuations are stretched, I'm not saying a crash is inevitable or even likely. And even if there is one it could be years away. I have no idea.

@AlphaAngle What are your thoughts on accessing super for your deposit?

Does anyone remember the days of government introducing ‘first homeowners grant in early- mid 2000s?’ The grant was up to $20k for new builds.

Does anyone want to hazard a guess about what happened to the cost of new builds once this government grant was introduced? ……Did the price of housing:

1) increase by >20k

2) decrease by >20k

3) do nothing

A toffee apple for the first to guess.

Given this history I wonder what would happen with $$ value of housing with super access?

Let’s throw this spanner in the works for fun…..who here thinks the old age pension will exist for retirees in 15 years?

Are houses the new alternate pension plan? Reverse mortgages?

How many people know retirees who are asset rich but can’t get pensions. There already seems to be a lot of elderly people accessing reverse mortgages to survive. Interesting how precarious life can be for retirees also.

Excellent take @SaberX ! Hard to do? Or unpopular to do?

Big banks face increased default on loans, lose Triple A credit rating. Find it hard to access international funds to prop up banks. More defaults. Restrictions tighten…,.less lending. Want to start a new business - where value may actually be added to the economy rather than the purported value of a Bunnings kitchen? Forget it.

No loans for business no capital available for companies on the ASX to grow and increase revenue. Mass collapse for companies with debt and no free cash flow.

However companies with balanced books and profit should survive. Residual money will flow to these safe havens in all likelihood.

Thanks @Strawman for recommending The Most Important Thing by Howard Marks recently. Just have to find that second order thinking and protect capital and think about the knock on affects once this pendulum inevitably hits its peak and reverses course.

Invested in the reject shop in 2005 and this served well. People will still need to shop and shop cheap. And although less palatable and morally ethical in hindsight debt recovery agencies are a possibility. FSA served me well in 2008.

Not sure if history will repeat. Other thoughts would be awesome.

Nnyck I'd imagine that cash for new builds would be very different to cash for existing houses as it's actually helping increase supply.

Okay, well follow up question then, what stocks are going to be good to hold in light of a housing market crash?

Retail is bad. Good balance sheets good. Global commodities probably relatively unaffected - I get the feeling that this is most strongly an Australian phenomenon rather than worldwide from what I've seen.

Actually maybe that's part of the answer, if it's an Australian phenom, then worldwide stocks may be useful.

A quick google check in 2004 was $14 K for new builds and $7 k for established housing.

https://ojs.deakin.edu.au/index.php/dpibe/article/download/52/59

Useful to look back and be reminded.

Both highlighted graphs from the above linked reference. In short housing prices far exceeded grants offered in both existing properties and new builds.

@Nnyck777 I wouldn't give up on the "holes" part of the economy yet. A week or two ago the original Economist magazine had a feature on the economies that will prosper from minerals needed for a future ESG world. Australia (for copper and a bunch of other commodities) was named alongside Chile (for their lithium) as two big winners.

Although property prices seem expensive in Australia, in fact the growth rate is around 7.8% compounded, which does not seem excessive.

It is also in line with regional UK property price growth.

Compare this price growth to Japan in the early 1980's where the growth rate was around 13% pa and has now returned to a long term growth rate of 6.5%pa.

"Sources: National sources, BIS Residential Property Price database, http://www.bis.org/statistics/pp.htm."

I keep my own rough tracking data and my perspective is that at the moment Sydney property prices are above the trend line for price growth (but not really like 2004) and so growth may slow, but I don't see a sign of a bubble.

I don't invest in property, but keeping a general sense of where prices are helps me interpret articles in the press and provides a reality check of the real situation. Understanding where one is in any investment cycle is a crucial factor in not overpaying for any asset.