What is the future of Australia's housing market? (Part 1) | 7.30

[Music] you just need to be willing to ride that market ride that storm and ask yourself the question is my money better off somewhere else or am i happy to hold this asset in this investment is it a challenging market even for you the market is challenging for me an auctioneer is only as good as the product of their selling those of you who may be intending on bidding we have an exceptional property terrific code I think this home really ticks all the boxes weld you'd be happy to commence the meeting today homes here to be bought so you let me know the number that you're happy to start the auction out here folks [Music] top Sydney auctioneer Damian Cooley is getting used to the sound of silence week one we are telling you that you'd need to be circa 1.5 million dollars if you'd like to be competitive here at the auction even in a suburb like stand more close to Sydney CBD sellers expectations are falling fast during the campaign we reduced that quote to 1,450,000 it's too far away from where we need to be I appreciate your officer you're leading something cerca the median 450 thousand three years ago when the market was booming the owner paid more than 1.3 million dollars for this place but caution now reigns supreme in Sydney's auction scene ladies and gentlemen we're gonna set the property aside in our vendors favor at 1 million four hundred and fifty will go straight into negotiations with those registered parties so we here today I can't thank you for your spirited bidding but I can't think if your attendance and a round of applause for the auction even 150 twice million 150 75 million 380 see what about 390 sir maybe say 390 in recent years Damian Cooley was routinely whipping bidders into a frenzy is there any better offer often lifting prices above the reserves third time before it goes sir back in the boom when we were getting five and six register bidders at every auction it was really easy to look good it was easy to extract bids buyers were had this fear of missing out and they were they were always jumping over the top of each other to play speeds and high increments now that markets change while you're starting to see is the news stories which are quite negative around the outlook for housing markets particularly in Sydney and Melbourne I started to change people's behavior so you're getting a broadening of the downturn when the market peaked last year more than 70% of properties in Sydney were selling at auction it's now less than half we call the top of the market last year and it wasn't for any single factor it was the fact that the market was facing so many headwinds all at the same time which was quite unprecedented Viki Calthorpe is downsizing and desperate to sell her house in Sydney's around ouack and how do you feel having to sell into this moment yeah it's a bit scary Vicky's house failed to sell at auction she and her agent are working on Plan B because I mean how many groups to have we head through yeah so over 15 oh yeah since the auction Vicky's had an offer but is holding out for more if you have to discount already you are yeah we have we have we've lowered our our expectation would lower that price I don't know how far or how much further we would be prepared to go initially it was generally higher priced homes in Sydney and Melbourne for investors but that downturn is now spread and this is the concern I have is that the likelihood of Australia facing the longest housing downturn in history has increased and it seems quite plausible to me that house prices will continue to fall for the next year into 2020 absolutely there that the chances of an economic downturn being fueled by a housing market downturn are heightened at the moment because of the wealth effect a reversal of the wealth effect because fewer transactions in the market Australia's recent property boom was overwhelmingly led by Sydney and Melbourne over the past decade Sydney real estate surged ahead of every other capital city apart from Melbourne when you look at the value of housing across Australia nearly 60 percent of Australia's housing value is in two cities in Sydney and Melbourne the boom has left many households in these cities with record levels of debt when you look at Australia's wealth we see about 55 percent of household wealth in Australia is in the housing asset class about 70 percent of Australian household debt is in the housing asset class as well Australian household debt it's tracking at about a hundred and ninety percent of disposable income it's never been that high we've just had this multi decade period where law and law rights went into higher and higher debt and higher and higher house prices those factors aren't likely to be repeated and that suggests to me that that multi decade boom has probably come to an end everywhere today young couples are being lured by signs which promise them if not the house of their dreams then our house which so easily could become home polling suggests three-quarters of Australians still view homeownership as part of the Australian Way of life basic price of the house mr. Horrocks is five thousand five hundred properties long been at the center of political debate way back in 1942 Robert Menzies declared one of our best instincts was the desire to have a little piece of earth with a house and a garden which is ours the sentiment lives on today there are three important economic goals that Australians aspire to to have a job to support and care for your family to achieve independence in your retirement and around your own home I lived and breathed watching my dad build these boxer units start selling them off and it was sort of like a real true game of Monopoly and I loved it @rv Aussie John Simon became a multi-millionaire riding the boom taking on the banks by offering cheaper loans the 71 year old bought his first apartment when he was just 18 that started me into it and I thought this is fantastic and over the years here I've bought properties and held a lot and sold a lot but I think it will always form part of the Australian psyche and I think it's really proved to be a very good thing for Australians rather than go off and blow and on holidays and new cars and all the other stuff to build a nest egg for later years in life or smashed avocado on toast or smashed ever cat on toes I don't mind that [Music] which one is yours mine is this big like many migrant families Australia's property obsession was embraced by the guptas when they moved to Melbourne from Dubai in 1990 you may buy a rental house 1100 your resort yeah I think you must go for that yeah everyone wants to come to Sydney and Melbourne from overseas everyone wants to live in these established cities where these jobs are available everyone wants to buy the property here because the value grows in Melbourne and Sydney as compared to the other states the guptas now owned more than 30 properties between them I call it generational wealth when you're building something with generational wealth you build it together so yes I might have a few property dad might have a few properties you know mums got a few properties in grandma's got a couple of her sleeve right you should change me it's for us it's a never-ending thing buying as much of the Monopoly board as one sees fit my view is that every ten years the property doubles while other investments there's always risk when you look at say the performance of different asset classes housing since 2009 has actually underperformed the equities market if you add in returns say dividends from equities and they yield for housing it's quite clear that if you owns say shares or a diversified portfolio in the share market you would have seen stronger growth in your in your overall asset portfolio [Music] property investors are now on the front line of the downturn major effect has been the borrowing capacity that we've had and the valuations that have that have dropped not substantially but have dropped a fair bit which has made the major lenders a little bit hesitant to to to lend against against current values throughout the boom investor David Jackson was successfully building a property portfolio then suddenly an apartment he bought off the plan in Central Sidney's woolum Allu was valued at less than he paid this particular circumstance the valuation come in let came in less than the purchase price which was news to me after after investing in properties for 10 years because we're a small small business bank lending has restricted the amount of debt that we can borrow so it's restricted our employment you know the number of employees we can hire increasingly David's had to turn to more expensive second-tier lenders it's hard work being an investor now than it used to be I think you could say yes [Music] an increasing number of Australians will never have the means to buy their own home let alone and mass a property portfolio the recent boom in Australia's two biggest cities has created a yawning gap between what people earn and what it costs to buy in the mid-1990s median house prices were about four times our median income it's nine times that instantly today if you said to me 20 years ago people in 2018 young people are taking mortgages for nearly a million bucks to buy a house I would have said well what are you smoking and what's it you know we just don't know what the next 10 or 20 years is going to bring but I'll tell you one thing it's going to be very very different most newly maintaining on meeting the Great Australian Dream has become a fantasy for many prices have fallen sharply in the past year by nine and a half percent in Sydney and almost 6 percent in Melbourne but just as homes are getting cheaper access to money is tougher than it's been in decades the mechanism and the main driver of the correction this time is a credit I mean it's a reduction in borrowing capacity and the problem is I just can't see what reverses that quickly it would take a major reversal of policy decisions by the government and the regulators to try to attempt to reflect the housing market and at the moment that's not the case in your hands to look for that opening offer I can't start it without your help though

Channel: ABC News In-depth

Views: 460,073

Rating: 4.6429906 out of 5

Keywords: Australia, Australian property bubble, Melbourne, Sydney, affordable rental, Organisation for Economic Co-operation and Development, International Monetary Fund, Australian property market, crash, downturn, correction, collapse, real estate, Rising house prices, GDP, loan default, house prices, global financial crisis, housing, residential

Id: usfe9Ue6H90

Length: 12min 3sec (723 seconds)

Published: Mon Dec 10 2018