{"id":5111,"date":"2015-07-20T01:00:07","date_gmt":"2015-07-19T15:00:07","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=5111"},"modified":"2015-07-20T01:00:07","modified_gmt":"2015-07-19T15:00:07","slug":"10-events-that-could-crash-the-housing-market","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/10-events-that-could-crash-the-housing-market\/","title":{"rendered":"10 events that could crash the housing market – Michael Yardney"},"content":{"rendered":"

 
\nWe are experiencing many warnings of housing bubbles<\/a>, crazy\u00a0house\u00a0prices and other alarms. So what needs to happen in the economy to cause\u00a0dwelling prices to fall significantly is a question we ask Michael Yardney<\/strong><\/a>. He outlines the 10 things that will signal such an event.
\n <\/p>\n

Transcript:<\/h4>\n

Kevin<\/b>:\u00a0 Property prices go up and down, but the talk about a crash is something that really brings a lot of emotion. Prices will go up and down all the time, but what actually will cause property prices to crash? This is a question I want to pose of Michael Yardney from Metropole Property Strategists.
\nHi, Michael.
\nMichael<\/b>:\u00a0 Hello, Kevin.
\nKevin<\/b>:\u00a0 It\u2019s highly emotive \u2013 isn\u2019t it \u2013 when we talk about price crashes?
\nMichael<\/b>:\u00a0 That\u2019s what one implies when you talk about a bubble, that it\u2019s going to burst. Let\u2019s be blunt that in the big capital cities, we actually haven\u2019t had price crashes in the past, while we have in segmented markets, but it could happen, Kevin.
\nKevin<\/b>:\u00a0 List out some of the events that could run us into that area.
\nMichael<\/b>:\u00a0 I guess it\u2019s the things that have been leading us up to these high property prices that may change. One of the dangerous ones, I guess, is a halt to our rising population. Our property values are increasing because there are more of us. I\u2019m not suggesting that it could happen, but that is one of the things that could cause property values to drop \u2013 if our population doesn\u2019t keep growing at these very high rates.
\nKevin<\/b>:\u00a0 Is it as simple as supply and demand, Michael?
\nMichael<\/b>:\u00a0 The demand side is related to household formation from our population growth, but also if there was a recession or, more likely, a depression where the entire country would have high unemployment and people defaulting on their mortgages.
\nRemember, if we\u2019re talking about a crash, we\u2019re not talking about the orderly slowing down of property values or slight drops; we\u2019re talking about the fact that people can\u2019t sell their homes and sell them at any price. That\u2019s when property values freefall. That doesn\u2019t usually happen because we\u2019re underpinned by a whole lot of owner-occupiers, so we really need some significant events, Kevin.
\nKevin<\/b>:\u00a0 What about overseas buyers, Michael?
\nMichael<\/b>:\u00a0 In certain segments of the market, overseas buyers make a big difference. If, for example, the Chinese and other Asian buyers stop buying, that definitely could affect their property markets.
\nThe two most likely causes are the government\u2019s actions making Asian investors feel unwelcome or some effects in their own hometown \u2013 like we saw way back in the 1980s when the Japanese were buying up Australian real estate and then all of a sudden, their economy faltered and it stopped them buying overseas. Again, we\u2019re just talking about the possibilities. Both of those are possibilities but probably not probabilities.
\nKevin<\/b>:\u00a0 Mixing up and all the talk about negative gearing, is that a danger for us?
\nMichael<\/b>:\u00a0 Clearly, the investor market is one of the things driving our general Australian property markets<\/a>. In some locations, especially Sydney and Melbourne, investors make up a significant portion of purchasers. If negative gearing is taken away, it will have a definite short-term impact when a whole heap of purchasers are out of the market, and that could cause property values to drop significantly.
\nKevin<\/b>:\u00a0 At a more local level, Michael, with councils, how much influence do they have on the market in terms of their approval for developers and so on?
\nMichael<\/b>:\u00a0 Council approvals are one of the reasons why property values are high. Ask any developer and he\u2019ll tell you how hard it is to get a development approval for apartments, but even if you go through the new estates, how hard it is and how expensive it is to get the infrastructure in. Therefore, changes to building regulations, in a way that they actually free it up and make it easier and therefore, increase more supply, could be one of the factors, even though I think it\u2019s unlikely to cause a property price drop.
\nKevin<\/b>:\u00a0 What about unemployment, Michael?
\nMichael<\/b>:\u00a0 Unemployment or concern about your job \u2013 in other words, consumer confidence, really \u2013 is one of the big factors that affects people making big buying decisions. If you\u2019re not certain about your job or if you haven\u2019t got one and can\u2019t keep a mortgage, that is one of the factors that can cause property prices to crash.
\nKevin<\/b>:\u00a0 What about higher interest rates? How much of a lever are they really?
\nMichael<\/b>:\u00a0 I remember paying 18% or 19% in the late 1990s. I bet you do, as well, Kevin.
\nKevin<\/b>:\u00a0 I do.
\nMichael<\/b>:\u00a0 It was for a really short period of time, but you don\u2019t even need to get to those levels. We found in 2003 \u2013 it actually happened in 2010 and it happened in the 1990s, as well \u2013 just an interest rate rise of about 2% stops the property markets dead in their tracks. That is probably the most likely thing that is going to stop this property cycle a couple of years down the track.
\nKevin<\/b>:\u00a0 I guess population is one thing. You mentioned that earlier, Michael. What about the aging population?
\nMichael<\/b>:\u00a0 Interestingly, currently pensioners are encouraged to hang onto their dwellings rather than downsize, but if these rules were changed, many dwellings would possibly come onto the market. People have talked about what the Baby Boomers are going to do, as well. That is one of the factors on the horizon that, if there are significant changes, may affect our property markets.
\nKevin<\/b>:\u00a0 And superannuation?
\nMichael<\/b>:\u00a0 Clearly, one of the big drivers of investor purchasing in the last couple of years has been people buying their self-managed super funds. Interesting, not just Baby Boomers, but I\u2019ve seen a lot of younger Gen X\u2019s and Gen Y\u2019s already getting into the property market through their self-managed super funds. If the government tinkers with those, that is another factor that could have a negative effect on property values.
\nKevin<\/b>:\u00a0 A lot of things to consider there, Michael. Sum it up for us if you could
\nMichael<\/b>:\u00a0 They\u2019re all possibilities, but if we talk about probabilities, the most likely thing to stop this property cycle will be rising interest rates or creditor squeezes in the way of macro prudential controls stopping investors in particular, but also home buyers, spending on properties.
\nI don\u2019t see either of those happening in the near future, and they\u2019re not likely to cause a crash, Kevin. I think it\u2019s just going to slow the market down and property values will fall a little.
\nKevin<\/b>:\u00a0 Thanks for that insight. Michael Yardney, thanks for your time.
\nMichael<\/b>:\u00a0 My pleasure.<\/p>\n","protected":false},"excerpt":{"rendered":"

  We are experiencing many warnings of housing bubbles, crazy\u00a0house\u00a0prices and other alarms. So what needs to happen in the economy to cause\u00a0dwelling prices to fall significantly is a question we ask Michael Yardney. He outlines the 10 things that will signal such an event….<\/p>\n","protected":false},"author":176692471,"featured_media":5112,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[10,13,25],"tags":[101],"class_list":["post-5111","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-kevin-turner-sponsored-channels","category-latest-story","category-sponsored-channels","tag-podcast"],"yoast_head":"\n10 events that could crash the housing market - Michael Yardney - Realty Talk<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/channels.realty.com.au\/realtytalk\/10-events-that-could-crash-the-housing-market\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"10 events that could crash the housing market - Michael Yardney - Realty Talk\" \/>\n<meta property=\"og:description\" content=\"  We are experiencing many warnings of housing bubbles, crazy\u00a0house\u00a0prices and other alarms. 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