Editor's Comments:
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Many times during my 50 year real estate career I wish I wasn't so darn accurate on my real estate predictions.
This is one of those times.
Since last year I've been predicting dire downturns in real estate in Australia and many other places in the world after frantic buying the last couple years would crash.
In January of this year I said this would be the year that Australian prices collapse.
No one believed me at the time.
Now nine months after that prediction prices are already down from five to as much as 15% in many metropolitan areas and predictions are coming out today of a possible plunge of 43.5%.
Since I've lived in Bali for 26 years the majority of my friends are now Australian.
You lose a lot of friends when you tell them that the prices of their homes and properties are gonna drop significantly this year.
At first of course they don't believe you then when bad news starts to emerge over the last few months they kind of hold me responsible for it. But I had nothing to do with.
What is causing these plunges is the same thing that causes every major real estate plunge uneducated greedy buyers buying just because it's the in thing and they think prices will go up forever.
But they don't.
My simple acid test for any real estate market anywhere is in the world is "can I buy a three-bedroom home or apartment in the area I'm interested in and make a positive cash flow?".
Australia failed that acid test years ago.
But prices kept on going up on panic buying and low interest rates.
Now everything has changed.
Many realize it is not time to buy and those that do will pay significantly higher mortgage rates which means even less cash flow if you're renting it out.
So what should you do?
You should have sold already on my advice.
If not sell now even though prices are less than six months ago.
I'm sure it's a lot more than you paid for it.
It never hurts to walk away with a handome profit.
remember the famous Wall Street saying. in investments, "Bulls can make money Bears can make money and pigs get slaughtered".
Take that profit and move it literally into greener pastures such as Bali which already had a crash for four years and prices are now selling at 50% to 30% less.
Our Bali luxury villas are 88% occupied and villas are selling like hot cakes right now starting as low as $268,000.
There's nothing but good news on the Horizon.
Especially with the major G 20 meeting happening next month which will focus the world's attention on every major news broadcaster on Bali for weeks before and after the event.
See some information following this article
‘Worst case scenario’: Fears house prices could plunge by 43.5 per cent
With
rising interest rates and a potential recession looming, there are
alarming warnings about house prices which could be “catastrophic”.
Sarah Sharples
@s_sharples
5 min read
September 30, 2022 - 2:42PM
More from buying
Sydney region where prices fell 12 per cent in a year
Surprising finding on house prices
The Sydney region still tipped to boom
House
prices could plummet by as much as 43.5 per cent in 2025 in the “worst
case scenario” if the Reserve Bank of Australia continues to push
through super-sized rate hikes to tackle the worst inflation in three
decades, alarming new analysis has found.
This could mean Sydney’s median house price would fall from its 2022 peak of $1.41 million to just $796,650 – a $613,350 drop in just three years.
Economics
research firm Digital Finance Analytics has modelled what could happen
to house prices in a worst-case and best-case scenario with rising interest rates, which have gone from a record low of 0.1 per cent to 2.35 per cent in just five months, alongside a potential recession.
It
found in the worst case, house prices could fall by 12.7 per cent in
2023, before dropping a further 27.2 per cent by 2024 and plunging as
much as 43.5 per cent in 2025.
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It
would see Melbourne’s median house price fall by $435,000 to a
decade-low of just $565,000 after reaching $1 million earlier this year.
The worst case scenario is based on rates rising to above 4 per
cent sending mortgages to an average of 7 per cent, inflation remaining
high and wages growth stalling due to a recession in Australia.
Digital
Finance Analytics principal Martin North said the worst case scenario
was relatively unlikely to happen but would be “catastrophic” for many
people if it did.
“My own perspective is if you look at the ASX
futures, it’s talking about rates at 4.1 per cent in May 2023 and still
being above 4 per cent in February 2024. Now that would be pretty
concerning as that would represent a mortgage rate of well over 6 per
cent and 7 per cent for many people, but I have a feeling that is
probably overstating the case,” he told news.com.au.
“The ASX
futures has been more accurate than the RBA on interest rates, so if
you believe the markets we could be in for a quite significant interest
rate shock.
“The RBA knows if rates went that high, it would put
tremendous pressure on Australian households and would be well above 2
to 3 per cent buffer from APRA in terms of loan serviceability.”
However, the most likely scenario was far less dire, although house prices were still expected to take a hit.
Buyers’ shrinking budgets
It
would see house prices fall by 8.8 per cent in 2023, before dropping
again to 17.1 per cent in 2025 and experiencing an even bigger plunge in
2025 to 23.7 per cent.
The base scenario modelling was based on rates rising to 3.5 per cent but no recession.
But Mr North said even in this scenario mortgage rates would still be knocking on 6 per cent for many people.
“That’s
enough to put many people off buying as it’s reducing borrowing power
considerably and the borrowing power has dropped by 20 to 25 per cent
for some householders,” he warned.
“It could go even higher to
30 to 35 per cent and that reduction of credit is enough to drive prices
down to the base scenario as the most significant lever of all for
house prices is credit availability.”
Best case for house prices
The
best case scenario according to the Digital Finance Analytics data is
that rates would stay below 2.5 per cent and fall next year, and
inflation would ease ahead of RBA expectations, while wages would also
jump faster.
This would see house prices fall by just 2.7 per
cent in 2023, dropping to 2.2 per cent in 2025 and rising again by 0.1
per cent in 2025.
However, Mr North said this would still be a “shock” as Australians had become used to “dramatic” house price rises.
“There’s
still this amazing belief in Australians that property prices double
every seven years but I don’t think that’s the case anymore. We are in a
new cycle,” he added.
He said there was a 50 per cent change of
Australia going into recession, although it was hard to predict as it
would be majorly influenced by what happens around the world.
“If
recessions are happening in the US and Europe and China goes off boil,
our economy is so reliant on international connections, it’s quite
difficult to see how we wouldn’t go into recession here,” he said.
What the banks are saying
Westpac
has predicted the biggest hike in interest rates forecasting they will
hit 3.6 per cent by February 2023, while ANZ has said they will hit 3.35
per cent by December.
The Commonwealth Bank and NAB have the most conservative estimates, predicting rates will reach 2.85 per cent by November.
In terms of house prices, Westpac warned Aussies about an 18 per cent fall in Melbourne and Sydney by the end of next year, which was also forecast by Commonwealth Bank.
However, the rest of the country was a much more sedate drop, of around 8 per cent on average, according to Westpac.
But CBA said house prices will drop by 15 per cent over the next 18 months across the country.
A 15 per cent drop in the median property price would see the value of the average property falling by $150,000.
NAB
went even further and predicted house prices in Sydney and Melbourne
could fall by 20 per cent or more by the end of next year.
ANZ
also released a similar forecast, with capital city prices tipped to
drop by 18 per cent by the end of next year before climbing by 5 per
cent in late 2024.
Homeowners and buyers
When it comes to homeowners, Mr North recommends they check their rates and shop around.
“People are sitting at 1 to 1.25 per cent above the best rates according to my research, so shop around,” he said.
For
those facing financial hardship, he advised them to look at their cash
flow and cut costs where possible but also talk to their bank early.
“Banks
are required to help when people get into hardship and have various
schemes and strategies. The one they are doing at the moment is offering
to extend the life of the loan, so if you have 15 years left on your
mortgage they will put it up to 25 years,” he said.
“It reduces
payments but it means paying a lot more interest for a lot longer and it
benefits bank as they don’t have a problem with defaults and more
interest earned means more profit for shareholders. Do you really want
to lock yourself in? Shop around first before you start extending the
life of the loan.”
For buyers he said it might be “sensible to
hang off” as further prices slides are predicted but if they do buy,
make sure they can afford rises of up to 3 per cent.
He added property investors should just forget it as there is no value in the current cycle.
The cost of rising interest rates
If
interest rates keep rising by a full 1 per cent between now and
December as predicted by two of the big banks, monthly repayments on a
$500,000 loan over 30 years could rise by $318 by Christmas.
This is in addition to the $652 already added to repayments from May, according to Canstar.
Mortgage
holders with a larger loan size of $1 million over 30 years could be
faced with factoring in an extra $635 by December, taking the potential
total increase in repayments from May to a staggering $1939 per month.
Canstar
research shows a 0.5 per cent interest rate rise in October could add
$157 to monthly repayments based on a $500,000 loan over 30 years.
The Australian Bureau of Statistics’ new monthly measure of inflation showed the pace of price rises hit 7 per cent in July before easing slightly in August, down to 6.8 per cent – meaning more rate rises are likely.
More Coverage‘Big hit’: price falls wipe out 3 years of growthSydney suburbs where its better to rent than buy
Meanwhile,
Wall Street bank Morgan Stanley expects the entire post-Covid housing
price boom in Australia to be retraced, now forecasting prices will fall
20 per cent nationally peak to trough.
It says the housing downturn will “easily be the largest in recent history”.
Sanur Real Estate - Hottest in History:
Anybody that has ever attended one of our seminars, listened to our radio program or read our blogs is well aware that we have been saying “Bali real estate demand is directly proportional to Bali tourist demand”.
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“Bali real estate demand is directly propotional to Bali Tourist Demand"
I have also been predicting that Sanur would be the place that a percentage of the 25% of the population of the world that are Baby Boomers would live in the future.
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Sanur
designated as Special Economic Zone.
Recently the President of Indonesia, fondly called Jokowi, announced here live that over 20 Hectares of land including the Grand Bali Beach Hotel is now designated as a Special Economic Zone.
What is really exciting is that this special economic zone is within walking distance of our three Bali Luxury Villas complexes
This new special economic zone will be mostly utilized for medical tourism, primarily for the elderly from around the world.
Boomers from around the world will come here and be treated for everything from a facelifts to cancer treatment at a fraction of the cost in their country.
If you drive by there right now you will see buildings going up like crazy.
I am sure they want to produly show this economic miracle to the G 20 leaders and associates when they come here.
Largest Real Estate Boom in Sanur History:
I have been predicting for years that there would be a real estate boom in Sanur from Baby Boomer Demand.
It is happening right now.
There has never seen more demand for Sanur Land, Villas, Homes and even million-dollar 100-million-dollar hotels than in my 26 years living here.
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For example, recently I had a call from one contact who has an owner from Jakarta looking for a hundred million dollar plus hotel in Sanur.
Later that day I had another contact call me and
tell me that he would like to share with me a development plan that is taking
place on the Southern Beach of Sanur which will include hundreds of beachside expensive
villas and a first-class marina. .jpg)
Boomers Moving from Crazy, Gridlocked
Southwestern Areas:
Then a few days later
during a private Bali Hai cruise one person after another told me that they
want to move away from Canggu, Kerobokan and even Seminyak because it has just
gotten crazy over there with grid lock traffic and a dramatic rise in crime.
Some of our Villa owners are reporting extraordinary rental prices right now for long-term rentals.
I am receiving one to three requests every week for long-term rental villas.
Couple with that there has been a large number of improvements in Sanur restaurants, grocery marts etc. and Sanur is now the place to retire as I predicted.
I personally along with a lot of seniors have been playing tennis twice a week at the new first class Liga Club which has a gym, six tennis courts, Pool, and other facilities.
2022-2025 - Will be Hottest Rental and Sales Market in History
We Hope that you enjoyed this update and join me in being enthusiastic about Bali’s future, especially Sanur.
There is no question in my mind that Bali will continue to be one of the most sought-after destinations in the world.
If you read TripAdvisor’s report in January of this year, we are ranked fourth.
I believe we will move up in
rankings this year because if you look at our competition, London which is suffering
through drought and 40 C Temperatures and Cancun which is almost shut down
right now due to Covid-19 we certainly look better.
I will go on out on a limb with a Nostradamus Moment and Predict that for the next 2-5 years Sanur will be one of the top three or five hottest real estate markets of Bali, Asia and even the world as it returns to the 2014 prices for real estate.
" Next 2-5 years Sanur will be one
of the top three or five hottest real estate markets of Bali, Asia and even the
world" L/B. Sept 2022
Very sincerely.
Lawrence B. M. B.
President Director
PT. Bali Affordable Lifestyles International. Since 2004
DBA Best Bali Real Estate & PT. Bali Luxury Villas
We have thousands of satisfied guests and clients worldwide.
Contact Us:
My name is Lawrence.
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| Owners. Notaris Azizah & Husband Lawrence |
I am the President, Owner of 18 Year old PT. B.A.L.I., who manage and operate award winning PT. Bali Luxury Villas & Best Bali Real Estate
My
wife and Partner Azizah who is a Licensed Bali Notaris along with our
70 + Loyal Professional staff will do buisness with us that is
"Far better than you expected"
Check out our selection of Best Bali Properties at our Best Bali Real Estate Web Site
For the best posssible deals and advice contact me direct in English by Tel or Whatsapp at +62-8123814014
For Bahasia Indonesia or English Contact our office at +62-361-284069.
For free legal consultation regarding Bali Real Estate, Establishing Bali Companies and other Notorial Work Contact Azizah at +62 811-3864-993
You may also email us at info@bestbalirealestate.com
Recent Testimonials:
"The owners of this company are the perfect combination of long-time international experience and in-depth subject-matter knowledge and relevant local expertise, networking and the right licenses to run this business and advice their clients. The properties on offer are at prime locations with huge growth potential."
CEO Indonesian Telecommunicatiosn Company.
Honesty and professionalism is everything when you're dealing with real estate but when you can also find the most knowledgeable people to advise you and help you with what you need, why go anywhere else... Hands down the best in Bali!
Wealthy American Couple - New Port Beach - 2022
Very professional and have a wide selection of quality properties, very responsive and will give you all the right advice and guidance on getting the dream home you are looking for.
Officer of Major Bali Hotel Supplier - 2022
I have personally experienced the hospitalty at laurences villas & l reccomend them to everyone truely a great experience in Bali. -2022
Australian Hotel General Manager - 2022
All things Realestate. Very knowledgeable for local market.
Retired Sucessfull English Hong Kong Attorney-2022
Australian House Prices Drop as Steep RBA Rate Hikes Sour Demand
Australian-housing-prices-continue-5th-consecutive-month-of-decline
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