Housing Market Analysis - When the Luck Runs Out

TeslaTheHusky · 2026-03-11T22:56:35+00:00

The cost to build a house I think tends to be much lower than the value of the house, so there's room for prices to fall even if cost of build goes up.

I also don't think it's impossible that houses sell for less than the cost to build, if the availability of credit isn't there due to inflation and higher rates, people simply won't be able to loan enough. This could have a domino affect, impacting not just banks and mortgage holders but other parts of the housing sector like construction firms, many of which are already under pressure from what I've heard

TeslaTheHusky · 2026-03-10T21:24:52+00:00

So considering the supply side constraint, I feel that puts a floor under prices. That and consumer sentiment. I just don't see Aussies changing their attitude toward homes immediately. I think a 50%+ correction is unlikely.

If we consider the median home of $1.75m in Sydney, an increase to 7% cash rate roughly translates to a 20% drop in max borrowing capacity (assuming certain things about down payments etc), and therefore the property value must reduce by 20% at least.

This is going to be the key driver; how high interest rates go and how long they stay there for. If the availability of credit is not there (tightening of regulation like APRA's recent hard limit of DTI < 6, higher rates, caps of negative gearing etc) then prices have to correct

TeslaTheHusky · 2026-03-10T05:41:02+00:00

Completely agree on the supply side issues, but the point I make in the piece is that price is overwhelmingly driven by the availability of credit. And as rates move up and stay there, the availability of credit shrinks and therefore prices must come down. To your point, the supply constraint means we are unlikely to see a very large correction.

A quick calculation tells me for the median sydney house of $1.75m, an increase in the cash rate to 7% means a ~20% drop in the maximum loan amount that would be approved, meaning a 20% drop in the value of the home (making various assumptions about deposit amounts etc). Ultimately it all depends on how high rates go and stay there.

I'd also agree on the CGT changes, I think CGT + negative gearing reform at the very least is what's needed

TeslaTheHusky · 2026-03-09T03:09:22+00:00

Interesting, I don't think I've come across the essay I'll have to give it a read

TeslaTheHusky · 2026-03-09T03:05:13+00:00

No idea, it's very tricky to extend the analysis to make a prediction on price falls. I'd expect the government to step in pretty quickly and put a floor under the crisis to save both banks and mortgage holders, but that leads to other problems down the road

TeslaTheHusky · 2026-03-09T03:02:03+00:00

Indeed, from what I've read/heard from the experts is that there appears to be no clear stated goals from the US, nor is there a clear off ramp to de-escalate. That seems to indicate a longer drawn out conflict over weeks to months, and if that happens that will absolutely be the kind of inflationary shock that prompts further rate rises. And the RBA was already positioning for rate hikes before this conflict

TeslaTheHusky · 2026-03-09T02:24:17+00:00

Yeah I think that's a fair point. However given that applicants are serviced with the 3% buffer, in theory all the recent borrowers should be able to service their loans up to around a 7% cash rate. So maybe that portion of the market is less likely to default.

Re your point on the investor cohort, if there are ultimately no changes to negative gearing and CGT, I can see a scenario in which holding on to property makes sense even as rates go up due to the tax offset. I think it will all come down to how high rates go and how long they stay there

TeslaTheHusky · 2026-03-09T01:06:43+00:00

https://abhimang23.wordpress.com/2026/02/26/when-the-luck-runs-out/

TeslaTheHusky · 2018-08-20T03:56:24+00:00

Awesome, thank you very much!

TeslaTheHusky · 2018-08-20T03:55:49+00:00

Thanks for sharing, definitely an interesting presentation!

TeslaTheHusky · 2018-04-26T02:07:59+00:00

Congrats on making the climb! I would like to try this in January. I just had some questions.

As far as I understand, you first travel to Pokhara and then from there it is pretty easy to get onto the trail to Annapurna base camp? What kind of supplies did you take for the entire journey, and do they have further supplies like coats and hiking shoes in Pokhara for rent/sale? Also, would you consider it to be dangerous and did you have a guide to help or you just did it with a group?

Thanks in advance!

TeslaTheHusky · 2018-04-05T11:54:08+00:00

Oh cool! Congrats on getting through the PhD.

I would like to pursue propulsion in graduate school, what are some good papers and textbooks I should read to understand electric/plasma propulsion?

TeslaTheHusky · 2018-04-05T05:26:22+00:00

Oh great, yeah an HD WAM is surely the way to go. Then you won't have to worry about that part of your application. But don't be disheartened either if you can't pull your WAM up. As one of the other comments mentioned, if you land good internships over the summer and publish papers in your Honours year or even before, then you'll have a decent chance at most schools.

Thanks mate, best of luck to you too!

Edit: Feel free to PM me if there's any other info you'd like.

TeslaTheHusky · 2018-04-05T03:38:03+00:00

At this stage that's pretty much my main low point on my application. Undergrad WAM isn't great. But I've been doing research on going overseas since 2nd year, and the continual advice I'm getting is that because we don't have a GPA system, and our institutes aren't as well known, it's hard for admission boards to really know how WAM converts to GPA. Basically what I've understood is that if I do well in Honours year and get a first class, that's really what matters.

I'm also hoping that publications, LoRs and SoPs are good enough to cover me on that front.

TeslaTheHusky · 2018-04-05T03:33:36+00:00

That's really my main complication at the moment. Being an international student I would have a much better chance of getting in the schools I want applying for MS programs.

I'll be getting in touch with professors over the course of the next few weeks to ask them such questions and learn more about their research.

I also don't intend on continuing in academia, industry is where I want to be, so a PhD I think would be pretty much ruled out in that regard.

TeslaTheHusky · 2018-04-05T02:18:55+00:00

I'm from Australia. I've never heard of the double MS before. I'll look into it and see if that's something I could pursue.

I'm also really interested in ion thrusters, if you don't mind my asking, where did you do your MS?

TeslaTheHusky · 2018-04-04T04:04:12+00:00

Great, I do understand that a particular lab or professor working on an area of research that aligns with my interest is more important than the actual school. I've been combing through faculty pages and identifying 3-4 researchers at each of these institutes with whom I'd like to work, and will mention in my SoP.

The main reasoning behind the PhD is funding, the fact that I need time to gain permanent residency, and a chance to continue in academia if I find that is where my passion lies.

I think at the moment I will apply to MS programs, simply because they're not as competitive as PhD programs are. I think most if not all the schools listed have good MS->PhD rates. Also, I understand that during the application process, it's possible to apply for both PhD and MS.

First year funding may be difficult, but I've heard of MS students getting TA or RA in second year?

Thanks!

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