Housing plan to tackle affordability

[krisbarry]

Houses overvalued despite softening

12aug05

HOUSE prices are still more than 20 per cent overvalued, despite growth having softened since the start of last year.

National house prices had skyrocketed between the last trough in 2000 and the end of 2003, but growth had slowed considerably since then, JP Morgan economist Jarrod Kerr said.

"Indeed, for the first time since 1996, real national house prices have submerged into the negative," he said.

"Prices are falling over the year in nominal terms in Sydney, Melbourne and Canberra."

He said JP Morgan estimates showed that national house prices were 22 per cent overvalued, even after the significant slowdown in growth.

"Sydney's overvaluation is the highest of all capital cities and above the estimated levels of overvaluation at similar points in time where house prices had stalled," he said.

Sydney was overvalued by 37 per cent, Melbourne by 22 per cent, Perth by nine per cent and Brisbane by four per cent.

Adelaide was neither overvalued nor undervalued.

Meanwhile, Canberra was undervalued by six per cent, Hobart by seven per cent and Darwin by 29 per cent.

JP Morgan has forecast a 10 per cent correction in national house prices by the end of 2005, which Mr Kerr said was modest given the overvaluation in the market.

In its quarterly Statement on Monetary Policy this week the Reserve Bank of Australia (RBA) published new data to provide a better measure of median house prices.

The RBA said the data, compiled by Australian Property Monitors, confirmed there had been "a marked cooling in nationwide house price growth over the past 18 months".

It said average city-wide prices had fallen or remained unchanged in Sydney, Melbourne and Canberra in the 18 months to the June quarter, while there had been only modest growth in Brisbane.

Growth in Adelaide and Perth had also slowed, but in contrast to the other capitals, prices had continued to rise at a solid rate.

 

[tech/a]

Adelaide was neither overvalued nor undervalued.

Meanwhile, Canberra was undervalued by six per cent, Hobart by seven per cent and Darwin by 29 per cent.

So where then would you be looking to buy realestate?
Where is the best opportunities?

 

[krisbarry]

Property prices too high for young people

12aug05

YOUNG people should think about leaving Sydney because it is such an expensive place to live, Reserve Bank of Australia (RBA) governor Ian Macfarlane said.

Mr Macfarlane said there had been significant net emigration from NSW over the past three to four years.

"Recently we've heard so much about house prices retreating in NSW, more so than other states,'' he said.

"It would give you the impression that somehow or other the imbalance has gone away and that Sydney is no longer so expensive relative to the rest of the country."

Mr Macfarlane said Sydney was "enormously" when compared to any other city in Australia.

"In dollar terms, Sydney is still way, way more expensive than anywhere else in Australia, and in fact I think it's so expensive that, particularly for a lot of young people, it's in their interests to go elsewhere, where the lifestyle is more affordable," he said.

Mr Macfarlane said Sydney house prices were somewhere between 50 and 60 per cent more expensive than Melbourne house prices.

"Despite all the increase in house prices in Melbourne and despite all the increase in house prices in Brisbane, Sydney is still extraordinarily expensive," he said.

"And that's why I have to say I get a little impatient when I hear the real estate industry in NSW saying `Oh, what we've got to do is get house prices going up again' - that somehow or other that's going to save NSW.

"That's Sydney's problem, it's not its solution," he said.

Mr Macfarlane was testifying before the House of Representatives committee on economics, finance and public administration.

 

[Knobby22]

My opinion for what it's worth is that the present low interest rates and high unemployment as well as a stable economy have made it possible for the present house values to be maintained. I cannot see any real upside over the next 4 years.

The US will be forced to raise interest rates over time and this will eventually effect us. When our interest rates rise, possibly in two years, then whammo!
This is not a reason to not buy a property for personal use as you get many advantages including no capital gains tax but with all the state taxes and lousy yields it is not a good environment for investing.

 

[krisbarry]

high unemployment .

You mean low unemployment?

 

[krisbarry]

LENDING finance for home owners rose 0.8 per cent in June to $11.7 billion, the Australian Bureau of Statistics said today.

Oh and did I mention that the combined total debt owed by Australian's on HECS debt is $14 billion.

Now that is a pretty amazing fact....that we have more debt tied up in our brains than we do in bricks and mortar.

Unsure if that $11.7 billion is for the month of June or the June quarter or the entire debt, but anyway I thought I would share this useless info.

What are we doing about this epidemic called youth debt? Nothing

John Howard thought the best way to solve it was for the youth to inherit more debt by increasing HECS fees another 25%

Can I paint the picture any clearer that in the past 4 years the youth of tomorrow have seen their study debt increase 25% AND House prices double


....I HEAR A CRISIS CALLLING!!!!!!

 

[Knobby22]

er- high employment.

 

[tech/a]

Unemployment is at an all time low

 

[mit]

Unemployment is at an all time low

Those figures are a bit rubbery unfortunately. There has been a slow redefinition of what consititutes unemployment and now if you work for an hour or more a week you are deemed as employed. So the current figures are hiding the move from full time employment to part time/casual employment. It's like the training statistics. Training is up but it actually translates to more people learning how to work in McDonalds and less apprenticeship training in TAFE and so-forth. Aren't statistics wonderful.

MIT

 

[Rafa]

Very Interesting thread this...

I am someone who completely missed the housing boom, but i don't hold any grudges on anyone... good luck to them i say, and i hope to be ready when the next one comes along.

I have just bought a property in SA, first home, paid around $400K, with a mortgage of around $200K. Aim to pay it off as soon as possible, tho i am struggling to work out how to do that, as well as try and stay in the stock market... any ideas? Yes, i should have bought about 3 years ago... but was sitting on my hands. Whilst living in it initially, i plan to rent it out for a couple of years. I am 27, so no immediate plans of settling down.

I think we have all made bad decisions.... i keep makiing then, if i add up all the bad decision i have made, i probably have lost close to $400,000!!! (e.g. both from shares losses and not getting into the property market!).

i made one just the other week when i got out of bhp, zfx and oxr...
since then the shares have gone up a combined $15000!!! I sold so i could put money into the mortgage!!!

But thats life. You get on with things... but one thing I never do is begrudge someone else's success. one day i hope to learn enough to make up for all this.

tech/a thanks for all your input so far, i have learnt a lot. keep it up.

 

[tech/a]

I dont know if it can be done now---but back 7 or so years ago I heard of someone who paid off his mortgage by putting all his pay into his mortgage and using a card---line of credit---then securing a margin loan with his house equity and placing the dividends and the profit back into the housing loan.

Along with some tricky accounting for tax advantages---which a good accountant could set up---and you can see the benifits if your a successful trader.

I dont think Margin lenders take house equity as security any more---could be wrong.

In your case Rafa you have time on your side and you'll see probably another 2 housing and 2 market booms.
One secret that was passed on to me and placed me in this last boom was/is
look for a reason for housing prices/stocks to rise.

As you know Adelaide mine was the Southern Expressway---we tendered the Walls on it---so knew it was happening way before most others.
We started buying houses in Seaford and Moana--particularly Esplanade.
Its just laughable what they were then and now.
Just one---I didnt buy--so I make errors in judgement like everyone else--was 3 bed Esplanade $89000-1996 last sold 2003- $425000.

I wasnt smart enough to see the boom coming but was in the market when it did.Like you Ill know what to lookfor next time.

Did know that Commercial followed 3 yrs behind domestic so took advantage of that late 2002.

With 50% equity in a 400K property at 27 your well in front of the pack.

 

[Alpaca]

Property prices too high for young people

12aug05

YOUNG people should think about leaving Sydney because it is such an expensive place to live, Reserve Bank of Australia (RBA) governor Ian Macfarlane said.

But what about employment? It is fine to say leave Sydney, but these "young people" also require work, and like it or not, Sydney provides more employment opportinities than other Australain regions. Mcfarline should be well aware of this. He should stick to monetary matters and leave the politicing to the dills we have elected.

 

[DTM]

But what about employment? It is fine to say leave Sydney, but these "young people" also require work, and like it or not, Sydney provides more employment opportinities than other Australain regions. Mcfarline should be well aware of this. He should stick to monetary matters and leave the politicing to the dills we have elected.

This is an excerpt from an article in the SMH and it does looks like most of the jobs have been created out of Sydney. The article quotes that Sydney is becoming an ageing work force and technically, it is in recession.

Quote from the SMH

Since July 2002 the number of full-time jobs in NSW has grown by only 3.3 per cent, but by 15.6 per cent in Queensland, 14.9 per cent in Western Australia and 12.4 per cent in Tasmania.

http://www.smh.com.au/news/national/job-boom-turns-gloomy-for-nsw/2005/08/11/1123353449455.html

 

[markrmau]

The article quotes that Sydney ... technically, it is in recession.

I am just a little concerned that Sydney will turn out to be a leading indicator for the rest of OZ. This may be just the begining of the property bubble hangover. Remember, you can't eat coal, zinc, copper ....

 

[Smurf1976]

I am just a little concerned that Sydney will turn out to be a leading indicator for the rest of OZ. This may be just the begining of the property bubble hangover. Remember, you can't eat coal, zinc, copper ....

What, exactly, have the other states done differently to NSW in order to avoid the consequences when the boom ends? Not much so I expect a similar outcome at least in Queensland, Victoria and Tasmania. Not so convinced about SA, WA, NT.

 

[Julia]

For those finding entry into home ownership difficult, there is another possibility which I used in New Zealand but which I'm not sure is available in Oz.

Following the 50/50 split of assets after a divorce, I didn't have enough for a deposit on a reasonable property. After much searching I found a 30 year old two bedroom brick house on LEASEHOLD CROWN LAND. This effectively halved the price of the property and cost $52 p.a. in "rent" for the land.
I upgraded the kitchen and bathroom, worked long and hard in the garden, and sold it two years later for three times what I paid for it.

To those people who complain about interest rates; when I bought my first investment property I was paying 22% on second mortgage.

There has been a lot of really sensible and encouraging advice offered on this thread. No one has suggested it's easy to acquire property, but it's usually a matter of priorities unless one is well below the average wage. I can well remember buying only second hand clothes for about 5 years in order to pay off a mortgage. And when shopping settling for sausages when I really wanted fish or steak. I'm sure we've all heard about the wealthy person who, when in receipt of the comment "oh, you're so lucky, you have everything you could possibly want", says "yes, and the harder I work and the more sacrifices I make, the luckier I get".

Julia

 

[Smurf1976]

To those people who complain about interest rates; when I bought my first investment property I was paying 22% on second mortgage.
Julia

When rates are high it's time to buy...

 

[TjamesX]

Sydne'y excessive prices lock out anyone from joining in their economy that doesn't already live there, and will continue to be a major problem in the future. Getting rid of the vendor tax is definitly not the answer.

The property developers' idea of nirvana is a boom in house building and house prices that goes on forever. But market economies have never worked like that. Booms always give way to busts.

Having overdone things so badly, we now must suffer the painful correction. To hanker for a resumption of the boom is as silly as curing a hangover by getting back on the grog.

If there's a criticism to be made of the Carr Government's policy it's that it left it far too late to introduce the vendor tax. Had it come three or four years' earlier, the boom wouldn't have been nearly as excessive as it was and we wouldn't now be set for several more years of sluggish growth while we wait for house prices to get back to something young people can afford.

Why am I labouring the point? Because I've seen the property lobby's mythmakers at work before.

I saw the way they rewrote history in the mid 1980s, inculcating the notion that Paul Keating had to restore negative gearing because of the devastation its withdrawal caused to the rental market. In truth, he backed down because the NSW Right got cold feet in the run-up to a state election.

In 10 years' time, the real estate agents will be recalling how the introduction of an insane thing called a vendor tax laid waste the NSW economy in the mid-noughties.

But you'll know that for the self-serving fabrication it is.

http://www.smh.com.au/news/business...ates-vendor-tax/2005/08/14/1123957949576.html

 

[markrmau]

Getting rid of the vendor tax is definitly not the answer.

Actually, Gittens has been saying that scrapping the vendor tax will have a negative affect on sydney house prices as it will improve liquidity.

 

[wayneL]

For those finding entry into home ownership difficult, there is another possibility which I used in New Zealand but which I'm not sure is available in Oz.

Following the 50/50 split of assets after a divorce, I didn't have enough for a deposit on a reasonable property. After much searching I found a 30 year old two bedroom brick house on LEASEHOLD CROWN LAND. This effectively halved the price of the property and cost $52 p.a. in "rent" for the land.
I upgraded the kitchen and bathroom, worked long and hard in the garden, and sold it two years later for three times what I paid for it.

Julia

http://www.royweston.com.au/propsearch/?oid=geraldton&est_ct=1

Oh yes. Above is an example of that. The lease on the land expires in 2014...allegedly renewable, but would you trust the guv'mint?

A beach shack with no security of tenure past 2014 for 100k? Pass!

Cheers