The future of Australian property prices

[satanoperca]

Hi,

Just curious, does anyone have any stats on the growth in mortgage debt against the growth in prices for the last two years?

Just interested if the current prices rises have been a direct result of increasing debt levels and if so, if this debt growth cannot be sustained would it result in prices coming back down to earth and a few people getting burnt fingers.

It seems our friends and allies in the US had unprecedented debt growth which resulted in super charged price increases, as that growth in debt has receded so have prices.

Cheers

 

[Mr Z]

Interesting interest rates....

The TNX looks like it is trying to put in a bottom... some volatile action today, be interesting to see if it has more legs or if we are in flame out territory.

This is also an interesting development on the Australian banking scene...

Major banks are chasing cash with high rates

... they want your money but the don't want to pay for it! Reminds me of some other life situations... sprats, mackerels, tender traps and others

In a nut shell... someone is very wrong about interest rates. I think that they will move higher... gently or sharply is the question? The Fed seem divided on the correct course to plot, QEII appears for all the world to be a damned if they do and damned if they don't!

Its a Clash!

A sharp move could cause an RE 'panic' despite the other positives in our market. Say what you will there is enough stress currently to fuel a correction.

Rates, rates, rates... be the key! and the Fed be the key master, for now. If they have any say we will stay low... if they retain the ability or should I say credibility to steer the markets. This, I think, is the source of the indecision at the Fed, I think they know that they are at the edge of what can be achieved in a free....ish market.

I have paling imprints in my bum and this fence is uncomfortable... this thing could go either way here, we could buy a few more years... but this could easily end up in a surprise as well!

 

[trainspotter]

satanoperca - I think Mr Z posted some terrific stats you are chasing a few pages ago. Damn near took up the whole page !

Anyways ........ Mark Bouris eh? Who would have thunk it that he has started his own home loan company ???

"Established in 2007, Yellow Brick Road is owned by Mark Bouris and several members of the senior management team. Mark was the founder and chairman of Wizard Home Loans, which grew to be one of the largest non bank lenders in Australia. Mark’s purpose in establishing Yellow Brick Road was to help all Australians access the quality financial advice they deserve."

http://www.ybr.com.au/homeloans/index.cfm for the home loan comparisons.

BUT WAIT THERE IS MORE !!!!!!

As of this morning Mark Bouris claims that "unaccountable" deposits will not affect savings history to apply for a loan with his company ???

ie gift from Mummy & Daddy for deposit or money laundering into kids accounts to evidence "savings".

Follow follow follow the Yellow Brick Road.

 

[robots]

Hello,

how's it going? beautiful day

does anyone know if you get any boost for buying off the plan?

thankyou
professor robots

 

[Mr Z]

Come now bots, you know the answer to that!

 

[robots]

hello,

oh yeah, i know everything

anyone put me in the right direction, couldnt find much about it

thankyou
professor robots

 

[trainspotter]

Australian home values stablise in July after June losses

After a large 1.0% seasonally-adjusted fall in June, Australian home values changed little in the month of July, recording an increase of +0.1% (up +0.4% seasonally-adjusted).

According to the market-leading RP Data–Rismark Hedonic Home Value Index, Australia’s capital city home values remained relatively flat in the month of July recording a modest, seasonally-adjusted increase of 0.4% (on a raw basis home values were up only +0.1% in the month).

The July results follow a 1.0% seasonally-adjusted decline in the month of June; the first negative movement in Australian capital city home values in 17 months.

Don't you just LOVE RP DATA ???


Will do some research for you robots and post tomorrow on the boost question.

 

[robots]

Hello,

Now that is just fantastic news Trainspotter.

Well done everybody.

Thankyou
Professor Robots

 

[Mr Z]

Australian home values stablise in July after June losses

After a large 1.0% seasonally-adjusted fall in June, Australian home values changed little in the month of July, recording an increase of +0.1% (up +0.4% seasonally-adjusted).

According to the market-leading RP Data–Rismark Hedonic Home Value Index, Australia’s capital city home values remained relatively flat in the month of July recording a modest, seasonally-adjusted increase of 0.4% (on a raw basis home values were up only +0.1% in the month).

The July results follow a 1.0% seasonally-adjusted decline in the month of June; the first negative movement in Australian capital city home values in 17 months.

Don't you just LOVE RP DATA ???


Will do some research for you robots and post tomorrow on the boost question.

Do we actually have a lead on the hedonics that they use? That can be used to substantially mask the real trend. The US CPI number has been slashed by dodgy ideas employed in the hedonic modeling... its not real but its politically expedient so reality gets trashed. Not saying they are doing it BUT it pays to understand what the hedonic adjustments are.

Side note.... attached is a table tallying the explosion in OTC interest rate derivatives used in Oz. I think that we have an unhealthy dependency in that area, trouble in that market spells big trouble for Oz RE IMO FWIW... one to keep an eye on... yeah I know obsessive compulsive broken record yada yada yada! Anyway a fast move in rates could lever this market out of the water.... to keep in mind, that tis all.

 

[Mr Z]

Hello,

how's it going? beautiful day

does anyone know if you get any boost for buying off the plan?

thankyou
professor robots

Well depends what you mean by boost! The first and most obvious thing that comes to mind is lower stamp duty, here in VIC at least. If you buy before build you can end up only paying the land value stamp duty which is charged at a lower rate on a lower value due to the progressive scale. Can save 10's of thousands.

 

[trainspotter]

Do we actually have a lead on the hedonics that they use? That can be used to substantially mask the real trend. The US CPI number has been slashed by dodgy ideas employed in the hedonic modeling... its not real but its politically expedient so reality gets trashed. Not saying they are doing it BUT it pays to understand what the hedonic adjustments are.

Side note.... attached is a table tallying the explosion in OTC interest rate derivatives used in Oz. I think that we have an unhealthy dependency in that area, trouble in that market spells big trouble for Oz RE IMO FWIW... one to keep an eye on... yeah I know obsessive compulsive broken record yada yada yada! Anyway a fast move in rates could lever this market out of the water.... to keep in mind, that tis all.

Not sure where Bismarc RP DATA obtain info on or how they disseminate into hieroglyphics for the punter to understand? Still only a broad brush approach IMO ... some suburbs have dropped 20% for sure but it does not reflect in the overall "big picture, seasonally adjusted" figures.

Wait until December / January when the Eurozone banks need to readjust a coupla trillion dollars in the market place. THEN we will see some heat come on interest rates ! NAB and Westpac squawking wholesale funds are hurting bottom line and will need to increase cost of borrowings onto the mortgage belt.

 

[Beej]

Hi,

Just curious, does anyone have any stats on the growth in mortgage debt against the growth in prices for the last two years?

Just interested if the current prices rises have been a direct result of increasing debt levels and if so, if this debt growth cannot be sustained would it result in prices coming back down to earth and a few people getting burnt fingers.

It seems our friends and allies in the US had unprecedented debt growth which resulted in super charged price increases, as that growth in debt has receded so have prices.

Cheers

Just checking in here after not reading the forum much for a while (I've been busy on some other things!). Hope everyone is well!

Anyway Satanoperca, the RBA recently published some data that might be what you are looking for here in a recent speech - (http://www.rba.gov.au/speeches/2010/sp-dg-150610.html). An interesting chart is this one:



As you can see, relative to average household income at least, average housing debt has not really grown at all for about the past 4-5 years - so this does not suggest a credit fueled price bubble to me.

There is another RBA paper that I can't find at the moment that looks at this specific issue using the total credit growth data - and it showed that prices recently had increased at a much faster rate than the growth in credit. I'll have to dig around and see if I can post that up later.

Cheers,

Beej

 

[cutz]

Hi Beej,

Depends how you read the numbers, even a flatlining at 150% is alarming.

Are the figures averaged out over the whole population ?

I doubt the majority of the population is running at 150% debt to disposable income so there must a section of the community with a disproportional high ratio.

Curious to know who's included in the mix.

 

[Beej]

Hi Beej,

Depends how you read the numbers, even a flatlining at 150% is alarming.

Are the figures averaged out over the whole population ?

I doubt the majority of the population is running at 150% debt to disposable income so there must a section of the community with a disproportional high ratio.

Curious to know who's included in the mix.

Hi Cuts - yep the paper/speech goes into the distribution of the debt - turns out that most of it by far is held by the highest income earning households. Ie ~50% of total debt held by the top 20% of income earning households, and ~75% held by the top 40% of earners. The bottom 40% of earners only hold < 10% of the total debt.





Cheers,

Beej

 

[Beej]

Here's some more data from Business Spectator:

Shows that for the past 2 years housing credit growth has been much lower than for the preceding 20 years, yet despite this house prices have seen steady gains since the end 2008/early 2009 slump. Again - this strongly indicates that the recent price rises in Oz are NOT being driven primarily by credit growth (ie house prices have actually increased more than outstanding credit for the past few years).

That chart is from this article, which is good read as well: http://www.businessspectator.com.au...eve-Keen-pd20100831-8TTJ2?OpenDocument&src=is

Cheers,

Beej

 

[Mr Z]

Again - this strongly indicates that the recent price rises in Oz are NOT being driven primarily by credit growth (ie house prices have actually increased more than outstanding credit for the past few years).

Yeah no....

% change is telling you that the rate of exponential credit growth is slowing, but because it is compounding significantly you really need to look at total $ flows vs total $ available housing stock. The slowing rate could just be an indication that we are maxing out our borrowing ability BUT only when that results in a total negative $ flow will the market as a whole correct. The percentages as a whole mean little as you are assuring a whole bunch of other things... e.g. If borrowing is quite low against v available housing stock a 50% credit growth rate will do little to price. If borrowing is quite high against v the available housing stock then a 2% increase could still conceivably drive price. Price is set at the margin so low credit growth or even contraction means little without considering supply numbers and then we need to deal with it in absolute $ flows terms.

So yes slowing growth in credit can still be driving price because a smaller % of a $ larger base can still out weigh total housing $ supply in $ terms even though in % terms house prices are out stripping % credit growth.

Logically credit increasing at a decreasing rate should cross the faster increasing house price at some point and produce negative price pressure. It seems that we have not hit that point yet and I guess nothing says we have to. If credit starts to flatten or increase its growth rate in line with house prices the whole thing may find a comfortable balance.

Anyway, I don't think you can really infer to much from that alone... JMO

 

[MACCA350]

Shows that for the past 2 years housing credit growth has been much lower than for the preceding 20 years, yet despite this house prices have seen steady gains since the end 2008/early 2009 slump. Again - this strongly indicates that the recent price rises in Oz are NOT being driven primarily by credit growth (ie house prices have actually increased more than outstanding credit for the past few years).

May also indicate house prices have been driven by international buyers, ie our housing market is diverging from locally driven factors.

Cheers

 

[robots]

hello,

good evening everyone, superb day and another week almost passed

here we go:

http://www.reiv.com.au/home/inside.asp?ID=162&nav1=1226&nav2=162

72% clearance rate, please note: i have do idea what it all means just helping everyone with the data

just rolling along by the looks of it with class doing well and the rubbish being sorted out

thankyou
associate professor robots

 

[robots]

Australian home values stablise in July after June losses

After a large 1.0% seasonally-adjusted fall in June, Australian home values changed little in the month of July, recording an increase of +0.1% (up +0.4% seasonally-adjusted).

According to the market-leading RP Data–Rismark Hedonic Home Value Index, Australia’s capital city home values remained relatively flat in the month of July recording a modest, seasonally-adjusted increase of 0.4% (on a raw basis home values were up only +0.1% in the month).

The July results follow a 1.0% seasonally-adjusted decline in the month of June; the first negative movement in Australian capital city home values in 17 months.

Don't you just LOVE RP DATA ??

?

hello,

Just researching the thread and thought some might be interested in this post from the other day. Especially those with superannuation questions.

Here to help.

Thankyou
Professor Robots

 

[robots]

Australian home values stablise in July after June losses

After a large 1.0% seasonally-adjusted fall in June, Australian home values changed little in the month of July, recording an increase of +0.1% (up +0.4% seasonally-adjusted).

According to the market-leading RP Data–Rismark Hedonic Home Value Index, Australia’s capital city home values remained relatively flat in the month of July recording a modest, seasonally-adjusted increase of 0.4% (on a raw basis home values were up only +0.1% in the month).

The July results follow a 1.0% seasonally-adjusted decline in the month of June; the first negative movement in Australian capital city home values in 17 months.

Don't you just LOVE RP DATA ???

hello,

gidday everybody, how's it going

a few good articles in the weekend papers, some fantastic results still for places

oh well, not much else happening brothers

thankyou
professor robots