Australian (ASX) Stock Market Forum

The future of Australian property prices

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morning grasshoppers.....
It is easy to draw you out, in unison, to rally against any good news on the housing front......
you know you have lost the battle.....when the banks start loosening their stance, TV shows start popping up again, and developers are advertising their new home deals......
the property market is simmering along just nicely.......and spring has only just begun.....the election is over, the drought has been stopped, and the grass is green again.....

the cockies are happy, abundance of food and water in the central areas of NSW and Vic.....after the worst drought that lasted between 15-20 years....

regional and country towns are buzzing, and a hive of activity......
those of you who are so focused on inner city prices, as if it were the only housing market indicator, may as well walk around with a blindfold on.......

the cockies are hiring workers again, the recent rains and floods will ensure prosperity for the farmers, graziers and those in the big food bowls....

tourism is bouncing back with the rivers full again, all those recreational lifestyles and activities that rely on water, will be revived.....

its all good, in fact stunning......plenty of work, interest rates at the standard average rate, and people are confident with the housing market, whether its buying, renovating or upgrading.....
it may pay some of you to get away from your PC, get out and take a drive, have a good hard look, as if you were a tourist......go somewhere you have never been before......
have a look at some of the bigger regional areas....jobs, lifestyles and affordable housing, its all there....
cheers
 
Hello,

hi everyone and what a fantastic day,

going to be interesting with The Block kicking off on ch9 on wednesday night, hows that hey!

this is a link to a site on buildings I read, and this one on a particular architectural style:

http://www.walkingmelbourne.com/forum/viewtopic.php?f=4&t=6295

fantastic homes/buildings and their "value" becoming ever so important, cream brick houses, fascinating

thankyou
professor robots
 
Hi Robots and fellow PI's..
...just getting in early....I have just become a Saints supporter, watched my first footy match ever, on the edge of my seat the whole time, stunning result....I was barracking for the saints....what a great team they are....
shame we have to go thru it all again....so thats in my diary for next sat arvo....
geez lots of activity in the property arena....if you are out there on the street you will notice it...reminds me of the 2005-2006 era...methodical frenzy....hive of activity, buildings being torn down for development, others coming to completion, plenty of people at the auctions....
commercial property is going great guns....
god help anyone who relies on the media for the market news
cheers all
 
http://www.abc.net.au/news/stories/2010/09/24/3021480.htm?section=business

CBA has waged its war against what it believes are housing doomsayers with graphs, numbers and international comparisons.

In its presentation, the bank rejects arguments that Australia's housing is relatively expensive compared to incomes.

It says Australia's house price to household income ratio of 5.6 in the major cities, and 4.3 nationwide, is comparable to many other developed nations.

It says San Francisco and New York have ratios of 7, Auckland's is 6.7, and Vancouver comes in at 9.3.
Click to expand...


However, as Australia's largest home lender, the Commonwealth Bank has one of the biggest vested interests in house prices rising.

It effectively owns a massive swathe of Australian housing as security for its home loans as well as many small business loans.

Many analysts say that has led the bank to use misleading figures and comparisons.

If you go to page four of CBA's presentation and read the source information at the bottom of the graph and table, you would notice there is an additional source on the international comparison - Demographia.

However, if the Commonwealth Bank had also used Demographia's analysis of Australia's house price to income ratio, it would have come up with a figure closer to 9 rather than 5.6 or 4.3.
Click to expand...
 
they quote demographia.....* and UBS
demographia has its own agenda.....to open up huge areas of land for housing.....but without the cost of supporting infrastructure to make it attractive...or actually liveable
they are against building high rise apartments, in areas that already have the support of existing infrastructure....
they seem to support the US situation.....where thousands, in fact millions of houses were built....without the support of providing jobs, schools hospitals etc...
their reports have massive problems coded in....they do not differentiate between the size of houses, type etc....all houses are lumped together as if it was one easily recognisable unit....
at least cba and others show a fibro 2 bdr unit, is not the same value as a 4 bdr mcmansion with 2 bathrooms...or that a house in an area with a population of 1000, is comparable with a city population of 5 million...
duh, dunces...anyone with half a brain could deduce there is no comparison

their idea that a house in towoomba is comparable with new york...and costed accordingly shows how ridiculous and meaningless their reports are...
I cannot be bothered with actual correct name of the towns they compared with major cities world wide.....it was just so laughable...

but it is great reading for the gullible amongst us out there in lah lah land
 
hello,

good afternoon everyone, what a great year it has been so far

anyone catch that article from M.Pascoe today, SQM man forecasting rental increases of 5-8% for Syd, probably get the same in Melb, Adel and Perth I reckon

what you think?

definitely doesnt look like dropping, which is in stark contrast to the many "companies" who reduced there dividend, amazing

oh well,

thankyou
professor robots
 
Hello,

Louis Christopher, sorry thats the guy from SQM

yeah about time rents got back to the long term average i reckon, its all been out of whack recently

should be around 8-9%, good yield

thankyou
professor robots
 
robots said:
Hello,

Louis Christopher, sorry thats the guy from SQM

yeah about time rents got back to the long term average i reckon, its all been out of whack recently

should be around 8-9%, good yield

thankyou
professor robots
Click to expand...

That is achievable, property retraces 40% of it high and you will see those returns but find it hard to believe that rents will increase 100% in the next few years.

Cheers
 
wayneL said:
In all other Anglo Saxon countries, there is an open admission that house prices became, and are, overvalued and a resignation that at best there will be an extended stagnation of prices.

Is Oz so different?
Click to expand...

No it is the same as everywhere else, but worth noting not all other Anglo Saxon countries are openly admitting, Canada springs to mind as a counter example where the scenario roughly equates to Australia right now.

The equation here is slightly different though. The link posted by Mr Z regarding Dr. Lowes warnings highlight this.

The trade-off is slightly more complicated than your average rock/hard place scenario, the components are:

1. Interest rates. These are influenced by three key factors:

a) The RBA target cash rate. However let us not forget that the RBA is not in control of rates. Global money markets are what dictate rates. Who really thinks it's a coincidence that Australian interest rates are at decade lows on the exact same timescale as the rate shenanigans occurring out of the US Federal Reserve?
b) The ability of big 4 banks to sell their debt on the foreign markets. This has its own dependent factors, namely the Treasury guarantee on this debt and a hope that the huge global sovereign debt issuance which has been going on since 2008 is not about to crowd any relatively small players such as our banks out of the market.
c) Real (rather than nominal) inflation/deflation. I make no claim as to know which way this real number is going in the future, but sooner or later rates will take notice of it.​

2. The ability of Australian exports to compete on global markets with the Aussie dollar vis-a-vis any other floating currency. Much noise is made about China and India fueling our boom and decoupling us from the US but let's face it, Chinese demand for Australian commodities stems mostly from US and European demand for Chinese manufactured goods (yes, even domestic growth in China is dependent on this demand). So decoupling is a big phooey. Each cent the AUD ticks up against the likes of the USD and EUR is a cent less competitive on all of our exports. Food exports might be immune to this due to insatiable global demand for staples, but the rest of our economy certainly is not.

3. Global commodity prices.

2 and 3 might seem sort of similar, and relatively small in a big picture, but the numbers show that global commodity demand and our ability to compete is the juice that has kept the Australian economy on life support.

So how do I see it playing out?

Well...

Either, everything is fine and dandy all over the world:

AUD up to 1.34 against the USD, commodities up, real inflation up. Rates converge and we start having weekly articles about "mortgage stress" again. Most likely in this scenario, real wages do not keep pace with real inflation (are they now? No.), and within 5 years from that mark we have a decreased standard of living in Australia as everyone is putting too much of their money into rent or mortgage payments (assuming a mortgage stress event doesn't just pop the whole market).

Or, everything is exactly the same as it was in 2008 (i.e. very very bad), the only difference between now and then being huge sovereign intervention into every market imaginable:

AUD is way way overvalued and heads back to 0.6 against the USD quick smart, commodities down, real inflation down. Rates diverge and the property market poops out with wave after wave of mining layoffs (no manufacturing layoffs since our whole manufacturing industry which used to contribute 10% to GDP is pretty much dead already), tax increases to make up the shortfall of property and mining taxes, and investment property selloffs as "astute property investors" realise there is no way the yield they forecast is going to come to pass over a 10 year horizon. Say hello to a decreased standard of living in Australia within 5 years of this occurring.

Basically, what I am trying to say is that Australia has an inflationary collapse (and accompanying decrease in standard of living for the majority) coming no matter what happens. You can be sure that the coming change in board of the RBA will only accelerate this.

I stopped coming on this thread, because the property bulls seem to think that railing against the complete and utter sell-out of our future as Australian citizens has me rubbing my hands with the glee that I would enjoy being right about either scenario. Which of course is their cue to shout down anyone who might have a different viewpoint. I find that idiotic, and mostly boring, so I'm sure this will be my last post on this thread for another few months. Unless, you know, you guys want to actually discuss things.
 
Hello,

yeah no worries Sinner, i feel the same way as you a lot of the time on this thread

its very evident why Australia is doing so well and I have regularly posted those prophecies but continually get abused. oh well life goes on

by the way, Mr Z on school holidays? or GPHC opened up again

thankyou
professor robots
 
Hmmmmmmm ....... all quiet in here? Where are all the naysayers tearing down the property bubble ?? *POP* That was me opening another bottle of champagne and not the property bubble bursting ..... hahahhahahaaaa.

Steady as she goes skipper .... rate hike on the horizon.
 
Here we are!

It looks like Joe Public is going to get the true story, as opposed to the one put out by the banks, HIA, REIV, media, forum spruikers etc etc. Worried? You should be!:eek:

http://www.smh.com.au/business/housing-stress-test-spooks-market-20100929-15x2u.html


Housing stress test spooks market
Chris Zappone
September 29, 2010 - 4:26PM
Credit ratings agency Fitch says it will stress-test the impact of steeper home prices on Australian banks' debt, sending shudders through financial stocks.

Fitch this afternoon said it’s probing the potential impact of a spike in mortgage defaults or drop in house prices on the portfolio of Australian residential banked mortgage securities it rates.

"Over the last few months, Fitch has received numerous enquiries as to the sustainability of Australian residential property prices and the possible impacts of a correction,” said Ben McCarthy, managing director for Australia and head of Asia Pacific Structured Finance.

“While over the short-to-medium term, a downturn is not Fitch's central expectation, the agency is performing its stress test exercise on ratings impact under the hypothesis of an imminent housing market correction.”

Australia’s capital city home prices have risen 41 per cent since June 2006, on official Australian Bureau of Statistics data. Over the same period prices plunged in the US, UK, Ireland and Spain.

An estimated 60 per cent of Australian banks’ loan books is secured by residential property, leading pundits and international investors to question the sustainability of house prices.

The announcement this afternoon put pressure on Australian bank stocks, according to CMC Markets.

“The banks seemed to be weighed upon by this news, with all four in the red following being in positive territory in the morning," said CMC Markets institutional equities dealer David Barrett-Lennard.

Bank stocks closed down 0.8 per cent for the day, as the benchmark S&P/ASX 200 index dropped 0.5 per cent, or 24.8 points, to 4645.

"A housing bubble is the one overhang of the Australian economy, with proponents arguing that with Australian banks having 60 per cent of their loan books secured by residential property, the entire Australian economy is very highly leveraged to a domestic asset bubble," he said.

There is growing wariness internationally about Australian house prices.

Several months ago The Economist published a report on the local real estate market saying prices were the most overvalued in the world. And investment bank Goldman Sachs last week said Australian house prices were overvalued by up to 35 per cent.

czappone@fairfax.com.au
Click to expand...
 
Hello,

hehehehe, spruikers, yeah i agree WayneL some posters

goldmans sach says overvalued, so come buy into one of our managed funds and we give you 5.5% p/a over the next 10yrs with no obligation to ever return your money

hahahahahahahahahaahahahhahhhhhhahahaaaaaaahhhaaaaaaahhahhahahhhhhhahhhhhhhhahhhhaaaaaaaaaahahahahaha

got any hard disappointments on the property front gloomers?

thankyou
robots
 

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