The future of Australian property prices

We can see the impact of these factors in NAB’s recent results. The bank’s average mortgage borrower is eight months ahead of the required payments, and two-thirds of customers are at least one month ahead, the average loan to valuation ratio on its books is 48%, and some 15% of the book is insured. The consequence is that the bank’s loss rate on mortgage lending is 0.04%. Clearly there are still risks, for example if a mortgage insurer were to collapse, but it looks quite safe.

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A near-doubling of impairment charges caused by its exposure to the ailing regional commercial property sector has seen Bank of Queensland’s annual profit slide by 13 per cent to $158 million.
The Brisbane-based bank, one of the three remaining regional banks of any size left after the recent consolidation in the industry, saw its bad debt charges jump from $104 million just over a year ago to $200.5 million.

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And while the chances of the bill ever becoming law are slight in the extreme - it first has to be picked from the ballot and then once given a first reading would likely be immediately torpedoed by the Government - any debate of the issue in the house would sure to be lively and emotive.

The issue of foreign ownership has become a heated one this year as house prices, particularly in Auckland, have headed skyward. Anecdotal tales have abounded about large numbers of offshore based buyers snapping up properties, but there is little hard evidence to either support or refute such tales.

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Trembling Hand said:

Labour has introduced a members' bill that would allow only New Zealand citizens and residents to buy any existing house, flat or apartment

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AUSTRALIAN housing construction activity has expanded for two months in a row for the first time since 2010, in a sign that low interest rates are slowly working.

The Australian Industry Group/Housing Industry Association's performance of construction index (PCI) rose by 0.8 points in November to 55.2.

The reading for October rose above the key 50 level, showing expansion for the first time in more than three years.

In November, new orders ran at the strongest pace in eight years while deliveries from suppliers also improved, taking the PCI reading to the strongest point since April 2010.

Ai Group public policy director Peter Burn says the rise in construction activity last month shows low interest rates are slowly working.

"The long-awaited re-balancing of the domestic economy may be getting underway on the back of low interest rates and a lift in business and household confidence," he said in a statement on Friday.

"However, given the extent of the slump in residential and commercial construction over more than three years, the expansions recorded in October and November are from a low base and we are still some months from a convincing recovery."

HIA chief economist Harley Dale said tight credit conditions were an "avoidable roadblock" to a construction-led recovery in the economy.

"To sustain that recovery and return new home building to strong levels requires closer attention to policy reform than is currently evident," he said.

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trainspotter said:

Low interest rates are gaining traction in the housing industry.



http://www.news.com.au/business/bre...on-expands-again/story-e6frfkur-1226776976122

Last thing we need is a change in the lending criteria ..... do they never learn?

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CanOz said:

Greenspan's brother?

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trainspotter said:

Might be? His laissez-faire capitalism certainly worked for the USA

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CanOz said:

I mean that's it really isn't it? Create a debt fueled bubble based on lax lending standards (ninja etc.) then offset the risk by packaging it all up and selling it to overseas investors (so it takes the rest of the world to the brink) and domestic pension funds (so it forever enslaves the retirees)...

What a brilliant idea.

So Australia has a housing bubble? Maybe a little frothy in places...

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"Innovation has brought about a multitude of new products, such as subprime loans and niche credit programs for immigrants. Such developments are representative of the market responses that have driven the financial services industry throughout the history of our country ... With these advances in technology, lenders have taken advantage of credit-scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers. ... Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending; indeed, today subprime mortgages account for roughly 10 percent of the number of all mortgages outstanding, up from just 1 or 2 percent in the early 1990s"

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CanOz said:

lol....great post.....You're like the TH of the Property Thread.....After the GFC everyone is so gun shy that anything remotely looking like a bubble and they're all calling doomsday...

We will have another bubble, chances are the the next one might be bigger, but only a few will be able to pick the timing...in the meantime carry on carrying on.

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waterbottle said:

I have been following this "housing bubble" for quite some time (since 2007) and am very disappointed in how it has persisted. There was an opportunity for the bubble to burst after Rudd's victory, although that was certainly scuttled with his boost to first-home owner's grants and the RBA's decision to cut (and maintain) interest rates at record lows.

I think it's time to admit that I've backed the losing side and that expensive housing is here to stay.

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sptrawler said:

It's not all doom and gloom, banks are lifting their home loan interest rates.
The squeeze will come.lol
http://www.propertyobserver.com.au/mortgages/should-you-fix-your-mortgage-now-experts-have-their-say

The banks would be given the wink before the plebs are told.

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sptrawler said:

It's not all doom and gloom, banks are lifting their home loan interest rates.
The squeeze will come.lol
http://www.propertyobserver.com.au/mortgages/should-you-fix-your-mortgage-now-experts-have-their-say

The banks would be given the wink before the plebs are told.

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Got nothing to do with the government of the day. Historically low interest rates, unemployment steady, job security back to normal levels, CPI within target range of the RBA, pent up demand, amount of investors back in the market place, banks offering 3 year rates at 5.8% (which have just gone up 0.06% btw *interesting*) as well as quite a few "other" market indicators. But you know all this right?

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trainspotter said:

Too late my friend ... too late. Posted this awhile back.



Rates haven't moved. Banks are profiteering.

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waterbottle said:

Hi TS,

I've seen you post a few times in this thread but am having a bit of trouble trying to figure out what your stance on the housing issue is.

Are you trying to say that the banks have no need to increase rates? and that there won't ever be a squeeze?

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"It's a comfort to the Reserve Bank that low interest rates are working and with no interest rate rise on the horizon any time soon, you'd expect that housing finance approvals and other housing indicators continue to trend higher in coming months."

JP Morgan economist Tom Kennedy said he was encourage by the increases in housing finance for the purchase of new dwellings, and the construction of dwellings.

"When you look at the breakdown it was fairly broadbased," he said.

"Construction loans, which is the one that the Reserve Bank of Australia has been targeting, trying to get a bit of a lift in that sector, they were up about one per cent and that is its third consecutive monthly increase, there are tentative signs of life in that sector.

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The national housing market moved into a growth phase throughout 2013, with combined capital city home values 7.9 per cent higher than they were a year ago, according to RP Data.

The RP Data Quarterly Review shows that house prices rose 8.2 per cent over the first 10 months of 2013.

However, although home values are broadly climbing across the combined capital cities, growth has been fuelled by a large rise in values across only a handful of cities.

The annual change in values has ranged from 11.6 per cent in Sydney to minus 0.7 per cent in Hobart. Sydney, Melbourne and Perth have each recorded annual value growth of more than 6.5 per cent, while values in all other cities have either fallen or risen by 3.5 per cent or less.

Combined capital city home values are now 2.0 per cent higher than they were at their previous peak. But this is being driven entirely by Sydney where values are 9.1 per cent higher than their previous peak. Across all other capital cities, values remain lower than they were at the time of their respective market highs.

In addition, the number of property transactions has risen over the year as overall sentiment has improved.

Over the three months to August 2013, there were 80,310 capital city house and unit sales. In comparison to the same three-month period in 2012, sales volumes are 20.1 per cent higher with a more significant lift in house sales (22.3 per cent) as opposed to unit sales (15.4 per cent).

Across each capital city, home sales are higher now than they were 12 months ago.

Given the improvement in both the RP Data Mortgage Activity Index and housing finance data, RP Data expects a further rise in transaction volumes over the coming months.

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"There had been further signs of the stimulatory effects of low interest rates, most notably in the housing market, and additional effects were still likely to be coming through," the RBA said.
"At the same time, inflation remained within the target.
"While the exchange rate had depreciated over the month, members agreed that it remained uncomfortably high and a lower level would likely be needed to achieve balanced growth in the economy."

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