The future of Australian property prices

[waterbottle]

http://www.thebull.com.au/articles/a/42883-the-cash-rate-cut-door-is-still-open.html

Dollar below 90 cents ... check
Lower interest rates having effect ... check
Banks softening lending practices ... check
RBA thinking about cutting rates again ... check
CERTAIN areas evidencing 20% + growth ... check

Employment is trending higher/lower/uncertain ... no check

Oh dear ..... here we go again !

To the moon?! Again?! But China just got there yesterday

 

[trainspotter]

To the moon?! Again?! But China just got there yesterday

And this is what they looked at .....

...

 

[Quincy]

The following article lists what I see going on in and around where I live and is the reason, I believe, why there is a current surge in sales and increased prices in both Sydney and Melbourne.

I know one Chinese woman in my area (friend of a friend) with PR status who has purchased over 20 properties for overseas family and friends (all cash purchases - no Bank loans).

http://www.news.com.au/realestate/c...before-next-boom/story-fncq3era-1226704103879

Interesting article (3 full page) in the AFR Weekend 21 December, 2013 by Matthew Cranston and Rebecca Thistleton.

Some of the content : -

THE GREAT CHINESE TAKEAWAY

With reports every week of Chinese and Chinese-backed buyers dominating home auctions and off-the plan apartment launches, especially in Sydney where house prices are up 11.6 per cent in the year to October, it is no coincidence the two biggest mansion deals in Australia in 2013 also involved hungry Chinese money. Australia is truly in the middle of The Great Chinese Takeaway.

As in London, where house prices are up 10 per cent in a year, commentators are suggesting the booming prices in the market and the repercussions for affordability will soon all become the foreigners’ fault.

“This is what happens when property in your city becomes a global reserve currency” Michael Goldfarb wrote in The New York Times in October.

While the Australian Foreign Investment Board’s laggard records show 4.2 billion worth of Chinese money flowed into the Australian real estate market in fiscal 2012, the true value of Chinese money entering the real estate market is hard to establish. Australian citizens with money from their Chinese relatives and business associates are able to bypass the FIRB rules that say foreigners can only buy new housing stock.

The money coming in from mainland China for property purchases could be exponentially higher than the FIRB could ever record.

Given the anecdotes and growing media coverage, you might think something should have been done by now to track the numbers more precisely and measure the impact of both Chinese and Chinese-backed buyers. But there is little hard data around.

It could, in part, be because of political correctness and the fear it might be considered racist to track cultural movements in capital, especially from the world’s rapidly growing second-largest economy.

It could be the bureaucracy and under-funding at the FIRB. It could be that the lawyers, who quietly negotiate the big buys and obsequiously create the veil of secrecy for the Chinese buyers, are all enjoying their job and the rich cream layer of fees that goes along with it.

In the past few months, the Reserve Bank of Australia has been taking soundings in the local real estate market to try to find out what impact Chinese equity might be having - or could have – on residential markets.

There is a seeming discrepancy between credit growth in Australia – which has remained about 4 per cent to 5 per cent in spite of several interest rate cuts – and growth in house prices. Historically, the two have tended to reflect each other. But in the past year, house prices have risen, nationally by about 8 per cent; Sydney has seen close to 12 per cent growth in prices.

It’s no surprise the RBA is wondering where the extra money is coming from.

Juwai.com, which calls itself the largest Chinese international property portal, estimates 63.1 million Chinese have the wealth to invest in overseas property and 90 million Chinese search for property every month.

Meanwhile, restrictions in China on investing in the housing market – on the amount of equity required for each dwelling purchase, which increases depending on how many you own – has also motivated Chinese investors to seek offshore markets.

Hengyi Australia’s co-founder and chairwoman, Min Wang, said Australian cities were easier to do business in “The Australian property market is more mature than China’s; its laws are clear, its business dealings simple and direct” she said.

Her view also reflects the desire of many mainland Chinese to counter political and economic uncertainties by investing their money in so-called safe-haven destinations such as Australia.

Agent John McGrath describes the Chinese money as the biggest surge from an offshore market he has seen in his 30 years in real estate. He says in some suburbs, 90 per cent of new product is selling to Chinese buyers.

“Our [real estate] market is the Chinese market, just like coal and iron ore,” *Triguboff famously says of the Chinese buyers. (*billionaire Harry Triguboff of Meriton).

Colliers International’s Andrew Scriven says the Chinese money is flowing in everywhere, not just the main cities.

In 2011, south-east Melbourne agent John Castran reported that most of the off-the plan buyers in a $65 million block of apartments in Glen Waverley were selling to Australian Chinese residents. He described their enthusiasm: “They were queuing up like labradors with cheques in their mouths.”

Almost three years later, he says, the demand has not stopped.

While it has been good business, he understands the frustration among buyers.

“There is no question that the Anglo-Australian is being pushed out into the greater concentric circles,” he says. “I see it. I am at the auctions and the Chinese are outbidding the Anglos. The power of their money opens the doors. The Chinese are so much more aggressive and organised. They are a pleasure to deal with and you don’t have to be chasing them up”.

At the big end of town, agent Michael Zhu says the decrease in the Australian dollar will drive further top-end investments by the Chinese. “This year, when the Australian dollar started to come down, the Chinese started to buy. I think next year, the Australian dollar will come down further, and you will see some big sales.”

Landmark Harcourts has also entered the Chinese market using the luxury car client list of the Bentley Owner’s Club. And Ray White has also set up an office in Beijing.

Ray White’s Marcus Ng says the aim is to help Chinese money find the right property in Australia: “In the old days, it was like waiting for fish to jump on the boat; now we have the best boat and the best fishing rods to catch all the best fish.”

 

[Bill M]

Quincy, I went back to your post of September regarding a similar artice to what you posted today and I am replying to ROE's post below where he addressed his concerns.

I agree with ROE, what a terrible high risk proposition. I would never ever hand over even $100 let alone $1 Million to a friend who may be a permanent resident of another country for them to invest on my behalf. You have no control and they can swipe the money by selling the house anytime they like.

The people who gave them the money in good faith wouldn't even know their property was sold and the "friend" could well be living on the otherside of the world by the time they found out. Bloody crazy if you asked me, too much risk and if they are foolish enough to make such an investment then they must bear all the losses too. That's what I call gambling, not investing.

In a few years you see articles that friend, relatives or who ever has the properties in their name and the actual owner want to sell and get their money they can't ..

This stuff repeat so many times in so many countries I am surprise people haven't learned -

Legally there is nothing they can do...I am surprise people that stupid hand over money to title they don't owned

 

[Mrmagoo]

BB

I'm happy to leave you with your vision property investing as some sort of tool the evil Baby Boomers use to repress the following generations . Obviously your not going to change your views and you have a nice little group of fellow true believers who congratulate you when you take things out of context and ignore other things .

Property investing is another tool for wealth creation that is available for any one who wants to use it . In the last few years I have seen people from all generations create wealth from investing in property . Just from people I know personally , I know two people in their 20's get to the point where they had signicant financial freedom . One paid cash for a house in Sydney's northern beaches , so it is not just BB' s who can and do benifit. My daughter , 24 , has just bought her first investment property and is looking forward to buying her second .

I wish you happiness along your journey.

Cliff

Please explain to us now how this is not the case, given the recent huge increases in Sydney exactly how is it not a tool of oppression ?

You don't create wealth with property you out right steal it from others.

 

[tech/a]

Please explain to us now how this is not the case, given the recent huge increases in Sydney exactly how is it not a tool of oppression ?

You don't create wealth with property you out right steal it from others.

He just did read above!

How you doin Cliff!

 

[Modest]

Interesting. So someone like myself looking at buying my first home (24, Male) should wait until rates return to pre GFC levels as that is when average house prices will be at their lowest?

My plan of attack was originally to buy NOW and pay off the mortgage QUICKLY (5 - 7 yrs) but it seems like the wise option would be to rent with friends for the time being and build capital and pounce when the rates are high and the home prices low and pay off the mortgage even quicker.

What kind of time frame are we looking at in regards to rates returning back to their highs?

 

[sydboy007]

What kind of time frame are we looking at in regards to rates returning back to their highs?

I'm thinking rates will be low for quite a bit longer with the way unemployment is increasing even while the participation rate is falling.

I'm not sure what the threshold for unemployment is before it starts to afect house prices, but the only thing that will keep house prices from falling is the reported foreign buyers, but then China is going through their own slow down so maybe that money will start drying up too??

Why buy when u can rent for and let the tax payer subsidise your living costs. Council rates water rates insurance all add up quickly, strata fees too for an apartment.

Just rent and save the difference compared to a mortgage in super or bonds / shares / hybrids. They'll al pretty much generate a better return than housing. Heck, I'm looking at an annualised return over 10% with hybrids for the last 6 months with no debt worries.

 

[matty77]

Interesting. So someone like myself looking at buying my first home (24, Male) should wait until rates return to pre GFC levels as that is when average house prices will be at their lowest?

My plan of attack was originally to buy NOW and pay off the mortgage QUICKLY (5 - 7 yrs) but it seems like the wise option would be to rent with friends for the time being and build capital and pounce when the rates are high and the home prices low and pay off the mortgage even quicker.

What kind of time frame are we looking at in regards to rates returning back to their highs?

As long as you can save faster then what the house prices are growing then keep renting and saving.

As soon as that changes buy a house, because then you are getting behind everyday.

 

[medicowallet]

As long as you can save faster then what the house prices are growing then keep renting and saving.

As soon as that changes buy a house, because then you are getting behind everyday.

It would be extremely difficult to keep up with property over the longer term unless you are gearing into investments too (and that can be difficult as banks charge more for eg margin loans) People probably make most money from property not on their principal, but due to the fact that they are gearing, often heavily (and I would say stupidly at the peaks)

MW

But don't ask me, ask Robots

 

[dian11]

Finally we get some clear information as to what property prices are really doing. The ABS are publishing 'House Price Indexes'. It won't be distorted or massaged by self interested Real Estate Agents any more.

 

[DB008]

As long as you can save faster then what the house prices are growing then keep renting and saving.

As soon as that changes buy a house, because then you are getting behind everyday.

http://www.smh.com.au/business/property/australian-capital-city-house-prices-rise-10-in-2013-20140102-306tk.html

Sydney recorded the strongest yearly growth across the capital cities, with an annual rate of 14.5 per cent in 2013.

If you can save 40k a year (for a cheap unit in Sydney[400k unit]), then keep saving...if not...

Actually, l'm about to off-load some properties. Need capital for a business venture, so please don't take any of my advice.

 

[sptrawler]

http://www.smh.com.au/business/property/australian-capital-city-house-prices-rise-10-in-2013-20140102-306tk.html



If you can save 40k a year (for a cheap unit in Sydney[400k unit]), then keep saving...if not...

Actually, l'm about to off-load some properties. Need capital for a business venture, so please don't take any of my advice.

IMO good move danny, the amount of housing and infill development in Perth, is scary.

But like I said, IMO, and it isn't worth anything.lol

 

[Value Collector]

You don't create wealth with property you out right steal it from others.

Can you explain, who the wealth is being stolen from? and how it was stolen?

 

[Value Collector]

I don't think any other country in the world allows this sort of thing to go on. Think about it. Most Aussies can't buy property overseas and would have little to no chance of working overseas yet we are allowing a tide of immigrants to come here and compete for jobs and houses so that a select few can get wealthy without having to lift a finger for it. It just isn't right. It is going to stuff up the lives of an entire generation.

I think you are suffering from "Poor Me Syndrome",

What do you mean "Most aussies can't buy property over seas", are you saying that there is only a special class of aussie that can buy property over seas.

I think you need to get your facts straight, Australian companies own property, businesses, mining rights and infrastructure all over the world. I even know private individuals who hold farm land over seas and realestate investments over seas.

 

[DB008]

Can you explain, who the wealth is being stolen from? and how it was stolen?

+1

This is a weird post Mrmagoo

 

[IFocus]

552 posts and Robots is still right, crack me up.

 

[Bill M]

Mrmagoo has come out with some beauties before. This is what he said 14 Months ago. :1zhelp:

A housing investor is no better than a drug dealer, pimp or stand over man.

 

[drsmith]

Listening to a real estate segment on ABC radio this morning, residential property sales in Perth have taken off but at the same time,

THE economy shed almost 32,000 full-time jobs in the lead-up to Christmas, reviving talk of further cuts in official interest rates in coming months and knocking almost US1c off the Australian dollar.

The number of people looking for work rose to 722,000, the highest level in more than 15 years, underscoring a rise in the national unemployment rate from 5.7 per cent to 5.8 per cent between November and December.

The surprise job market deterioration was worst in states suffering from the resource slowdown: unemployment rates rose most in Queensland and Western Australia, to 5.9 per cent and 4.7 per cent respectively.

http://www.theaustralian.com.au/bus...-cut-speculation/story-e6frg926-1226803161706

Month to month job figures can be lumpy but it remains a tightrope for the RBA between encouraging employment growth and preventing a real estate asset bubble.

 

[DB008]

Listening to a real estate segment on ABC radio this morning, residential property sales in Perth have taken off but at the same time,



http://www.theaustralian.com.au/bus...-cut-speculation/story-e6frg926-1226803161706

Month to month job figures can be lumpy but it remains a tightrope for the RBA between encouraging employment growth and preventing a real estate asset bubble.

This might sound like a crazy idea, but if l were in Gov, l'd scrap 'unemployment benefits' altogether. They are trying to build a super massive national infrastructure project (aka - NBN).

Want a job? You got one....work for NBN Co. (Didn't the 'Snowy Mountains Hydro Scheme run for 25 years?)

The Snowy Mountains Scheme was notable for its immigrant, mostly European, work force. [5] The scheme's construction is seen by many "as a defining point in Australia's history, and an important symbol of Australia's identity as an independent, multicultural and resourceful country".[2]
http://en.wikipedia.org/wiki/Snowy_Mountains_Scheme

Provide training and experience. Have a sub 1% unemployment rate. Save money and give people skill in a technology sector which will grow for, well, pretty much forever...