The future of Australian property prices

sptrawler · 11 August 2014

I have noticed a lot more 'for lease' signs in the suburbs around my area.
I don't know if it will result in an increase in financially stressed investors. However a downturn in mining and an oversupply of rental properties looks possible in Perth.IMO

sydboy007 · 11 August 2014

According to the ABS, investor finance commitments in New South Wales in June were 34% higher than June 2013. New South Wales investor loans were also up by 42% in rolling annual terms in the year to June 2014, well above the national average increase of 29%.

Further, as at June 2014, investors accounted for an astonishing 54.5% of total housing finance commitments (excluding refinancings) in New South Wales – a new record. Victoria’s (read Melbourne’s) share of investor mortgages also rose to 46.2%, which was also a record share for that state.

Seems like the NSW VIC market is NG investors flipping to NG investors.

Madness

rimtas · 11 August 2014

Looks like these record figures will mark a 5+ year correction top in property prices. Extremes in sentiment always precede a turn to another direction. Though we can't be sure that these extremes can go even more extreme, but when you hear the words like "record", o "selling like hotcakes" it is worth to be cautious and to think twice before putting your money into real estate or taking a mortgage.
Real estate is the same asset that follows the same market rules as stocks, currencies, commodities etc. I myself was looking for a house this year but after a few months of reading and hearing an over-optimistic agent talks about how property prices are "set so soar' and that it is the "best time to buy", I abandoned this idea and will keep renting.

If stocks are turning down now, property will follow soon and in a couple of years should hit a new lows(compared to 2009). Then it would be a really good time to buy.

CanOz · 11 August 2014

rimtas said:
Looks like these record figures will mark a 5+ year correction top in property prices. Extremes in sentiment always precede a turn to another direction. Though we can't be sure that these extremes can go even more extreme, but when you hear the words like "record", o "selling like hotcakes" it is worth to be cautious and to think twice before putting your money into real estate or taking a mortgage.
Real estate is the same asset that follows the same market rules as stocks, currencies, commodities etc. I myself was looking for a house this year but after a few months of reading and hearing an over-optimistic agent talks about how property prices are "set so soar' and that it is the "best time to buy", I abandoned this idea and will keep renting.

If stocks are turning down now, property will follow soon and in a couple of years should hit a new lows(compared to 2009). Then it would be a really good time to buy.

Yeah, makes sense...seems like a top might be in...hang tight in QLD

Wysiwyg · 11 August 2014

rimtas said:
Real estate is the same asset that follows the same market rules as stocks, currencies, commodities etc. I myself was looking for a house this year but after a few months of reading and hearing an over-optimistic agent talks about how property prices are "set so soar' and that it is the "best time to buy", I abandoned this idea and will keep renting.

Do you mean as in supply and demand factors?

I bought my first property because I could afford to and because I did not want to give another cent toward renting from a property investor which in some cases is contributing to their loan repayments. So not for any rules as such but I could have bought it for less, like 10 years ago when the block was just bush at the crest of a hill.

DB008 · 18 August 2014

Anyone read last weekends Fin ?

Very interesting article about how Canada had problems with the Chinese buying up lots of their property and raising prices (up to 20% in 1 year).

I think that Australia should clamp down on foreign buyers snapping up our property. It, at the very least, should be a 2 way street (eg - Can I buy a house/apartment in Japan as a foreigner? No. Well, too bad, you can't buy here either. Can I buy in USA? Yes. Well, you can buy here. Why shoot ourselves in the foot?)

studmuffin · 18 August 2014

DB008 said:
Anyone read last weekends Fin ?

Very interesting article about how Canada had problems with the Chinese buying up lots of their property and raising prices (up to 20% in 1 year).

I think that Australia should clamp down on foreign buyers snapping up our property. It, at the very least, should be a 2 way street (eg - Can I buy a house/apartment in Japan as a foreigner? No. Well, too bad, you can't buy here either. Can I buy in USA? Yes. Well, you can buy here. Why shoot ourselves in the foot?)

Actually foreigners can buy Japanese property. But what you are proposing is quite fair.

sydboy007 · 20 August 2014

not pretty if you're landlording outside Sydney and Darwin. hate to think what it's like to be a perth landlord now.

sptrawler · 20 August 2014

sydboy007 said:
not pretty if you're landlording outside Sydney and Darwin. hate to think what it's like to be a perth landlord now.

I think it will get really bad in Perth, the amount of infill housing under construction and new subdivisions on the go, is scary.

Combine this with the outflow of workers, that were dependent on mining construction jobs and I think the perfecr storm is brewing for Perth property.
The big difference with Perth is, there isn't a large service sector as opposed to Sydney and Melbourne, so alternative employment isn't readily available.

TheUnknown · 20 August 2014

I have been out of Aus since dec 2013 and only returned 2 weeks ago.....looking at property prices they have really went up looked at a block of land before i left was selling for 330k now 400k.........is this sustainable? I think it's going to go downhill unless people are earning 300k these days. thoughts?

Wysiwyg · 20 August 2014

TheUnknown said:
I have been out of Aus since dec 2013 and only returned 2 weeks ago.....looking at property prices they have really went up looked at a block of land before i left was selling for 330k now 400k.........is this sustainable? I think it's going to go downhill unless people are earning 300k these days. thoughts?

Yes the ask prices are ridiculous but with the very low home loan rates; over 25 years makes it affordable for the average wage earner. Increase rates by + 2% and mortgage stress will be evident. They reckon inflation is below par but most goods and services (& houses) have risen sharply. Maybe there is a lag between data and reality. Actually it is the 'fixed' way inflation is calculated.

sptrawler · 20 August 2014

Wysiwyg said:
Yes the ask prices are ridiculous but with the very low home loan rates; over 25 years makes it affordable for the average wage earner. Increase rates by + 2% and mortgage stress will be evident. They reckon inflation is below par but most goods and services (& houses) have risen sharply. Maybe there is a lag between data and reality. Actually it is the 'fixed' way inflation is calculated.

View attachment 59115

Yes Wysiwyg, add in local government rates, electricity, gas, public transport i.e unavoidable costs and I think the picture will be different.
One thing I have noticed a lot of small commercial property, that has sat vacant for years, is now being bought.
I guess this is the shift in the economy the RBA keeps talking about, the unemployed construction people becomming self employed.

The time lag will be significant.IMO

sydboy007 · 26 August 2014

got to wonder what the buffers are like when I/O loans are running at such a high level

http://www.digitalfinanceanalytics.com/blog/interest-only-loans-up-to-43-2-in-june-apra/

ADIs with greater than $1 billion of residential term loans held 98.4 per cent of all residential term loans as at 30 June 2014. These ADIs reported 5.1 million loans totalling $1.21 trillion and an average loan size was approximately $237,000

There are a number of interesting observations within the data, but the one which stands out is the continued growth in interest only loans. Looking at the new loans written, we see that 43.2% were interest only loans. This is the highest ever, and reflects the growth in investment loans where tax offsets are maximized by keeping the balance as high as possible.

We also see a growth in the number of loans which are approved outside normal criteria. It lifted to more than 3.5% of all loans written in the quarter. At a time when regulators are stressing the importance of good lending practice, this is a surprise, but reflects the fact that larger loans are required by some to chase inflated house prices.

Investment loans across all ADI’s now make up 33.8% of all lending in the portfolio.

The average loan balances across the portfolio for loans with offsets, and interest-only mortgages continues to rise, with the average balance for the latter now at $299,000.

sptrawler · 26 August 2014

sydboy007 said:
got to wonder what the buffers are like when I/O loans are running at such a high level

http://www.digitalfinanceanalytics.com/blog/interest-only-loans-up-to-43-2-in-june-apra/

ADIs with greater than $1 billion of residential term loans held 98.4 per cent of all residential term loans as at 30 June 2014. These ADIs reported 5.1 million loans totalling $1.21 trillion and an average loan size was approximately $237,000

There are a number of interesting observations within the data, but the one which stands out is the continued growth in interest only loans. Looking at the new loans written, we see that 43.2% were interest only loans. This is the highest ever, and reflects the growth in investment loans where tax offsets are maximized by keeping the balance as high as possible.

We also see a growth in the number of loans which are approved outside normal criteria. It lifted to more than 3.5% of all loans written in the quarter. At a time when regulators are stressing the importance of good lending practice, this is a surprise, but reflects the fact that larger loans are required by some to chase inflated house prices.

Investment loans across all ADI’s now make up 33.8% of all lending in the portfolio.

The average loan balances across the portfolio for loans with offsets, and interest-only mortgages continues to rise, with the average balance for the latter now at $299,000.

Lending for investment loans, is good for the banks, as they tend to need a larger deposit 20%.

I just can't believe, that people are still pouring into investment properties, it will end in tears.IMO

Unemployment rising, rental returns falling, Government impasse on reduced spending = increase in taxes, reduced business expenditure, increase in unemployment as business cut costs.
Fall in income tax reciepts, increase in indirect taxes = further fall in consumer confidence, less spending.
Further lay off's = more delinquent tenants.

Property as an investment doesn't quite stack up at the moment.IMO

sptrawler · 27 August 2014

I suppose unsustainable property prices, unsustainable wages, unsustainable welfare payments, unsustainable superannuation,unsustainable electricity prices.

It all ays one thing.

Mrmagoo · 30 August 2014

Wysiwyg said:
Yes the ask prices are ridiculous but with the very low home loan rates; over 25 years makes it affordable for the average wage earner.

View attachment 59115

YOu're kidding right ?

Mrmagoo · 30 August 2014

DB008 said:
Anyone read last weekends Fin ?

Very interesting article about how Canada had problems with the Chinese buying up lots of their property and raising prices (up to 20% in 1 year).

I think that Australia should clamp down on foreign buyers snapping up our property. It, at the very least, should be a 2 way street (eg - Can I buy a house/apartment in Japan as a foreigner? No. Well, too bad, you can't buy here either. Can I buy in USA? Yes. Well, you can buy here. Why shoot ourselves in the foot?)

A lot of people are dual citizens and don't care about Australia. Our latest 2 PMS have been EU nationals. I bet once they've made a buck they both go back to Europe. This is part of the reason so much of our country is designed at making a quick buck and does not consider the long term.

DB008 · 31 August 2014

Further to my previous post, RE: Chinese buyers...

House price pain shifts spotlight to Chinese

A proposal to hit Chinese property *buyers with extra stamp duties or fees is under active consideration by a *parliamentary committee charged with finding a solution to the nation’s housing affordability crisis.

With the busiest season for real estate sales about to start, community concern is growing that cashed-up mainland Chinese buyers are pricing Australians out of their own market.

The parliamentary committee is looking at a number of options, *including a charge on Foreign *Investment Review Board approval for residential property.

An even more dramatic measure to be considered by the joint-Coalition and Labor committee – due to report in October – is whether extra stamp duty should be imposed on all foreign buyers. The move could mirror Singapore’s 2011 decision to curb excessive offshore buying with a 10 per cent duty.

Stuart Button, First National Real Estate’s national communications manager - speaking to AFR Weekend after addressing the hearing on Friday – said his company’s agents had found that in key parts of Sydney and *Melbourne mainland Chinese buyers were likely responsible for one in four of the top end purchases.

http://www.afr.com/p/business/property/house_price_pain_shifts_spotlight_Bj2VOVa9YQWnooX4R2T8VL

qldfrog · 31 August 2014

Mrmagoo said:
A lot of people are dual citizens and don't care about Australia. Our latest 2 PMS have been EU nationals. I bet once they've made a buck they both go back to Europe. This is part of the reason so much of our country is designed at making a quick buck and does not consider the long term.

just a note:
I am dual citizen and I do care about Australia, actually I care far far more than any of of the Australia born people I frequent;
I have the advantage to know and be able to compare Australia and other models; to see the best and the worst and Australia not being a leader in many political filed/experiment, to know exactly what is shaping ahead of the latest fad here!

Do you really believe any European born PM would ever think about going back considering all the rort they can have here?
I actually found that among people involved in sustainable actions, land care and conservation, etc: there is a high imbalance of european born aussies.And we (as collective) are facing a huge majority of Aussie born and bred who often see this country as a rape and pillage resource: to mine, subdivide and sell more real estate,
Proud of the latest great $ with Nana's beach shack or house in the inner suburbs.We are not talking top elite, just the usual bbq talk you will have ..
just wanted to put this straight

banco · 31 August 2014

DB008 said:
Anyone read last weekends Fin ?

Very interesting article about how Canada had problems with the Chinese buying up lots of their property and raising prices (up to 20% in 1 year).

I think that Australia should clamp down on foreign buyers snapping up our property. It, at the very least, should be a 2 way street (eg - Can I buy a house/apartment in Japan as a foreigner? No. Well, too bad, you can't buy here either. Can I buy in USA? Yes. Well, you can buy here. Why shoot ourselves in the foot?)

I just wish the various commentators who say foreigners can only buy new properties etc. under the law would STFU. The Foreign Investment Review Board has admitted these rules are completely unenforced.

The future of Australian property prices

sptrawler

sydboy007

rimtas

CanOz

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Wysiwyg

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DB008

studmuffin

sydboy007

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sptrawler

TheUnknown

Wysiwyg

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