The future of Australian property prices

FxTrader · 1 September 2014

banco said:
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.

True enough. No doubt existing and especially new property owners welcome this influx of foreign investment in our residential property market, billions are at stake if the price bubble collapses. As for future local aspirants hoping to buy a house one day, STFU or become politically activist because entrenched, well established policies favor the status quo and very few politicians (many of whom are property investors themselves) have any real interest in the housing affordability issue (yet).

The insanity continues, would you pay 2 million for this, even as a developer?...
http://www.theage.com.au/victoria/rotting-richmond-house-to-sell-for-millions-20140831-10ams7.html

Value Collector · 1 September 2014

FxTrader said:
The insanity continues, would you pay 2 million for this, even as a developer?...
http://www.theage.com.au/victoria/rotting-richmond-house-to-sell-for-millions-20140831-10ams7.html

That's a pretty big block, I guess it comes down to how much the four townhouses would sell for once complete, I am not familiar with that area, But the quality of the existing house is meaningless if the all the value is tied up in the land.

There is certainly areas around Sydney where even a vacant block would be worth well over $2million, I am guessing Melbourne would be the same.

kid hustlr · 1 September 2014

http://smh.domain.com.au/real-estate-news/strongest-winter-for-property-since-2007-20140901-10atrf.html

Major capital cities still strong.

Been a lot of negativity towards house prices in this thread over the past few years and whilst some very good arguments have been made, you can't argue with results.

Smurf1976 · 1 September 2014

kid hustlr said:
Been a lot of negativity towards house prices in this thread over the past few years and whilst some very good arguments have been made, you can't argue with results.

Can't argue with the facts but they defy logic especially in the smaller cities.

Perth up 3.5% despite the mining boom winding down.

Adelaide up 5.9% whilst the SA economy struggles and more job losses (eg Holden) are known to be virtually guaranteed in the years ahead.

The only one that makes any real sense is Canberra, where the 1.4% rise is below CPI, in a city where the largest employer (public service) is having significant job cuts. Also possibly Hobart where the 2.8% rise, roughly in line with overall inflation, in a economy that could best be described as "muddle through".

Sydney's 16.2% sure isn't backed by anything solid. Wages, economy, population - none of it is growing anywhere near that fast and it's not as though there's any sort of major, transformational development on the cards either (and it's pretty hard to do something transformational in a city that size, easier somewhere like Darwin or Hobart but not Sydney).

Quincy · 2 September 2014

Smurf1976 said:
Sydney's 16.2% sure isn't backed by anything solid. Wages, economy, population - none of it is growing anywhere near that fast and it's not as though there's any sort of major, transformational development on the cards either (and it's pretty hard to do something transformational in a city that size, easier somewhere like Darwin or Hobart but not Sydney).

The two word response to your above question regarding Sydney (generally) is "Chinese buyers".

Around 10 million of the wealthiest Chinese families, or around one in seven, are interested in migrating to Australia, according to a survey conducted by the broker. And home ownership in a desirable destination country is “a key reason” for the flood of money coming into the Sydney and Melbourne property markets

http://www.smh.com.au/business/prop...o-continue-20140815-104bpj.html#ixzz3C7h4R71g

Chinese nationals 'illegally' buying luxury Australian real estate are forcing prices up by 30 per cent, leading agent claims

http://www.dailymail.co.uk/news/art...cing-prices-30-cent-leading-agent-claims.html

Chinese rush for Australia's homes is here to stay

http://www.smh.com.au/business/chin...as-homes-is-here-to-stay-20140806-100vnc.html

10 million Chinese buyers look to buy Australian homes

http://www.heraldsun.com.au/news/vi...042127068?nk=7d82ce93586163573246cbb452c9f31b

However fears that the surge in money from China could overwhelm the local market have become inflamed in recent months following the *publication in March by investment bank Credit Suisse of a report forecasting Chinese nationals would buy around $44 billion in residential real estate over the next seven years.

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

Value Collector · 2 September 2014

Smurf1976 said:
Perth up 3.5% despite the mining boom winding down.

Even in a city of static population growth, 3% should roughly be the norm, that pretty much just takes Inflation into account.

In a city that is growing its population either organically or through immigration you will see the price of land rising faster than the 3% inflation rate.

The price of land can grow faster than wages if the population is growing and density is increasing, eg if you can fit more households onto a block by building town houses or apartments, then the price of that block can go up without the wages of the households increasing at the same rate.

also the prices tend to stall and surge, so a surge of 16% in Sydney, may just be playing catch up from slow or no growth a few years earlier, or if it has over shot, a stall my take place, But in general it should offer a sound hedge against inflation, while also producing income or offsetting rent if you live in it.

Quincy · 2 September 2014

Value Collector said:
Even in a city of static population growth, 3% should roughly be the norm, that pretty much just takes Inflation into account.

In a city that is growing its population either organically or through immigration you will see the price of land rising faster than the 3% inflation rate.

The price of land can grow faster than wages if the population is growing and density is increasing, eg if you can fit more households onto a block by building town houses or apartments, then the price of that block can go up without the wages of the households increasing at the same rate.

also the prices tend to stall and surge, so a surge of 16% in Sydney, may just be playing catch up from slow or no growth a few years earlier, or if it has over shot, a stall my take place, But in general it should offer a sound hedge against inflation, while also producing income or offsetting rent if you live in it.

What you are saying makes sense "on paper" - but normal economic principles are out the window now (see my above post - 2 posts above - regarding Sydney).

DB008 · 2 September 2014

House price correction inevitable, warns David Gonski

ANZ chairman David Gonski says a correction in the housing market is inevitable amid growing concerns that soaring house price growth in the capital cities risks further inflating a property bubble in Australia.

After new statistics this week showed that house price growth accelerated in the past three months, Mr Gonski said in Melbourne today that all the banks “are very aware of history”.

“They know that you can have the growth in prices that we have had and over time and there will be a correction,” Mr Gonski said.

“I don’t know whether it is going to happen tomorrow, at five o’clock this afternoon or in three months. I have no idea. But the fact is anybody who believes that prices will always go up is a fool,’’ he told a lunch staged by the British Australia Chamber of Commerce.

http://www.theaustralian.com.au/business/property/house-price-correction-inevitable-warns-david-gonski/story-fn9656lz-1227045173078

sptrawler · 2 September 2014

DB008 said:
House price correction inevitable, warns David Gonski

http://www.theaustralian.com.au/business/property/house-price-correction-inevitable-warns-david-gonski/story-fn9656lz-1227045173078

It will be interesting to see what Glen Stevens does.
He has indicated, he believes a further drop in interest rates won't improve the situation.
If as he says, the government needs to enact change to stimulate growth, it will be interesting to see which way interest rates go.
Lets not forget, the RBA cranked up interest rates, when Labor were sending out cheques to all and sundry.

Mrmagoo · 2 September 2014

It is fairly obvious the RBA are corrupt. I mean they dropped rates when the economy was booming causing a housing boom. I bet they all had bought shares in the CBA and bought properties knowing full well everything was going to boom.

Australia must be among the most corrupt nations in the world. So corrupt our corruption is ignored. So corrupt it has been written in the letter of the law that corruption is now legal

Value Collector · 3 September 2014

Mrmagoo said:
It is fairly obvious the RBA are corrupt. I mean they dropped rates when the economy was booming causing a housing boom. I bet they all had bought shares in the CBA and bought properties knowing full well everything was going to boom.

Australia must be among the most corrupt nations in the world. So corrupt our corruption is ignored. So corrupt it has been written in the letter of the law that corruption is now legal

Only mining was booming, the high interest rates caused the aussie dollar to rise and put pressure on manufacturing. Interest rates were dropped to protect the rest of the economy.

Magoo, the world is not against you, you need to not be so negative, you'll never get anywhere.

satanoperca · 3 September 2014

This seems to have become common in the media of lately :

The palatial bayside home that served as the contestant compound for the hit TV show MasterChef has been whipped off the market by an offshore investor.

Sources understand the purchaser is a China-based investor.

.

Where is FIRB on this. Shouldn't the RE be taken to task?

When are our elected officials going to represent the citizens of this country and our societies best interest?

How does selling a home to a foreigner help our society?

Treason is the only word that comes to mind.

Hang the bankers, politicians and the RE agents and start again.

Mrmagoo · 3 September 2014

Value Collector said:
Only mining was booming, the high interest rates caused the aussie dollar to rise and put pressure on manufacturing. Interest rates were dropped to protect the rest of the economy.

Magoo, the world is not against you, you need to not be so negative, you'll never get anywhere.

The establishment is against my generation.

tech/a · 3 September 2014

Yeh it was against mine in the 80s

Interest 18%

kid hustlr · 3 September 2014

People continue not to get it.

For those who sat on the side lines for the last 2 years waiting for the impending doom before buying. What now?

Mrmagoo · 3 September 2014

tech/a said:
Yeh it was against mine in the 80s

Interest 18%

wish they were that now they should be

Value Collector · 3 September 2014

Mrmagoo said:
The establishment is against my generation.

You and I are probably the same generation, how old are you?

who is the establishment?

Value Collector · 3 September 2014

Mrmagoo said:
wish they were that now they should be

why is that, all it would do is make our dollar go through the roof, destroy the Australian export industry and make all other non cash investments unviable.

Mrmagoo · 3 September 2014

Value Collector said:
why is that, all it would do is make our dollar go through the roof, destroy the Australian export industry and make all other non cash investments unviable.

It would be ****ing awesome, people who work for a living would be rewarded, those who borrow would be punished. Excellent system. 18% interest rates for the win !

These days you are either credit leveraged.

Or part of the corrupt union/government/credit consortium to demand unsustainable high wages. i.e why minor pay rises for people in actual industries are a big deal and the union construction companies are on something like 60 dollars an hour plus a list of entitlement 4 pages long, all paid for on the international credit card.

Smurf1976 · 3 September 2014

Value Collector said:
so a surge of 16% in Sydney, may just be playing catch up from slow or no growth a few years earlier, or if it has over shot, a stall my take place, But in general it should offer a sound hedge against inflation, while also producing income or offsetting rent if you live in it.

If you look at Sydney then it's more like a surge after a surge. Prices were high to start with, now they're higher.

It's a bit like saying it's going to be 40+ degrees for a week in January. OK so far, but somewhat extreme if every other day in the past two months was also 40+ degrees. Normally, you expect a cooler period between heatwaves but we haven't really had that with property prices at least in the faster growing areas.

Agreed though that in the long term property ought to be an effective hedge against inflation and that it does provide income. It's a real, tangible asset after all and if it's in a city then it won't become redundant (unlike, say, a mining town with no other industries where property ends up effectively worthless when the mine closes).

The future of Australian property prices

FxTrader

Value Collector

Have courage, and be kind.

kid hustlr

Smurf1976

Quincy

Jack of all trades master of 0

Value Collector

Have courage, and be kind.

Quincy

Jack of all trades master of 0

DB008

sptrawler

Mrmagoo

Value Collector

Have courage, and be kind.

satanoperca

Mrmagoo

tech/a

No Ordinary Duck

kid hustlr

Mrmagoo

Value Collector

Have courage, and be kind.

Value Collector

Have courage, and be kind.

Mrmagoo

Smurf1976

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