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- 17 January 2007
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And therein lies the problem for central bankers....too many people with too much leverage paid for with debt!
More than just a pop?
When interest rates increase---watch the exodus!
Bubbles Popping Everywhere.
And therein lies the problem for central bankers....too many people with too much leverage paid for with debt!
More than just a pop?
And therein lies the problem for central bankers....too many people with too much leverage paid for with debt!
More than just a pop?
90% of housing financial commitments are for existing.
Whether or not that is sensible depends on the location. Eg Sydney (high population growth) there's a definite need for new builds but that isn't really the case in, say, north-west Tasmania where the population is stagnant at best.
This paper examines whether it costs more to own a home or to rent. We argue this is a useful criterion for assessing housing overvaluation. We use a new Australian dataset, which includes prices and rents for matched properties, letting us value housing in levels. We find that if real house prices grow at their historical average pace, then owning a home is about as expensive as renting. If prices grow more slowly, as some forecasters predict, the framework used in this paper suggests that the average home buyer would be financially better off renting. We decompose house prices into contributions from rents, interest rates and expected capital gains, which may help policymakers in the detection of housing bubbles. Recent data do not show signs of a bubble.
The Reserve Bank has warned of even higher home prices, saying stocks of unsold land suitable for development in Sydney and parts of other cities are getting "unusually low".
Builders have also lifted their margins, as record low interest rates encouraged more investors and owner occupiers to borrow to buy property.
If prices grow more slowly, as some forecasters predict, the framework used in this paper suggests that the average home buyer would be financially better off renting.
The property price slide in W.A, appears to be accelerating.
http://www.perthnow.com.au/realesta...407289548?sv=fe8b70ba935e3af5c94ebc61ebe00831
Those are some pretty significant falls. I am not too familiar about Perth and its surrounding suburbs, but I can't imagine that a >10% fall in South Perth (i.e. next to the CBD) is a good sign.
The property price slide in W.A, appears to be accelerating.
http://www.perthnow.com.au/realesta...407289548?sv=fe8b70ba935e3af5c94ebc61ebe00831
If WA property returned to intrinsic value, It be worth moving back there.
The falls in WA are interesting and encouraging development. Now there are calls that property will crash in Victoria (I believe from Phillip Sous who seems to be bearish on housing overall).
What would happen if we had price falls in both WA in Vic? Surely those who invested in these markets but live in other states would be losing money and therefore be restricted in which properties they can further purchase in their home states. Further, if those markets get to a low enough price then maybe residents of more expensive states (i.e NSW) will begin migrating to them. Couple this with the recent measures to reduce mortgage credit and things aren't looking good for Australian property
I tend to think W.A isn't reflective of the other states, it is quite unique, being remote extremely large and a very small population.
W.A will tank big time, due to the resources cycle, the Eastern States aren't as exposed.
Right, but W.A isn't its own independent nation.
Do none of the Eastern citizens own property in WA?
Do the IP owners in WA own property in the Eastern states?
Can residents from the Eastern states cross borders and take their money West?
I just don't think you can have a crash in one part of the country and loss of capital without having some sort of effect on another part.
I know a few who have moved to WA in recent years and they all moved for the same underlying reason. Jobs. Either they couldn't get a job at all in their previous location and saw WA's then booming economy as the answer, or they could get themselves a substantially better job by moving.
To the extent that WA is no longer a booming economy then that reason to move there disappears and thus cuts future demand for housing. To the extent that recent arrivals become unemployed, or end up in a lower level (either pay or position) role than they could get in the eastern states then they have no real reason to stay in WA at all. They've got family and friends elsewhere after all, and are only in WA in the first place for the money.
Go back a couple of years and "I'll just move to WA" was pretty much the standard response for anyone faced with the prospect of becoming unemployed and not able to secure employment in their current location. That idea doesn't really work anymore it seems and that removes the reason to move to WA.
Go back a generation or two and Perth and Adelaide were about the same size in terms of population. Since then, Perth has grown far more rapidly on the back of WA's mining-based economy whilst Adelaide has almost stagnated as the city's manufacturing industries have declined or disappeared completely. Without the mining based growth, it's highly doubtful this would have been the case. Needless to say, if mining falls hard enough then that's the end of the WA growth story.
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