The future of Australian property prices

[dyna]

Only just noticed .....no sign of the good 'ole USA on Credit Suisse Australia's "median" list of 20 countries.
"Median" being where 1/2 the folks in those places have more dough, 1/2 have less.....Let's call a spade, a shovel, here. Life just ain't fair in the Land of The Free.
You have to go to the "mean" list to see our good buddies....thar they be, in 2nd spot behind Switzerland. HK is next. Then us.( With our " mean" net worth jacked up to $US 1/2 Mill.)

 

[wayneL]

I wonder what the general public narrative will be if a rate rise does cool off the current enthusiasm and we see a pull back in housing prices. No one likes to see their investments/assets drop in value especially those buying in a peak. My tip is the public narrative will shift to one of expecting the government to prop up and drive up housing prices

How could they not? It has been the norm for the last 20 years.

 

[dyna]

For the March quarter, Australian Bureau of Stats. reveal housing loans increased by $21 Billion for the period, but investor loans, by a little over $3 Billion. That's just the second (quarterly) I.P. loan increase since 2018. So, there's not likely to be a glut of rentals any time soon, by the look of it.

 

[dyna]

CoreLogic's 1/4ly dwelling values chart of average and high end properties for all our cities, shows definite buying opportunities for both, in their "saw-tooth" chart. The last best-buy chance was just last year, in 2020 !
Looking further back, it bottomed at the end of 2011. Once more in early 2016 and again in 2019, after the slow decline from the mid 2017 peak which has now been topped by this crazy ( 2% interest rate) boom. None of those past peaks were sustainable and all but the 2017 one, fell sharply and very quickly, indeed. Perhaps the RBA's 2023 (?) rate rise will do it for this one.

 

[Tyler Durden]

For the March quarter, Australian Bureau of Stats. reveal housing loans increased by $21 Billion for the period, but investor loans, by a little over $3 Billion. That's just the second (quarterly) I.P. loan increase since 2018. So, there's not likely to be a glut of rentals any time soon, by the look of it.

Does this indicate that investors are selling and home owners are buying?

 

[Smurf1976]

https://www.domain.com.au/news/mortgage-repayments-could-rise-soon-than-expected-as-banks-forecast-earlier-cash-rate-hikes-1069649/?utm_campaign=strap-masthead&utm_source=the-age&utm_medium=link&utm_content=pos5&ref=pos1

Home owners could face a rise in mortgage repayments of hundreds of dollars a month within two years, with the big banks predicting cash rate hikes well ahead of the Reserve Bank’s forecasts.

I don't have much to add beyond noting that this "warning" is published in an extremely mainstream source so far as real estate is concerned so anyone buying will very likely see it. Whether that influences their decisions is of course another matter.....

 

[sptrawler]

Does this indicate that investors are selling and home owners are buying?

I'm not sure this is relevant, but a couple of my mates, who are very near retirement, have pulled their super, one to pay off the mortgage and the other to buy a house as he has always rented. Neither are expensive houses and are in lower cost suburbs, one in Mandurah, the other in outer Brisbane.
I wonder if it is a trend, as the baby boomers get close to retirement?

 

[over9k]

Boomers flogging their investment properties to fund caravan trips you say?

 

[sptrawler]

Boomers flogging their investment properties to fund caravan trips you say?

No, boomers buying their first and most likely last house.

 

[sptrawler]

Boomers flogging their investment properties to fund caravan trips you say?

Here is another indication that boomers aren't as big a part of the issue as some think.
A lot of boomers not only don't have the investment houses, but the trend to reverse mortgaging their PPR is increasing.
This may have a long term effect on house prices, as inheritances reduce.

Retirees flock to reverse mortgages to tap equity in their homes

For those looking to give up some of the equity in their home to top-up their retirement income, the government-backed Pension Loans Scheme could be the answer.

www.smh.com.au

From the article:
The Pension Loans Scheme (PLS) allows those who have reached age pension age to top-up their income, where their family home (or other real estate) is put up as collateral. When the house is sold, the loan is repaid from the proceeds.
However, the scheme has to approached carefully. As the loan is not repaid until the sale, interest is capitalised and over time the debt can grow to erode a large part of the property’s value.

The government-backed scheme is conservatively managed but, from the middle of next year, it will come with a “no negative equity guarantee”, meaning borrowers will not have to repay more than the market value of their property.
The maximum income that can be received under the scheme is 150 per cent of the full age pension. It is open not only to full and part-pensioners but also self-funded retirees.
It means a full-rate pensioner can receive a maximum income top-up that is equal to half of the age pension. For a self funded retiree, the maximum is equal to the 1.5 times the full age pension.
For part-pensioners, the cap is somewhere between, depending on how much part-pension is received.
The payments are not assessable for the age pension means test.

 

[MovingAverage]

Here is another indication that boomers aren't as big a part of the issue as some think.
A lot of boomers not only don't have the investment houses, but the trend to reverse mortgaging their PPR is increasing.
This may have a long term effect on house prices, as inheritances reduce.

Retirees flock to reverse mortgages to tap equity in their homes

For those looking to give up some of the equity in their home to top-up their retirement income, the government-backed Pension Loans Scheme could be the answer.

www.smh.com.au

From the article:
The Pension Loans Scheme (PLS) allows those who have reached age pension age to top-up their income, where their family home (or other real estate) is put up as collateral. When the house is sold, the loan is repaid from the proceeds.
However, the scheme has to approached carefully. As the loan is not repaid until the sale, interest is capitalised and over time the debt can grow to erode a large part of the property’s value.

The government-backed scheme is conservatively managed but, from the middle of next year, it will come with a “no negative equity guarantee”, meaning borrowers will not have to repay more than the market value of their property.
The maximum income that can be received under the scheme is 150 per cent of the full age pension. It is open not only to full and part-pensioners but also self-funded retirees.
It means a full-rate pensioner can receive a maximum income top-up that is equal to half of the age pension. For a self funded retiree, the maximum is equal to the 1.5 times the full age pension.
For part-pensioners, the cap is somewhere between, depending on how much part-pension is received.
The payments are not assessable for the age pension means test.

Don’t you come around here presenting actual facts and data…who are the haters going to hate now ?

 

[sptrawler]

Don’t you come around here presenting actual facts and data…who are the haters going to hate now ?

Yes, I wonder how many millenials are mortgaging up to the hilt, on the expectations of a windfall, when their boomer parents fall off the perch. ?

 

[over9k]

Hah.

My brother & his other half have just pulled the trigger on 200k of renovations (after buying 60k worth of cars) due to a combination of the government stimulus programs and 300k of inheritance being due very shortly. Horrible I know, but it's reality.

I also can't blame a lot of boomers for using reverse mortgages. It's a classic case of being staggeringly asset rich but with very little cash and with interest rates at record lows and asset (house) prices at record highs...

 

[dyna]

In Auscap fund manager, Tim Carleton's video, he says the 180% household debt to income ratio, high by international standards, misses something very important. Last year's recession, unusually, showed disposable income grew at its greatest rate in a decade. More was saved in the final 9 months of last year than in the previous three and a half years. Money has poured into mortgage off-set accounts, so that, in net terms, household debt has fallen back to 2004 levels, when the RBA's next-to-nothing cash rate was then over 5 % and mortgage rates were four times higher at about 8 %.
Similarly, ANZ economist Richard Yetsenga says consumer debt servicing costs are their lowest since 1985.

 

[MovingAverage]

In Auscap fund manager, Tim Carleton's video, he says the 180% household debt to income ratio, high by international standards, misses something very important. Last year's recession, unusually, showed disposable income grew at its greatest rate in a decade. More was saved in the final 9 months of last year than in the previous three and a half years. Money has poured into mortgage off-set accounts, so that, in net terms, household debt has fallen back to 2004 levels, when the RBA's next-to-nothing cash rate was then over 5 % and mortgage rates were four times higher at about 8 %.
Similarly, ANZ economist Richard Yetsenga says consumer debt servicing costs are their lowest since 1985.

This is a very good point. Not sure if you remember but at Frydenburg's first financial outlook conference post the March meltdown this is the very point he was making--basically people were saving a whole lot more than they expected despite all the extra cash they were pumping into economy. Frydenburg and Co. were basically hoping all that extra disposable cash would be spent on stuff to keep the economy going but he admitted they didn't think people would be using a lot of their disposable cash to paydown personal debt. I guess the general public knows high interest rates will come again and using the current environment to shift that debt.

 

[qldfrog]

This is a very good point. Not sure if you remember but at Frydenburg's first financial outlook conference post the March meltdown this is the very point he was making--basically people were saving a whole lot more than they expected despite all the extra cash they were pumping into economy. Frydenburg and Co. were basically hoping all that extra disposable cash would be spent on stuff to keep the economy going but he admitted they didn't think people would be using a lot of their disposable cash to paydown personal debt. I guess the general public knows high interest rates will come again and using the current environment to shift that debt.

Funny how being actually responsible borrower is seen as bad for the economy.i still believe it is good, but obviously, if our rba decides that AUD is worth nothing, paying debt is just a waste of time and opportunities

 

[MovingAverage]

Funny how being actually responsible borrower is seen as bad for the economy.i still believe it is good, but obviously, if our rba decides that AUD is worth nothing, paying debt is just a waste of time and opportunities

Yeah, all those economists chasing growth need everyone to spend their hard earned cash on stuff. Saving ain’t good for economic growth that’s for sure

 

[wayneL]

Yeah, all those economists chasing growth need everyone to spend their hard earned cash on stuff. Saving ain’t good for economic growth that’s for sure

In aggregate may be different from on an individual basis, no?

 

[wayneL]

In aggregate may be different from on an individual basis, no?

IOW, should one be a sheep or an eagle?

Sheep go where the rest of the sheep go, eagles go where there is food.

 

[MovingAverage]

In aggregate may be different from on an individual basis, no?

Yup, aggregate