The future of Australian property prices

[moXJO]

Don't you also still pay rates on a vacant block of land?

 

[Tysonboss1]

A block of land cannot generate income unless:

a/ it is productive e.g. cropping

b/ you can lease it because someone else has a use for it... eg it has a house on it etc

The bloke sitting on the empty house block of land (AKA in NZ as a siction [which I am reliably informed is spelt "section"]) 3 doors down from me isn't getting any income from it.

Exactly, so you just buy one that has a house on it.

I only refered to it as a block of land because it's the land that is the important bit when it comes down to the store of value side of things, the house wears out.

 

[Uncle Festivus]

Exactly, so you just buy one that has a house on it.

I only refered to it as a block of land because it's the land that is the important bit when it comes down to the store of value side of things, the house wears out.

And it's such good value at the moment - that 5m X 20m block of land in inner Sydney, which also has an annoying unit on it, goes for about $1M+ these days . Same for those other suburbs where the average is $1M+.

Right now, property is all about selling to the bigger fool, although there is a hint, from the auction clearance rates, that some people are actually just starting to realise they don't want to be the bigger fools? 10% in a week!?

THE Sydney housing market has shown the first signs of slowing as climbing interest rates and sky-rocketing prices scare off potential buyers.
Residex figures show auction clearance rates dropped by more than 10 per cent last Saturday to 62.5 per cent, down from 73.5 per cent the weekend before.

OR 30% for May ....so far....

Independent auction house Cooley Auctions saw clearance rates plunge from 80 per cent to 50 per cent in the first week of May alone.
"There are early signs that the heat's coming out of the market," auctioneer Damien Cooley said

 

[satanoperca]

What is this

Population growth to ease, report says

BIS Shrapnel says annual net overseas migration – which includes permanent migration and longer-term but temporary stays – will fall from its pace of 298,900 in the year to June 2009 to 240,000 in the year to June 2010. It will fall more dramatically to 175,000 in 2010-11 and 145,000 in 2011-12

It cannot be, that is what we are led to believe has been one of the driving forces of property growth.

Next the MSN will be saying "We don't have a housing Shortage"

Cheers

 

[CamKawa]

It cannot be, that is what we are led to believe has been one of the driving forces of property growth.

Next the MSN will be saying "We don't have a housing Shortage"

Cheers

lol

 

[UBIQUITOUS]

Obviously the writer of this doesn't visit ASF - the last bastion of Property Spruikers.
An excellent article.

http://www.moneymorning.com.au/20100517/property-spruikers-quiet.html#more-3195

The Property Spruikers Have Been Awfully Quiet
by KRIS SAYCE on MAY 17, 2010

Have you noticed? The property spruikers have been awfully quiet in recent weeks.

In fact, since we started our occasional ‘Preposterous Property Spruiking’ section we’ve been amazed at the, well, almost complete lack of preposterous property spruiking in the mainstream press.

Monday is usually the day when the spruiking is at its most shrill. It’s usually when the property hacks to go all gooey-eyed over the latest “amazing” auction results at the weekend.

You know the drill, they’ve got a standard template, “A house in [insert expensive suburb here] sold for a [insert ridiculous price here] dollars above the reserve price of [insert another ridiculous price here], what great/fantastic/amazing* [*delete as applicable] news for the property sector.”

But not today.


Today, and in fact for the last few weeks the spruikers have been amazingly quiet. We’re almost worried about them.

We can only think it’s one of two things. Either they’re so busy flipping houses between each other that they don’t have time to ghost-write the spruiking articles for the mainstream journos, or they’ve realized the housing, er, house of cards is on the verge of collapsing around them.

Let’s take just a couple of points.

First this comment in News Ltd today from Residex managing director John Edwards:

“It’s normal for clearance rates to slow at this time of year, but we’ve suddenly had a 10 per cent fall since the last interest rise.”

What he means is a ten percentage point fall. Or rather, an eleven percentage point fall.

Edwards was referring to the drop in the Sydney weekend auction clearance rate which fell to 62.5% from 73.5%. Or to put it another way, nearly 40% of Sydney auctions failed to result in a sell.

But hang on a minute, what happened to the theory that house prices weren’t influenced by interest rates? Or even more ridiculously, that rising interest rates would lead to higher house prices?

Surely the spruikers won’t stand for that comment from Mr. Edwards.

And according to the Real Estate Institute of Victoria – which also seems to have gone quiet – the Melbourne auction clearance rate for this weekend was 75%. In other words, one in four houses failed to sell.

But before the weekend the REIV was undaunted. In its auction preview for the weekend’s auctions it stated:

“As it was only the second time in the last twelve months that the clearance rate fell below 80 per cent it’s not clear yet if this the start of a more stable and sustainable market or just a once off, that will be clearer at the end of May.”

Although for some reason the ‘Auction preview’ is only available in a cached version through Google as it seems to have disappeared from the REIV website.

Bless ‘em, the REIV is still running with the line that the housing market will level off and not collapse in a stinking heap. If you’ll recall, that’s exactly the same argument the property chumps in the UK, Ireland and US ran with.

But at least it’s cleared up whether the previous weekend’s results were a once-off or not. Clearly it wasn’t.

We can hear the creaking of the property market now. Wouldn’t it be appropriate if the peak of the housing market proved to have coincided with prof Steve Keen’s walk to Mt. Kosciusko?

But that’s not all. The factor that all property spruikers have been relying on to keep the housing market strong for the next thousand years, may turn out to have lasted shorter than the Third Reich.

We’re referring to the population growth theory.

You know the one. That’s apparently where rich/crazy (take your pick) foreigners buy up all of Australia’s houses forever, regardless of price.

It seems the argument goes that even though Australians are unable to afford higher house prices due to the “affordability crisis”, there are millions of rich/crazy foreigners with bottomless pockets.

But wait, what’s this? “Population growth to ease, report says”.

That’s what Jessica Irvine has written in today’s The Age newspaper. Jessica better get her head down and prepare for a dose of vitriol from the spruikers. Because they won’t like having the population growth theory popped.

According to Jessica’s article:

“BIS Shrapnel says annual net overseas migration – which includes permanent migration and longer-term but temporary stays – will fall from its pace of 298,900 in the year to June 2009 to 240,000 in the year to June 2010. It will fall more dramatically to 175,000 in 2010-11 and 145,000 in 2011-12.”

We could have picked that would happen, because right on cue, at the tip of the market, the federal government installed the first ever Population Minister. A minister whose job could now be trying to stem the brain-drain rather than managing the inflow.

You can always rely on the government to not only over-react, but to over-react after the event.

Look, we don’t know how accurate BIS Shrapnel’s numbers are. But it’s interesting that it should come from an organisation that has previously been prepared to talk up the housing market.

Logically, the very idea that the population could increase unabated is ludicrous. People will come to Australia as long as they see value. If they don’t see value then they won’t come.

It’s easy to look around you and think, “Why wouldn’t people want to come here?” But if you put yourself in the position of the potential immigrant, the case for coming to Australia may not be quite as obvious.

Take those emigrating from the UK or Ireland as an example. If you look at properties there and compare them with properties here, you could make a fair argument by saying that you get more for your dollar here.

However, if you’re living in the UK or Ireland and you’re looking at the price of Australian housing, sure it may offer more in size, but is it worth it? And is it worth moving to the other side of the world for?

Then you just need to take a look at the actual immigration numbers. The spruikers tend to highlight the headline numbers – gazillions of people heading to Australia, that sort of thing.

But if you look at the Australian Immigration Update for 2008-2009, you’ll see the spruikers have left out a few key facts when they talk about immigrants flooding the country and creating a massive demand for housing.

For instance, look at the tables on page 8. You’ll notice that a whopping 56,477 people were added to the Australian population under the Family category.

But when you strip back the numbers, it doesn’t mean that there’s a requirement for 56,477 houses, and it doesn’t even mean there’s a need for 22,590 houses if you assume an average occupancy of 2.5 people per home.

For a start, 42,425 of those permanent additions were spouses or fiancées. That means they may already have housing in Australia due to an Australian spouse/fiancée.

Another 7,679 were parents of people already living here. So again there’s no guarantee that that has created a demand for housing, especially if the parent intends living with their son or daughter.

But it’s also worth noting that over 14,000 of these permanent immigrants were already resident in Australia. In other words their need for housing has already been met.

So it’s possible, just possible, that nearly the entire 56,477 new permanent residents have created absolutely no recognisable demand for housing whatsoever.

Another big batch of permanent immigrants is in the Skilled category. But again, almost half of those in that category are what’s known as Onshore applicants. That is they were already resident in Australia and would therefore already have satisfied their housing needs.

The demand-side immigration argument is fairly flawed to begin with, but when you look at the numbers closer, the flaws stand out even more.

We’re not arguing that there hasn’t been a big increase in the Australian population, because there has.

But what we do argue is that the increase is not justification enough for the property spruikers to claim that it will drive both housing demand and higher house prices.

We’ve always pointed out that the Australian housing sector is inextricably linked to the Australian banking sector. Right now, despite the propaganda, the Australian banks are bloodied and bruised on the ropes.

Australia’s banks managed to duck and weave their way through the last economic meltdown thanks to the government bailouts.

We’ve seen how short-lived those bailouts can be, just by looking at the experience of the US and Europe.

And with the US and Europe already on the brink, and China teetering close to the edge, it can only be a matter of time before the Australian economy feels the full brunt of the fallout.

Even the supposedly Teflon-clad housing and banking sector won’t be able to withstand that one.

 

[trainspotter]

"We’ve always pointed out that the Australian housing sector is inextricably linked to the Australian banking sector. Right now, despite the propaganda, the Australian banks are bloodied and bruised on the ropes". .......


Haha ah aha a a ... 2.88 BILLION dollars in 6 months for Westpac is on the ropes? 1.9 billion for 6 months for ANZ is a bruise? NAB Net profit fell to $2.095 billion for the six months to March 31 ... haha ha ahaha ha bloodied ! Commonwealth felched out a lousy 2.91 billion to Dec 31st 2009 is really bad propoganda.

Oh Dear ! A journalist with a hack point of view is a dangerous weapon.

 

[satanoperca]

$2.88 BILLION dollars in 6 months for Westpac

Fair call, just if you have it to hand what was their rate on return of capital?

If it was 8% then Ok, if it was 15% fantastic, if was 50%, introduce a new banking tax of 40% as all Australian are paying for their profits.

Cheers

 

[explod]

"We’ve always pointed out that the Australian housing sector is inextricably linked to the Australian banking sector. Right now, despite the propaganda, the Australian banks are bloodied and bruised on the ropes". .......


Haha ah aha a a ... 2.88 BILLION dollars in 6 months for Westpac is on the ropes? 1.9 billion for 6 months for ANZ is a bruise? NAB Net profit fell to $2.095 billion for the six months to March 31 ... haha ha ahaha ha bloodied ! Commonwealth felched out a lousy 2.91 billion to Dec 31st 2009 is really bad propoganda.

Oh Dear ! A journalist with a hack point of view is a dangerous weapon.

Its all past tense Champ, the winners will be those who can evaluate and act on what is happening now.

 

[trainspotter]

Its all past tense Champ, the winners will be those who can evaluate and act on what is happening now.

I will await my winning dividends when they are due then Portnoy. I have seen the future and it doesn't work.

What might your evaluation and actions be then?

 

[trainspotter]

Fair call, just if you have it to hand what was their rate on return of capital?

If it was 8% then Ok, if it was 15% fantastic, if was 50%, introduce a new banking tax of 40% as all Australian are paying for their profits.

Cheers

I do not have the figures you command satanoperca. Does it not strike you as stange that these were the very same banks crying foul during the GFC and requested backup from the Govt to shore up their stocks and stopping people from withdrawing their cash? These are the same banks that bleat that they have to increase margins because they are being squeezed on global lending and the profits are inadequate.

When will we wake up to this BS ?? And now we have people saying that the property market is going to the wall because it happened in the US and Japan (nevermind these were completely different sets of regulatory lending) just because a journalist writes a couple of paragraphs? so.. IMO ... safe as houses brothers .. bricks and mortar ... there is no place like home, home sweet home.

There you go Champs. Evaluate on this.

 

[explod]

I will await my winning dividends when they are due then Portnoy. I have seen the future and it doesn't work.

What might your evaluation and actions be then?

Wish I could see into the the future like that, can only go by the now. Have little in property, just a Property Shopping Centre Trust that has been good. Probably lost a lot by getting out early but my other investments have more than offset. However good for you trainspotter, but think there maybe more down than up looking ahead for awhile.

 

[So_Cynical]

I was reading in today's paper that the big banks have about 125 billion in debt to roll over in the coming months...money that will cost them significantly more to borrow than the debt its replacing..debt from 3, 4 and 5 years ago.

 

[robots]

hello,

good afternoon, great day

how's the week going, any surprises or major events happening?

all's normal, good

spot on Trainspotter, the banks rolling in it and nothing wrong with that, thats life,

Usual socialist talk from Kris Sayce, attack the banks, attack the wealthy, try and bring them down, take from the rich and give to the poor bleaters (non property owners)

how about article on wealth creation instead of propaganda

thankyou
robots

 

[robots]

Wish I could see into the the future like that, can only go by the now. Have little in property, just a Property Shopping Centre Trust that has been good. Probably lost a lot by getting out early but my other investments have more than offset. However good for you trainspotter, but think there maybe more down than up looking ahead for awhile.

hello,

thats okay explod, just read ASF brother where you can tune into those ahead of the pack man

the ones looking down the road and not over their shoulder like Kris Sayce, alan kohler, s. keen, Hired Goon

thankyou
robots

 

[robots]

hello,

gee, whats happening?

oh well everybody must be consumed with other things

thankyou
robots

 

[robots]

hello,

oops,

sorry, dinner and neighbours

thankyou
robots

 

[nunthewiser]

Great day for the Bewtiful ppl tho

WA's first-homebuyer market has plummeted, sparking fears the State's housing industry is about to stall.

Data from the Office of State Revenue on first-homeowner grants show that there were 1334 fewer first-home buyers in April this year compared with the same month last year. "The artificial boom of first-time buyers triggered by the Commonwealth grant has now well and truly ended," Real Estate Institute of Western Australia president Alan Bourke said.

In addition to the scrapping of the first-homebuyer stimulus grant, he said a string of rising interest rates also contributed to the collapse of the market.

For the month of April the OSR data showed 728 first-home buyers bought an existing home and 260 decided to build.

This is in contrast to April last year when 1555 bought established homes and 767 built new ones.

The statistics show that it is not only the first-homebuyer market that is down, with sales across the board dropping 15 per cent in Perth during April.

Its all good Bro.

Regional WA has not been spared, with figures showing sales dropping in Mandurah, Bunbury and Geraldton during April.

Listings increased in all regional centres, with Mandurah-Murray increasing by six per cent over the past six weeks to 1750 properties while Bunbury was also up six per cent to 1300 properties.

Listings in Geraldton-Greenough have risen by 20 per cent to 650 properties.

http://au.news.yahoo.com/thewest/a/-/wa/7262099/first-homebuyers-disappear/

 

[Uncle Festivus]

hello,

oops,

sorry, dinner and neighbours

thankyou
robots

Suddenly gone quiet in here - trying to drum up some enthusiasm ? Lonely at the top robots?

Exchange rates taking a tumble, makes for more expensive imports = more lowering of standard of living for the mortgage slaves?

The top is in....and passed?

 

[drsmith]

Its all good Bro.

The canary in the coal mine for residential real estste in Australia I suspect will be the sunny Pilbara coastal towns in WA's northwest.

http://www.rs.realestate.com.au/cgi-bin/rsearch?a=sp&s=wa&u=port+hedland