Aussie Housing

Zambia

HeraldSun wrote:

AUSTRALIA should be spared a housing crash, despite a dramatic surge in prices that has rapidly outstripped wage growth.

An ANZ economic report reveals that if property prices had climbed only as fast as household income in the past 25 years, today's average house would cost $310,000 instead of $564,000.

House prices would "need to fall some 44 per cent" to return to the historical average based on income levels, the report says.

But ANZ economists expect property prices to stay flat over the coming year, rather than drop severely.

The report says there has been a "momentous" change in factors that help determine prices and affordability, with the fall in inflation and interest rates during the 1990s underpinning higher values.

ANZ's head of Australian economics and property research, Ivan Colhoun, said the market was not as overvalued as was often assumed.

Since 1986, incomes are up 300 per cent and house prices have blown out by 550 per cent.

But Mr Colhoun said families today could service a much bigger mortgage because interest was half that of the 14-15 per cent rates of the mid-1980s.

A combination of higher wages, lower inflation and lower mortgage rates had propelled most of the extraordinary house price growth over the past two decades.

Other factors, such as capital gains tax changes, strong population growth from immigration and first-home owner bonuses, had potentially tacked on a further $50,000.

Mr Colhoun said property prices were expected to stay flat over the year and grow in line with income increases in the medium term.

The ANZ research comes amid predictions the Reserve Bank is poised to lift interest rates for the first time since November last year.

Many economists are tipping the first of two increases this year in the coming months.

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http://www.heraldsun.com.au/news/more-news/property-crash-unlikely-says-bank/story-fn7x8me2-1226056335181

So the Herald Sun via ANZ reckns there will be no crash but a stop in the rise of Property.

I see about a 10 percent fall in Average houses and higher in the Mansion in the top end.

ballooba

I wouldn't be making any predictions, but a soft landing is exactly what we were told to expect in Ireland. Fool me once shame on you, fool me twice shame on me. Australia's property markets are ridiculously over valued, there will be a correction, it's only a matter of when.

TKline

The Australian House Price Crash is already well underway. Most people exist in economic environments they neither understand properly nor benefit from. The truth here is Australian property speculators have brought this upon themselves by choosing high debt levels and dual incomes to bid up the cost of housing, and that's engrained in society now so many people foolishly believe it won't go back to the way it was (i.e. when an average wage could buy an average home). You just need to read some of the spruiking on the Somersoft property forum to understand how ingrained this belief in endless house price inflation is.

Australia has a poor track record on housing. The Germans have better economic model that works well and is the most successful in Europe yet they're still going to foot the bill for other Euro bailouts. The moral of the story is nobody wins from high house prices, and those high prices are not here to stay despite what many spruikers will tell you.

Plenty of FHBs are locked out of the market right now but they will be sitting pretty when prices finally do crash by 40-50% which is what is on the cards right now.

Cheers,

Tom Kline.

Zambia

Ah I cant see 40-50 Percent. I may even stretch as far as 25% but not 50%.

Ireland had that but we had nothing underlying the economy for years except us selling houses to each other.

Australia has a good bit more of a economy underlying it

The Sweeper

I see some developers feeling the pinch because their land isn't selling as quickly, but our property construction model is different to Ireland's. Developers buy a site for $14 million which should have a developed value of $120 million, but they won't see all that cash. Nor do they spend it. They put in the infrastructure for the development - roads, driveways, lighting, water, power, gas, sewerage and any fancy 'lifestyle' areas they want, like lakes. Then they hang price tags off the divided land and sell it in staged releases, attaching a bunch of caveats to the building that each buyer needs to be aware of. At point of sale of land, the future homeowner has committed their own money as an investment. It's different to spending fifty million euros building identical houses with no buyers.

ballooba

Zambia wrote: »

Australia has a good bit more of a economy underlying it

One thing and one thing only. Mineral resources. Yet they couldn't export enough to exceed the 'investment' in housing over the last few years. Property and mining are the only shows in town and I don't think mining can pick up the slack from property.

The Sweeper wrote: »

Developers buy a site for $14 million which should have a developed value of $120 million, but they won't see all that cash.

Developers have been dropping like flies in Queensland for at least two years now.

Zambia

ballooba wrote: »

One thing and one thing only. Mineral resources. Yet they couldn't export enough to exceed the 'investment' in housing over the last few years. Property and mining are the only shows in town and I don't think mining can pick up the slack from property.

True but like I said Ireland nothing = %50 Drop
Aus has some economy without building = 25% Approx

But it will recover a lot quicker.

The Sweeper

ballooba wrote: »

Developers have been dropping like flies in Queensland for at least two years now.

I think a lot of that could be from folks who try their hand at property development. It's the flip side of what I said earlier - because you can buy a site for $14 million, the developed value of which will be huge, various folks are trying their hand at development.

My OH worked in the industry in Vic for a few years before joining the army(!) and I can recall the mortgage broker he referred to approaching us at one point to see if we could raise half a million bucks to go in on a $10 million investment. (LOL. We couldn't.)

We'd have been the perfect example, if we had scrimped and tried to raise the cash, of developers in trouble if things hadn't gone as planned!

ballooba

Zambia wrote: »

True but like I said Ireland nothing = %50 Drop
Aus has some economy without building = 25% Approx

But it will recover a lot quicker.

Ireland has it's corporation tax rort that brings in plenty of cash. We also now have a trade surplus that Australian economists would be envious of.

The Sweeper wrote: »

I think a lot of that could be from folks who try their hand at property development. It's the flip side of what I said earlier - because you can buy a site for $14 million, the developed value of which will be huge, various folks are trying their hand at development.

My Mrs is in the industry and it is definitely just not amateurs that are going under. Plenty of high profile receiverships.