Australian Housing Affordability Discussion

[JohnK]

Understand the Australian economy is like a house of cards but one can say the same for the rest of the world.

We have never been richer in the history of the world but we have never been in so much debt either. Something has to give. I thought it was going to be 2017 but it seems to keep defying logic.

 

[Jeffrey O'Neill]

Net Rental Yields Under Pressure – Digital Finance Analytics (DFA) Blog

We have updated our gross and net rental yield modelling to take account of recent results from our household surveys, which incorporates the latest movements in rental income, investment loan interest rates, and other costs including agency fees and other ongoing costs. This gives a view of the gross rental yield by state, as well as the net rental yield. We also estimate the after mortgage value of the property.

The average rental property has a gross rental yield of 3.83% (down from 3.9% in September 2016), a net rental yield of 0.22% (down from 0.4% in September 2016) and an average equity value (after mortgage) of $161,450 (compared with $161,798 in September 2016).

There are considerable variations across the country with Victoria and New South Wales both under water on a net yield basis. Tasmania offers the best net rental return.

 

[cove]

Bloomberg is covering stories about the Chinese Government seriously wanting to stop money flooding out of their country (illegally in their opinion).
I think the number of defaults on purchases in Sydney and Melbourne are about to surge as breaching the regulations on funds transfers can have very bad consequences for Chinese investors.

 

[get me outta here]

Interesting thanks, I think it has been coming for a while. Apart from the very high properties, do they normally buy new places and off the plan? I ask ask my daughter is still looking in a place where most apartments are around 100 years old or a bit newer and I had thought that she was probably not up against Asian buyers on these old places so much.

Bloomberg is covering stories about the Chinese Government seriously wanting to stop money flooding out of their country (illegally in their opinion).
I think the number of defaults on purchases in Sydney and Melbourne are about to surge as breaching the regulations on funds transfers can have very bad consequences for Chinese investors.

 

[whatmeworry]

Interesting thanks, I think it has been coming for a while. Apart from the very high properties, do they normally buy new places and off the plan? I ask ask my daughter is still looking in a place where most apartments are around 100 years old or a bit newer and I had thought that she was probably not up against Asian buyers on these old places so much.

Actually a foreigner can buy an existing dwelling with certain temporary visas.

 

[cove]

Yes that should have been changed whatmeworry. Hovels in Sydney and Melbourne changing hands for a couple of million each is quite amazing. When the music stops there may be sad faces.

 

[get me outta here]

cove, my daughter is caught in this terrible trap. She is looking at old apartments, no way she can look at a hovel of a house, and the strata fees are ~ $6K a year for a small place.


Yes sure, but I meant they seem to go for new properties I think - that's what I'm wondering. If that is the case, the shrinking of the Asian market unfortunately won't help her.

Actually a foreigner can buy an existing dwelling with certain temporary visas.

 

[Jeffrey O'Neill]

Actually a foreigner can buy an existing dwelling with certain temporary visas.

Turnbull created a new Visa to allow a foreign primary school child to study in Australia and their guardian is allowed to accompany them and buy an existing dwelling.

https://www.border.gov.au/Trav/Visa-1/590-

Considering how focused on education the Chinese are, you can bet they'll be focused on houses that either have at least a top public school near by.

i swear the the Laberals will sell us all out to prop up the housing market, and the greens are no better as they support rampant immigration. I'm yet to hear why pop growth of 400K (a Canberra) each year is good for us. How is needing to build a new Melbourne every decade good for us?

each year the various levels of Govt crow about spending more on infrastructure than ever before, but the per capita spending gets smaller and smaller, which is why the trains are crowded, most main roads are slow moving car parks, why dog box apartments are considered the answer to affordable housing.

I truly believe the first party to have a distinct policy on

* lowering immigration to at most the long term average of 70,000
* links this to increasing housing affordability
* enforces current laws on the ability of foreigners to buy local housing
* undertakes taxation reform around NG on exisiting properties
* works with the states to have them change from stamp duty to broadly based land taxes (stamp duty adds around $100 a month to mortgage repayments due to the lower deposit payment of SD causes)

A broadly based land tax would make land banking less rewarding - currently some building companies have up to 17 years of land banked around various capital cities as squeezing supply provides greater profit than construction.

You just need a narrative that ties in quality of life with benefiting locals. Gen X and Y are powerful voting blocks but have been discarded by the mainstream parties.

Somehow we have to understand that rising house prices are not good for the economy, and not good for any of us in the long run.

 

[RAM]

Turnbull created a new Visa to allow a foreign primary school child to study in Australia and their guardian is allowed to accompany them and buy an existing dwelling.

https://www.border.gov.au/Trav/Visa-1/590-

Considering how focused on education the Chinese are, you can bet they'll be focused on houses that either have at least a top public school near by.

i swear the the Laberals will sell us all out to prop up the housing market, and the greens are no better as they support rampant immigration. I'm yet to hear why pop growth of 400K (a Canberra) each year is good for us. How is needing to build a new Melbourne every decade good for us?

each year the various levels of Govt crow about spending more on infrastructure than ever before, but the per capita spending gets smaller and smaller, which is why the trains are crowded, most main roads are slow moving car parks, why dog box apartments are considered the answer to affordable housing.

I truly believe the first party to have a distinct policy on

* lowering immigration to at most the long term average of 70,000
* links this to increasing housing affordability
* enforces current laws on the ability of foreigners to buy local housing
* undertakes taxation reform around NG on exisiting properties
* works with the states to have them change from stamp duty to broadly based land taxes (stamp duty adds around $100 a month to mortgage repayments due to the lower deposit payment of SD causes)

A broadly based land tax would make land banking less rewarding - currently some building companies have up to 17 years of land banked around various capital cities as squeezing supply provides greater profit than construction.

You just need a narrative that ties in quality of life with benefiting locals. Gen X and Y are powerful voting blocks but have been discarded by the mainstream parties.

Somehow we have to understand that rising house prices are not good for the economy, and not good for any of us in the long run.

Trouble is that the Ponzi scheme is exceptionally good for the major donors to all of the major (& some fringe) political parties.

5 of top ten donors Aust-wide to all levels of politics historically have been Leightons, Lend Lease, Meriton, Mirvac and Westfield. Now the number one donor to both ALP and Libs/nats is a Chinese property developer. Interesting how many donations get funneled through subsidiary companies with different names.

Enough said.

 

[cove]

Perth has the opposite to Sydney, Melbourne and Canberra. Problem is the job market is very tough and is not improving. House rentals for investors are dropping still with vacancies over 5%.

 

[Jeffrey O'Neill]

Perth has the opposite to Sydney, Melbourne and Canberra. Problem is the job market is very tough and is not improving. House rentals for investors are dropping still with vacancies over 5%.

Perth is the housing canary.

with the china can kick and bump in the ToT for straya i think the east coast canary should be exhibiting flu like symptoms in 12 to 18 months, though you never know how far the Chinese Govt will go in propping up the "old" economy so as to maintain social harmony.

I don't think next year the turnbot govt (i can't help but feel the toned abs is gonna make a play soon to regain the PM salary) will have much ability to do much in supporting the economy. the AAA has to go soon, or the rating agencies have to acknowledge they're useless. the federal budget of lies is only surpassed by the WA state govt budget of lies.

was just speaking to my housemate and said I feel sorry for anyone who's bought in the last few years. a lot of people will lose everything when the recession rolls through the economy. it will be a long hard battle for the strayan economy to regain any resemblance of international competitiveness. there's a mountain of debt to be sorted out, and we will be at the whim of our foreign creditor overlords.

 

[whatmeworry]

Data has come out showing ~20% of units in Brisbane and ~10% of units in Melbourne sold for a loss in the September quarter.

CoreLogic’s September quarter Pain and Gain report offers a snapshot of property resale values over that period, and shows the proportion of loss-making unit sales in Brisbane and Melbourne is trending higher recently, particularly in Brisbane.
According to CoreLogic, nearly 20% of all units sold at a loss in Brisbane during the September quarter, while 10.5% of Melbourne sales were also for less than what the originally purchase price.

CHART: One fifth of Brisbane units sold at a loss during 2016's September quarter | Business Insider

 

[RAM]

Data has come out showing ~20% of units in Brisbane and ~10% of units in Melbourne sold for a loss in the September quarter.



CHART: One fifth of Brisbane units sold at a loss during 2016's September quarter | Business Insider

Tick, tick, tick

 

[whatmeworry]

Possibility the housing bubble in Melbourne and Sydney is slowing down. This has been said for the last couple of years but we might get some stabilisation in the market at least.

After a long pause, the auctioneer commissioned to sell a Sydney beachside apartment for in excess of $800,000 puts his gavel away, unable to entice a single bid.
Across town, in the city's trendy inner western suburbs, the owner of a warehouse converted into a three-level home drops his reserve price for the property's sale. There are just two potential buyers at the auction, and they have declined to enter the kind of bidding war that has caused home prices in Sydney and Melbourne to double since 2009.

As the buyers have drifted off, the sellers have also started to back away and the number of home listings is down 25 per cent from a year ago, according to CoreLogic RP Data.

[h=3]Chinese tour numbers halve[/h] Hong Kong-based hedge fund manager Apt Capital Management has shorted Australian banks because of their exposure to a property market it believes is out of step with Australia's economic strength. It is forecasting a severe correction.
Apt Capital strategist Amy Reynolds said interest rate rises or a drying up of foreign investment were the most likely triggers for a future downturn in prices.

At one new apartment auction on Sydney's north shore attended by Reuters, it took 50 minutes for the price to be bid up by $50,000, with two foreign investors reverting to small incremental bid rises. That sober behaviour is in contrast to the buying frenzies of the past three years that saw hopeful bidders queuing up to take part.

Australia's property boom showing signs of slowing as buyers hold back

 

[cove]

House prices don't always rise. Could be a good time to wait if you are thinking about buying in Sydney but so many forecasters of doom have been wrong. No one really knows but if the big 4 banks pull back on the percentage that they lend that would slow the market a lot.
Vancouver tackled their market with a foreigners tax and it is working so far.

 

[pauly7]

A local real estate agency in inner Melbourne just fired 20% of their (sales) staff as they aren't getting listings. 3 months in a trot about 25% down apparently and prices flat.... I'm not a doom sayer but it feels like the heat has come out of the market a bit now. Listings have just started to pick up (still down on LY) but the amount of people going through the houses just aren't in the same numbers.... will be really interesting to see the first few weeks of 'real sales' in a few weeks - not the dregs that didn't sell before Xmas that are selling now....

 

[cove]

Melbourne will be affected by the car manufacturing stopping, the smelter in trouble and other businesses running roughly. The Victorian government is currently not doing too well and the traffic snarls have become legendary. The real estate market may cool quickly once redundancies become the talk around town.

 

[penegal]

Melbourne has a lot (and is getting more) "shoebox" apartments. Many are empty.

 

[penegal]

I am still remarkably happy with the three property transactions I have executed in the past ~6 months. Maybe I am delusional, but hopefully I have sold two at the top of market in a tax effective way, and bought one in a "bargain" situation.

The thing about property is everyone talks about "one market". The reality is every suburb, and parts of suburbs, or even apartment buildings are their own sub-markets which behave differently.

And naturally any asset is only worth what someone else is willing to pay for it.

 

[penegal]

A local real estate agency in inner Melbourne just fired 20% of their (sales) staff as they aren't getting listings. 3 months in a trot about 25% down apparently and prices flat.... I'm not a doom sayer but it feels like the heat has come out of the market a bit now. Listings have just started to pick up (still down on LY) but the amount of people going through the houses just aren't in the same numbers.... will be really interesting to see the first few weeks of 'real sales' in a few weeks - not the dregs that didn't sell before Xmas that are selling now....

There does seem to be less stock on the market, and fewer people looking.