Australian Housing Affordability Discussion

[cove]

For everyone with superannuation we would hope so wmw. Mums and dads have to be careful not to hand over so much that it hurts. Once a parent has retired from earning they cannot recover if the money is lost.

 

[whatmeworry]

For everyone with superannuation we would hope so wmw. Mums and dads have to be careful not to hand over so much that it hurts. Once a parent has retired from earning they cannot recover if the money is lost.

If our super funds are smart enough, they will be divesting themselves of bank stocks.

 

[RAM]

Given the 4 big banks AND Macquarie make up about 10 to 20% of most Industry and private-sector run super funds - EVERYBODY gets hit when the Ponzi scheme implodes.

Too big to fail only works when there is someone bigger to bail them out. In 2007/8 the Fed Govt had net assets - now it is running up debt at one of the fastest rates in the OECD.

In 2007/8 the UK and US did not have the firepower to pump-prime (aka spend like there's no tomorrow) and you saw their housing markets implode. In some US states residential property prices are below the levels seen in 2005. Inflation in the meantime has risen 25% - so in real terms residential property prices are down over 30% in 12 years whilst mortgage holders have paid close to 50% of loan values in interest payments. AKA 80% worse of.

In 2017 Australia has caught up to the downside that we avoided a decade ago. Unfortunately the political parties continue to focus on their snouts in the trough and NOT what's good for Australia. With debt levels growing faster than incomes for ten years in a row there is only one way this can end - unless immigration is kept at record high levels.

That only pushes the day of reckoning out and ensures the outcome is significantly worse. Look at Japan - 26 years of virtually no growth and their debt levels are such that if interest rates rise by 0.75% then that would take 80% of Govt spending to pay the interest on Japanese Govt Bonds. No wonder Japanese residential property prices now over 27 years from their peaks are still around 40% below the level seen in 1990.

 

[cove]

Most super funds have exposure to the Big 4 bank shares. They may be a bit underweight but most have some bank shares as banks have been big profit earning enterprises in the last 25 years.
The riskiest part of mum and dad lending is where a bank takes a mortgage on their home as well as the children’s home.

 

[RAM]

If our super funds are smart enough, they will be divesting themselves of bank stocks.

In funds management there is a saying "If you're not the first then don't go through the door".

Due to margin lending, CTAs, market makers, delta players, hedge funds etc etc. It does not take much real selling in any company to see its shares plummet. Once there's 'blood in the water' - its too late. My own approach is to let the profits run and cut losses early - most adopt the opposite - hoping to be able to sell out at the price they bought in. Hope does not make a good investment approach. There are many more reports of falling house prices globally (Singapore 17 quarters, London - 0.6% Year to September, parts of Canada etc etc

London house prices fell for the first time year-on-year since the height of the financial crisis eight years ago, underperforming the rest of the UK, Nationwide has said. The average price of a home in the capital is £471,761, down by 0.6% between July and September compared with the same period last year.23 hours ago
London house prices fall for first time in eight years as rest of UK rises ...
https://www.theguardian.com/.../london-house-prices-fall-for-first-time-in-eight-years-as...

‘There’s nothing positive’: Toronto home prices plunge as buyers retreat

Other than super funds or retail funds there are no large natural buyers of banks.

Shareholder.........................................Effective Date....Capital (%).....Shares
HSBC Custody Nominees (Australia) Limited..2/08/17...... 21.75 ... 376,380,123
J P Morgan Nominees Australia Limited ........ 2/08/17...... 10.79 ... 186,821,486
Citicorp Nominees Pty Limited.........................2/08/17........ 5.84 ... 101,043,275
National Nominees Limited..............................2/08/17........ 3.46 .... 59,912,985
BNP Paribas Noms Pty Limited.......................2/08/17........ 3.28 ..... 56,776,266
Bond Street Custodians Limited......................2/08/17........ 0.97 ......16,812,646
Australian Foundation Investment Company Limited 2/08/17 0.46 .... 7,900,000
Pacific Custodians Pty Limited........................2/08/17.........0.28 ........ 4,812,429
Navigator Australia Limited..............................2/08/17........ 0.22 ....... 3,723,861
Argo Investments Limited................................2/08/17........ 0.19 ........ 3,203,731

Of the top ten holders - 8 are custodians for super or retail funds. Seller no buyer I'm afraid. Pass the parcel only works if someone will take the parcel. There is nobody big enough to buy them.

Read more: CBA Shareholder Activity - Top 20 Shareholders | afr.com

Overseas investors get next to no value for the franking credits - so they are seriously under-weight which matches the over-weighting by most super funds. SFs use the franking credits to offset part of the super tax on earnings as most trustees ALWAYS ask "how much tax did our fund pay?"

Mad as it seems, one pooled super fund I was running (about the only one to have a positive return in Dec 87 qtr) - the first 3 questions asked at the Sydney Investors meeting were about how much tax was paid, what rate this was and what steps would we take in future to ensure the tax rate was lower.

My response was, as we out-performed every other fund manager by an average of 17% over the quarter AFTER paying tax - I would change nothing about the way the fun was investing. I'd rather see the fund go up in value than pay minimal tax - as I expect all the fund managers we beat would like to as well.

No more questions were asked.

 

[whatmeworry]

So much for Chinese capital controls.

Shanghai restaurateur David Hu said he’s nervous about wiring money to Australia for a home purchase because of China’s crackdown on currency outflows. Instead, he plans to carry the cash in a suitcase.

The 61-year-old intended to move about $85,000 to Melbourne this month, the last part of his financing for a deal struck last year.

“Buying a property abroad was and is still workable,” said Hu, though he described the process as a “lot more troublesome” nowadays.

Chinese money seeps through the cracks into world's housing market

 

[whatmeworry]

So apparently now Chinese developers walking from developments.

“Chinese developers that have been overpaying for properties in Australia are now struggling to find the finance to closing those deals and they’re actually walking away from large deals and large deposits,” he observed.

Chinese authorities, anxious to stem the outflow of money from China and stabilise the yuan, have tightened restrictions on foreign investment by their companies.

The concern is that China’s financial stability is threatened by the capital outflows, which are being exacerbated by property developers.

Chinese developers 'walking away' from Australian projects

 

[pauly7]

So apparently now Chinese developers walking from developments.



Chinese developers 'walking away' from Australian projects

I was surprised the Chinese are such a tiny percentage of investment compared the the percentage of media attention they get... Check out the US investors...

 

[whatmeworry]

Some reports saying the housing market in Melbourne and Sydney slowing down.

Foreigners are piling into Victoria with offshore buyers purchasing more new homes in Victoria than Australian-based buyers. For the June quarter, total foreign buyers purchases of new homes in Victoria jumped to $1.1 billion, up from just below $800 million in the March quarter.

The leap in foreign buyer purchases came despite increased duties on foreign buyers in both NSW and Victoria.

A staggering 87 per cent of all foreign demand for Sydney property during the first six months of 2017 was generated by buyers from China, Hong Kong, Taiwan and Macau, Credit Suisse found.

Foreign buyers snap up NSW, Victorian new homes, FOI finds

Melbourne house prices are still tracking up, but new data shows growth has started to slow, an early sign the property market is cooling.

And while Sydney’s median house price has fallen for the first time in two years, economists say the Victorian capital is unlikely to follow in the coming year.

Slowest quarterly growth for Melbourne house prices in 3 years

Australia, meanwhile, can implement higher taxes on foreign buyers without impacting demand, according to Credit Suisse researchers.



Foreign buyers, almost all from China, are purchasing 25 per cent of new homes NSW, 17 per cent in Victoria and 8 per cent in Queensland, a report released by the investment bank on Wednesday shows.

Revealed: How many new homes are really being snapped up by foreign buyers

 

[whatmeworry]

NZ to ban the sale of homes to overseas buyers.

Overseas buyers will no longer be allowed to purchase existing homes in New Zealand, Prime Minister-elect Jacinda Ardern said Tuesday, as she unveiled a raft of policy deals made with her coalition partners.

New Zealand homes 'not for sale' to foreigners under new PM

 

[Denali]

We sold a house in May and I see that the house 3 doors down is now up for sale. Like for like, 2 bedroom fibro dog box on 600mtr land but in better condition (our house absolutely needed new bathroom and kitchen), better back yard and slightly better neighbours and its list price is $40K less than what we sold.

 

[cove]

Suddenly hovels in Sydney are not flavor of the month. There should be a bit of a relationship of rental return to a house price but that was forgotten while house prices were going up. We will now go to a more realistic way of determining the value for a while.

 

[whatmeworry]

165 cranes in Melbourne now. However the first major Skyscraper project for a decade or so has collapsed. Beginning of the end?

There are a record 165 cranes operating in Melbourne – everywhere from Altona to Hawthorn and Fairfield – according to planning website Urban Melbourne.

Crane numbers soar to new heights in Melbourne

At least 581 apartment buyers have been left in the lurch after a Singaporean developer pulled the plug on a glittering 71 storey Melbourne tower following a long and bitter legal battle that undermined the project.

Glittering skyscraper plans fall over, buyers refunded

 

[cove]

Yes I saw all the cranes in Melbourne last week. I also saw that Melbourne has had an influx of Chinese folks in the city.
I had the fire alarm sound but it was a false alarm so didn’t do the 38 floor walk down this time.
I do wonder about living on levels 60 to 100 in some of the latest buildings.....that is a lot of steps to take to make it to the ground floor.

 

[whatmeworry]

Yes I saw all the cranes in Melbourne last week. I also saw that Melbourne has had an influx of Chinese folks in the city.
I had the fire alarm sound but it was a false alarm so didn’t do the 38 floor walk down this time.
I do wonder about living on levels 60 to 100 in some of the latest buildings.....that is a lot of steps to take to make it to the ground floor.

The MFB's tallest ladder is only 15 storeys.

 

[TomVexille]

165 cranes in Melbourne now. However the first major Skyscraper project for a decade or so has collapsed. Beginning of the end?



Crane numbers soar to new heights in Melbourne



Glittering skyscraper plans fall over, buyers refunded

I think a lot of those cranes are building old folks homes

 

[whatmeworry]

A home in my area recently sold for 1.1 mil. It sold for like 800k 2-3 years ago. It is now advertised for lease. Bloody negative gearers.

Hamish or Andy (I don't know who is who) sold a property they had in Seddon. I think it went for about a mill. Couple of bidders, young couples but went to downsizers probably cashed up from selling their large home in Glen Waverley to either developers or a foreign student.

Don't know if I mentioned this before, my bros BIL got divorced and sold his martial home for 2 mil. Sold to the parents of an 18 old year student from China who will be occupying the 4 bedroom home alone.

 

[whatmeworry]

Global credit markets are getting nervous.

The credit markets have sharp antennae. They issued early warning alerts four to eight weeks before each episode of stress over the last 20 years, although with several false alarms along the way.

The shake-out in the US junk bond market last week had an ominous feel for traders and may finally mark the top of the post-Lehman boom in corporate credit. The exuberant reach for yield is nearing its limits.

Meanwhile predictions Australia might be going down Canada's housing path.

Australian homeowners have nine months to prepare themselves for higher interest rates and tighter lending restrictions, according to ANZ economists, who say Canada’s approach to a similar property market could be seen as a roadmap.

Vancouver and Toronto are often likened to Sydney and Melbourne, with post-GFC low interest rates sparking huge house price booms. And as financial screws are now being tightened in both countries, Canada’s experience should be closely watched by Australia, economists say.



Put simply, Canada’s housing market is simultaneously facing the hurdles of higher interest rates and tighter lending regulations, causing soaring prices to ease.

Australia's property sector has nine months to prepare itself

Meanwhile in Melbourne.

Owner occupiers led the charge in Bentleigh and Bentleigh East. Ms Gursansky sold 28 Tambet Street before auction for $1.96 million, well above the $1.6 million to $1.75 million price guide.

“We had a buyer who really loved it and was determined to buy within the next two weeks before heading back to China,” she said. “Their daughter will live in it now and the family will join her later.”

Opinions mixed on strength of Melbourne’s market, as Brighton left high and dry

 

[whatmeworry]

Cove you must be reading too much of News Ltd.
A recent Telegraph opinion piece headlined-
The only thing Bill Shorten knows about money is marrying it.

So this is about Housing Affordability?

 

[drron]

Sorry WMW but I was answering Cove.Thought we were allowed to comment on previous posts.