TalkFinance.net - Kangaroo House Prices http://www.talkfinance.net/ Is Australia in a bubble or will house prices always double every seven years? en Fri, 10 Sep 2010 20:34:11 GMT vBulletin 1 http://cdn.talkfinance.net/images/fun/misc/rss.jpg TalkFinance.net - Kangaroo House Prices http://www.talkfinance.net/ Property delusion quote of the week http://www.talkfinance.net/f32/property-delusion-quote-week-6549/ Thu, 09 Sep 2010 22:50:59 GMT Had to do a double take when I read this in todays Financial Review: Goldman Sachs economist Tim Toohey said the behaviour of house prices over... Had to do a double take when I read this in todays Financial Review:

Goldman Sachs economist Tim Toohey said the behaviour of house prices over the past decade did not resemble a speculative bubble. "There is a very big difference between a speculative bubble and a period of overvaluation" said Mr Toohey, who estimated Australian house prices are probably overvalued by between 24 and 35%.

No need to worry folks, theres no bubble... just a 35% overvaluation. ]]> Kangaroo House Prices Della http://www.talkfinance.net/f32/property-delusion-quote-week-6549/ Popping the hedge funds bubble http://www.talkfinance.net/f32/popping-hedge-funds-bubble-6540/ Thu, 09 Sep 2010 07:32:26 GMT Chris Joye, our white knight defending us from those evil hedge funds, has posted this on his blog and at Business Spectator: Popping the hedge... Chris Joye, our white knight defending us from those evil hedge funds, has posted this on his blog and at Business Spectator:

Popping the hedge funds' bubble | Christopher Joye | Commentary | Business Spectator

Interestingly, he posits most of his claim that house prices are fine on this graph:



Empirically -and from the view of a linear world - this looks correct: disposable household income is tracking house price appreciation very nicely, no bubble at all. (although it has risen from ca. 2.5x to over 4.6x times since 1993, and has I've shown before, this ratio is rising exponentially (but slowly) over time)

Obviously, house prices rise because disposable income rises. Case closed.

So on that note, let us pack up our bags, pull down the bear flags, get our shorts covered and head to the local CBA and get a great big mortgage - house prices will only go up from here.

:cool:

But I can see two problems with this hypothesis - first, is there a limit to disposable income and how households service debt and has that improved or decayed over time, and more importantly, is there a positive feedback occurring between house price inflation and wage inflation?

I have more to say on this (and am leaning upon better economists than I for inspiration) but I will leave it at that for the time being. ]]> Kangaroo House Prices nickmakwell http://www.talkfinance.net/f32/popping-hedge-funds-bubble-6540/ Housing sales up by 11pc as first home buyers return to the market http://www.talkfinance.net/f32/housing-sales-up-11pc-first-home-buyers-return-market-6514/ Tue, 07 Sep 2010 21:48:01 GMT *Housing sales up by 11pc as first home buyers return to the market * HOME and mortgage sales jumped 11 per cent in August as homebuyer confidence... Housing sales up by 11pc as first home buyers return to the market

HOME and mortgage sales jumped 11 per cent in August as homebuyer confidence strengthened and mortgage delinquencies stabilised.
While the Reserve Bank kept official interest rates on hold yesterday, home sales across the nation reached 6269 during August, 10.9 per cent higher than in July, as first home buyers continued to return to the market, according to the Australian Finance Group.
Australia's biggest mortgage broker said first home buyers' share of the mortgage market troughed at 9.5 per cent in June, before climbing to 11.1 per cent in July and 11.7 per cent in August.

Read more: Housing sales up by 11pc as first home buyers return to the market | News.com.au


Sounds like good news :) ]]> Kangaroo House Prices steven http://www.talkfinance.net/f32/housing-sales-up-11pc-first-home-buyers-return-market-6514/ News Home buyers confident despite repayment problems http://www.talkfinance.net/f32/home-buyers-confident-despite-repayment-problems-6505/ Tue, 07 Sep 2010 03:42:11 GMT ---Quote--- The index of homebuyer confidence by the mortgage insurance company Genworth Financial stood at a baseline level of 100 points in 2007,...
Quote:
The index of homebuyer confidence by the mortgage insurance company Genworth Financial stood at a baseline level of 100 points in 2007, but dropped to 92 in 2008.

It has now recovered to 99 points.
Quote:
The index also found that 20 per cent of first home buyers expect to find it hard to make repayments in the next 12 months.

Genworth says that is up from 15 per cent a year ago.
If you want more detail, head to the Press Release

Quote:
Genworth has modelled data from between 2005 and 2010 to track key changes in the index and therefore sentiment in the mortgage market over time. The index shows a strong reduction in confidence in 2007-2008, falling from 100 to 92.4, but rising again by 7.7% to 99.5 in 2008-2009. Between 2009 and 2010 there was a small decrease of 0.4% to 99.1.
I know it's a quibble over small movements which shouldn't be taken too seriously, but the ABC glossed over the most recent fall.

What they are really showing:

Quote:
The GHCI measures the attitudes of home loan borrowers to their own mortgage and the overall mortgage market at a given time, combining this with non-borrower attitudes towards the mortgage market.

The index is based on three factors including the respondents’ ability to service debt, the past and future repayment ability of home loan borrowers, the levels of comfort with LVRs (loan to value ratios) and whether or not respondents believe it’s a good time to buy a home.
]]> Kangaroo House Prices Gim http://www.talkfinance.net/f32/home-buyers-confident-despite-repayment-problems-6505/ Woolies running for the exit? http://www.talkfinance.net/f32/woolies-running-exit-6503/ Tue, 07 Sep 2010 00:44:37 GMT What is to be made of this? The words 'rats' and 'sinking ship' come to mind?

Woolworths to sell $900 million of shopping centres | Courier Mail

Cleanup on aisle 2? ]]> Kangaroo House Prices SittingWaiting http://www.talkfinance.net/f32/woolies-running-exit-6503/ Australian Crash by Christmas 2010 http://www.talkfinance.net/f32/australian-crash-christmas-2010-a-6499/ Mon, 06 Sep 2010 17:29:12 GMT July China closes 40% of Steel industry for maintenance August Iron ore prices and volumes drop China announces that they are to close by the... July
China closes 40% of Steel industry for maintenance
August
Iron ore prices and volumes drop
China announces that they are to close by the end of September “762 cement factories, 279 paper mills, 175 steel mills, 192 coking plants and an unspecified number of aluminum mills”

Early September
July maintenance of Chinese steel industry causes large drops in volumes and prices of iron ore and coking coal and trade surplus drops from $3.5 billion to $1.89 billion in July, Analysts had expected a $3.1 billion surplus.

Early October
Effect on over 2000 Chinese factories on August Trade account
Early November
US election, probable Republican landslide.
Negations for quarterly Iron Ore prices, probable massive drop in Iron Ore prices
Effect on Trade account of completed closures of Chinese plants

Main reason for Republicans huge support is their focus on:
Reducing national debt, decrease tax rates, increase nuclear and oil projects.
They want to build the economy not on spending or regulation but by giving business and investors more of their profits to spend on newly opened energy markets.

Prediction December 2010
Improving USA economy
Australian mining industry plummets
Australian property prices following mining industry over the cliff

I would like to go on record as early as November 10, 2010 if there is not a markedly increase in the US economic sediment AND demand for Australian resources are much lower AND property prices are heavily falling nation wide- I will climb “Jacobs Ladder” (up and down as many times as issues I was wrong about) in Perth (as I will be there visiting) and I am so confident that everything is aligned and with a weak Australian federal government the free fall is now on its way.
]]> Kangaroo House Prices robertsherlock http://www.talkfinance.net/f32/australian-crash-christmas-2010-a-6499/ News Ponzi schemes rip millions from investors http://www.talkfinance.net/f32/ponzi-schemes-rip-millions-investors-6491/ Mon, 06 Sep 2010 05:20:49 GMT Ponzi schemes rip millions from investors (http://www.abc.net.au/news/stories/2010/09/06/3003499.htm) Bit of a jest - it has nothing to do with... Ponzi schemes rip millions from investors

Bit of a jest - it has nothing to do with housing, but it could.

Quote:
The Commissioner for Consumer Protection, Anne Driscoll, is warning the public that any scheme that offers high returns is also highly risky.

She says investors need to get independent advice.

"We all need to be really careful and not taking up opportunities that might be portrayed as a very urgent opportunity, you know, 'you need to get in quickly, don't get advice, you're going to miss this opportunity if you let this pass today'."
]]> Kangaroo House Prices Gim http://www.talkfinance.net/f32/ponzi-schemes-rip-millions-investors-6491/ Debt and House Prices http://www.talkfinance.net/f32/debt-and-house-prices-6483/ Sun, 05 Sep 2010 12:11:10 GMT As requested by Stewart, here's some charts of House Price Index's and Debt, by state.

All data is sourced from the ABS.
Australian Finance is from table 10b and 11.
HPI's are from tables 1-10.

For HPI's I used established homes, not project homes.

Investors finance is not available at the state level (or I missed it :P).

At the national level you can see the total financing from owner occupiers and investors. I'm actually surprised how low the investor financing is, and it appears to be steady after a boom in 2000-2003.

The good news is that at the state level, missing the investors is unlikely to screw up the data. After 2000 changes in investor and owner occupier finance track each other very closely, except for late 2008 when owner occupiers jumped ahead (due to the FHBG boost) and at the latest points, where (as SuitablyIronicMoniker noted already in the Perth thread) owner occupiers have been dropping off, but investors haven't.
Attached Images
File Type: jpg Housing Finance in Australia without HPI.jpg (52.5 KB)
File Type: jpg Change in Housing Finance.jpg (55.3 KB)
File Type: jpg Housing Finance in Australia (Both).jpg (50.5 KB)
File Type: jpg Housing Finance in Australia (OO).jpg (55.2 KB)
]]> Kangaroo House Prices Gim http://www.talkfinance.net/f32/debt-and-house-prices-6483/ News Brisbane Real Estate Problems http://www.talkfinance.net/f32/brisbane-real-estate-problems-6480/ Sun, 05 Sep 2010 05:17:00 GMT South East Queensland is often the first to boom, and the first to feel any chill financial winds; Real estate golden goose takes flight... South East Queensland is often the first to boom, and the first to feel any chill financial winds;

Real estate golden goose takes flight

Quote:
Dan Molloy, managing director of the Real Estate Institute of Queensland (REIQ), said agents all across Queensland had been hit hard by the downturn.
The downturn will, of course, only be temporary;

Quote:
I would expect the market to pick up again by 2011
Perth and Brisbane are definitely doing it tough at the moment, despite these being the states that benefit most from the mining boom. ]]> Kangaroo House Prices SuitablyIronicMoniker http://www.talkfinance.net/f32/brisbane-real-estate-problems-6480/ Land owners shout bingo in WA http://www.talkfinance.net/f32/land-owners-shout-bingo-wa-6450/ Thu, 02 Sep 2010 03:25:37 GMT Landowners Shout `Bingo' as West Australia's Mining Towns Boom - Bloomberg

Paul Eaton moved to Karratha 10 years ago with a fledgling building business. Now he and his 40 employees can’t build homes quickly enough in the remote Western Australian mining town where demand for land is so hot that the government organizes lotteries to select buyers.

“During ballots people would literally yell out ‘bingo’ if they got a block of land because instantly they knew they’d made A$100,000 ($90,100),” Eaton, 43, said in between monitoring workers at a building site in the town of 20,000 people. “They’d build a house on it and their profit would go up to A$250,000.”

The housing shortage in a region that’s one of the world’s biggest suppliers of iron ore and natural gas is driving up costs for companies such as Chevron Corp. and BHP Billiton Ltd. as they mine raw materials to feed China’s industrialization. Chevron, the second-largest U.S. oil company, was forced to lease seven-year-old cruise liner MS Finnmarken to house 350 workers at its A$43 billion Gorgon gas project.

Karratha, the biggest town in the arid northwest Australian region of the Pilbara, has a median house price of A$775,000, 49 percent more than Sydney’s. A four-bedroom home in the fly- ridden, cyclone-prone outpost rents for about A$10,000 a month, triple the average apartment in Manhattan.

Mining Center

The Pilbara -- a region 20 percent bigger than California with just 45,000 people -- generates 23 percent of the nation’s merchandise exports. Karratha, about 1,500 kilometers (932 miles) north of the state’s capital Perth, is one of the world’s remotest locales, making homes twice as costly to build as in the nation’s major cities as each brick, roof-tile and sheet of plasterboard must be shipped thousands of kilometers.

The other main town in the region, which is the center of BHP and Rio Tinto Group’s iron ore operations, is Port Hedland. Like Karratha, its property prices are booming, giving it a mean housing price of A$908,000, according to Real Estate Institute of Western Australia figures. That compares to A$520,000 in Sydney, according to property researcher RP Data.

“The region has gone ballistic,” said Dianne Gilleland, regional manager at the Master Builders Association. “Logistically, it’s very expensive to build houses in the Pilbara. Tradesmen don’t have anywhere to stay. There are a few caravan parks; hotels charge whatever they like. To even book into a hotel is tough. Prices will rise for a long time.”

Fly In, Fly Outs

The mining and energy companies house most of their staff - - known as “fly in, fly out” workers as they reside in cities such as Perth and Sydney when not on-site -- in permanent self- contained units known as Dongas. Due to a shortage of these, other companies are forced to rent hotels or houses.

That’s bad news for the towns’ non-resources workers, who earn about a third of the miners’ wages.

“Some people who have lived in Karratha and Port Hedland all their lives working in low- to moderate-income jobs can’t afford to live there anymore,” said Bronwyn Kitching, chief executive officer of Shelter WA, a non-government organization dedicated to improving housing opportunities for lower- and middle-income workers in the state.

Other workers, especially in the service industries, can’t afford their own room and are forced into “hot-bedding,” where they pay rent for a bed that is taken by another worker as soon as they wake up, she said.

“The fly in, fly outs use the town’s amenities and services but they don’t contribute back to the local economy,” Kitching said. “They drive up the price of everything, but don’t pay the rates for the local councils to build more infrastructure. So there’s more and more need for the hairdressers and shop attendants to live there, but they can’t get accommodation at a reasonable price.”

Catch-22

Western Australia Premier Colin Barnett, who labels his state “the Saudi Arabia of natural gas,” is aware of the problem. His government is planning to turn Karratha and Port Hedland into sustainable cities with populations of about 50,000 by 2035, complete with new marinas and shopping centers.

“We have a Catch-22 situation where we need housing, but the people that build the houses can’t afford to live here,” said Chris Adams, general manager of the government’s new Pilbara Cities initiative. “There is massive demand for housing and community facilities and the supply is just not there. We’re fixing up the supply end, but at the same time demand keeps growing. We’re always playing catch up.”

The region’s home prices may be unsustainable, said Cameron Kusher, a Brisbane-based analyst at RP Data.

Voter Backlash

“When a house in the middle of nowhere costs A$950,000, it’s a bit tough to say prices will keep going up,” Kusher said. “For the miners it’s fine, but for the peripheral industries wages aren’t there to support it.”

That problem is vexing the Reserve Bank of Australia as the mining industry booms while the rest of the nation’s economy struggles. Australia would benefit from slower growth in China as that may ease inflationary pressures in the south-Pacific nation, the central bank’s Deputy Governor Ric Battellino said in June.

Western Australia’s voters punished the incumbent Labor Party’s plan to introduce a profits tax on iron ore and coal miners, with a swing of 5.5 percent against it in the Aug. 21 federal election. The poll failed to provide either major party a clear majority, leaving the ruling Labor government and opposition Liberal-National coalition in negotiations with independents to try to form government.

Inhospitable Climate

The Pilbara -- named after pilbarra, an aboriginal word for mullet -- is the main resource center of Western Australia, a state about four times the size of France that accounts for 62 percent of the nation’s mineral production, 75 percent of natural gas and 64 percent of crude oil and condensate, according to state government figures.

Mining and petroleum production in the state was worth more than A$60 billion last year and the state has about A$170 billion worth of projects in the investment pipeline over the next five years.

The Gorgon project at Barrow Island, off Karratha, holds more than 40 trillion cubic feet of gas and will supply 8 percent of current global liquefied natural gas capacity, the San Ramon, California-based Chevron said last year. It is the company’s largest project.

The LNG that Gorgon will produce will help elevate Australia to second among global suppliers of the fuel from sixth now, according to BP Plc.

The Pilbara includes 12 iron ore mines operated by Rio Tinto and seven by BHP.

Cyclones, Land Claims

Visitors to Karratha, which arose from the arid moonscape and scrub terrain less than a half-century ago, would be forgiven for thinking it an unlikely place for a housing boom. Karratha means “good country” in the language of the local indigenous people.

During the day, mothers and young children shelter in their homes or in the town’s lone shopping center, escaping the average maximum temperature of 32.3 degrees Celsius (90.1 degrees Fahrenheit), which often soars above 40 degrees in summer. At night, burly men from the mines in their stained work clothes gulp beers in tatty pubs.

Cyclones buffer the region November to April, further adding to building costs as homes must be made cyclone-proof. Meanwhile, land releases are constrained due to claims by the region’s aboriginal population, and reticence to allocate land to housing when it may have minerals underneath.

All of that adds up to a “perfect storm” constraining the supply of new homes, according to Karratha real estate agent Phil Hodnett. Properties that 10 years ago were selling for A$160,000 are now approaching A$1 million, he said.

“The world wants more and more of what we have here in terms of natural resources and every other day there’s new stuff found,” he said. “The game just keeps going on.”

To contact the reporter on this story: Jason Scott in Perth at Jscott14@bloomb ]]> Kangaroo House Prices Reppat http://www.talkfinance.net/f32/land-owners-shout-bingo-wa-6450/ Housing crash would halve bank profits - fin review http://www.talkfinance.net/f32/housing-crash-would-halve-bank-profits-fin-review-6449/ Thu, 02 Sep 2010 02:05:39 GMT Housing crash would halve bank profits 01 September 2010 | Matthew Drummond | The Australian Financial Review A 30 per cent fall in Australian... Housing crash would halve bank profits
01 September 2010 | Matthew Drummond | The Australian Financial Review

A 30 per cent fall in Australian house prices would lower bank profits by just 10 per cent, according to research by Morgan Stanley. However, the broker said that a collapse in the housing market would trigger a recession that was likely to cut bank profits in half.



afr.com - Financial Services - The Australian Financial Review

need to be a member to view full article ]]> Kangaroo House Prices Reppat http://www.talkfinance.net/f32/housing-crash-would-halve-bank-profits-fin-review-6449/ <![CDATA[Law change could favour 'rogue' agents]]> http://www.talkfinance.net/f32/law-change-could-favour-rogue-agents-6430/ Tue, 31 Aug 2010 07:52:43 GMT Law change could favour 'rogue' agents
A change in legislation may allow unscrupulous real estate agents to buy at unfair prices property they have been commissioned to sell, consumer groups fear.

The proposed legislation enables agents to buy property from clients with the written consent of the seller and a ''legal practitioner, conveyancer or accountant representing the vendor''. The agent will be required to notify Consumer Affairs within seven days of receiving consent.

Link: Law change could favour 'rogue' agents ]]> Kangaroo House Prices steven http://www.talkfinance.net/f32/law-change-could-favour-rogue-agents-6430/ News House prices waver as rate rises weigh (RP Data) http://www.talkfinance.net/f32/house-prices-waver-rate-rises-weigh-rp-data-6421/ Tue, 31 Aug 2010 01:50:18 GMT House prices waver as rate rises weigh | Australia's real estate ]]> Kangaroo House Prices Tulip Flipper http://www.talkfinance.net/f32/house-prices-waver-rate-rises-weigh-rp-data-6421/ News Fall in Building Approvals http://www.talkfinance.net/f32/fall-building-approvals-6420/ Tue, 31 Aug 2010 01:42:17 GMT The ABS has released the figures for building approvals; 8731.0 - Building Approvals, Australia, Jul 2010... The ABS has released the figures for building approvals;

8731.0 - Building Approvals, Australia, Jul 2010
  • The trend estimate for total dwellings approved fell 2.5% in July 2010 and is showing falls for five months. The trend fell in New South Wales (-2.4%), Queensland (-6.7%), South Australia (-1.8%) and Western Australia (-7.2%).
  • The trend estimate for private sector houses approved fell 1.7% in July and has fallen for seven months. The largest falls were in Queensland (-4.0%) and Western Australia (-3.2%).
  • The trend estimate for private sector other dwellings approved rose 0.5% in July and is now showing rises for 13 months..
  • The trend estimate for the value of total building approved fell 1.0% in July and has fallen for five months. The trend estimates for the value of building approved should be interpreted with caution.

The reason for caution on the value of approvals is that the federal government spending has now peaked.

The graphs for each State show a clear peak and decline for WA, Queensland, NSW and SA. ]]> Kangaroo House Prices SuitablyIronicMoniker http://www.talkfinance.net/f32/fall-building-approvals-6420/ Yellow Brick Road removes proof of savings in home buying applications http://www.talkfinance.net/f32/yellow-brick-road-removes-proof-savings-home-buying-applications-6414/ Mon, 30 Aug 2010 21:35:32 GMT *Yellow Brick Road removes proof of savings in home buying applications * AN emerging non-bank lender has upped its fight against the major banks... Yellow Brick Road removes proof of savings in home buying applications

AN emerging non-bank lender has upped its fight against the major banks by removing the need for its home loan applicants to show proof of savings.
The intrepid move, initiated by Mark Bouris' Yellow Brick Road, is aimed squarely at first home buyers who either are gifted a deposit from their parents, or inherit cash.
Even a favourable night at the casino won't raise questions, as long as the deposit is on the table and the repayments can be met.
Under existing strict lending criteria at the major banks, such home buyers would be denied a loan because they could not show the lender any proof they are good savers.
Read more: Yellow Brick Road removes proof of savings in home buying applications | News.com.au

This seems like a fantastic idea :cool: ]]> Kangaroo House Prices steven http://www.talkfinance.net/f32/yellow-brick-road-removes-proof-savings-home-buying-applications-6414/