Australian housing bubble thread

EURCHF new all time closing low 1.2425 (anything to do with that oldie eu official imprisoned in ny?) Suggesting stress in EU on increase as majority of borrowers loaded with property around 1.6500. AUD not down.

If EUR falls further, interest rates will be forced up globally. AUD refuses to fall for now, implying that market expects rates will go up housing down or not and AUD will not be sacrifised like in 2008.

Almost as interesting as LNDK...
 
It's a new month, which means that the latest RP Data – Rismark Home Value Index Release is available.

http://www.rpdata.com/press_releases/Page_1.html

http://www.rpdata.com/research/rents_rise_while_home_values_fall_by_2.7_per_cent_in_2011.html

PDF file:
http://www.rpdata.com/images/storie...s/rp_data_rismark_home_value_index_jun_30.pdf

First three paragraphs:

"Capital city dwelling values declined by 0.3 per cent (seasonally adjusted - s.a.) in May, and are down 1.2 per cent (s.a.) over last 3 months. Rest of State house values were also weak in May (-0.1 per cent s.a.) and are off -0.9 per cent (s.a.) over last 3 months. Gross rental yields for Aussie apartments are now 5.0 per cent.

"Based on more than 110,000 home sales nationally in 2011, the market-leading RP Data-Rismark Home Value Index for Australia’s capital cities declined by -0.3 per cent (s.a.) in the month of May (or by -0.5 per cent in raw terms). Capital city home values have now fallen for the last five consecutive months with by far the worst seasonally-adjusted result coming in the month of January (-1.2 per cent), which accounts for 45 per cent of the 2011 decline.

"The softening in Australian home values is delivering a valuation dividend with Australia’s dwelling price-to-disposable income ratio falling to 4.2 times, which is its lowest level since June 2003 according to Rismark’s analysis. "

More information at the links above.
 
I agree with most of what you say.

However, given that you can get 5.75% in an at-call deposit at a too-big-too-fail bank, this is looking very attractive compared to property, which has fallen since the start of the year.

It's likely that some existing "investors", (whose main reason for property "investing" is the negative gearing / tax benefits) will see this and think "time to take profits, rather than hold onto a property whose rent is not enough to pay my loan interest".


Quote from Ghost of Cutten:

An alternative scenario is that we are in the later stages of the bubble but there are still 2-3 more years to go. A few reasons supporting this theory:
More...
 
Quote from m22au:

I agree with most of what you say.

However, given that you can get 5.75% in an at-call deposit at a too-big-too-fail bank, this is looking very attractive compared to property, which has fallen since the start of the year.

It's likely that some existing "investors", (whose main reason for property "investing" is the negative gearing / tax benefits) will see this and think "time to take profits, rather than hold onto a property whose rent is not enough to pay my loan interest".
More...

M22au,

You raise a good point here. If you sell your house and go to cash in a 'Too big to Fail' Bank, and that bank actually does fail. Then your cash will evaporate and you would of been better to keep your house.

Make no mistake, when greece eventually defaults, they will be followed by Spain, portugal and Ireland. Im pretty sure this will trigger a worldwide bond crisis and a run on banks. Most banks at this point will fail.
 
Quote from Runningbear:

M22au,

You raise a good point here. If you sell your house and go to cash in a 'Too big to Fail' Bank, and that bank actually does fail. Then your cash will evaporate and you would of been better to keep your house.

Make no mistake, when greece eventually defaults, they will be followed by Spain, portugal and Ireland. Im pretty sure this will trigger a worldwide bond crisis and a run on banks. Most banks at this point will fail.
More...

True. Most people have everything in property. With little free cash floating around, I can see cash becoming valuable in the future in form of further AUD appreciation or other opportunities. Especally when now is clear property is on artificial support -> chances of real growth are minisculus. Before rents get to economic level, will take many years of inflation.
 
Quote from Runningbear:

M22au,

You raise a good point here. If you sell your house and go to cash in a 'Too big to Fail' Bank, and that bank actually does fail. Then your cash will evaporate and you would of been better to keep your house.

Make no mistake, when greece eventually defaults, they will be followed by Spain, portugal and Ireland. Im pretty sure this will trigger a worldwide bond crisis and a run on banks. Most banks at this point will fail.
More...

If that happens, then yes there would be some withdrawals from Aussie banks. But with such a low govt debt to GDP ratio, the Australian govt has plenty of room to provide a credible guarantee for deposits in the big 4 banks, and possibly the entire Aussie banking system. Whereas in Greece, Ireland, Portugal, any deposit guarantee is not as credible.
 
"Permanently High Plateau Theory Touted for Australia Housing; Real Estate Agents Refuse to Disclose Sale Prices"

http://globaleconomicanalysis.blogspot.com/2011/07/permanently-high-plateau-theory-touted.html

snippet:


"We are facing a situation where we are just spinning the wheels for up to 10 years until incomes catch up with property prices," Mr Oliver said. "You could have a five to 10-year period where you have prices rise before they come off again and basically track sideways within a range."

(from quoted Herald Sun article
http://www.heraldsun.com.au/news/mo...-property-market/story-fn7x8me2-1226091381419)
 
Quote from m22au:

"Permanently High Plateau Theory Touted for Australia Housing; Real Estate Agents Refuse to Disclose Sale Prices"

http://globaleconomicanalysis.blogspot.com/2011/07/permanently-high-plateau-theory-touted.html

snippet:


"We are facing a situation where we are just spinning the wheels for up to 10 years until incomes catch up with property prices," Mr Oliver said. "You could have a five to 10-year period where you have prices rise before they come off again and basically track sideways within a range."

(from quoted Herald Sun article
http://www.heraldsun.com.au/news/mo...-property-market/story-fn7x8me2-1226091381419)
More...

I have long thought that the current economic period is very similar to the post 1990 recession. We simply won't see any growth in property prices for 5 years. From 1990 to 95, housing didn't move an inch, but by 96 wage growth had made real estate seem cheap. I had mates earning 80K back then and you could by a house for 160K. Since 96 salaries have gone up 40% and housing has gone up 400%. So the cycle is kind of repeating itself.
 
Quote from Runningbear:

I have long thought that the current economic period is very similar to the post 1990 recession. We simply won't see any growth in property prices for 5 years. From 1990 to 95, housing didn't move an inch, but by 96 wage growth had made real estate seem cheap. I had mates earning 80K back then and you could by a house for 160K. Since 96 salaries have gone up 40% and housing has gone up 400%. So the cycle is kind of repeating itself.
More...

I think this is what a lot of Aussie property owners are missing - even though property prices may not decline by a large amount, there is the opportunity cost of 5.75% in an at-call account. If the RBA cash rate (and therefore bank deposit rates) was to decline, it's highly likely this could be in economic circumstances that are bearish for property.

As an aside, I notice that the govt guarantee for bank deposits expires on 12 October, just as people realise that the financial crisis is not over, due to the problems in the PIIGS.

I've read articles suggesting that the deposit guarantee will be reduced to a lower amount ($100,000 maybe). I can imagine the big smile on the faces of NAB, CBA, ANZ and WBC executives as they see inflows from small institutions as a result of this.
 
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