Australian housing bubble thread

House prices will keep rising. The average net worth of a politician is over $1.5 million. They all have investment property.

The next step will be a national roll out of government shared equity schemes

The more traditional shared equity schemes involve shared ownership, with the lender taking a stake in your home.
Western Australia's First Start program is a good example. Targeted at low to middle income first home owners, the scheme allows the government to buy up to 40 per cent of eligible borrowers' new homes while the borrower pays for the remainder through a low deposit home loan. The home owners are able to repurchase the government's share of their property as their finances permit.
 
news in general media :
"The Commonwealth's decision to add 20 basis points to the RBA's 25-basis-point rise will put its mortgage rate at 7.8 per cent. This is more than 0.5 percentage points above the average for mortgage rates over the past 10 years and will add $88 a month to the cost of servicing a $300,000 mortgage."

lets see 300K, increase 0.45% : 300K *0.0045 /12 = 112.5$ per month.

Media claims $88.5 per month.

Hope this number is calculated properly on a p/l worksheet of property investors in AU. Else thats could explain why yields do not match expected ones :D :D :D
 
http://www.zerohedge.com/article/chinese-rate-hike-rumors-overnight

Some interesting comments regarding possible tightening in China, and how this relates to the Australian housing market.

"But the theme tonight is in the China-Australia risk complex. Australia has clearly hit trough inflation and although it's hiked quite a bit, the RBA still has a ways to go; meanwhile PBoC will be forced to start its rate hike cycle soon, and beyond just RRR hikes into actual benchmark rates.

"Both of these developments will be very bearish for their respective property markets, particularly Australia's, which is characterized by a 1.7x household debt/disposable income and a mortgage debt/GDP higher than even USA's at the height of its housing bubble. Australia's Commonwealth Bank responded to the RBA's 25bp hike earlier this month by hiking mortgage rates by 40bps. Banks are pressed for ways to keep margins high and the more the RBA tightens liquidity to fight inflation, the higher proportionate drag is felt on Aussie households with their mortgage payments. "

***

My comment:

Look at CBA.AX and WBC.AX (two largest home loan lenders in Australia), they have underperformed the Aussie stockmarket since the start of September and are getting close to 52-week lows.
 
1. banks passed the stress test for housing slump, now all ready to withdraw all sorts of stimuluses.
2. mood of peope turning to modest living, and staying there for a while
3. interest rates close to 8% which seem to be breaking point based on my study of sales.
4. anecdotical evidence prices are down 5% in blue ribbon suburbs
5. demographic clock ticking. Areas in Sydney do not sell at all. Youngsters do not want to mortgage their lives for areas where average age is 50+. dont blame them.
6. QLD and West AU experiencing significant falls in some ares.
7. Chinese sooo persistent with inflation fight
8. cash deposit rates decent

Is there any incentive to buy now, or better wait as increase in prices unlikely and let fundamentals work - wait till rent matches holding costs. Till then get 5% differential rent/buy risk free per year and increase buying power.
 
Macroman it sounds like you have your finger on the pulse. Are you from Australia by any chance?

#8 in your list below is interesting. Even though the RBA cash rate is "only" 4.75%, you can easily get 6.25% at-call at NAB and CBA, with both the explicit government guarantee (until late 2011) and then an implicit government guarantee thereafter.

Quote from macroman:

1. banks passed the stress test for housing slump, now all ready to withdraw all sorts of stimuluses.
2. mood of peope turning to modest living, and staying there for a while
3. interest rates close to 8% which seem to be breaking point based on my study of sales.
4. anecdotical evidence prices are down 5% in blue ribbon suburbs
5. demographic clock ticking. Areas in Sydney do not sell at all. Youngsters do not want to mortgage their lives for areas where average age is 50+. dont blame them.
6. QLD and West AU experiencing significant falls in some ares.
7. Chinese sooo persistent with inflation fight
8. cash deposit rates decent

Is there any incentive to buy now, or better wait as increase in prices unlikely and let fundamentals work - wait till rent matches holding costs. Till then get 5% differential rent/buy risk free per year and increase buying power.
More...
 
RP Data-Rismark Home Value Index

title:
Aussie home values steady in October, but 2010-11 headwinds loom

My analysis:
* most of the country flat for October
* As mentioned by Macroman, Brisbane and Perth the two cities showing declines. NB. These are the two cities with the greatest exposure to the mining / China story

*****************

Press release / commentary:
http://www.rpdata.com/press_release...dy_in_october_but_2010_11_headwinds_loom.html

Data set:
http://www.rpdata.com/images/storie...rismark_home_value_index_november_30_2010.pdf
 
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