Archive for January, 2011
The Irish Examiner reported yesterday that house prices in Ireland are now the most affordable in 25 years.
WHAT a difference a bust property bubble makes?
While much of the decade was all about exorbitant house prices, latest figures show prices are now at their most affordable in more than 25 years.
It reports that the average first home buying working couple is now spending 12.6% of their disposable income on the mortgage in December 2010. In the second quarter of 1988 this figure was 13.8%.
» Most affordable house prices in 25 years – Irish Examiner, 28th January 2011.
Posted in Australian economy | 9 Comments »
The Sydney Morning Herald has today reported some banks in China have raised interest rates on property loans by as much as 10 to 45% after a surge in credit growth this month. New loans issued to the 24 of January exceeded twice the amount that was loaned in December.
Meanwhile Beijing has launched its own control measures, increasing the deposit required on second and subsequent housing loan purchases to 60 percent, up from 50 percent, with interest rates on such loans to be at least 10 percent higher than the central banks benchmark lending rate.
All eyes are now on China’s central bank this weekend to see if they will raise the benchmark lending rate.
Premier Wen Jiabao told citizens in December that “I made a promise to the Chinese people last year that I would try to keep housing prices at a reasonable level during my tenure, and I won’t shrink from that goal,”
» Chinese banks hike rates by as much as 45% – The Sydney Morning Herald, 27th January 2011.
» China property shares suffer from latest policy moves – Market Watch, 26th January 2011.
Posted in China Housing | 6 Comments »
According to a poll of 237 property professionals, House prices in Australia are now expected to fall in 2011. NAB conducted the survey from a pool of expert respondents including real estate agents/managers, property developers, fund managers and owner/investors.
They expected property prices will not only fail to keep up with inflation, they will actually fall a modest 0.5 percent. These results come after Residex published data last week showing house prices in Australia fell 1.1 percent in the December 2010 quarter, suggesting a 0.5 percent fall could be on the light side.
“There has…been a significant downward revision in house price expectations over the next 12 months,” said National Australia Bank chief economist Alan Oster. “The house price expectations of our survey respondents have been downgraded significantly from our previous survey.”
Demographia has just released the results of its 7th Annual International Housing Affordability Survey. It compared house prices to household income in 325 cities around the world and found Hong Kong had the most expensive housing followed by Sydney in 2nd place and Melbourne 4th place. The report noted “Australia’s major markets have a severely unaffordable Median Multiple of 7.1, nearly 2.4 times the 3.0 affordability standard. Each of the major markets, with the exception of Sydney had housing affordability within the 3.0 norm during the 1980s.”
This abnormal increase in House prices since the 1980′s has seen household debt surge with banks having to go off shore to get more funding to fuel our appetite for housing. Ratings agency Finch reports the ratio of Household debt to disposable income in Australia is 159 percent, more than the levels in the US, UK and Spain at the top of their housing bubbles. Fitch says Australia’s reliance on external wholesale funding is a key vulnerability, but believes our banks will be able to manage a severe downturn. “Even in a severe downturn, gross losses incurred by the four major banks in their mortgage portfolios would be manageable,” said John Miles, senior director at Fitch Ratings. A 40 percent drop in Australia house prices was used to model the “severe” downturn.
» House prices to ease in 2011: NAB survey – The Sydney Morning Herald, 25th January 2011.
» House price expectations turn negative – The Australian, 25th January 2011.
» 7th Annual Demographia International Housing Affordability Survey: 2011. – Demographia, January 2011.
» Lenders to weather housing slump, says Fitch – The Sydney Morning Herald, 24th January 2011.
Posted in Australian economy, Australian Housing | 17 Comments »
According to data released today from Residex, House prices in Australia fell 1.1 percent in December. During December falls were experienced in every capital city except Brisbane, although Brisbane recorded a fall of 2.9 percent for the year.
Residex Chief Executive John Edwards said they wouldn’t know until the end of January if this was a “serious indicator of a pending correction”
» Property values fall in December – The Sydney Morning Herald, 19th January 2011.
Posted in Australian economy, Australian Housing | 13 Comments »
According to data from RP Data and the HIA, the number of land sales across Australia in the September quarter plunged 57 percent for the year, falling to levels not seen since September 2001. Melbourne saw a 74 percent drop over the year.
The median price for a lot in Australia increased 5.2 percent to $186,629.
Naturally, Housing Industry and Real Estate Lobbyists jumped on these latest figures indicating there will be a chronic shortage of homes as a result and prices will skyrocket. The HIA believes Australia now faces a 200,000 unit housing shortage.
» Land sales plummet, adding to price squeeze – The Sydney Morning Herald, 18th January 2011.
» Land sales slump but prices hit new heights The Age, 19th January 2011.
Posted in Australian economy, Australian Housing | 2 Comments »
A monsoonal trough in the aftermath of Cyclone Wanda caused around 900mm to fall in the South Eastern Queensland between the 24 and 29th of January 1974. These floods were the worst to hit Queensland since 1893.
Back in 1974, Australian’s saved for a rainy day. According to data from the Australian Bureau of Statistics, at the time Australians were putting away the average of 15.3 percent of their household disposal income in the piggy bank. This little nest egg of savings could be drawn on at time of disaster such as a flood. Debt was also manageable during this era. While RBA statistics only date back to 1977, in 1977 the average Australian household had 33.2 cents of debt for every dollar their household earned per year.
In the aftermath of this weeks flood, Queenslander’s are not only drowning in water, they, like most Australians are drowning in debt. Today, household debt levels have ballooned out to 159.2 percent of household disposal income, that is for every dollar a household earns this year, they will have $1.59 of debt or 4.7 times the debt that had during 1974. 89 percent of that debt is locked into housing and unfortunately for some, that is the asset that is underwater. Households today are extremely leveraged time bombs.
With so much debt, there is not much opportunity to save for a rainy day. Since 2002 to the start of the global financial crisis, we were spending more than we earned, i.e. we were depleting any savings we had. The GFC wacked us around to a little extent, and households are once again saving for that rainy day, but to a very small extent.
While the 2011 floods have not broken the 1974 record in terms of river levels, the devastation is likely to exceed that of 1974. Today, there is more housing and much denser housing in the same area. But what is not yet clear is the impact to household finances. With so much leverage today, is there any spare capacity in household budgets to get through the tough times?
Our hearts go out to everyone affected by flooding.
Posted in Australian economy, Australian Housing | 13 Comments »
Following in the footsteps of China who is working in vain to curb speculation in their housing bubble, Singapore has also stepped up measures to cool it’s market.
Previously citizens could only borrow up to 70 percent to fund a purchase of a 2nd or subsequent home. This has now been decreased to 60 percent. Loans to other entities (companies, funds etc) have been reduced from 60 percent to 50 percent.
To help prevent investors flipping houses, sellers will now have to pay stamp duty on homes sold within four years. This was previously three. If an owner sells a property within a year, they will now have to pay 16 percent tax, up from the previous 3 percent.
A Global Real Estate Trends report published by Scotia Economics on Christmas Eve showed Australia topped the world in house price growth in 2010. The Australian Government has yet to make any attempt to cool its frothing housing market.
» Singapore joins nations curbing house prices – The Sydney Morning Herald, 14th January 2011.
Posted in Australian economy, Australian Housing | 1 Comment »
Labour force figures released today by the Australian Bureau of Statistics (ABS) show “official” unemployment fell 0.2 percent points in December to hit a two year low of just 5.0 percent.
Despite the jobless numbers falling 25,400 to 598,700, the biggest factor contributing to the fall in the unemployment rate was the fall in the number of people looking for work. The participation rate fell 0.2 percent to 65.8 percent.
Despite full time positions increasing 1,700 places and part time positions increasing 600 places, there were falls in the aggregate number of hours worked across the country, decreasing 3.4 million hours to 1,599 million hours worked.
But if you ask any social or volunteer worker on the streets, not all is as rosy as the figures suggest. The Salvation Army says at least 80,000 Australians needed their help for the first time last year. According to a report from the Salvo’s, two million Australians now live in poverty, or 1 in 10 Australians. 50 percent of Australia’s low income households have reported experiencing cash flow problems with a quarter of them needing to increase credit card debt, exhaust savings or borrow money from Friends and Family.
This is the emerging group of people titled the working poor. These are people who would like more work, but have been unable to find it. With housing and living costs increasing faster than wage inflation, thanks to our housing bubble and sky-rocking household debt levels, this group of people are finding it harder and harder to make ends meet. Many need multiple jobs to keep up with the pace of the living.
The definition of employed persons for the purposes of the official ABS statistics includes persons who worked without pay for more than 1 hour per week in a family business or on a farm – certainly not sufficient to live off.
Private gauges of “true” unemployment in Australia paint a much bleaker picture. According to Roy Morgan Research, unemployment jumped in December 2010 by 0.8 percent points to 7.7 percent. They believe there are 903,000 Australian’s out of work. Underemployment – people who have a job, but is looking for more work or hours is up 2 percent to 8.8 percent. Roy Morgan’s figures indicate over 1 million Australians are underemployed. In total, last month, 1.93 million or 16.5% of Australians are either unemployed or underemployed.
» 6202.0 – Labour Force, Australia, Dec 2010 – The Australian Bureau of Statistics, 13th January 2011.
» As school leavers hit the job market December unemployment jumps 88,000 to 903,000 (7.7%, up 0.8%) & Underemployment is up 216,000 to 1,028,000 (8.8%, up 2.0%) Now 1.93 million (16.5%) Australians are Unemployed or Underemployed – Roy Morgan, 10th January 2011.
» Perceptions of Poverty – The Salvation Army, 18th October 2010.
Posted in Australian economy, Australian Housing | 13 Comments »
According to the Zillow Home Value Index, the current housing crisis in the U.S. has surpassed that of the 25.9% decline observed during the Great Depression. The Index recorded a fall of 25.9% between 1928 and 1933. Since the peak of the U.S. bubble in June 2006, prices have now fallen 26%, with falls expected to continue for some time.
The November fall is the 53rd consecutive month of falling home prices. Prices have now been falling for 4 and a half years.
» Housing Market Slips Into Depression Territory – CNBC, 11th January 2011.
» Home Value Declines Surpass Those of Great Depression Zillow Blog, 11th January 2011.
Posted in US economy | Comments Off
According to data from SQM Research the number of property listings surged 44 percent in 2010 suggesting the Australian property market is set to take a slide in fortunes this year.
SQM Research MD, Louis Christopher said “It’s still very clear to us that they are now at levels that would suggest a downturn in the housing market, although the stock levels have fallen seasonally. The overall number is up now by 44% across the nation.”
With 328,270 residential property listings in December, it is hard to find any evidence to support claims that a housing shortage will put a floor under Australia’s grossly inflated market.
Across the country, Brisbane recorded increased listings of 59.4% for the year, Darwin 57.3%, Perth 54.8%, Canberra 46.5%, Melbourne 42.7%, Adelaide 39.6%, Hobart 24.6% and Sydney 22.6%.
Melbourne has the biggest oversupply of properties with 24,884 houses and 8,981 units for sale.
» 44% jump in property listings points to price falls in 2011: Expert – Smart Company, 10th January 2011.
This is an extract from an article we published on March 19th 2010 :
The Housing Industry Association (HIA) has this week released a report showing Australia’s housing “shortage” will quadruple if we don’t act now and increase the number of homes being constructed.
The group has called for another 466,000 homes to be built by 2020, with the “shortage” currently at 109,000 homes. The report shows Australia’s population is likely to grow to 36 million by 2050, further straining affordability.
A severe housing shortage in Australia is said to put a floor under house prices, and used by the industry to dismiss any notion there is a housing bubble in Australia.
On the 9th February 2006 a similar article was ran in California :
The California Building Industry Association (CBIA) continues to express alarm over what it calls an ongoing housing crisis in Southern California.
Alan Nevin, the association’s chief economist, projected in a 2006 CBIA Housing Forecast that only 185,000 to 205,000 building permits will be granted this year, far short of the 240,000 new homes needed each year.
Southern California has been experiencing a massive population boom in recent years and it’s believed that 6 million new residents will be living in the region by 2020. The population increase, coupled with the housing shortage, has the CBIA worried that it will be increasingly difficult for first-time homebuyers to find a moderately priced unit.
“Los Angeles and Ventura counties are suffering from a housing crisis,” said Holly Schroeder, chief executive officer of the Building Industry Association Greater Los Angeles Ventura Chapter. “While we have seen increases in permitting, it still consistently falls far below the needs of our region. We have to find a way to take care of our own and provide housing to those that need it and want it.”
Yet, despite the shortage, this is what happened to Los Angeles’ House prices after the article was published :
Even the U.K. had a shortage of houses prior to their housing crash :
Shortage of homes over next 20 years threatens deepening housing crisis
19 March 2002
Britain is heading for a property shortage of more than a million homes by 2022 unless the current rate of housebuilding is dramatically increased, according to reports from the Joseph Rowntree Foundation (JRF). The evidence, being presented at the Foundation’s Centenary Housing Conference in London, reveals that the supply of housing is already falling behind demand faster than previously recognised.
» Housing shortage to quadruple: HIA – The Sydney Morning Herald, 19th March 2010.
» Construction industry says housing crisis has hit California – February 9, 2006.
» Shortage of homes over next 20 years threatens deepening housing crisis – March 19th, 2002.
Posted in Australian economy, Australian Housing | 12 Comments »
According to the China Daily, China’s Central Government plans to strengthen policy in 2011 designed to cool the property bubble in China. The announcement came a day after China’s Central bank increased the one year benchmark lending rate by 25 basis points to 5.81 percent in a further bid to curb spiraling home prices. The benchmark deposit rate increased to 2.75 percent. On December the 3rd, the central bank said it would adjust monetary policy in 2011 from relatively loose to prudent in a bid to tighten the supply of hot money fueling inflation.
China’s Premier Wen Jiabao acknowledged in an interactive radio broadcast on the 26th December current policies designed to cool the market has not achieved satisfactory results.
“I made a promise to the Chinese people last year that I would try to keep housing prices at a reasonable level during my tenure, and I won’t shrink from that goal,”
“I believe that, through our consistent efforts, housing prices will drop to a reasonable level.”
According to Minister of Housing and Urban-Rural Development Jiang Weixin, the government plans to introduce more favorable policies to assist people who want to purchase a house to live in, while restricting the purchases of homes intended for investment and speculation. In April 2010 the government raised the minimum deposits for families purchasing second homes, and for first home buyers. It also restricted banks from offering mortgages for third homes in some of the larger cities such as Beijing & Shanghai. “These measures have helped contain speculative demand to some extent,” Jiang said, “And this year we will continue to limit mortgage loans for buyers of second and third homes in major cities.”
Many Chinese hold vacant property as a means of investment. Most have never seen house prices fall, and with deposit rates low, speculating on capital gains from housing provides better returns. In August 2010 there were reports that 64.5 million urban electricity meters recorded zero electricity consumption over a 6 month period, and predictions the 64.5 million vacant apartments could home over 200 million people. In survey results published in “Property Monthly” dated the February 10, 2010 by China Reality Research, nearly a fifth of all recently sold properties were kept vacant.
» Govt reveals new-year pledge on housing prices – The China Daily, 1st January 2011.
Posted in China Housing | 8 Comments »