Australia's housing bubble could be the first to burst.
Jun 8th 2004, 2:23 pm
#1
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Thread Starter
Joined: Dec 2003
Location: Rio de Janeiro - Brazil
Posts: 65
Australia's housing bubble could be the first to burst.
Australia's housing bubble could be the first to burst. It won't be the last
SEEKING to cut through the tangle of statistical measures of Britain's housing market, the economics editor of The Economist turned to her hairdresser. Last year, he was convinced that “buy to let� was a sure way to make money. Today, finding it harder to cover his costs with rents, he has decided to sell. A sign that the residential-property boom could soon turn to bust? Maybe. Figures, not just anecdote, also suggest that in Britain and elsewhere, housing markets look ready to fall.
Two years ago, we launched a set of house-price indicators, backdated to 1975, for 13 developed economies. In our latest quarterly update we have added three more countries: New Zealand, Denmark and Switzerland. Our indicators, based on data from estate agents, lenders and official sources, show that house prices are slowing in several economies that had been looking frothy. In America average house prices rose by only 1% in the first quarter of this year, the smallest quarterly increase for six years. Prices fell in 39 of the 220 metropolitan areas covered. Even so, prices were still 7.7% higher than a year before (see table). California saw the biggest gains, with prices up by 18% in Los Angeles. But higher mortgage rates may be starting to bite: new home sales fell by 12% in April, the biggest drop for ten years.
The average house price in Britain, as measured by the Office of the Deputy Prime Minister (ODPM), rose by 7.8% in the year to March, down from an increase of 25% at the end of 2002. The ODPM index weights price changes by the value of homes in different parts of the country and is considered to be a more accurate measure than other indices which currently show prices rising much more rapidly.
Australia's housing market has weakened. According to official data, average house prices kept rising in the first quarter, leaving them 18% higher than a year before. However, figures collected by Australian Property Monitors, which are more timely because they are based on prices when contracts are signed rather than at settlement, suggest that home prices tumbled by an average of 8% in Sydney and by 13% in Melbourne in the first quarter. Anecdotal evidence suggests that the slide has continued since then. Last weekend in Sydney only one-third of properties put up for auction—the most common method of sale in Australia—were sold, signalling that prices have farther to fall.
The drop in house prices in Australian cities undermines a popular argument heard in Britain and America that even if house prices do look frothy, they are unlikely to fall unless there is a big rise in interest rates or a jump in unemployment. Neither has been needed in Australia. Interest rates have risen by only half a percentage point during the past year, to 5.25%—less than half the level during the previous housing downturn in 1990. Meanwhile, unemployment is close to a 20-year low.
Instead, the main reason for the falls in Sydney and Melbourne seems to be that first-time buyers have been priced out of the market, while demand from buy-to-let investors has dried up as net rental yields have fallen below mortgage rates. This holds lessons for Britain, where the number of first-timers has also slumped and buying-to-let is looking less profitable.
However, not all markets are slowing down. House prices in New Zealand surged by 22% in the year to the first quarter, the biggest increase in any of the countries we track. House prices have also risen at double-digit rates in France, Italy, Spain and Ireland in the past year.
House prices have outpaced inflation everywhere in recent years except Germany and Japan, where prices continue to fall. Among our 16 countries, prices are now at record levels in relation to average wages and rents in America, Australia, Britain, Ireland, the Netherlands, New Zealand and Spain. The ratios of prices to incomes exceed their averages in the past 30 years by between 25% and 60%. A return to the long-term average could be brought about either by a fall in house prices or by a rise in wages and rents. The snag is that with wages in most countries increasing by only 3-4% a year, it would take years for inflation to erode real house prices to normal levels.
The chart to the right shows by how much prices would need to fall to get back to their long-term average, assuming that the decline takes place over four years and that wages rise at a pace similar to that in the recent past. House prices would need to fall by 10% in America, by 15% in New Zealand and by 20-30% in the other five countries.
Need prices fall so far? Maybe not: lower real interest rates than in the past would justify an increase in the long-term ratio of house prices to wages and rents, and would therefore require a smaller fall in prices. On the other hand, when past housing booms have turned to bust, prices have typically undershot their average by 10% or more
SEEKING to cut through the tangle of statistical measures of Britain's housing market, the economics editor of The Economist turned to her hairdresser. Last year, he was convinced that “buy to let� was a sure way to make money. Today, finding it harder to cover his costs with rents, he has decided to sell. A sign that the residential-property boom could soon turn to bust? Maybe. Figures, not just anecdote, also suggest that in Britain and elsewhere, housing markets look ready to fall.
Two years ago, we launched a set of house-price indicators, backdated to 1975, for 13 developed economies. In our latest quarterly update we have added three more countries: New Zealand, Denmark and Switzerland. Our indicators, based on data from estate agents, lenders and official sources, show that house prices are slowing in several economies that had been looking frothy. In America average house prices rose by only 1% in the first quarter of this year, the smallest quarterly increase for six years. Prices fell in 39 of the 220 metropolitan areas covered. Even so, prices were still 7.7% higher than a year before (see table). California saw the biggest gains, with prices up by 18% in Los Angeles. But higher mortgage rates may be starting to bite: new home sales fell by 12% in April, the biggest drop for ten years.
The average house price in Britain, as measured by the Office of the Deputy Prime Minister (ODPM), rose by 7.8% in the year to March, down from an increase of 25% at the end of 2002. The ODPM index weights price changes by the value of homes in different parts of the country and is considered to be a more accurate measure than other indices which currently show prices rising much more rapidly.
Australia's housing market has weakened. According to official data, average house prices kept rising in the first quarter, leaving them 18% higher than a year before. However, figures collected by Australian Property Monitors, which are more timely because they are based on prices when contracts are signed rather than at settlement, suggest that home prices tumbled by an average of 8% in Sydney and by 13% in Melbourne in the first quarter. Anecdotal evidence suggests that the slide has continued since then. Last weekend in Sydney only one-third of properties put up for auction—the most common method of sale in Australia—were sold, signalling that prices have farther to fall.
The drop in house prices in Australian cities undermines a popular argument heard in Britain and America that even if house prices do look frothy, they are unlikely to fall unless there is a big rise in interest rates or a jump in unemployment. Neither has been needed in Australia. Interest rates have risen by only half a percentage point during the past year, to 5.25%—less than half the level during the previous housing downturn in 1990. Meanwhile, unemployment is close to a 20-year low.
Instead, the main reason for the falls in Sydney and Melbourne seems to be that first-time buyers have been priced out of the market, while demand from buy-to-let investors has dried up as net rental yields have fallen below mortgage rates. This holds lessons for Britain, where the number of first-timers has also slumped and buying-to-let is looking less profitable.
However, not all markets are slowing down. House prices in New Zealand surged by 22% in the year to the first quarter, the biggest increase in any of the countries we track. House prices have also risen at double-digit rates in France, Italy, Spain and Ireland in the past year.
House prices have outpaced inflation everywhere in recent years except Germany and Japan, where prices continue to fall. Among our 16 countries, prices are now at record levels in relation to average wages and rents in America, Australia, Britain, Ireland, the Netherlands, New Zealand and Spain. The ratios of prices to incomes exceed their averages in the past 30 years by between 25% and 60%. A return to the long-term average could be brought about either by a fall in house prices or by a rise in wages and rents. The snag is that with wages in most countries increasing by only 3-4% a year, it would take years for inflation to erode real house prices to normal levels.
The chart to the right shows by how much prices would need to fall to get back to their long-term average, assuming that the decline takes place over four years and that wages rise at a pace similar to that in the recent past. House prices would need to fall by 10% in America, by 15% in New Zealand and by 20-30% in the other five countries.
Need prices fall so far? Maybe not: lower real interest rates than in the past would justify an increase in the long-term ratio of house prices to wages and rents, and would therefore require a smaller fall in prices. On the other hand, when past housing booms have turned to bust, prices have typically undershot their average by 10% or more
Jun 8th 2004, 7:24 pm
#2
BE Forum Addict
Joined: Nov 2003
Location: Lower Chittering, Perth
Posts: 4,646
sorry, but I got half way through and 
Jun 8th 2004, 7:33 pm
#3
Hello from Brisbane
Joined: Feb 2004
Location: Brisbane
Posts: 326
wake me up later
Jun 9th 2004, 1:45 am
#4
Forum Regular
Joined: May 2004
Posts: 55
Re: Australia's housing bubble could be the first to burst.
If I read carefully the articles in The Age (www.theage.com.au), www.news.com.au, etc.
There are two types of group of peoples that speak.
The first group of people are trying to prevent the missery of thousands of mums and dads that property bubble could hurt them (Ian McFarlane, APM, etc.).
The second group of people are trying to tone down all the above since it hurts their pocket (property agents, real estate developers, etc.).
And it's very funny that those 'mums and dads' do not like the first group's warning either.
Millions lose trillions of dollar during the stock market crash not just in the USA but all over the world. And guess who lost, the 'mums and dads' that ignored warning. Instead of getting out of the market quickly and not to fuel the boom even further, they kept investing until it really burst. And even after it burst, they still hang on to it until they lost everything. And you know what, those rich people are long gone from the market as early as 1996-1997.
Sounds familiar?
There are two types of group of peoples that speak.
The first group of people are trying to prevent the missery of thousands of mums and dads that property bubble could hurt them (Ian McFarlane, APM, etc.).
The second group of people are trying to tone down all the above since it hurts their pocket (property agents, real estate developers, etc.).
And it's very funny that those 'mums and dads' do not like the first group's warning either.
Millions lose trillions of dollar during the stock market crash not just in the USA but all over the world. And guess who lost, the 'mums and dads' that ignored warning. Instead of getting out of the market quickly and not to fuel the boom even further, they kept investing until it really burst. And even after it burst, they still hang on to it until they lost everything. And you know what, those rich people are long gone from the market as early as 1996-1997.
Sounds familiar?
Originally posted by pdohr
Australia's housing bubble could be the first to burst. It won't be the last
SEEKING to cut through the tangle of statistical measures of Britain's housing market, the economics editor of The Economist turned to her hairdresser. Last year, he was convinced that “buy to let� was a sure way to make money. Today, finding it harder to cover his costs with rents, he has decided to sell. A sign that the residential-property boom could soon turn to bust? Maybe. Figures, not just anecdote, also suggest that in Britain and elsewhere, housing markets look ready to fall.
Two years ago, we launched a set of house-price indicators, backdated to 1975, for 13 developed economies. In our latest quarterly update we have added three more countries: New Zealand, Denmark and Switzerland. Our indicators, based on data from estate agents, lenders and official sources, show that house prices are slowing in several economies that had been looking frothy. In America average house prices rose by only 1% in the first quarter of this year, the smallest quarterly increase for six years. Prices fell in 39 of the 220 metropolitan areas covered. Even so, prices were still 7.7% higher than a year before (see table). California saw the biggest gains, with prices up by 18% in Los Angeles. But higher mortgage rates may be starting to bite: new home sales fell by 12% in April, the biggest drop for ten years.
The average house price in Britain, as measured by the Office of the Deputy Prime Minister (ODPM), rose by 7.8% in the year to March, down from an increase of 25% at the end of 2002. The ODPM index weights price changes by the value of homes in different parts of the country and is considered to be a more accurate measure than other indices which currently show prices rising much more rapidly.
Australia's housing market has weakened. According to official data, average house prices kept rising in the first quarter, leaving them 18% higher than a year before. However, figures collected by Australian Property Monitors, which are more timely because they are based on prices when contracts are signed rather than at settlement, suggest that home prices tumbled by an average of 8% in Sydney and by 13% in Melbourne in the first quarter. Anecdotal evidence suggests that the slide has continued since then. Last weekend in Sydney only one-third of properties put up for auction—the most common method of sale in Australia—were sold, signalling that prices have farther to fall.
The drop in house prices in Australian cities undermines a popular argument heard in Britain and America that even if house prices do look frothy, they are unlikely to fall unless there is a big rise in interest rates or a jump in unemployment. Neither has been needed in Australia. Interest rates have risen by only half a percentage point during the past year, to 5.25%—less than half the level during the previous housing downturn in 1990. Meanwhile, unemployment is close to a 20-year low.
Instead, the main reason for the falls in Sydney and Melbourne seems to be that first-time buyers have been priced out of the market, while demand from buy-to-let investors has dried up as net rental yields have fallen below mortgage rates. This holds lessons for Britain, where the number of first-timers has also slumped and buying-to-let is looking less profitable.
However, not all markets are slowing down. House prices in New Zealand surged by 22% in the year to the first quarter, the biggest increase in any of the countries we track. House prices have also risen at double-digit rates in France, Italy, Spain and Ireland in the past year.
House prices have outpaced inflation everywhere in recent years except Germany and Japan, where prices continue to fall. Among our 16 countries, prices are now at record levels in relation to average wages and rents in America, Australia, Britain, Ireland, the Netherlands, New Zealand and Spain. The ratios of prices to incomes exceed their averages in the past 30 years by between 25% and 60%. A return to the long-term average could be brought about either by a fall in house prices or by a rise in wages and rents. The snag is that with wages in most countries increasing by only 3-4% a year, it would take years for inflation to erode real house prices to normal levels.
The chart to the right shows by how much prices would need to fall to get back to their long-term average, assuming that the decline takes place over four years and that wages rise at a pace similar to that in the recent past. House prices would need to fall by 10% in America, by 15% in New Zealand and by 20-30% in the other five countries.
Need prices fall so far? Maybe not: lower real interest rates than in the past would justify an increase in the long-term ratio of house prices to wages and rents, and would therefore require a smaller fall in prices. On the other hand, when past housing booms have turned to bust, prices have typically undershot their average by 10% or more
Australia's housing bubble could be the first to burst. It won't be the last
SEEKING to cut through the tangle of statistical measures of Britain's housing market, the economics editor of The Economist turned to her hairdresser. Last year, he was convinced that “buy to let� was a sure way to make money. Today, finding it harder to cover his costs with rents, he has decided to sell. A sign that the residential-property boom could soon turn to bust? Maybe. Figures, not just anecdote, also suggest that in Britain and elsewhere, housing markets look ready to fall.
Two years ago, we launched a set of house-price indicators, backdated to 1975, for 13 developed economies. In our latest quarterly update we have added three more countries: New Zealand, Denmark and Switzerland. Our indicators, based on data from estate agents, lenders and official sources, show that house prices are slowing in several economies that had been looking frothy. In America average house prices rose by only 1% in the first quarter of this year, the smallest quarterly increase for six years. Prices fell in 39 of the 220 metropolitan areas covered. Even so, prices were still 7.7% higher than a year before (see table). California saw the biggest gains, with prices up by 18% in Los Angeles. But higher mortgage rates may be starting to bite: new home sales fell by 12% in April, the biggest drop for ten years.
The average house price in Britain, as measured by the Office of the Deputy Prime Minister (ODPM), rose by 7.8% in the year to March, down from an increase of 25% at the end of 2002. The ODPM index weights price changes by the value of homes in different parts of the country and is considered to be a more accurate measure than other indices which currently show prices rising much more rapidly.
Australia's housing market has weakened. According to official data, average house prices kept rising in the first quarter, leaving them 18% higher than a year before. However, figures collected by Australian Property Monitors, which are more timely because they are based on prices when contracts are signed rather than at settlement, suggest that home prices tumbled by an average of 8% in Sydney and by 13% in Melbourne in the first quarter. Anecdotal evidence suggests that the slide has continued since then. Last weekend in Sydney only one-third of properties put up for auction—the most common method of sale in Australia—were sold, signalling that prices have farther to fall.
The drop in house prices in Australian cities undermines a popular argument heard in Britain and America that even if house prices do look frothy, they are unlikely to fall unless there is a big rise in interest rates or a jump in unemployment. Neither has been needed in Australia. Interest rates have risen by only half a percentage point during the past year, to 5.25%—less than half the level during the previous housing downturn in 1990. Meanwhile, unemployment is close to a 20-year low.
Instead, the main reason for the falls in Sydney and Melbourne seems to be that first-time buyers have been priced out of the market, while demand from buy-to-let investors has dried up as net rental yields have fallen below mortgage rates. This holds lessons for Britain, where the number of first-timers has also slumped and buying-to-let is looking less profitable.
However, not all markets are slowing down. House prices in New Zealand surged by 22% in the year to the first quarter, the biggest increase in any of the countries we track. House prices have also risen at double-digit rates in France, Italy, Spain and Ireland in the past year.
House prices have outpaced inflation everywhere in recent years except Germany and Japan, where prices continue to fall. Among our 16 countries, prices are now at record levels in relation to average wages and rents in America, Australia, Britain, Ireland, the Netherlands, New Zealand and Spain. The ratios of prices to incomes exceed their averages in the past 30 years by between 25% and 60%. A return to the long-term average could be brought about either by a fall in house prices or by a rise in wages and rents. The snag is that with wages in most countries increasing by only 3-4% a year, it would take years for inflation to erode real house prices to normal levels.
The chart to the right shows by how much prices would need to fall to get back to their long-term average, assuming that the decline takes place over four years and that wages rise at a pace similar to that in the recent past. House prices would need to fall by 10% in America, by 15% in New Zealand and by 20-30% in the other five countries.
Need prices fall so far? Maybe not: lower real interest rates than in the past would justify an increase in the long-term ratio of house prices to wages and rents, and would therefore require a smaller fall in prices. On the other hand, when past housing booms have turned to bust, prices have typically undershot their average by 10% or more
Jun 9th 2004, 2:33 am
#5
Lost in BE Cyberspace
Joined: Apr 2004
Posts: 10,375
Do you blokes sell shares for a living or something?
How about a link to all the super slashed houses please?, weve been househunting for 2 months now, you must know about more bargains than us. People coming to QLD might be in for a quite a shock if they think houses have got cheaper
Just that everytime I look in here there seems to be the same old 2/3 people who dont live here posting the aussie house market has collapsed. But if you read this weeks papers Housing Aucton Clearance rates bounced right back up and Consumer sentiment, those wishing to buy also went right up. Yet another state (QLD) is looking at reducing stamp duty in the budget for homebuyers and nobody thinks interest rates will go much higher.
So come on lets have the link
How about a link to all the super slashed houses please?, weve been househunting for 2 months now, you must know about more bargains than us. People coming to QLD might be in for a quite a shock if they think houses have got cheaper
Just that everytime I look in here there seems to be the same old 2/3 people who dont live here posting the aussie house market has collapsed. But if you read this weeks papers Housing Aucton Clearance rates bounced right back up and Consumer sentiment, those wishing to buy also went right up. Yet another state (QLD) is looking at reducing stamp duty in the budget for homebuyers and nobody thinks interest rates will go much higher.
So come on lets have the link
Last edited by jad n rich; Jun 9th 2004 at 2:53 am.
Jun 9th 2004, 6:16 am
#7
Drunken Aussie
Joined: Jun 2003
Location: Brisvegas
Posts: 1,080
not true. they are just sh*tholes!
Originally posted by ABCDiamond
Looks like no one can find these cheap properties ?
Looks like no one can find these cheap properties ?
