sackofspuds

Interesting article here - :

While the fall in building approvals was largely anticipated, the sharp fall in New South Wales by 15.5% and Western Australia by 6.4% offset the rise from Victoria up 6.9%; Queensland up 3.2%; South Australia up 9.2% and Tasmania up 29.9%.
...
Further evidence of what effect affordability is having on the market has been the continued strength in building activity in regional Australia in areas such as the Mid-North Coast of New South Wales, Outer Adelaide in SA, Mandurah and Bunbury in WA, Geelong and Ballarat in Victoria and many Far-North Coast towns in Queensland.

Lots on this board seem to be going to WA, QLD and SA. Unfortunately for me, the Southern Adelaide suburbs is where I am probably heading and prices there are still going up; many other places are just unaffordable despite cheap and easy credit.

For my money, I predict a house price crash here and there. The average Australian is more indebted than in just about any other country. The wages in places like Adelaide are shite. The average is $40k at best, probably $35k and family homes in the cheapest suburbs about $300k. How can income to house price ratios of 8 or 9 be sustained?

sackofspuds

Whoops, that article is here

ABCDiamond

Here is an extract from the the Your Mortgage Magazine"
From something that I read recently, and put some figures into another thread, the income to house price ratios are not much different to the figures of about 10 years ago.

Who really knows what will happen though, but we will all find out eventually


This was the other thread, but it was for QLD:
http://britishexpats.com/forum/showthread.php?p=1853078

bondipom

Sydney housing affordability is lower than 1989 which means the market is more susceptible to crash. The low inflation also means the capital base of mortgages is not being eaten into as was the case in 1989 and it will take longer to pay off a loan.

Quarter to september prices in Sydney were down. Loads of units on the market at the moment.

Interest rates are predicted to stay on hold next week however they are expected to rise in the new year. Oil is still at $45 a barrel which has a high interest effect in that it takes money out of the economy.

Badge

I read that a small gain on the oil - eg 50-55 was actually beneficial to Aus as it was a net exporter of oil and a commodity based economy (yadda yadda) but that if prices rose to say, 60+ then this would then become a problem.

BM

bondipom

Good for those that work for oil or in the supply business but not for housing or retail. It certainly keeps the budget surplus but also keeps the dollar higher which is what is blowing out the trade defecit.

Perth does well out of commodity booms.

Steady oil is what Oz needs, especially rural oz which is trying to recover from drought. large parts of the nation are still in drought and agricultural exports are down a few billion.

bondipom

Mr Symonds who owns Aussie Home Loans reckons on a 10% drop in 2005.

ABCDiamond

I was just reading that report myself. http://www.theage.com.au/articles/20...923231645.html

some parts of it here:

The Australian Bureau of Statistics (ABS) today (24/12/04) reported that Australian house prices were down 0.7 per cent in the September quarter - falling for the first time since the third quarter in 2000.

And economists believe that the Reserve Bank of Australia (RBA) will likely put off raising interest rates for quite some time, as it will be content that the housing market is cooling but not collapsing.

On an annual rate established house prices rose 8.2 per cent, the lowest annual increase since the June quarter of 2001.

"I expect that housing values will fall by a further five to ten per cent over the next year," Aussie Home-Loans managing director John Symond said.

"I continue to believe that the Reserve Bank will not increase interest rates for the foreseeable future, especially as there is a stream of mixed data being released on the state of the economy."

In that statement released on November 8, the Australian Property Monitors forecast a fall in the quarter of 5.7 per cent, and the Commonwealth Bank of Australia forecast a 4.8 per cent drop.

National Australia Bank strategist Kristina Jawerth said the RBA would see the data as a continued steady easing of the housing sector.
"The RBA would be content that the housing market is cooling but not collapsing," she said.

The ABS also reported that prices rose in half the states but fell in the larger states, driving the overall decline.

Hobart experienced the biggest fall, of 2.2 per cent in the quarter, followed by a fall of 2.0 per cent in Sydney and 1.6 per cent in Melbourne.
On the annual rates, Brisbane continued to race ahead with prices there rising 20.5 per cent.

And over the year, Sydney increased 5.4 per cent and Melbourne marginally improved 1.8 per cent.

sackofspuds

[QUOTE=ABCDiamond]From something that I read recently, and put some figures into another thread, the income to house price ratios are not much different to the figures of about 10 years ago.
[QUOTE]

That seems to be contradicted here :

A report from the National Centre for Social and Economic Modelling and AMP has revealed Australians are spending more than they earn.
The study finds average household is spending each week is 2.3 per cent more than average income.
A drop in savings has been driven by the home mortgage, which has more than doubled on average over the last 10 years to $205,000.
AMP's Craig Dunn says it makes for a financial tightrope.
He says the average borrower had more of a safety zone 10 years ago when the average mortgage of $91,000 was equivalent to 2.8 years of full-time wages.
Now, the average mortgage of $205,000 is equivalent to 4.2 years of full-time wages. …

sackofspuds

Just to add that this is, of course, the average mortgage, not the average house price which I reckon is far more than 4.2 x average income. The people who will, in my opinion, be in a world of pain are those who have taken out 85% plus LTV (loan to value) mortgages over the last say 5 years. Traditionally in the UK banks would lend 3 x single or 2.5 x joint income. Banks in Oz will lend 3 x joint income which is up to 65% of net income. Sorry, but that can't be sustained in my opinion. Of course, there are plenty taking out more expensive mortgages using "low doc" loans (called self-cert in the UK).

In the absence of galloping wage inflation, these people will get into serious trouble very quickly.

Look at this article from The Age:

In a speech to a Committee for Economic Development of Australia dinner this week, Reserve Bank governor Ian Macfarlane metaphorically grabbed the banks by their shoulders and gave them a good shake for allowing a sales culture to infect their credit policies. …
"Banks seem to regard the bulk of income above subsistence as being available for debt servicing," he concluded, exhorting his audience, as an aside, to check out the "How Much Can I Borrow?" calculators on bank websites.
I did. Looking at three at random - ANZ, Westpac and Suncorp - the average loan size available to a couple earning $50,000 was about $150,000 or 300 per cent of income. Average debt servicing ratio on that was 40 per cent of gross and up to 65 per cent of net income (Suncorp).
The highest debt-servicing ratio possible in this survey of three was from Westpac. A single person on $150,000 could borrow $750,000, which would require 80 per cent of his or her net income to service, or $6179 a month. That leaves $1545 a month, or $386 a week, for bills, pizzas and video rentals (weeklies, not overnighters, they're too expensive).
A day after the governor's speech, as if on cue, NAB launched an aggressive new low-doc product, the first with no interest rate premium (although loans above 60 per cent loan-to-valuation ratio must be insured and no LVR above 80 per cent is accepted). Nevertheless, that means, for the first time, that someone who doesn't provide a group certificate or accountant's letter to substantiate income pays the same interest rate as anyone else. …