Australia Property

[BlueKelah]

Ah default lai liao for downunder apartment glut.

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Scott Morrison eases limits on foreign buyers as apartment glut looms

The federal government has announced it will make it easier for foreigners to buy new apartments amid concerns of a looming glut that will drive down prices.
Treasurer Scott Morrison said the government will make changes to the foreign investment framework to allow foreign buyers to buy an off-the-plan dwelling that another foreign buyer has failed to settle as a new dwelling.
Previously, on-sale of a purchased off the plan apartment was regarded as a second hand sale, which is not open to foreign buyers. Foreign buyers can only buy new dwellings.
The move effectively opens up the pool of buyers who can soak a potential flood of apartments hitting the residential markets due to failed settlements.

"This change addresses industry concerns, and means property developers won't be left in the lurch when a foreign buyer pulls out of an off-the-plan purchase," Mr Morrison said in an announcement.

"It is common sense that an apartment or house that has just been built, or is still under construction and for which the title has never changed hands, is not considered an established dwelling."
Default rate on rise
The policy change comes after Mirvac said it experienced a rise in the default rate for the settlement of off-the-plan residential sales, above its historic average of 1 per cent.
The changes will apply immediately and regulation change will be made soon to enable developers to acquire "New Dwelling Exemption Certificates" for foreign buyers of these recycled off-the-plan homes.

On top of defaults, the Australian apartment markets – which boomed in the last four years – are facing other fresh risks.
On Friday, HSBC said an oversupply of apartments in Melbourne and Brisbane could send unit prices down by as much as 6 per cent in 2017.
The apartment building boom, an ongoing concern for the Reserve Bank of Australia, especially in inner city Melbourne is likely to "start showing through" in price drops of between 2 per cent and 6 per cent in that city next year, HSBC chief economist Paul Bloxham said in a note.
It's a similar story in Brisbane where apartment prices are forecast to fall by as much as 4 per cent.

"A national apartment building boom, which has been part of the rebalancing act, is likely to deliver some oversupply in the Melbourne and Brisbane apartment markets, which is expected to see apartment price falls in these markets," Mr Bloxham said.
"A modest shakeout in the inner-city apartment markets in Brisbane and Melbourne, as we are forecasting, is not expected to have a broad-based impact on the overall housing market or economy."
While apartment prices could fall, there were little expectations of price falls in second hand dwellings and houses as stock levels remain tight.

Read more: http://www.afr.com/real-estate/scott-morrison-eases-limits-on-foreign-buyers-as-apartment-glut-looms

[BlueKelah]

I remember a fellow VB saying he didn't believe property prices would drop in Aus whilst interest rates were going down. Well now they are starting to go up.
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Westpac Banking Corp has joined the ranks of lenders jacking-up interest rates on fixed-rate home loans and investment property loans.
Street Talk understands the bank is raising rates on two, three and five year fixed-rate loans effective November 28. 
The largest increase will hit the five-year fixed rate investment property loan where the interest rate will rise 60 basis points to 4.79 per cent. 
The two and three year fixed rate investment loans go up by 30 basis points, while the same tenure home loans for owner occupiers rise 24 basis points.

The five-year fixed rate home loan interest rate will jump by 54 basis points to 4.59 per cent.

The Australian Financial Review this week reported that some lenders were raising the cost of buying property by up to 60 basis points. That came as the impact of the "Trump effect" took hold and amid growing expectations that central bankers are set to end the era of record low rates ripple through global markets.
ME Bank, which is owned by 29 industry funds, is also raising its variable rates by up to 10 basis points, the first hike in a variable rate in the latest round of increases. Fixed rates are rising by up to 15 basis points.
Other lenders, such as Bank of Sydney, are raising five-year fixed rates by up to 60 basis points. Other big increases on fixed rates include a 20 basis point increase by Bank of Queensland, according to Canstar, which monitors the cost of financial products and services. 

Read more: http://www.afr.com/street-talk/westpac-bank-jacks-up-price-on-fixed-rate-home-loans-investment-loans-20161124-gsx9qn#ixzz4R9rwHj6R 
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[Boon]

How housing market forecasters get it horribly wrong in 2016

Economists, analysts and well-known housing market pundits got things horribly wrong in 2016 – as they did in 2015 – with forecasts that house prices would decline, if not crash, as Big Short Report author Jonathan Tepper predicted.

Instead the housing market – aided by two rate cuts in May and August to a record low of 1.5 per cent, continued strong population growth in Sydney and Melbourne, a historically low number of property listings and ongoing strong demand – proved far more resilient as capital city values rose between 3.5 and 11 per cent, according to various data providers.

Fears that new stamp duty charges and land taxes imposed on foreign buyers in NSW, Queensland and Victoria would reduce demand from this sector and force down price growth did not play out. Instead prices continued to rise in Melbourne, Sydney, Brisbane, Canberra and Hobart.

What actually happened?..............................................................

Why were so many wrong?

According to Mr Christopher, property is "very much a specialist, unique asset class and takes years and years to fully grasp all its intricacies".

"Not just the intricacies of the various leading housing market indicators but the nature of real estate itself in that it is an emotional asset class," he said.

"So price is actually rarely driven by whether the market is overvalued or not. Even after my 20-plus years involvement with it, I'm still learning." 

He said many forecasters got things wrong by overplaying the role foreign investors played in driving up house prices and understating the broader economic factors such as low interest rates, population growth and the imbalance between demand and supply.

Mr Christopher believed foreign buyers had played only a "minor role" in above average capital growth in Sydney and Melbourne and said the new taxes wouldn't have a material impact on another strong housing market in 2017.

http://www.afr.com/real-estate/residenti...223-gth4k2
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[Stocker]

How housing market forecasters get it horribly wrong in 2016

Economists, analysts and well-known housing market pundits got things horribly wrong in 2016 – as they did in 2015 – with forecasts that house prices would decline, if not crash, as Big Short Report author Jonathan Tepper predicted.

Instead the housing market – aided by two rate cuts in May and August to a record low of 1.5 per cent, continued strong population growth in Sydney and Melbourne, a historically low number of property listings and ongoing strong demand – proved far more resilient as capital city values rose between 3.5 and 11 per cent, according to various data providers.

Fears that new stamp duty charges and land taxes imposed on foreign buyers in NSW, Queensland and Victoria would reduce demand from this sector and force down price growth did not play out. Instead prices continued to rise in Melbourne, Sydney, Brisbane, Canberra and Hobart.

What actually happened?..............................................................

Why were so many wrong?

According to Mr Christopher, property is "very much a specialist, unique asset class and takes years and years to fully grasp all its intricacies".

"Not just the intricacies of the various leading housing market indicators but the nature of real estate itself in that it is an emotional asset class," he said.

"So price is actually rarely driven by whether the market is overvalued or not. Even after my 20-plus years involvement with it, I'm still learning." 

He said many forecasters got things wrong by overplaying the role foreign investors played in driving up house prices and understating the broader economic factors such as low interest rates, population growth and the imbalance between demand and supply.

Mr Christopher believed foreign buyers had played only a "minor role" in above average capital growth in Sydney and Melbourne and said the new taxes wouldn't have a material impact on another strong housing market in 2017.

http://www.afr.com/real-estate/residenti...223-gth4k2
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One guy in VB tried very hard to post countless negative news about Aust property must be very disappointed . Anyway good try , he would get it right one day if he continue to repeat the same .

[Boon]

Australia's new five speed property market
03-Jan-2017
by Elizabeth Knight

So remember how 2016 was meant to be the year the housing bubble started to seriously deflate? Well in the major city markets of Sydney and Melbourne little oxygen escaped with dwelling values rising more than 15 per cent and more than 13 per cent respectively.

The love affair with residential property doesn't appear to be over yet.

The yearly gains were boosted by a surge in prices over December after more modest gains in November - an outcome that few had anticipated.

With capital growth of still more than 10 per cent for 2016 calendar across the five biggest capital cities combined it's easy to see why investors demand for residential property remained strong - despite attempts by regulators to limit finance to cool demand and by banks to increase the cost of investor borrowing.

Factoring in gross rental yields and capital gains, CoreLogic calculates that housing as an asset class, earned a total annual return of 14.7 per cent based on the combined capital cities index results.

These returns would have been significantly higher for Sydney (19.2) and Melbourne (17.1). Putting this into perspective the average balanced superannuation fund earned around 7.2 per cent over the same period and the share market was up 7 per cent.

Five-speed market

The figures out paid to the Reserve Bank argument that the property market was experiencing a solid easing over the year and that its interest rate cuts it made during the year would not boost demand for housing......................................................

http://www.smh.com.au/business/the-econo...tl4y0.html
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[ksir]

Hi Boon, I am just curious whether there is any place to search for Australia Property supply/demand reports by City? The main reason of the doom & gloom views are based on oversupplies and not on lack of demands. Hence, it really ticks my curiosity because with the difficulties in even getting any Property Development started (licenses etc), it is hard to imagine there is oversupply in Aussie.

I'd imagine the piled up backlog causing the hike in price.
Not enough supply over the years causing the current increase in price when demands caught up.

It will come a time (could be this year or next 2-5years, my guess as bad as anyone else) when the supply catch up and bubble burst. But when a lot of people in media singing the bubble burst, i don't think it would happen. It will burst when most people no longer think it is possible.

[specuvestor]

I think RBA has kept its repute as a credible central bank in softening the fallout, including enforcing foreign investment restrictions. I don't find people using the word "hot" to describe Aussie properties anymore. The inflexion had been reached even as pundits doubt the impact of foreigners' demand or price benchmarking

Question is whether they think property rising in 2016 is optimal versus a Singapore scenario of a slow decline. From that perspective I think they are still tied to dogma than learn from history. They can do much more on the macro prudential policy front, including removing tax preference for mortgage interest or LTV ratio, with household debt to income reaching 200%

That's neo monetarist speaking. Policy changes can also affect property prices greatly. From a country as small as Singapore to as big as China it can be done. Monetarism works in certain context, but it is not a cure all and end all. To paraphrase Glenn Stevens that is "crazy"

It should be obvious by now that RBA cutting rates is not so much about housing but because the core economy is slowing down, after the initial smoke and mirrors. Propping up property prices from lower interest rates is unintended consequences as they are still stuck in the market deterministic dogma of Greenspan and latter GFC which the world should have learnt a lesson by now. Sometimes dogmas rule over historical evidence and lessons

Three things that could trigger a house price crash: interest rates, unemployment, the dollar

June 4, 2015

Jennifer Duke

Bubble has replaced boom as the major descriptor for Australian house prices in the past week, but those betting on a sudden pop may be disappointed.

On Wednesday, the Organisation for Economic Cooperation and Development joined the chorus of doomsayers, saying Australian property prices were at risk of a "sharp correction".

Earlier in the week Treasury Secretary John Fraser said Sydney and up-market areas of Melbourne were showing unequivocal signs of a bubble.

However, Domain Group senior economist Andrew Wilson is not convinced.

"We have nothing like the pre-conditions for a sharp fall in house prices," he said.

In the current housing market, he said there were only three scenarios that could feasibly trigger a dramatic price drop of 5 to 10 per cent in Sydney and Melbourne – and none of them were particularly likely.

Trigger 1................

http://news.domain.com.au/domain/real-es...hes4d.html

[Boon]

Hi Boon, I am just curious whether there is any place to search for Australia Property supply/demand reports by City? The main reason of the doom & gloom views are based on oversupplies and not on lack of demands. Hence, it really ticks my curiosity because with the difficulties in even getting any Property Development started (licenses etc), it is hard to imagine there is oversupply in Aussie.

I'd imagine the piled up backlog causing the hike in price.
Not enough supply over the years causing the current increase in price when demands caught up.

It will come a time (could be this year or next 2-5years, my guess as bad as anyone else) when the supply catch up and bubble burst. But when a lot of people in media singing the bubble burst, i don't think it would happen. It will burst when most people no longer think it is possible.

Hi ksir,
 
On the supply side of the equation, building approvals numbers are published by ABS (Australia Bureau of Statistics) for the Greater Capital Cities.
 
http://stat.data.abs.gov.au/Index.aspx?D...e=BA_GCCSA
 
Note that “approvals” won’t necessarily become a “completion”.
 
HIA (Housing Industry Association) does publish dwelling starts figures by states.
 
https://hia.com.au/~/media/HIA%20Website...casts.ashx
 
NSW planning department does publish approvals and completions for Greater Sydney
 
http://www.planning.nsw.gov.au/Research-...ney-Region

The demand side of the equation is harder to gauge and
measure … …………………………….
 
NSW planning department does publish “population change” and dwelling completions.
 
There are many other publications by various industry participants (banks, lenders, real estate consultants, brokers, etc), with diversity of views.
 
http://www.smh.com.au/money/does-austral...nxgz2.html
 
According to the above article;
 
“The ANZ Bank recently released an analysis putting the shortage at 250,000 houses nationally.
 
That analysis is challenged in modelling by LF Economics titled, The Australian Phantom Housing Shortage: The Myth in Every Bubble, which estimates a housing oversupply of about 220,000 homes.
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Fitch: Australian housing supply and demand in balance
 
Key Quotes:
“Australia's high house prices and record levels of housing construction have not yet pushed demand and supply out of balance”
“Although housing completions reached a record quarterly high in June 2016, Australian dwellings completed, when compared to population, have remained relatively stable over the recent years”
“Oversupply could result if the increase in home completions outpaces population growth, which could lead to a decline in property prices”
“Property price growth is a key driver of mortgage performance”
 
https://www.fxstreet.com/news/fitch-aust...1611300359
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Undersupply – ANZ’s view
Oversupply – LF Economics’s view
Supply and demand in balance – Fitch’s view

Who is right ?

Notwithstanding the fact that prices could overreact on the upside (and the downside) - when supply catch up with demand (whenever that happened) prices would decline as in the case of Perth market which has been in "correction" phase but not "crash". 
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[ksir]

Hi Boon, I am just curious whether there is any place to search for Australia Property supply/demand reports by City? The main reason of the doom & gloom views are based on oversupplies and not on lack of demands. Hence, it really ticks my curiosity because with the difficulties in even getting any Property Development started (licenses etc), it is hard to imagine there is oversupply in Aussie.

I'd imagine the piled up backlog causing the hike in price.
Not enough supply over the years causing the current increase in price when demands caught up.

It will come a time (could be this year or next 2-5years, my guess as bad as anyone else) when the supply catch up and bubble burst. But when a lot of people in media singing the bubble burst, i don't think it would happen. It will burst when most people no longer think it is possible.

Hi ksir,
 
On the supply side of the equation, building approvals numbers are published by ABS (Australia Bureau of Statistics) for the Greater Capital Cities.
 
http://stat.data.abs.gov.au/Index.aspx?D...e=BA_GCCSA
 
Note that “approvals” won’t necessarily become a “completion”.
 
HIA (Housing Industry Association) does publish dwelling starts figures by states.
 
https://hia.com.au/~/media/HIA%20Website...casts.ashx
 
NSW planning department does publish approvals and completions for Greater Sydney
 
http://www.planning.nsw.gov.au/Research-...ney-Region

The demand side of the equation is harder to gauge and
measure … …………………………….
 
NSW planning department does publish “population change” and dwelling completions.
 
There are many other publications by various industry participants (banks, lenders, real estate consultants, brokers, etc), with diversity of views.
 
http://www.smh.com.au/money/does-austral...nxgz2.html
 
According to the above article;
 
“The ANZ Bank recently released an analysis putting the shortage at 250,000 houses nationally.
 
That analysis is challenged in modelling by LF Economics titled, The Australian Phantom Housing Shortage: The Myth in Every Bubble, which estimates a housing oversupply of about 220,000 homes.
________________________________________
Fitch: Australian housing supply and demand in balance
 
Key Quotes:
“Australia's high house prices and record levels of housing construction have not yet pushed demand and supply out of balance”
“Although housing completions reached a record quarterly high in June 2016, Australian dwellings completed, when compared to population, have remained relatively stable over the recent years”
“Oversupply could result if the increase in home completions outpaces population growth, which could lead to a decline in property prices”
“Property price growth is a key driver of mortgage performance”
 
https://www.fxstreet.com/news/fitch-aust...1611300359
________________________________________
 
Undersupply – ANZ’s view
Oversupply – LF Economics’s view
Supply and demand in balance – Fitch’s view

Who is right ?

Notwithstanding the fact that prices could overreact on the upside (and the downside) - when supply catch up with demand (whenever that happened) prices would decline as in the case of Perth market which has been in "correction" phase but not "crash". 
 _________________________________________________________________________________________

Thanks Boon for the sharing.
I personally do not think the property market is going to crash soon, but the household debt to income is alarmingly high.
Hence I'd say it is bubbly and healthy correction should be the best way forward to slowly let out the winds.

OTOH, commodity engine is restarting and hence it could soon be reaching the euphoria when most people think the crash can not happen and then burst. My guess is as bad any anyone else.

Will work more on the data from the link you have provided.

[Boon]

Big fight for Australian industrial property in 2017
17 Jan 2017
By Matthew Cranston 

The fight to own properties housing Australia's industrial and logistics sector is set to intensify this year as the assets available for sale dwindle just as institutional investors look to expand their ownership...........................

http://www.afr.com/real-estate/big-fight...116-gts7jr
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