Australian Property Buyers Don’t Live On Wall Street

Australian Property Buyers Don’t Live On Wall Street

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Another roller – coaster week on the “shock” market where on Monday it fell to a two year low and then the next day, rallied back by posting the biggest one- day gain in nearly three years. The fear factor is a mover and a shaker although it is most apparent that Australian households are more concerned about their superannuation and not what property prices are doing. Superannuation returns are now worse than in the recession of 1990 – 91. Share market instability takes its toll on super research company SuperRatings announced this week that the decline means the average super fund balance is down 3.1 per cent this financial year, or about $3000 for every $100,000 savings. Australia’s superannuation industry is valued at $1.3 trillion, our housing industry sits at $2 trillion and our mortgage market is valued at $1.1 trillion.

Take Europe and the United States out of our stock market woes and we find another problem – funds face shrinking universe due to takeovers. The Australian equity markets are thinning and we are experiencing static initial public offer (IPO) markets where supply has reduced significantly with very few new industrial stocks. Donald Williams of Platypus Asset Management said “one of the things that refreshes the pipeline for fund managers and investors generally is a good IPO market and that has been stuffed for five years.” The top 20 stocks today account for more than half the market capitalisation in Australia which is heavily weighted to resources, financials and the big insurers.

Given that the IPO markets remain in the doldrums there is a very strong argument that investor attention will in all probability head back into the real estate markets. A strong argument was presented this week in Property ObserverWhy DIY super funds shouldn’t snub residential property.

BUY PRINT

Tim captured this shot earlier in the week – he phoned me from the helipad and asked what shot I wanted to which I responded ‘something different and special’. The man is a genius in the air!

Call me a masochist, just that I love reading predictions that suggest Australia is in a housing bubble. If you want a big read over the long weekend I recommend Bubbling Over: The End of Australia’s $2 Trillion Housing Party by Philip Soos, a researcher at Deakin University’s School of International & Political Studies. Soos writes: “This .com bubble was followed by an US$8 trillion housing bubble, which saw an 86% run – up in housing prices between 1996 and 2006, climaxing with a spectacular crash that nearly brought down the entire banking and financial system in the US. In Australia, our $2 trillion housing bubble has seen prices rise by 127% from 1996 – 2010, and every fundamental indicator is off the chart.” What he does not say is that in the US the banks have no recourse against the housing defaulter where in Australia our banks bankrupt you – a huge difference!

Suburbs in ‘ring of fire’ feeling the heat – The struggling areas of Sydney are the outer regions where most of those with mortgages are on lower than median incomes. That they are suffering the most should not surprise anyone, but what is intriguing is that the underlying values of homes in some of those areas has actually risen. Seven reasons households are well placed to deal with mortgage stress: RBA another pertinent point is that households saving like its 1985. The Reserve Bank of Australia is under increasing pressure to start cutting rates AMP chief economist Dr Shane Oliver says cut rates or we will crash too.

Australian banks better positioned to overcome global shocks, says Reserve Bank although mortgage pain intensifies as Queensland, WA show most stress. Of Australia’s 65 regions, 11 are performing “very poorly”, with NSW making up more than half. South Australia is the best performing state, with all of its regions performing “satisfactorily”. Delinquencies (borrowers who are 30 days behind) account for $117.6 billion of mortgages, or about 10 per cent of Australia’s $1.1 trillion mortgage market. Australia’s population reaches 22.5m at the end of March this year which was a 1.4 per cent increase over the year – this in itself drives our property markets.

Source: Property Observer

Sydney now has 14 super – prestige suburbs and 106 above the $1 million median so if you are going to cherry pick where you should live, the above list provides the best indicator. Out of interest it should also be noted that Mosman has one of the smallest delinquency rates in Australia.

Well it’s tax summit  time next week so I filed this story on Property Observer Tax summit is much ado about nothing. Quite a few are getting fired up with HIA demands tax relief for new housing ahead of tax summit. Just like the Henry Review everything Fort Fumble attempts ends up in its weighty, too hard basket.

I’m fast developing a fascination each week when I extrapolate the weekly house/apartment numbers so I was not surprised to see this week that in Mosman, the vendors are winning the battle. Historically, low volumes can have a habit of greatly assisting the weekly results. The apartment market is on fire given the recent announcement that in NSW the First Home Buyers Grant changes on December 31, 2011 where only those buying new homes will qualify for the grant.

    MOSMAN – 2088

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    • Number of houses on the market last week – 116
    • Number of houses on the market this week – 106
    • Number of apartments on the market last week – 86
    • Number of apartments on the market this week – 83

    CREMORNE – 2090

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    • Number of houses on the market last week – 16
    • Number of houses on the market this week – 15
    • Number of apartments on the market last week – 33
    • Number of apartments on the market this week – 36

    NEUTRAL BAY – 2089

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    • Number of houses on the market last week – 13
    • Number of houses on the market this week – 16
    • Number of apartments on the market last week – 78
    • Number of apartments on the market this week – 76

For this week’s sales in Mosman real estate, Beauty Point real estate, Clifton Gardens real estate, Balmoral real estate, Cremorne real estate, Cremorne Point real estate, Neutral Bay real estate, Cammeray real estate Click Here

Another fascinating week of sales which is even more surprising when we are in the first week of school holidays. Our demographic property markets are well placed just that Europe and the US financial turmoil is distracting attention. Based on past data, our housing numbers should be around the 200 mark – next week it may very well fall below 100 again.

That would be another clue! There is no Wall Street in Mosman either.

Steve and Rich, (both parochial Manly fans) demanded that I send a Grand Final heads – up to their beloved team so – Go Manly!

Cheers ^__^

5 Responses to “Australian Property Buyers Don’t Live On Wall Street”

  • Ann says:

    Interesting Robert, with IPO markets in the doldrums, whether that will shake the tree of bankers, lawyers and down the line.

  • Gordon says:

    Your point about non-recourse housing loans in the US is spot on, Robert.

    Previous Democratic administrations did two incredibly stupid things in their so-called social justice programs. They mandated that lenders had to make a specified proportion of housing loans to ‘underprivileged’ people, and they legislated to make housing loans non-recourse.

    So what happened? Three things:
    People with no hope of making repayments were given loans to meet the quota.
    When they failed to make payments, they stayed in the houses until the banks could evict them; because the loans were non-recourse the banks were unable to seek any further payment.
    And the masters of the universe on Wall St securitised large parcels of these sub-prime loans into CDOs, which they used their (then) reputations to widely market to unsuspecting investors.

    Result – the US housing bubble caused by govt policy went bang, and the world slid into the GFC. Somebody should write a book about it (and probably has), but the social welfare lobbies may be unlikely to read it.

  • Terrific edition…. Many will be bitterly disappointed at the lack of political content! 🙂

  • Ann says:

    I guess Steve and Rich will be late to work on Tuesday?

  • Actually – Steve is a Dragon’s supporter and Rich loves the Bunnies leaving me as the proud Manly supporter. I just wanted to see their respective responses when they read the edition! Their respective responses we too funny – so it worked well.

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