Budget aside – just who is watching Australian housing?

Budget aside – just who is watching Australian housing?

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The first Coalition budget was always to going to be a fiasco – should the Coalition significantly reduce the budget deficit this would put the ALP in the untenable position of being seen as incapable of managing the nation’s finances given their past track record. So when it goes to the Senate it will be rejected given the Coalition simply don’t have the numbers to get it through. In the meantime let’s have a look at what I perceive as a major housing affordability issue – actually it’s horrendous.

In a nutshell, the budget forecasts economic growth to be 2.5 per cent in 2014 – 15 and moving to 3.5 per cent in 2017 – 18. Unemployment to sit at 6.25 per cent in 2014 – 15 then falling to 5.75 per cent in 2017 – 18 and inflation sitting around 2.25 per cent in 2014 – 15 rising to 2.5 per cent in 2017 – 18. The big mover is debt which will reduce from $667 billion to $389 billion over the next ten years. All very good but what are the Reserve Bank of Australia’s (RBA) cash rate projections as this is the sleeping elephant in the china shop.

Cue the Australian Bureau of Statistics (ABS) who released this week what many are saying is the real debt crisis in Australia and we should be very afraid about these statistics. Australian household debt at the end of 2013 came in at approximately $1.84 trillion which then calculates out at approximately 180 per cent of disposable household income. Little wonder we are now starting to see household debt slowing – this should come as a major concern. Government debt is currently sitting at around 30 per cent of GDP – Australian household debt today is sitting at around 120 per cent of GDP.

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SYDNEY AERIAL PHOTOGRAPHY

Household debt is today at the highest level for 25 years and when you deduct 25 from 2014 you come up with 1989. Whilst the vast majority may not remember what happened in 1989, I clearly do as I recently wrote about it – Why property bubbles are like the Loch Ness monster. Now to put these statistics into greater context it needs to be remembered that back in 1989 the cash rate was sitting between 17.5 per cent and 19 per cent as against 2.5 per cent today. The cash rate is crucial to the Australian housing industry given once the RBA starts to raise it there will be collateral damage along the way as “some” households will not be able to meet their repayments given our high cost of living. The areas that have been over heated in recent times are a natural example where previously they witnessed dramatic property value corrections.

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So the ABS has released in its March 2014 data that Australia’s total housing stock is estimated currently at $5.1 trillion which equated to a rise of $105,348.0 million over that quarter – with the total number of residences calculated at 9.33 million.

The June housing numbers will make for compelling viewing given so many Australians see their homes as an appreciating ATM that can easily be borrowed against – which is fine so long as homes are in capital appreciation mode. In recent times we have seen areas posting annual capital appreciation of around 30 plus per cent which signals dangerous debt loading.

Historically what we see next is the banks tightening their loan ratios which many would agree is long overdue given their recent ‘lend at all costs’ mandate to increase their respective market shares. We would all remember that as we entered the Global Financial Crisis the first thing expected of the government is to guarantee bank deposits – to stop a run on the banks.

.What is assured is that until household debt starts showing signs of improvement the RBA could well be forced to lower the cash rate further to say 2.00 per cent.

When one takes a moment to seriously consider the economic ramifications we are presently observing in the housing industry it makes a mockery of all the political bickering of what is currently being argued in Canberra.

There is also another significant reason as to why we may see housing debt reduce simply because 25 years ago we did not have a thing called the internet where today in Australia we have approximately 15.4 million internet users.

MOSMAN – 2088

• Number of houses on the market this time 2013 – 109
• Number of houses on the market last week – 92
• Number of houses on the market this week – 102
• Number of apartments on the market this time 2013 – 72
• Number of apartments on the market last week – 61
• Number of apartments on the market this week – 61

CREMORNE – 2090

• Number of houses on the market this time 2013 – 8
• Number of houses on the market last week – 7
• Number of houses on the market this week – 7
• Number of apartments on the market this time 2013 – 20
• Number of apartments on the market last week – 27
• Number of apartments on the market this week – 27

NEUTRAL BAY – 2089

• Number of houses on the market this time 2013 – 11
• Number of houses on the market last week – 6
•Number of houses on the market this week – 7
• Number of apartments on the market this time 2013 – 27
• Number of apartments on the market last week – 51
• Number of apartments on the market this week – 48

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

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For this week’s opens for inspections

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Source: Australian Property Monitors

More surprises with the number of houses in Mosman breaking the 100 mark for the second time in 2014. One month ago the number of houses dropped to 79 although this may also be a sign that the market is slowing too. Homeowners should not be concerned as capital appreciation in Mosman has struggled to reach 10 per cent year in – year out. Although purchasers should be happy as we are seeing clear signs (in houses anyway) that price appreciation is starting to wane.

Cheers ^__^

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