House prices are as thick as a brick

House prices are as thick as a brick


The same can be said for many commentators who continue to argue that our macro property markets are, by world standards, massively overpriced. In Australia, overpriced does not equate to  over-populated, with Australia’s population very shortly to reach 22,500,000 population clock ABS with approximately 6,000,000 homes being the macro picture. Tick – tock goes the housing time bomb – “a confluence of building approvals, housing price and population figures are likely to all point in one direction: the failure of housing policy in key markets to keep pace with the nations needs.” So what happened a few days later?

  • New home sales fall 4 months in a row where the number of new homes fell by 2.6 per cent to 6,887 in August, the Housing Industry Association (HIA) said in a statement on Wednesday. The fall followed a 7.1 per cent drop in July and brought about the decline since April to 19.7 per cent. Sales in August were 20.5 per cent below the level recorded a year earlier in August 2009 and at their lowest point since 2008. This data reveals that new home commencements would have risen in only two years out of ten – those being 2002 and 2010. Politicians in Canberra offered no comment – no idea.
  • Immigration plunges – without politics which signals that Australia’s net migration rate has started to nosedive where births comfortably outnumbered net migration over the year – 303,500 babies versus 241,400 migrants. Migration levels in sharp drop as Australia’s population growth has fallen to its slowest rate since 2007. Politicians in Canberra again offered no comment – no idea.



Only when commentators start looking closely at the machinations that drive property markets, will they even begin to understand what drives property prices. Only when one starts to piece the puzzle, does the picture become clearer. In the Sun Herald last Sunday, Louis Christopher from SQM Research wrote “SQM’s vacancy rate series also reveals a tight rental market with only some slack at the very affluent end of the market place. Vacancy rates are at 1.3 per cent and even tighter in Sydney’s west at a dire 0.7 per cent. And from what I can see there are no significant increases in new housing developments in the next two years for the local market.” Christopher went on to say “this is scary stuff and means only one thing for rents. Our forecast is for a Sydney – wide average rise of 5 – 7 per cent a year for at least the next two years. The west could record an even higher growth rate of 8 per cent – plus.” When rents climb, the rental community buy and this coincides with government policy on house construction which, as we all know is dead policy!

27-09-2010 11-08-18 AM

House prices do not inexorably rise another great article by Christopher Joye on Business Spectator “If the Reserve Bank of Australia (RBA) ‘central case’ comes to pass, which would involve a surge in resources investment on the back of China and India’s industrialisation, notwithstanding weak US and European growth, we can expect to see it raise the target cash rate at least four times to 5.5 per cent with an upper bound of 6 per cent. Note that this is an exclusive of any ‘top – ups’ delivered via the banks. When the RBA speaks, listen up as bad news looms for debt – laden households. The share of debt–free households in Australia has plunged to a nine year low, amid signs that people are borrowing heavily to keep pace with rapid growth in house prices forcing more people closer to the edge.

27-09-2010 11-10-12 AM

Barring catastrophe, interest rates likely to be high for many years to come where it will be a safe bet that the official interest rate will rise in 2010 and even more to be expected in 2011. It’s in your own best interest to save before the Reserve forces you because the cost of owning a home (with a mortgage) will go up, given the inflationary impact of the mining boom as RBA’s stride quickens. The mining boom is reflected with labour supply – Western Australia recorded the nation’s highest growth of 2.3 per cent, Queensland 2.2 per cent, Victoria 2 per cent, Northern Territory 1.9 per cent, ACT 1.6 per cent, NSW 1.6 per cent, South Australia 1.3 per cent and Tasmania 0.9 per cent.

27-09-2010 10-59-26 AM

Economy on solid foundations, Wayne Swan despite Labor’s growing labour crisis Fort Fumble keeps addressing international politics whilst ignoring local concerns as ALP urged to embrace growth. Budget deficit of $54.8 billion for 2009/10 is smaller than expected then Access Economics declared Swan’s budget an ‘accident waiting to happen’ given budget surplus in 2012 ‘may be short – lived’. Naturally, Wayne Swan responded Access Economics Budget forecast is pessimistic although he failed to respond to Chris Richardson’s concerns that “Treasury may be right that there is a permanent boom in mining but it would be the first ever recorded in any market.”Australia still the great performer, buoyed by the resources boom although Fort Fumble must cut spending to boost competitiveness given Labor facing storm clouds: International Monetary Fund.

30-09-2010 10-13-19 AM

Next entry on the whiteboard will no doubt be the “Great White Elephant” – Gillard’s NBN. Mexican telco billionaire’s claim that NBN is too expensive backs our case: Tony Abbott then Conroy hits back at Slim: you don’t know what you’re on about. My prediction: Conroy will be smashed over the untried and costed Gillard NBN roll-out – Advantage Turnbull given, Telstra nonchalant on NBN.

Cable equates to “why more” and wireless equates to “why not less”?

Someone should ask Wayne Swan why we are doing plenty of digging, yet no building? The sooner someone explains to him that Australia is not about digging a nation, but rather building a nation,  will we see greater housing affordability – and  that won’t be happening anytime soon.

We need direction to build on – not tax on!

Cheers ^__^

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