http://www.theage.com.au/news/natio...l/2005/07/03/1120329326019.html?oneclick=true
Economist predicts long house prices fall
By Tim Colebatch
Economics Editor
Canberra
July 4, 2005
Australians will see their wealth decline for the first time since the last recession as housing prices fall, investment bank ABN AMRO has warned.
In a new analysis, the Dutch-based bank's chief economist in Australia, Kieran Davies, said house prices had entered a period of decline, which was needed to bring prices back towards their normal relationship to household income.
The housing bubble almost doubled household wealth between 1998 and 2004, creating a "confidence effect" in which consumer spending boomed. As that process goes into reverse, Mr Davies warned, it will damp consumer spending and economic growth.
It could put a significant brake on economic activity, he said. Household spending accounts for 60 per cent of demand in the economy, and in recent years it grew faster than household incomes. Households now spend more than they earn.
"The economy is facing a period where declining household wealth should be a significant and ongoing drag on growth as the massive bubble in house prices slowly deflates," he said.
Economists predict that this week's economic data will show the unemployment rate has risen for the first time in four years.
With surveys reporting fewer job vacancies, a Reuters survey found market economists expect Thursday's figures to show no growth in jobs, with unemployment rising to 5.2 per cent.
Commonwealth Bank chief economist Michael Blythe warned markets not to expect an interest rate cut, as futures markets are suggesting. He said constraints in the economy and the rapid growth in household debt would keep the Reserve Bank inclined to raise rates, most likely in the December quarter.
Some commentators have said house prices are likely to flatten out at their peak rather than fall, but Mr Davies said we were more likely to see "modest outright declines in prices over the next year or so".
"The fundamentals will slowly catch up with prices, and valuations should gradually return to more sustainable levels," he said. "As this happens, declines in real home prices should see declines in real net household wealth."
ABN AMRO's research found that almost two-thirds of Australian household wealth is now in housing, with a market value of $3.2 trillion - almost six times households' annual income. Over the past 45 years, the value of housing has, on average, been just 31/2 times household income, and for much of that period interest rates were as low as now or lower.
While 64 per cent of Australian households' wealth was in real estate, just 6 per cent was in ownership of shares, the bank said. Another 18 per cent was in superannuation, 8 per cent in cash or bank deposits, and 3 per cent in cars and other durables.
http://www.thecouriermail.news.com.au/common/story_page/0,5936,15809472%5E3122,00.html
Rates 'to head south' as buyers head north
James McCullough
04jul05
THE man who held a blowtorch under the belly of the country's major banks in the early 1990s, John Symond, has not lost his ability to make bold predictions and stand up to establishment forms of home lending.
"Don't panic on interest rates – probably this time next year they will be lower than they are now," Mr Symond said in Brisbane at the weekend.
The Aussie Home Loans chief was in Queensland as part of his ambition to form a national network.
On Saturday he opened the group's first two retail outlets in the state at Sunnybank Plaza Shopping Centre and Centro Taigum Shopping Centre – and plans more outlets over the next 12 months. The Aussie Home Loan outlets will offer a one-stop shop, providing a home finance advisory service, a large range of home loans along with customer advice.
The shops will feature private consulting rooms, as well as a great "kidzone" to keep children entertained while their parents get expert help in what is their largest investment in life – their house or apartment.
Mr Symond said Queensland was feeling the effects of a slowing property market, but had not impacted as much as Sydney or NSW.
"The Sydney market really is slowing and southeast Queensland has started to experience a bit of a slowdown but the market is still quite buoyant," he said.
The Aussie chief pointed out Queensland enjoyed the benefit of a net growth in population which is offsetting the property run off, proving a far more resilient market than NSW or Victoria.
He said Queensland had also benefited from NSW vendor taxes, resulting in a number of southern investors putting money into Queensland investment property.
Mr Symond gave the Australian banks a serious jolt in 1992 when he launched Aussie Home Loans, the first major non-bank mortgage originator, but concedes today the country's major banks have cleaned up their acts.
"They have certainly got a lot better and a lot more competitive," Mr Symond said.
Aussie now offers a range of projects, which included bank offerings, leading many to suggest Mr Symond had simply sold out to the banks, something he strongly denies. A breakdown of the Aussie loan book reveals that new lending is growing at about $800 million a month, of which $650 million would go into bank products.
"We do still compete with the banks but we also offer the best of their products but our major competitors remain the big banks because they are still the majority provider of home loans," he said.
"Today I think consumers want choice and trust and people are saying that so we must provide a range of products and services other than just Aussie products."
Economist predicts long house prices fall
By Tim Colebatch
Economics Editor
Canberra
July 4, 2005
Australians will see their wealth decline for the first time since the last recession as housing prices fall, investment bank ABN AMRO has warned.
In a new analysis, the Dutch-based bank's chief economist in Australia, Kieran Davies, said house prices had entered a period of decline, which was needed to bring prices back towards their normal relationship to household income.
The housing bubble almost doubled household wealth between 1998 and 2004, creating a "confidence effect" in which consumer spending boomed. As that process goes into reverse, Mr Davies warned, it will damp consumer spending and economic growth.
It could put a significant brake on economic activity, he said. Household spending accounts for 60 per cent of demand in the economy, and in recent years it grew faster than household incomes. Households now spend more than they earn.
"The economy is facing a period where declining household wealth should be a significant and ongoing drag on growth as the massive bubble in house prices slowly deflates," he said.
Economists predict that this week's economic data will show the unemployment rate has risen for the first time in four years.
With surveys reporting fewer job vacancies, a Reuters survey found market economists expect Thursday's figures to show no growth in jobs, with unemployment rising to 5.2 per cent.
Commonwealth Bank chief economist Michael Blythe warned markets not to expect an interest rate cut, as futures markets are suggesting. He said constraints in the economy and the rapid growth in household debt would keep the Reserve Bank inclined to raise rates, most likely in the December quarter.
Some commentators have said house prices are likely to flatten out at their peak rather than fall, but Mr Davies said we were more likely to see "modest outright declines in prices over the next year or so".
"The fundamentals will slowly catch up with prices, and valuations should gradually return to more sustainable levels," he said. "As this happens, declines in real home prices should see declines in real net household wealth."
ABN AMRO's research found that almost two-thirds of Australian household wealth is now in housing, with a market value of $3.2 trillion - almost six times households' annual income. Over the past 45 years, the value of housing has, on average, been just 31/2 times household income, and for much of that period interest rates were as low as now or lower.
While 64 per cent of Australian households' wealth was in real estate, just 6 per cent was in ownership of shares, the bank said. Another 18 per cent was in superannuation, 8 per cent in cash or bank deposits, and 3 per cent in cars and other durables.
http://www.thecouriermail.news.com.au/common/story_page/0,5936,15809472%5E3122,00.html
Rates 'to head south' as buyers head north
James McCullough
04jul05
THE man who held a blowtorch under the belly of the country's major banks in the early 1990s, John Symond, has not lost his ability to make bold predictions and stand up to establishment forms of home lending.
"Don't panic on interest rates – probably this time next year they will be lower than they are now," Mr Symond said in Brisbane at the weekend.
The Aussie Home Loans chief was in Queensland as part of his ambition to form a national network.
On Saturday he opened the group's first two retail outlets in the state at Sunnybank Plaza Shopping Centre and Centro Taigum Shopping Centre – and plans more outlets over the next 12 months. The Aussie Home Loan outlets will offer a one-stop shop, providing a home finance advisory service, a large range of home loans along with customer advice.
The shops will feature private consulting rooms, as well as a great "kidzone" to keep children entertained while their parents get expert help in what is their largest investment in life – their house or apartment.
Mr Symond said Queensland was feeling the effects of a slowing property market, but had not impacted as much as Sydney or NSW.
"The Sydney market really is slowing and southeast Queensland has started to experience a bit of a slowdown but the market is still quite buoyant," he said.
The Aussie chief pointed out Queensland enjoyed the benefit of a net growth in population which is offsetting the property run off, proving a far more resilient market than NSW or Victoria.
He said Queensland had also benefited from NSW vendor taxes, resulting in a number of southern investors putting money into Queensland investment property.
Mr Symond gave the Australian banks a serious jolt in 1992 when he launched Aussie Home Loans, the first major non-bank mortgage originator, but concedes today the country's major banks have cleaned up their acts.
"They have certainly got a lot better and a lot more competitive," Mr Symond said.
Aussie now offers a range of projects, which included bank offerings, leading many to suggest Mr Symond had simply sold out to the banks, something he strongly denies. A breakdown of the Aussie loan book reveals that new lending is growing at about $800 million a month, of which $650 million would go into bank products.
"We do still compete with the banks but we also offer the best of their products but our major competitors remain the big banks because they are still the majority provider of home loans," he said.
"Today I think consumers want choice and trust and people are saying that so we must provide a range of products and services other than just Aussie products."