Latest Residex Report - Housing markets move solidly into positive territory

[Shadow]

Residex Report May 2009 - Housing markets move solidly into positive territory

Latest Residex Report. Most areas performing very strongly, especially Sydney houses.

This is just another indication that the housing market has turned around. The RPData and APM statistics are also showing positive growth. Clearance rates remain strong, housing finance commitments continue to rise (especially investor finance) and consumer sentiment is building.

Link to full report with charts and tables...

http://www.residex.com.au/newsletter/source2009_06aMC.html

At last we can report that our housing markets have moved more solidly into positive territory.

Winter is usually one of the slower periods but improved affordability coupled with the First Home Owners Grant has seen auction clearance rates reach around the mid 60% across Australia and there is good asset growth in all but the top end of the market.

.....

So overall, in my view, the market will complete its turnaround like the whale.

 

[boz]

wouldn't read residex without some data: there is some good information and charts on businesspectator from RP data Rismark and thanks to Chris Joye

 

[Shadow]

wouldn't read residex without some data: there is some good information and charts on businesspectator from RP data Rismark and thanks to Chris Joye

Hi Boz, the data is included with the Residex report. As I said in my first post, follow the link for charts and tables. I assume that's what you're after?

 

[yieldmatters]

Latest Residex Report. Most areas performing very strongly, especially Sydney houses.

How do I read it? I must be reading it incorrectly. Doesn't it say Sydney median houses since June 30 2008 have moved by 0.06%. Is that right? Didn't you say Sydney houses are performing strongly? Or were you being sarcastic?

The miserable yields and the comments afterwards (under "Affordability") were interesting as well. I suppose I can quote a little of it as long as I don't copy and paste the whole thing.

The basic unaffordable nature of many markets will hold back growth in the next few years but during this time rentals are going to increase as the young move back to rental as the alternative to home ownership. How can they not simply recognise the benefit (lower living cost) from rental versus ownership when housing becomes as unaffordable as it is and the differential is so significant?

 

[craigb]

it seems to have slowed abit the last weeks though???

 

[Aaron Sice]

yeah it's a L plater clutch start. whole lotta motion - real sudden, car's moving...then nothing. engine stalls, we roll a little....

 

[Shadow]

How do I read it? I must be reading it incorrectly. Doesn't it say Sydney median houses since June 30 2008 have moved by 0.06%. Is that right? Didn't you say Sydney houses are performing strongly? Or were you being sarcastic?

Sydney houses up 3% last month and 2.5% over the quarter according to Residex. APM and RPData agree that Sydney prices are up.

I suppose I could do what folks on other forums do (with negative figures) and annualise that to get 10% - 36% growth.

Didn't you say we were having a big crash or something? No sign of a crash in Brisbane yet either. Still confident you made the right decision to sell a few years ago?

The miserable yields and the comments afterwards (under "Affordability") were interesting as well.

Sydney yields are pretty good. Not hard to find cashflow positive opportunities these days.

 

[yieldmatters]

Sydney houses up 3% last month and 2.5% over the quarter according to Residex. APM and RPData agree that Sydney prices are up.

OK - I'm with you. Rubbish CG up until the last few months.

I suppose I could do what folks on other forums do (with negative figures) and annualise that to get 10% - 36% growth.

You could but it would be a meaningless number.

Didn't you say we were having a big crash or something? No sign of a crash in Brisbane yet either. Still confident you made the right decision to sell a few years ago?

Sydney yields are pretty good. Not hard to find cashflow positive opportunities these days.

I should have held on longer - the insanity got government support which kept it going much longer than I thought it would. Famous last words but I think we may actually be there. Remove the FHBG and what is holding it up? Not much. Residex has a very modest 5 year forecast. Why would an investor jump in without any expectation of capital growth? If you look you hard enough you might find genuine C/F+ properties (i.e. after costs yield greater than interest rates) but this is on very low interest rates. Using an estimate of "normal" interest rates (as residex has done) and it's much more of a challenge to find C/F positive.

 

[Shadow]

OK - I'm with you. Rubbish CG up until the last few months.

Rubbish CG for Sydney during 2008 I agree (depending on location).

2005 to 2006 was OK. 2007 was good. 2009 looks like being OK.

As my learned colleague from another forum says, it looks like 2008 was a bit of a 'bear trap' year (no, I'm not him).

Remove the FHBG and what is holding it up? Not much.

- Interest rates falling to record lows.
- Investors need somewhere to park their cash, and are wary of equity markets due to the global stock market crash.
- Very high overseas immigration.
- Trend towards fewer persons per household.
- Already very high current pent-up demand for housing.
- Not enough new houses being built.
- Many properties are now cashflow positive.
- Cheaper to buy than rent in many suburbs.
- Australian median prices are still very low compared to many other countries.
- The falling Australian dollar has made Australian more affordable to foreign investors.
- Rapidly increasing rents encourage investors back to property.
- Banks have agreed to mortgage payment holidays for the unemployed.
- Geographic expansion constraints (Ocean/Mountains/National Park bordering Sydney).
- Resistance to high-density development.
- Prices set to rise after past 6 years of falling prices and stagnation.
- Real prices are 20% below their previous peak level.
- Current Sydney median price is historically low compared to other Australian cities.
- Reversal of the past internal migration trend from NSW to other states.
- Very strong auction clearance rates throughout 2009.
- Stamp duty relief

Residex has a very modest 5 year forecast.

I don't pay much attention to Residex forecasts as they change depending on the direction of the wind. I only really rely on Residex/RPData/ABS etc for historical information, then make up my own mind about the future. Still, if we do get 6%+ per annum for Sydney as Residex predict, then I'll be pretty happy.

 

[boz]

I should have held on longer - the insanity got government support which kept it going much longer than I thought it would. Famous last words but I think we may actually be there. Remove the FHBG and what is holding it up? Not much.

The government with FHBG proved that house market can be artificially propped up, the FHBG is just one way to do it and many other ways can be used after that. The bottom line is that more expensive housing will get and more expensive (taxpayer money) will cost to hold it up. probably the best outcome for long term (economic and political outcome) is to hold price steady untill affordability will get into the long term range as well as long term wage earning, also debt/gdp would need to get into balance (at least not rising anymore).
One thing is for sure that you can't sustain shrinking GDP and rising mortgage debt for long time

 

[yieldmatters]

- Interest rates falling to record lows.
- Investors need somewhere to park their cash, and are wary of equity markets due to the global stock market crash.
- Very high overseas immigration.
- Trend towards fewer persons per household.
- Already very high current pent-up demand for housing.
- Not enough new houses being built.
- Many properties are now cashflow positive.
- Cheaper to buy than rent in many suburbs.
- Australian median prices are still very low compared to many other countries.
- The falling Australian dollar has made Australian more affordable to foreign investors.
- Rapidly increasing rents encourage investors back to property.
- Banks have agreed to mortgage payment holidays for the unemployed.
- Geographic expansion constraints (Ocean/Mountains/National Park bordering Sydney).
- Resistance to high-density development.
- Prices set to rise after past 6 years of falling prices and stagnation.
- Real prices are 20% below their previous peak level.
- Current Sydney median price is historically low compared to other Australian cities.
- Reversal of the past internal migration trend from NSW to other states.
- Very strong auction clearance rates throughout 2009.
- Stamp duty relief

You've really got to stretch your imagination to give yourself comfort. Glad you are comfortable though.

 

[Shadow]

You've really got to stretch your imagination to give yourself comfort. Glad you are comfortable though.

Haha. Yeah, everybody told me last year that I was stretching my imagination when I suggested that the NSW government would introduce new incentives to stimulate demand for property. (I was told by the gloomers that because the NSW government were broke they could not afford any stimulus for the property market). Turns out I was right though...

I was also told by the gloomers that I was stretching my imagination when I stated in February 2008 that Australia would not go into recession that year. Many gloomers thought my idea was so ridiculous that they put my quote in their sigs. But it turned out I was right...

I was also told by the gloomers that I was stretching my imagination when I stated in March 2008 that interest rates had peaked and would be falling by the end of the year. This was deemed so funny that the gloomers copied my quotes into their predictions thread. But then it turned out I was right again...

Then when it was obvious that Australia in fact had not gone into recession and house prices did not crash, the gloomers started making up excuses, such as 'yes, Shadow was right, but for the wrong reasons, the recession and crash should have happened were it not for all the government interference blah blah blah'... when in fact my whole point was that the government and RBA would NOT stand by and let the market crash, and that it was obvious from the beginning that they would slash interest rates and introduce stimulus to avoid recession and ensure the stability of the housing market (while the gloomers were saying 'oh no, interest rates will go UP not down and even if the RBA cuts the banks won't pass it on, and the government are powerless to stop the crash' etc.)

It is good to stretch ones imagination occasionally.

Anyway, the proof is in the pudding YM. House prices are rising.

 

[chilliaa]

Forget it guys,
Yld matters has been looking for reasons NOT to buy ever since he joined this site. The reasons change over time, which just shows inconsistancy in my opinion, but the conclusion is always the same.

 

[boz]

I was also told by the gloomers that I was stretching my imagination when I stated in February 2008 that Australia would not go into recession that year. Many gloomers thought my idea was so ridiculous that they put my quote in their sigs. But it turned out I was right...

That is a bit stretchy, you might be not 100% wrong but for sure you are less then 50% right on that one.
Let's see the GDP growth data:
1st quarter 2009 +0.4%
4th quarter 2008 -0.6%
3rd quarter 2008 +0.1%
2nd quarter 2008 +0.3%
1st quarter 2008 +0.7%.
So, if you add up the last 4 quarters you get a +0.2% that is positive. but what is the forecast for this quarter that ended the 1st of June and will be released in early september? a whoopping -0.6% (source Bill Evans chief economist at westpac) thanks to all the dodgy positive data sqeezed into the 1st quarter, and even after the grant that was paid in the 2nd quarter as well.
Anyhow with a -0.6%, the 4 quarter reading would add up to -0.7% on year to year basic , 1st quarter data will also be revised (pretty sure will be revised down).
EDIT: I forgot to add we have to consider a whoopping 2% population increase that would imply a reducing standard of living with a less then 2% GDP growth, and also that government debt is over 5% of GDP and debt is not taken into account in GDP number.

 

[Shadow]

That is a bit stretchy, you might be not 100% wrong but for sure you are less then 50% right on that one.
Let's see the GDP growth data:
1st quarter 2009 +0.4%
4th quarter 2008 -0.5%
3rd quarter 2008 +0.1%
2nd quarter 2008 +0.3%
1st quarter 2008 +0.6%.
So, if you add up the last 4 quarters you get a +0.3% that is positive. but what is the forecast for this quarter that ended the 1st of June and will be released in early september? a whoopping -0.6% (source Bill Evans chief economist at westpac) thanks to all the dodgy positive data sqeezed into the 1st quarter, and even after the grant that was paid in the 2nd quarter as well.
Anyhow with a -0.6%, the 4 quarter reading would add up to -0.6% on year to year basic , 1st quarter data will also be revised (pretty sure will be revised down).

Doesn't matter. My prediction was for 2008.

It is impossible now for Australia to record any technical recession in 2008.

I didn't say anything about whether we would have a technical recession in 2009. We might.

 

[boz]

Doesn't matter. My prediction was for 2008.

It is impossible now for Australia to record any technical recession in 2008.

I didn't say anything about whether we would have a technical recession in 2009. We might.

OK, you might be technically right.
But you make your forecast in february 2008, so if you measure the growth of the economy in the 12 months starting the following quarter on the 1st of June 2008 till the 31st of may 2009 you'll likely get a -0.7% growth. I don't think you should flag around that you nailed the growth forecast made last year

 

[Shadow]

OK, you might be technically right.
But you make your forecast in february 2008, so if you measure the growth of the economy in the 12 months starting the following quarter on the 1st of June 2008 till the 31st of may 2009 you'll likely get a -0.7% growth. I don't think you should flag around that you nailed the growth forecast made last year

I won't link to it, but my quote is in the predictions thread of your forum (Post #39).

QUOTE (Shadow @ Feb 6 2008, 11:41 PM) *
There won't be a recession in Australia this year... that is just crazy talk. We're not going to suddenly go from booming economy inflation on the rampage, to recession, in 10 months.

Hired Goon tried to do the same as you - i.e. after I was proved right he tried to spin my quote and make excuses about why, although I was right, I was really wrong because I was right for the wrong reason or some such nonsense.

 

[Token Funder]

You need to do some research on the various definitions of recession.

 

[yieldmatters]

You need to do some research on the various definitions of recession.

I second that.

 

[yieldmatters]

Forget it guys,
Yld matters has been looking for reasons NOT to buy ever since he joined this site. The reasons change over time, which just shows inconsistancy in my opinion, but the conclusion is always the same.

When did the reason change? The reason has always been the same. Hence "YieldMatters". Prices relative to rents are ridiculous. Prices relative to incomes are ridiculous. The only thing pushing them up is greater levels of personal debt thrown at housing. This will hit the wall at some point - timing is hard to predict especially when government intervenes. But despite Shadow's fantasies even the government can't hold something up that is fundamentally unsustainable - eventually it will just bring down the government with it.

Same argument for a long time.