Sydney Housing most affordable in 20 years

[MichaelW]

Hi Guys,

Another day, another media article espousing the amazing property market dynamics at present, this one focussing on my favoured little patch Sydney:

Sydney Housing most affordable in 20 years

I know from the statistics that investors are starting to reenter the market and pick up the baton after FHBs scale back. Another article in the Fin Review today shows survey responses from investors who seem to be largely waiting for the grant to end before reentering the market. They had Gen Xers as the major investor group, followed by Gen Ys and then Boomers, but the whole spectrum of would be investors is lining the sidelines at present. That article even made the point that they might be dissappointed given prices are lifting due to FHB interest and will likely stay elevated as this significant group of investors reenter in early calendar 2010.

Here's some snippits from the linked article above:

HOUSING in Sydney is more affordable than it has been for two decades, allowing more people into the market than ever.

Stagnant inflation, low interest rates, rising incomes and soft prices mean that affordability has improved by 40 per cent during the past year.

But stalled developments threaten to ruin the real estate honeymoon as NSW experiences a historic slump in development approvals, according to quarterly data by independent research firm Property Insight.

"If we don't start building more, prices are going to go through the roof," researcher Rob Ellis told The Daily Telegraph yesterday.

If nothing else, this kind of coverage will definately help put a floor under the market in entry level and mid level properties which are favoured by investors. As that filters through to the masses it becomes self fulfilling as more and more people come back to the market given its evident security and espoused potential.

Cheers,
Michael

 

[The Fence]

Even Allan Kohler espoused resi property tonight in his charts.....bear turned bull that one...

Ahh it's good news ahy... To da moon....! LOL

 

[Token Funder]

Given the lowest interest rates in forty years it should be better.

 

[MichaelW]

Given the lowest interest rates in forty years it should be better.

Yeah, I agree. But against the pervasive backdrop of fear driven by the US created GFC, its still pretty good. People are wising up to the differences over here and the 4 pillars, but this isn't any ordinary recession. You were spot on about credit rationing and we're not done yet. It will be a slow property progression this time round, not some bull out of the gate explosive boom.

It will alson be a while before the financial markets return to a semblance of their former selves and in a way I hope they don't. A bit more regulation is not a bad thing.

Cheers,
Michael

 

[Token Funder]

More to come, I imagine.

On a slightly related matter, there's been some legal stuff building discretely over the last 2 years that I believe, if continued, could mean the end of lo doc (as most people understand it) a serious possibility in the foreseeable future.

 

[Propertunity]

there's been some legal stuff building discretely over the last 2 years that I believe, if continued, could mean the end of lo doc ....

TF before the term 'lo doc' was coined, weren't these kinds of loans still done but referred to as 'asset lends' or similar?

 

[topcropper]

Just a trivial point,

but why did the author pick 20 years as his comparison..?? 1989 was hardly a period of affordable housing. House prices had just finished their massive boom after the 87 share crash, almost doubleing in some areas, and interest rates were 14% and would rise to 17% in 1991 and the recession.

I'd think housing would have been very affordable in 1987 before the boom started and everyone was piling into shares, and later in about 1995/96 or there abouts after the recession and prices had been flat for a long period and interest rates had crashed, but 1989..??



OK, I'm being picky, but my point is, if prices are the most affordable for 20 years, then surely they are the most affordable for longer than that since 87 and before was so much cheaper and interest rates lower?


See ya's.

 

[sparky23]

The only thing to kill this recovery will be the banks. I lost a client last week who came with a pre-approval of $850,000 based on a 97% lend. The house they were buying was only $457,950 but by the time they went back to the bank the rules had changed and now they will only lend at 95% leaving them short. They are not FHB and have savings for the required period.

If they have the capability to repay a much larger loan as previously approved are the banks not shooting themselves in the foot?

 

[topcropper]

If they have the capability to repay a much larger loan as previously approved are the banks not shooting themselves in the foot?

I dunno Sparky, I tend to think the tougher stance will be a good thing for all concerned. Crikey, resi property is going so well, it's everything else that is the worry.

What about property developers? They can't get credit to build more houses, thus the house shortage that's only going to get worse. [OK's, youse can all stop the applause now ] Otherwise profitable property trusts can't get funds they need. Companies the same, small business.!!

Credit needs to get to every other part of the economy, otherwise thats where the looming problems will be. Resi property is doing fine as we can all see. We just live in houses, but business generates all the wealth and employs all the people, so that people have money to buy houses. Banks will shoot themselves in the foot if they strangle the rest of the economy.

See ya's.

 

[Token Funder]

TF before the term 'lo doc' was coined, weren't these kinds of loans still done but referred to as 'asset lends' or similar?

The old "solictors loans" were available at terms that would make a loan shark proud.

No Doc is essentially dead.

Lo Doc is sick.

 

[Token Funder]

I dunno Sparky, I tend to think the tougher stance will be a good thing for all concerned. Crikey, resi property is going so well, it's everything else that is the worry.

What about property developers? They can't get credit to build more houses, thus the house shortage that's only going to get worse. [OK's, youse can all stop the applause now ] Otherwise profitable property trusts can't get funds they need. Companies the same, small business.!!

Credit needs to get to every other part of the economy, otherwise thats where the looming problems will be. Resi property is doing fine as we can all see. We just live in houses, but business generates all the wealth and employs all the people, so that people have money to buy houses. Banks will shoot themselves in the foot if they strangle the rest of the economy.

See ya's.

+1.

In spite of all the wailing and gnashing teeth, the major banks in Australia are using their business/corporate books to subsidise their resi mortgage books, as the latter is more (immediately) politically sensitive.

Note, as an example, the noise here and elsewhere over the 10bp CBA move.

To TC's point, it is credit for productive enterprise that is required for a sustainable recovery.

 

[Token Funder]

The only thing to kill this recovery will be the banks. I lost a client last week who came with a pre-approval of $850,000 based on a 97% lend. The house they were buying was only $457,950 but by the time they went back to the bank the rules had changed and now they will only lend at 95% leaving them short. They are not FHB and have savings for the required period.

If they have the capability to repay a much larger loan as previously approved are the banks not shooting themselves in the foot?

A classic example of the the exponential impact to borrowing power of small reductions in LVR.

Tried to make this point a year ago but.....