The Australian housing bubble furphy

This is interesting
http://www.businessspectator.com.au...-bubble-pd20110317-F24WP?OpenDocument&src=kgb

There has been much discussion over a number of years about whether Australia’s house prices are too high, and indeed whether there is a house price ‘bubble’. This notion is typified by the Economist magazine’s regular update suggesting that Australia’s house prices are up to 50 per cent overvalued against standard naive measures.

Our view is that these metrics are indeed too naive to be useful. Typically they take a measure of housing prices to income or to rents and compare the current level to a 15- or 20-year average. This ignores a large structural adjustment that occurred in the Australian housing market between 1997 and 2003. This transition involved lower interest rates, better-anchored inflation expectations, and increased availability of housing credit. Without some reversal of these structural changes – which is a virtual impossibility – we do not expect Australian housing prices to fall.
 
This transition involved lower interest rates, better-anchored inflation expectations, and increased availability of housing credit.

Don't know about this one right now.

From what I'm seeing and hearing, obtaining finance is not easy ATM unless you are in a strong financial position - always a criteria, but moreso than two years ago.
 
Don't know about this one right now.

From what I'm seeing and hearing, obtaining finance is not easy ATM unless you are in a strong financial position - always a criteria, but moreso than two years ago.

Mark

Lending criteria have certainly tightened up but money is stil easily obtainable we just need to show that we can service the loan
 
we do not expect Australian housing prices to fall.
They are already falling.

We view the risk of a sharp fall in housing prices as very low.
Well I would agree with this, I think a more likely correction will play out at around -5% per year for several then a long period of stagnation.
 
Well I would agree with this, I think a more likely correction will play out at around -5% per year for several then a long period of stagnation.
Ms Hobo-Jo

You're ignoring the existing housing shortage and our population increase. I think that people will continue to buy property because it is a necessity.

Ok we might not see double digit growth for a while but growth will come due to inflation and population growth and especially in affordable suburbs.

I also believe that like the stock market there will be small up and down movement of the median price but I'm confident that property is a sound long term investment.
 
I agree. There is only a housing shortage in ares or suburbs that are very much in demand. And their prices reflect that. Say, like Balmain in Sydney.

Beside that,where's the shortage.


As far as population increase, mostly immigration. Immigrants arent spread out equally creating demand for housing. They pretty much cluster together and there numbers (net migration - emigration) are pretty low anyway.

I read somewhere recently that last year was a record number of people leaving Australia impermanently, creating relatively low population growth through immigration.

Dont believe the hype.

Bah! Humbug! In most major cities the 'housing shortage' is mere propaganda.
 
What I've found particularly interesting to note - and it is undeniably a good thing - is that Australian's have discovered saving again. Whether this translates further to a sensible approach to debt is another thing but the increase in offset account balances and additional repayments has been significant.

One implication, under estimated in my view, is that a new conservatism amongst owner occupiers (the group largely doing the saving) may well have an impact on borrowing appetite and price pressures. Combined with lenders continuing to narrow and redefine their funnel in terms of acceptable borrowers makes for interesting times ahead.

As an aside, the arrears performance gap between investors and OOs continues to widen, which has implications itself.
 
The sentence you point to uses the word "increased" availability of credit. Its clear that credit has eased or else why would NAB bother going on such a marketing campaign for loans etc? I doubt they are waiting for you to come to their branch only to decline you. Its clear finance\credit has eased up a bit.

However if your arguing credit is still not as easy as it was a few years back then ofcourse its not.

Don't know about this one right now.

From what I'm seeing and hearing, obtaining finance is not easy ATM unless you are in a strong financial position - always a criteria, but moreso than two years ago.
 
I have said this before and I will say it again your understanding of shortage of housing stock is wrong and hence why you feel its propaganda.

There is a shortage of stock that people can afford. They cannot afford the stock available because of the high asking prices which is a direct result of excess demand over supply which keeps prices up. E.g. people who want to live in Balmain for $400k 3 bedroom + parking simply cannot, so they move further and further and further outwest. When they find themselves past doonside and realise it takes 2 hours to get to work they settle on, renting, sharing accomodation or simply staying longer at their parents home before they choose to move out.

There is restrictions on development, land supply, infrastructure which prevents an increase in stock (supply) to lower prices and thus increase the base of people buying.

A nice neat example. Imagine they allowed 3000 new units to be built in Balmain as you pointed too. What do you think will happen? They wont sell?? they will all sell in a day because that amount of new stock would probably push prices down in the $400k mark and be absorbed easily into the market. But how??? If there was no such thing as a housing shortage were are these people coming from? Who is buying their properties they are vacating to move to balmain?

Seriously!

People cannot afford so they rent and hence why there is such a tight rental market pretty much everywhere.

Seriously evand, its simple but keep thinking HIA, MBA, UDIA, RPDATA, residex, ABS, pretty much everysingle economist that went to a university aside from western sydney agree there is a housing shortage. The only problem is your lack of understanding of the term shortage, you go to realestate.com.au and see houses for sale you think "what shortage".

There are more people "sharing accomodation", more people staying longer at home etc etc all these people WOULD buy but cant because of what I outlined above a shortage of stock!

I know you are shaking your head and will disagree but its simple economics.



I agree. There is only a housing shortage in ares or suburbs that are very much in demand. And their prices reflect that. Say, like Balmain in Sydney.

Beside that,where's the shortage.


As far as population increase, mostly immigration. Immigrants arent spread out equally creating demand for housing. They pretty much cluster together and there numbers (net migration - emigration) are pretty low anyway.

I read somewhere recently that last year was a record number of people leaving Australia impermanently, creating relatively low population growth through immigration.

Dont believe the hype.
 
Its clear that credit has eased or else why would NAB bother going on such a marketing campaign for loans etc? I doubt they are waiting for you to come to their branch only to decline you. Its clear finance\credit has eased up a bit.

Maybe they were one of the tighest Banks during and after the GFC, lost some market share and now are trying to get some back?

They're still not gunna lend you money if you are marginal, and I think this is one of the goal past changes across the board that noone knows about - the banks' version of a "marginal" mortgagee has included the level 3's and from what I've heard even the level 4's.

The brokers here might be able to comment more accurately on what the climate currently is?...

My MB, when we last spoke about a month ago, was saying he is busy with enquiry, but not good news on conversions as a percentage compared to a couple of years ago or so.
 
There is a shortage of stock that people can afford. They cannot afford the stock available because of the high asking prices which is a direct result of excess demand over supply which keeps prices up.

We have a 2x1 bedroom unit with SLOG, courtyard, separate toilet, in a quiet court in Central Frankston, near Myers and the train station, near the Monash Freeway entrance, near the hospital and the TAFE.

We need to sell it, and have been told by the agents it is worth $270k.

In 6 weeks of selling campaign; not one offer - not even a low one.

The agent even said DON'T DROP THE PRICE!! :eek: because there is no point doing so - the market is pretty flat. He hasn't been able to make a sale this month. In a place like Frankston; this is unheard of.

We would take $250k if the settlement was short.

Now, if this is unaffordable in today's world, I'll go he.

aah! but it's not a brand new 3x2 house with DLUG, within 5km's of the CBD. Damn; that'd be the problem :rolleyes:.
 
aah! but it's not a brand new 3x2 house with DLUG, within 5km's of the CBD. Damn; that'd be the problem :rolleyes:.

Hi Bayview,

Would it be possible to hold off on the sale until the market improves? Is it true that a FHB incentive/grant kicks in, in Victoria in July? An agent in my local area told me this - but I am not sure? He thinks that there will be increased pressure on prices in the lower end of the market when this occurs.

All the best with it.


Regards Jason.
 
I still disagree and i do understand the situation. Regardless of your efforts to say otherwise.

The point is:

The same people who would live in Balmain are not the same people that would live in Doonside, regardless of affordibilty.

There is only a 'housing shortage' in areas/suburbs where demand exceeds supply. and that is evidenced by relatively high prices. Therefore, the 'shortage' exists in only a very few areas of Australia.

People who say a shortage of supply will drive up prices as a blanket statement are wishful thinkers at best and deluded at worse.

Its that simple.


And as for your theoretical example. They will sell, because yes there is demand. But only in Balmain.

Also, if the under supply of property spills over to a higher demand for rentals, then why aren't rents constantly rising everywhere in line with the so called high demand for housing caused by an 'undersupply'? They arent. Its a myth with no basis in fact.


I have said this before and I will say it again your understanding of shortage of housing stock is wrong and hence why you feel its propaganda.

There is a shortage of stock that people can afford. They cannot afford the stock available because of the high asking prices which is a direct result of excess demand over supply which keeps prices up. E.g. people who want to live in Balmain for $400k 3 bedroom + parking simply cannot, so they move further and further and further outwest. When they find themselves past doonside and realise it takes 2 hours to get to work they settle on, renting, sharing accomodation or simply staying longer at their parents home before they choose to move out.

There is restrictions on development, land supply, infrastructure which prevents an increase in stock (supply) to lower prices and thus increase the base of people buying.

A nice neat example. Imagine they allowed 3000 new units to be built in Balmain as you pointed too. What do you think will happen? They wont sell?? they will all sell in a day because that amount of new stock would probably push prices down in the $400k mark and be absorbed easily into the market. But how??? If there was no such thing as a housing shortage were are these people coming from? Who is buying their properties they are vacating to move to balmain?

Seriously!

People cannot afford so they rent and hence why there is such a tight rental market pretty much everywhere.

Seriously evand, its simple but keep thinking HIA, MBA, UDIA, RPDATA, residex, ABS, pretty much everysingle economist that went to a university aside from western sydney agree there is a housing shortage. The only problem is your lack of understanding of the term shortage, you go to realestate.com.au and see houses for sale you think "what shortage".

There are more people "sharing accomodation", more people staying longer at home etc etc all these people WOULD buy but cant because of what I outlined above a shortage of stock!

I know you are shaking your head and will disagree but its simple economics.
 
? ummm anecdotal evidence is useless... I have examples showing sold the same day they appeared on the market does that prove you wrong? No it doesnt it proves absolutely nothing just like your example.

We have a 2x1 bedroom unit with SLOG, courtyard, separate toilet, in a quiet court in Central Frankston, near Myers and the train station, near the Monash Freeway entrance, near the hospital and the TAFE.

We need to sell it, and have been told by the agents it is worth $270k.

In 6 weeks of selling campaign; not one offer - not even a low one.

The agent even said DON'T DROP THE PRICE!! :eek: because there is no point doing so - the market is pretty flat. He hasn't been able to make a sale this month. In a place like Frankston; this is unheard of.

We would take $250k if the settlement was short.

Now, if this is unaffordable in today's world, I'll go he.

aah! but it's not a brand new 3x2 house with DLUG, within 5km's of the CBD. Damn; that'd be the problem :rolleyes:.
 
There is only a 'housing shortage' in areas/suburbs where demand exceeds supply. and that is evidenced by relatively high prices. Therefore, the 'shortage' exists in only a very few areas of Australia.
It depends on how you look at shortage.
For me shortage is evident by the limited supply which keeps house prices above average.
Or from the 15 or more rental applications I receive everytime a propery becomes vacant.
There are too many people trying to get a rental because they can't afford to buy or are not ready to buy.
 
Its not the limited supply that causes house prices to be above average. Its easy credit, govt stimulus, low int rates, etc etc...... there are many factors driving demand, much more relevant than 'under supply'

It depends on how you look at shortage.
For me shortage is evident by the limited supply which keeps house prices above average.
Or from the 15 or more rental applications I receive everytime a propery becomes vacant.
There are too many people trying to get a rental because they can't afford to buy or are not ready to buy.
 
Evand I am sorry but you fail to understand the simple mechanics of Demand & Supply, Equilibrium Price and what shortage actually means.

Economics removes specific examples like "Balmain" and tries to apply a rule\concept to all. In this case the concept being misunderstood by you is specifically D&S.

The reason the "same people" that live in Doonside are not the same as in Balmain is people in Doonside are of a lesser wealth and simply cannot afford to live in Balmain. Once upon a time Balmain was a working village these people slowly got pushed out (gentrification) as "DEMMAND" increased due to its favourable location. Supply was constrained as there wasnt new development and hence "SUPPLY" was limited.

This led to prices increasing and people who once lived there or wishing to live there having to move further out not by choice but by force due to the equilibrium price being much higher as a result of demand and supply.

Now apply this to the State! people are being forced to live in smaller, further out properties or have to find alternate arrangements like renting, staying longer at home or group accomodation.

This is because there is a SHORTAGE IN SUPPLY! as "DEMMAND" is pushing prices up to the point were a large chunk of the population simply cannot afford. Any drop in price for ANY reason these people will act as a floor to prices much in the same way wage constraints are keeping a roof on prices.

I am sorry evand this is not even opinion its fact. Those who claim there is plently of supply simply dont understand how D&S works, plain and simple.

What should be occuring is a slow ramp up in stock via, land release, higher density living and infrastructure improvements. This will increase "SUPPLY!" and lower price until a new more efficient equilibrium price is found but one at a point where more people are living in accomodation.

Anyways I am off to my HIA\UIDA conspiracy meeting.. ciao.

The same people who would live in Balmain are not the same people that would live in Doonside, regardless of affordibilty.
 
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