Is the Australian Property market a bubble waiting to burst

Discussion in 'Australia Property' started by Damian George, Nov 22, 2010.

  1. Damian George

    Damian George New Member

    Has the australian property bubble burst?

    With rising rates and buyers looking for bargins the market looks like it is in for a tough ride in 2011

    REAL estate agents have a huge stockpile of unsold properties as potential buyers lose confidence.

    Sales are being hit due to rising interest rates and banks tightening their lending to would-be purchasers.




    Read more: Rising interest rates add to homes stockpile | News.com.au
     
  2. EPI_Den

    EPI_Den New Member

    I don't think the bubble has burst because I'm not so sure there was ever a bubble in the first place. I am aware that there are many sensationalist reports of people such as GMO Capital founder and investment strategist Jeremy Grantham saying that our market is overvalued by in excess of 40%.
    I simply don't agree, and here's why:
    1. We have a shortage of supply in most, if not all, desirable areas.
    2. We expect to have a substantial increase in population.
    3. The Reserve Bank has reported that, contrary to what I have heard in many popular (read "sensational") media reports, that a large portion of property debt is held by those who can MOST afford it.
    This being said, I do believe that the market is softening at the moment but the underlying foundations are still pretty strong. Stacked up against other investment strategies, I still reckon property looks pretty good!
    Cheers,
    Den
     
  3. Damian George

    Damian George New Member

    Hi Den,

    Australian Property prices are based on two things at the moment

    1) overseas investors
    2) commodity prices, driving high share prices and the nations wealth.

    What happens when the party is over, China is overheating, the world is growing closer to finacial melt down, new zealand is getting credit downgrades (Australian banks are massively expossed to this market)

    Think investing - could be time to take a profit and let the dust settle as the next 2 years could see a 10% fall and bargins over the current overinflated prices
     
  4. Felipe

    Felipe New Member

    I don't know much of this game, but I know allot about the mining and oil & gas industry.
    If you rewind the clock to when property went through the roof (2004-2007) this came on after the wave of the resource boom. I have been heavily involved in this industry for 10 years now and I certainly noticed that when plenty of projects are running, everyone is working, everyone has expendable available cash, property starts to rise.
    Simply people are smashing off their loans or buying more or renovating their house, as for the "cashed up bogans' they just buy there plasma's, jetski's and HSV's either way Australia suddenly has a population of people who are high money earners and the price bar is raised accordingly.

    There will be another boom, I would say about 2013 to 2016, I wouldn't be holding my breath
    for the market to go plummeting down because the follow up is on it's way, I am still buying and I am on the forefront of one of these projects and there are another 3-4 major projects
    starting up in the next year or two.
     
  5. Damian George

    Damian George New Member

    Hi Felipe,

    how is the market looking in 2011

    As the australian dollar exchange rate continues to rise those overseas must be thinking of better places to buy in
     
  6. TKline

    TKline New Member

    he so-called shortage is a myth, an illusion dreamed up by the vested interest spruikers. The reality is there are hundreds of thousands of empty houses in Australia and these are being held empty for speculative purposes. What we're seeing now as interest rates rise is stock on the market is soaring as these empty houses begin to flood onto the market. The USA and Ireland thought they had a shortage too. Look how that turned out!

    Here's a list of great blogs on real estate matters. Enjoy!

    Property Room Property or evidence rooms are safe rooms in a police station where important evidence is stored until needed in court.

    Real Estate Australia Australian property is popular with overseas and domestic investors and owner occupiers looking for returns and stability. The Australian housing market has (until now at least) had a track record of price stability. The large crashes experienced in other countries have so far not visited Australia.

    Australia Property Property is an important cultural desire in Australia. Australians have always aspired to the "Great Australian Dream" of owning a freestanding home on a large plot of land. Home ownership is seen as highly desirable. A former Victoria Premier once said, "The home owner feels that he has a stake in the country, and that he has something worth working for, living for, fighting for."

    Whirlpool Forums Whirlpool is an Aussie discussion forum, founded in 98 by Simon Wright. It expanded rapidly and substantially since that date, with over 400,000 members at the present time. The intention of the Whirlpool Forums is to offer a venue for debating technology, networking, broadband and other similar topics.

    Domain Real Estate Domain.com.au is a part of Fairfax Digital Network and one of Australia’s top destinations for real estate advertisers and seekers. Domain provides tools and data for homebuyers, vendors, and tenants across Australia - and a highly qualified audience for real estate advertisers.

    RPData / RP Data The RPData name is synonymous with the commercial and residential real estate markets. We built a strong reputation as industry leaders in the provision of holistic real-time information that reduces costs, lifts productivity and delivers quick and tangible returns on your investment.

    Auction Results Auction results are a useful guide for evaluating the property market, however it's important to understanding what the figures represent and how they're calculated. Every weekend, a range of real estate organizations publish auction results, which are rarely the same. There are several reasons for these differences in the results. The auction results discussion threads on AustralianPropertyForum.com cover all the latest results from APM, RPData, and the Real Estate Institutes.

    Aussie Home Loans Following its establishment in 1992, Aussie Home Loans grew to become the nations top NBL (Non-Bank Lender) with operations across all capital cities and regional centers. Aussie won Best Mortgage Broker Award for three successive years, an NBL Award in 2008, and Innovative Product of the Year Award in both 2009 and 2010.

    American Mortgage AHMIC (American Home Mortgage Investment Corporation) was the tenth largest retail mortgage lender in the USA and was structured as a property investment trust. The company stated that it was focused on earning net interest income from self-originated loans and mortgage-backed securities, and through its taxable subsidiaries, from originating and servicing mortgage loans for institutional investors. Mortgages were originated through the company's employees as well as through mortgage brokers and purchased from correspondent lenders and were serviced at the company's servicing center in Irving, Texas.

    Population Growth The rate of population growth changed significantly following the Australian gold rushes, the Great depression and World War II. At the time of Australian Federation in 1901, the rate of natural increase was 14.9 persons per 1,000 population. The rate increased to a peak of 17.4 per thousand population in the years 1912, 1913 and 1914.

    Housing Market SQM Research director Louis Christopher states the downward pressure on values will be made worse in upcoming months, when demand for auctions will drop. He points to REIV figures showing over 1,000 homes were put up for auction in VIC – well above the long-term average.

    Negative Gearing In recent years, investing in real estate has become very popular across Australia, particularly in the large real estate markets of Sydney, Melbourne, Brisbane, Perth and Gold Coast. Many aspiring property investors have been attracted by the large capital gains that were obtainable due to the Australian real estate boom. One more reason for the popularity of property investment is the various tax benefits including negative gearing. But is negative gearing into the housing market really such a great idea?

    Australia Property Prices A large number of real estate experts are warning values will continue to drop into 2012 as the housing market becomes flooded with a glut of unsold homes, as potential buyers remain wary due to higher interest rates. The warning comes as the housing market recorded yet another weak performance over the weekend, with auction results still in the 50s in VIC and NSW.

    Debt To Equity A D/E ratio, or debt-to-equity ratio is an economic ratio describing the percentage of debt and equity utilized for the financing of an individual or organization's assets. The D/E ratio is related to leverage position, and as such the ratio may also be known as gearing, leverage or risk.

    Australia Real Estate Bubble The Economist (21 Oct 2010) found that Australian house prices were overvalued by 63.2%, stating that "Our analysis of 'fair value' in housing, which is based on comparing the current ratio of house prices to rents with its long-run average, suggests that China has less to worry about than the likes of Australia, which is again the most overvalued of the markets we track. That makes it all the more surprising that Australia’s central bank opted not to increase its benchmark interest rate this month."

    Steve Keen Professor Steve Keen is a Fellow at the Center for Policy Development, and an Associate Professor in finance and economics based at the University of Western Sydney (UWS). He considers himself post-Keynesian. He criticises modern neoclassical economics and some Marxian economics as lacking in consistency, non-scientific and not supported empirically (in other words, they aren't supported by observable or replicable phenomena) .

    Property Crash Only recently our corrupt Government and their ill-advised advisers told us Australia’s 'strong economy' would save us from any downturn or real estate correction. When the GFC was staring them right in the face they said, no worries here, we're Australia, we're different, take this $1000 cheque this $21,000 and go buy stuff on debt. Any old stuff but especially houses. Bid them right up. It's your debt and ours. Debt is good. No worries, mate.

    Housing Affordability The term 'affordable housing' describes homes where costs are considered affordable to people earning a median wage. The term can be applied to rental and owner-occupied housing, however this blog concentrates on affordability for owner-occupiers.
     
    Last edited: Jul 11, 2011
  7. Damian George

    Damian George New Member

    I think there may be a shortage now with sadly 30k houses been destroyed
     
  8. TKline

    TKline New Member


    There is a massive oversupply of 800,000 empty houses in Australia, plenty to house everyone.
     
  9. TKline

    TKline New Member

    In case anyone doesn't believe me about the empty houses, the data is from the Australian Bureau of Statistics from the last census so it is pretty reliable. The chart below shows the empties in Sydney alone.....


    Oh, the system wouldn't let me post the chart, something about no links being allowed, sorry.
     
  10. Wendell Zuchs

    Wendell Zuchs New Member

    Maybe in some other place of Australia turn down the Real estate business. Let say in Queensland. If you remember the previous disaster there flooding for almost a month. This dilemma really affects the housing bubble here in Australia.
     
  11. proprateanalyst

    proprateanalyst New Member

    Due to rising rates, they maybe a small pull back. However, long term fundamental point to an upward trend. Unless more houses are built and restrictioons on supply of land is loosened -the long term trend is upward, with pull back in prices.
     
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