Australian property market; sustainable?

Hi Pasha.

My understanding of China is that they are trying to slow their growth artificially. If they reduce their growth from 11%pa to 8%pa., they're still going to need 8% MORE of our product than last year.
My mining sources suggest from Feb things should be picking up as companies increase hiring. (In the area I have property.)

I do not have a crystal ball, and form my opinion  from what I read. You are quite right to have your own views, and base your opinion on that. You may be right. Or not. But you have to know your own risk profile, and invest where the risk fits your views.

I agree with some of your points, ie cost of petrol and living to increase. To me, though, these are reasons to be optimistic in investing. They may deter people from buying, so more renters to rent our IP's! Which over time will increase rents, and if they keeps up with interest rates, I'm happy. 

I don't agree prices are over-inflated. Last year "they: said prices may drop 5-10% and they almost all went up that much in Sydney, Melb, Darwin, …. I believe we have avoided the bust they had in USA and UK.
The catch is, conditions will never be perfect for property investing. And if you never invest, you'll never make money in property. (Or make a loss, I agree.)

quickchick

So when was the last time people in Australia were economically fearful?

The majority have been greedy for at least a decade and fueled our housing bubble with that greed. When the rest of the world had property downturns, Australia didn't because of 2 things achieved by the combined actions of our government and banks:

1. Consumer confidence.
2. Flow of credit.

Just to set some posts straight.

USAs housing oversupply only became known after the crash, before than their nation was full of the same property spruik as ours. In addition, not all US states allow non-recourse loans. Most of the US mortgage holders in negative equity cannot walk away, although their supreme court is now looking at the validity of low doc mortgages that were sold off.

British Isle property markets like the UK and Ireland still claim an undersupply but crashed anyway. They crashed when credit supply was restricted. Unbelievably, Poms and Irishmen, like people here, were happy to pay ridiculous prices for houses but the banks just wouldn't let them.

I thought our market would crash in 2009 and it would of if not for the FHOB, lowered interest rates and the flow of credit. Now, who knows when it will be on? But make no mistake, all bubbles eventually burst.

My current line of thinking is that an oversupply of apartments will become blatantly apparent by March and there will be definite negative growth (1-5%) reported in the market by that time. How the government, the RBA our banks, media and the REI as a whole respond is anyone’s guess.

Curious as to who exactly is claiming there is an undersupply in the British markets? The Sun, Daily Mirror or the Sport? The fundamentals of the markets are completely different.

Sorry to be cliched again but there is no Australian market, just markets within markets. The successful property investors are the ones who make educated decisions, understand it is a long term strategy, consider the risks and can pick the appropriate time and place to enter and exit the market.

Whats interesting is when you look back through the years of posts on this site to see the same old negative spiel regurgittated back over and over again. Too many people listen to whats reported in the mainstream media and don't consider the facts.

Given Steve has done a great job with selling his idea that Dec 09- Jun 10 is the time to buy property, (and if everyone listens to that idea) perhaps you should buy after the middle of the year???  (am I allowed to say that here?)

Keen clarifies that he had no idea how much future debt our government would throw at our property market to keep it afloat, after he made his predictions of a 2008/2009 crash. I would walk up the mountain with him, even though I do not trust that Australian media gives an unbiased view of what is really happenning in the property market – some media companies own property monitors and RE advertising pays for the biggest percentage of our media.

What the government spent on property in 2009 to produce the best growth since 2003 has to be paid back eventually – probably with higher taxes. Even this forums founder acknowledges that.

With the inevitability of rising taxes and rising IRs – how much money do you think consumers are going to have to throw at housing? Remember Oct 2008? 8% IRs was enough to give the market wobbles and that was when mortgages were 10-15% less and homebuyers were less leveraged.

Market stats indicate that property in the capital cities are taking an upward swing again, and Investors are flooding back to the market. Now is the time to buy, I’ve seen it all before. Heres an interesting article… “Investor loans surge as first homebuyers head for the exits
20th January 2010

Investors have become the main driving force of the property market following a mass exodus of first homebuyers.

According to the latest data from the Australian Bureau of Statistics, the total value of loans taken for investment purposes climbed by 2.1%. Over the year, investment loans have increased by 26.1%, the best showing in over two years.

“The improvement in economic conditions – particularly in the labour market, should improve investor sentiment in the housing sector,” said Craig James, chief economist with CommSec. “Stronger population growth and rising rents will ensure the housing sector plays a key part in the economic recovery.”

In contrast, the number of new homebuyer loans has plunged by 5.9% in November to its lowest level in 10 months and follows a follows a 2% fall in October. First homebuyers now account for 22.1% of the total market, down from 26% in October.

Looking forward, the near term data is likely to look weak, largely due to potential home buyers having brought forward planned purchases over the past year according to James.

“It is clear that the interest rate hikes are starting to bite. Overall the housing sector looks like it may be starting to consolidate after what has been a phenomenal run over the last year.”

However, James pointed out that despite the recent weakness, housing finance is still up over 14% in annual terms and in recent times construction loans have surged by over 100% compared with a year ago.

“In the midterm as the economic recovery becomes more concrete, budding home buyers are likely to feel more confident about the future outlook and move forward on planned purchases,” he said.”Steve.

That would be why I said markets and not market.

 
 couldn't agree more.

Yet you spoke about them as if they were one?

Sorry, I forgot this before but here are some links about the British undersupply.

http://www.telegraph.co.uk/finance/2945465/Shortage-of-stock-and-keen-buyers-raise-house-prices.html

http://www.forbes.com/feeds/afx/2007/11/05/afx4303757.html

http://www.forbes.com/feeds/afx/2006/12/14/afx3253751.html

Sound familar? The spruik there then, almost mirrors here now (as did PI sentiment). Only difference is that here the banks let the credit flow and our govt. gave us an extra 7-14k to spend on houses in 2009. I could go into some detail as to how and why this all happened (have been studying it for a couple of years now) but i get the feeling that you don't really care.

Hey, DWolfe, if your vision of this forum is so pure – why would threads like this be opened in the first place? All POVs are valid and may contain credible information – not just yours.

Investement isn't a religion, it isn't about unwavering faith, it is about wieghing up the pros and cons. The OP raised a question, for which there are more answers than just the PIs, spruikers or REAs.

It's really simple – the only possible way Australia can have the capital growth in housing over the next 10 years as it has over the last 10 is if we become a hyperinflationary and devalue the dollar with ever flowing credit. If credit stops flowing, the market will downturn and possibly crash.