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More Jobs. Strong Economy. Infrastructure Spending. The recipe for Sydney’s real estate surge.; It would have happened if the RBA hadn’t been cutting interest rates
Topic Started: 21 Aug 2015, 06:07 PM (3,962 Views)
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The recipe that cooked up Sydney’s real estate surge: Terry Ryder

Terry Ryder, 17 August 2015

Here's a clue as to why Sydney has been having a property boom that no other capital city has come close to matching. NSW has the nation's No.1 economy and, according to ABS data, has created more jobs in the past six months than the rest of Australia combined.

That remarkable situation provides the best explanation of the Sydney real estate boom, far more so than the flimsy offering from most economists, who attribute the boom to low interest rates (but can't explain why Brisbane, Perth, Canberra, Adelaide, Darwin, Hobart and most of regional Australia aren't having price booms).

The Sydney/NSW economy is pumping, boosted by high levels of spending on infrastructure and a return of business confidence thanks to changes in the political scene.

According to the ABS, NSW has added 85,600 jobs since January. All the other states and territories have managed a combined 68,000.

The NSW economy has been rising steadily ever since the worst government in my lifetime, the 16-year-old NSW Labor Government, was tossed out in a predictable landslide in 2011.

With that change, things that had been long absent from Sydney and NSW began to happen again. Decisions started being made. Infrastructure spending resumed. The economy awoke from its coma and business re-opened. Jobs started to be created, with those latest figures from the ABS providing evidence of a process that has been four years in the making.

According to ANZ research, employment growth in NSW has been led by four industry sectors: health, education, hospitality and professional services.

It’s not a coincidence that the rise of the Sydney property market after 10 dormant years has happened during this resuscitation of the NSW economy.

Low interest rates, the fallback position of economists who haven’t got a clue (i.e. most of them), have little or nothing to do with Sydney’s elevated market.

If it was all about interest rates, Perth prices would be zooming instead of going backwards. A clue to the decline of the Perth market is also found in the ABS employment figures: Western Australia, previously a leading generator of jobs, has created only 8,500 positions in the past six months, one-tenth of that managed by NSW. Since January the WA unemployment rate has risen from 5.5% to 6.3%.

Just three years ago, the NSW ranked joint second last, alongside South Australia, in the CommSec State of the States report. Back in July 2012, it was “WA first and daylight second”, according to one media report. The ACT, the Northern Territory, Queensland and Victoria all ranked above mediocre NSW, which was tied with SA in sixth place, with only Tasmania ranked lower.

Fast forward three years and the latest State of the States report indicates that NSW is now entrenched as the No.1 strongest economy in the land, having taken over the top ranking from WA last year.

NSW ranks first or second among the states and territories on population growth, retail trade, employment, equipment investment and housing construction.

A growing economy, extensive spending on transport and other infrastructure, the return of confidence in the state government and the local economy, solid population growth, jobs being created – that’s the recipe that cooked up Sydney’s real estate surge. And it would have happened if the RBA hadn’t been cutting interest rates.

Read more: http://www.propertyobserver.com.au/terry-ryder/45126-here-s-a-clue-into-sydney-s-property-boom-terry-ryder.html
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Elastic
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The NSW economy is booming because of all the investor led borrowing for housing.
Terry is confusing cause and effect.
He's an idiot.
Only a rat can win a rat race.

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Ex BP Golly
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Terry Ryder Repos

Terry has an exit strategy.
WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
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Bardon
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Terry gets it right again.

All that tax payer funded infrastructure spending must ultimately find its way into increased land values, where else could it go?
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Elastic
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Bardon
22 Aug 2015, 10:30 AM
Terry gets it right again.

All that tax payer funded infrastructure spending must ultimately find its way into increased land values, where else could it go?
Sorry Bardon, but any increase in infrastructure spending is a drop in the ocean compared to the massive credit growth resulting from the investor led housing boom.
Low interest rates, population growth, housing investors, overseas buyers are far more important factors.
The windfall in the state government coffers from the housing activity has also enabled healthy government spending.
Only a rat can win a rat race.

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Bardon
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Of course they all add up yes and then you have the magic of credit growth a big yes but the new infrastructure value, funded by taxpayers like you and me is taken up in the increased value of the adjacent land and is therefore a windfall of sorts to the local landowners.

Consider this you have two suburbs on either side of a river. The state decide to build a taxpayer funded bridge across the river for $100m. The initial construction contractor stimulated the wider economy by spending this amount building the bridge, on completion the local residents enjoy an increased connectivity and therefore amenity and in the longer term the economic benefit of the bridge is taken up in the increased land value of each of these now more desirable than before suburbs. The bridge itself is a deprecating asset that will require taxpayer funded long term maintenance and eventual demolition.
Edited by Bardon, 22 Aug 2015, 11:23 AM.
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ggriff
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Can somebody mention to Terry 'Genius' Ryder that the reason low interest rates
have done nothing for the property markets in WA and QLD is the drastic decline
in the prices of commodities namely coal and iron ore and the resulting end to the
mining boom. His comments aimed at economists are plain childish and unfounded.

There are many factors driving the Sydney housing boom including: Investors,
low interest rates, negative gearing, CGT exceptions and the fact people are vary
of other investment classes. Of course a construction boom creates jobs but for
how long? The lessons learnt in Ireland should not be forgotten...

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Terry
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What's wrong with Terrier's observations? Low interest rates and infrastructure spend. That's what the Japanese did.
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Loki
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Elastic
22 Aug 2015, 11:07 AM
Sorry Bardon, but any increase in infrastructure spending is a drop in the ocean compared to the massive credit growth resulting from the investor led housing boom.
Low interest rates, population growth, housing investors, overseas buyers are far more important factors.
The windfall in the state government coffers from the housing activity has also enabled healthy government spending.
Well, that's part of it. The other part is that NSW and VIC have been running massive trade deficits while WA, QLD, NT and SA were running trade surpluses. In other words, export revenues were being taxed and redistributed to NSW and VIC, in particular State governments, who hired a whole bunch of overpaid public servants, who in turn bought a whole bunch of overpriced houses, hired a whole bunch of overpaid tradies, drank a whole bunch of overpriced lattes, engaged the services of a whole bunch of overpaid consultants, and so on and so forth.

As the terms of trade collapse, so will the 'boom' in NSW and VIC.

Bardon
22 Aug 2015, 11:18 AM
Consider this you have two suburbs on either side of a river. The state decide to build a taxpayer funded bridge across the river for $100m. The initial construction contractor stimulated the wider economy by spending this amount building the bridge, on completion the local residents enjoy an increased connectivity and therefore amenity and in the longer term the economic benefit of the bridge is taken up in the increased land value of each of these now more desirable than before suburbs. The bridge itself is a deprecating asset that will require taxpayer funded long term maintenance and eventual demolition.

Posted Image

Get in quick! Land values to the moon I tells ya!

Wait, this one is even better. Land values will be going nuts on either side of this bridge.

Posted Image
Edited by Loki, 23 Aug 2015, 02:05 AM.


“Talk sense to a fool and he calls you foolish.” - Euripides
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Bardon
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If you asked a current land owner in Castle Hill what they thought was the main reason that their land price has shot up so dramatically in recent times I would put London on a brick that the response wouldn't be the state trade deficit.
Edited by Bardon, 23 Aug 2015, 10:10 AM.
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