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Sydney property prices faltering as new home 'tsunami' hits; Homes are 20 per cent overvalued, according to Goldman Sachs, which is seeing a one in three chance of a recession
Topic Started: 21 Sep 2015, 12:01 PM (5,154 Views)
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Sydney property prices faltering as new home 'tsunami' hits

September 21, 2015, Narayanan Somasundaram

A home-building frenzy that is shoring up Australia's economy as the mining boom ends may also be what finally takes the steam out of one of the world's most expensive property markets.

The case in point: Green Square. Nearly 10,000 apartments will be built in one of Sydney's newest suburbs in the next four years to satisfy investor demand, which has already sent property prices in the city to the highest ever. It will also add to the record 213,000 new home starts across the country amid slowing population and economic growth, prompting Goldman Sachs to warn of a supply glut by 2017.

"There is a tsunami of home supply coming," said Nigel Stapledon, head of real estate research at the University of New South Wales Business School and former chief economist at Westpac.

"The market is going to be tested in accepting this sort of supply. It's not like there is economic growth to support it. Income growth has gone from boom time to the lowest in a number of years and population growth has eased back."

Housing and home prices have been the biggest beneficiaries of the central bank's 10 interest-rate cuts since November 2011 to a record low that made mortgages the cheapest they have been in five decades. Economic growth has remained below historical rates and capital spending and confidence have sagged.

Some cracks are starting to appear. Auction clearance rates in Sydney dropped to 75 per cent for the week ending September 13 from a peak of over 90 per cent in April, as buyers' tolerance for some of the most expensive property in the world and a median price that touched a record $773,000 cooled, according to property researcher CoreLogic Inc. Nationally, auction clearance rates, used to gauge buyers' demand, have dropped to just over 70 per cent from a high of more than 80 per cent in April.

At the same time, demand from investors, responsible for more than half the mortgage commitments since August 2014, a record, is being choked by tighter lending requirements to landlords. Investor loan growth dropped from 29.6 per cent in April to 16.5 per cent in July, the latest government data showed.

Homes are 20 per cent overvalued, according to Goldman Sachs, which is seeing a one in three chance of a recession in Australia in the coming year, according to a note this month, while Barclays Plc puts the overvaluation at 14 per cent.

Read more: http://www.smh.com.au/business/the-economy/sydney-property-prices-faltering-as-new-home-tsunami-hits-20150920-gjr39u.html
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Ex BP Golly
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A tsunami on top of existing oversupply.

WOW.
WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
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The Whole Truth
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Bubble bubble toil and trouble. Japan to a T
"Panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive works." John Stuart Mill
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Ex BP Golly
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Will we also have "lost decades" with all the social problems, such as youth hiding from everyone in their solitary confinement ( hikikomori) aged care home warehouses in run down old resorts (which is admittedly better than kodokushi) renting 'family' to celebrate birthdays, anniversaries etc?

So much to look forward to!
Edited by Ex BP Golly, 21 Sep 2015, 01:30 PM.
WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
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Dr Watson
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Ex BP Golly
21 Sep 2015, 01:18 PM
renting 'family' to celebrate birthdays, anniversaries etc?
Ummm Golly ... what does that involve, exactly?
The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt — Bertrand Russell
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Ex BP Golly
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Dr Watson
21 Sep 2015, 01:28 PM
Ummm Golly ... what does that involve, exactly?
You rent actors to pretend to be your children, wife etc, to celebrate special moments.

It is weird, but not too far from 'pretty women' being hired as an escort to go to dinner or work functions.
Edited by Ex BP Golly, 21 Sep 2015, 01:33 PM.
WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
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ThePauk
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http://australianpropertyforum.com/single/?p=8578172&t=10362136

14 September and in support of Johns call...

"I call it the 'peak' and the 'trend' will now be down. "
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Dr Watson
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ThePauk
21 Sep 2015, 01:37 PM
http://australianpropertyforum.com/single/?p=8578172&t=10362136

14 September and in support of Johns call...

"I call it the 'peak' and the 'trend' will now be down. "
John called a crash in October. While it is looking like a peak of sorts, whether the market crashes remains to be seen. The market must crash in October for Frum to be correct.
The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt — Bertrand Russell
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ThePauk
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Dr Watson
21 Sep 2015, 01:45 PM
John called a crash in October. While it is looking like a peak of sorts, whether the market crashes remains to be seen. The market must crash in October for Frum to be correct.
Sure. I realise that but the peak in Sept does support his call....
I bought my SGP and CBA PUTs in June..... and very happy to date...
Edited by ThePauk, 21 Sep 2015, 01:52 PM.
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GGG
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A correction is inevitable. Anyone who says otherwise is either a sheep, a fool or fails to understand economic logic.

I hate to spell out the truth in regards to property... But rising prices do not actually do any good for anyone in reality. High property prices just make us all pay more for stuff & pay more to live.

The only people who benefit in anyway from rising house prices are those down-sizing, or those cashing in & moving to a cheaper area.

For everyone else here are the results of rising property prices:

1) You buy & sell in the same market .. hence you pay more to upgrade.
2) Your kids will need support to get into the market
3) Businesses have to charge more for everything to cover the rental or purchase costs
4) Fewer businesses start up in brick & mortar type spaces
5) More people have less money to spend, hence depressed spending
6) Those people who are getting wealthy from the 'free' money are those who bought many years ago & they are often not even really spending that much anyway. Many who are relishing in the free money rental stream are using family trusts, NG, superannuation & other perks to minimise the tax they could be contributing anyway.
7) The high living costs are the more stress, health problems & mental issues our society encounters ... Which obviously lead to higher infrastructure costs, higher spending requirements in health, policing, court & administrative costs.

So next time you are thinking how wonderful it is that you house price increased a little think of the consequences of that on paper valuation ..
Banks, Government & Real Estates are loving the cash ... few others in reality.
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