Welcome Guest [Log In] [Register]


Reply
  • Pages:
  • 1
  • 9
The Red Dragon Effect: China’s impact on housing
Topic Started: 29 Oct 2016, 01:57 PM (5,372 Views)
Black Panther
Default APF Avatar


THE RED DRAGON EFFECT: China’s impact on housing

HAVE you ever seen so many cranes?

Soon, thousands of new apartments will be completed in Australia’s biggest cities. Will it cause a house price crash?

The Reserve Bank is watching closely. The number of apartments coming on line in Sydney, Melbourne and Brisbane is huge.

http://www.news.com.au/finance/real-estate/a-housing-crash-looks-inevitable-except-for-one-thing/news-story/276c1780da216e606b27d71178bdd958
Profile "REPLY WITH QUOTE" Go to top
 
Ex BP Golly
Member Avatar


Black Panther
29 Oct 2016, 01:57 PM
THE RED DRAGON EFFECT: China’s impact on housing

HAVE you ever seen so many cranes?

Soon, thousands of new apartments will be completed in Australia’s biggest cities. Will it cause a house price crash?

The Reserve Bank is watching closely. The number of apartments coming on line in Sydney, Melbourne and Brisbane is huge.

http://www.news.com.au/finance/real-estate/a-housing-crash-looks-inevitable-except-for-one-thing/news-story/276c1780da216e606b27d71178bdd958
I remember a similar situation when we hitched our wagon to Japan, and it was those guys buying up big in our mines, houses, businesses etc.


Then all of a sudden the dragon, or tiger or whatever they called their good times met the Baku monster and it was all over till the next asian financial crisis (1997) rerun.

And the big one is yet to come.
WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
Profile "REPLY WITH QUOTE" Go to top
 
Will
Unregistered

Hmmm, I think I better keep my freestanding house, seems surprising the gap between house price and unit price growth from the article. Looks like Brissie apartments haven't done much since 2012, with a lot more supply coming.
"REPLY WITH QUOTE" Go to top
 
Elastic
Member Avatar


The only real possibility for an over supply in Australia is through apartment construction. Houses are generally built as requested.
If they build enough surplus apartments for Asian buyers then there could be a problem although it seems they are being absorbed in Sydney and Melbourne at the moment.
Potentially there are a large number of apartments being left vacant which could come onto the market under certain conditions.
Seems to be a lot of unknowns with this apartment boom so it will be interesting how it plays out.
The likelihood of a bust seems to rest with the fortunes of China's economy like so much else about Australia's future.
Only a rat can win a rat race.

Profile "REPLY WITH QUOTE" Go to top
 
Jimbo
Member Avatar


Elastic
29 Oct 2016, 10:24 PM
The only real possibility for an over supply in Australia is through apartment construction. Houses are generally built as requested.
Australia does build to demand in general.

Buy a block, have a house built.

Oversupply has not been a problem in Australia (historically).

Undersupply caused by high immigration and slow land release has been a problem.

11 people needing a life jacket and only 10 life jackets available.

The apartment building frenzy is a paradigm shift in our property market however.

11 life jackets and 10 people needing a life jacket.

Value of life jacket number 11 = 0.

Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be :?: rising.
Profile "REPLY WITH QUOTE" Go to top
 
Foxy
Member Avatar
Zero is coming...

Elastic
29 Oct 2016, 10:24 PM
The only real possibility for an over supply in Australia is through apartment construction. Houses are generally built as requested.
If they build enough surplus apartments for Asian buyers then there could be a problem although it seems they are being absorbed in Sydney and Melbourne at the moment.
Potentially there are a large number of apartments being left vacant which could come onto the market under certain conditions.
Seems to be a lot of unknowns with this apartment boom so it will be interesting how it plays out.
The likelihood of a bust seems to rest with the fortunes of China's economy like so much else about Australia's future.
What about the cat???
http://www.afr.com/content/dam/images/g/n/2/1/u/8/image.imgtype.afrArticleInline.620x0.png/1456285515560.png
Profile "REPLY WITH QUOTE" Go to top
 
Ex BP Golly
Member Avatar


Jimbo
30 Oct 2016, 09:47 AM
Australia does build to demand in general.

Buy a block, have a house built.

Oversupply has not been a problem in Australia (historically).

Undersupply caused by high immigration and slow land release has been a problem.

11 people needing a life jacket and only 10 life jackets available.

The apartment building frenzy is a paradigm shift in our property market however.

11 life jackets and 10 people needing a life jacket.

Value of life jacket number 11 = 0.
Mahamed
2 Mar 2011, 10:42 PM


http://popping-bubble.blogspot.com/2011/02/australian-residential-housing-demand.html

Australian Residential Housing Demand and Supply

By raveswei

This document will try to research one of the most controversial housing issues in Australia – supply/demand issue. Many times we heard arguments that Australia is facing a chronic shortage or that price boom is not followed by supply response. At the same time, some people claim that we have oversupply of homes for decades. In this document we will try to estimate residential demand and supply in recent years. We will focus on demand/supply for dwellings used as primary residence. This is very complex issue because of many unknowns and limited data. We will try to make assumptions that will favour shortage argument. Data for Australian cities are not available so this document will focus on all of Australia.

Document will be organized in the following order: In a first few sections, we will go through the supply and demand calculations for one particular year (2007-08), showing the data sources and methodology. Later we will provide data for a period 1995-2010 calculated using the same data sources and methodology. At the end we will give a conclusion.
All raw data used is provided by ABS or Department of Immigration.

DEMAND
Estimation of the demand for housing is not easy task. Demand is driven by many factors, but two of them are the most important: population growth and household demographics change. Population growth has two components: natural increase and net overseas migration.

Migration

Immigration is one of the most important drivers of the housing demand in Australia. Both immigration components (permanent and temporary), increase housing demand in the short term and should be included in calculations. In 2007-08 there was 277 000 net migrants (number of immigrants minus number of emigrants). There was 149 400 permanent arrivals and 76 900 permanent departures. Out of this number there was almost 38 400 “family immigrants” - large majority of them (80%) being partners and children. It is a reasonable to assume that these immigrants do not contribute to the new housing demand (do not create new households) in the first year after arrival. On longer run some of them will require new homes but that demand will be included in the demand calculation that uses households size changes.

Because of the similar demographics among permanent immigrants and emigrants we may assume that dwellings previously used by emigrants are adequate for the same number of immigrants. This assumption is based on similar age, similar proportion of children, occupation... This leaves only 38 400 permanent immigrants in need for a new home. After taking into account fact that around 15% of them are dependent children, assumption of household size of 2 persons is well on the safe side. In 2007-08 these immigrants created demand for 19 200 dwellings.

Net number of temporary, long term visitor, immigrants in 2007-08 was 205 200 with majority of them being foreign students and WHMs. Around 73% of all long term visitors (long term visitors include following groups: temporary workers, students and WHMs) 149 800 were students and WHMs, majority of them being students from China and India. This group of a temporary immigrants add less demand for new housing than the general immigration population. Some of WHMs stay in hostels and budget hotels, not adding any demand for residential housing. Estimation of foreign student and WHM demand for residential housing is not strait forward, but based on student living habits we think that assumption that average student household size of 2.5 is well on the safe side. There are many student living arrangements that involve 3, 4 or more students sharing the same dwelling. This created demand for 59 900 dwellings.

The rest of temporary immigrants (55 400) are workers and their families. We will use household size of 2 to be on safe side. It is very likely that workers who arrived with families live in larger households. It is also likely that some of the single workers share dwelling with other single persons. They created demand for 27 700 dwellings.


References:
ABS 3412.0 Migration 1995-2008
- Department of Immigration and Citizenship – Migration Program Statistics http://www.immi.gov.au/media/statistics/statistical-info/visa-grants/migrant.htm
- Department of Immigration and Citizenship – Fact Sheet – Permanent Arrivals and Departures - http://www.immi.gov.au/media/fact-sheets/05emigration_1.htm
- Department of Immigration and Citizenship – Population flows: Immigration aspects 2000-2009
- Department of Immigration and Citizenship - Settler Arrivals 2001 – 2010
- Department of Immigration and Citizenship - Immigration in Brief 2000

Natural population increase

There was 289 500 births and 140 700 deaths in 2007-08. This makes natural population growth of 148 800. Births do not directly increase the demand for new dwellings, but they affect household size and distribution. The best way to estimate internal demand for new housing is to determine housing demands generated by demographic changes and natural population increase.

Unfortunately the number of households is available only for census years and the number of migrant households is not available at all. Instead we will use following formula:

This formula includes new housing demand from natural increase and demand from household demographic changes. Household size change includes all of previous population changes (including divorces, marriages, new household creation, previous migration …). Good way to estimate demand from household changes is to use household size number.

Household size change can be calculated using the closest two census data with assumption that change during short period between two censuses is linear.

It is interesting to notice that according to census based data, household size slightly increased between 2001 and 2006. For the years after 2006 we will use new ABS household projections (Series II) that projects household size shrinking in following decades. This numbers are very likely to be underestimated because two previous ABS projections were wrong (ie. in 2001 ABS projected household size to shrink to 2.5 in 2006, instead household size increased by 0.01).

In year 2007-2008 there was 21 432 000 Australian residents, the projected household size of 2.62 and projected household size change of -0.38%. This data gives additional demand from natural increase of population was 56 800. Demand generated by household shrinking in 2007-08 was 33 600. Combined internal demand for new dwellings was 90 400.

Total demand for additional dwellings in 2007-2008 was 198 900. Please notice that this number is much larger that estimates provided by other people who use population increase divided by average household size (163 000).

References:
- ABS 3236.0 Household and Family Projections (1996-2001-2006)
- ABS 1301.0 Year Book Australia 1995-2010
- ABS 3222.0 - Population Projections, Australia, 2006 to 2101
- ABS Census Data (1996-2001-2006)

SUPPLY

There are two components of a housing supply. The first and the obvious one, is new dwelling construction supply. Second component of housing supply is made of vacant dwellings after resident’s death. In this section we will try to estimate these numbers.

New Construction

For the new construction supply we will use ABS Number of dwelling units Commenced. This number is slightly lower than Number of New dwelling units Approval, what put us on the safer side because not all aproved units are built.

In 2007-2008 there were 158 500 new unit commencements. To get more realistic number of the new residential dwelling supply we have to subtract number of dwellings that were demolished or replaced during the same period. To estimate this number we will use available data from Queensland. During 5 year period (2001-2006) around 1% of housing stock in Brisbane LGA was replaced or demolished. The same report estimates replacement levels of 0.5% in Gold Coast City, 0.25% in other urban LGAs, and 0.1% in the rest of Queensland. To be well on the safe side we will use 1% replacement level over 5 year period for whole Australia. This estimate is likely to be well above the real number because not all of the new construction is done in central LGAs. Using the estimate that housing stock was 1.06 times higher than number of households we got 17 300 demolished or replaced dwellings in 2007-08.

The total number of newly constructed residential dwellings in 2007-08 was 141 200. Some of these homes were holiday homes not available for new residents, so we have to subtract holiday homes from the total number. We will use generous estimate that around 4% of all new dwellings are holiday homes. That makes 5650 of new dwellings holiday homes. So the total number of new dwellings available for primary residence in 2007-08 was 135 500.

References:
- ABS 8750.0 - Dwelling Unit Commencements
- Queensland Department of Local Government, Planning, Sport and Recreation - Household projections, Queensland Local Government Areas 2007- Appendix A

Other Supply

Single person households create housing supply after the resident dies. In this section we will try to estimate number of dwellings made vacant after resident death.
Huge majority of Australians who die are old persons, 80% of persons who died in 2008 were 65+ at the time of death. There were around 140 700 deaths in that year. According to ABS data, in 1996 38% of population 65+ were living alone. This number is projected to increase by 84% in next 25 years. This gives us 50.5% of 65+ people living alone in 2007-2008; to be safely on the conservative side we will use 5% lower estimate - 45.5%. There are also some living alone persons under age of 65 who died but to be on the safe side we will not include them in our calculation.

After taking into account all this we may say that more than 51 000 dwellings are made available by the resident death in 2007-08. This number significantly adds to the supply side and it is often neglected by other authors. Combined, new construction supply and supply from homes vacant after the resident death makes total supply in 2007-08 of 186 500 homes available for new residents.

References:
- ABS 3302.0 – Deaths 1995-2010
- ABS 1301.0 Year Book Australia 1995-2010
- ABS 3236.0 Household and Family Projections (1996-2021, 2001-2026)

TRENDS

In this section we present results that we calculated using the same methodology we used for year 2007-2008. Some data (household size) between censuses is estimated using linear progression. This is likely to be a good estimate because of the nature of data set and short period between two censuses. Table 1 shows estimated demand and supply for period between year 1994-1995 and 2009-2010.

Posted Image

Table 1. Supply and Demand for residential dwellings in Australia

Posted Image

Chart 1. Supply and Demand for residential dwellings in Australia

CONCLUSION

By looking at the results we may see that Australia is facing huge oversupply of residential dwellings. Since 1995, there were only two years of a construction undersupply (2008 and 2009) driven by huge immigration numbers. During the years before that, Australia was building the similar number of new homes while immigration and population increase was half or even third of the 2008 or 2009 levels. After 15 years of construction, almost 950 000 dwellings that now do not have primary resident were built. That is around 10% of total housing stock. This means that around 38% of newly constructed dwellings during this period were oversupply (not used as primary resident or holiday home).
It may look very strange that such a huge oversupply is not easily visible. The reason for this, in our opinion, is the fact that market demand for housing was huge and in large part driven by investors interested in capital gain. Similar market behaviour was recorded in some parts of USA and Europe recently. In all these places, during the period before market crush, many reports were warning of a housing shortage, just to discover huge real oversupply after bubble bursted.

This is an estimated number, intentionally biased toward the undersupply side and as such, it is good enough to shows that there is significant real oversupply of homes in Australia. Situation in a particular city may be slightly different but after taking into account that combined capital city population did not grow faster than general population we may say that estimates are good for most of the cities. Some of capital cities (Sydney, Hobart, and Adelaide) had slower that the average population growth. Same cities also recorded lower construction activity and slightly larger mortality rates among older population. In addition, Sydney and Melbourne population increase was mostly driven by student population that demands less housing than natural increase or other immigrants. Some of the areas with high construction activity (Gold Coast, SE and North Queensland, Mandurah) were also fastest population growing areas in Australia.

Huge real (primary residence) oversupply will significantly impact house prices in Australia in future. In the case of market slowdown, oversupply will flood the market driving prices down.
Interesting to revisit some old posts whenever the whole 'we don't have enough houses' meme pops up its head.
WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
Profile "REPLY WITH QUOTE" Go to top
 
Khaderbhai
Member Avatar
Wealthy Suburbanite

Ex BP Golly
30 Oct 2016, 03:11 PM

Interesting to revisit some old posts whenever the whole 'we don't have enough houses' meme pops up its head.
Considering the massive boom that has occurred since Raveswei's 2011 post, I reckon he was dead wrong again.
Banks can't repossess your home simply because the market value falls. Australia's Consumer Credit Code says consumers aren't liable for things ordinarily outside their control and can't be held to obligations that could only be met by selling their home. Click for details.

"The truth is that there are no good men, or bad men. It is the deeds that have goodness or badness in them. There are good deeds, and bad deeds. Men are just men."
Profile "REPLY WITH QUOTE" Go to top
 
Rastus2
Member Avatar


Khaderbhai
30 Oct 2016, 04:44 PM
Considering the massive boom that has occurred since Raveswei's 2011 post, I reckon he was dead wrong again.

Dead wrong about what exactly ?

"Huge real (primary residence) oversupply will significantly impact house prices in Australia in future. In the case of market slowdown, oversupply will flood the market driving prices down. "

He cited no date, no deadline, simply showed numbers and stated the obvious.
Shadow - Defrauded his Bank ? 2015 I have 9 different loans and my bank had no idea which ones were personal and which were investment. They had half of them classed incorrectly. When this change came in they asked me to tell them if any personal loans were incorrectly classed as investment, which I did, and they switched them to personal for the lower rate. They also had a couple of investment loans incorrectly classed as personal. They didn't ask me about those. So they stay on the lower rate too. Worked out pretty well. :)
Shadow - 2008 Sydney Median House Price 1.25M by 2014-2015

Shadow : I think this boom has already begun in several cities. My prediction :
Peak of boom: 2014-2015. Sydney Median Price: $1,250,000 Bottom of bust: 2017-2018. Sydney Median Price: $1,100,000

Shadow's Original 2010 House Boom and Crash prediction http://s836.photobucket.com/user/rastus22/media/shady-orig-2010-chart.png.html?sort=3&o=0

Shadow's attempt to edit his 2010 chart in 2015 and replace it with one that does not show a crash in 2013 http://s836.photobucket.com/user/rastus22/media/Screen%20Shot%202015-06-06%20at%207.12.52%20pm_1.png.html
Profile "REPLY WITH QUOTE" Go to top
 
Khaderbhai
Member Avatar
Wealthy Suburbanite

Rastus2
30 Oct 2016, 05:37 PM
Dead wrong about what exactly ?
Everything really.

Don't you remember Raveswei?

He spent a couple of years here on APF predicting a massive imminent crash and then vanished when prices boomed instead.
Banks can't repossess your home simply because the market value falls. Australia's Consumer Credit Code says consumers aren't liable for things ordinarily outside their control and can't be held to obligations that could only be met by selling their home. Click for details.

"The truth is that there are no good men, or bad men. It is the deeds that have goodness or badness in them. There are good deeds, and bad deeds. Men are just men."
Profile "REPLY WITH QUOTE" Go to top
 
1 user reading this topic (1 Guest and 0 Anonymous)
ZetaBoards - Free Forum Hosting
Free Forums. Reliable service with over 8 years of experience.
Go to Next Page
« Previous Topic · Australian Property Forum · Next Topic »
Reply
  • Pages:
  • 1
  • 9



Australian Property Forum is an economics and finance forum dedicated to discussion of Australian and global real estate markets and macroeconomics, including house prices, housing affordability, and the likelihood of a property crash. Is there an Australian housing bubble? Will house prices crash, boom or stagnate? Is the Australian property market a pyramid scheme or Ponzi scheme? Can house prices really rise forever? These are the questions we address on Australian Property Forum, the premier real estate site for property bears, bulls, investors, and speculators. Members may also discuss matters related to finance, modern monetary theory (MMT), debt deflation, cryptocurrencies like Bitcoin Ethereum and Ripple, property investing, landlords, tenants, debt consolidation, reverse home equity loans, the housing shortage, negative gearing, capital gains tax, land tax and macro prudential regulation.

Forum Rules: The main forum may be used to discuss property, politics, economics and finance, precious metals, crypto currency, debt management, generational divides, climate change, sustainability, alternative energy, environmental topics, human rights or social justice issues, and other topics on a case by case basis. Topics unsuitable for the main forum may be discussed in the lounge. You agree you won't use this forum to post material that is illegal, private, defamatory, pornographic, excessively abusive or profane, threatening, or invasive of another forum member's privacy. Don't post NSFW content. Racist or ethnic slurs and homophobic comments aren't tolerated. Accusing forum members of serious crimes is not permitted. Accusations, attacks, abuse or threats, litigious or otherwise, directed against the forum or forum administrators aren't tolerated and will result in immediate suspension of your account for a number of days depending on the severity of the attack. No spamming or advertising in the main forum. Spamming includes repeating the same message over and over again within a short period of time. Don't post ALL CAPS thread titles. The Advertising and Promotion Subforum may be used to promote your Australian property related business or service. Active members of the forum who contribute regularly to main forum discussions may also include a link to their product or service in their signature block. Members are limited to one actively posting account each. A secondary account may be used solely for the purpose of maintaining a blog as long as that account no longer posts in threads. Any member who believes another member has violated these rules may report the offending post using the report button.

Australian Property Forum complies with ASIC Regulatory Guide 162 regarding Internet Discussion Sites. Australian Property Forum is not a provider of financial advice. Australian Property Forum does not in any way endorse the views and opinions of its members, nor does it vouch for for the accuracy or authenticity of their posts. It is not permitted for any Australian Property Forum member to post in the role of a licensed financial advisor or to post as the representative of a financial advisor. It is not permitted for Australian Property Forum members to ask for or offer specific buy, sell or hold recommendations on particular stocks, as a response to a request of this nature may be considered the provision of financial advice.

Views expressed on this forum are not representative of the forum owners. The forum owners are not liable or responsible for comments posted. Information posted does not constitute financial or legal advice. The forum owners accept no liability for information posted, nor for consequences of actions taken on the basis of that information. By visiting or using this forum, members and guests agree to be bound by the Zetaboards Terms of Use.

This site may contain copyright material (i.e. attributed snippets from online news reports), the use of which has not always been specifically authorized by the copyright owner. Such content is posted to advance understanding of environmental, political, human rights, economic, democratic, scientific, and social justice issues. This constitutes 'fair use' of such copyright material as provided for in section 107 of US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed for research and educational purposes only. If you wish to use this material for purposes that go beyond 'fair use', you must obtain permission from the copyright owner. Such material is credited to the true owner or licensee. We will remove from the forum any such material upon the request of the owners of the copyright of said material, as we claim no credit for such material.

For more information go to Limitations on Exclusive Rights: Fair Use

Privacy Policy: Australian Property Forum uses third party advertising companies to serve ads when you visit our site. These third party advertising companies may collect and use information about your visits to Australian Property Forum as well as other web sites in order to provide advertisements about goods and services of interest to you. If you would like more information about this practice and to know your choices about not having this information used by these companies, click here: Google Advertising Privacy FAQ

Australian Property Forum is hosted by Zetaboards. Please refer also to the Zetaboards Privacy Policy