All this mean, for the most part, interest rates are too high relative to the cost of building. Therefore no building.
Interest rates will continue to fall. If not today, then soon.
Which returns us to the key question:
How does the RBA use monetary policy in such a way that engenders new building without the appalling vista of speculators wanking all over established builds?
We need speculators to push up prices so they exceed replacement cost. When this happens, developers will be ecouraged to supply more stock.
I think this has happened already in Vic (apartment supply has been strong since 2010), and is starting to happen in Perth. Sydney still has some way to go.
I'm not convinced by this theory b_b. If you look at new detached housing there is no shortage of supply, just a lack of demand and investors don't buy in these areas. As for apartment housing, i would guess that much of the demand is coming from OS and therefore not dependent on our IR levels or necessarily price sensitive.
I'm not convinced by this theory b_b. If you look at new detached housing there is no shortage of supply, just a lack of demand and investors don't buy in these areas. As for apartment housing, i would guess that much of the demand is coming from OS and therefore not dependent on our IR levels or necessarily price sensitive.
Every sub-market is different. Different demand / supply dynamics, and different economic break-even costs.
But the facts are; - Aust Dwelling completions are running low relative to historic numbers - They are especially low in NSW - population growth is still good - The above suggests either we had a massive over supply in the past and are now working off the excess, or we were in balance in the past and are undersupplied now - I think the latter is more realistic because since 2006 rents in most areas are up 60%
At a macro level, it is hard to suggest there is no shortage (although at a individual market level there can be).
Shadow, are you confident that we won't see a downturn in the next 2 years?
By that I mean an economic downturn, not necessarily a housing downturn.
While the last economic downturn was great news for house prices (they rose 20% in 18 months), I don't expect to see another economic downturn of that magnitude in the next two years, so I think we'll have more moderate house price growth compared to the property mini-boom we experienced during the last economic downturn.
All the other bubbles were burst by proper recessions; we havent had one. Yet.
I have my reasons for believing we never had a bubble.
A lot of that is based on NPV. If prices of any asset rises far above the future earnings, then that could potentially be bubble territory. In Australia property, the rent to house price ratio has been fairly consistent. Which means plenty of investors can buy and let the income stream make the investment worthwhile.
Every sub-market is different. Different demand / supply dynamics, and different economic break-even costs.
But the facts are; - Aust Dwelling completions are running low relative to historic numbers - They are especially low in NSW - population growth is still good - The above suggests either we had a massive over supply in the past and are now working off the excess, or we were in balance in the past and are undersupplied now - I think the latter is more realistic because since 2006 rents in most areas are up 60%
At a macro level, it is hard to suggest there is no shortage (although at a individual market level there can be).
My feeling is that much of the population growth is being absorbed by more people living in the same houses. There has been very little change in the stock on market or rental vacancies the past few years but we have somehow been absorbing 300,000 plus people a year. Or perhaps we are building enough houses.
We need speculators to push up prices so they exceed replacement cost. When this happens, developers will be ecouraged to supply more stock.
I think this has happened already in Vic (apartment supply has been strong since 2010), and is starting to happen in Perth. Sydney still has some way to go.
So if I want to sell more pears - then I should increase the price of apples?
Surely it makes more sense to look at inefficiencies in the building trade, and the amount of hidden taxation on new builds. It would also help to ease planning permission rules, and increase the govts spend on infrastructure. The costs of this could be paid for be removing -ve gearing. Then you will have a general easing of all housing prices which will kick start the economy.
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
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