Not wanting to burst your bubble Mike but prices in Sydney are rising strongly and prices in Perth have been rising but elsewhere there isn't much price movement at all. In Adelaide and Hobart, prices are falling and I would put that down to the lack of population growth in these cities. So to suggest this is evidence of a nationwide bull market for the next few years is just wishful thinking.
Couple this with a weakening economy and you appear to be getting ahead of yourself. Clearly, Sydney is struggling with strong population growth and a lack of supply response but I'd suggest that Perth has already had its supply response and things will level off from here.
Commonwealth Bank chief executive Ian Narev does not lie awake at night worrying about how the property market might respond to record-low interest rates, despite persistent questions about house prices from foreign investors.
The chief of the country's biggest bank said on Monday he thought the economy was suffering from low confidence, and it was important that the election produced a clear winner.
He also said he thought there would probably be one more 0.25 percentage point cut in the cash rate, after the Reserve last week cut the benchmark rate to a 53-year low of 2.5 per cent.
While some experts are debating the potential for cheap debt to sow the seeds of a housing bubble, Mr Narev said he had confidence in the judgment of Reserve governor Glenn Stevens and the board.
Mr Narev said foreign investors ''always'' wanted to talk about Australian house prices, but ''stress tests'' had found the bank would survive a severe housing downturn with price falls of up to 40 per cent.
The comments came amid fresh signs of banks competing to sell home loans, with NAB offering $1000 cash payments to customers who refinanced with the lender.
Aussie Home Loans also slashed rates on two-year fixed mortgages to 4.64 per cent, a move it said was facilitated by funding from CBA, which owns 80 per cent of the mortgage business.
After the sharp falls in interest rates, some analysts and industry insiders say there is a debate to be had on risks of a housing bubble.
Real estate agent John McGrath, speaking on the same panel, said the recent pace of price growth in some areas was fast and probably not sustainable over the long term.
No its a failure on her part and Bears to grasp the reality of what is happening.
I do not know any Bull that claims prices rise for ever. Shadow posted only a few days ago talking about property cycles. We are in a Bull market and prices of property nationwide could rise much further. It does not matter if "You" cannot afford it as there are many people who can and will buy as they have more money then you.
As I have told you prior, when you have more and more people chasing fewer and fewer properties prices will rise and rise further and faster then most think is possible. Until we build much at a much higher level so supply can keep up with demand this will continue.
We are in a bull market for the next few years at least then as all markets do it will turn it may happen in 2 years or maybe 5 who knows.
If you wanted to buy or build 2011 was the best year with 2012 not far behind it. If you missed that period for what ever reason then you are just plain out of luck until the next bear market. Even then you will be buying property from a new high base most likely 20-30% higher then levels of 2011/12.
Ah yes, the property cycle.
Hows the property cycle looking in Dublin?or Barcelona? or Amsterdam?
Property markets are notorious for boom and bust cycles.
Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?
The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly. Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
AMP’s Shane Oliver says Australian house prices have turned up at a time when they are still overvalued but there is no sign of a new property bubble.
The average annual capital city house price growth is now around 5%, having initially failed to respond to rate cuts, according to Shane Oliver.
"This is coming at a time when house prices in the UK and the US have also started to head up. The only difference is that prices in these countries are turning up from much lower levels, whereas Australian house prices are turning up from a high level," Oliver says.
"Fears of a renewed bubble have also been heightened by a surge in Sydney’s auction clearance rate above the 80% level, well above its normal cyclical high of around 70%."
He says although Australian house prices have cooled, they are still overvalued with real house prices still above their long term trend by around 7%.
And he says the ratio of house prices to incomes in Australia is now 21% above its long term average.
But he says apart from overvaluation and hot Sydney auctions there is little evidence of a housing bubble at present.
"This is not to say that it won’t turn into a house price bubble but at this stage the property market is a long way from that. And with the pick up relying on improved affordability with house price to income ratios remaining high it wouldn't take much in the way of price increases for the improvement in affordability to be undermined. Rising unemployment may also act as a dampener on house price appreciation," he says.
"The cyclical upswing in house prices likely has further to run with gains likely to be around 5% to 10% over the year ahead. However, the overvaluation of Australian housing will likely see real house prices stuck in a 10% range around the broadly flat trend that has been evident nationally since 2010.
"This is consistent with the 10-20 year pattern of alternating long term bull and bear phases seen in real Australian house prices since the 1920s. See the third chart in this note.
"The long term bull phase of Australian house prices that started in the mid 1990s likely gave way to a long term bear phase commencing in 2010 that in the absence of an unexpected economic collapse is likely to be characterised by a flat trend in real house prices until the excesses of the 1996 to 2010 period are worked off." Do you agree with Shane Oliver that the Australian residential property market is a long way from turning into a house price bubble?
Don't stand at the station to long waiting or you will miss that train.
Just sayin
Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?
The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly. Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
Garry Marr | 13/09/11 | Last Updated: 13/09/11 3:07 PM ET
Low borrowing costs and balanced market conditions have brought buyers to the Canadian housing market, although slowing job growth and a recent jump in fixed long-term mortgage rates will likely cool the market for the rest of 2013 and into next year.
Low interest rates are helping to boost property markets across the globe and Canada is no exception, says a new report from the Bank of Nova Scotia. Quarter of Canadians spend more on housing than they can afford
Joelle Gibson, 24, and her husband Stephen, 25, had to make sacrifices to find a rental property that suited their needs, including giving up their car, selling off some household items and cutting costs wherever they could.
Living in a two-bedroom townhouse in Ottawa with their 16-month-old son, Jesse, the Gibsons put 36% of their total household income toward their rent and utilities.
However, future gains in Canada are no guarantee, the report from economist Adrienne Warren says.
“Canadian housing activity remains buoyant, though the underlying fundamentals for continued gains are becoming less favourable,” she said, noting average inflation-adjusted home prices jumped 2% in the second quarter from a year ago.
Ms. Warren says low borrowing costs and balanced market conditions have brought buyers to the Canadian housing market, although slowing job growth and a recent jump in fixed long-term mortgage rates will likely cool the market for the rest of 2013 and into next year.
On a regional basis, she says Alberta continues to have the strongest housing market, aided by population increases and growth in full-time jobs. By contrast, B.C. prices remain some of the softest.
On the condo front, she says potential overbuilding remains a concern, especially if demand slows. “Reduced expected returns have dampened investor demand for new condos, while high prices and supply constraints have undercut low-rise sales,” says Ms. Warren.
South of the border, the U.S. housing recovery continues to leave it near the top of Scotiabank’s international ranking. Inflation-adjusted average prices rose 8% in the second quarter from a year ago.
“Demand is being bolstered by moderate job growth and near-record affordability, while low inventories and fewer distressed sales are supporting prices,” said Ms. Warren, adding she expects rising mortgage rates will moderate the U.S. recovery but not derail it. “There is considerable pent-up demand for housing following the multi-year downturn.”
Europe is also showing signs of a housing revival with the United Kingdom’s “help to buy” stimulus measures in the 2013 budget. Real prices in the second quarter were up from a year ago for the first-time in two and half years.
Other European markets have not been so lucky. Spain is in a deep slump thanks to 25% unemployment, and in Ireland mortgage arrears are now 12% of all loans.
As discussed a few months back (see post), Canadian households continue amass higher levels of debt. At this point in the cycle, consumer leverage should have stabilized - particularly given tighter lending standards imposed by the government. However household credit outstanding as a fraction of disposable income hit another record last quarter.
The good news is that Canadians' net worth has been improving and the debt growth remains slow relative to pre-recession levels. That doesn't mean the situation is without risks. Canada's household leverage is now materially higher than that of other nations who love credit, namely the UK, Spain, and the US. The overall consumer debt levels are also rising as a fraction of the nation's GDP.
Somewhat surprisingly, Canadian seniors are now getting quite comfortable with high debt levels as well. It's a dangerous trend.
CBCNews: - The increase in debt among seniors was the biggest year-over-year of all age groups.
Jeffrey Schwartz of Consolidated Credit Counseling Services of Canada says the finding on seniors' debt is in line with other reports that show bankruptcies among retirees is on the rise.
"That's what scary about this," he said. "Seniors are carrying more debt into retirement. They are trying to maintain a lifestyle they had pre-retirement but on post-retirement income, and if income has dropped, they are increasing their debt to cover off their spending. It's a very dangerous strategy."
He added another possible cause is that seniors are supporting their grown children in greater numbers.
Furthermore, Canadian households are becoming increasingly exposed to real estate. This makes Canada vulnerable to an economic downturn, as falling property values could quickly erode wealth and increase delinquencies.
This rising debt burden could inhibit the nation's economic growth because the consumer is less likely to contribute to any expansion without further debt increases. The currency markets are not ignoring the situation, with the Canadian dollar moving lower (USD moving higher) on the news on Friday.
Bloomberg: - “The household debt number shows you can’t expect the Canadian consumer to contribute much to Canadian growth, and reflects the troubles the Canadian economy still faces, which is not a positive for the currency,” said Adrian Miller, director of fixed-income strategies at GMP Securities LLC in New York. “Any strength in the Canadian dollar has to be discounted, as the bias is still to the downside as the U.S dollar gains strength with a better economic performance and expected tapering from the Fed.”
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