This week’s wrap – the usual suspects, but with a twist – Sydney affordability, first home buyer deposit; Australia’s two-paced property markets; more dire predictions; the nanny state strikes again; a Brisbane record in the making; & China – there, not here. Read on.
- Sydney deposit hurdle – calls have been made for the first-home-buyers’ grant to be doubled to $30,000 in NSW to keep pace with house price gains in Sydney. BIS Shrapnel associate director, Kim Hawtrey, says the problem of raising a 20 per cent deposit is the bigger cause of the falling proportion of first-home buyers. FHOG: great politics piss poor policy – inflationary; exacerbates the property cycle & is one of the reasons why there are fewer first home buyers now than would otherwise be the case.
- Two-paced – a boom is raging through inner Sydney & Melbourne, while many parts of the country remain untouched by the euphoria. In some areas, prices remain flat & some owners are taking losses. Whilst some debate continues over Australia’s housing bubble, the pace of price growth in the hottest markets is likely to ease this year. So true. But doesn’t everyone in Australia live in Sydney & Melbourne?
- Rate rises coming coming to burst your bubble – Christopher Joye writes that house prices could continue to rise rapidly for some time yet if the RBA keeps the cash rate at 2.5%. The single most important question facing buyers today, he says, is what mortgage rates might do over the next 5-10 years. “Adopting a realistic view about future borrowing costs, home values could easily fall by up to 20% consistent with the conclusions yielded when we appraised prices using disposable incomes”. Also of importance are job growth; wages & demographics. Rising interest rates; aging population & structural economic change – we are in for a dumpier; shorter & lower growth cycle this time around (more on that tomorrow!)
- Cracks emerging – property prices are falling for the first time in China, sending a warning sign to global financial markets. Chinese apartment prices are being slashed, leaving many Chinese home buyers carrying a significant degree of leverage – in many cases, two generations of wealth is required to buy an apartment. In a culture where off the plan purchases require full payment up front, some properties are being slashed to less than the amounts borrowed. The Shadow Loan Land. A great movie title don’t you think? [sam id=37 codes=’true’]
- Queensland rules – home buyers will be able to search auctions by price range on the internet; but a general ban on price guides in Queensland will remain. The Queensland Attorney-General has brokered a deal with real estate agents over his looming changes to price guide rules; but in spite of calls by agents for transparency; & concerns raised by the REIQ, future Queensland buyers will continue to be banned from receiving price guides for auctions. Another over-reaction to our increasingly zero tolerant world, from those who think, ignorantly, that a one size fits all rule will fix all problems. A bit like Queensland’s new bike laws! We increasingly have ‘rules of law’ not the ‘rule of law’ – none of which are enforced.
- A Brisbane record is anticipated with the sale of Transpacific Industries founder Terry Peabody’s vast Brisbane River estate. The six bedroom, six bathroom residence is located in Hamilton – the same locale as Brisbane’s previous record sale in 2011 of $10.3 million for a 5 bedroom riverfront home. The Peabody mansion, one of Brisbane’s largest private residential properties, is on 4.4 hectares, with a pool, two tennis courts, separate staff quarters, an orchard and a 306- metre river frontage. Rotsa ruck, Terry – really.
No cause for alarm yet – low interest rates, a lower dollar and rising populations were supercharging property demand, causing prices to surge past sustainable levels in some places, according to some analysts; but there is still a mixed reaction about potential problems.
CommSec says higher prices means wealth levels are rising. The RBA urges caution – “rates will rise” – “people need to do their homework”. Analysis from Michael Matusik showed the March median dwelling price in Brisbane was $482,000 with house price to disposable income ratio at 7.4 (11.4 in Sydney & 10.1 in Melbourne).
Limited wage growth in Queensland is keeping a lid on local generic price growth, he said. ”Most are very cautious about their next move. That suggests to me a fully priced market, not an undervalued one (in Brisbane),” he said. We get the final word.