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Saturday Summary – the most interesting property investment articles I read this week

Each Saturday morning I like to share some of the interesting property investment and economic articles I’ve read during the week.

I’ve put them here all in the one place for your easy reading.

Enjoy your weekend….and please forward to your friends by clicking a social link buttons on the left.

Australian house price down 2.1% over past year but still 36% overvalued: The Economist magazine

Each year The Economist magazine rates housing markets around the world and for almost as long as I remember they’ve said Australian housing is overpriced and ready to crash.

Well they’ve said it once in the magazine’s August 2012 update of 21 residential-property markets around the world more where they suggest Australian house prices are slightly less overvalued than they were four months ago but are still 36% above their fair value.

The Australian housing market ranked 13th, with prices down 2.1% year-on-year. In its previous update, The Economist reported Australian house prices as 38% overvalued.

However, the Australian market is not nearly as overvalued as Hong Kong (64% above fair value), Singapore (58%) or Canada (54%).

Over the past five years, Australian house prices are up just under 10% – modest in comparison to house price gains in Hong Kong (up 64%) and Austria (23%) and below comparable markets like Canada (18%).

Here are their findings:

The Economist defines “fair value” as “the long-run average ratio of house prices to disposable income and to rents”.

By the way…I disagree with their conclusions and will give my thoughts on this in my market update in next Friday’s newsletter, but in the mean time you can read their findings here…

We dust off the ‘crystal ball’ – Part 2.

Another great  Property Uncut  show  produced by Kevin Turner. If you don’t already subscribe to this excellent weekly Internet based radio show.

We continue with our second week of looking at the market today and asking our experts what it is expected to be like in a year from now.

This week he has a heap of great guests:

You will also hear from Rolf Schaefer and Jan Somers and finally Michael Yardney will wrap it all up for us this week as he sums up the sentiment of our experts.

You should definitely subscribe to this weekly audio program. Click Here It’s free and you can listen on the go on your smartphone, iPad etc.

Surge in first home buying

First home buyers are back – in large numbers according to John McGrath!

New figures from Australia’s largest mortgage broker, AFG show a surge in first home buying in July as rising rents, decreasing interest rates and good value buying create a compelling environment for young people to purchase.

The interest rate factor plays a huge role in young people’s decision to purchase.  According to the Reserve Bank, the home loan rates on offer today are about 50 basis points below their 15-year average. That’s seriously cheap money for young people on tight budgets.

And then there’s rising rents, with RP Data’s latest numbers showing a 3.3% increase in weekly rents across the capital cities over the first seven months of the year alone. When rents keep getting higher, people start getting their calculators out to compare the cost of renting vs. buying.

A surge in first home buying is an important indicator for the broader market too, and here’s why.

First home buyers are arguably the most cash-strapped budget buyers in the market. They’ve often spent years saving a deposit and have no assets to leverage from.  As a result, we don’t see a huge number of them unless market conditions are very favourable. When first home buyers start buying in droves, it tends to impact the other sectors of the market with a cascading effect.

Check out these stats by reading more here…

If you buy a unit because of a developer’s incentive, you deserve your dud investment:

Terry Ryder suggests that people who allow themselves to be lured by developer incentives into buying new apartments deserve the dud investment they’re getting.

He says that quality properties for which there is genuine demand don’t need to offer incentives to buyers. The existence of incentives is a warning sign for buyers to look elsewhere.

Melbourne’s inner-city unit market is the standout example. For the past 18 months Ryder has been urging buyers to steer clear, because the level of new product being built is bordering on the ludicrous.

Demand for real estate is weak in Melbourne, and the only way developers can stir up sales is to offer inducements or sell product in distant locations like China. Both are happening, and both serve as danger signals for buyers.

Read more…

Census Statistics

There’s so much data available in the recently released 2011 Census, sometimes it’s hard to know where to start looking.

One of the great website that makes it easy has been put together by SBS.

Check it out here…



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About

Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


'Saturday Summary – the most interesting property investment articles I read this week' have 2 comments

  1. Avatar for Property Update

    August 25, 2012 @ 2:49 pm David Lee

    Michael
    I really struggle to understand why people keep banging on about our market being overpriced. Obviously they don’t understand the Australian setting where the vast majority of our people live in only 8 cities. In the fringe suburbs of Perth young people can by a block of land for on average $185000 (remembering in Perth it cost developers something like $80000 to put in the infrastructure and pay costs to government) – add a house and the package is around $300000. That then sets the base for house prices in Perth. As you move closer to the CBD and greater facilties it becomes increasingly more expensive. So my message for those waiting for property to drop by 36% ( East Perth for example )- have your finance organised because in the very unlikely scenario they do, you will have to beat me and my mates who have been steadily building their property portfolio while you have been waiting for property to plummet.

    Reply

    • Avatar for Property Update

      August 26, 2012 @ 3:23 pm Michael Yardney

      Thanks David

      I agree with with you. Unfortunately there will always be doomsayers. Some genuinely believing their arguments and there seems to be another group when seem jealous of those who own property, not recognizing that this people had to work hard, save and take action.

      Reply


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