There are more interesting articles, commentaries and analyst reports on the Web every week than anyone could read in a month.
Each Saturday morning I like to share some of the ones I’ve read during the week.
The weekend will be over before you know it, so enjoy some weekend reading.
Why it was easy to get 2018 property prices predictions so wrong
What does the next year hold for property prices?
While many experts can have their view – the truth is sometimes they get it wrong.
An article from The Financial Review looks at why it was easy to get it wrong for 2018.
Midway through 2017, competitive bidders with a strong fear of missing out, particularly in Sydney and Melbourne, were continuing to drive up prices, often by hundreds of thousands of dollars over reserve.
At that point, several of the country’s top economists made predictions about where property prices would head in 2018.
Just one economist surveyed by The Australian Financial Review midway through 2017 predicted prices would fall.
Some thought prices could increase in Sydney by as much as 9 per cent.
National house prices declined 2.7 per cent annually with Sydney leading the way.
Just a few months later, prices peaked and Sydney’s median house price fell by 1.9 per cent to $1.17 million.
Then at the end of November, the government announced a royal commission into misconduct in the banking and financial services sector.
So far this year, house prices have fallen 2.6 per cent nationally and 4.9 per cent in Sydney, according to September’s CoreLogic figures.
BIS Economics’ Angie Zigomanis was the most accurate with his forecast of a 1 per cent drop nationally and 4 per cent fall in Sydney.
Mr Zigomanis said the figures were predicated on a tightening of the lending environment for investors, particular in Sydney, last year.
“A key driver in the Sydney boom had been the investor markets,” Mz Zigomanis said.
“It’s going to be important to see where sentiment goes from here on in – will investors and owner occupiers keep retreating for the market?
That’s the big question mark for us. On the other hand we still expect strong population growth in Sydney.”
While several economists from other institutions expected tightened macroprudential policy to weigh on housing demand, it was to a much lesser extent.
HSBC predicted Sydney house prices to grow more moderately in 2018, compared to 2017, by between 7 and 9 per cent, while the expectation nationally was for growth of between 3 and 6 per cent.
NAB expected 4.3 per cent growth in prices across the country and 4.9 per cent in Sydney for 2018, while investment bank JP Morgan anticipated a more subdued result of 2 per cent nationally.
While investment bank UBS jumped the gun slightly by “ringing the bell and calling the top” of the market back in March 2017, it nevertheless expected prices to grow by between 0 per cent and 3 per cent in 2018.
But it’s little wonder so many got it wrong as the perfect storm was only just starting to brew.
Faced with higher taxes, demand from foreign buyers was softening, wages remained stagnant at near-record lows, a surge in new apartments hit the market adding to supply and then, to top it off, the federal government announced the banking royal commission.
Group chief economist for NAB Alan Oster said economists at that point in 2017 had underestimated how much financial conditions would be tightened while there had also been less money come from China than expected.
“Most of us would have also assumed wages would have picked up by now but they haven’t,” he said.
Nevertheless Mr Oster said the fall in house prices should be put in perspective.
“I’d say the housing market is still pretty healthy. Sydney is still up 26 per cent, and Melbourne is up 33 per cent [from four years ago],” group chief economist for NAB Alan Oster said. “I see this as a mild mid-cycle adjustment.”
Read the full article here
Australian jobs attracting Kiwis again
It would seem that there’s one country that has it’s eye on Australian jobs.
Kiwis heading to Oz again…gradually
At the peak of Australia’s mining boom Australia was attracting more than 50,000 permanent and long-term migrants per annum from New Zealand (and 40,000 on a net basis).
Australia’s economy was really booming back then, and the lure of a labour shortage and higher pay was too strong to be resisted.
But then came the resources construction downturn and steadily rising unemployment for Australia, while New Zealand managed to turn its economy around following its post-financial crisis malaise.
There was also the Christchurch factor.
Only a visit last year to the city helped me to appreciate the sheer potential scale of the rebuild operation for what is a relatively small country and population, and this may have played a role in attracting some construction workers home to New Zealand.
Only now is Australian beginning to close the unemployment rate gap, with our seasonally adjusted unemployment falling rate falling to a near 7-year low of 5 per cent, while at the last count New Zealand’s unemployment rate (measured quarterly rather than monthly) ticked up a notch to 4½ per cent.
Wages growth has been similarly sedate in both jurisdictions.
Read the full article here
Sydney, Melbourne house prices to fall up to 20 percent: AMP
It’s no secret that prices have fallen in the two major capitals.
But just how far are they set to fall?
According to an article on finance.nine.com.au prices could fall up to 20 percent.
House prices in Australia’s biggest property markets are likely to see top to bottom falls of 20 percent, AMP has warned.
Dr Shane Oliver, Chief Economist of AMP’s Capital division, has predicted that house prices in Sydney and Melbourne are likely to continue plunging as the major banks clamp down on riskier lending practices.
Blaming tightening credit conditions, supply rises, and “a negative feedback loop from falling prices”, Dr Oliver said models are showing dire prospects for owners over the next two years.
“For some time, we have been expecting top to bottom falls in Sydney and Melbourne prices of 15 percent spread out to 2020, implying price declines around 5 percent per annum,” Dr Oliver wrote in a research note.
“However, the risks are starting to skew to the downside – particularly around tighter credit and falling capital growth expectations made worse by fears of a change in tax arrangements.
“As such we are now allowing for a 20 percent decline in prices in these cities, again spread out to 2020, which would take average prices back to first half 2015 levels.”
Other factors denting prices in Sydney and Melbourne include a cutback in foreign demand from Chinese investors – down by as much as 70 percent since 2015 – and a rising supply of empty units that threaten to drag down apartment prices.
Dr Oliver reassured market watchers that while Sydney and Melbourne are likely to experience significant falls in value, the rest of the country will remain relatively stable.
“With prices now falling naturally the calls for a property crash are getting a lot of airing,” wrote Dr Oliver.
“But these have been wheeled out endlessly over the last 15 years or so.
“Our assessment remains that a crash (say a 20 percent or more fall in national average prices) is unlikely unless we see much higher interest rates or unemployment (neither of which are expected) or a continuation of recent high construction for several years (which is unlikely as approvals are falling) and a collapse in immigration.
Capital City median dwelling values*
City: Change over 12 months: Median value: Sydney – 6.1 percent $847,948 Melbourne – 3.4 percent $697,457 Brisbane + 0.8 percent $495,474 Adelaide + 0.7 percent $438,570 Perth – 2.8 percent $452,138 Hobart + 9.3 percent $443,711 Darwin – 3.7 percent $436,936 Canberra + 2.0 percent $598,326 National – 2.7 percent $550,610
*CoreLogic September Home Value Index Results. Includes both apartments and houses.
Read the full article here
Labor ‘will add further downward pressure’ to house prices that are already falling at an increasing pace
With an upcoming election year, many industry experts fear of how a Labor government may affect the housing market.
This article from Business Insider looks at what affect Labor will have on housing prices.
If recent polling and the Wentworth by-election result are anything to go by, Australia could have a change in government at the next federal election.
Whether sooner than May next year or otherwise, the signs right now point to a Labor Party victory, and with it, the potential for widespread changes on the tax treatment of housing.
According to new analysis from RBC Capital Markets, Labor’s announced policies to limit negative gearing to new dwellings and halve the capital gains discount from 50% to 25% for any property held for a period of 12 months or longer carries the potential to exacerbate recent weakness in the housing market, even with the grandfathering of existing arrangements for homeowners.
“We expect the proposed changes to negative gearing and halving of the capital gains discount to add further downward pressure to house prices,” says Su-Lin Ong and Robert Thompson, senior members of RBC Capital Markets Australian team.
“At present, around 90% of investor finance commitments are for established rather than new dwellings, suggesting that there is room for a considerable shift in investor behaviour.”
Fitting with prior analysis from the Grattan Institute, RiskWise/Wargent Advisory and Australian Treasury that suggest these tax changes will lead to larger price falls than what would otherwise have been the case, RBC says these policies, at a time when lending standards have been tightened and foreign investment is weakening, will likely see national home prices fall significantly further in the years ahead.
“Our own base case forecast is for national house prices to experience falls of about 15% in peak to trough terms by the end of 2020,” Ong and Thompson say.
“This is likely to result in a protracted downturn, with annualised price declines running at about 6% to 7% before we see the cycle turning around the end of 2020.”
While the pair say this “paints a fairly grim picture for housing”, they says falls of such magnitude are not out of the question given median values surged 50% from late 2011.
“The previous two dips in 2008/9 and 2010/11 were shallower, with national prices falling around 5% in peak-trough terms, but both periods saw the RBA cutting rates,” they say, adding that on this occasion the risk is the RBA will be tightening policy settings, potentially by the end of 2019.
Read the full article here
Want to be a great neighbour? Here are some tips from etiquette experts
Long gone are the days when we borrowed a cup of sugar from our neighbours, but that doesn’t mean we can’t create a great relationship with them.
This article from Domain.com.au looks at the etiquette rules good neighbours should have.
To live in a great neighbourhood, and enjoy all the comforts that come with being part of a tightknit community, you have to be a good neighbour yourself.
There’s certainly no shortage of examples of bad neighbours in TV shows and films (think Homer Simpson or any neighbour from “Desperate Housewives”).
But what does it mean to be a genuinely good neighbour?
Here, etiquette experts share ways to build and maintain positive, long-lasting relationships with your neighbours. (It takes more than simply lending someone a cup of sugar.)
Share important information
One of the best ways to welcome new neighbours is by providing them with a “need-to-know” checklist, says Diane Gottsman, author of Modern Etiquette for a Better Life.
If you know a great housekeeper, handyman, dry cleaner, dog walker or lawn-mowing service, give a sheet with their contact information to your new neighbour.
Include suggestions on the best and nearest supermarkets restaurants and pharmacies.
Keep up your curb appeal
Just one ugly home in a community can reduce property values for the entire neighbourhood.
You don’t want to become known as the owner of “that ugly house” – i.e., the one with knee-high grass, overflowing gutters, dirty windows, peeling paint or toys scattered across the front yard.
“You should be cleaning up the front of your house as much as possible,” says Lizzie Post, co-president at the Emily Post Institute, a Burlington, Vermont-based etiquette-training business.
Be a responsible pet owner
“Pets can be a big bone of contention between neighbours, so you need to keep them in check,” etiquette consultant Lisa Mirza Grotts says.
Start with Pet Etiquette 101: Clean up after your pooch.
“When you take your dog for a walk, do not deposit your dog’s poop bag into someone else’s trash can,” Gottsman says.
“It sounds basic, but it happens a lot.”
Organise a service project
You may want to attend street parties, local barbecues and other neighbourhood events so you can mingle and form friendships.
But to go an extra mile, suggests Elaine Swann, founder of the Swann School of Protocol, coordinate a community-wide project that neighbours can participate in together, such as decking out your neighbourhood’s playground for occasions like Easter or Halloween.
Live by a senior citizen?
Assemble a group of neighbours to help hang lights outside the person’s house for Christmas.
Invite your neighbours over
Recently moved in?
One way to build rapport is by inviting your neighbours over for a housewarming party, instead of inviting only your friends.
But “let people know that you’re not accepting gifts,” Post says.
“This should be simply a social event.”
Once you’ve established a relationship, you could form a neighbourhood book club or weekly softball game to deepen friendships.
Don’t be the town gossip
Part of being a good neighbour is avoiding gossip.
But, Post says, there’s a difference between “good” gossip and “bad” gossip.
“If a neighbour’s mother passes away, communicating that news to other neighbours so that people can attend the funeral is good gossip,” she explains.
Bad gossip, meanwhile, spreads negative rumors (e.g., “I heard Jerry got fired from his job. I can’t say I’m surprised”).
Be a respectful party host
Keeping music at a reasonable noise level when you’re throwing a party is common sense.
An aspect people frequently overlook, though, is minding where their guests park.
“The last thing you want is for your guest to block your neighbour’s driveway,” Gottsman says.
You also don’t want your guests’ cars to take up the entire block, which is why Gottsman suggests hiring a valet service to handle guest parking.
Play by the rules
When you live in an apartment block, you have to comply with the strata rules.
Still, a lot of people don’t take the time to review their building’s rules, Swann says.
These rules may dictate parking restrictions, rubbish and recycling schedules, landscaping requirements, move-in procedures and more.
Breaking the rules can not only result in fines but also ruffle feathers with neighbours.
“It’s your responsibility to police yourself if you want to avoid conflict,” Swann says.
Handle conflict judiciously
No matter how friendly you are, you may have disagreements or quibbles with neighbours.
Handling these conflicts with tact is crucial.
Generally, if you have an issue with a neighbour, your first line of defense should be to try to resolve the problem with the person directly.
This should be done face-to-face, not by text message or email, where messages can get misconstrued, Swann says.
Read the full article here
Weekend video: How to Draw Spinning Wheels Optical Illusion
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