Australia's House Prices Overvalued

[Guest The Pom Queen]

​Fears that Australian house prices are in bubble territory have receded as price rises have moderated since the global financial crisis. But The Economist magazine says Australian property is still among the most expensive in the world.The Economist uses two ways for working out whether a property is overvalued or not. One is the ratio of disposable income per person to prices, a measure of affordability.

Melbourne prices are 16 per cent higher.

 

 

On this measure, Australian house prices are 24 per cent overvalued, the fourth-most overvalued of the 18 countries in the survey after France, the Netherlands and Canada.

The other measure is the prices-to-rents. On this measure, Australia is also the fourth-most overvalued in the world, after Hong Kong, Canada and Singapore. However, as property prices in the most developed countries around the world have been falling since the GFC, the overall risk of a property price bubble has decreased.

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Louis Christopher, the managing director of specialist property researcher SQM Research, says comparative studies need to fully account for the differences in tax treatment of property in each country. "Negative gearing" helps to drive investor demand for property and prices higher, he says. This is where if the costs of investing are more than income from the investment, the shortfall reduces the investor's income on which income tax is paid.

Christopher says Australian property prices are expensive by world standards. "But I cannot see any of the triggers that would cause a sharp downturn in prices at this point in time," he says. Except in parts of Melbourne and in some coastal holiday locations, there is no oversupply of residential real estate. Unemployment is low and interest rates are not likely to rise sharply, he says.

Auction clearance rates in Sydney and Melbourne are rising and record low interest rates will encourage more first home buyers into the market as the year progresses, Christopher says. An increase in first home buyers creates upward pressure on prices in the lower and middle parts of the market, he says.

Property researcher, RP Data, says Sydney property prices are up 3.7 per cent over the past year and Melbourne prices are 1.6 per cent higher. Property values across the capital cities contracted 0.5 per cent over the month of April, but RP Data says that is more due to seasonal factors, with the first three months of the year typically the strongest for price growth.

Tim Lawless, RP Data's director of research, said earlier this month the April results represent more of a stumble along the path to recovery than a sign of a renewed trend in price falls. ''When viewed in line with other metrics, such as auction clearance rates, private treaty indicators and some improvement in housing finance demand, it is likely that the negative April result will be a blip along the path to recovery,'' he says.

Christopher says there is some oversupply still in Melbourne among apartments in Southbank and Docklands, and still a lot of house and land packages to be completed in some ''outer-ring'' suburbs.

''But building approvals in Melbourne have tapered off a bit and we are finally coming to the end of the peak of the construction cycle in Melbourne,'' he says.

Prices are rising in Carlton, Richmond and Albert Park, Christopher says. Prices are also rising in many inner-east locations of Sydney, including Paddington and Surry Hills. They are also growing in Sydney's inner-east suburb of Elizabeth Bay after a substantial downturn in prices there, he says.

 

 

 

 

Read more: http://www.smh.com.au/money/investing/expensive-on-a-world-scale-20130525-2n3so.html#ixzz2US6Pgx9g

[Bobj]

Odd spot...A New Zealand dairy farmer came to Grasstree Beach, near Sarina, Qld for a short holiday. The average house price then was $360,000 within 80 metres of the beach. One he saw, he liked so much that he offered the owner $500,000. The owner had no intention of selling as he had just retired there. The dairy farmer asked what he wanted for the dwelling. The owner said that he would sell for $1 million. The dairy farmer bought it within 6 weeks. That was about 8 years ago.

 

Cheers, Bobj.

 

Forgot...Anothery, at the beach end of my street is a rather large 2 bedroomed house. It was being built at the same time as mine (1995/96). The owner paid $495,00, (beach front). The family split up and it was offered for sale at the same price a few years later, but no one wanted to pay that amount and it was vacant for about 8 or 9 months. A retired farmer bought it for $390,000. 3 years ago, he was offered $890,000 and knocked it back. The bloke who offered asked why he didn't want to sell. The owner said that he sold his farm for almost $6 million and didn't need any more money.

So, a house is only worth what someone is willing to pay for it.

Edited May 27, 2013 by Bobj

[Guest The Pom Queen]

Odd spot...A New Zealand dairy farmer came to Grasstree Beach, near Sarina, Qld for a short holiday. The average house price then was $360,000 within 80 metres of the beach. One he saw, he liked so much that he offered the owner $500,000. The owner had no intention of selling as he had just retired there. The dairy farmer asked what he wanted for the dwelling. The owner said that he would sell for $1 million. The dairy farmer bought it within 6 weeks. That was about 8 years ago.

 

Cheers, Bobj.

What would it be worth now Bob?

[Petals]

Its getting hard to get good property around here now, the houses seem to sell very very quickly, given that most of the smaller houses have a lot of land with them guess that is the draw card. The acreage properties are not in abundance, in fact there are never many for sale. People seem to stay until the children leave home and then sell, and if they are like us, they just stay. I just could not imagine living on a small block with neighbours close enough to hear them speaking anymore.

[Que Sera Sera]

5 houses have sold on our road this year alone , all of them sold within a month or two of being on the market . I really think as always it depends on where you live.

[Bobj]

What would it be worth now Bob?

 

I doubt it would sell above the average price. Just that a millionaire wanted it and was willing to pay.

 

http://www.realestate.com.au/buy/in-grasstree+beach,+qld+4740/list-1

 

Cheers, Bobj.

[Guest JK2510]

Oh house prices in perth....shocking,over valued...our rental is up for sale....had private inspection last Tuesday,offers x2 by end of Tuesday,offer subject to inspection by a builder(buyers family member)...looking at paying up to $600k for a house...

[Ausborn]

I cannot see prices falling dramatically. Some houses are sold the same day they are advertised. New builds don't sit on the market to long. As long as people keep buying and the supply is there, I can't see change. Supply and demand. Residential building is picking up and getting busy , so plenty are buying. Building companies seem to be able to be as greedy as they want when they are in this position.

[flag of convenience]

Prices will adjust come a downturn in the economy when folk start to tighten their belts. It will take firstly increases in unemployment followed by immigration decline.

 

There are other factors at work as well. For example baby boomers downsizing or leaving the housing market all together. This has barely began to impact yet.

The difficulty with many folk to obtain a loan on part time or casual work. Australia having one of the largest casual workforces in the world this must also impact at some stage.

 

When the downturn does take effect besides the declining demand from immigrants for new buys there will also be declines in the rental market, hence buy to rent will be less attractive to those doing so which keeps the prices higher than necessary at the lower end of the market.

 

Besides unless Australia is going down the path where the principle creator of wealth is through flipping houses, for ever increasing prices that it is only as number without any meaning like a board game.

 

Unlikely as at one point the first home buyers will baulk at generations of debt being passed down to their kids to pay.......

One country mentioned The Netherlands has come unstuck after years of ever increasing prices, much like Australia. Of course the scare tactics used by the industry will only go so far.

 

Rather shocking state of affairs the Australian housing industry though which is bound to end in tears.

Edited May 27, 2013 by flag of convenience

[Ausborn]

Prices will adjust come a downturn in the economy when folk start to tighten their belts. It will take firstly increases in unemployment followed by immigration decline.

 

There are other factors at work as well. For example baby boomers downsizing or leaving the housing market all together. This has barely began to impact yet.

The difficulty with many folk to obtain a loan on part time or casual work. Australia having one of the largest casual workforces in the world this must also impact at some stage.

 

When the downturn does take effect besides the declining demand from immigrants for new buys there will also be declines in the rental market, hence buy to rent will be less attractive to those doing so which keeps the prices higher than necessary at the lower end of the market.

 

Besides unless Australia is going down the path where the principle creator of wealth is through flipping houses, for ever increasing prices that it is only as number without any meaning like a board game.

 

Unlikely as at one point the first home buyers will baulk at generations of debt being passed down to their kids to pay.......

One country mentioned The Netherlands has come unstuck after years of ever increasing prices, much like Australia. Of course the scare tactics used by the industry will only go so far.

 

Rather shocking state of affairs the Australian housing industry though which is bound to end in tears.

 

 

So when's this down turn coming then oh wise one. Except for the mining industry which has just slowed down, but talk to most people in it working and they will happily tell you they see it picking back up again come the turn in goverment. Construction, farming and most other industries are doing just fine. Ford was bound to move offshore , that's no big deal in the scheme of things. There is no talk at all in the industry of house prices coming down. House price increases yes. Look at Perth, tradesman are run of their feet. They can't keep up with the demand.

You lot with the doom and gloom mentality do put a smile on your face. I'm sure if and that's a big if in ten years time Australia did go into a bad state, you lot would be raising glasses to each other. You talk the talk but in reality nothing of what your saying makes much sense. All a bunch of what ifs.

[VERYSTORMY]

Where i am, we are already seeing a drop - lots of guys that work in mining have being laid off and are now desperate to get rid of investment properties and i live in an area that has a lot of people who work in mining. Also seeing a lot of repossessions.

[Guest chris955]

Construction is doing just fine, other than shrinking for the 35th consectutive month you mean ?

http://m.theaustralian.com.au/business/breaking-news/construction-sector-declines-again/story-e6frg90f-1226636539699

 

Farmers are being offered loan interest loans by the Government because they are struggling and record numbers are going under.

 

Manufacturing is struggling big time as is retail and tourism.

 

Mining will miraculousy pick up again when Abbott gets in, that will be news to every mining expert I would say.

 

This is nothing to do with doom and gloom, look at the figures, it is called reality. Denying it wont make it change

[Ausborn]

Construction is doing just fine, other than shrinking for the 35th consectutive month you mean ?

http://m.theaustralian.com.au/business/breaking-news/construction-sector-declines-again/story-e6frg90f-1226636539699

 

Farmers are being offered loan interest loans by the Government because they are struggling and record numbers are going under.

 

Manufacturing is struggling big time as is retail and tourism.

 

Mining will miraculousy pick up again when Abbott gets in, that will be news to every mining expert I would say.

 

This is nothing to do with doom and gloom, look at the figures, it is called reality. Denying it wont make it change

 

 

I don't need your figures which you have to go searching for every time you TRY and prove your constant Australian bashing. I go to industry meetings with 3 of queenslands biggest builders every month, discussing health and saftey issues, work loads ect. there great for a free breakfast as well as telling you whats going on. Their sales are all picked up continuously this year.2009 , 2010 , 2011 were not so good. My brothers in Perth and run of his feet. Seen all the land getting cleared for more developments. According to our last newsletter 35 % of Queensland tradies are now working in fly in fly out positions , most relating to mine work or construction of housing for the mines. It's getting busy in residential housing again. That's a fact. I'm here, not sitting on a computer in England constantly bashing Australia . Look at every post someone makes on this forum praising Australia, most of the time your right behind them knocking them back. Great mod. Give yourself a clap.

[Guest chris955]

Thats fine then, as long as everything is OK. Its your opinion, its a shame you always have to make it personal.

[Xenon4017]

OnTheHouse is a good place to find out how many sales there have been in a particular suburb. It breaks down the last couple of year into quarters, and the also gives the annual figures going back about 15 years.

 

Seemingly, we're in a bit of a trough at the moment. Traditional economic theory would suggest that the number of sales will fall if either a)the price is too low and no one wants to sell, or b) the price is too high and no one wants to buy. Another interesting statistic is the amount of mortgages issued to new buyers, since these prop up the market as a whole. I'll leave the interested reader to find out where this data is headed.

[Chortlepuss]

Brisbane house prices have always seemed hopelessly overvalued in relation to earnings here, but even with a bit of a dip last year, houses seem to sell well . Even really nasty tiny town houses seem to be selling in Holland Park at the $400-$500k mark. So someone wants them, and presumably someone can afford to pay the mortgage. It's baffling to me. My hubby is a teacher - chance of owning a family property on his salary? Zilch!

[VERYSTORMY]

Mining is not going to pick up just because of a change of goverment. Companies are not investing or exploring because there is a lack of demand, there is an even bigger lack of demand forecast, the costs of mining in Oz has just become way too high is no longer sustainable and nobody has any money. Just take a look at the big boys - Newcrest - the biggest gold miner in Oz, has half of its gold operation in review to see if there is any future in the existing mines and has shelved all expenditure in Oz indefinatly. Barrick is in a world of pain globally after some poor decisions, BHP has slashed its budget and describes its plan foreward as "mining by austerity", Rio is slashing costs and has fired most of its exploration team. Newmont the same. Anglo has pretty much given up on Oz and shifted its focus to South America and Africa.

 

The mid tier companies are struggling to raise funds and loads have given up their ground in Oz in favour of other projects in the world. The juniors are suffering as there is no appatite now for risk and junior explorers are very high risk.

 

Hence why most of the expat guys i know in the game have left Oz or are planning to.

[Peach]

Mining is not going to pick up just because of a change of goverment. Companies are not investing or exploring because there is a lack of demand, there is an even bigger lack of demand forecast, the costs of mining in Oz has just become way too high is no longer sustainable and nobody has any money. Just take a look at the big boys - Newcrest - the biggest gold miner in Oz, has half of its gold operation in review to see if there is any future in the existing mines and has shelved all expenditure in Oz indefinatly. Barrick is in a world of pain globally after some poor decisions, BHP has slashed its budget and describes its plan foreward as "mining by austerity", Rio is slashing costs and has fired most of its exploration team. Newmont the same. Anglo has pretty much given up on Oz and shifted its focus to South America and Africa.

 

The mid tier companies are struggling to raise funds and loads have given up their ground in Oz in favour of other projects in the world. The juniors are suffering as there is no appatite now for risk and junior explorers are very high risk.

 

Hence why most of the expat guys i know in the game have left Oz or are planning to.

 

You're a bit of a stuck record, yours was the first mention of mining in the thread.

[Guest chris955]

You're a bit of a stuck record, yours was the first mention of mining in the thread.

 

​Maybe so but it was in response to the belief that for some bizarre reason mining would pick up when the Government changes which goes against what every mining expert is saying.

[Guest chris955]

When we bought our house in Brisbane 12 years ago one of the neighbours told us they paid almost the same for their place 10 years previous to that. In the next 10 years prices went up nearly 300%. The couple that bought our house were both working professionals and had to get a loan from parents to get the deposit.

 

Brisbane house prices have always seemed hopelessly overvalued in relation to earnings here, but even with a bit of a dip last year, houses seem to sell well . Even really nasty tiny town houses seem to be selling in Holland Park at the $400-$500k mark. So someone wants them, and presumably someone can afford to pay the mortgage. It's baffling to me. My hubby is a teacher - chance of owning a family property on his salary? Zilch!

[Peach]

​Maybe so but it was in response to the belief that for some bizarre reason mining would pick up when the Government changes which goes against what every mining expert is saying.

 

Bit of a Doh! moment. Apologies VS, I now see it wasn't you that brought mining into the thread initially.

[Guest Ptp113]

Prices will adjust come a downturn in the economy when folk start to tighten their belts. It will take firstly increases in unemployment followed by immigration decline.

 

There are other factors at work as well. For example baby boomers downsizing or leaving the housing market all together. This has barely began to impact yet.

The difficulty with many folk to obtain a loan on part time or casual work. Australia having one of the largest casual workforces in the world this must also impact at some stage.

 

When the downturn does take effect besides the declining demand from immigrants for new buys there will also be declines in the rental market, hence buy to rent will be less attractive to those doing so which keeps the prices higher than necessary at the lower end of the market.

 

Besides unless Australia is going down the path where the principle creator of wealth is through flipping houses, for ever increasing prices that it is only as number without any meaning like a board game.

 

Unlikely as at one point the first home buyers will baulk at generations of debt being passed down to their kids to pay.......

One country mentioned The Netherlands has come unstuck after years of ever increasing prices, much like Australia. Of course the scare tactics used by the industry will only go so far.

 

Rather shocking state of affairs the Australian housing industry though which is bound to end in tears.

 

​Been hearing that bollox for over 4 decades and it hasn't happened yet. Keep trying......

[fish.01]

Brisbane house prices have always seemed hopelessly overvalued in relation to earnings here, but even with a bit of a dip last year, houses seem to sell well . Even really nasty tiny town houses seem to be selling in Holland Park at the $400-$500k mark. So someone wants them, and presumably someone can afford to pay the mortgage. It's baffling to me. My hubby is a teacher - chance of owning a family property on his salary? Zilch!

 

Yes, at those prices you might as well buy a house instead. I guess the townhouse market has a life of its own.

[Harpodom]

Hi mate. Was your meeting anything like these 2 blokes (the 2 in the truck, obviously)?

 

 

 

I don't need your figures which you have to go searching for every time you TRY and prove your constant Australian bashing. I go to industry meetings with 3 of queenslands biggest builders every month, discussing health and saftey issues, work loads ect. there great for a free breakfast as well as telling you whats going on. Their sales are all picked up continuously this year.2009 , 2010 , 2011 were not so good. My brothers in Perth and run of his feet. Seen all the land getting cleared for more developments. According to our last newsletter 35 % of Queensland tradies are now working in fly in fly out positions , most relating to mine work or construction of housing for the mines. It's getting busy in residential housing again. That's a fact. I'm here, not sitting on a computer in England constantly bashing Australia . Look at every post someone makes on this forum praising Australia, most of the time your right behind them knocking them back. Great mod. Give yourself a clap.

[sipidan]

http://m.perthnow.com.au/news/western-australia/market-forecast-whats-in-store-for-perth-real-estate/story-fnhocxo3-1226666480513

 

I like the comment made by:Old, wise and wealthy because of it.Posted at 7:03 PM June 20, 2013

Perth has seen the biggest exodus of real estate agents and reps from the industry in the last 20 years (almost 40%... Why would they all be leaving if things were so rosy..? I'd bet London to a brick that house prices will be at least 20% 'LOWER' (maybe even more!) within the next two or three years. I honestly don't understand why a few people can't grasp the fact that house prices can plummet like they have done in Greece, England, Spain, Wales, Ireland, Italy, Scotland, Portugal, Japan, Netherlands, Canada, Poland and of course the devastation in the USA where houses are selling for as little as $10,000 US. We are not immune people and we will see that for ourselves very soon... If you are looking for a home to 'live in', sit tight, wait and watch house prices drop and then buy when you can afford it. If you're looking for an 'investment', then steer clear of property and shares and buy gold.