Property Bubble in Australia

[Guest Gibbo]

Arrived in Perth in July 09 from Ireland and after witnessing what happened with the property market and economy there it was great to see the total opposite in Perth. At first it was a very refreshing feeling that we had landed in a country that had so much optimism and good feeling about it.

We spent the first few weeks settling down and getting our bearings etc. After that we started looking at the properties in the areas where we would like to live ( NOR ).

After seeing what was on offer and the asking prices for these homes , it very quickly took us back to a couple of years previous in Ireland. Queues of people attending home opens , houses with sold signs up after being on the market a week , auctioneers saying that they have had offers on houses far over the asking prices , a feeling that if you didn't get on the ladder now then you will be priced out of the market.

I just get a bad feeling about the whole situation.

You are told that Australia has side stepped the worst of the recession and the next boom is on its way (Gorgon etc.) . But what Australia has done is try to prop the economy up with stimulus packages to keep the whole thing ticking along and provide jobs but I think the FHOG simply fuelled an already inflated property bubble which at some point will have to be paid for. They encouraged people to spend money that perhaps they could not afford to do.

The Australian press, in many instances , seems to talk up the market also and I wonder if this is due to the ammount of advertising revenue it recieves from the real estate industry.

Also the ammount of work available seems to be slowing down. The visas for trades people are also being cut back. Even for nurses , the work is not as abundant as it once was.

The banks are raising interest rates and demanding higher deposits from potential buyers.

I am not qualified in any way to try to predict where this is all heading but it is just a view from the ground.

Not trying to deter anybody from moving to Australia , just giving my opinion on the current situation as emigrating is a very expensive and emotional journey that until you have done it you will never understand . We all have dreams but the dream just might be a little harder to achieve at this present time.

[Guest iselinger]

The big difference in Oz is that there is a constant stream of new immigrants who need housing and unlike the UK they are skilled workers (because of the immigration policy) who can afford/want to buy their own property.

 

I think the UK is more expensive than here. OK I am relatively well off (no apologies I have worked bloody hard for 40 years). I have a nice house on the lower north shore 20 minutes drive from Sydney CBD backing onto the bush with great views over middle harbour and a pool. There is no way that I could buy the equivalent property in London with the same amenities. It would cost at least the same in GBP as this is worth in AUD. I know because I am returning to the UK in a few months and have started looking at purchasing in the UK again. I spent all Sunday afternoon looking at 'Rightmove' and couldn't find anything I liked that I could afford.

[Guest Gibbo]

The big difference in Oz is that there is a constant stream of new immigrants who need housing and unlike the UK they are skilled workers (because of the immigration policy) who can afford/want to buy their own property.

 

Average salary for new migrant ? Average house price at present ? Not sure if this is sufficient to prop up the market.

[Guest iselinger]

Average salary for new migrant ? Average house price at present ? Not sure if this is sufficient to prop up the market.

 

 

Yes but its all about the ladder. If you have lots of people trying to get on the first rung then they push all the others up!

 

We will see what happens. No one knows but everyone has an opinion.

 

Nothing I can do about it apart from keep my fingers crossed that it keeps going for another four weeks when my house here in Oz is due to go to auction!

[Guest Gibbo]

Yes but its all about the ladder. If you have lots of people trying to get on the first rung then they push all the others up!

 

We will see what happens. No one knows but everyone has an opinion.

 

Nothing I can do about it apart from keep my fingers crossed that it keeps going for another four weeks when my house here in Oz is due to go to auction!

 

 

best of luck with the house sale. good luck with finding your UK property.

 

By the way , I am not one of these people that is hoping a crash will happen as I have seen the misery and stress this can cause normal working families with large mortgages, it is just an observation re: the property market in Perth at the moment.

Hopefully it will just even out at this stage.

The reason I posted is to give people some insight into some of the possible pitfalls of the move.

If a family who are desperately trying to migrate sells their home in the UK for a sum that is way under what they expected to achieve then purchases a property in Australia at the peak of the market it could turn a dream into a nightmare for them.

[Guest gratom]

The big difference in Oz is that there is a constant stream of new immigrants who need housing and unlike the UK they are skilled workers (because of the immigration policy) who can afford/want to buy their own property.

 

Thanks for last views/replies--particularly from those on the ground.I'm really sorry for 'confused irishman',you are clearly having suffering badly---hopefully everything will come right soon.A friend in Dublin tells me that house prices[if you can sell at all] are down by 40% and still falling.Is this your experience??.

I started above with Iselingers interesting quote;but the point is fatally flawed---the new immigration rules will lower the numbers coming to Oz quite substantially.This will be exacerbated by the very poor exchange rate[i personally know of two medical types who are now not bothering precisely because of that factor].Also the numbers of cashed up pommies will decrease because of the aforementioned.All of this will exert downward pressure on prices,the new March bank guarantee rules will cut credit and force up the cost of what is available.Interest rates must rise because inflation is on the rise and the average Australians debt is 100.4% of GDP[far higher than the UK--where prices are falling].The question is will the bubble deflate gently or with an almighty bang---being pessimistic I fear it will be the latter.If there is a double dip recession/depression then God help us because the politicians are about as informed or inspiring as a corpse entering a state of rigor-mortis.Thanks for all your points---keep them coming

[gemjay]

The big difference in Oz is that there is a constant stream of new immigrants who need housing and unlike the UK they are skilled workers (because of the immigration policy) who can afford/want to buy their own property.

 

Thanks for last views/replies--particularly from those on the ground.I'm really sorry for 'confused irishman',you are clearly having suffering badly---hopefully everything will come right soon.A friend in Dublin tells me that house prices[if you can sell at all] are down by 40% and still falling.Is this your experience??.

I started above with Iselingers interesting quote;but the point is fatally flawed---the new immigration rules will lower the numbers coming to Oz quite substantially.This will be exacerbated by the very poor exchange rate[i personally know of two medical types who are now not bothering precisely because of that factor].Also the numbers of cashed up pommies will decrease because of the aforementioned.All of this will exert downward pressure on prices,the new March bank guarantee rules will cut credit and force up the cost of what is available.Interest rates must rise because inflation is on the rise and the average Australians debt is 100.4% of GDP[far higher than the UK--where prices are falling].The question is will the bubble deflate gently or with an almighty bang---being pessimistic I fear it will be the latter.If there is a double dip recession/depression then God help us because the politicians are about as informed or inspiring as a corpse entering a state of rigor-mortis.Thanks for all your points---keep them coming

The biggest driving force in Australia behind the Housing ponzi scheme is SENTIMENT, its just on another level compared to the UK, the government in Australia know exactly what they are doing, they want a secound term and what better way to do that, than to tell the population how much there houses have climbed in value (wealth effect) remember 65-70% GDP in Australia is property related, we are 2 years away from a collapse IMO which will be triggered by a Double dip world recession with the US bond market being the trigger, lack of available are expensive credit, Baltic Dry sea index will show the way, China is itself in a huge bubble with most of the demand for Australian resoures being used there for domestic needs (for how long?). I am also pessimistic in regard to the global economy and believe we are in a Deppression (which is 2 years of recession). All the stimulus moneys which have been thrown about will have to be paid back via cuts in services and higher interest rates due to Inflation build ups (Australia have already started the moves up they are hoping other nations follow soon).:biggrin:

[Guest iselinger]

I don't know how many of the people commenting on this thread are actually living in Oz and speaking from real experience. I am.

 

Don't kid yourself that the Brits are considered important either as a source of talent or wealth. They aren't! To be honest there are lots of Ozzies (with Brit ancestors) who would be pleased never to see another whinging Pom!

 

There is now real money coming into Oz from all over Asia and India. The same reasons that have attracted the Poms for the last 40 years also attract the rest of the world. Climate, standard of living etc.... Its just that now they can afford to come and have the skills or are willing to learn and work hard. Just take a walk round the streets of Sydney or one of the major regional centres like Chatswood and you will see for yourself.

 

If it weren't for family who resolutely refuse to move out here (no idea why) we wouldn't be going back.

 

Getting back to the point - The bubble in Oz, if that is what it is, will only burst if the rest of the world economies fall apart and just like last time it wont hurt as much here as the other countries. If I was going to be anywhere when it happens I would want to be here. At least I can enjoy the sunshine. :-)

[gemjay]

Australian unemployment falls to 5.3% in Feb (in other words – CASUAL JOBS). Such labor output does not add value. Factor in another rate rise within the next 2-4 months and Australia, the debt laden society, WILL BE FOLLOWING THE USA in its footsteps. Many think the resource sector will save Australia. Think again. 65-70% of GDP is property related, so watch what another few rate hikes in 2010 does down-under to this rate sensitive industry.

Total debt in Australia is at the same level as in the US, although Australian Federal government. debt is not as high a % of GDP as in the US, UK or other Western Europe nationals.:biggrin:

[Guest boa]

I'm not sure where your information comes from (the pub ? ) but the UK is the single biggest overseas investor in this country ahead of the USA overall and judging by the British doctors, nurses, scientists etc here I would consider the British to be important as both a source of wealth AND talent. These things aren't influenced by the racists you mention.

 

 

Don't kid yourself that the Brits are considered important either as a source of talent or wealth. They aren't! To be honest there are lots of Ozzies (with Brit ancestors) who would be pleased never to see another whinging Pom!

 

 

[gemjay]

I'm not sure where your information comes from (the pub ? ) but the UK is the single biggest overseas investor in this country ahead of the USA overall and judging by the British doctors, nurses, scientists etc here I would consider the British to be important as both a source of wealth AND talent. These things aren't influenced by the racists you mention.

Behind many Australian mining companies the Uk is a major driving force and always will be, as for skills the Uk has plenty given the unique diverse Professions of which many just dont exist in Australia hence skills shortage.:biggrin:

[Guest boa]

Exactly right, this

"Don't kid yourself that the Brits are considered important either as a source of talent or wealth. They aren't!" was a very bizarre comment given the facts.

[Guest SO,DIZZY]

i currently live in ireland where the property bubble burst. and it burst big time. i live in a town called carlow in the southeast of ireland. the building trade has all but stopped. off the top of my head i can think of about 200 houses that sit empty because the banks wont lend and the people wont pay what is being asked. all the major sources of employment have dried up in this town. the sugar factory , braun and lapple(not apple) have all pulled out, the building work is at a standstill with no new houses being built and no one can get loans to improve their homes because the banks wont lend. halifax bank just pulled out of ireland . they had a branch in carlow town. as you can see the place is a black hole for unemployment. the rest of ireland isnt fairing much better. all of this is the knock on effects of a housing bubble that burst. BUT our authorities let the rate of building out weigh the rate of demand. for example we needed 29,000 houses a year in ireland to meet demand so the powers that be allowed 90,000 a year to be built for 3 years running.others years they allowed 50-60,000 houses to be built. according to the green party we now have a surplus of houses to the tune of 200-300,000. thats ten years of house building done!!!

 

the bubble will burst in australia but if managed properly the effects should be minimal on the work force, unfortunately the irish govt did not manage it properly and as a result most tradesmen are f*****d in ireland. economies run in cycles, so a house price "correction" may be seen as inevitable. looking at how the australian govt handled the recent world downturn i think you guys have some reason to look forward with some optimism. the irish govt were like kids in a candy store with their communion momey when they got it.they spent spent spent. when the inevitable downturn came they were in massive debt within six months of coming out of the biggest economic boom in it history. tell me thats not massive econmic mismanagement. sorry about the rant but i have been on the recieving end of my govt mistakes for two years now. and they still want us to pay more. maybe if i could get a job i'd be happy to oblige.:arghh::arghh::arghh:

 

 

 

We are Scottish and the same thing happened in scotland my hubby was one of the tradies(brickie) effected by the housing market falling off a cliff, so we know first hand the devastating effects of this EC. The problem in Scotland was not a glut of housing but over inflated house prices as a result of the banks lending far too much to far too many.. And although I think the banks are greatly responsible with there diabolical lending policies (lending ten times yearly salaries) I think there is an elemant of personal responsibility for everyone who borrowed and then found having to pay back a half a million pound morgage took all the fun out of having the half a million pound house im so surprised that this could happen again so soon after the last big housing crash ..

 

We as a nation were only at the tail end of entangling ourselves from the last recession and housing crisis.. I remember the hardships we endured as children in the late 70's and most of the 80's when my dad and grandfather were made redundant from British Steel they were bloody awfull times the whole county went to the dogs under Thatcher unless you were in the money already... and by the way very few people owned there house back then well untill Thatcher told everyone they could buy there council house for peanuts and when they houses were all bought up you could not get a decent council house to rent as they were all gone (unless you were prepared to live in tips on the worst estates)... so people like now were forced in to taking morgages or renting from the private sector which put demand for housing up and forced rents up and in turn house prices.. all a merry go round.. but that recession was due to mostly unemployment Thatcher sold of all public sector industries, coal, gas, bt, steel, all goverment contracts went overseas we started buying cheep imports but were putting british workers out of bussiness as a result.. the dole lines were endless...

 

If the labour goverment when they came to power had for instance built a new stock of public sector housing to rent to hard working families who were paying through the nose to private landlords to stay in decent areas instead of only replacing or upgrading the sh** holes that most council tenants were living in on bad housing estates no one wants to live in as they are over run with neds and junkies the boom would not have been able to get so out of control there were no decent housing options available for people who were living in this situation they want more out of life and as a result they took financial risks to morgage. a house is only worth what someone else is prepared to pay for it in the end, and far too many payed far too much as a result of being able to borrow far too much...

We now live here in Australia were the cost of living is very high wages are not in line with the cost of living (my hubby is earning less than back home but we are paying much more for just about everything) and house prices here are getting out of control too, although you get more house for your money, its just unfortunate you dont get very much when you have very little money... we didnt sell up back home because we wanted to test the water here first but we are seriously considering it now as we are paying 900 pound a month rent for not the biggest of 3 bed houses and we are pretty sick of that money going towards someone elses morgage and because of the constant influx of immigrants there is always a demand here for housing keeping rents high so we are looking at increases 7 percent last year.... we actually thought there would be more building work here because of the influx but thats so not the case.

lots of people rent...

On the plus side if we were at home he would have no work and would be worse of...

but there is not the glut of work that everyone raves about in oz so tradies beware... we are always constantly under presure on the work front and it is definetly drying up...

[Guest iselinger]

Boa,

 

Maybe I wasn't clear. My point was not the Brits / other immigrants who are already here but the ones that aren't here yet! These are what will fuel the property demand.

 

As far as inward investments go its difficult to find up to date figures because its all commercially confident but Trade figures are available and the UK is not exactly the top of the list see below.

 

There may be a lot of UK investors who are putting their money into Australia but there's one hell of a lot of Chinese money coming or ready to come in. Chinalcos recent bid for RTZ (AUD 28 billion) is an example of the sort of money they have. OK BHP managed to mess it up for them but the Chinese wont go away for long.

 

Australia’s Direction of Trade 2008/9

“China was Australia’s largest individual two-way goods and services trading partner in 2008-09, accounting

for 14.7 per cent ($83.0 billion) of total trade.

" APEC members accounted for 67.9 per cent of Australia’s total trade.

" Exports to APEC members increased 24.5 per cent; ASEAN members grew 3.1 per cent; OECD countries increased 22.9 per cent; and members of the European Union rose 12.9 per cent.

" Imports from APEC members rose 5.2 per cent; ASEAN members grew 2.7 per cent; members of the

European Union rose 5.2 per cent; and OECD countries increased 3.2 per cent.

Major Export Sources

" Japan was Australia’s largest export market, accounting for 19.3 per cent

($55.0 billion) of total exports in2008-09 – rising 46.7 per cent.

" China was Australia’s second largest export market ($44.4 billion) – increasing 41.3 per cent.

" The Republic of Korea was Australia’s third largest market ($21.0 billion) – rising by 31.0 per cent

UK is the sixth most important export market

Major Import Sources

“China was Australia’s largest import source, accounting for 13.8 per cent ($38.6 billion) of total imports in 2008-09 – rising 18.7 per cent.

" The United States was Australia’s second largest import source ($35.6 billion) – rising 4.9 per cent.

" Japan was Australia’s third largest import source ($20.3 billion) – decreasing 7.6 per cent.

UK is the fifth most important import market

http://www.dfat.gov.au/publications/stats-pubs/cot_fy_2008_09.pdf

[Guest boa]

I'm not referring to exports or imports, I am referring to investment and as the UK is the largest overseas investor in this country your statement was incorrect, I would say that Brits are considered important as a source of talent and wealth.:smile:

Our increasing dependence on China is a major concern though, I heard someone refer to it as putting all our eggs in one basket and that seems to sum it up well, although as long as PM Crud continues to yes sir no sir the Chinese we should be fine :rolleyes:

[heyyu]

I'm not referring to exports or imports, I am referring to investment and as the UK is the largest overseas investor in this country your statement was incorrect, I would say that Brits are considered important as a source of talent and wealth.:smile:

Our increasing dependence on China is a major concern though, I heard someone refer to it as putting all our eggs in one basket and that seems to sum it up well, although as long as PM Crud continues to yes sir no sir the Chinese we should be fine :rolleyes:

 

so are sth africans canadians americans kiwis cubans italians greeks slavs croats and anybody else we wont stop if migration from GB stops:wink:

[Guest boa]

Absolutely, migrants aren't the major source of wealth overall. If there were no more UK migrants I suspect the UK would still invest it's $400 odd billion regardless. :biggrin:

[heyyu]

Absolutely, migrants aren't the major source of wealth overall. If there were no more UK migrants I suspect the UK would still invest it's $400 odd billion regardless. :biggrin:

 

thats because they know a good thing when they see it:biggrin:

[Guest boa]

Yes, the UK is also the largest foreign investor in the US.

[heyyu]

how can they afford it

[Guest boa]

Because the UK is still extremely rich, don't let the up and downs of the economy mislead you :wink:

[heyyu]

well you;d think they would have a little faith in thier own countrymen and invest a little more in them to help them out a bit at the moment

[Guest boa]

The fact that there is outward investment doesn't mean there isn't inward investment as well, that applies to all countries.

[heyyu]

maybe they can try a little harder,and help the unemployment situation in there own country as opposed to another

[gemjay]

In Australian Financial Review Today very interesting read.

 

"Australia’s banks threaten to constrain the country’s economic growth and are helping fuel a household debt binge, National Australia Bank’s head of business banking, Joseph Healy, said yesterday".

 

The big four banks are now investing more money in the Housing Bubble than in Business investment, pretty obvious really when you look at the level of mortgage debt out there now, when will it end?