Bank Warning on Australian Property Prices

[connaust]

Bank Warning on Australian Property Prices

 

 

Morgan Stanley analyst bearish on housing market. LOCAL property investors have become "Ponzi borrowers" in a market 40 per cent overvalued, according to a Morgan Stanley strategist.

 

In a bearish note to clients this morning, Morgan Stanley strategist chief strategist Gerard Minack warned Australia's housing "bubble" could be pricked should banks tighten credit or "loss-making" middle-class landlords start to sell.

 

He argues owner-occupiers are in too much debt and investors are riskily relying on capital gains to repay their loans and interest repayments.

 

Compounding the problem is "ill-advised policy", such as the government's first home-buyers grant, which has combined to make Australian houses "40 per cent above fair value", Mr Minack says.

 

"Buying an asset that's over-priced never ends well," he said. "The real return on residential property over the next decade is likely to be negative, in my view."

 

 

No surprise, the supposed increase or spruiking of house prices has been based upon "population growth" spike due to labour demand till 2008, returning Australians, international students and backpackers (statistics and related info lags a lot...). But this has slowed dramatically with new student enrolments for 2011 "falling off a cliff", permanent residency blocked for many due to "immigration debate" so they are either not coming in the first place or are returning home, thus investors assuming they can rent out their properties should be very wary..... owner occupiers should be fine in medium term.

[Guest lynneunderwood]

Bank Warning on Australian Property Prices

 

 

Morgan Stanley analyst bearish on housing market. LOCAL property investors have become "Ponzi borrowers" in a market 40 per cent overvalued, according to a Morgan Stanley strategist.

 

In a bearish note to clients this morning, Morgan Stanley strategist chief strategist Gerard Minack warned Australia's housing "bubble" could be pricked should banks tighten credit or "loss-making" middle-class landlords start to sell.

 

He argues owner-occupiers are in too much debt and investors are riskily relying on capital gains to repay their loans and interest repayments.

 

Compounding the problem is "ill-advised policy", such as the government's first home-buyers grant, which has combined to make Australian houses "40 per cent above fair value", Mr Minack says.

 

"Buying an asset that's over-priced never ends well," he said. "The real return on residential property over the next decade is likely to be negative, in my view."

 

 

No surprise, the supposed increase or spruiking of house prices has been based upon "population growth" spike due to labour demand till 2008, returning Australians, international students and backpackers (statistics and related info lags a lot...). But this has slowed dramatically with new student enrolments for 2011 "falling off a cliff", permanent residency blocked for many due to "immigration debate" so they are either not coming in the first place or are returning home, thus investors assuming they can rent out their properties should be very wary..... owner occupiers should be fine in medium term.

 

 

www.bubblepedia.com.au great website for anyone considering buying property in Oz..looked at real estate today in Brisbane...reductions up to 20 grand.. contract crashed... mortgagee sale very much signs tht all is not well we are heading the same way as Canada ...:unsure:

[Guest gratom]

The question is not if--but when??,and will it deflate gently[the article seems to suggest this]or will it go off with a bang??:hug:

[mr luvpants]

This link works bubblepedia.net.au : HomePage

[Petals]

Read this article and agree, but then I have been waiting for a few years now for the bubble to burst.

 

I have never been a fan of the first home owners grant and I too blame it for the price of housing now. Unfortunately most of it was gobbled up by builders and developers and rising prices and no real aid in the big picture to people's own debt.

 

Prices have dropped before in the early nineties houses in some areas were selling for less than their council capital improved value, could this happen again, probably, things seem to go in roundabouts.

 

When who knows, the one thing that has changed is we have a shortage of housing now and with the increased migration this does not look like changing any time soon.

 

I look at housing like well if my house price drops everyone elses does too and if I move its no different except I will pay less gov tax.

[Guest The Pom Queen]

I look at housing like well if my house price drops everyone elses does too and if I move its no different except I will pay less gov tax.

 

This is so true and something that a lot of people tend to forget.

[Ken]

I look at housing like well if my house price drops everyone elses does too and if I move its no different except I will pay less gov tax.

 

Unfortunately if all house prices fall the government will simply increase the tax rates to compensate so you'll end up paying the same amount of tax:biglaugh:

[nevsm]

This is a very generalised comment. Australia is a huge country and there are many regional differences. Yes there may be drops but it will not be across the board. Some regional towns have really suffered, there are lots of luxury unit developments that are overpriced, and certainly too more luxury houses than there are buyers. The way house price statistics are compiled can be quite misleading so 40% is unlikely to happen across the board. Many family homes are holding their value and there is a shortage of everyday houses.I know a house that was on the market for a cool $25 million and sold for less than $10 million, that sort of drop has a huge effect on statistics.