Australian Housing 'severely unaffordable'

Mr_Matey

The Australian Housing bubble is set to burst.

http://www.smh.com.au/news/national/housing-bubble-yet-to-burst/2009/01/25/1232818248039.html

Happy Australia Day!
:beer: :beer: :beer:

Generali

Mr_Matey wrote: »

The Australian Housing bubble is set to burst.

http://www.smh.com.au/news/national/housing-bubble-yet-to-burst/2009/01/25/1232818248039.html

It's pretty clear from where I'm sitting. I'm in a rather nondescript part of the Western Suburbs of Sydney. I could rent a nice 3 bed, air-con, solar water place on 800-1000m^2 block with a lockable car port (or perhaps a single garage) for a little over AU$310/week = $16,210/year.

To buy the same thing second hand in moving in condition would be AU$400,000-450,000. At 6% (a pretty keen rate) would be AU$24,000-27,000. To buy new would be impossible but the equivalent thing (bigger house, smaller plot) would be about $500k on a home & land package.

Ok, you get $14,000 if you buy 2nd hand and $24,000 if you buy new from the state Govt. in Sydney as an FTB. It's still hard to see how someone on less than say $80k which strikes me as a fairly decent wage can afford to buy without really stretching themselves.

Wookster

I spent a month in Australia (February 2008) and was astonished at how expensive property was in Melbourne and particularly Perth. IIRC the average house price in Perth was £220,000 (AU$465,000)!

Average wages don't come anywhere close to being able to support that sort of price and with the collapse of the mining boom in WA I would imagine that the bubble will burst.

I'm always astonished at how people seem to lose track of affordability with commodities and are willing to pay seemingly exhorbitant prices despite the fact that they can't really afford it.

MissMoneypenny

Mr_Matey wrote: »

The Australian Housing bubble is set to burst.

http://www.smh.com.au/news/national/housing-bubble-yet-to-burst/2009/01/25/1232818248039.html

My Aussie sister said the housing market already has and is going down and that she knows people who bought at the peak and are in negative equity. People who used land as collateral to buy another house, only to find that the value of their land had dropped when they sold it.

They are even looking at their jobs to see which ones might be fairly recession proof.

Edited to say, she knows of someone who bought land, subdivided, put houses on them as rentals and can't rent them out. A couple of years ago she had a financial adviser trying to get her to get into BTL after she sold some of her land. She decided against it and is very glad she did as she is mortgage free now.

mower5

Will the oz government handouts to their oldies & others pay off?

Can they dodge the recession unlike the rest of western world?

Mining has to take a big hit. Tourism has got to suffer. They a major agriculture exporter so that must reduce with less world demand.

I am guessing that they will have a recession but not as bad as UK because they dig stuff out of the ground to export and grow stuff to export. Unlike UK which has just lost the main pillar of the economy, the banking sector and manufacturing plants owned by foriegn companies have cut back radically.

Houses in the UK & AUS have been a bubble driven to stupid excess size on the back of cheap debt. I would not buy a house in either coutry for at least 2 years, but given the choice i would rather be in oz any day!

Generali

mower5 wrote: »

Will the oz government handouts to their oldies & others pay off?

Can they dodge the recession unlike the rest of western world?

Mining has to take a big hit. Tourism has got to suffer. They a major agriculture exporter so that must reduce with less world demand.

I am guessing that they will have a recession but not as bad as UK because they dig stuff out of the ground to export and grow stuff to export. Unlike UK which has just lost the main pillar of the economy, the banking sector and manufacturing plants owned by foriegn companies have cut back radically.

Houses in the UK & AUS have been a bubble driven to stupid excess size on the back of cheap debt. I would not buy a house in either coutry for at least 2 years, but given the choice i would rather be in oz any day!

The stuff the Aussies produce will face falling demand of course. However, they are very efficient producers of soft and hard commodities so may do better in the mid-term as competitors go bust and pricing power returns. Until that happens there will be a lot of pain however.

PasturesNew

I wonder how much of the price rises was due to all those Brits rushing out there with their house cash and snapping them up.

mower5

PN.

The last stat i heard was 60 brits per day move to oz. 21900 ish per year. Not enough to fuel a bubble.

Bet they get alot of blame from pommy haters though!

Wookster

mower5 wrote: »

Bet they get alot of blame from pommy haters though!

Bloody immigrants and all that you know

Mr_Matey

For those that are interested, it’s an interesting situation in Aus.

Rental yields have been poor for the past 5 years, especially compared to the UK, as landlords have to pay council tax. Having said that, rents have increased quite dramatically recently in city centres due to demand.

As an example, I used to rent a 1 bedder in Pyrmont for $350 a week, but when I moved out it jumped to $450 a week!

The government has also tried desperately to boost the property market as it is a big source of state revenue. The first home-owner grant is a good example. Originally $7k for a first home-owner and no stamp duty up to $500k. So what happened? Surprise surprise, first home properties went up by $7k. Now it’s $14k for a couple.

There is also foreign money. Skilled migrants get the living away from home allowance which makes rent super-cheap for them, and Aus property is cheap compared to UK. Also there are a lot of people like me who go overseas, save some £, then head home and look to buy.

In resource areas the mining boom has fuelled property prices (WA, North QLD).

The media has also been very one-sided, i.e. pro property, and there’s been barely a peep against it until recently (no hpc websites even). Even now the media saying the crash has happened is rubbish so they can talk up prices. Prices have not fallen much. Their opinion of a crash is no HPI or -1% for a few months!

Edit: Oh forgot to mention, also in Aus the popular programs in the early noughties were Renovation shows like "Backyard Blitz" rather than "Location Location". Doing up houses and gardens and adding extentions etc. So there could be an argument that a lot of properties should be worth more than they were before the bubble as they have been done up.

mower5

Mr_Matey wrote: »

For those that are interested, it’s an interesting situation in Aus.

Rental yields have been poor for the past 5 years, especially compared to the UK, as landlords have to pay council tax. Having said that, rents have increased quite dramatically recently in city centres due to demand.

As an example, I used to rent a 1 bedder in Pyrmont for $350 a week, but when I moved out it jumped to $450 a week!

The government has also tried desperately to boost the property market as it is a big source of state revenue. The first home-owner grant is a good example. Originally $7k for a first home-owner and no stamp duty up to $500k. So what happened? Surprise surprise, first home properties went up by $7k. Now it’s $14k for a couple.

There is also foreign money. Skilled migrants get the living away from home allowance which makes rent super-cheap for them, and Aus property is cheap compared to UK. Also there are a lot of people like me who go overseas, save some £, then head home and look to buy.

In resource areas the mining boom has fuelled property prices (WA, North QLD).

The media has also been very one-sided, i.e. pro property, and there’s been barely a peep against it until recently (no hpc websites even). Even now the media saying the crash has happened is rubbish so they can talk up prices. Prices have not fallen much. Their opinion of a crash is no HPI or -1% for a few months!

Edit: Oh forgot to mention, also in Aus the popular programs in the early noughties were Renovation shows like "Backyard Blitz" rather than "Location Location". Doing up houses and gardens and adding extentions etc. So there could be an argument that a lot of properties should be worth more than they were before the bubble as they have been done up.

Happy Australia day, have you got a little southern cross flag and temp tattoo? I love the way aussies celebrate national day, Lots of pride. Reminds me of 1977 silver jubilee!

What have the media in oz made of US, Spain, Ireland & UKs house bubble burst and international banking failure? Do the media think that their economy is immune to the rest of the western worlds problems? Does anyone you know talk of the comparisons? Has the receession started to bite yet?

Sorry for all the questions but i am interested because gf is an oz and we have spent lot of holiday time there in the last few years.