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"Housing market tipped to implode

May 03, 2010 1:02pm


 

AUSTRALIAN house prices are 50 per cent above fair value, warns the man who predicted the GFC.

Edward Chancellor, of US investment management firm GMO, says the Australian economy is yet to emerge from the global financial crisis, despite the widespread belief it has escaped the worst of it ahead of the rest of the world.

Mr Chancellor, whose Crunch Time for Credit? was published in 2005, estimates Australian house prices are more than 50 per cent above their fair value - a once in 40-year event. "

If house prices were to revert to their historic long-term average (ratio of average price to average income) they would fall quite considerably," he told The Australian.

He said prices would have to fall by more than a third to reach fair value - although some of this fall would be cushioned by income growth.

He described Australia's banking system as a "cartel" and said luck rather than skill had allowed the Australian economy to fare better in the global financial crisis than other developed economies.

He attributed Australia's "luck" to a comparative lack of competition among local banks, enabling them to avoid much of the reckless lending that occurred in the US, as well as the commodities recovery led by China.

"My view is Australia had a private sector credit boom just like the US and the UK and it had a real estate boom," he said.

"Those are the facts and you can't paper over them.

"In this environment, house prices rose last year and that seems to me to actually have exacerbated the problem.

"The problem is the bubble and that hasn't gone away."

A key area of concern for Mr Chancellor was first-home buyers. As interest rates rose, the ratio of their mortgage repayments to their income would rise to very high levels, he said.

"It's the rising interest rates, particularly with real estate bubbles, that tend to generate the collapse," he said.

Another potential trigger was China, particularly if the demand for iron ore, coal and liquefied natural gas were to collapse.

"We would see the Chinese demand for Australian commodities as being potentially vulnerable," Mr Chancellor said.

He said he expected the negative news in Australia to come from "the housing market falling under . . . the sheer weight of its overvaluation and lack of affordablity" and a "terms of trade shock".

Everyone referred to Australia as the lucky country, he said. "I think that's pretty apt."

However, "given the great growth in private sector credit and the vulnerability of the housing market, . . . Australia is not out of the woods. It hasn't even entered the woods."

Read more on the looming housing crisis at The Australian.

Article from: News.com.au"

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Selling a Home in Frankston, Victoria

 


Selling your home is an involved process that affects your family and your future.  Before you begin this process, you'll want to ensure that you have the most up-to-date information.  When should you sell?  How do you get the best price? What kinds of renovations should be made prior to the sale? 

These home selling reports will assist you in answering the many questions that arise during the home selling process.  When you're armed with the right information, and an experienced real estate professional, you'll be closer to reaching your goal - selling your home fast, and for the best price.

Please contact me if you have any questions about selling your Frankston home. 

Below, select desired reports and complete the form provided. If you need a comparative Market appraisal



The Right Selling Price

When you're selling your home, the price you set is a critical factor in the return you'll receive. Learn several factors to base the assessment of your home.

Common Selling Mistakes

Learn the top nine selling mistakes and what steps you can take to avoid them.

Selling Your Home -Where to begin.

How to present your property for sale - what to do and what not to do - plus a checklist. More punch for your dollar.


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Market Slowing

 

Poor clearance rate suggests market slowdown

by CurtisCooper | 7 days ago

Clearance graphIt seems Australia's booming property market may finally be showing signs of slowing down with recent auction clearance rate figures easing across all capital cities.

According to rpdata.com senior research analyst Cameron Kusher, the property market has been characterised by strong auction results and value growth over the past 12 months.

Mr Kusher said that as a proportion of overall sales, auctions account for less than one quarter of all dwelling transactions nationally. 

“Auction clearance rates provide an excellent indication of current market sentiment - the results are more timely than private treaty results which are subject to time lags,” he said.

Nationally, the largest capital city auction markets are consistently Melbourne and Sydney however, auctions still account in both cities to a relatively small proportion of total sales.  

Mr Kusher said that the strength in auction clearance rates throughout these markets during the last year had been reflected in the strong growth in property values within both cities during the last 12 to 15 months.

Across capital cities, auction clearance rates have sat between 70 and 80 per cent for the entire second half of 2009, and the vast majority of 2010. 

Rpdata.com analysts reported that in recent weeks there has been a downturn in clearance rates with last week’s rates sitting at 63 per cent; well below the recent benchmark range of 70 to 80 per cent. 

This nationwide fall has been led by Sydney and Melbourne as the two largest markets and consistently the two best performing auction markets. 

Eight weeks ago Melbourne recorded its strongest auction clearance rate of the year at  85.3 per cent however, last week the clearance rate for Melbourne auctions fell to 69.4 per cent which was the second worst clearance rate this year (behind the Australia Day long weekend). 

Similarly in Sydney eight weeks ago, clearance rates were quite strong sitting at 73.7 per cent, whilst last week saw a clearance rate of just 63.0 per cent.

While the clearance rates in Melbourne and Sydney eased, so too have the traditionally weaker auction markets of Brisbane, Adelaide and Perth. 

At their peak, clearance rates reached 45.6 per cent this year in Brisbane, 77.8 per cent in Adelaide and upwards of 65 per cent in Perth.  Last week these cities recorded clearance rates of 32.5 per cent, 51.4 per cent and 14.3 per cent within Brisbane, Adelaide and Perth respectively.

Mr Kusher said that while auction clearance rates have been healthy in recent times and have started to ease of late, the total number of auctions taking place has remained very strong.  “Obviously there is no shortage of willing sellers in the market,” he said.

Last week there were more than 1,800 capital city auctions nationwide which was the fourth greatest number of weekly auctions held this year.  Interestingly, the number of properties being taken to auction during much of 2010 has been far greater than the volume of auctions which were undertaken during the typically strong spring selling of last year.

Data collection shows that for the week ending 30th May 2010, there are currently 2,257 capital city auctions planned.

“With standard variable interest rates now 160 basis points higher than they were last September, housing finance volumes have been falling for the last six months and consumer confidence now easing, these indicators all suggest a slowdown in the rate of property value growth,” Mr Kusher said.

“The recently released Consumer Sentiment Index’s subset, the Time to Buy a Dwelling Index, fell by more than 15 per cent during May 2010 to 88.4 points indicating that most people surveyed do not believe now is the time to be buying residential homes.

“We have been suggesting for some time that the rate of property value growth will slow during 2010.  It seems as if the recent weakness across auction clearance rates along with a number of other less buoyant housing sector figures may be providing the first signs of a residential market slow down.”

If you liked this article try these stories: Housing dream slips further; Consumer confidence falls during May; Mixed news for first home buyers

* Article supplied by rpdata.com

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