Sydney Property Bubble

New York, Sydney best for property investors in 2015
PUBLISHED: 0 HOUR 11 MINUTES AGO | UPDATE: 0 HOUR 3 MINUTES AGO

The strength of the residential property markets in Sydney and New York is down to the appetite for real estate from foreign buyers and the relative ease of acquiring property.
LARRY SCHLESINGER

The most sought-after global cities for residential property investment are set to endure a tough 2015, according to forecasts from real estate firm Knight Frank.

Of the eight prime global cities ­monitored by Knight Frank, only two – New York and Sydney – will experience price gains in 2015.

The London residential market is forecast to be flat over 2015 while ­property prices are forecast to fall in Paris, Singapore, Hong Kong, Geneva and Dubai.

New York property prices are ­forecast to rise between 5 per cent and 10 per cent over 2015, while the gains will be more modest in Sydney, up as much as 5 per cent.

The strength of these two markets is down to the appetite for real estate from foreign buyers and the relative ease of acquiring property.

Knight Frank’s global head of research, Liam Bailey, said: “The ­two-pronged effect of ­strengthening international demand and improving economic indicators has helped push prime New York prices up by 6.7 per cent to date in 2014. We expect this trend to continue in 2015 with Chinese buyers likely to be ­increasingly active, particularly in light of the recent relaxation of visa terms.

OFFSHORE INTEREST STRONG
“Along with New York. we expect Sydney to be one of the strongest ­performing luxury residential markets in 2015. Rising business confidence and an increasing sense of political stability is helping to attract interest from overseas.

“The weak Australian dollar is adding to this momentum and also reviving interest from Australian ex-pats.

“Low interest rates are forecast to remain steady with no change expected until mid to late 2015 and banks are keen to lend at competitive rates,” Mr Bailey said.

He also noted the House of ­Representatives Standing Committee on Economics review into foreign investment in Australia’s residential property market placed no additional restrictions on foreign purchasers buying in Australia, though a list of recommendations have been made to ensure the rules are more rigorously enforced.

New property taxes, additional stamp duty and other measures ­introduced to cool down house-price growth are some of the reasons for the bearish outlook for the other global property markets.

In New York, Manhattan’s ­downtown region will be the strongest market. In Sydney, Knight Frank says the eastern suburbs and the lower north shore will be the strongest local markets.

Dubai has the weakest outlook (prices could fall as much as 10 per cent) following a doubling of the transfer fee to 4 per cent and the introduction of mortgage caps by the UAE central bank, which have pushed up property buying costs and dampened appetite.

The Australian Financial Review

I am surprised that RBA cut rates today. Has the property sentiment turned so fast or they think structurally they are now able to rein in hot money?

SGD and AUD parity coming. IMHO VBs should be wary of Singapore property companies getting Aussie exposure in the past year, not only due to FX but also slowing property market.

(Bloomberg) -- The Reserve Bank of Australia unexpectedly cut its benchmark interest rate to a new record low and said the local currency remains overvalued, joining a dozen global counterparts in easing this year as commodity prices tumble.

The overnight cash rate target was lowered by 25 basis points to 2.25 percent, Governor Glenn Stevens said in a statement Tuesday. Growth will be weaker for longer and the jobless rate peak higher than earlier expected, he said.
http://www.bloomberg.com/news/articles/2...ion-battle

(08-03-2014, 09:18 AM)greengiraffe Wrote: There is no need to look so far to Australia to see the damage forlong run economics. London, Hong Kong and Singapore have all witnessed the impact of hot $. Basically, the lack of willingness behind policy makers to tackle the hot $ flow is the key problem and frankly when a central bank is caught between the rock and the hard place, they are all likely to take the easy way out.

RBA in this instance is also caught between the demise of mining investments and the need to find a replacement engine. I have long given up on the prediction of currency trends as it is a complete black box of factors driving currency directions.

Overall, my simple conclusion with major central banks all still printing at different rates in hope of lowering unemployment, hot $ flow will continue to be a nuisance. The relevant consideration for us as investors is how to position to beat the asset inflation that comes with hot $ flow.

GG

(08-03-2014, 08:02 AM)specuvestor Wrote: Australia will be a good case study on how hot money is detrimental to long run economics, in REAL TIME. No tickets needed to watch the show or learn from other people's mistake

RBA won't lower interest rate to stoke more leverage demand but that's exactly the ingredient for hot money until global interest rate rise. But RBA is a very credible central bank and I'll be interested to see what structural measure they will come up with. It is not difficult to envision SGD and AUD parity in 2015.

RBA will have to cut until zero then add in some QE like what the FED has done the way commodity prices are going.

This is called mining bust. With commodity prices so low, there is no way to mine their way out of budget deficits and recession.

(03-02-2015, 11:18 PM)BlueKelah Wrote: RBA will have to cut until zero then add in some QE like what the FED has done the way commodity prices are going.

This is called mining bust. With commodity prices so low, there is no way to mine their way out of budget deficits and recession.

This should be discussed under “Australian Economic News”, nevertheless……….

“there is no way to mine their way out of budget deficits and recession”

Is Australia in recession now?

“trying to prevent an economy from entering into a recession” is different from “trying to manoeuver an economy out of a recession”

“Zero interest rate + QE” = “policy medicine to administer to a very sick economy”

Between now and zero, at least the RBA still has 225 basis points to play with………………….

Interest rate cut likely to turbo-charge Sydney house-price growth

DateFebruary 3, 2015

Jennifer Duke

http://news.domain.com.au/domain/interes...34qd6.html

Billionaire brothers eye CBD buildings
THE AUSTRALIAN FEBRUARY 06, 2015 12:00AM

Lisa Allen

Property & Tourism Reporter
Sydney
Billionaire brothers eye CBD buildings
The historic Department of Lands sandstone building at Circular Quay, Sydney. Source: News Corp Australia

ONE of Singapore’s first families of luxury real estate, the multi-billionaire Kwee brothers, is said to be one of the two final parties shortlisted to buy Sydney’s heritage-listed sandstone buildings in the financial core of the CBD, after a host of local and international bidders pulled out of the running.

The Kwees’ Pontiac Land Group operates four luxury hotels in Singapore, including the Regent and the Ritz-Carlton, and like other major Asian groups has been scouring Sydney for hotel investment ­opportunities.

Billed as Singapore’s fifth-richest family, the four Kwee brothers were also reportedly looking to expand out of Singapore a year ago buying into Manhattan.

Far East Organization, which wants to bring the prestigious Fullerton hotel brand to Australia, is the only other contender for the sandstone-clad buildings that date back to the 1890s and will be offered in one line on a 99-year lease by the NSW government.

The winning bidder will be announced mid-year after the Macquarie Capital-run process concludes.

“Unfortunately we are unable to comment on your queries at this point,” said Pontiac Group’s Singapore-based head of group corporate communications last night. It is understood the company spent hundreds of thousands of dollars on the due diligence process, as has Far East, which was flagged by The Australian as an interested party last November. Far East declined to comment yesterday.

Other contenders such as Dexus Property Group and global asset manager Brookfield have bowed out.

Another strong contender, privately owned global travel group the Travel Corporation, which has long wanted to bring its luxury Red Carnation hotel brand to Australia, is also out of negotiations. The Travel Corporation had wanted Sydney’s sandstone buildings as both an owner and operator but is understood to have pulled out of negotiations, judging the required work and difficulties dealing with planning authorities on the two heritage buildings as too difficult.

The NSW government could allow the successful purchaser of the sandstone precinct buildings to build 300 hotel and serviced apartments above the Department of Education as part of its conversion to a five-star hotel.

The total cost of the development, including the conversion of the Lands Building into a six-star hotel, is put at more than $250 million plus the fee for ­leasing the prime site from the government.

Meanwhile, Singapore’s ­Silver­needle Group continues to scour Sydney.

Additional reporting: Kylar Loussikian

Comprehensive discussion and report. note : Residex is Australia's Leading Provider of Accurate Property Information most buyers/sellers/real estate agents use to track and value properties.

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Why the RBA Should Have Left Interest Rates On Hold
by John Edwards
Founder of Residex Pty Ltd and Consultant to Onthehouse.com.au
Feb 04 2015

The Cash Rate is now 2.25 per cent and at a historic low. Personally, I was not on the side of a rate decrease as I did feel that the falling oil price and the lower Australian dollar was sufficient for stimulating demand in the Australian economy, and it was better to wait and see if these provided sufficient economic stimulus and keep “fuel” for future use if it is needed. I did believe that there would be a rate cut in the last half of this year.

Before I discuss the implication for all in our housing markets of the rate cut I provide the Australia wide performance of our markets in Table 1.
[Image: Table-1-Market-Performance.jpg]

The most obvious issue to come out of the table is very mixed results across Australia. The only city to be doing really well is Sydney, which has seen growth in the last 12 months of 16.78 per cent for houses and a lower 12.9 per cent for units. In fact some markets are going backwards and failing to keep pace with inflation.

Sydney has crossed another major milestone. The median value of a house is now $900,500, making it all but impossible for the median income family in Sydney to purchase the median property. Affordability calculations indicate that it now takes about 56.9 per cent of the median family’s weekly income to meet their mortgage commitments and leaves them with a very small $734 per week to live on and pay for the necessities in life. The reality is simply that Sydney is no longer an affordable place to buy and own a home if you are just starting out.

The growth in the Sydney market in dollar terms is in boom conditions. The median value of a house is now $900,500 and in the last 12 months has provided an increase of $144,732.

Most would recognise the period ending December 1988 as a boom in house prices when the growth rate was 36.17 per cent. The dollar value increase was $51,500. Even in today’s dollars (making an allowance for inflation) that figure is $93,922.66.

There has not been a tendency to call the current growth period a boom simply because the rate of growth has been relatively low (16.78 per cent) when compared to prior periods of high growth. However, this lower growth is simply a function of the much higher cost of housing.

Given the above there can be no doubt that in the last 12 months we have in fact witnessed one of the largest boom periods in the history of Sydney’s housing market.

The boom conditions are usually caused by supply issues and greed. The latter comes about as a consequence of people believing there are low levels of risk and quality returns to be made by entering a market.

Read more here

Hot air but no bubble following RBA rate cut

6 February 2015

The move by the RBA to a record-low 2.25% cash rate at its first meeting for 2015 has unsurprisingly reignited speculation of a “turbo-charged” bubble in Sydney’s house prices.

In actuality, the rate cut will not ignite a housing bubble and is the right policy given broader macroeconomic conditions.

While prospective property buyers in Sydney may feel the central bank has snubbed them, monetary policy is about a lot more than Sydney’s house prices. While pockets of Sydney have experienced high price appreciation in the past 12 months, this growth has not been experienced evenly across the city and certainly not across the country. Latest data from CoreLogic RP Data, for example, show that while property prices in Sydney are up 13% over the past year, prices in Perth (2.56%), Darwin (1.40%) and Canberra (-0.34%) have barely kept pace with inflation in the 12 months to 31 Jan 2015.

This high variation in property prices across the country is a recurring theme in Australia. The figure below shows the average annual housing market returns to the east coast cities (SMB: Sydney, Melbourne and Brisbane) against non-east coast cities (APD: Adelaide, Perth and Darwin). For comparison, housing market returns in Sydney alone are also charted.

Several facts become apparent in this analysis. Firstly, while price growth in Sydney has been high and increasing in the past year, it is not a bubble and is showing signs of cooling off. It also shows how the two-speed economy extends to housing markets.

Monetary Policy Is About More Than Sydney’s House Prices

The RBA cash rate is a blunt policy tool. The same rate applies to the housing market in Sydney as much as Perth, and to homeowners as much as small business owners, farmers and stock market investors. Adjusting the cash rate in order to target something as specific as house prices in Sydney is certainly not the appropriate response.

Rather the RBA has used the cash rate to target inflation. In the broader economy, there has been a significant easing in inflationary pressures. Commodity prices are falling, unemployment is creeping up and, most importantly from the RBA’s perspective, the consumer price index grew at its slowest rate since mid-2012 last year, slipping below the 2-3% target range.

Another common argument you will hear from the bubble-spruikers is that property investors are going to fuel price increases with lower borrowing rates. Over the past year credit growth to housing investors has grown relative to homeowners (although subsequent data revisions indicate this difference was initially exaggerated). However, this trend is unlikely to continue with rents steady and yields falling markedly in the past year. Where the average rental yield in Sydney in 2013 was over 4.25% it has fallen to under 3.9% in 2014.



Sydney Rental Yield

Click to enlarge
.

It is the role of regulators and government, not the RBA, to consider issues such as housing affordability and equitable access. We are seeing other regulators, such as the Australian Prudential Regulation Authority (APRA), actively monitoring lending practices as a targeted response to risks in the housing market. Earlier this week, the Prime Minister also signalled that issues around foreign investment would be considered by the government and Foreign Investment Review Board in coming weeks.

Keep these facts in mind as the tea leaves of the RBA’s February Statement on Monetary Policy are read and you hear about the impending property bubble.

http://theconversation.com/hot-air-but-n...-cut-37269

(06-02-2015, 03:37 PM)BlueKelah Wrote: Comprehensive discussion and report. note : Residex is Australia's Leading Provider of Accurate Property Information most buyers/sellers/real estate agents use to track and value properties.

---------------------------------------------------------------------------

Why the RBA Should Have Left Interest Rates On Hold
by John Edwards
Founder of Residex Pty Ltd and Consultant to Onthehouse.com.au
Feb 04 2015

The Cash Rate is now 2.25 per cent and at a historic low. Personally, I was not on the side of a rate decrease as I did feel that the falling oil price and the lower Australian dollar was sufficient for stimulating demand in the Australian economy, and it was better to wait and see if these provided sufficient economic stimulus and keep “fuel” for future use if it is needed. I did believe that there would be a rate cut in the last half of this year.

Before I discuss the implication for all in our housing markets of the rate cut I provide the Australia wide performance of our markets in Table 1.
[Image: Table-1-Market-Performance.jpg]

The most obvious issue to come out of the table is very mixed results across Australia. The only city to be doing really well is Sydney, which has seen growth in the last 12 months of 16.78 per cent for houses and a lower 12.9 per cent for units. In fact some markets are going backwards and failing to keep pace with inflation.

Sydney has crossed another major milestone. The median value of a house is now $900,500, making it all but impossible for the median income family in Sydney to purchase the median property. Affordability calculations indicate that it now takes about 56.9 per cent of the median family’s weekly income to meet their mortgage commitments and leaves them with a very small $734 per week to live on and pay for the necessities in life. The reality is simply that Sydney is no longer an affordable place to buy and own a home if you are just starting out.

The growth in the Sydney market in dollar terms is in boom conditions. The median value of a house is now $900,500 and in the last 12 months has provided an increase of $144,732.

Most would recognise the period ending December 1988 as a boom in house prices when the growth rate was 36.17 per cent. The dollar value increase was $51,500. Even in today’s dollars (making an allowance for inflation) that figure is $93,922.66.

There has not been a tendency to call the current growth period a boom simply because the rate of growth has been relatively low (16.78 per cent) when compared to prior periods of high growth. However, this lower growth is simply a function of the much higher cost of housing.

Given the above there can be no doubt that in the last 12 months we have in fact witnessed one of the largest boom periods in the history of Sydney’s housing market.

The boom conditions are usually caused by supply issues and greed. The latter comes about as a consequence of people believing there are low levels of risk and quality returns to be made by entering a market.

Read more here

Being Australia's Leading Provider of Accurate Property Information most buyers/sellers/real estate agents use to track and value properties - Residex projected that there is currently some 7,000 dwellings surplus to need – but it also agreed that the oversupply position that it had calculated is unlikely to be correct…………ha-ha ! How credible are they?

Assuming the 7,000 dwellings oversupply is correct, how is that compare to Singapore situation ?

Singapore market with a population of about 5.5 million has a surplus of 24,000 units of private apartments - Sydney market with a population of about 4.5 million has a dwelling surplus of 7,000 units - Bear in mind that there is no HDB housing market in Sydney and the "surplus" in Sydney could easily be absorbed with demand from population growth .............from immigrants.................

24,000 private homes in S'pore sitting empty
Jan 26, 2015
http://www.propertyguru.com.sg/property-...ting-empty

8 February 2015

Seven reasons why the Sydney inner ring market may continue to fire: Pete Wargent

http://www.propertyobserver.com.au/forwa...rgent.html
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Has Australia's property bubble just got worse? Auction clearance rates hit 82 per cent in Sydney ... just DAYS after interest rates are cut to record lows

By Sarah Dean for Daily Mail Australia

Published: 01:23 GMT, 9 February 2015

http://www.dailymail.co.uk/news/article-...-lows.html
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Sydney heading for a ‘50-50’ housing market

By Your Mortgage | 06 Feb 2015

http://www.yourmortgage.com.au/article/s...96538.aspx
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High time for Sydney as population swells: Key mayors back plan for tall towers near railway stations

EXCLUSIVE John Lehmann Editor-at-Large
The Daily Telegraph
September 01, 2014 12:00AM

http://www.dailytelegraph.com.au/news/ns...7043163447