Sydney Property Bubble

[Boon]

Home prices surge higher, Melbourne leads the way

April 1, 2014 - 11:08AM

Glenda Kwok

Read more: http://www.smh.com.au/business/the-econo...z2xavMM9fq

[Stocker]

One old question;
St****** management ever said they always wanted to maintain a debt level of around A$300 millions to take advantage of the tax system in Australia. Wonder this has something related to NG ?

[greengiraffe]

Should be - very complicated exercise - tax issues down under a big blackbox.

One old question;
St****** management ever said they always wanted to maintain a debt level of around A$300 millions to take advantage of the tax system in Australia. Wonder this has something related to NG ?

[Boon]

Should be - very complicated exercise - tax issues down under a big blackbox.

One old question;
St****** management ever said they always wanted to maintain a debt level of around A$300 millions to take advantage of the tax system in Australia. Wonder this has something related to NG ?

Depending on how investments are structured, companies are already allowed to offset losses suffered from investment A against gains made from investment B.

In Australia, this “privilege” has been extended to include INDIVIDUAL taxpayers in the form of Negative Gearing.

From the company point of view, it makes no business sense to “intentionally” make a loss in an investment so that one could offset this loss from gains elsewhere.

As for SLC’s debt, it is also about benefits of tax but from a different perspective – the argument for it is - it is cheaper for firms and investors to finance with debt than with equity – this by itself is a big topic under Corporate Finance.

[greengiraffe]

We’ll suffer if Chinese home buyers get cold feet: Harry Triguboff

TURI CONDON AND GREG BROWN THE AUSTRALIAN APRIL 03, 2014

Harry Triguboff of Meriton says there would be pain for all if Chinese buyers withdrew fr
Harry Triguboff of Meriton says there would be pain for all if Chinese buyers withdrew from the Australian market. Picture: Nikki Short. Source: News Limited
BILLIONAIRE apartment developer Harry Triguboff says apartment prices in some areas would fall 10-15 per cent if Chinese buyers stopped purchasing Australian residential property.

Mr Triguboff, whose Meriton group develops 2000 units a year in Sydney and southeast Queensland, also believes apartment rents would rise if the wave of Chinese developers withdrew, as fewer new projects would be built.

“There is a fear that home ­prices are so high that people cannot afford them,” Mr Triguboff said, adding that the cause was inefficient planning systems across the country.

Mr Triguboff was born in the Chinese city of Dalian and sells about 70 per cent of his apartments to Australians of Asian descent and offshore buyers.

“If production (of units) dropped, the impact would be a huge rise in rents,” he said.

Chinese investment had underpinned sectors of the economy hard hit during the global financial crisis, he said, citing a boost to the construction industry and the flow on into home goods retailing and other parts of the economy.

China’s biggest developer in the local market is Greenland Holdings Group, which last year recorded global revenue of $55 billion and aims to invest $1.5bn in Australian property this year.

The group will next month release the second stage of its first Australian project: the $600 million luxury apartment tower called the Greenland Centre, on Pitt Street in the Sydney central business district.

Greenland is regenerating an old office building into what will be the tallest residential tower in Sydney. The group will begin selling 200 apartments in the ­development on April 12. This follows the sale of 300 apartments in the first stage released in December.

Greenland Australia managing director Sherwood Luo said that about half of the first stage went to overseas buyers, giving the group confidence that its Australian projects will be successful. He also said the company aimed to win over the local market. “The demand from overseas will stimulate local property development,” Mr Luo said.

“It’s not just a question to Greenland, but all the developers, and the whole industry benefits from the demand of overseas buyers.”

Greenland has this month bought two Sydney sites, in North Sydney and Leichhardt, for multi-million-dollar apartment developments. It is also bidding to develop the multi-billion-dollar Queens Wharf precinct in the Brisbane central business district. Mr Luo would not comment on these projects.

But he pointed out that Greenland’s Australian foray would benefit the local community. “We bring funds, we create employment opportunities and we stimulate the local economy,” Mr Luo said.

“All these things will be positive to the Australian economy, to people and to society.”

ANZ head of property research Paul Braddick said that Chinese investment in Australian real estate helped boost the supply of housing, which was much needed in capital cities around the country.

“If we were to see Chinese investment slowdown then we could see a turnover of the recent pick up in dwelling approvals,” Mr Braddick said.

[greengiraffe]

House prices ‘flash red’ as debt to income ratio hits record high
PUBLISHED: 2 HOURS 44 MINUTES AGO | UPDATE: 0 HOUR 50 MINUTES AGO

House prices ‘flash red’ as debt to income ratio hits record high
Photo: Louise Kennerley
CHRISTOPHER JOYE
Australian household debt has hit a record 177 per cent of annual disposable income while housing valuations are “flashing red”, according to Barclays’ chief economist, Kieran Davies.

“House prices now equate to 4.3 times annual income and 28 times annual rent, both within a fraction of their historic highs,” Mr Davies said.

The respected former treasury economist believes the RBA is “worried about the strength of the housing market, where the evolution from recovery to boom has brought jawboning by the governor into play.”

“We’re paying more attention to house prices and credit than the currency to see if the RBA changes its mind on macro-prudential tools [which limit lending growth] to gauge if housing strength could trigger a rate rise this year.”

In March RBA governor Glenn Stevens warned “we need to be alert to the possibility that the past year of strong rises in dwelling prices leads people to assume that this is the norm”.

“Were such an assumption to lead to increasing speculative activity, accompanied by a renewed increase in household leverage with all the associated risks to the housing market … that would be unwelcome,” Mr Stevens said.

Australian house prices leapt almost 11 per cent over the 12 months to 31 March to record levels in absolute terms, with capital gains of 15 per cent experienced in the nation’s largest city, Sydney.

Using ABS data on total Australian household liabilities and incomes, including small business debts that are excluded from similar RBA metrics, Barclays found that the ratio of household debt to disposable incomes has hit a record of 177 per cent.

“This is up from a recent low of 173 per cent and exceeds the previous high of 175 per cent reached in 2010,” Mr Davies noted.

In striking contrast to consumers in the US and UK, Australian families have boosted debt relative to incomes since the 2008 crisis. The RBA put the household debt to income ratio at 149 per cent in December, just a touch off its 153 per cent peak in 2006.

   
Source: Australian Bureau of Statistics, Bloomberg, Reserve Bank of Australia, Barclays Research
Mr Davies says the large increase in Australian household debt over the 1990s and 2000s has heightened consumer sensitivity to changes in interest rates.

“Increased leverage and more investor activity increases the scope for more volatility in house prices, which could spill over into the broader economy given most people have the bulk of their wealth tied up in housing,” he said.

Barclays’ analysis of the Australian housing market’s valuation puts average house prices at 4.3 times annual incomes, which is “a fraction under the all-time high of 4.4 times income reached in 2003 and 2010”.

“The ratio of prices to incomes has been extremely high compared with history for about a decade now with the average over the last century only 2.3 times” Mr Davies observed.

Barclays also found that average Australian home prices were 28 times annual rents in the first quarter of 2014, which is just below the 29 times record touched in 2007 and 2010 and double the 14 times average over the second half of the 20th century.

HSBC’s chief economist, Paul Bloxham, is more sanguine about housing market conditions, arguing that “the recent increase in prices is roughly in line with what should be expected, given that mortgage rates are at 50-year lows”.

   

Source: Australian Bureau of Statistics, Real Estate Institute of Australia, RP Data-Rismark, Stapledon, Barclays Research

[greengiraffe]

Flat spots indicate a two-paced boom in housing
TURI CONDON THE AUSTRALIAN APRIL 05, 2014 12:00AM

THE housing boom is raging through inner Sydney and Melbourne, but many parts of the country remain untouched by the euphoria.

On Queensland’s Gold Coast, in parts of Adelaide and in other centres, prices are flat and some owners are still taking losses. This is not a boom for all.

In a week where the housing bubble debate re-emerged, researcher SQM released its Distressed Property Report, naming individual homes where the owners would likely take a bath.

These are properties — often in coastal and regional areas — where the asking price is up to 40 per cent less than the initial listing price. One coastal Queensland property has had the for sale sign out for nearly four years. While there are good reasons some of these homes are so heavily discounted — such as a mortgagee sale — it's a far cry from Sydney’s heady prices.

This week another researcher, RP Data, put Sydney’s home values at 15.8 per cent above the previous peak in June 2012, while Melbourne’s house prices are 4.7 per cent above the previous high point.

Sydney’s residential values posted strong quarterly growth of 4.4 per cent, according to RP Data, and Melbourne saw a 5.4 per cent price rise for the three months to the end of March. But not all the capitals are growing at this pace or have recorded a sustained upswing.

While economists and commentators will continue to argue over Australia’s housing bubble, the pace of price growth in the hottest markets is likely to ease this year given the strength of the most recent spurt — and if it doesn’t, then the first rise in interest rates will put the handbrake on.

Meanwhile, there are many homeowners outside the hot spots who must be scratching their heads and legitimately asking: “What boom?”

Turi Condon is property editor.

[Boon]

Is it a bubble? 16 key housing market questions

April 9, 2014

Read more: http://www.smh.com.au/business/is-it-a-b...z2yMOrUZgT

[greengiraffe]

No worries mate. Australia is always a lucky country. If the Aussies are not worried, why should many of us be concern?

Is it a bubble? 16 key housing market questions

April 9, 2014

Read more: http://www.smh.com.au/business/is-it-a-b...z2yMOrUZgT

[greengiraffe]

South the new focus for apartment belt

Rebecca Thistleton
318 words
11 Apr 2014
The Australian Financial Review
AFNR
English
Copyright 2014. Fairfax Media Management Pty Limited.

Sydney's inner south is cementing its position as a major residential hub, as more than 40 per cent of proposed inner-city apartments are concentrated along the CBD-airport corridor.

Analysis from Deep End Services and Landsburys found the number of proposed apartments for inner Sydney rose 20 per cent in the six months to March this year and about 30,000 units are in the pipeline.

"The corridor between the CBD and the airport is also very active, with another 800 apartments proposed in Mascot; Zetland and Waterloo another 700 each; and 2000 apartments approved as part of the redevelopment of the BKK Eastlakes Shopping Centre, just since September last year," Deep End Services director Kevin Stanley said.

About 4900 apartments have been proposed for Sydney's CBD. About 15 per cent will be in office conversions.

Landsburys associate director Sam Barrow said just 8 per cent of the CBD apartments were under construction.

Among the most significant is Greenland Centre, a $680 million tower from Shanghai-based Greenland Group to be built on the former water board site on Bathurst Street.

After 300 apartments sold out after stage one release, another 200 will be put to market on Saturday.

Singaporean group Far East Organisation has also bought four secondary office buildings in the CBD for residential development.

While the number of apartments continues to grow, median prices have held their ground and rose on average about 7 per cent last year.

An evolving market Well-established residential areas such as Darlinghurst, Crows Nest, Lane Cove and Chatswood all recorded price growth above 11 per cent last year, while the emerging residential markets recorded a 4 per cent to 7 per cent price growth. Rebecca Thistleton