Sydney Property Bubble

[newbie11]

Just look at latest car park auction by Aussie . No loan and a lot of cash? Our ang moh friends also have a lot. Not just Chinese

[greengiraffe]

Hi Mate,

Any supporting link?

GG

Just look at latest car park auction by Aussie . No loan and a lot of cash? Our ang moh friends also have a lot. Not just Chinese

[BlueKelah]

GG think he meant this.
Kirribilli car spot sells for $120,000 at auction

It is getting obvious that there is a bubble in Sydney.

Sydney prices are actually not playing catch up as the previous article suggests. They already overboomed until 2003 when interest rates were increased by RBA which cooled down and caused the market there to go sideways until recent years where the interest rate dropped again. Back then there was a similar craze, with lots of home improvement shows and property investment seminar advertised and everyone there talking about property.

still think the main cause is easy credit and leverage provided by banks. Until recently, investors could easily borrow up to 95-97% on property value with LMI(loan mortgage insurance). Put it simply,

Aus banks would only do principal and interest loans for 80% with 80% leverage like ~20 years ago. 50k deposit would get you 200k loan to buy a house. Back then houses were going for around that 200k mark.

Then leverage to 90% was allowed with the LMI. so now 50k would get the investor 450k loan to buy a 500k property. Property prices naturally adjusted upwards to that range. Before this boom average sydney melbourne suburb houses went for around this price. They also provided investors with I/O(interest only) loans which means the properties are bought without the expectation to pay back any principal. With this method, when property price rises, investors can revalue the property and get "equity"out to use as a deposit for another loan, etc etc. This extra value allows more loans to be obtained and more properties to be accumulated over a short span of time.

Then banks started doing 95% loans. which meant 50k would get one 950k loan. So prices started bid up to 1million mark. Which is where the average house price in Sydney is almost sitting at. Imagine if a LTV of 95% was allowed in singapore!! Some more this 95% LVR is not limited to how many loans you have, just how much you can service with rent/salary/other income. Many property investors have multiple properties all at 95% LVR I/O loans whilst they are gearing/accumulating for their portfolio.

Thus the recent push by APRA for the banks to tighten their servicing ratio as well as the leverage ratio as there will be systemic risk due to those I/O loans increasing more than 10% a year. After all they have to ensure aussie banks comply with those BASEL requirements to maintain their high ratings.

So with the Max leverage back to 90% now, a 50k deposit is only going to get the investor a 500k property instead of a 1million property. Which means at auctions, not so many investors can afford the average 1 million house price in sydney, so house prices there should moderate with this credit tightening.

Good explanation of mortgages on property guru..
All you need to know about Australian mortgages

We'll see I guess. Actually more interested in seeing what happens on the China stock market side

[greengiraffe]

Jun 15 2015 at 7:15 PM Updated Jun 15 2015 at 9:11 PM

Renting will be more common in Sydney: Liberal MP

Treasurer Joe Hockey and Member for Eden-Monaro Peter Hendy in Queanbeyan. Alex Ellinghausen


by Joanna Mather
Renting will increasingly become a way of life for Sydneysiders as rates of home ownership fall to similar levels as New York and London, according to a Liberal MP who lives near Canberra.

"We can't keep thinking that in an international city – with all of its associated expenses and population pressures – that you can expect to have the same level of owner occupiers as in other cities," Peter Hendy will tell Federal Parliament on Tuesday.

About 65 per cent of Sydneysiders own their home, just below the national rate of 67 per cent. In London, only about half of inhabitants live in a house they own, according to Dr Hendy, an economist who started out as a cadet with Treasury. He has a doctorate in government studies.

In New York the owner-occupier rate is 32.2 per cent, for Los Angeles it's 49 per cent, Paris less than 30 per cert and Tokyo 44.6 per cent.

"Australian lawmakers cannot ignore this fact of life," Dr Hendy will say. "The Sydney levels of owner occupation will probably fall to match those of other international cities."

Dr Hendy, whose seat of Eden-Monaro sits just outside Canberra and includes towns like Bateman's Bay and Bega, will cite the figures while warning that Labor plans to get rid of negative gearing, which would harm investment.

Reserve Bank governor Glen Stevens last week described the Sydney property market as "crazy".

And despite Treasury secretary John Fraser saying Sydney is showing "unequivocal" signs of a housing bubble, the Abbott government insists there is no bubble.

Dr Hendy will say what is truly 'crazy' is the attack on negative gearing and capital gains tax by Labor and the Greens.

"For short-term expediency they are justifying their tax grab as some sort of solution to a so-called housing bubble in Sydney," he will say.

"Let's be clear, we should not be setting our taxation system simply based on the property market in Sydney. The solution to Sydney's housing issues are not taxation measures designed to impact on the demand side of the equation."

A Grattan Institute report in late 2013 said policymakers should think about greater security for renters, such as longer minimum lease periods and notice periods before lease termination.

"In 2004, Ireland moved from arrangements similar to Australia's towards improving security of tenure for renters," it said.

"The standard lease moved from six to 12 months to a legally prescribed four years, though landlords and tenants can terminate a lease in the first six months with 28 days' notice."

[greengiraffe]

Jun 16 2015 at 5:37 PM Updated Jun 16 2015 at 6:16 PM

It could take 30 years for Sydney to become a city of renters


The investor-driven apartment boom is pushing more Australians to rent rather than buy.
by Michael Bleby

Peter Hendy may not be wrong, but his prediction that Sydney will become a city of renters, rather than owners, could take 30 years.

It took decades last century for Australia to become a nation of homeowners and to unwind that – even partially – would take a similar time, said Bill Randolph, the head of City Futures, the University of NSW's urban research centre.

"It'll take a fair number of years to get us to a majority rental population – if we ever do," Professor Randolph said on Tuesday. "Maybe over 20-30 years you'd start to get a majority shift."

Eden-Monaro MP Mr Hendy said this week renting would increasingly become a way of life in Sydney.

Menzies-era policies pushed home ownership to a peak of 72 per cent in 1961 from 53 per cent in 1947 and while that had since slipped – to 67 per cent in the 2011 census from 68 per cent five years earlier – it remained high. A 2013 comparison by the United States-based Pew Research Centre puts ownership in Australia above many developed country peers. Germany's was 53.4 per cent and the US 65 per cent.

LOWER THAN EUROPE

But it is lower than a large swathe of central and eastern European countries that have large rural populations, as well as Italy, which the Pew report put at 72.9 per cent and Spain (82.7 per cent). The highest was Romania, with 96.6 per cent.

A widely fragmented residential investment market in Australia sees mum-and-dad investors taking advantage of negative gearing and capital gains tax concessions to play a role that large institutions fulfilled in other countries.

"Institutions have avoided residential property in Australia because of government charges, management and regulation, or the rights of tenants," said Peter Szabo, managing director of Homesafe Solutions, which provides an equity-release product for seniors. "There's enormous resistance from asset consultants regarding what is perceive to be a new asset class."

But with interest rates at record lows, that could change, particularly if the current debates about tax and home investment reset the incentives more towards institutions, Prof Randolph said.

"There is an appetite amongst the large-scale funds to revisit a long-term rental investment role," he said. "They see [it] as low-yielding but very solid and given that interest rates are so low at the moment, that helps them think more positively."

Independently of that, the shift to renting would continue, he said.

"You can see certain parts of our cities are already majority renters – the CBD may well be heading that way. The apartment boom is predicated on an investor market," he said.

Jun 15 2015 at 7:15 PM Updated Jun 15 2015 at 9:11 PM

Renting will be more common in Sydney: Liberal MP

Treasurer Joe Hockey and Member for Eden-Monaro Peter Hendy in Queanbeyan. Alex Ellinghausen


by Joanna Mather
Renting will increasingly become a way of life for Sydneysiders as rates of home ownership fall to similar levels as New York and London, according to a Liberal MP who lives near Canberra.

"We can't keep thinking that in an international city – with all of its associated expenses and population pressures – that you can expect to have the same level of owner occupiers as in other cities," Peter Hendy will tell Federal Parliament on Tuesday.

About 65 per cent of Sydneysiders own their home, just below the national rate of 67 per cent. In London, only about half of inhabitants live in a house they own, according to Dr Hendy, an economist who started out as a cadet with Treasury. He has a doctorate in government studies.

In New York the owner-occupier rate is 32.2 per cent, for Los Angeles it's 49 per cent, Paris less than 30 per cert and Tokyo 44.6 per cent.

"Australian lawmakers cannot ignore this fact of life," Dr Hendy will say. "The Sydney levels of owner occupation will probably fall to match those of other international cities."

Dr Hendy, whose seat of Eden-Monaro sits just outside Canberra and includes towns like Bateman's Bay and Bega, will cite the figures while warning that Labor plans to get rid of negative gearing, which would harm investment.

Reserve Bank governor Glen Stevens last week described the Sydney property market as "crazy".

And despite Treasury secretary John Fraser saying Sydney is showing "unequivocal" signs of a housing bubble, the Abbott government insists there is no bubble.

Dr Hendy will say what is truly 'crazy' is the attack on negative gearing and capital gains tax by Labor and the Greens.

"For short-term expediency they are justifying their tax grab as some sort of solution to a so-called housing bubble in Sydney," he will say.

"Let's be clear, we should not be setting our taxation system simply based on the property market in Sydney. The solution to Sydney's housing issues are not taxation measures designed to impact on the demand side of the equation."

A Grattan Institute report in late 2013 said policymakers should think about greater security for renters, such as longer minimum lease periods and notice periods before lease termination.

"In 2004, Ireland moved from arrangements similar to Australia's towards improving security of tenure for renters," it said.

"The standard lease moved from six to 12 months to a legally prescribed four years, though landlords and tenants can terminate a lease in the first six months with 28 days' notice."

[greengiraffe]

Jun 16 2015 at 4:57 PM Updated Jun 16 2015 at 4:57 PM

Sydney development opportunities snapped up at auction

This commercial building in Liverpool offloaded by the NSW government was sold to a local developer for $6.33 million. Supplied


by Larry Schlesinger
Developers snapped up six out of seven development sites in and around Sydney as part of a portfolio auction on Tuesday which achieved $35 million in total sales and a clearance rate of 68 per cent.

The top price achieved at the auction was for a commercial building on a 4210 square metre site on the Hume Highway in Liverpool in the city's south west offloaded by the NSW state government. It sold for $6.33 million to a private local developer at a land rate of $1500 per square metre.

The property at 359 Hume Highway was marketed by John Macree and Leslie Cheng of JLL. "There's strong demand for development sites to meet the need for housing. We have more of these coming up and we want more [to take to market]," Mr Macree said.

Four small inner suburban sites measuring under 500 square metres each in Camperdown, Riverwood, Petersham and Mascot sold for a combined $12 million. Developers also snapped up a 2355 square metre site at North Narrabeen on the northern beaches for $2.59 million.

But, a 1627 square metre site in Canterbury in the inner west with a permit for 48 units was passed in at $6.95 million.

Two neighbouring guesthouses on Crown Street, Darlinghurst sold for a combined $5.54 million.

A rundown freehold block of 12 studio apartments and two shops in Rushcutters Bay in the Eastern Suburbs sold for $3.03 million to a local investor on a sub 6 per cent yield. Selling agent Nuri Shik of Laing + Simmons said while there was some negativity around, investors were looking for long-term opportunities that could ride out any correction.

[Boon]

RBA minutes note supply shortage in Sydney housing

June 16, 2015
Mark Mulligan
Markets and economy reporter
House price inflation in Sydney and Melbourne remains a concern for the Reserve Bank of Australia, although its focus is shifting to the shortage of new stock rather than the impact of low interest rates on the market.

This is one of the observations in the minutes of the RBA's last board meeting, on June 2, when the central bank opted to hold the cash rate at 2 per cent.

Analysts have said governor Glenn Stevens failed to give clear guidance on the bank's next move in his comments around the decision. The minutes, too, refer only to ongoing "assessment of the outlook" based on data flow.

In a powerful speech in Brisbane last week, Mr Stevens stressed that any further cuts to the cash rate would have only limited impact on economic activity, and that it was up to governments and business to pick up the slack.

The RBA is known to be concerned about weak business investment, but also reluctant to further fuel double-digit price increases in Sydney property, the affordability of which has been the centre of fresh debate in political and economic circles.

While the RBA has repeatedly referred to its work with regulators in restricting riskier lending to buy-to-let and but-to-sell property investors, this is the first time in recent months in which it has pointed a finger at imbalances between supply and demand in the Sydney market.

"Although housing price inflation had remained high in Sydney and, to a lesser extent, in Melbourne over recent months, there had been some divergence in price developments for different segments of these markets; price inflation of detached houses had increased, whereas price inflation for units had eased in both cities," the RBA minutes, published on Tuesday, say.

"Noting that housing price growth in other cities and regional areas had declined over recent months, members discussed the strength and composition of underlying supply and demand conditions in different parts of the housing market.

"They also observed that there was a relatively low stock of dwellings for sale in Sydney and Melbourne and that dwellings took only a short time to sell."

The sentiment chimes with a series of speeches by RBA officials in recent weeks, not least that of Mr Stevens, who last week described pricing in some segments of the Sydney market as "crazy".

Assistant governor Christopher Kent on Monday night told a Canberra audience that low interest rates had gone some way to addressing the supply and demand imbalances, although he warned of further price rises related to input costs.

"It is . . . possible that a period of very low interest rates will eventually lead to higher inflation for land and construction work, as is normally required to bring forth more supply of a particular good or service," he said.

"These pressures might arise from a depletion of suitable land available for development or a need to attract more developers and workers into the industry.

"In such circumstances, any further increases in construction demand would tend to push up prices of existing and new dwellings."

JP Morgan's chief economist for Australia Stephen Walters said the latest RBA board minutes lacked an "explicit easing bias" - meaning clear guidance on whether the bank will cut again - and had toned down its warnings on property inflation.

"On housing, the message was less extreme than the governor's comments last week, when he said some developments in Sydney were 'crazy' and 'acutely concerning', he said.

"Today, the minutes make the more sober distinction between what is happening in Sydney, where there is plenty of enthusiasm, and elsewhere, where investors are far less active."

The Australian dollar, which the minutes said needed "further depreciation", jumped on their release, before easing back.

http://www.smh.com.au/business/markets/r...hoz8l.html

[greengiraffe]

Enjoy house boom, beware the market

810 words
20 Jun 2015
The Australian Financial Review
AFNR
English
Copyright 2015. Fairfax Media Management Pty Limited.
Mike Baird and his Treasurer Gladys Berejiklian can breathe easy for now.

At the moment, the NSW government is enjoying a boom in stamp duty revenue, which will be the hero of Tuesday's state budget.

There is no immediate danger of that boom ending.

At the same time, the annual growth of Sydney house prices has peaked and, while the city's high land prices will affect population growth, so far there has been nothing like the dramatic change in interstate population flows associated with past Sydney property price booms.

The risk that rocketing housing prices will undercut the state's population growth and economic recovery has faded.

However, not all the Premier's boats are safely home. The Reserve Bank's June board meeting warned the exchange rate was still too high and that "a further depreciation therefore seemed both likely and necessary, particularly given the significant declines in commodity prices over the past year".

The economic forecaster and consultant, BIS Shrapnel, estimates the Australian dollar may need to fall to between US58¢ and US70¢ to return the economy's competitiveness to a historical "norm".

However, the dollar remains just under US78¢, and it might not fall to a level consistent with balanced economic growth if the aggressive monetary policy easing in Japan and Europe leads to stronger capital flows into Australia.

If it doesn't, the RBA will be under pressure to reduce the official cash rate still further - a move that would spark more speculative investment in the Sydney property market and increase the risk of a more dangerous house price bubble.

An asset price bubble occurs when investors extrapolate recent price increases and capital gains indefinitely into the future.

That's what happened in the early 2000s, and it eventually helped push the NSW economy into a prolonged growth recession. The accompanying graph is updated from the NSW government's 2004 budget, and it depicts the largely unnoticed but sometimes destructive role of Sydney house prices in the NSW economic cycle.

When Sydney house prices have risen strongly, as they did in the late 1980s and early 2000s, net migration from NSW to the other states has increased.

The increase in net migration out of NSW is the result of both more people leaving the state in search of more affordable housing and fewer people coming to NSW because they cannot afford to buy into the Sydney market.

It remains to be seen if the most recent surge in Sydney house prices is quickly followed by much of an upswing in the rate of net migration out of NSW. The strong catch-up growth of the NSW economy and the strength of house prices in Melbourne are likely to work in NSW's favour.

However, the chemistry of house prices and population movements might be less favourable to NSW in the medium term, especially if interest rates fall further.

But the issue is not just low interest rates and strong pent-up demand.

Like his Labor predecessors, Baird will be battling the underlying supply constraints in Sydney.

The government can increase the effective supply of land on the edge of the city by investing in faster roads and better public transport. But the bigger battle is to increase the density of housing in the established inner and middle ring suburbs.

This is about building large unit towers at the major transport hubs and medium-sized unit blocks of six to eight storeys on transport routes linked to the hubs.

Chris Johnson, a former NSW government architect who now heads the developer organisation, Urban Taskforce Australia, says Sydney will have to double the existing number of dwellings over the next 50 years.

The increase in the supply of home units and town houses under way now is due in part to the politically costly efforts of the Labor government to force high density development.

Barry O'Farrell's Coalition government came to power with a promise to "return planning decisions to the community" and a less heavy-handed approach to development.

But the government is running into the deep-seated hostility of local communities to the medium- and higher-density development needed to support Sydney's growing population.

The desire of baby boomers to downsize but stay in their communities no doubt will help soften opposition to higher density development.

But the real key to changing attitudes is to show the community what successful, well-designed development can look like. Some of this is occurring right now, as a result of the Labor government's urban planning efforts. But more can be done with one or two successful redevelopments of degraded areas such as Parramatta Road and the gradual replacement of the city's ugly 1960s and 1970s "walk-ups".

Quality will be the key to changing community attitudes.


Fairfax Media Management Pty Limited

Document AFNR000020150619eb6k00010

[greengiraffe]

'We are in a bubble', says advocate as Sydney auctions clear 84pc

This Lennox Street home in Mosman sold for $2.35 million which was $150,000 above its reserve.
by Mercedes Ruehl

All 130 apartments at the launch of a new apartment project in Sydney's northern suburbs at the weekend sold out by 2pm for more than $110 million in total sales. None was an offshore buyer.

The result in Beecroft was one of many strong sales in Sydney on Saturday as buyers ignored warnings of a overheated housing market. Preliminary results from RP Data put the Sydney clearance rate at 84 per cent across 847 auctions. A national rate of 77.7 per cent was recorded.

"The onset of winter has taken a little bit of the heat out, and Sydney has struggled to get past 85 per cent over the last month or so," Domain Group senior economist Andrew Wilson said.

"That being said, more than eight out of 10 houses successfully selling at auction in winter is still a very strong result."

The apartment project, Beecroft Place, was being delivered by Melbourne-based developer Landream, and attracted local investors and owner-occupiers, said CBRE director Tim Rees. The $116 million development was due for completion in mid 2017 and would include a new shopping centre.

"Beecroft is a tightly held suburb with limited opportunities to buy in the area – locals rushed in to purchase as a result," Mr Rees said.

GOOD DAY

It was a stellar day for Cooley Auctions on Saturday as well, with a clearance rate of 87 per cent across 67 homes. Of the 58 that sold, 24 sold prior to auction.

"The 34 were sold at auction for a combined $3.109 million over reserve which equates to an average of more than $90,000 over reserve for each property," auctioneer Damien Cooley said.

In Melbourne a preliminary auction clearance rate of 79 per cent was recorded with more than 1047 properties taken to auction.

A four-bedroom Victorian home in St Kilda East sold for $1.592 million after starting bids opened at $1.4 million. The auction for the 12 King Street home had more than 50 onlookers, said selling agent Hocking Stuart.

Buyers' advocate David Morrell said most reserves were being passed easily, even in the $2 to $4 million bracket.

"Are we in a bubble? Of course we are. It just depends who is caught with the parcel," he said. "But in my opinion, it is incredibly hard to buy because you cannot justify the prices," he said.

In Sydney's north shore, a three-bedroom Mosman home sold for $150,000 over reserve. There were four bidders for the 7 Lennox Street property. A local Sydney buyer paid $2.35 million for the house.

Selling agent Tim Foote of Belle Property said he did not expect the heat to come out of the Sydney market this winter.

"Buyer demand does not change over winter, supply does," he said. "There is more supply this year and and I think the things driving the housing sector at the end of the day remain."

There was a more than 20 per cent rise in listing numbers in both Sydney and Melbourne, compared with June last year, Dr Wilson said.

"We have unusual auction numbers for winter [in] the next couple of weeks and while clearance rates are coming down it remains a promising market for sellers."

[greengiraffe]

Jun 22 2015 at 4:02 PM Updated Jun 22 2015 at 4:43 PM
Sydney's apartment boom chases transport links and spreads across metro area

Waiting for the train: An apartment block goes up in Castle Hill, in Sydney's northern districts. Isabella Lettini


by Michael Bleby
Sydney's apartment boom is spreading across the metropolitan area, with suburbs doing the heavy lifting when it comes to new approvals.

The quadrupling of new apartment approvals in the outer-ring northern districts this financial year showed the boom was prioritising suburbs with the transport links to support it.

The figures, tracked by planning consultancy MacroPlan Dimasi, showed how the planned Greater Sydney Commission would have to guide the extra housing the state government would create with its $400m budget boost to speed up land release.

Unlike Melbourne and Brisbane, where the city centres still dominated apartment construction, Sydney's growth was in the inner and outer suburbs. The 280-hectare Green Square development in the city's inner south, for example, had yet to influence approvals in a significant way.


Townhouse and apartment approvals had quadrupled in Sydney's northern district on the back of the promised North West Rail Link, a 23 kilometre, $8.3 billion train line connecting Epping on the upper north shore with Rouse Hill in the north west. Approvals surged in the area that included Baulkham Hills, Castle Hills and the Hawkesbury, to 2154 in the 10 months to April, from 525 last year, the figures showed.

"There's an anticipation effect that's come with the new rail line," said MacroPlan Dimasi chief economist Jason Anderson. "You can see the projects close to where those stations are. They've picked locations which are established centres, including Castle Hill and Rouse Hill, which is at the end of the rail line. Both of those areas are set for a lot more apartment development."

Australia's largest city has always had more people living in units, townhouses and semi-detached homes than other cities. The proportion of households in detached houses fell to 60 per cent from 68 per cent in the 10 years to 2011, planning minister Rob Stokes said.

SYDNEY LEADS BOOM

After a lost decade with little housing investment, Sydney was leading the country's biggest housing construction boom. But the proliferation of apartments in Sydney carried risks. Building certification in NSW was the worst in the country, a new Engineers Australia report said, and unless safety standards were improved, it was "just a matter of time" before an otherwise avoidable disaster struck, an author of the report said on Sunday.

The Inner West area – where approvals jumped 42 per cent from last year to 2299 – included areas such as Dulwich Hill, Canterbury and Ashfield, and was making former industrial land available for housing at the same time as it was benefiting from a light rail extension from the city.

"Rather than councils wanting to protect older industrial sites for some reason, notionally for further employment, they can see that there's a light rail station five minutes' walk away and say 'We'll let that be rezoned'," Mr Anderson said.

Parramatta, where apartment approvals rose 31 per cent to 5005, was benefiting from having good existing infrastructure that could support more developments.

"It is definitely a sweet spot from a movement point of view," he said.

The figures showed Sydney's apartment growth was more spread out than in Melbourne, where the city, Docklands and Southbank accounted for nearly half of all approvals this year, and Brisbane, where the inner city made up 55 per cent of all approvals.

But the figures also showed development in some parts of Sydney was being held up.

Mr Anderson said eastern suburbs such as Randwick, where apartment approvals rose to 126 from 87 last year, and Maroubra, which increased to 164 from 78 apartments, could support much greater growth than was being permitted.

"These are areas that have major roads and they really should be in the several hundreds (of new apartments)," he said.

"They're still very small numbers. Randwick, in particular is interesting. The [Sydney] Light Rail will run to it and through it. It's on the cusp of having a lot more projects being proposed and looked at carefully."