Sydney Property Bubble

[BlueKelah]

Would you pay a million bucks for this 107sqm piece of land located on the fringes of the Sydney CBD? This is what happens when you let foreign money pour into the country uncontrolled.

Just for your entertainment my fellow value buddies since I am located down-under. Singapore and hongkong already realising the potential economic damage bubbles bring.

http://media.domain.com.au/property/doma...23876.html

[greengiraffe]

Hi Mate,

Blame it on the gutless central bankers and governments globally over generations.

Asset bubble is not a current issue - it has been generations.

Policy makers need to create jobs after previous generations over-spending that were not accounted for so they pursued easy solutions - print $. $ printed simply head for assets in politically stable countries.

So the problem and cycle will continue.

If anyone is to be blame -perhaps blame yourself for not being gutsy enough to make easy $ at the early phase of asset bubble (myself included as well)

GG

Would you pay a million bucks for this 107sqm piece of land located on the fringes of the Sydney CBD? This is what happens when you let foreign money pour into the country uncontrolled.

Just for your entertainment my fellow value buddies since I am located down-under. Singapore and hongkong already realising the potential economic damage bubbles bring.

http://media.domain.com.au/property/doma...23876.html

[greengiraffe]

Move out or up: city property supply solutions

Australia is highly urbanised but with relatively low urban density. Photo: Rob Homer
Bassanese
DAVID BASSANESE
With house prices rising and debate raging over whether we are entering bubble territory, it’s worth remembering exactly why local property prices appear relatively high by global standards.

To my mind, it not about overly generous tax subsidies – forms of which exist in most countries – but our relatively unique supply challenges. It’s only on the supply side where lasting solutions to Australia’s festering problem of home affordability can be found.

Why are we unique? Note despite our large land mass, most Australians live along a tiny strip of land that hugs our south-eastern seaboard. Accordingly, there are only two ways to boost housing supply, neither of which is easy: live beyond this narrow strip of land or increase the population density within it.

As for the former, there does not appear enough affordable and well-serviced regions around our major urban centres to expand low-rise housing supply easily. Those who can only afford to buy far out from our cities complain of a lack of available jobs near where they live, or poor transportation links if they’re required to travel into the city for work.

In a classic catch-22, governments are loath to spend on transportation infrastructure and business is loath to create new businesses in these outer regional areas, until enough people live there to justify the investment.

The alternate option of increasing housing density within our inner suburbs gives rise to anti-development protests, and a “not in my backyard” mentality. To some extent these concerns are understandable: few want a skyscraper built next door, with associated increases in local traffic. But it does not make overcoming our housing supply problems any easier.

AUSTRALIA HIGHLY URBANISED
As a result, Australia is highly urbanised but with relatively low urban density – resulting in a high average land component per unit of housing stock. By international standards, many more of us cram into our two largest cities, which in turn can accommodate relatively few people per square kilometre.

To my mind, it’s the high effective land content per Australian dwelling, and the embedded land price premium, that keeps our average dwelling prices relatively high.

So what to do? Assuming governments remain reluctant to spend on better transport links into existing cities, then one answer is to send the jobs out to the regions through policies that encourage industry decentralisation.

Former NSW Treasury Secretary, Percy Allan, for example, has long advocated more state government activities being housed in regional areas – even moving the NSW Parliament itself to Newcastle. Proposals to rejuvenate dying rural towns by attracting inner city professionals also fit under this strategy.

Meanwhile, another perhaps more viable short-term option is also gaining traction – increasing the residential housing supply within our central business districts.

Paris and New York, for example, are great cities in which to live and work, though manage much higher population densities than Melbourne or Sydney.

Given the still high office vacancy rates in our major capital cities – and an apparent nationwide housing shortage – the current trend toward office-residential conversion is welcome and should be encouraged by all levels of government.

[funman168]

AUSTRALIA'S real estate market is in a bubble that will burst and wipe out up to half the value of property, a leading US economist has predicted.
And Melbourne will join Sydney as the hardest hit.
Harry Dent, a widely respected economist and demographer who has predicted a range of economic events including the 2008 global financial crisis, pointed to falling affordability in Melbourne and Sydney where prices are ten times the average income.
"Bubbles ultimately peak when the people buying can't afford to buy it," Mr Dent said.
"Melbourne has been, actually, the biggest bubble in recent years and I would expect the biggest burst there.
"In Australia obviously the bigger bubbles are in Sydney, Melbourne, Brisbane and Perth because they had the greatest growth and the greatest limitations in supply - but not quite as much in Adelaide and other cities."
The bubble would burst after a crash in the stock market and would be linked to an anticipated crash in the Chinese property market.
Mr Dent, who headlines a Secure the Future event in Sydney and Brisbane later this month, said most global markets, from London to a number of US cities, would also face market reductions.
"I see it like a popcorn popper, different markets are bursting at different times … but all of real estate in coastal cities all around the world is greatly overvalued and they're all going to burst whether it be 30 per cent or 40 per cent ... or 90 per cent in the worst case," Mr Dent said.
He said that worst case scenario would likely be China. Surging interest in Australian property from Chinese investors could be a sign the Asian superpower's rich were afraid of a looming crash at home.
"They want to leave the country, a lot of people have already left - and their favourite places to go are Australia, Canada, the US and New Zealand and London," he said.
Mr Dent has predicted the economic and real estate bubble in China will burst in the next couple of years, and Australia would be hit hard when it does.
"The China bubble is going to burst, starting around next year, and it is going to be the biggest bubble to burst. It is the greatest bubble, the most government driven, the most extreme in valuations," he said.
"Australia is the best country to weather this downturn and take advantage of the next boom.
"But this China bubble is going to back up on resource and commodity markets and it's going to hit Australia hard and I think it's going to cause your real estate to get hit and finally burst.
"I see real estate going down 60 to 65 per cent in the US, it's probably more like 30 to 50 per cent in Australia, but that's still enough for you to say: Hey why would you go buying real estate?"
Mr Dent argued buying property and expecting significant growth, 10 to 15 per cent, is crazy.
"Your real estate bubble is peaking ... and it is going to burst pretty substantially," he said.
"So why would you want to own real estate unless you're going to live in it forever or it's very important to your business.
"And why would you speculate on real estate, that's crazy at this point."
Mr Dent's views have been challenged by a number of local commentators.
RP Data senior analyst Tim Lawless said neither Sydney nor Melbourne were in bubble markets, particularly with mortgage arrears rates at about 0.5 and 0.6 per cent across the country, but continued unsustainable growth in some areas could cause alarm.
Home prices continue to rise 2:53
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RP Data has found home prices have continued to climb in January, with Melbourne leading the charge.
"Value growth in Melbourne and Sydney for the last six months has been pretty unsustainable, but six months isn't long enough to do that (form a bubble)," he said.
"If we did see a high growth rate continue to the middle of 2014, that's where you are starting to get into alarming territory."
His comments come as RP Data figures today reveal Melbourne house values rose 3.2 per cent across January, bringing the city to 11.9 per cent growth year-on-year.
Only Sydney recorded greater growth, with a 13.4 per cent increase for the same period.
Real Estate Institute of Australia president Peter Bushby said Mr Dent's predictions were heavily focused on particular markets, like inner Sydney, and did not account for a broader range of factors - but he is concerned about younger buyers.
"First homebuyers are about 60 per cent of what they have been and to us that's a major concern in terms of putting more pressure on the rental market," he said.
In a pre-budget submission the REIA has called for first homebuyers to be allowed to access part of their super to help build a deposit.
Buyers advocate and market commentator Catherine Cashmore said most of what Mr Dent said was true, but his prediction of collapse was premature.
"In (our) system of real estate, cycles come to an end and there's a sharp correction, I don't think that will happen this year - but I think that if something were to happen to China it will affect us," she said.

[potatolover]

What does this mean for property counters with exposure to Australian markets ? E.g St******

[opmi]

List of SG developers with exposure to OZ property (from memory only. Please add)

Hiap Hoe
Ho Bee
Chip Eng Seng
Oxley
Capitaland (via Australand)
Fragrance (??? incorporate a Australia co recently)

[BlueKelah]

What does this mean for property counters with exposure to Australian markets ? E.g St******

Well you just have to calculate in the increased risk / increased profit for these counters.

I think only Fraser will end up the big winner as it entered the market in Sydney earlier than the rest. May end up like singapore, getting expensive land from bids then when start building the market goes down. But who knows how long the China bubble will last.

[greengiraffe]

St****** is taking advantage of the bubble to explore options to lock in value for shareholders. Options include - outright sale if there is a willing buyer or redevelopment if they deemed there is a market for their products at that point in time.

The turnaround time for Australian development varies from state to state as development approval process also differs. The cleanest way for quick developments is to get land that comes with pre-approved plans. Fraser CP stated in their latest annual report that their turnaround time to onsell a development in Singapore can be as short as 7 months. Australia is a big question mark.

There are thousand and one opinions on the market with regards to any subject on earth - can be bull, bear or neutral.

My personal opinion is that the ongoing recovery in Australian residential property prices remains on track. Only certain cities are benefiting from last year's surge. Sydney is red hot followed by perhaps Melbourne (though I have always been reading that the apartment sector there is over-supplied). Anyway with Australian interest rates at historical low levels in 50 years, it is not too difficult to excite people with property investments given that Australian has enjoyed the property boom for the last 2 decades. Moreover, negative gearing (a tax related concept - please google for a better understanding) will continue to underpin investment properties demand. 1 additional point to note is that in Australia, supply is never sufficient to meet demand for housing needs as there is always a readily available pool of people looking to rent (underpinned by migrant growth).

GG

What does this mean for property counters with exposure to Australian markets ? E.g St******

[greengiraffe]

Fears housing price growth is ‘unsustainable’

GREG BROWN THE AUSTRALIAN FEBRUARY 10, 2014 12:00AM

THE Sydney and Melbourne housing markets have shown no signs of slowing after a roaring end to 2013, with near-record low interest rates and improved economic prospects keeping buyers and sellers in the market.

However, experts warn the price growth in Sydney and Melbourne is unsustainable and housing unaffordability would bring slower growth later this year.

In auctions on the weekend in Sydney, more than 84 per cent of homes offered were sold for a total of $151 million — leaving less than 16 per cent of homes without a buyer. This was well up on the same period last year when only 60 per cent of homes auctioned in Sydney were sold. There were also more homes offered this year, at 296 for the weekend compared with 168 on the same weekend in 2013.

In Melbourne, clearance rates were a solid 75.6 per cent, boding well for a market many economists tipped to struggle this year.

Melbourne’s residential property market surprised most economists during the week, with RP Data-Rismark figures showing monthly January price growth of a soaring 3.2 per cent, bringing growth for the year to January to nearly 12 per cent.

Australian Property Monitors senior economist Andrew Wilson said the Reserve Bank interest rate halt last week had stoked buyer appetite. He said the lowering of interest rates by major lenders was even more significant.

“The Sydney market has got no sense of stopping at the moment. There’s been no pause for reflection over the holiday break,” Dr Wilson said. “The type of growth we’re getting now, at 6 per cent a quarter, is unsustainable, but we must remember how low interest rates are now which has pushed down the repayment on the average loan.”

Dr Wilson said that there was no bubble emerging as banks were stringent on the loan-to-value ratio. Housing unaffordability would moderate price value growth in the back end of the year, although a lot would depend on the performance of the economy.

BIS Shrapnel managing director Robert Mellor was more concerned about price growth in Melbourne being unsustainable, with the fundamentals not as strong as Sydney.

Sydney was correcting from a period of slower value growth, while Melbourne had outperformed in the years following the global financial crisis, he said. He was particularly concerned about the oversupply of apartments in the CBD, Southbank and Docklands.

“If price growth kept going this strong towards the back end of 2014 there would be a risk of price declines in some segments of the market,” Mr Mellor said.

The median price of Melbourne houses sold under the hammer this weekend was $695,000, compared with $576,250 at the same time last year. Median prices in Sydney were $970,000.

Brisbane had weekend clearance rates of close to 58 per cent, but the volumes were too small to give an indication of the market.

[Dividend Warrior]

Oh no......

AIMS AMP and Suntec REIT have acquired properties in Australia recently!