Australia Property

[specuvestor]

Property values in Sydney fell for the seventh straight month in March as the once-booming housing market continues to cool.
Prices in the nation’s biggest city declined 0.3 percent last month and are down 2.1 percent from a year earlier, CoreLogic Inc. data released Tuesday show. By contrast prices in Hobart rose 1.7 percent and are up 13 percent on the year.
A combination of tighter mortgage-lending standards, regulatory restrictions on investor loans and affordability constraints are weighing on the Sydney market. While the pace of decline has slowed, few predict a quick rebound.
<SNIP>

-Bloomberg

[specuvestor]

IMHO this is healthy trend and much needed before a catastrophic pop

Australia’s property slump deepened in July, with housing prices falling the most in almost seven years.
National dwelling values dropped 0.6 percent last month -- the biggest fall since September 2011 -- as declines in Sydney and Melbourne accelerated, according to CoreLogic Inc. data released Wednesday. Prices have now fallen for 10 straight months due to a combination of lending curbs, stretched affordability and reduced investor demand.

<snip>

-Bloomberg

[specuvestor]

I've also mentioned back then that there were only 2 property bubble left: UK and Australia. Since then even HK & China has retraced and recovered; while London has started to taper as well (In US$ term it has actually peaked in 2014 since GBP lost 1/5 of value, AUD lost 30% value in US$ since 2011). With US likely to go real interest rate soon, return expectation, not only downunder, will change.

From London to Sydney and Beijing to New York, house prices in some of the world’s most sought-after cities are heading south.
Tax changes to damp demand, values out of kilter with affordability and tougher lending standards have combined to undermine the market. That could have wider implications because the world’s wealthy have been buying homes on multiple continents, meaning a downturn in one country could now pose more of a threat to markets elsewhere, according to the International Monetary Fund.

<snip>

https://www.bloomberg.com/news/articles/...o-new-york

[specuvestor]

Decline of 20% from here.
Which market? Each capital cities has its own market dynamics and hence property cycles
Starting time = now
Ending time = ?
What's your basis of 20% decline from here?

The basis has been described in past posts. Mainly because Aussie economy is commodity driven and recent rise is fueled by Chinese money. That said I have also said Australian Financial sector seemed very well managed historically so I do not expect a crash, but a substantial decline; which "substantial" to me means >20%. Asking about which capital city is like asking US property bust is different for each state, which is true to a certain extent but inconsequential.
 
If I know the ending time, not to mention the exact starting time, I would not be working I would be playing bitcoin. 

I've also mentioned back then that there were only 2 property bubble left: UK and Australia. Since then even HK & China has retraced and recovered; while London has started to taper as well (In US$ term it has actually peaked in 2014 since GBP lost 1/5 of value, AUD lost 30% value in US$ since 2011). With US likely to go real interest rate soon, return expectation, not only downunder, will change.

In post # 729,
 
With response to Bloomberg’s “ The party is finally winding down for Australia’s housing market. How severe the hangover is will determine the economy’s fate for years to come, you wrote:
 
“Talked about this for more than 3 years... that's how long it can take for a bubble to burst”
 
That’s why I responded by asking “Is party winding down same as bubble bursting?” in post#725.
 
Now you are saying “no crash” but a “substantial decline”.
 
But definition, if there is a bubble, then it will eventually burst. If it doesn’t, then it wasn’t a bubble to begin.
 
So was there a bubble in the first place? 
___________________________________________________________________________________________________________________

How many property bubble left in Australia now ?

I think more articles talking about Australia property bust now. I think this will continue till 2020 at least if Aussie govt is prudent. AUDSGD is now below 1

This is just one from Forbes which is similar to what I have said 8 months earlier (and more prior)

https://www.forbes.com/sites/johnwake/20...073fe02e54

[specuvestor]

(Bloomberg) -- Sydney’s property market slump has reached a new milestone, with values falling further than the late 1980s when Australia was on the cusp of entering its last recession.
Average Sydney home values have fallen 10.1 percent since their 2017 peak, CoreLogic Inc.’s head of research Tim Lawless said Tuesday, citing data as of Dec. 7. That surpasses the top-to-bottom decline of 9.6 percent recorded between 1989 and 1991.
The declines in Australia’s most populous city are accelerating as tighter mortgage lending standards crimp the amount people can borrow and as nervous buyers sit on the sidelines. While local policy makers are monitoring the market closely, none appear nervous of an outright crash.
Sydney was the epicenter of a five-year boom and prices are still more than 60 percent higher than they were in 2012. That means few existing homeowners are underwater, and the major banks, which dominate about 80 percent of the mortgage market, have plenty of buffer before losses would bite.
“We are obviously past the cycle peak in housing and prices naturally are coming off,” Craig Vardy, BlackRock Inc.’s head of fixed income for Australia, said at a briefing in Sydney on Tuesday. “Moderation in the housing market is expected to continue.”
Vardy said that the housing slump could be “prolonged” over the next 12 to 18 months and national house prices could fall another 10 percent.

Separate data from the Australian Bureau of Statistics on Tuesday showed Sydney prices fell 1.9 percent in the three months to the end of September, the worst quarterly performance since March 2005.

[BlueKelah]

(Bloomberg) -- Sydney’s property market slump has reached a new milestone, with values falling further than the late 1980s when Australia was on the cusp of entering its last recession.
Average Sydney home values have fallen 10.1 percent since their 2017 peak, CoreLogic Inc.’s head of research Tim Lawless said Tuesday, citing data as of Dec. 7. That surpasses the top-to-bottom decline of 9.6 percent recorded between 1989 and 1991.
The declines in Australia’s most populous city are accelerating as tighter mortgage lending standards crimp the amount people can borrow and as nervous buyers sit on the sidelines. While local policy makers are monitoring the market closely, none appear nervous of an outright crash.
Sydney was the epicenter of a five-year boom and prices are still more than 60 percent higher than they were in 2012. That means few existing homeowners are underwater, and the major banks, which dominate about 80 percent of the mortgage market, have plenty of buffer before losses would bite.
“We are obviously past the cycle peak in housing and prices naturally are coming off,” Craig Vardy, BlackRock Inc.’s head of fixed income for Australia, said at a briefing in Sydney on Tuesday. “Moderation in the housing market is expected to continue.”
Vardy said that the housing slump could be “prolonged” over the next 12 to 18 months and national house prices could fall another 10 percent.

Separate data from the Australian Bureau of Statistics on Tuesday showed Sydney prices fell 1.9 percent in the three months to the end of September, the worst quarterly performance since March 2005.

Getting bad now, certain pockets are already 20%+ down. Will get worse over next 2 years as the bulk of 5year IO[interest only] investor home loans are due and most will be only to refinance as PI[principal &interest] increasing the monthly payments about 40%. Many highly leveraged investors will be unable to service this sudden increase and forced to sell.
 A big change in servicing calculators will be a big additonal hurdle for those obtaining loans.

Better than a sudden crash but even with this controlled correction, once sentiment turns it very hard to stop downward spiral of prices. 

Latest  home loan growth seems to have rebounded a bit after being negative for past couple months so maybe things are stabilizing a bit or may just be a dead cat bounce.

Probably the only effect and relevance will be on sg developers who have significant exposure to aussie prop in syd/melb. If they havent TOP yet, many investors may just forfeit 10% deposit rather than take a 20 or 30% hit. Not many will hold as yields are only doing 1 to 2% most places.

Good blog on property
http://petewargent.blogspot.com/2018/10/...t.html?m=1

Monthly released indices with stats on houses and unit prices compared MoM and YoY
https://www.corelogic.com.au/research/monthly-indices

[specuvestor]

(Bloomberg) -- Sydney’s property market slump has reached a new milestone, with values falling further than the late 1980s when Australia was on the cusp of entering its last recession.
Average Sydney home values have fallen 10.1 percent since their 2017 peak, CoreLogic Inc.’s head of research Tim Lawless said Tuesday, citing data as of Dec. 7. That surpasses the top-to-bottom decline of 9.6 percent recorded between 1989 and 1991.
The declines in Australia’s most populous city are accelerating as tighter mortgage lending standards crimp the amount people can borrow and as nervous buyers sit on the sidelines. While local policy makers are monitoring the market closely, none appear nervous of an outright crash.
Sydney was the epicenter of a five-year boom and prices are still more than 60 percent higher than they were in 2012. That means few existing homeowners are underwater, and the major banks, which dominate about 80 percent of the mortgage market, have plenty of buffer before losses would bite.
“We are obviously past the cycle peak in housing and prices naturally are coming off,” Craig Vardy, BlackRock Inc.’s head of fixed income for Australia, said at a briefing in Sydney on Tuesday. “Moderation in the housing market is expected to continue.”
Vardy said that the housing slump could be “prolonged” over the next 12 to 18 months and national house prices could fall another 10 percent.

Separate data from the Australian Bureau of Statistics on Tuesday showed Sydney prices fell 1.9 percent in the three months to the end of September, the worst quarterly performance since March 2005.

Getting bad now, certain pockets are already 20%+ down. Will get worse over next 2 years as the bulk of 5year IO[interest only] investor home loans are due and most will be only to refinance as PI[principal &interest] increasing the monthly payments about 40%. Many highly leveraged investors will be unable to service this sudden increase and forced to sell.
 A big change in servicing calculators will be a big additonal hurdle for those obtaining loans.

Better than a sudden crash but even with this controlled correction, once sentiment turns it very hard to stop downward spiral of prices. 

Latest  home loan growth seems to have rebounded a bit after being negative for past couple months so maybe things are stabilizing a bit or may just be a dead cat bounce.

Probably the only effect and relevance will be on sg developers who have significant exposure to aussie prop in syd/melb. If they havent TOP yet, many investors may just forfeit 10% deposit rather than take a 20 or 30% hit. Not many will hold as yields are only doing 1 to 2% most places.

Like Singapore, they have achieved their deceleration objection

will it spiral down it depends on the govt will and skill. Frankly the biggest player in property markets is the govt, in terms of supply, policies and leverage, etc. But when you mix in populstic politics and sometimes self-preservation interests, the concoction becomes dangerous. As long as govt act pre-emptively instead of the misguided ideology of letting "invisible hand of the market" decides, usually it should be ok over the long term, avoiding the painful spiral, unless there's external shock.

[BlueKelah]

(Bloomberg) -- Sydney’s property market slump has reached a new milestone, with values falling further than the late 1980s when Australia was on the cusp of entering its last recession.
Average Sydney home values have fallen 10.1 percent since their 2017 peak, CoreLogic Inc.’s head of research Tim Lawless said Tuesday, citing data as of Dec. 7. That surpasses the top-to-bottom decline of 9.6 percent recorded between 1989 and 1991.
The declines in Australia’s most populous city are accelerating as tighter mortgage lending standards crimp the amount people can borrow and as nervous buyers sit on the sidelines. While local policy makers are monitoring the market closely, none appear nervous of an outright crash.
Sydney was the epicenter of a five-year boom and prices are still more than 60 percent higher than they were in 2012. That means few existing homeowners are underwater, and the major banks, which dominate about 80 percent of the mortgage market, have plenty of buffer before losses would bite.
“We are obviously past the cycle peak in housing and prices naturally are coming off,” Craig Vardy, BlackRock Inc.’s head of fixed income for Australia, said at a briefing in Sydney on Tuesday. “Moderation in the housing market is expected to continue.”
Vardy said that the housing slump could be “prolonged” over the next 12 to 18 months and national house prices could fall another 10 percent.

Separate data from the Australian Bureau of Statistics on Tuesday showed Sydney prices fell 1.9 percent in the three months to the end of September, the worst quarterly performance since March 2005.

Getting bad now, certain pockets are already 20%+ down. Will get worse over next 2 years as the bulk of 5year IO[interest only] investor home loans are due and most will be only to refinance as PI[principal &interest] increasing the monthly payments about 40%. Many highly leveraged investors will be unable to service this sudden increase and forced to sell.
 A big change in servicing calculators will be a big additonal hurdle for those obtaining loans.

Better than a sudden crash but even with this controlled correction, once sentiment turns it very hard to stop downward spiral of prices. 

Latest  home loan growth seems to have rebounded a bit after being negative for past couple months so maybe things are stabilizing a bit or may just be a dead cat bounce.

Probably the only effect and relevance will be on sg developers who have significant exposure to aussie prop in syd/melb. If they havent TOP yet, many investors may just forfeit 10% deposit rather than take a 20 or 30% hit. Not many will hold as yields are only doing 1 to 2% most places.

Like Singapore, they have achieved their deceleration objection

will it spiral down it depends on the govt will and skill. Frankly the biggest player in property markets is the govt, in terms of supply, policies and leverage, etc. But when you mix in populstic politics and sometimes self-preservation interests, the concoction becomes dangerous. As long as govt act pre-emptively instead of the misguided ideology of letting "invisible hand of the market" decides, usually it should be ok over the long term, avoiding the painful spiral, unless there's external shock.

yes that is true. In fact another policy coming in is the removal of what they call negative gearing. Where investors can use depreciation/maintenance and bank repayments on their properties to reduce their tax bill. However this results in prices going up and many investors having negative cash flows on their investment properties, which they were happy to sit on as that means they can leverage more, enjoy tax benefits and later capitalise on capital gains.

The opposition party(Labor party which is expected to win the next election(due to ther populist policy promises) is planning to remove this "perk/subsudy" for investors. 
http://theconversation.com/negative-gear...tors-92679

They are also planning to increase the capital gains tax on properties from something like 20% to close to 30%.
https://www.smh.com.au/money/tax/capital...4zwjh.html

of course this will only put in place if the opposition wins the next election, which i believe is slated no later than 1H 2019 due to their senate reelection rules. 
It seems very likely Labor is on track to win at the next national elections with Bill Shorten to be the next PM.
https://www.theguardian.com/australia-ne...eject-fear
https://www.theguardian.com/australia-ne...l-in-a-row

So the expectation is for further downside from 2019-2020 before any recovery in Syd/Melb property sector. It is also very unlikely for their APRA prudential regulator to remove the stricter requirements on banks to maintain a 30% to 70% IO to PI loan ratio as well as the stricter servicing calculation which is now based on actuals(actual income/spending/debt etc/rent income/etc..) Aussie side is also trying to conform to the BASEL IV banking requirements to maintain their banks reputation lol.. Their banks are also undergoing a strict royal banking commission , investigating wrongdoing by the banks and already a lot of scandal have emerged. latest is NAB top staff kena house raided for "bribery", i think a big fat can of worms been opened up. Wonder what will be found if CAD did some sort of similar banking sector investigation on our DBS/UOB.
https://www.smh.com.au/business/banking-...50lqy.html


The big external shock IMHO is trade wars and also the current reversal of US10yr treasury vs 10yr Aus Bond yields (  2.89% vs 2.45% [44basis points gap!]) that started sometime middle of this year. Previously AUS Bonds were doing like 25 basis points more than US 10yr. I am actually quite surprised AUD is still holding quite stable at >70c to the USD despite the expected massive reversal of carry trade when bond yields become higher overseas. The ASX200 has dropped quite a bit from peak in recent months though but I reckon thats more due to commodity prices and China related economic news.

[specuvestor]

yes that is why I am relatively sanguine on property markets where govt take decisive pre-emptive actions, including China (compare with HK's "decisiveness"), versus other capitalistic republic that waits for the music to stop

[cyclone]

Australia's Property Slump Drives Biggest Wealth Drop in 7 Years

By Michael Heath
March 28, 2019, 10:22 AM GMT+7

Australia’s slumping property and stock markets have driven the biggest decline in household wealth in seven years, underscoring pressure on the central bank to resume cutting interest rates.

Household wealth decreased 2.1 percent in the final three months of last year, the largest drop since the third quarter of 2011, the statistics bureau said in Sydney Thursday. The decline was driven by land and property values, which slid for a fourth straight quarter, and financial assets as pension funds were hit by stock market losses.

Australia is seeing a reversal of its traditional wealth generation method of gearing up to the limit to buy a house and then inflating away debt with wage rises and property gains. Instead, asset deflation is pushing up debt ratios: despite restricted lending, mortgage debt as a share of residential land and dwellings climbed to 28.3 percent, a four-year high.

Money markets reckon Lowe will be easing before long and are pricing in almost two quarter-point cuts from the current 1.5 percent cash rate.

More details in https://www.bloomberg.com/news/articles/...in-7-years