Australia Property

[greengiraffe]

Mate,

U are half empty... I used to be like you... i feel like expandables...

The world needs more optimistic folks... ie more gutsy blokes...

If we keep being pessimists, the world will pass us by...

Australia is a country where there is freedom of speech... everyone will talk will write research papers and in the end the execution will be this, that and nothing...

No Vested Interests
Just Focus On Making $
GG

Murray Inquiry will shed light soon and AU gov will have to decide on next step to take in December. From the local property forum discussions, many prop investors are already slowly deleveraging by selling props.

Article below should shed some light on the precarious situation of AU Banking sector.

[Image: 225739-ad44e91c-2dcc-11e4-8424-141fab601c36.jpg]

Reserve Bank takes aim at mortgages

Noteworthy :
"the banking regulator this week revealed total assets had grown to $4 trillion — that is backed by just $207bn of capital."

"The big four already have to hold common-equity tier-one ratios of at least 8 per cent by 2016, which they claim is high and some like NAB and ANZ are under pressure to achieve given looming headwinds."
================================================================================================

Upcoming speech David Murray 1/12/2014

Ball likely to drop then.
==========================================

Boon - Mining Booms and the Australian Economy
Very long article but good reading. If history is any indicator at all, this time round post boom its worse - AUS has low inflation(means rest of economy is crap) and high AU dollar.
===========================================================
NZ/SG/HK Govs all realise the risks involved and have done good job with cooling measures. Aus usually just bust spectacularly until the next mining boom comes around

[newbie11]

And nothing.. I like that quote.. haha..

Always good to have diverse views. Help to rein in my optimistic view

[BlueKelah]

And nothing.. I like that quote.. haha..

Always good to have diverse views. Help to rein in my optimistic view

Just calling it as it is based on what information is available.

Can't deny there is no credit/mortgage boom in AU and AU banks are very relient on housing mortgage for earnings and highly leveraged.

Mining and oil / commodity boom looks to be over for a while now.

Cautiously bearish on AU Prop ;D which may ruffle some feathers, especially those invested in SG prop counters that have significant AU exposure.

[greengiraffe]

And nothing.. I like that quote.. haha..

Always good to have diverse views. Help to rein in my optimistic view

Just calling it as it is based on what information is available.

Can't deny there is no credit/mortgage boom in AU and AU banks are very relient on housing mortgage for earnings and highly leveraged.

Mining and oil / commodity boom looks to be over for a while now.

Cautiously bearish on AU Prop ;D which may ruffle some feathers, especially those invested in SG prop counters that have significant AU exposure.

It is a fact that resources boom is behind for Australia and the rest of the world but service industry like education and tourism is making a come back on the back of weakening A$.

That is perhaps the resilience of a diversified and regulated economy of Australia. If things are crab, your Ah Tiong comrades won't be buying like no tomorrow. Ah Tiongs are probably one of the smartest on earth now... they seem to be benefiting from all the chaos around the world - low resources input prices and the lack of need to be part of global policing force. Plus also their corporate finance remains one of the most fearful around the world - the disappearance act of companies...

[newbie11]

Ah yes embrace the ah tiong and their xiao Mei mei haha..

[greengiraffe]

Chinese housing fear unfounded, says Juwai founder
THE AUSTRALIAN NOVEMBER 17, 2014 12:00AM

Damon Kitney

Victorian Business Editor
Melbourne
20/5/13 Juwai.com CEO's Andrew Taylor and Simon Henry on the Gold Coast for the AREC conferene. Pics Adam Head
Juwai.com CEOs Andrew Taylor and Simon Henry. Juwai.com is planning to release a report on the property market next year. Picture: Adam Head Source: News Limited

THE Australian entrepreneur who developed a now booming global real estate portal for Chinese investors says there could be a “racist’’ element to the backlash from first-home buyers against soaring investment from China in the nation’s property market.

Shanghai-based Andrew Taylor, co-founder of juwai.com — now China’s largest international property website for Chinese buyers — said he believed the backlash against Chinese investors in Australian property was ‘‘not based on any data’’.

“No one was ever complaining when it was people from Canada, from the US and the UK investing in larger sums than what the Chinese are doing now. No one ever batted an eyelid. So there is a question mark on whether there is some element of racism or people just not being familiar with the audience,’’ Mr Taylor told The Australian after addressing a forum at the G20 in Brisbane.

“When you have a heated property market in Australia that is difficult for first-home buyers, it is easy to start picking on people who look a bit different and are easy to identify rather than a seasoned Australian investor who is buying up a whole heap of first-home buyer stock and then renting it out to the people that couldn’t afford to buy it.’’

He said that for every example of purchases involving Chinese investors, “I can give you three or four local examples that are having the same or even greater ­impact’’.

Chinese investors have been the largest source of foreign demand for Australian ­property this year and Credit Suisse has forecast that Chinese nationals will buy about $44 billion in residential real estate over the next seven years.

Juwai, which has been asked by the Foreign Investment Review Board to provide data on Chinese property purchases in Australia, is planning to release a report next year that Mr Taylor said would offer transparency “to the whole global as well as Australian Chinese property buyer’’.

It will show that international Chinese property buyers wanting to purchase in Australia have an average budget of $US2.6 million ($3m) whereas Chinese residents within Australia have a much lower budget of around $US800,000 and are largely ­focused on purchases around the $US500,000 level.

Juwai was launched in 2011 and aims to provide a portal for overseas real estate marketers to reach Chinese property buyers. Its co-founder is Simon Henry.

Mr Taylor is a former executive of online real estate firm REA Group.

While Australian property has long been a popular choice for Chinese money, the flow of investment has allegedly increased following the Chinese government’s crackdown on corruption.

But Mr Taylor said allegations of illegitimate Chinese transfers of money into the Australian market had been overplayed.

“I don’t accept the premise that there is evidence of people funnelling money illegally into the Australian property market,” he said. “Let’s come up with evidence of that. If they did, I would suggest they look at the Canadians, the US, the UK guys who have been doing it for a long time before this.’’

[greengiraffe]

House price growth to slow ‘markedly’, Saul Eslake says
PUBLISHED: 0 HOUR 49 MINUTES AGO | UPDATE: 0 HOUR 26 MINUTES AGO

House price growth to slow ‘markedly’, Saul Eslake says
Photo: Jessica Shapiro
MARK MULLIGAN
Sydney auction fever may break soon

We need house prices to grow economy

House price inflation will decelerate further next year, weighing on construction activity and household sentiment, as real wage and income weakness continues to hold back economic growth, according to a cautionary assessment from the closely watched economist Saul Eslake.

Bank of America Merrill Lynch’s senior Australian economist says the current slowdown in house price growth will persist into 2015, despite record-low lending rates. Plans by the Australian Prudential Regulatory Authority (APRA) to toughen conditions around investor loans will also be a factor here, he says.

All this could eventually curb construction activity – one of the main drivers of non-resource growth at the moment – and trap negatively geared property investors counting on capital gains to upgrade to owner-occupiers, he warns.

“It is our view that national median dwelling-price growth will decelerate markedly in 2015,” he wrote.

“This is as household income growth and sentiment remain soft, the unemployment rate rises, affordability deteriorates and the stimulatory impact of low interest rates fades.”

He said the slowdown would bring house price inflation more into line with income growth and mortgage rates, calculated at between 3.5 per and 4 per cent.

APRA’s macroprudential measures added “downside risk” to this calculation, as did the chances of the beginning of a monetary tightening cycle in 2016, Mr Eslake said. The cooling property market had important macroeconomic repercussions.

“The Reserve Bank of Australia for one has been extolling the role that increases in house prices have been playing in supporting both consumer spending and residential construction,” he said.

“If house price growth decelerates and perhaps even declines in real terms this could weigh on consumption and dwelling investment into 2015,” he said.

Mr Eslake’s comments cap a week in which official data confirmed that real wages were declining, business and consumer sentiment remain subdued despite improving operating conditions and growth in lending to buy-to-let property investors is dramatically outstripping mortgages to first-home buyers.

For the first time in the 30-year history of the Australian Bureau of Statistics’ housing finance series, the value of investor loan approvals in September, at $11.94 billion, was greater than the value of loans to owner-occupiers, at $11.77 billion.

Investor finance approvals have risen 68 per cent since the RBA starting cutting the cash rate in 2009.

Mr Eslake said this trend was driving a build-up of risks in the housing market, aided by the widespread use of negative gearing, which allows investors to offset interest costs against tax.

“The latest data from the Australian Tax Office for 2011-12 suggests that 19 per cent, or around one in five, Australian taxpayers is a landlord,” said Mr Eslake.

“And of this, around 13 per cent of these taxpayers are taking advantage of negative gearing,” he said.

This meant that 68 per cent of landlords declare an income loss on their property investments.

“Therefore these landlords are relying on capital gains to offset income losses,” said Mr Eslake.

“This is a strategy subsidised by the government, but it may not be a good one if dwelling prices don’t rise,” he said,

The Australian Financial Review

[Boon]

For your AU recession reading since you are questioning my post in detail - Boon - Mining Booms and the Australian Economy
Very long article but good reading. If history is any indicator at all, this time round post boom its worse - AUS has low inflation(means rest of economy is crap) and high AU dollar.

Economic History of Australia - you can find all the recessions here and the reasons contributing
===========================================================
NZ/SG/HK Govs all realise the risks involved and have done good job with cooling measures. Aus usually just bust spectacularly until the next mining boom comes around

Thanks for the link. Interesting reading indeed ! But ................the article does not substantiate your following argument, nor it address my queries to your argument:

“History already clearly shows. Falling commodities = falling aud = recession. simple as that. No one wants to invest in a falling currency.”

Australia has reported 23 straight years of positive annual GDP growth, beginning immediately after what then Federal Treasurer Paul Keating infamously called “the recession we had to have” in 1990–91. The Netherlands is the only economy in the modern era that has managed to avoid recession for longer — a 27-year stretch of uninterrupted growth from the early 1980s until the GFC.

“The recession we had to have” was caused by high leverage in the corporate world - not by post mining boom or falling AUD.

The mining booms that the author had described took place over a period of about 160 years, and against very different backgrounds.

The AUD was only floated in Dec-1983

Pre-Floating-of-Exchange-Rate, “every mining boom was accompanied by increased inflationary pressure - the nominal exchange rate was either fixed or managed very tightly - The real exchange rate could therefore only adjust through inflation”.

Post-floating of the exchange rate, “in the current episode of boom, with a floating rate, the behaviour of the nominal exchange rate has been very different from the past. It has risen early in the boom and by a large amount -this has been an important factor helping to dissipate inflationary pressures”

The author concludes that “History tells us that mining booms are periods of significant economic change and that they can pose complex challenges for policy makers. Key among these is the need to ensure flexibility in the economy and maintain disciplined macroeconomic policies in order to contain the inflationary forces generated by the boom. History also shows that, in the past, these challenges proved to be quite difficult to deal with. However, in the 30 years since the previous boom, the Australian economy has developed in ways that should make it better able to accommodate the surge in mining activity that is currently under way. The floating exchange rate is a key difference but goods and labour markets are also more flexible, and the monetary and fiscal policy frameworks are now more soundly based. This gives grounds for confidence that we can do better this time, but the task will not be without challenges.

My points remain

1) There was no historical precedent in which Australia had suffered a recession due to a combination of falling commodities price AND falling AUD. (Because previous booms happened before the floating of AUD exchange rate.)
2) During the 2009 GFC, BOTH commodities price AND value of AUD plunged substantially, yet Australia did not go into recession. If your argument is correct, recession should have had happen then, but it didn’t. Why ?

Your new statement:
“If history is any indicator at all, this time round post boom its worse - AUS has low inflation(means rest of economy is crap) and high AU dollar.”

New questions:

1) What is the basis for arguing that “AUS has low inflation means rest of economy is crap ?
2) What is the historical basis for arguing that post boom this time is worse, while the author is confident that "we can do better this time"?

[greengiraffe]

Hi Buddies,

http://www.valuebuddies.com/thread-5501-...#pid100598

Debate shifted to the above...

No Vested Interests
GG

[greengiraffe]

Funds inflow could alter land market

PropertyKaren Maley
474 words
18 Nov 2014
The Australian Financial Review
AFNR
English
Copyright 2014. Fairfax Media Management Pty Limited.

The influx of Chinese money into the real estate market has given Australian buyers access to properties that otherwise would not have been developed, says Christopher Carolan, NSW general manager of developer Grocon.

In an interview with The Australian Financial Review, Mr Carolan said the free trade deal would accelerate the flow of Chinese investment funds into the local property market.

"It's a supply and demand scenario and part of that scenario is land availability. There's a shortage of housing on the eastern seaboard and that shortage is only going to free up on the basis that land is made available," he said.

"That land availability relates to investment. And what we're seeing is that Chinese investors have return expectations that are lower than Australian investors.

"This means that the paradigm on land price changes, because the return expectations are lower, which means that land prices go up."

Mr Carolan said: "What we're seeing for major sites, for example, in Sydney, is that the major bidders are almost exclusively Chinese."

He added: "Some sites that have been locked up for many years have now become available to the market because of the different expectations on investment returns. And that's been a good thing. There are a number of sites that wouldn't have been available to Australian buyers If it wasn't for the Chinese investment."

Ross Hamilton, a partner at Ernst & Young Real Estate Advisory, said Chinese investors were able to finalise deals faster than local buyers. "Chinese inbound investors tend to move very quickly. There's a preparedness to pay more for the sites, and there is also a lack of conditions that comes with that. From the vendor's perspective, it means their ability to close out deals is a lot quicker, cleaner and easier."

Mr Carolan said property development in China moved at a much quicker pace than in Australia.

"Their property development process is much faster, both in pre-construction and during construction.

"They use techniques like modular construction, and their planning periods are much shorter.

"Here it's different, and we've also got industrial relations issues in terms of construction activity."

But as Australian companies increasing join with Chinese firms in property joint ventures, they need to be conscious of the potential for tension.

"There are risks around the misalignment of interests and there's likely to be some cultural differences at points in time," said Mr Hamilton.

"A bigger issue though is concerns relating to mis-understandings, when these groups have purchased sites, as to what their obligations are - such as issues on easements or complexities around town planning. And there are instances . . . where some developers have been trying to sell product onto the market without the relevant approvals in place."


Fairfax Media Management Pty Limited

Document AFNR000020141117eabi00032