The Housing Bubble

A report from News.com.au in Australia. “We are going to read a lot about apartment oversupply this year. The Reserve Bank of Australia has already kicked off the discussion warning of the consequences of any flood of new apartments hitting the market. The central bank pointed out that residential approvals have been almost 50 per cent higher across Australia than their long-term average during the past two years. Oversupply of units in some Sydney inner city suburbs represented the greatest risk for investors, according to the latest update from valuation firm Herron Todd White.”

“HTW has already detected a number of valuations for new units on settlement not meeting their off the plan prices. It said this was particularly happening in suburbs with concentrated new stock along with a distinct difference in value between the new and original older style unit prices. HTW says this is more common in some second tier suburbs in Western Sydney and additionally in pockets of the northern suburbs.”

“While mostly occurring for overseas buyers, it could then trigger difficulties for locals obtaining finance. There was also concern by HTW that rentals might fall short of yielding enough to service mortgage repayments. They suggested developments that have been completed simply to cash in on demand could fall short in quality and ‘therefore won’t have appeal to either owner occupiers and potential tenants.’”

The Australian. “Bendigo and Adelaide Bank has spooked investors with an increase in soured loans, denting profits as the regional lender opened the door to offloading part of home equity release business Homesafe. Since mid-2012, Sydney house prices have increased by 70.5 per cent, according to CoreLogic, as the Reserve Bank cut interest rates to record lows, helping Homesafe while also raising concerns of a property bubble.”

“Bendigo chief Mike Hirst said the housing market was showing few cracks and employment was the critical factor for the health of its lending books, playing down concerns about growing stress in corporate lending. ‘Employment really is the key to a lot of what people are concerned about with banks going forward right now,’ he said.”

The Courier Mail. “More than 43,000 full-time employees – the equivalent of almost a capacity crowd at Suncorp Stadium – have vanished from the workforce in regional Queensland in the past year. The sharp concentration of economic pain outside Greater Brisbane is highlighted by new trend analysis of regional labour force data. And it reveals that even in areas away from the state capital where jobs are being created, full-time positions are increasingly being replaced by part-time jobs in a major switch in patterns of work.”

“Real Estate Institute of Queensland figures show that over the past five years, house prices rose 12.5 per cent across Greater Brisbane, 16.5 per cent on the Gold Coast and 17 per cent on the Sunshine Coast. But they tanked by about 20 per cent in Gladstone and Mackay, 10 per cent in Rockhampton and 8 per cent in Townsville. Anecdotal reports in Mackay suggest about 3000 houses are sitting empty.”

“‘Much of regional Queensland is struggling,’ REIQ chief executive Antonia Mercorella said. ‘The feedback from agents on the ground is some fairly tragic stories … family breakups, depression. It’s dire.’”

The Gladstone Observer. “A developer whose Telina housing estate plans were rejected the first time around is hopeful a new and downsized proposal will be more popular. Gladstone region mayor Matt Burnett still has concerns, questioning the need for more houses on the market. ‘We actually don’t need new lots on the market,’ Burnett said. ‘I would guess this developer may just be getting his ducks in a row so he is ready when the market is.’”

The Daily Mercury. “Mackay could be the town best placed for growth on the Queensland coast given its unique combination of high-capacity infrastructure and faltering population, each a relic of the last mining boom. That claim was made by Mackay Regional Council director of development services Gerard Carlyon, who went on to explain how bringing more drive in, drive out miners to Mackay could kick-start that growth potential.”

“By bringing more DIDO workers to town, Mackay could therefore work to build up its population to fit the high level infrastructure built during the mining boom. ‘We have built infrastructure for a certain population level that’s significantly higher than what’s living here. We could probably accommodate an extra 10,000 people right now,’ Mr Carlyon said.”

“Not only was there an oversupply in housing, vacancy rates sat at 7.9%, but the council had invested in sewerage, water and roads networks designed to operate at much higher capacity, leading to short-term budget deficits.”

The Australian Financial Review. “Developer Poly Australia, a subsidiary of the $125 billion state-owned conglomerate China Poly Group Corporation, is planning to expand its multi-density apartment portfolio in Melbourne and Sydney and even Queensland this year, despite fears of an apartment supply and price correction. The developer doesn’t think there will be a correction and considers some areas on the east coast undersupplied.”

“Reserve Bank of Australia assistant governor for economics Luci Ellis last week gave a sanguine assessment of the various apartment markets. Brisbane was undergoing a correction due to the sudden boost in supply. ‘In Brisbane, apartment prices are falling,’ she told the Australasian Housing Researchers Conference. ‘There was more supply coming online than there had been underlying population demand for it.’”