The Housing Bubble

A report from Reuters on Australia. “In their struggle to cool red-hot property prices in Australia’s big cities, authorities are ratcheting up measures that could dent the whole market but avoiding more targeted steps that have had some success in New Zealand and China. Australian regulators first focused on reining in investment loans nationally in 2015, by imposing an annual limit of 10 percent on how much banks could expand their investor loan book. Those steps worked for a while, but the heat is on again in Sydney, where prices are rising almost 20 percent a year, having more than doubled since 2008, and Melbourne, where the pace is over 15 percent, according to Core Logic.”

“‘They should … just sit in a corner and not do a thing,’ said Lindsay Partridge, managing director of Brickworks. ‘Any of the things that they do are going to affect confidence, and that is going to affect construction activity … The state governments should release more land for construction and just let the market run and correct itself.’”

From News.com.au. “Forget dipping into super, scrapping negative gearing or opening up new supply. If we’re going to restore some sanity to the Australian housing market, the regulator must step in to ban ‘toxic’ interest-only loans, economist Lindsay David has argued. ‘It’s definitely the best policy to take artificial and speculative heat out of the market,’ he told news.com.au.”

“‘Over the last 20 years, Australian house prices have risen in real terms by about 131 per cent, in the same time real wages have risen by about 38 per cent, and real rents have only increased by about 20 per cent,’ Mr David told Sky News. ‘So I disagree that Australia actually has a housing affordability issue, but what we do have is a credit-fuelled housing bubble issue. The easiest way to make house prices more affordable is to limit the amount of debt that gets flooded into the housing market. Here in Australia we’ve had this total household credit expansion that has moved in a beautiful straight line at about a 35-degree angle — the only other line I know that grows like that is Bernie Madoff’s Ponzi scheme.’”

From the Gold Coast Bulletin. “Is this the beginning of the apartment armageddon we’ve been warned about? A property developer is offering homebuyers $30,000 cashback, or to pay their stamp duty, in a bid to sell unsold apartments in a major Parramatta development. In an effort to sell the remaining units, Harcourts real estate agent Ramez Riad offered the sweetener as a final release incentive. The complex includes a mixture of one, two and three-bedroom apartments, however, the remaining 10 in the final release consist of nine two-bedroom units and one three-bedroom, ranging from $750,000 to $920,000.”

“According to a report by trends forecaster Hotspotting, off-the-plan units sold in Sydney, Melbourne, Brisbane and the Gold Coast are a ‘clear and present danger’ to property buyers, due to over supply forcing down prices. And units in Sydney’s ’second CBD’ Parramatta are at even greater risk. ‘Parramatta, in particular, is a concern,’ Hotspotting director Terry Ryder said. ‘There is already a pattern of decline in sales but supply is still increasing. It’s a very dangerous combination.’”

The Gladstone Observer. “An unfinished Gladstone housing estate is for sale after the company behind the project collapsed. Brookview Estate was a $90 million project from Latitude Development Group, which once promised a ‘resort style’ gated community. Latitude was placed in the hands of receivers McGrathNicol early last year. Special project agent Tony Williams said expressions of interest campaign has been launched for the sale. The buyer would receive 23 residential lots, and the additional 123 approved residential lots which are in the second stage of the development.”

“Mr Williams said he couldn’t give an estimate for the amount the estate could sell for, but said it would be ‘interesting what the market offers. Gladstone’s going through some difficult times but there’s a whole raft of groups looking at buying opportunities in the region.’”

The Namoi Valley Independent. “Queensland residents have described the coal seam gas industry’s impact on local housing prices as ‘a really short party with the worst and longest hangover.’ Karen Auty bought her home in Chinchilla in 2007, prior to the CSG mining boom enveloping the area, which she said sent house prices, rental rates and land valuations sky rocketing. When the CSG industry came to town, the value of her unimproved land tripled in three years, before dropping more than $20,000 below its original value.”

“‘My unimproved land was worth $58,000 prior to the boom – between 2011 and 2014, when the CSG party was in town, it rose to a whopping $182,500 and my rates increased by almost 100 per cent,’ Ms Auty said. ‘Every year since that peak the value of my land has dropped but rates have continued to rise. I just got a valuation notice this month and it’s dropped to $35,000. Coal seam gas is like a really short party with the worst and longest hangover. The money is there for a good time, not a long time, and locals are left much worse off.’”

“Kylie Hausler said she sold her home to take her family away from the Tara gasfield and lost $100,000 on the property. ‘I worked hard for 20 years in nursing to pay a mortgage and ended up with nothing, not even a home,’ Ms Hausler said.”