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Australia’s property price surge set to take a breather in 2017

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HOUSE price growth is set to slow nationally this year as low inflation, weak wages growth and oversupply worries in some cities put the brakes on recent rises.

And the popular claim that home prices double every 10 years has become a myth, as a News Corp Australia analysis shows that only Sydney delivered on that promise in the past decade and forecasters say no city will grow this much in the coming 10 years.

From 10 per cent-plus growth in 2016, most independent forecasters expect home prices to rise about 5 per cent nationally as the likelihood of another Reserve Bank interest rate cut diminishes and hot markets in Sydney and Melbourne start to cool.

“We are expecting slower growth, in the region of three to five per cent,” said CommSec chief economist Craig James.

“However, we had underestimated the demand that was out there in 2016. The Sydney market still remains quite buoyant,” he said.

Each city has its own property price cycle and different supply and demand issues. Sydney and Melbourne have boomed, Perth and Darwin dropped as the mining boom petered out, while other cities have been relatively flat.

“It’s basically been Sydney and Melbourne then daylight comes next,” Mr James said.

An analysis of Real Estate Institute of Australia data shows that Sydney’s house prices have surged exactly 100 per cent in the past decade, while its unit prices rose 95 per cent.

No other capital city saw prices double in the decade — Melbourne houses were next best (up 94 per cent), Darwin 57 per cent, Adelaide 51 per cent, Canberra 51 per cent, Brisbane 45 per cent, and Perth and Hobart 23 per cent.

Mr James said increasing supply — particularly in apartments in Sydney, Brisbane and Melbourne- should slow down price growth. “Across the country a lot of new buildings have been approved and are under construction. When wages are growing at 2.5 per cent it’s hard to sustain growth in home prices at these levels.”

Metropole Property Strategists CEO Michael Yardney said property markets would be fragmented in 2017 depending on local economic strength and supply and demand, with two-thirds of full time jobs likely to be created in Melbourne and Sydney to underpin continued outperformance there.

“The elephant in the room is the huge oversupply of new apartments being completed in Brisbane and Melbourne,” he said.

Most areas of Australia were unlikely to double in price over the next 10 years, Mr Yardney said.

“We’re now at a time of lower inflation, lower interest rates, lower economic growth and lower wages growth, so it’s likely we’ll have lower capital growth of property in the next decade,” he said.

However, some suburbs would outperform. “In the last five-year Census period, while overall wages growth in Australia was 20 per cent, some municipalities had 40 per cent wages growth. In general these were the gentrifying inner and middle ring suburbs where affluent owner occupiers with higher disposable income wanted to live and could afford to pay for the privilege of living there.”

Originally Published: http://www.goldcoastbulletin.com.au/

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Opinion

Experts warn of ‘debt bomb’ as housing downturn worsens

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debt bomb
AUSTRALIA is facing a “debt crisis” — and the property market and our entire economy are at risk as a result.

That’s according to the sobering 60 Minutes segment Bricks and Slaughter which aired last night, revealing the country’s property downturn was just the tip of the iceberg.

According to reporter Tom Steinfort, the current slump is actually “more like falling off a cliff”, with a number of real estate and finance experts claiming houses could plummet in value by up to 40 per cent in the next 12 months.

If that happens, it would also cause an economic “catastrophe”.

Mr Steinfort spoke with data scientist Martin North from Digital Finance Analytics, who said Australia was uniquely vulnerable when it came to an economic crash tied to a property downturn.

“At the worst end of the spectrum, if everything turns against us we could see property prices 40-45 per cent down from their peaks, which is a huge deal,” he said.

“There’s $1.7 trillion held by the banks in mortgages for owner-occupies and investors. And that’s about 65 per cent of their total lending.

“That’s higher than any other country in the Western world by a long way.

“There’s probably no country in the world more susceptible to the ramifications of a housing crash than Australia. We are uniquely exposed at the moment.”

Mr North said Australia was now in the same position as the US was back in 2006 and 2007 — a position which triggered an economic collapse.

“As a society, and as a government, and as a regulatory system, we’re all banking on the home price engine that just goes on giving and giving and giving. It’s not going to,” he said.

“We’ve got a debt bomb, we’ve got a debt crisis and at some point it’s going to explode in our face.”

debt bomb

Melbourne homeowner Mohammed Souid told 60 Minutes his family was experiencing mortgage stress. Picture: 60 MinutesSource:Supplied

It’s a sentiment shared by Laing and Simmons real estate agent Peter Younan, who said the median house price in his patch in Granville in Sydney’s west had dropped from $1.2 million to $1 million in just one year — a shocking $200,000 plummet.

He said foreclosures had also risen by 600 per cent in the region.

“The mortgage stress is definitely being felt especially in this area,” he said.

60 Minutes also spoke with several Aussie homeowners who gave harrowing details of the stress they faced trying to pay off their mortgages, including having their power turned off and being “hounded’ by their banks.

What does a million dollars buy in Aussie capital cities?

debt bomb

Market analyst Louis Christopher of SQM Research said the market had been “clearly overvalued”, labelling the downturn as the “correction we had to have” — at least in Sydney and Melbourne.

“On our numbers, Sydney was effectively over 40 per cent overvalued. And Melbourne was overvalued by about the same amount,” he said.

But property investor Bushy Martin said the blame lay squarely at the feet of buyers who “mortgaged themselves up to their eyeballs” in a bid to snap up dream homes before being able to afford them.

debt bomb

Property investor Bushy Martin says homeowners are to blame for the crisis. Picture: 60 MinutesSource:Supplied

However, the segment has also sparked backlash online, with some claiming the situation had been exaggerated.

One Reddit user branded the report as an example of “alarmist journalism and scare tactics”, while another said it was “dramatic and cringe-worthy”.

Others also criticised the segment for making it seem like all homeowners would be affected, when the downturn was actually mainly focused in the NSW and Victorian capitals.

And some said it was unfair to blame the banks for the situation, and that homeowners needed to take responsibility for their own decisions.

That was in response to comments made by one homeowner on the program, who said the bank had “suddenly switched the mortgage to interest and principal”, raising his repayments by 57 per cent.

“The interest only part annoyed me the most. The bank didn’t ‘suddenly change’ your repayment from (interest only) to (Principal and interest) your IO term expired. You a) knew this would happen and b) assumed the bank would renew it when it expired. I hope this speculator gets burnt first,” one Reddit user said.

Related article: Experts warn of ‘debt bomb’ as housing downturn worsens

Source: news.com.au

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Opinion

Queensland is the next property hotspot, experts say

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Queensland is the next property hotspot, experts say

As New South Wales and Victoria continue to experience weakness. Queensland is expected to take the lead, a National Australia Bank (NAB) poll of property professionals revealed.

According to the survey, industry experts project house prices in Queensland to increase by 0.7% next year and 1.3% in two years.

Some areas seen to perform strongly over the next year include Brisbane, Cairns, the Gold Coast, and the Sunshine Coast. Out of the suburbs, Coomera and New Farm are expected to realize robust gains.

Meanwhile, Queensland’s rental market is also poised to enjoy an upward boost, growing by 1.3% next year and 1.9% in two years. This is despite the stricter rules on housing investment.

The respondents of the survey also expect Queensland to retain foreign buyer interest. In fact, the share of foreign sales hit a four-year high of 22.8% over the previous quarter.

The results of the survey go against NAB’s own projection of the market. For instance, the bank expects house prices to remain flat in Brisbane over the next three years. Unit prices, on the other hand, is seen to fall by 4.5% over the next year.

NAB chief economist Alan Oster said Brisbane’s housing market seemed to be going sideways and its unit market still creates concern.

“It hasn’t peaked yet, so that’s good. We’re seeing quite strong economic activity in Queensland, so that always helps,” Oster said, as quoted by The Courier-Mail.

Source: brisbaneinvestor.com.au

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Opinion

Gold Coast house values record the biggest growth in Queensland

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Gold Coast house values record the biggest growth in Queensland

The Gold Coast has recorded the strongest growth in house prices in Queensland over the past 12 months.

GOLD Coast house prices are leading the way in Queensland, up six per cent in the past 12 months to an average $620,000.

The latest figures by the Real Estate Institute of Queensland show homes on the Glitter Strip are $35,000 more on the same time last year.

Unit prices are up 1.9 per cent to $428,000.

Gold Coast house values record the biggest growth in Queensland
REIQ data reveals houses on the Glitter Strip are worth $35,000 on the same time last year.

REIQ’s Queensland Market Monitor for March said the strong population growth came on the back of infrastructure projects such as the $550 million Gold Coast Health and Knowledge Precinct and M1 upgrades.

“The property market has been one of the big winners from the sporting event as the $1.5 billion infrastructure investment has boosted confidence and demand for housing in the region,” the report stated.

“We expect house prices will show an upward path in 2018. However, this growth will most likely be more moderate.”

A quiet real estate period leading up to, and during, the Commonwealth Games likely contributed to a slight drop (-0.3 per cent) in the March quarterly median sales price, the report reveals.

Gold Coast house values record the biggest growth in Queensland
Andrew Henderson says a growing population and employment opportunities were contributing to a strong property market. Picture: Jerad Williams

REIQ Gold Coast zone chairman Andrew Henderson said he expected interstate migration to continue to benefit the city.

“I expect the market to remain strong,” he said.

“There is a heavy amount of interstate buyers moving here.

“I was at an auction recently where the winning bidder was from Sydney and the underbidder was from Melbourne.”

Mr Henderson said growing employment opportunities were also attracting homebuyers to the city.

Gold Coast house values record the biggest growth in Queensland
The Gold Coast property market is expected to remain strong.

“We have some of the best health facilities in the country and our universities are world recognised.

“Those two things alone complement the tourism industry and the lifestyle aspects that the Coast offers.”

The report found the fastest-selling suburbs on the Coast included Worongary, Merrimac, Highland Park, Mudgeeraba and Carrara.

It also revealed the rental vacancy held tight throughout the first quarter of the year at 1.1 per cent.

Gold Coast house values record the biggest growth in Queensland
Andrew Bell says the Coast had evolved from a tourist town into a vibrant city with an expanding economy. Picture Mike Batterham

Ray White Surfers Paradise Group CEO Andrew Bell said the Games heralded the next chapter for the Coast, as it evolved from a tourist town into a vibrant city with an expanding economy.

“The city’s property market is riding the irreversible momentum that has now come to the Gold Coast in terms of economic diversity and with more employment options we will need more housing options for people,” Mr Bell said.

“We are no longer going to be subject to tourism upsides and downsides as we were in the past because our economy has well and truly diversified beyond just tourism.”

Source: brisbaneinvestor.com.au

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