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Recovery Commeth – by Matusik

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Moreton Investor (10), Property Management, Real estate Moreton, Mortgage Broker Moreton, Moreton property market

OZ, The Great & Powerful. Moreton Investor (10), Property Management, Real estate Moreton, Mortgage Broker Moreton, Moreton property market

Now that should be the title of this missive.  But we just don’t want to believe it.  Most of the rest of the world does.  But still we don’t see it.

The weekend papers ran headlines like: “Forget talk of gloom, this is all boom” & “We’re doing so well yet we keep whingeing”.  At dinner on Saturday night a mate summed up our current malaise in a nutshell:  “We worry more about the Greek economy than the Greeks do.”

The Herald-Lateral Economics Well-Being Index (which measures both individual economic circumstances & happiness) shows that we should be doing very well.  Our well-being is up 5% on last year.  But still we whinge.

Well, there shouldn’t really be much to whinge about when it comes to residential property, especially in my neck of the woods, being Queensland & in particular the south-east corner of the state.  But still, there are many Doubting Thomases.

On a broad scale – interest rates are low & still falling; gross rental yields are now often in positive territory; the sharemarket is improving & we have plenty of money saved – in term deposits; in our superfunds or in advanced payments on the mortgage.  The past shows us that it usually goes – cash first; shares second & property third.  The experienced keep telling me you make your cash-flow by trading shares & real money in buying & holding property.  You make your money in property when you buy, not when you sell.

In addition, this time around we have self-managed super funds, which hold over $1.5 trillion dollars in assets.  Yet these funds have little exposure to property, though they can borrow (with strict rules) to buy property assets.  This segment will be a big part of the residential investment scene over the next five years.  They will add considerable momentum to this residential recovery.

Now for mine, it is a great time to buy in Queensland & especially in Brisbane.  And there are ten reasons why:

1.    Queensland’s population growth increased by 75,000 last year – up 50% or 25,000 on 2010’s 50,000 annual increase.  History shows that Queensland attracts a third of Australia’s annual population growth.

2.   According to the ABS employment figures, 30,000 new jobs have been created in Queensland since late last year & more than half of these were in Brisbane.

3.    Based on last year’s statistics, Queensland looks to be heading towards a massive undersupply, with 33,000 new dwellings needed during 2012, yet just 26,000 supplied – an undersupply to the tune of about 20%.  The inner Brisbane apartment market is also undersupplied & in this case by as much as 40%.  There is a need to build 2,650 new apartments across inner Brisbane every year, but just 1,600 new properties have been delivered (each year) since 2006.

4.    The Brisbane vacancy rate is currently 1.9% & whilst rental growth has slowed down, median rents still rose across much of the state last year.  Importantly, rental properties are showing good rental returns, averaging 5.5% gross.

5.   Economic forecasters, BIS Shrapnel, predict that Brisbane’s dwelling values should start to grow in earnest during 2013, accelerating in 2014 as the economic upturn gains momentum & the underlying dwelling deficiency becomes more pronounced.

6.    Official statistics show that new property prices across Brisbane have already risen by 4.9% during 2012, which is strong against the national average increase of just 1.4%.

7.   There has been a 6% drop in the number of properties listed for sale across Brisbane during 2012.  Resale supply is starting to tighten.

8.   In addition, there has been a 10% increase in the number of settled sales across the south-east corner of Queensland over the last twelve months.  Overall properties are now selling faster than new ones are being listed.

9.    Whilst Brisbane isn’t an auction city, but when comparing Brisbane auction results so far this year, against those from early 2012, there has been a 56% increase in the number of properties sold at auction.  There are increasingly bigger crowds at auctions & better results on the day.

10.  Finally, Brisbane is now quite affordable, being the third most affordable major urban place in Australia.  And this is one reason why Queensland’s population growth is increasing again.

It is a somewhat closed circuit – a Queensland & even Australia-wide residential recovery – it starts with improved liquidity; improving profits (& a better share market); competitive (often real) returns; higher household formation & scarcity – perceived or otherwise.  Human nature slows & stops the cycle – being overly cautious now & in due course greedy.  Confidence is the key.  It is missing now.

OZ, The Great & Powerful.  Yes, but only if you believe!  Now that would make a great title for a movie, don’t you think?

 

Article originally published in  Matusikmissive.com.au   12/3/2013

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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