Monday, March 22, 2010

Record Heights: National performance Gauge

Hi InsideStory Subscribers,

This is a really interesting report and explains what I was struggling to explain some weeks ago for blogger Paul when it came to deteriorating affordability.

CommSec National Performance Gauge

I interviewed Craig James, Chief Economist for CommSec last week on www.toop.tv which was very interesting and covers a lot of ground with has specific predictions on South Australia. Last week was the first of a 3 part series with Craig James.

Be sure you view last week’s program as we also had as co-host Peter Vaughan who is CEO of Business SA, with his predictions for Adelaide’s property market.

If you have any property you are looking to sell, or if you are in the market, be sure to be in touch as we have been doing a lot of business on line and many properties are not hitting the market at the moment.

This is a MUST READ report,

Regards

Anthony


6 comments:

Paul said...

Interesting how the report says; 'It’s important to remember that there is no fundamental reason why prosperity has to consistently lift over time – it certainly hasn’t been the case in other advanced economies.' I suppose one could also say the US (& Irish & Spanish & ...) economy reached new heights around 2006/2007! only for housing prices to drop up to 60% in some locations! (same occured to Ireland, the euro 'wonder' economy during the 90's & naughties). There's no disputing that if the economy continues to expand, then this should be reflected in higher share prices & if population growth continues to outstrip new building then house prices might continue to rise, however as the report states; 'the main drag on economic prosperity over the coming year is likely to come from higher interest rates (Westpac said yesterday that interest rates will continue to rise for 5 years), reducing mortgage affordability & potentially restraining consumer confidence.' Regardless, the fact still remains that in Australia (& Hong Kong) property prices are amongst the highest in the world relative to wages! So if you like, go by that expensive average house & live the Aussie dream! just as the Americans lived the great American dream turned nightmare!

Dee said...

From 25 March 2010 Sydney Morning Herald (Source: Colmar Brunton). It’s official: 60 per cent of investors believe Australia has a property bubble. A confluence of housing shortages, low interest rates, speculative fervour and last year’s move by the Rudd Government to relax foreign ownership rules on real estate have turbo-charged house prices. But as John Maynard Keynes famously said: “A market can stay irrational longer than you can stay solvent,” and those looking for an imminent correction will find little evidence for it in investor attitudes!

Anthony Toop said...

The good news for South Australian investors is that our market is so conservative; it lacks the massive highs and the dreaded lows. So the way I see it, there is a healthy up side and a pretty moderate down side in the medium term, but in the longer term I feel very confident in property in S.A.



Anthony

Roberto said...

29 March 'The Australia.' The nation's top central banker has taken the unprecedented step of being interviewed on commercial television, in doing so warning property buyers not to borrow too much. Some analysts have interpreted the unusual appearance as indicating that the Reserve Bank is concerned that the property market may become overheated. In the first of a series of excerpts from the interview, being broadcast on Sunrise this week, Mr Stevens cautioned against property investment as a "riskless'' path to riches. 'I think it is a mistake to assume that a riskless, easy, guaranteed way to prosperity is to be leveraged up into property,' he said. 'It isn't going to be that easy.'

Dee said...

3 April Sydney Morning Herald: In a recent newsletter the chief economist at AMP Capital Investors, Shane Oliver, pointed out that the growth rate for Australian house prices is now even higher than in China, which must set a few alarm bells ringing. Oliver's analysis showed house prices were about 29 per cent above their long-term trend and among the most expensive in the OECD in terms of house prices to income. More ominously for investors, the traditional relationship between property prices and rents is also out of whack. According to the OECD, it is 58 per cent above its long-term average - well above the level of most comparable countries. Oliver says the gross yield (that's before the inevitable expenses) is just 3.5 per cent on houses and 4.5 per cent on units - below what you'd get in any half-decent cash account..... Further falls in affordability are likely as the combined effect of higher prices and higher interest rates take their toll...... The Australian housing market may not have the oversupply problems that we saw in the US but there are plenty of indications that at some stage prices will revert to more normal levels. Australians have geared up heavily to buy property. Oliver says household debt has risen from less than 40 per cent of household income in 1990 to 155 per cent now. Again, we've moved from the low to the high end of OECD countries. Glenn Stevens is right to urge caution. Even with a housing shortage, taking on yet more debt to fund an expensive investment in a climate of rising interest rates isn't a risk-free way to make money.

Anthony Toop said...

Hi Dee



Great information… here are some more stats.



1994-2009



House Prices increased 203 per cent

Home loan sizes increased 175 per cent

Average weekly earnings increased 83 per cent

Home loan percentage of weekly income:

94: 29%

09: 34%

I am unsure where the 155% number comes from but that presumably includes all debt including cars and personal loans, it may also be quoting Sydney??



With regard to Gross Yield, the capital appreciation has to be factored in and the improved buying power on household goods which has assisted affordability on property.



Regards



Toopie