House prices up in November

Real Estate Agents and Property Lobbyists have opened their new years’ bottles of Champagne early today as figures from the RP Data-Rismark home value index show house prices rose just 0.1 percent (noise) in November after the worst year for Australian real estate in more than a decade.

Home price rises in Melbourne, Perth and Canberra helped push the November figure positive, while Brisbane, Adelaide and Hobart continued to notched up further falls. Values in Sydney recorded no change.

While experts believe this demonstrates the flattening and bottoming out of the market, and naturally, it is never a better time to buy, we are still very much cautious about 2012.

The pending problems in Europe will no doubt continue to take centre place and could cause credit markets to freeze over at any moment.

Problems unfolding with the bursting of China’s real estate bubble is likely to intensify next year with reports some local government financing vehicles are starting to deter debt payments. Other reports suggest some local governments that are having difficulty paying public servants such as teachers and police as they generated much of their revenue from land sales, and the developers are simply not buying land any more. If developer’s are not buying any land, they are not building further empty apartments and office towers, and hence not consuming copious amounts of our resources.

In Australia, cost of living pressures including sky-rocketing housing costs have contributed to one of the worst periods for retailers in two decades. This has seen economists predict Australia’s unemployment rate will rise next year with as many of 100,000 jobs being slashed in the months after Christmas.

Some experts believe government deficit spending (stimulus) will be able to bridge the gap while Australia households pay down mountains of debt and repair their balance sheets. While the unprecedented stimulus was “successful” in 2008 with the first home buyers’ boost, $900 spending handouts, the building of new school halls (BER) and the fitting of home insulation, the economy is once again going down the gurgler. It didn’t last very long and we don’t have much to show for the money. You could also argue schemes such as the first home owners boost, helped new households acquire more debt, than actually assist in repairing their balance sheets.

A new stimulus package next year could be difficult after Joe Hockey warned the opposition may oppose the raising of our debt ceiling from the current $250 billion dollars. According to the Australian, government debt now stands at $223 billion. The limit was raised from $70 billion to $200 billion at the height of the global financial crisis in February 2009 and by a further $50 billion in the middle of this year.

The focus next year will be on what rabbits the government can pull from its hat to keep our economy from falling into recession.

» China governments in hole as land sales plummet – Market Watch, Monday 19th December 2011.
» Aussie jobs to be slashed in new year – Ninemsn, Thursday 22nd December 2011.
» Default threat as Liberals issue debt warning – The Australian, Friday 23rd December 2011.
» ‘Tea Party tactics’ on debt limit: Wayne Swan – The Australian, 30th December 2011.
» Provincial borrowers defer loan payments – The China Daily, Monday 26th December 2011.
» Australia Home Prices Drop 3.7% as Banks Doubt 2012 Rebound on Rate Cuts – Bloomberg, Friday 30th December 2011.