The latest annual QBE report into mortgage and property market sentiment shows Australian’s perceptions towards the residential property market is deteriorating rapidly amid concerns the market is overvalued.
The survey found only 36 percent of respondents now believe it is a good time to buy property in the next twelve months. This is down significantly from a weak 42 percent in 2013. The reason appears to be the federal budget, with 59 percent intending to hold off and review the impact of the harsh budget.
But perceptions the market is overvalued could be holding just as many back. 59 percent now believe the Australian residential property market is overvalued, with 31% believing the market over-valuation exceeds 10 percent. This has also rapidly increased with only 20% believing the market was more than 10% overvalued last year.
But it is no longer just individuals doubting the fundamentals of Australia’s infallible property market. Billionaire Lang Walker, Executive Chairman and owner of Walker Corporation – one of Australia’s largest property developers, has warned this week house prices in Sydney and Melbourne has surged too much. He is now forced to turn to Malaysia to reduce risk and find growth.
Yesterday, Stockland – one of the largest residential developers in Australia, said double-digit house price growth is unsustainable, and could screech to a halt.
» An annual study of the mortgage market and associated insurance in Australia – QBE, 7th August 2014.
» Billionaire Lang Walker says Sydney, Melbourne house markets ‘too hot’ – The Sydney Morning Herald, 15th August 2014.
» Stockland says double-digit house price growth not sustainable – The Sydney Morning Herald, 18th August 2014.
Cue post by banking troll saying how stupid general public are and that they (troll) are untouchable even if lending practices are fraudulent.
It’s all good, keep lending like that and bank will go bust.
Cue me sounding like a broken record:
Ask a Chinese Investor if they think Sydney and Melbourne are over-valued?
Answer: No
Every day we are bombarded with surveys conducted by the various vested interest groups of the property sector, such as the Banks, Real Estate industry, HIA, etc. Quite often the results are reported on the nightly news, particularly if they are bullish toward property.
I was lucky enough to be surveyed over the phone recently by SQM Research. SQM Research is a Real Estate sponsored research group.
I found many questions to be confusing and vague and the options given of how to answer those questions as quite restrictive. I find it impossible how they can form conclusions from such surveys.
@average_bloke – I thought a leopard could not change its spots, but someone was just posting about Treasury cutting negative gearing. He use to sound like a broken record, saying negative gearing would never be axed.
Anyway, while property bulls but on a brave face and say Chinese demand for property is strong, word on the street is China’s crackdown on money laundering is having its intended effect. Bank of China’s laundering service has slowed significantly.
@Michael – so true, companies will phase questions to get their intended outcome. But that doesn’t generally happen in the property game anymore – they have moved on to simply making the stuff up, e.g. auction clearance rates. Much easier.
For me, the tell tail signs is the smart money moving. If the large property developers – Walker Corporation and Stockland are singing that the market is overvalued, then I’ll take note of that. Surely Stockland saying the market is unsustainable can be good for shareholders.
@Pete – I thought I said that there would be no housing crash unless NG is changed. Or was that another broken record of mine? I have a lot of broken records, hard to remember all of them.
I don’t like to get high on hope-ium, when it comes to political courage and Negative Gearing.
@Pete, unfortunately Chinese demand is still very strong. The Chinese govt might be wanting to crack down, but that gives Chinese investors all the more reason to get it out of the hands of their own government and launder it in our property. Not only that, but our government welcomes corrupt Chinese money with open arms, never questioning the origin of these fund, just as long as it props up our housing bubble.
Average Block is right – Chinese investors are prepared to pay way over expectations for Sydney and Melbourne property.
What I find most terrifying is that there are so many Chinese, who if they wanted to, could buy literally ALL the Australian property and no Australian government would do anything to stop them. So even if there were no Australians to buy property, that doesn’t mean that nobody would be buying.
Yet not only are we not allowed to buy property in China, the Chinese are severely limited in the amount of properties they can own. Yet they can buy as many properties as they want in Australia, and even if it contravenes the law, nobody is going to police those laws or stop them.
I am a 30 yo professional and have been capable of buying a property for the last couple of years but have held off. By capable of buying, I mean I have the deposit but no desire to spend the rest of my life in debt for something I view as overvalued.
The current job market doesnt help, though I have been employeed continuously the last 10 years I am currently a contractor, along with 40% of working Australians. With such a large risk and no job security, to me it seems unreasonable to invest in the Australian property market as it currently stands. I will be giving it another couple of years but then be looking to leave the country if the current structures don’t change.
The baby boomers will be looking to sell their investment properties to fund their retirement but I think they are going to struggle. I am hoping for a crash though am not hopeful it will actually happen with current government policy to boost investment in property at whatever cost. I saw Xenophon (currently owns 9 investment properties) wanting Gen Y to use their super to buy into the market, I hope no one is foolish enough to fall for it but the level of foolishness in Australia surrounding property investment is astounding. When people talk about the property market you hear the same sort of language that you would hear at the races from the old alcoholic gamblers. Surely that tells you something.
@ 8 Ditto Adam – I’m 45, renting and loving it.
I ‘live’ in a beautiful house I could never hope to ‘own’ without handing over my not insubstantial savings, and becoming a debt slave to an over-exposed banking cartel.
What me makes me laugh is that in all the books for expats moving to Australia, Aussies are described as “loving a bet”, “always gambling” and “keen on a flutter”. Who knew that it would go as far as property, man? Your analogy to old alcoholic gamblers is astute and prescient.
@Adam
Best to rent. A professional couple renting and living within their means and driving an average car should aim to save at least $50K a year. After a couple of years, the interest earned on the savings would go close to covering the rent.
If you decide to have kids at that stage then become a stay at home parent and put the interest in your name and pay no tax.
When property crashes (and it will crash big time) and you have a healthy bank account then you might be able to purchase outright and live debt free.
https://www.youtube.com/watch?v=5IJeemTQ7Vk
prepper
@Adam and @Michael
Same situation. I’m 29 and my wife is 27. Both are working professionals. I could probably buy something at the moment but don’t see value in buying a badly designed 2 bed apartment for 550k. Have done the sums and to have a mortgage the same as my rent I would need a deposit of 150k+ at current lowest ever interest rates. Its not worth it, its a financial death sentence. Unfortunately I can see housing to continue to rise as long interest rates are low and international demand is strong. However it is clear from the banks books that they are not taking on business loans and are preferring mortgages which shows record low interest rates are not improving the economy. Once unemployment and stagnent wage growth kicks in and the teal economy shows itself what will happen to house prices? I think next year will be very interesting.
As soon as China stops constructing, they will stop buying Australian iron ore. Then the Chinese will start pumping investment into renewables (they’re not as stupid as we are), which we don’t do (because of having a climate-change denying PM). If China ceases to ‘need’ Australian resources (we really should be concentrating on renewables NOW of course – duh!) then unemployment will rise and so will interest rates. One of the Big4 banks will probably go down too. Maybe then I’ll consider buying a house, but it’s not going to be pretty for a lot of people who have over-leveraged themselves by falling for the greatest Ponzi scheme in history.
next year or the following year … somethings got to give
“However it is clear from the banks books that they are not taking on business loans and are preferring mortgages”
Right, the writing for the righting is on the wall all right!
There a protest on the 31st of August in most of the capital cities following up from the one in March, it’ll be interesting to see what the turnout and the media coverage will be like for it.
When the banks are the largest corporations in Australia, this is a sign we are in a soft depression.
Many families are stuck with their ‘great’ rental property investments that lose money each year. They can’t afford to sell the rentals as they are not worth what they paid for them.
The system is designed to destroy your wealth. If you have no wealth you have no power. Hence we need a big government to look after the weak!
I choose not to be a debt slave to the banks!!!
You know who your rulers are when you dare not mention their name.
Wages have been stagnant for 30 years.Maybe they have doubled,if you are lucky to have full time job.This is deflation,destroying all chances of you ever having any wealth.Meanwhile,inflation is expedentialy exploding beyond all parameters.The prime example being Sydney house prices.Suburban home prices have increased by 1000%,in this time frame.Add average interest,on loans, over thirty years.Tragic numbers.We have experienced the creation of the “banana republic”.All debt in private hands(the 99%).The least populated continent,on earth,with highest real estate prices.The lucky country?
A mate of mine just separated from his wife. Between them they had 3 mortgages (one rental in a run down part of town, one apartment not yet built with a 12 month rental guarantee, and a small house they lived in), 2 young kids and only one job. He moved out from her and went straight to the bank to get a loan for a car. They offered him $25,000 but only if it was less than 3 years old for some reason. This is utter madness.
Rupert – you are right. The Chinese are moving rapidly from the current phase of construction to building new industries around ICT, renewables, biotech, cleaning up pollution, etc. The gas deal they have recently signed with Russia signals a wholesale shift of the economy from coal to gas/renewables. This is a planned strategy. This will have significant consequences for Australia as the demand for raw materials declines. We should be planning to respond to this. Of course we are not given the dimwits with have as politicians.
Yoda – the Australia economy has severe structural issues that successive governments have failed to address, have compounded and in fact have a vested interest in maintaining (politicians have $300m invested in property). The policies of this government would be laughable if they were not so petty, cruel and focused on the wrong thing. The public sector in Australia is not an issue and there is no debt crisis. In fact the Liberal dimwits have increased the debt. Even if someone gets a bit more benefit than they should it is spent in the economy.
The current government budget and perverse neo-conservative policies are all a distraction to take the focus of the real issues. These are 1. 60% of national assets being property (UK is 20% and US is 15%). 2. 50% of the economy being financial services. 3. Private debt up to 150% of GDP (public debt is not an issue) 4. Gross mis-investment from productive investments to non productive property. 5. No value add processes – we don’t even own the machines that digs the dirt out of the ground nor do we value add to convert the dirt to semi finished product. 5. Distorted tax structure that results in massive subsidies and fuels investment in none productive assets. 6. No program or idea how to position the economy to create new industries and jobs going into the future – we are in danger of losing all the high quality engineering skills/expertise when the car industry closes. There is no thinking as to how this can be reused. 6. Guarantees given to the banks such that the taxpayer bails them out and enables them to lend in a risky way (if they got in difficulties I would nationalise them all).
With great debt comes great responsibility, either way in the end the piper will have to be paid one way or another.
Like the song says – ONE WAY, OR ANOTHER, IM GUNA GETCHA GETCHA GETCHA…….YER BABY LOVE THAT SONG……
@Nexus
I mostly agree, but I wouldn’t nationalize the banks. Let the cigar butt investors come in: Buy the banks and their loans: Then extract their cash from the public that are defaulting.
Of course dreams are free, and this will never happen. The tax payer to the rescue….again.
It’s gonna be one hell of a show stopper when it gives in. I just can’t fathom how we hear of big companies laying of staff continually (here in basket case SA anyways). Yet the demand for debt and bad/toxic assets just keeps climbing. There is ZERO consideration of risk. None, nudda, zip. “Get an investment house or two or twelve and you can laugh at everyone”
What an utter f&^%$$*g disaster. I’ve mentioned it many times, but I honestly think it requires an external trigger as the domestic economy is just self feeding itself.
I mean really: Step back, think about the number of businesses and job that have vapourized since (for arguments sake) 2005. Yet GDP is up 20/30/40% (not sure of actual figure), but how? Company profits are in the toilet. Hours worked are dropping. Unemployment is the highest in that time. Exports are, well, F#%^&$#$D. So what’s doing the GDP push? Finance sector……..150% of GDP on property…..Man oh, man.
Lamb’s to the slaughter. I thinks it’s time to start to monitor the bank executives share holdings, see when they start off loading.
“Economic disaster begins with a philosophy of doing less and wanting more.” — Jim Rohn
Not sure if this is sensationalist or not, but it’s not the positive news the real estate industry wants:
http://www.afr.com/p/business/property/landlords_hit_by_glut_of_apartments_TyeuZS5jx2nrxr0Yo1MxaI
CONCLUSION :- ” Downward trend in world economy is likely to be in mild form during
November, 2014 to April, 2015, to grow somewhat intense during May, 2015
to October, 2015, becomes harsh during November, 2015 to July, 2016.
Such areas of life as minerals and metals, foodcrops, energy resources , defence and security of nations are likely to bear the brunt of these trends.
Collective wisdom in decision making, communication systems, aviation industry, and the cinema , music and TV industries are also , in addition, likely to be touched by these trends.
Countries or regions whose names begin with the letters B , E , EU, N, O, P, U or V may need to implement multilevel approach to challenges during this period”.
This is the substance or salient feature of my article – ” Stressful times ahead for world economy in 2015 and 2016″- published online on June 2, this year at Astrologyweekly.com
Stop making sense!
Video link on the following webpage:
http://www.macrobusiness.com.au/2014/08/australias-boom-to-bust/
I don’t know what things are like in the rest of OZ but things here in the west are almost palpable.
The problem is, to most out west the good times will never end, typical boom bust dynamics.
Wages are dropping, management is putting pressure on their workforce to leave and if necessary lay off and rehire at a lesser rate.
So much for the boom state and the crash is not even in full garb yet!
Abbot says ,flying weapons of destruction,from OZ to Iraq and Syria is humanitarian aid.WTF.Doublespeak and double cross has wrecked this country.Liberal Labor same script for the actors pretending to run this country.When will people wake up!Stand up and say that we don’t swallow the bullshit no more.
but the Chinese are still buying as much property as they can. one wonders who is going to pay the Chinese rent when Australians are out of jobs.