Are Australian house prices overvalued?

The remarkable resilience of Australian house prices during the Global financial Crisis and strong financial gains have led widespread talk of a housing price 'bubble'.  However, there are solid underlying reasons for the strength of Australian house prices and we do not believe a ‘bursting of the bubble' is imminent.

House prices underpinned by solid fundamentals.

Widespread forecasts of a looming collapse in Australian house prices ignore the stark fundamental  differences between Australia and most of the developed world. Conservative  (on-balance sheet) lending, minimal sub-prime, full recourse loans, minimal CDS exposure, record population gains, significant pre-emptive policy action and a severe housing shortage all saw Australian house prices remain well supported through the Global financial Crisis. An acceleration of immigration in 2008-09 to over 300,000 combined with a mini-baby boom, lifted Australia's population  by 460,000 or 2.1% ( the strongest population growth in the developed world). These people need to be housed and underlying demand last year is estimated to have risen well above 200,000 homes for the first time on record. This combined with a cyclical trough in home building ( starts of just 131,000) saw  the housing  market tighten dramatically as reflected  in near-record low rental vacancy rates.

We believe the fundamental shortage of housing and a buoyant economy are responsible for the ongoing strength of housing prices despite the removal of the First Home Owners boost and sharply rising mortgage rates.

Skilled labour shortages in several sectors suggest an ongoing requirement for high levels of international migration which combined with insufficient home building (excessive charges on developers, inadequate land release, rising interest rates, restrictive credit conditions and capacity restraints ), mean it is very hard to see the housing shortage being resolved by any time soon. With new supply expected to remain below housing demand, an ever tightening housing shortage will be a feature of the market for many years to come and will continue to place upward pressure on house prices and rents.

Contrary to popular belief, for the past seven years, house price gains have been broadly matched by growth in average household incomes, maintaining the house price to income ratio at just over 4 times. Nonetheless, rising interest rates mean housing affordability (purchase and rental ) will deteriorate further and will eventually cap price growth. However, prices are expected to decelerate rather than fall, as long as the economy remains supportive.

Source:   RP Data Rismark.

Note: Full recourse loans mean that the loan MUST be paid back. In USA,  most  loans offered prior to the GFC were non- recourse loans and as such people could not meet payments and simply handed the keys back! (editor)

Australia is in limbo

The stock market is uncertain, property is very quiet.  WHY?

Here are a few thoughts:

• Negative gearing will not be altered by either political party- as stated in the run up to the election.
• Property is still in demand as a safe, sure investment. There is no way that your property will be worth nothing in the morning.
• Rental properties are still and always will be in high demand considering affordability issues right now.
• From an investment point of view there is absolutely no reason for a delay and /or waiting for the state of play in the Political landscape.
• If a prospective investor has a steady job or business, has equity in his/her house and is paying tax( it's even more effective if paying a lot of tax) there are many good solid property investments available now.

Best part- it's so easy, an initial deposit of $1000 and about $100 a week (equal to a meal in a restaurant , that's all) use some of the equity in their property, arrange the finance and wait for settlement. It is a simple process - simple for me and that's thegood part.

I offer a helping hand every step of the way. Arranging for legal, finance, rentals, tax claims, insurance, landlord protection insurance etc. The lot!

Details- leave those to me.

Relax, take it easy, and pick up the dollars in the long run.

REIA applauds bi-partisan support for negative gearing

The Real Estate Institute of Australia (REIA) has applauded both the Government and the Opposition for ruling out the abolition of negative gearing for the purpose of property investment at today’s debate at the National Press Club, Canberra.

"This is fantastic news for renters, affordable housing and real estate investors," said REIA President, Mr David Airey.

Negative gearing, for the purpose of property investment, in its current form is addressing the supply of rental accommodation and is complementary to the goals of the Housing Affordability Fund (HAF).

"The Hawke Government abolished negative gearing for property in 1985 only to have it reinstated in 1987. During that period rents increased by 57.5% in Sydney, by 38.2% in Perth and by 32.0% in Brisbane. At the same time building approvals fell by 13.8%", continued Mr Airey.

When negative gearing was reinstated, the Government noted that any tax advantages conferred by negative gearing were countered by the CGT regime when capital gains were realised.

"To amend the current negative gearing provisions for housing as some critics have suggested would be treating real estate differently to other asset classes and create a resource misallocation", he continued.

policy?" he said.

"Housing is a crucial part of the economy and is facing some major challenges, however seems to have been left off the election campaign agenda", concluded Mr Airey.

US Senate hogties the US Financial sector (Wall Street)

The United States is set to impose the most sweeping overhaul of Wall Street since the Great Depression. The new financial regulations aim to rein in the risky banking practices blamed for the global financial meltdown.

The US Senate has just passed new laws, a vast 2300 pages, by 69 to 40 votes that will prevent the financial sector (Wall Street) from future  misbehavior.

This overhaul is the largest ever change since the Great Depression and as President said "we will never let the American taxpayer have to pay for their errors again.

Goldman Sachs has been fined $US550 million for their part in affecting the Us and the World economies.

I often think why would we let other people handle our finances ? It seems so simple to invest in residential property of which we have such a big shortage, and simply don't take a risk of others mismanaging  and playing games with our money.

Want to take the SAFE route? Give me a call on 0416243649

Lot 128 Woodlands is HOT HOT HOT Property

Only $458,900 Turnkey- Let the tenants move the furniture in and start living  

Registered Land

• Large block - 640sq
• Spacious home - 212sq
• 2 living areas
• Rumpus room
• Large traditional double garage
• Under roof line outdoor entertainment area
• Estimate rental return - $390 per week and rising
• Full turn key package price - $458,900

Plus the home comes complete with:

• Legal Fees Paid
• Depreciation Schedule
• Full Turnkey Package
• Landscaping & Fencing
• Stone Kitchen Bench Tops
• Flyscreens
• Air Conditioning (Split System)
• Property Management Package including:
• - Ray White 3 year rental agreement
• - lawn and garden care (12 months)
• - landlord protection insurance (12 months)

The Woodlands Estate is located in the high growth suburb of Waterford, only 30 Minutes South of Brisbane and North of Gold Coast and will cover 137.3 Hectares.

There are numerous Schools, TAFES and Universities with-in minutes, as well as popular Shopping Centres and convenient Public Transport.

Woodlands boasts a huge range of facilities including bike and hiking trails, proposed sports oval and 6 multipurpose sports courts, including BBQs & quality basket ball courts. Each home with be only a short walk from an enormous 17 hectare environmental corridor. The local community are very proactive and hold regular events and activities including Pilates, Boxercise, Quilting and there's even a community Choir.

Interested in this one? Just give me a call on 0416 243 649 Ian Begaud