Some economic experts here and abroad are calling for property in Australia to drop by 40% citing we will suffer the same fate of the USA.
What these experts don’t realise is Australia’s housing market is radically different to that of the US. Today the US property market still remains in ill health because of these indicators:
- National unemployment remains at 9.5% (compared to Australia’s 5.3%)
- Mortgages more than 90 days in arrears are estimated to be at almost 10% of all loans. The situation is even worse in states like Nevada, California and Florida where the 90 days arrears rate is estimated to be around 20% of all loans (the percentage of Australian home loans more than 90 days in arrears is estimated at 0.6% of all housing loans)
- Research indicates that more than 11.3 million or 24 percent of all residential properties with mortgages had negative equity at the end of the fourth quarter of 2009. The typical US home owner with negative equity won’t move into positive equity until around 2015/16. In worse hit markets a move back to positive equity isn’t likely until around 2020.
The US market has a long way to go before a recovery can be celebrated. While home prices appear to have stabilized, volumes remain extremely low and continue to show further falls. The housing market is arguably going to present the largest hurdle for a broad based US economic recovery and an improvement in conditions doesn’t seem to be on the drawing board any time soon.
Australia vs USA property prices
Australia currently has a housing shortfall, strong population growth, a robust financial system, low unemployment, improving economic conditions and a residential market that appears to be moderating in growth in a controlled fashion. Importantly, mortgage arrears have not moved upwards suggesting that Australian borrowers are coping with the increased level of interest rates quite reasonably
Whilst the cost of building replacement stock in the US far exceeds purchasing high quality existing stock the construction industry & furnishings will struggle. Not so the case in Oz.
Lot's of opportunities are there for the optimists out threre!
Thank you ALF 1 for the optimistic thread. I also do not believe that Australia property market will have the same fate as the US property market. You mentioned valid indicators for the US. Fortunately, for us it is not as bad here in Australia But I still read a lot of articles stating otherwise. According to them the Australian property prices are set for further annual fall. Do you believe it is any possible ways for the US property market to recover faster?
The Australian property market in my view will not fall in fact in many pats of Australia we have a shortage of properties in many of our major cities. This is leading to an increase in rents. This is occurring because finance especially for development projects is very tight. The solution is that we partner with people in mid size projects and we are finding that there are great returns for our partners and us. However there are also great opportunities in the United States however I believe there is better value in buying commercial properties such as apartment complexes and small strip centers.
Nigel Kibel | Property Know How
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Nigel, I agree with you on the American market. Buying apartment complexes there will definitely make big money. A lot of foreclosures happening there right now, which means that more people move to apartments.
Apartments are good for meager caps under 10%. It doesn't have to be apartments, people still would rather rent a SFH over apartments. I do have four and six plex's though, they are cash machines.
The prices can't get any lower, if anything the banks are being more creavtive. REO deals and brokers are coming back, bought two auctions last week that made buying cheap properties super easy. It's not going to last more than 4 years max and all the inventory will be gone. Look at Atlanta, Phoniex, Florida, all the good stuff has been bought up. I wish i could still get brand new houses in Cape Coral, FL for 35,000.
Your economy is super inflated, the property prices are stupid for the prices. Day labors for 300 a day sounds crazy, nobody in the states makes that as a day labor. People borrowing on the equity of there inflated house prices. Paying on notes that could be close to a million and waiting to sell for appreaction that will never come. Not a game i would want to play
The states will come back from this, The younger generation is more green and IT friendly. Technology is the future, not buying crap from China. A swing to green energy will be hard as big oil/big gov will be bought for on that agenda. I don't think you guys think about how much easier it would be to run a country that is half the population of Cali.
When you look at the failures of the US and Europe and compare them back to the Australian market, you soon realise that the fundamentals are totally different.
In some parts of Europe, new house construction accounted for over 30% of GDP :eek: when you compare this to our figure of around 8% you soon realise that the OS situation where supply outstrips demand for several years, there is bound to be a massive correction. Conversely, in the US, where demand for IPs was fueled by liberal lending policies (think CMBS with very poor covenants) and there was another time bomb.
When were things last 'bad' in Australia? Our last recession was over 20 years ago – for many FHB, this is a lifetime.
I was reading an article the other day with regards to a recovery in the property sector in the US – people's faith in property has been severely eroded, we will see a generation of non-home owners going forward as they turn their eyes back to equities as an investment class rather than their own homes.
Not an optimist Anthony, a realist. You haven't seen misery or the effects of the GFC until you spend some time in the US or the Eurozone. If you look at our markets ie Indo/China/India/Asia, these economies have been steadily growing with a new Sydney worth of middle class annually in each of these countries.
Not an optimist Anthony, a realist. You haven't seen misery or the effects of the GFC until you spend some time in the US or the Eurozone. If you look at our markets ie Indo/China/India/Asia, these economies have been steadily growing with a new Sydney worth of middle class annually in each of these countries.
Just read that American property prices are on the rise, but I am being a little bit skeptical that this rise will stay for long. In my opinion, prices will drop back again pretty soon, but , of course, I might be wrong.
I think again it is easy to generalize. There are some state still falling some remaining flat and others that are going up.
I will put up a post comparing two states Florida and Texas
Nigel Kibel | Property Know How
http://propertyknowhow.com.au
Email Me | Phone MeWe have just launched a new website join our membership today
Nadeem Walayat (The Market Oracle) published this rather comprehensive article on the US housing market which I found quite interesting although I don't all together believe he has it nailed.
It's an extremely optimistic report but not outside the bounds of reality. Where things may go wrong though are Obama Care (OC) and the impact that is having on unemployment especially U6 rates. U6 has been falling but I expect to see it start to rise towards the 2H 2013 as OC nears implementation.
QE 3 and QE – ∞ are largly targeted at the mortgage market. If QE was to be wound back (and there is talk of this) then my guess is that could affect house price expectations.
Fannie and Freddie. There was talk of them being wound up and my guess is sold off to the private sector. Not sure how that may pan out for new borrowers and current borrowers who are underwater.
The biggest threat to the housing market would be another crises and I think that probability is quite high.
We live in interesting times.
PS: US Vs Au housing market…. chalk and cheese
Bad news sells papers.
We have all seen it before. A half truth spread through the papers screaming doom and gloom.
As Freckle said US v AU housing economies are chalk and cheese.
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