The Real Estate Institute of Australia has released a document (9.6.11) on the differences between the Australian real estate market and the USA, GB, Spain markets to substantiate why they believe we do not have the bubble other countries have. The PDF document can be viewed at http://www.reia.com.au/userfiles/REIAPresentations_BurstingtheHousingBubbleMyth_Web.pdf.
The document made some interesting and encouraging points about the more positive outlook for Australian real estate but I still can't help feel that due to the organisation publishing it, the argument is weakened somewhat due to vested interests.
What do others think (rationally)?
Thanks
Boshy
Bubble , no. In need of a correction, probably yes.
How is it apparent? Longer days on market, lower auction clearance rates, lower median prices (reflecting no new stock or poorer quality sales) & reduced asking prices.
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This reply was modified 10 years ago by
Scott No Mates. -
This reply was modified 8 years, 10 months ago by Jinghong Chiu.
Scott No Mates wrote:Bubble , no. In need of a correction, probably yes.Interesting. So what's the difference? When does a correction become a bubble or visa verca?
Did the UK have a correction or did a bubble burst? What about Ireland and the US?
I don't have an answer – just think that defining the diffence between an 'overvalued' market and a 'bubble' market is an interesting thing to do.
Thanks for the article. However I'm beginning to feel that there is no need to substantiate the presence of a bubble, nor the need to prove that it doesn't exist.
There will always be people on both sides of the argument, and one of them will take the prize. Whatever it is, this argument is getting old.
At the end of the day, the equation is simple: want it? Buy it. Think it's overpriced? Then forget it.
No obviously we dont have a property bubble ha, property is different in australia, because in the lucky country prices always go up, and we have fantastic quality houses, people who say there is a bubble are uneducated because land and houses are in a shortage, thus demand and supply is making them more expensive.
Even if we did have a bubble it wouldn’t make a difference because we sell petrified wood to China
Unemplment is low and pies taste better with tomato sauce which makes property appreciate during the mid term
People say there has been falling prices this year, I say there will be a soft landing
Once confidence in the property market returns probably in the later end of this year, expect clearance rates to soar
We are at the beginning of another great property boom ppl, expect to see massive returns during the next 2-3 years
The fundamentals are just ripe in this present buyers market !
fWord wrote:Thanks for the article. However I'm beginning to feel that there is no need to substantiate the presence of a bubble, nor the need to prove that it doesn't exist.There will always be people on both sides of the argument, and one of them will take the prize. Whatever it is, this argument is getting old.
At the end of the day, the equation is simple: want it? Buy it. Think it's overpriced? Then forget it.
Oh come on… it never get's old:) It's been the best (though most avoided) point of debate in Australia for the last 10 years.
It's not quite as simple as your equation though. Correction – probably less than 10% (perhaps 15%) but the country will pick up the pieces fairly quickly afterward. Bubble – 15% or more drop in value in 12 – 18 months and the country is going to be pretty screwed for a while to come.
ummester wrote:Oh come on… it never get's old:) It's been the best (though most avoided) point of debate in Australia for the last 10 years.
It's not quite as simple as your equation though. Correction – probably less than 10% (perhaps 15%) but the country will pick up the pieces fairly quickly afterward. Bubble – 15% or more drop in value in 12 – 18 months and the country is going to be pretty screwed for a while to come.
Haha, I thought it was a never-ending debate that's been around for as long as housing existed.
Anyway, it's going to take a big crash to scare me enough to drop my property. I'd like to suggest that in the event of a bubble, not all property is going to suffer the same loss of value. Some would lose more value, and others will lose less. Boils back down to the principle of buying right.
Anybody who wants to dabble in the mathematics side of house prices then this is the video to watch
Over the last year or so I have followed with interest the talk about bubbles, corrections, and Australia's unique impenetrable position of always higher property prices. I have to say I'm still none the wiser.
I like the fact that ummester has tried to nail figures to a definition. Good job!!! After all it has to be more than semantics?
Perhaps a parallel would be the difference between a correction and a crash on the stock exchange. I'm not sure if there's a technical definition differentiating the two.
My question is can there be an unburst bubble? By my way of thinking we'll only know it when it pops. Until then I think a correction at worst.
Andrew
itsandrew
Go as far as you can see and you will see further.
Hmmm. Interesting. I will have to check out that video link when I have a spare 45 minutes. Houses are selling in Port Macquarie at the moment but units are a little slow.
Noticed there is are three grants to help home buyers – $7K for first home owner, $10K for a new construction, $7K to relocate from Sydney, Gosford or Newcastle to the Mid North Coast. That's potentially a $24K grant for a new home owner or a $14K grant to relocate and buy an existing property. These offerings don't seem to be promoted as most people I know have no idea they exist – except for the first home owner grant.
a "crash" is 20% fall or more
a "correction" would be less then 20%
I just received a flyer from Qld.gov.au/boost offering $10k to buy, build or invest + an additional $7k for fhb. So the money’s flowing in other states as well.
Can you give me some reasons or evidence why we are NOT in a property bubble that needs to pop ? to me the overwhelming evidence only shows that we are in fact in the biggest property bubble of all time
Can you show me evidence that in fact housing is also historically affordable today ?
@ hbbehrendorff I can't give any evidence but my gut feeling is either a flattening or a correction if things go pear shaped world wise. I think the Australian economy is going well although not perfect. Pessimism is counter productive to most endeavours but it is wise to keep a critical eye on what is happening around us. The stock market roller coaster last week reflects just how emotional people are feeling at the moment. Perhaps some will view real estate as a much safer option when there is a low debt to value ratio. Wising for high gains in this economic climate is unrealistic unless you have the ability and experience to spot a great opportunity and have enough cash so high debt is not required during the venture.
Boshy
I think the line between pessimism and realism in some instances isn't far off.
I tend to agree with hbbehrendorff's suggestion that Australia's current property bubble is the biggest of all time. It is just that most Australian's haven't seen it yet (bubbles don't look like bubbles from the inside, they look hollow rather than fulll and ripe for popping).
Japan's property bubble was the next biggest to ours that I am aware of but it didn't pop as far as most think – it just crippled the economy of a country with it's ongoing deflation. America's bubble popped and prices lost 30% seemingly over night. America's seemed bigger because the pop was, not because it was. Who knows what the test and definition of a bubble really is – they change as each new one pops or deflates.
Not sure if it really fits in this topic but Christopher Joye recently released this discussion paper discussing 'affordability' which, to me, underpins any bubble debate.
The answer is simple. It is about:
1. Supply and demand
2. Stable employment
3. A healthy banking system
4. Borrowers who must take responsibility for the mortgage.
Australia and New Zealand tick all these boxes and while we might be going through an adjustment phase (driven largely by a lack of buyer confidence) we certainly have nothing that would resemble a ‘bubble’. Sales volumes are down and in some areas by as much as 30% and we have in excess of 6 to 12 months worth of stock but the underlying confidence and desire to ‘own a property’ is still very strong.
We are seeing Gen Y now willing to sacrifice some of life’s luxuries to get a property. That is a very positive sign.
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This reply was modified 10 years ago by
Scott No Mates.
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