Property market to hit the brakes in 2016 

Date
    January 14, 2016
    Sydney Morning Herald

Australian's golden run of property price growth will end "sharply" this year, predicts global credit agency Fitch Ratings.   :(

In a new report, Fitch predicts that a combination of low affordability, exposure to US rate hikes, and prudential regulations will add up to a much slower rate of growth in a number of Asia-Pacific countries including Australia.

"The pace of house-price growth should decelerate particularly sharply in Australia and New Zealand this year; while the decrease should continue in Singapore, with prices dropping by a further 5 per cent from last year," it says.


Fitch predicts the markets will remain relatively stable due to low interest rates.

Fitch forecasts growth will clock in at about 2 per cent in Australia in the coming year about half that likely across the ditch in New Zealand.

For Australian capital cities that is well down on the 8 per cent average annual growth enjoyed over in the last three years, according to CoreLogic RP data.

"Stretched affordability and further compression of rental yields are likely to be key factors driving down price growth in Australia," Fitch says in a media statement.


The Australian property market is in for a quiet year.

"This is especially the case in Sydney and Melbourne, where price appreciation in recent years has outpaced wage growth - leading to decreasing levels of affordability.

Weaker demand from investors has also already begun to affect mortgage demand, as falling rental yields and new prudential measures restrict the growth of investment loan portfolios."

Despite the slowdown Fitch predicts the markets will remain relatively stable due to low interest rates and steady mortgage performance.


Weaker demand from investors has also already begun to affect mortgage demand.

"Steady Australian performance reflects increasing levels of servicing buffer from lower interest rates, a stable unemployment rate, and price appreciation opening up additional equity for borrowers," Fitch's report says.

"Low wage growth and rising living costs would mean performance coming under pressure if rates rise, but this is unlikely in 2016."

Fitch also notes that low interest rates and solid employment may also weaken attempts by regulators to cool the market.

Although it does predict that investors will be less of a force.

"Fitch expects weaker demand from investors as a result of a further compression in rental yields, increased costs - a result of prudential measures restricting the growth of investment loan portfolios - dwindling prospects for capital growth in the capital cities, and increasing transactional costs," it says.

I disagree.

The property boom is demographically fueled.

Retirees are investing in property for the regular income from rents and potential capital gains whilst shunning equity markets as they are too volatile and cash because rates are too low.

Demographically there are increasing numbers of Baby Boomers retiring, and this will continue for at least 10 years or more unless stock markets stabilise and vastly improve and rates go up significantly.

of course, they predicted the same in 2015,2014,2013,2012,2011,2010,2009,2008,2007,2006,2005,2004,2003,2002,2001,2000

meanwhile, in the real world .... with the stock market going into freefall, the property market is about to get another boost

Though investors try to unlink the property and share market, in the end , they are linked and in the end , they both perform at about the same level.

swag is right that a drop in shares causes a surge in property but its not really the case long term.

if we get back to basics.


when stocks fall, something is wrong with the business sector.  when businesses arent as profitable and yields are falling and stocks are falling, then it is likely businesses will be shedding jobs and unemployment rising.

this, then effects housing as rising unemployment sees mortgage stress, more selling pressure, renters defaulting on rent and lower yields in returns and more vacancies.

a drop in interest rates , should, effect both to the same extent.  ie both shares and housing should get a boost.


i really dont think any of this is worth worrying about.

just set your goals, put 1/3 of your wealth into property, 1/3 into shares, 1/3 into fixed deposits.

if you trust super, have as much as you can in the super system, but beware the accountants who pedal SMSF as they do quite well out of the auditing. You would really need 750 k at least to make a SMSF worthwhile.

thats always been my strategy and i look at the index every 18 months and in between couldnt care less.
if you buy an indexed fund , in blue chips , through super, i cant see how you can possibly go wrong.

if you buy housing near a major university, major teaching hospital or close to a CBD , i cant see how you can possibly go wrong.

the trick is, dont over leverage, especially if you dont have job security

John Smith wrote on Jan 14^th, 2016 at 10:43pm:

of course, they predicted the same in 2015,2014,2013,2012,2011,2010,2009,2008,2007,2006,2005,2004,2003,2002,2001,2000 meanwhile, in the real world .... with the stock market going into freefall, the property market is about to get another boost

exactly... weve been hearing it for years and years...but then some do enjoy spreading gloom....

I often wonder if they have their own homes.....unless they think their home will be insulated from any price fall.. ::) ::) ::)

John Smith wrote on Jan 14^th, 2016 at 10:43pm:

of course, they predicted the same in 2015,2014,2013,2012,2011,2010,2009,2008,2007,2006,2005,2004,2003,2002,2001,2000 meanwhile, in the real world .... with the stock market going into freefall, the property market is about to get another boost

Property investment is a far safer bet than the stock market because unlike stocks, property values don't really go anywhere except up. The only difference really is by how much they go up.

I'm not sure property prices will keep going up.

For one - there is an oversupply of rentals as supply now outstrips demand.

2 - China.

It will be interesting to see what will happen if China does fall over.

Australia has had property price crashes in the past and could happen again in the future.

cods wrote on Jan 15^th, 2016 at 7:22am:

John Smith wrote on Jan 14th, 2016 at 10:43pm: of course, they predicted the same in 2015,2014,2013,2012,2011,2010,2009,2008,2007,2006,2005,2004,2003,2002,2001,2000 meanwhile, in the real world .... with the stock market going into freefall, the property market is about to get another boost exactly... weve been hearing it for years and years...but then some do enjoy spreading gloom.... I often wonder if they have their own homes.....unless they think their home will be insulated from any price fall.. ::) ::) ::)

Lack of supply and huge demand will see prices continue to rise.

21st Century Dialup Network wrote on Jan 15^th, 2016 at 12:40pm:

I'm not sure property prices will keep going up. For one - there is an oversupply of rentals as supply now outstrips demand.

Rental vacancies are low in Sydney, how can this be so if there is an oversupply

Baronvonrort wrote on Jan 15^th, 2016 at 12:44pm:

21st Century Dialup Network wrote on Jan 15th, 2016 at 12:40pm: I'm not sure property prices will keep going up. For one - there is an oversupply of rentals as supply now outstrips demand. Rental vacancies are low in Sydney, how can this be so if there is an oversupply

http://www.domain.com.au/news/perths-median-rent-continues-to-drop-20160113-gm4m9w/

Not on units anyway.

http://www.news.com.au/finance/money/costs/rents-across-each-of-australias-capital-cities-is-getting-cheaper/news-story/aef2e51bf0bd2d5a7129c7fa099a7655

CHANGE IN WEEKLY DWELLING RENT OVER THE PAST QUARTER
Sydney $592 — down 0.2 per cent
Melbourne $448 — down 0.3 per cent
Brisbane $430 — down 0.6 per cent
Adelaide $364 — down 0.9 per cent
Perth $459 — down 2.8 per cent
Hobart $336 — down 1.2 per cent
Darwin $532 — down 3.9 per cent
Canberra $490 — down 1.3 per cent
Combined $483 — down 0.7 per cent

There are more rentals on the market and the vacancy rates are up:

http://propertyupdate.com.au/vacancy-rates-around-australia-houses-steady-units-rising/

The vacancy rate for houses remained steady at 2.2 percent with vacancies for units up from 2.8 percent to 3.1 percent.

The overall total residential vacancy rate increased from 2.4 percent to 2.5 percent over the month.

Rents are steady, however I don't think we will see big increases this year - especially in WA/QLD.

Property markets are hitting the brakes (so to speak), for similar reasons to Financial & Shares markets AND THAT IS SET TO CONTINUE FOR QUITE SOME TIME!

21st Century Dialup Network wrote on Jan 15^th, 2016 at 12:40pm:

I'm not sure property prices will keep going up. For one - there is an oversupply of rentals as supply now outstrips demand. 2 - China. It will be interesting to see what will happen if China does fall over. Australia has had property price crashes in the past and could happen again in the future.

oversupply of rentals? who are you kidding? My rentals have lately been going within a few days, and I was asking for prices I thought I wouldn't get. :D :D :D

Talking about the Property Market, do yourself  a favour and go see the movie, The Big Short about the Global Financial Crisis set off by the American Mortgage Crisis.

This is a must see movie. Well documented and truly will have you dropping your jaw at the outrageousness of the American Financial system.

I give it 5 out of 5 and I have never rated a movie 5 out of 5 before.

The irony is, I believe history is repeating itself even though the G.F.C. only happened in 2007.

We humans never learn from history, never ever.

Reading the report from Fitch Ratings reminds me of what Standard and Poor the huge ratings agency got up to in the G.F.C.

This Agency was too scared to drop it's triple AAA rating on the Mortgage Housing Bond business which was dropping through the floor because it was frightened if it did, their business would walk up the street to their Opposition Moody's and get their Triple AAA ratings there.

Unbelievable..but hey that's the Americans baby!

The A$ is currently up and down like a professional lady's underwear. This portends a growing instability in price of Australian assets.

perceptions_now wrote on Jan 15^th, 2016 at 3:09pm:

Property markets are hitting the brakes (so to speak), for similar reasons to Financial & Shares markets AND THAT IS SET TO CONTINUE FOR QUITE SOME TIME!

You are pathologically incapable of accepting good news.  Everything is grim. OIL HAS run out... etc

housing prices will probably slow down and possibly even have a minor correction in line with the way it has operated for the last 100 years.

when someone bothers to note that rents are down a whole $3/wk you know the news is pretty much immaterial.

longweekend58 wrote on Jan 15^th, 2016 at 3:55pm:

perceptions_now wrote on Jan 15th, 2016 at 3:09pm: Property markets are hitting the brakes (so to speak), for similar reasons to Financial & Shares markets AND THAT IS SET TO CONTINUE FOR QUITE SOME TIME! You are pathologically incapable of accepting good news.  Everything is grim. OIL HAS run out... etc housing prices will probably slow down and possibly even have a minor correction in line with the way it has operated for the last 100 years. when someone bothers to note that rents are down a whole $3/wk you know the news is pretty much immaterial.

It is correct, that Global & Local Economics has operated on a cycle, over much of the modern era and that is where your beliefs originate!

It is also correct, that the Global & Local BASIC ECONOMIC DRIVERS ARE NOW IN THE PROCESS OF CHANGING & that is where you fail to incorporate CURRENT REALITIES!

perceptions_now wrote on Jan 15^th, 2016 at 5:05pm:

longweekend58 wrote on Jan 15th, 2016 at 3:55pm: perceptions_now wrote on Jan 15th, 2016 at 3:09pm: Property markets are hitting the brakes (so to speak), for similar reasons to Financial & Shares markets AND THAT IS SET TO CONTINUE FOR QUITE SOME TIME! You are pathologically incapable of accepting good news.  Everything is grim. OIL HAS run out... etc housing prices will probably slow down and possibly even have a minor correction in line with the way it has operated for the last 100 years. when someone bothers to note that rents are down a whole $3/wk you know the news is pretty much immaterial. It is correct, that Global & Local Economics has operated on a cycle, over much of the modern era and that is where your beliefs originate! It is also correct, that the Global & Local BASIC ECONOMIC DRIVERS ARE NOW IN THE PROCESS OF CHANGING & that is where you fail to incorporate CURRENT REALITIES!

basically, you think you are the oracle and know better than everyone else. And naturally, it is all devastatingly bad news. I never recall you having a positive comment on economics or politics... EVER. and yet, you continue to be wrong, year-in, year-out. A bit like your 'peak oil' embarrassment and how we were all going to run out of oil by 2010 or perhaps 2020 and now we have more oil than we have ever had in all of history.

Why dont you make a special thread when you finally have something positive to say?

your medication is obviously not strong enough.

longweekend58 wrote on Jan 15^th, 2016 at 5:16pm:

perceptions_now wrote on Jan 15th, 2016 at 5:05pm: longweekend58 wrote on Jan 15th, 2016 at 3:55pm: perceptions_now wrote on Jan 15th, 2016 at 3:09pm: Property markets are hitting the brakes (so to speak), for similar reasons to Financial & Shares markets AND THAT IS SET TO CONTINUE FOR QUITE SOME TIME! You are pathologically incapable of accepting good news.  Everything is grim. OIL HAS run out... etc housing prices will probably slow down and possibly even have a minor correction in line with the way it has operated for the last 100 years. when someone bothers to note that rents are down a whole $3/wk you know the news is pretty much immaterial. It is correct, that Global & Local Economics has operated on a cycle, over much of the modern era and that is where your beliefs originate! It is also correct, that the Global & Local BASIC ECONOMIC DRIVERS ARE NOW IN THE PROCESS OF CHANGING & that is where you fail to incorporate CURRENT REALITIES! basically, you think you are the oracle and know better than everyone else. And naturally, it is all devastatingly bad news. I never recall you having a positive comment on economics or politics... EVER. and yet, you continue to be wrong, year-in, year-out. A bit like your 'peak oil' embarrassment and how we were all going to run out of oil by 2010 or perhaps 2020 and now we have more oil than we have ever had in all of history. Why dont you make a special thread when you finally have something positive to say? your medication is obviously not strong enough.

Ok, YOU ARE POSITIVELY WRONG, AGAIN, AS USUAL!

As for, saying we are going to run out of oil, by 2010 or 2020, THAT IS SOMETHING YOU SAY, I have said our Production of "old Oil" Peaked around 2005 & Shale Oil was/is a "short lived commodity, WHICH IT IS, IT IS ALREADY IN DECLINE!

As for the news being bad, that is purely a Reality fact, as it is a product of the CHANGING BASIC ECONOMIC DRIVERS!

Oh, btw, there are a couple of major differences between us -
1) I question all the relevant facts & come to my own conclusions, based on the best info currently available, whereas you rely on what used to be.
2) I debate & RELY ON Facts, WHEREAS YOU RELY ON "BELIEFS" & ABUSING OTHERS.

There is a big overhang of foreign owned properties with absentee owners and which are not rented. In some areas this constitutes 15+% of apartments.

All it takes for a selling wave is for panic to set in such as a steep dip in the A$ or a tax imposition. Once a panic starts it has a life of its own.

If apartment prices start falling it will infect the house market as well.

John Smith wrote on Jan 14^th, 2016 at 10:43pm:

of course, they predicted the same in 2015,2014,2013,2012,2011,2010,2009,2008,2007,2006,2005,2004,2003,2002,2001,2000 meanwhile, in the real world .... with the stock market going into freefall, the property market is about to get another boost

The boost will accompany a boost in debt !! Surely you don't believe that this growth in debt is sustainable ?

The australian government has a habit of meddling in the property market it to keep it propped up but this sets a dangerous precedent and that sooner or later their meddling will fail to work. Just see what happened to the chinese stock market when the government meddled in it to keep it propped up. Their meddling is now destabilizing the whole world markets !!

cods wrote on Jan 15^th, 2016 at 7:22am:

John Smith wrote on Jan 14th, 2016 at 10:43pm: of course, they predicted the same in 2015,2014,2013,2012,2011,2010,2009,2008,2007,2006,2005,2004,2003,2002,2001,2000 meanwhile, in the real world .... with the stock market going into freefall, the property market is about to get another boost exactly... weve been hearing it for years and years...but then some do enjoy spreading gloom.... I often wonder if they have their own homes.....unless they think their home will be insulated from any price fall.. ::) ::) ::)

The rise in property prices in the US was never supposed to end !! What happened in 2008 ? According to many that was never going to happen !!

Things in China economically are going down the toilet. Extrapolate that into the Chinese investors gobbling everything in sight here is about to come to a shuddering halt.

So are Sydney property prices which are rocketing....down!

wrote on Jan 14^th, 2016 at 4:55pm:

Property market to hit the brakes in 2016  Date     January 14, 2016     Sydney Morning Herald Australian's golden run of property price growth will end "sharply" this year, predicts global credit agency Fitch Ratings.   :( In a new report, Fitch predicts that a combination of low affordability, exposure to US rate hikes, and prudential regulations will add up to a much slower rate of growth in a number of Asia-Pacific countries including Australia. "The pace of house-price growth should decelerate particularly sharply in Australia and New Zealand this year; while the decrease should continue in Singapore, with prices dropping by a further 5 per cent from last year," it says. Fitch predicts the markets will remain relatively stable due to low interest rates. Fitch forecasts growth will clock in at about 2 per cent in Australia in the coming year about half that likely across the ditch in New Zealand. For Australian capital cities that is well down on the 8 per cent average annual growth enjoyed over in the last three years, according to CoreLogic RP data. "Stretched affordability and further compression of rental yields are likely to be key factors driving down price growth in Australia," Fitch says in a media statement. The Australian property market is in for a quiet year. "This is especially the case in Sydney and Melbourne, where price appreciation in recent years has outpaced wage growth - leading to decreasing levels of affordability. Weaker demand from investors has also already begun to affect mortgage demand, as falling rental yields and new prudential measures restrict the growth of investment loan portfolios." Despite the slowdown Fitch predicts the markets will remain relatively stable due to low interest rates and steady mortgage performance. Weaker demand from investors has also already begun to affect mortgage demand. "Steady Australian performance reflects increasing levels of servicing buffer from lower interest rates, a stable unemployment rate, and price appreciation opening up additional equity for borrowers," Fitch's report says. "Low wage growth and rising living costs would mean performance coming under pressure if rates rise, but this is unlikely in 2016." Fitch also notes that low interest rates and solid employment may also weaken attempts by regulators to cool the market. Although it does predict that investors will be less of a force. "Fitch expects weaker demand from investors as a result of a further compression in rental yields, increased costs - a result of prudential measures restricting the growth of investment loan portfolios - dwindling prospects for capital growth in the capital cities, and increasing transactional costs," it says.

That's interesting and probably correct.  But what did Fitch say just before the GFC?

Quote:

Despite the slowdown Fitch predicts the markets will remain relatively stable due to low interest rates and steady mortgage performance.

And this statement has the forum's village idi0ts announcing that the crash they have been predicting for decades is now about to happen?

red baron wrote on Jan 16^th, 2016 at 6:38pm:

Things in China economically are going down the toilet. Extrapolate that into the Chinese investors gobbling everything in sight here is about to come to a shuddering halt. So are Sydney property prices which are rocketing....down!

All markets over shoot in price then come down.
The same thing happened in 2000.

Wolseley wrote on Jan 16^th, 2016 at 10:15pm:

Quote: Despite the slowdown Fitch predicts the markets will remain relatively stable due to low interest rates and steady mortgage performance. And this statement has the forum's village idi0ts announcing that the crash they have been predicting for decades is now about to happen?

And the GFC could never happen either because houses are the best investment. Right ? :D LOL

Bobby. wrote on Jan 16^th, 2016 at 10:19pm:

red baron wrote on Jan 16th, 2016 at 6:38pm: Things in China economically are going down the toilet. Extrapolate that into the Chinese investors gobbling everything in sight here is about to come to a shuddering halt. So are Sydney property prices which are rocketing....down! All markets over shoot in price then come down. The same thing happened in 2000.

Did you check your facts before you posted that?  I don't think so.

Check it out from "The Daily Reckoning"


Quote:

--Phil Anderson, editor of Cycles, Trends and Forecasts, predicted the US market would bust in his book, The Secret Life of Real Estate and Banking. He said the bottom would occur in 2010. The prediction was bang on the money. --But Australia, the lucky country, avoided the bust. After all, as property types will tell you, even if they don’t know how exactly, Australia is different. --Personally, I think that’s a terrifying argument. The simple fact is that Australia avoided getting caught up in the US cycle because China dragged us into its orbit. Instead of falling in unison with the rest of the world’s real estate markets, Australia went the other way. --Does that mean that our real estate fortunes are tied to China, and no longer the US? --That’s a question only hindsight can answer for sure. But there is evidence to suggest that is the case. Australia’s interest rate settings reflect our relationship with China. Our ability to attract foreign capital reflects our relationship with China. --These two factors have a huge impact on real estate prices. If China’s credit boom turns to bust (which it seems to be in the process of doing) then it will bust Australia’s housing market too. --The initial signs are already here. The squeeze on Chinese capital coming into the country will begin to impact prices at the margin. From the Financial Review: ‘One of Sydney's top real estate agents said Chinese buyers are finding it increasingly difficult to get money out of the country, as Beijing tightens foreign exchange controls in a bid to support its weakening currency. ‘Lu Lu Pallier from Sotheby's International Realty, who is focused on buyers from mainland China, said she had heard in recent weeks clients were having difficulty moving money offshore.’ --This is just the start of things to come. A slowdown in Chinese capital flows is a precursor to a slowdown in foreign capital flows in general. And given that Australia’s housing market rests on a foreign debt pile of approximately $1 trillion dollars, THIS is the crucial point that no one seems to get. --To make it clear, our foreign creditors ultimately control the rate of interest we pay on mortgages, not the RBA. As China moves closer to a credit bust, foreign creditors will freak out and increase Australia’s cost of capital. That will bust our housing market. It’s just a matter of time. Greg Canavan, For The Daily Reckoning

No it won't friend.

Them folks gots it all worked out. These young folks know about it too.

Them folks from the Wilds of Asia will come and borrow the money friends