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Australian Housing Now Severely Unaffordable. (Read 3841 times)
imcrookonit
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Australian Housing Now Severely Unaffordable.
Jan 24th, 2011 at 5:49am
 
Melbourne housing now 'severely unaffordable'


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Poll: Is the high price of housing killing the Great Australian Dream?
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MELBOURNE has scored near the bottom of a global ranking of housing affordability, raising fears that runaway house price increases in recent years have made Australia a less equitable country.   Sad

The Demographia International Housing Affordability Survey, which ranked 325 markets by affordability, listed Melbourne as the world's 321st most affordable city, more reasonably priced than only Sydney and a handful of other locations.   Sad

London is more affordable than Geelong.


The ratio of house prices to median yearly household income was 9 in Melbourne, versus 9.6 in Sydney - the second least affordable city in the world, in spot number 324, according to data produced by the US-New Zealand anti-regulation group Demographia.

The group put the median Melbourne house price at $565,000 with the median household income at $63,100.   Shocked 

Hong Kong came in last at number 325, with an income-house price ratio of 11.4, while Saginaw, in Michigan ranked No. 1, with a multiple of 1.6. Demographia considers markets with a median multiple of 3 or less "affordable", while those with 5.1 or more are considered "severely unaffordable". Australia's major markets were all considered "severely unaffordable''.   Sad

US-based geographer and author Joel Kotkin said that even after the housing bubble implosion in the US and Britain beginning in 2008, the ratio of home prices to incomes has grown in major cities such as Los Angeles, San Francisco, Boston, London, Toronto and Vancouver.

"Perhaps most remarkable has been the shift in Australia, once the exemplar of modestly priced, high-quality, middle-class housing, to now the most unaffordable housing market in the English-speaking world," he said. "The real issue is affordability and Australia has gone from a middle-class paradise in that regard into a more stratified society - just as we find in Britain and parts of the US."  Sad

Mr Kotkin, who has visited Australia extensively, described the trend as "neo-feudalism" that unravels the social achievement of spreading property ownership.

Demographia's report comes as Australian home prices are expected to show little growth in 2011, after double digit yearly growth as recently as 2010, driven by the slow pace of construction approvals, strong immigration, and an economy that hasn't experienced a recession in nearly two decades. House prices plateaued in mid-2010, amid interest rate rises and a weaker pace of sales. The national city dwelling price fell 0.2 per cent in November, to $466,000, according to RP Data-Rismark information. Six in 10 Australians live in major cities.

The third quarter 2010 rankings were compiled from national housing reports and estimates drawn from census data on incomes, with calculations made in local currency.

Sydney-based real estate research and investment group Rismark believes Australian homes will become more affordable through 2011, as incomes remain strong and house prices flatten out.

"As Australia's business investment and export boom drives strong household income growth at the same time as interest rates keep dwelling prices in check, we are likely to see a substantial improvement in residential real estate valuations," said Rismark joint managing director Christopher Joye.

By Rismark's calculations, the ratio of price to disposable household income ratio has dropped from 4.6 to 4.4 between the June and September quarters, as the median quarterly Australian home price fell from $418,000 to $405,000.

Rismark includes homes outside capital cities, apartments and attached units, and draws on income data that captures wealth generated from investments and multiple sources of revenue, when calculating house-price to income ratios.

Melbourne-based innovation research agency 2thinknow, which compares the social and commercial advantages of 289 cities worldwide, agreed with Demographia's assessment on Australia's affordability.

"Anything [with an income-house price ratio] above 5 is a high multiple - based on two incomes and the lifestyle flexibility to have children," director Christopher Hire said.

The impact means Australian cities receive low benchmarks in the world on 2thinknow's property prices in the Innovation Cities Index. Sydney ranks among the least affordable places, with a 0 out of 5 rating, on a par with San Francisco and Hong Kong, while Melbourne, Brisbane, Adelaide, and Hobart have a rating of 1. "High property prices mean investment that should be in productive infrastructure or capital is spent on property," he said, leaving the country unprepared when the mining boom ends.   Sad
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salad in
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Re: Australian Housing Now Severely Unaffordable.
Reply #1 - Jan 24th, 2011 at 7:13am
 
Never fear, Tanya is here:

Quote:
TANYA PLIBERSEK, HOUSING MINISTER: Well, I saw the Leader of the Opposition saying that earlier and I thought it was pretty funny actually, that after 12 weeks, when we have laid out a comprehensive range of policies to help with housing affordability, the Opposition would be saying it's too little too late when they had 12 years to do something about housing affordability and did nothing.

None of us believe that what we've announced today is the silver bullet to housing affordability. This is a complex problem. It has developed over a decade. It's part of a suite of answers needed. Today's announcement to double the amount of affordable properties through our national affordable scheme is one important measure. Our housing affordability fund, which is a $500,000 million fund to bring down construction costs for new housing, another important measure. Our first home saver accounts to help young Australians save a deposit for their own homes, very important. Release of excess Commonwealth land, having a housing supply council so that we are predicting 10, 20, 30 years into the future the housing and land supply needs that we'll have. All of these are part of a solution. On their own, of course, they're not a solution and certainly no solution is an overnight solution.
http://www.abc.net.au/lateline/content/2007/s2178777.htm


Thank g*d that the ALP is here to help.
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Re: Australian Housing Now Severely Unaffordable.
Reply #2 - Jan 24th, 2011 at 11:39am
 
the answer is to bring more migrants here so they can keep a floor under house prices to stop them from collapsing Wink LOL
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In August 2021, Newcastle Coroner Karen Dilks recorded that Lisa Shaw had died “due to complications of an AstraZeneca COVID vaccination”.
 
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Re: Australian Housing Now Severely Unaffordable.
Reply #3 - Jan 24th, 2011 at 11:45am
 
salad in wrote on Jan 24th, 2011 at 7:13am:
Never fear, Tanya is here:

Quote:
TANYA PLIBERSEK, HOUSING MINISTER: Well, I saw the Leader of the Opposition saying that earlier and I thought it was pretty funny actually, that after 12 weeks, when we have laid out a comprehensive range of policies to help with housing affordability, the Opposition would be saying it's too little too late when they had 12 years to do something about housing affordability and did nothing.

None of us believe that what we've announced today is the silver bullet to housing affordability. This is a complex problem. It has developed over a decade. It's part of a suite of answers needed. Today's announcement to double the amount of affordable properties through our national affordable scheme is one important measure. Our housing affordability fund, which is a $500,000 million fund to bring down construction costs for new housing, another important measure. Our first home saver accounts to help young Australians save a deposit for their own homes, very important. Release of excess Commonwealth land, having a housing supply council so that we are predicting 10, 20, 30 years into the future the housing and land supply needs that we'll have. All of these are part of a solution. On their own, of course, they're not a solution and certainly no solution is an overnight solution.
http://www.abc.net.au/lateline/content/2007/s2178777.htm


Thank g*d that the ALP is here to help.


Tanya Plibersek should get the vote for being the most useless politician ever !!
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In August 2021, Newcastle Coroner Karen Dilks recorded that Lisa Shaw had died “due to complications of an AstraZeneca COVID vaccination”.
 
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Re: Australian Housing Now Severely Unaffordable.
Reply #4 - Jan 24th, 2011 at 4:43pm
 
You couldnt pay me enough to live in Melbourne, over priced, unfriendly, noisy and polluted.

Give me the country life anyday.  There was only ever three good things to come out of Melbourne.  AFL, Cartlon Draught and the Hume Highway
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Re: Australian Housing Now Severely Unaffordable.
Reply #5 - Jan 25th, 2011 at 3:55pm
 
Reading The Age reporting on the housing market over the last couple of weeks has been like watching the Comedy Channel.

At any point we expect Jon Stewart or Stephen Colbert to fly out of the page to tweak our nose and give us a cheeky wink.

First we had, “Land sales plummet, adding to price squeeze”.

Fairfax reporter Chris Zappone wrote:

“Land sales have dropped to decade lows, further eroding the nation’s housing affordability as prices continue to rise, according to RPData and the Housing Industry Association…

“Even as the pace of sales slows, Australia faces a roughly 200,000-unit housing shortage, HIA estimates, driven by complicated planning processes, a tax policy that encourages buyers to hold multiple homes, and the slow release of suitable land by real estate developers and governments.”

So what we have is falling demand equalling a housing shortage.

How does that work then?

Surely, if the bulls were right and there is a housing shortage, buyers would be ripping the arms off real estate developers to get land at any price.

Yet as The Age reports:

“Land sales in the city [Melbourne] staged an even bigger retreat, falling 74.2 per cent in the year to September, to about 1500, the lowest since the March quarter of 1991.”

Cameron Kusher from RPData is quoted saying:

“Undoubtedly something needs to be done to address affordability constraints and governments at all levels need to realise that it is a serious problem.”

Turn the numbers around and what you’ve got are buyers saying they won’t pay stupid prices.  Prices are too high.  And they need to fall.  But the mainstream doesn’t look at it like that.

As far as the mainstream is concerned, a lack of demand equals a lack of supply.  Therefore prices are bound to go higher… because there’s a housing shortage.

Of course, as you should know, the so-called housing shortage doesn’t exist.  What you’ve got in most cases is over-the-top expectations of sellers.

I can give you a good example… about two years ago, a house in the Sayce family’s street sold for around $750,000.  That was roughly 60% more than houses in the same street were going for three years earlier.

Today, two homes in the same street are on the market in the mid to high $600,000s.  One of these homes has been on the market for over a year.  By our estimate, they’re dreaming if they reckon they’ll get anything close to what they’re after.

If they knock 10—20% off the price they might be in with a chance… More likely they’ll have to lop 30% off the reduced price to have a chance of selling.

And based on letters we’ve received from Money Morning readers, it’s a similar story elsewhere in suburbia.  Prices on decent, relatively modern homes are 30% lower than similar homes were two years ago.

Trouble is, they’re still overpriced!

Yet so far, this familiar story has failed to show up in the dodgy housing index numbers.  We doubt that will be the case for long.  In fact, based on the comical analysis of the housing market by ANZ Bank [ASX: ANZ], we’ll bet the numbers will start showing up before this year is out.

According to reporting of the ANZ report – which we haven’t got our hands on yet:

“The bank estimates that house prices will plateau this year, at a little more than $550,000, on average.”

Well, that’s something.  At least it’s better than the ‘house prices will double’ rubbish we’re used to reading.

Even so, the banks still can’t admit it.  They haven’t got the balls to say house prices have and will fall.  They’ve always got to put a spin on it.  In their world house prices either go up, plateau or become more affordable… but they never go down.

Of course, the simple reason for that is the banks don’t live in the real world.  They live in the crazy banking world where house prices must go up.

You and I know why the banks have to push house prices higher – because the banks’ balance sheets are so leveraged to the housing market.

It’s similar to if you have a margin loan on a share portfolio.  While share prices go up you’re laughing.  You’re getting a lovely return on your capital.  But as soon as prices fall, unless you’ve reduced your exposure, you’re going to be in a bunch of trouble.

And that’s exactly what the banks are exposed to… falling house prices.

But as we say, even with price expectations falling by 30%, Aussie homes are still way overpriced.  Yesterday the 7th Annual Demographia International Housing Affordability Survey was released.

It shows that housing in every Australian town and city surveyed is either ‘Seriously Unaffordable’ or ‘Severely Unaffordable’.

For example, in Sydney the median house price is 9.6-times the median household income.

In Melbourne the median house price is 9-times the median household income.

And on the Sunshine Coast the median house price is 8.4-times the median household income.

But we thought it would be fun to see how the ratios had changed since the Commonwealth Bank of Australia [ASX: CBA] published its misleading figures a few months ago.

You’ll recall the bank printed the following slide in a presentation it gave to international investors:
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Re: Australian Housing Now Severely Unaffordable.
Reply #6 - Jan 25th, 2011 at 3:56pm
 
Yep, house prices in Sydney and Melbourne are considerably more expensive than other major cities.  And, whereas prices-to-income ratios in other major cities have largely stabilised, in Sydney and Melbourne the ratios have gotten much worse.

But how does that gel when we claim house prices have already started to fall?

It’s simple.  Right now, many sellers falsely believe house prices will recover.  So they’re holding on… for dear life.  They’re still in a dreamland thinking they’ll get the same price that sellers were getting two or three years ago.

But soon enough they’ll start to sell, and those figures will filter through to the dodgy house price indices.  And eventually the numbers will even start to show in the Demographia survey.

That’s when sellers will figure out the glory days have gone.  And that’s when you’ll get the rush to the exit.  Especially when the fabled baby-boomers start flooding the market with their un-mortgaged properties.

What do they care whether they sell for $600,000 or $500,000 when they bought the house for $50,000 thirty years ago?  OK, they will care, because it’ll be a big chunk out of their retirement savings.  But the point is, once they get it that house prices don’t always go up, they’ll sell as soon as you can blink.

But, The Age article did get one thing right:

“Australian house prices are expected to finish this year flat, amid signs that a slowdown in price gains could become ‘entrenched’, according to ANZ.”

The bit they got right is the ‘entrenched’ part… not the house prices finishing flat this year.  House prices will finish the year lower.  There’s no doubt about that.

What will become entrenched is the realisation that house prices don’t always go up.  Investors and buyers have already started to figure that one out.  And the longer prices stay where they are, the more convinced buyers will be that there’s no rush to tuck into the market.

That’s happened in the UK and US where property buyers no longer see housing as a get-rich-quick money-making goldmine.

“But what about the chronic housing shortage?” you may ask.  It doesn’t exist.

Remember the daft numbers from the National Housing Supply Council?  That’s the government body responsible for spreading the myth about the shortage.  The NaHSC is where the banks and property spruikers have gotten their ammo to support the shortage myth.
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Re: Australian Housing Now Severely Unaffordable.
Reply #7 - Jan 25th, 2011 at 3:58pm
 
We remember seeing it for the first time and laughing heartily.  We picked these numbers apart over a year ago.  Yet still the mainstream peddles the myth.

The numbers to support the housing shortage are based on 9,000 homeless people sleeping rough, 35,000 families who live with friends and relatives, 13,000 families who live in caravan parks, and 26,000 people who… well, this one is really ridiculous.

These 26,000 people are imaginary.  They no more exist than the Loch Ness monster…

What it’s saying is that because the rental vacancy rate is, say 2%, another 26,000 homes are needed in order to get the vacancy rate up to 3%.  In other words, there isn’t a shortage of rental properties at all.  It’s just that the vacancy rate is lower than the long-term average.

What it’s saying is that to solve the so-called housing shortage the market needs more empty houses!

We liken it to a shop claiming there’s a milk shortage when they’ve got ten bottles of milk left over at the end of the day when they used to have fifteen left over.

It’s not a shortage.  It’s a surplus you clowns.

But even better than that, the NaHSC wasn’t happy to just add all the dodgy numbers together.  It had to round the number up to the nearest 5,000.  So even if we accepted their dodgy numbers – which we don’t – the number has been exaggerated by 2,000 dwellings that are merely the result of rounding-up!

What a joke.  But that’s the government for you.

Yet these are the numbers the banks and spruikers base their statistics on when they carp on about a housing shortage.

Make no mistake, all the evidence is pointing towards a massive drop in the price of Australian housing.  For many the drop has already happened.  Just look at the houses on the market in your area and you’ll see the asking price is well below the levels of two years ago – and still they aren’t selling.

The UK and US housing bubble made a loud pop when it burst.  It seems in contrast the Aussie market is suffering from a slow deflation as the air comes out of it.

Either way, it’s bad news for sellers right now. But a year from now it’ll be great news for buyers.  As I wrote a couple of weeks ago, keep your eye on the housing market… but don’t buy yet… your time will come.

http://www.moneymorning.com.au/20110125/aussie-house-prices-hit-the-tipping-point.html
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Re: Australian Housing Now Severely Unaffordable.
Reply #8 - Jan 25th, 2011 at 6:30pm
 
Yes I read that too. Did you notice how the spruikers were quick to come of the wood work as soon as the bank CEO's were warning of interest rate rises as soon as April Wink

Somehow this is translated by the spruikers to "you'd better buy now to avoid the rush" and the reason why nobody is buying because there is a shortrage of housing Cheesy LOL
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In August 2021, Newcastle Coroner Karen Dilks recorded that Lisa Shaw had died “due to complications of an AstraZeneca COVID vaccination”.
 
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Re: Australian Housing Now Severely Unaffordable.
Reply #9 - Jan 25th, 2011 at 7:57pm
 
Quote:
But a year from now it’ll be great news for buyers.


Good because I need to upgrade.
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Re: Australian Housing Now Severely Unaffordable.
Reply #10 - Jan 25th, 2011 at 10:28pm
 
<<Good because I need to upgrade.>>

From a dump to a hovel. Good for you batsh!t. Good to see you moving up in the world.
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Re: Australian Housing Now Severely Unaffordable.
Reply #11 - Jan 26th, 2011 at 12:00am
 
whatsforme wrote on Jan 25th, 2011 at 10:28pm:
<<Good because I need to upgrade.>>

From a dump to a hovel. Good for you batsh!t. Good to see you moving up in the world.


351 posts full of bullshit. Must be a record !!
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In August 2021, Newcastle Coroner Karen Dilks recorded that Lisa Shaw had died “due to complications of an AstraZeneca COVID vaccination”.
 
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Re: Australian Housing Now Severely Unaffordable.
Reply #12 - Jan 26th, 2011 at 12:03am
 
Sir lastnail wrote on Jan 26th, 2011 at 12:00am:
whatsforme wrote on Jan 25th, 2011 at 10:28pm:
<<Good because I need to upgrade.>>

From a dump to a hovel. Good for you batsh!t. Good to see you moving up in the world.


351 posts full of bullshit. Must be a record !!


Whatsforme,
dump to a hovel? -
that's a bit of an assumption isn't it?
From where do you base that you 14 year old little twit?
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Re: Australian Housing Now Severely Unaffordable.
Reply #13 - Jan 26th, 2011 at 12:51pm
 
From Money Morning

Quote:
A quick note on Australia’s overpriced housing.  Yesterday we wrote:

“In their world house prices either go up, plateau or become more affordable… but they never go down.”

Yesterday afternoon we noticed an article on The Age website headlined, “House prices to ease in 2011: NAB survey”.

In mainstream journalism speak, “ease” is another way of saying “faaaaaaaaaaaaaaall”

The banks are panicking.  The mainstream is on the ropes.  And Alan Oster, chief economist at NAB told the paper:

“There has… been a significant downward revision in house price expectations over the next 12 months.”

He goes on:

“The house price expectations of our survey respondents have been downgraded significantly from our previous survey.”

Didn’t you just say that Alan?  Oh well, never mind.  And what is the extent of this significant downgrade?

Reporter Chris Zappone reveals all:

“National house prices are likely to decline 0.5 per cent over the next 12 months.”

Is that all?  Are they kidding me?  Oh hang on.  Who did the NAB survey?  The Age says it’s “according to the poll of 237 property professionals.”

Of course.  Prices only ever go up, plateau or… ease.  They never go down.

But they’re an influential bunch are these spruikers.  Over at BusinessSpectator, Patrick Stafford writes:

“Demolishing pricey property claims”.

We wouldn’t say Mr. Stafford demolished the pricey property claims.  Rather he trots out the usual excuses:

“A new report has put Melbourne and Sydney at the bottom of a survey of the world’s most affordable property markets based on a ratio of median house prices to income levels, but experts say this method is faulty and doesn’t take into account factors such as interest rates and tax policy.

“The report also comes as a new piece of research from Fitch Ratings also shows Australian banks would be able to withstand a doomsday-scenario where house prices fall by 40 per cent and defaults skyrocket.”

… And Australia will destroy anyone who tries to mess with us using our supercomputer and powerful radar gun.

Ah yes.  Australia is different.  Australian banks can withstand anything… including radar guns.

As we pointed out recently, you can take all the stress test results you like and throw them away.  We don’t need them.  We’ve got what happened in real life to guide us.  And that’s the fact that Australia’s banks would have gone bust in 2008 if it wasn’t for the taxpayer bailouts.

They would have gone bust with low defaults and without house prices dropping.  But Fitch reckons the banks can withstand high defaults and prices dropping 40%... Jokers.

Expect the property gurus, spruikers and mainstream press to keep banging on about the resilience of the Aussie housing market… right until it crashes around their ankles.

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Re: Australian Housing Now Severely Unaffordable.
Reply #14 - Jan 26th, 2011 at 1:00pm
 
Youve been predicting a 40-75% price crash for years now and youve been totally wrong. No reason to expect you wil be right now either. There have been many examples of property prices falling over the last 50 years. it is hardly news. 2011 will probably see a levelling or slight drop in prices. so what? hardly earth shattering or even new!  But the ugliest thing about you is that you are truly HOPING for such a crash despite knowing the havoc that would cause in the economy as it did in the USA.

and in the meantime, prices rise and you rent.
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