Aussies are $1.2 trillion in debt ! Wow!
In a new record, Australians now owe more in household debt than the country's entire economy earns in a year. Reserve Bank figures show mortgage, credit card and personal loan debts now stand at $1.2 trillion, up 71 per cent from just five years ago and equating to $56,000 for every man, woman and child in the country.Our spending binge, fuelled most recently by the federal government's First Home Owner Grant, means personal debt now totals 100.4 per cent of Australia's annual GDP - one of the highest ratios in the developed world. "It's the first time household debt has cracked 100 per cent of annual GDP and it's a terrible, terrible sign," University of NSW economics professor Steve Keen told News Ltd. "It shows we are living beyond our means and many highly geared borrowers are now extremely vulnerable to further rate rises - they are already saturated with debt and will not be able to tolerate much of an increase to their repayments." Australia's financial headache is likely to get worse before it gets better. The country is in the midst of the peak spending season, when billions goes on the plastic, yet the Reserve Bank data dates back to October's debt levels only, so that means there are another two months of First Home Owner Grant-fuelled mortgage activity still to be taken into account. The extra cost is expected to add billions to the burgeoning debt tally.
Sunday, December 27, 2009
2010 forcast
As prospective home buyers look for the best time to jump into the market, many of the nation’s top housing analysts have forecast modest residential price growth of about 5 or 6 per cent in 2010. Some of Australia’s leading economists believe demand for homes will stay strong as investors and upgraders pick up the slack from first home buyers. But a small group of doomsayers is convinced a combination of rising interest rates, the winding up of the first home owners grant boost and over-inflated prices could lay the foundations for a crash.
Happily, the nation is emerging from the global financial crisis with strong population growth, the lowest interest rates in decades and a rosier jobs outlook. Most economists, industry heads and real estate agents see the sun continuing to shine on residential property next year. BIS Shrapnel senior project manager of residential property Angie Zigomanis predicts steady growth of about five to six per cent in established residential property next year. ‘‘I’d expect you’d see steady low-to-mid single digit growth next year,’’ Mr Zigomanis said. ‘‘Over the next two or three years I think you’ll find interest rates will keep slowly edging upwards and it’ll keep a lid on the massive double digit price growth we were seeing previously.’’ Annual established house prices in Australia grew 6.2 per cent to September 2009, the latest Australian Bureau of Statistics data show. ‘‘If you look at most markets, prices declined last year and while people are talking about booms and everything else, most of what it did was really put prices back to where they were 12 to 18 months ago,’’ Mr Zigomanis said. First home buyers would not be excluded from the market until the Reserve Bank of Australia (RBA) raised interest rates by another 1 or 2 per cent, he said. Investor demand and upgrader’s demand picked up in the last few months of 2009 and would continue well into next year. As city rents increased due to low vacancy rates, more first home buyers in the 25 to 35 year age group would be encouraged into the market. Housing Industry Association chief economist Harley Dale said Australia would experience significant 20 to 25 per cent growth in new housing stock through to mid 2011. He also supports predictions of about five to six per cent growth in established home next year.‘‘With prices, we’ll probably continue to get a little bit more growth over the next six to 12 months but probably not at the rate that we’ve seen over the last six months which has been driven a lot by the first home-owner base,’’ he said. Mum and dad investors, who tended to look at the same type of investment housing stock as first home buyers, were beginning to step in to fill the gap. A shortage of housing, low interest rates and the first home buyer’s grant had helped support prices, he said.But University of Western Sydney Associate Professor of economics and finance Steve Keen said the rates and grants combination had already helped cause a housing boom in 2009.‘‘The fact that rates are rising as we enter 2010, combined with the ending of the boost and the winding back of government stimulus packages, means that rising interest rates are likely to end the (housing) bubble that began in 2009,’’ Mr Keen said. The implications would be ‘‘substantially negative’’ for all properties, not just those valued under $500,000.‘‘I’d expect a five per cent or so fall (in residential house prices), probably returning to somewhere between the current peak and the previous one in September 2008.’’ Meanwhile Commonwealth Bank economist James McIntyre cites wages growth as a key part of the equation, while predicting significant skills shortages emerging within 12 to 18 months.He said house prices would grow in the ‘‘mid single digits’’ next year, but those increases depended on how the build up of wages translated to other sectors of the economy. ‘‘If the whole economy catches fire with a strong growth in wages, then that will really be supportive of a continued strong growth in house prices.’’ He dismissed suggestions the Reserve Bank of Australia (RBA) had waited too long to increase interest rates and said there was a very low chance of house prices falling. It would take a ‘‘significant global shock’’ and an unprecedented surge in building approvals of between 200,000 and 250,000 homes to see significant weakness in house prices, he said. Ray White Real Estate chairman Brian White believes Australia has avoided a dramatic downturn in house prices. ‘‘All of us seem to have forgotten the anguish of the first four or five months of the year and we’re trying to understand just how on earth the year finished so strongly,’’ Mr White, who heads the nation’s largest group of real estate agencies, said. He also forecast growth of about 5 per cent in 2010 and said it had become a vendor’s market. ‘‘Now we’re going into the new year with a number of interest rate increases occurring but with quite strong growth.’’
Happily, the nation is emerging from the global financial crisis with strong population growth, the lowest interest rates in decades and a rosier jobs outlook. Most economists, industry heads and real estate agents see the sun continuing to shine on residential property next year. BIS Shrapnel senior project manager of residential property Angie Zigomanis predicts steady growth of about five to six per cent in established residential property next year. ‘‘I’d expect you’d see steady low-to-mid single digit growth next year,’’ Mr Zigomanis said. ‘‘Over the next two or three years I think you’ll find interest rates will keep slowly edging upwards and it’ll keep a lid on the massive double digit price growth we were seeing previously.’’ Annual established house prices in Australia grew 6.2 per cent to September 2009, the latest Australian Bureau of Statistics data show. ‘‘If you look at most markets, prices declined last year and while people are talking about booms and everything else, most of what it did was really put prices back to where they were 12 to 18 months ago,’’ Mr Zigomanis said. First home buyers would not be excluded from the market until the Reserve Bank of Australia (RBA) raised interest rates by another 1 or 2 per cent, he said. Investor demand and upgrader’s demand picked up in the last few months of 2009 and would continue well into next year. As city rents increased due to low vacancy rates, more first home buyers in the 25 to 35 year age group would be encouraged into the market. Housing Industry Association chief economist Harley Dale said Australia would experience significant 20 to 25 per cent growth in new housing stock through to mid 2011. He also supports predictions of about five to six per cent growth in established home next year.‘‘With prices, we’ll probably continue to get a little bit more growth over the next six to 12 months but probably not at the rate that we’ve seen over the last six months which has been driven a lot by the first home-owner base,’’ he said. Mum and dad investors, who tended to look at the same type of investment housing stock as first home buyers, were beginning to step in to fill the gap. A shortage of housing, low interest rates and the first home buyer’s grant had helped support prices, he said.But University of Western Sydney Associate Professor of economics and finance Steve Keen said the rates and grants combination had already helped cause a housing boom in 2009.‘‘The fact that rates are rising as we enter 2010, combined with the ending of the boost and the winding back of government stimulus packages, means that rising interest rates are likely to end the (housing) bubble that began in 2009,’’ Mr Keen said. The implications would be ‘‘substantially negative’’ for all properties, not just those valued under $500,000.‘‘I’d expect a five per cent or so fall (in residential house prices), probably returning to somewhere between the current peak and the previous one in September 2008.’’ Meanwhile Commonwealth Bank economist James McIntyre cites wages growth as a key part of the equation, while predicting significant skills shortages emerging within 12 to 18 months.He said house prices would grow in the ‘‘mid single digits’’ next year, but those increases depended on how the build up of wages translated to other sectors of the economy. ‘‘If the whole economy catches fire with a strong growth in wages, then that will really be supportive of a continued strong growth in house prices.’’ He dismissed suggestions the Reserve Bank of Australia (RBA) had waited too long to increase interest rates and said there was a very low chance of house prices falling. It would take a ‘‘significant global shock’’ and an unprecedented surge in building approvals of between 200,000 and 250,000 homes to see significant weakness in house prices, he said. Ray White Real Estate chairman Brian White believes Australia has avoided a dramatic downturn in house prices. ‘‘All of us seem to have forgotten the anguish of the first four or five months of the year and we’re trying to understand just how on earth the year finished so strongly,’’ Mr White, who heads the nation’s largest group of real estate agencies, said. He also forecast growth of about 5 per cent in 2010 and said it had become a vendor’s market. ‘‘Now we’re going into the new year with a number of interest rate increases occurring but with quite strong growth.’’
Wednesday, December 2, 2009
Rents increase
SYDNEY rents are set to climb more than 21 per cent over the next three years, the forecasting group BIS Shrapnel says. It suggests that after rising 6.2 per cent this year, Sydney rents will increase by 7.1 per cent a year for the next three years.
The tightening rental market will cause the vacancy rate to drop below 1 per cent, then remain very low in 2011, BIS Shrapnel predicted. The envisaged rent rises were an outcome of medium- and high-density dwelling construction starts plunging 28 per cent in 2009, reaching their lowest level since 1987. ''Housing supply is set to fall due to the low pipeline of new apartments,'' Jason Anderson, an economist at BIS Shrapnel, said. "While supply (of new apartments)has plunged, demand remains very strong.'' The net addition to the population from migration in 2008/09 is estimated at about 300,000, a record high, Mr Anderson said. Tighter lending restrictions on development projects following the global financial crisis had also contributed to the decline in supply. ''It is uncertain as to how long it will be before lending restrictions are eased and, even if some improvement were to occur in the near future, it would be some time before supply improves as most projects take 12 to 18 months to complete,'' he said. The rush to buy a first home was another factor adding to the pressure on rental markets. "A first-home buyer moving out of the family home, and purchasing a former investment property, will have actually reduced the available rental stock," Mr Anderson said. The long-term rental growth in Sydney between 2002 and 2008 was 3.5 per cent. The latest official data from the NSW Department of Housing indicated rents rose 3.9 per cent in the year to September. This reflected a $395 weekly median for two-bedroom rentals across Sydney. Rental growth was highest in the outer suburbs, with a 6.9 per cent annual increase to $310 a week. It was up 4.2 per cent to $375 a week in middle-ring municipalities and up 2.2 per cent to $500 in the pricier inner ring suburbs. The estate agent John McGrath said he expected rents would increase next year by between 5 and 10 per cent due to continuing short supply. He said yields would be maintained around current levels. Yields had dropped slightly from an average 5.3 per cent for apartments to 5.1 per cent, he said, and house rental yields had dropped from 4.4 per cent to 4.3 per cent.
adendum
Renters Becoming Latest Victims as Foreclosure Crisis Widens - (Washington Post - November 23, 2009)A new wave of foreclosures stands to hurt people who may have never taken out a mortgage: renters. In cities such as New York, Chicago and Los Angeles, where many investors are carrying upside-down mortgages on large rental buildings, some tenants are watching their homes fall apart along with the financing. The impact on tenants is uneven. New York City officials say the owners of the vast majority of buildings in foreclosure there are likely to maintain decent standards of living. Yet, of the 200 properties on the city housing agency's 2008 list of buildings with the worst maintenance problems, at least 77 had been in foreclosure. In buildings where a landlord is struggling to make loan payments, maintenance is often the first thing to go. Garbage can pile up, lists of overdue repairs get longer, and vermin multiply. http://www.washingtonpost.com/wp-dyn/content/article/2009/11/22/AR2009112200927.html
The tightening rental market will cause the vacancy rate to drop below 1 per cent, then remain very low in 2011, BIS Shrapnel predicted. The envisaged rent rises were an outcome of medium- and high-density dwelling construction starts plunging 28 per cent in 2009, reaching their lowest level since 1987. ''Housing supply is set to fall due to the low pipeline of new apartments,'' Jason Anderson, an economist at BIS Shrapnel, said. "While supply (of new apartments)has plunged, demand remains very strong.'' The net addition to the population from migration in 2008/09 is estimated at about 300,000, a record high, Mr Anderson said. Tighter lending restrictions on development projects following the global financial crisis had also contributed to the decline in supply. ''It is uncertain as to how long it will be before lending restrictions are eased and, even if some improvement were to occur in the near future, it would be some time before supply improves as most projects take 12 to 18 months to complete,'' he said. The rush to buy a first home was another factor adding to the pressure on rental markets. "A first-home buyer moving out of the family home, and purchasing a former investment property, will have actually reduced the available rental stock," Mr Anderson said. The long-term rental growth in Sydney between 2002 and 2008 was 3.5 per cent. The latest official data from the NSW Department of Housing indicated rents rose 3.9 per cent in the year to September. This reflected a $395 weekly median for two-bedroom rentals across Sydney. Rental growth was highest in the outer suburbs, with a 6.9 per cent annual increase to $310 a week. It was up 4.2 per cent to $375 a week in middle-ring municipalities and up 2.2 per cent to $500 in the pricier inner ring suburbs. The estate agent John McGrath said he expected rents would increase next year by between 5 and 10 per cent due to continuing short supply. He said yields would be maintained around current levels. Yields had dropped slightly from an average 5.3 per cent for apartments to 5.1 per cent, he said, and house rental yields had dropped from 4.4 per cent to 4.3 per cent.
adendum
Renters Becoming Latest Victims as Foreclosure Crisis Widens - (Washington Post - November 23, 2009)A new wave of foreclosures stands to hurt people who may have never taken out a mortgage: renters. In cities such as New York, Chicago and Los Angeles, where many investors are carrying upside-down mortgages on large rental buildings, some tenants are watching their homes fall apart along with the financing. The impact on tenants is uneven. New York City officials say the owners of the vast majority of buildings in foreclosure there are likely to maintain decent standards of living. Yet, of the 200 properties on the city housing agency's 2008 list of buildings with the worst maintenance problems, at least 77 had been in foreclosure. In buildings where a landlord is struggling to make loan payments, maintenance is often the first thing to go. Garbage can pile up, lists of overdue repairs get longer, and vermin multiply. http://www.washingtonpost.com/wp-dyn/content/article/2009/11/22/AR2009112200927.html
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