Dire Prediction For Australia
The Fairfax site reports JP Morgan sees much lower home prices in Australia. "Analysis by JPMorgan concluded that nationwide house prices would fall 10 per cent because the stock of new housing had grown unsustainably, while returns from rentals were about half those commanded by shares investors."
"Stephen Walters, the investment bank's chief economist, noted housing accounted for a record 56 per cent of all investment spending last year, up from 40 per cent five years earlier. The deflating housing bubble would create 'a significant headwind for Australian consumers this year', he said."
"Mr Walters blamed state and federal policies for stoking the bubble, including stamp duty concessions, first home owners grants, negative gearing and the 1999 capital gains tax discounts."
8 Comments:
So what is so dire about a 10% off sale on housing? Or do they mean it's the beginning of the unwinding of the global property debt bubble?
There is no bubble.
Prices are merely catching their breath in australia. Give it a year or two and they'll be up 50% from here.
This is a great BUYING OPPORTUNITY!
That's what all the stock indsiders say when they want to dump while the lumpeninvestors buy.
Rome...here we come!
10% nationwide would be huge in the US for a number of reasons. First, we have not had a natiowide decline since the depression. And secondly, a 10% nationwide decline would mean price drops of 30-50% in places like Los Angeles, DC and Florida.
I don't see a drop in home prices as "dire." Sure, it would screw the people who got in at the very top, but the insanity in housing is hurting everyone except speculators and realtors (and the rare people who sell and rent or move to a cheaper area).
30-50 percent in LA would be a dream come true!
That's the problem when you base an asset's price on what a scant few actual comparable sales were. Let me explain it very simply- suppose a billionaire walked into san francisco and said "i must have that 3 bedroom condo, i will pay 10 million dollars for it" and the condo is sold for that price.
suddenly, everyone in the area thinks their condo has gone up in value from 500k to 10 million, because clearly that is the price people are willing to pay now.
unfortunately, they made the classic mistake of assuming the marginal sale was representative of actual increased value. it was not. it was just a fluke.
and in the last 5 years we have had a "fluke" of lax lending standards, non-stop hucksterism with hundreds of home improvement shows, fraudulent appraisers, etc etc that have distorted the TRUE price of homes.
this is how pets.com stock fell back to earth, and it is how the california real estate market will fall back to earth. once the last marginal buyer has bought, there's nowhere to go but down.
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Prices in Sydney, the largest city in Oz have dropped 40% in 9 months. With the economy continues to slide, sellers just kept waiting but no one is buying until they finally realized it's just a pipe dream and dropped the price to current level.
Sydney prices have not fallen 40% in 9 months. I believe 20-30% is more accurate ... and this is from the peak in early 2004. Having said that, I fully support the article that there should *at least* be *another* 10% fall from here on. Probably slightly more than that... so I can buy my house/home.
anon 5:38,
Canberra's about the same, with units falling more than houses. I have actually noticed some price RISES in new developments, maybe the rises in materials and tradesmen's costs are coming through.
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