Edwin Almeida, our Property Insider joins us through another ramble through the latest property news, including rooster cam, news from China, and the latest in listings numbers. We also look at the latest articles and consider the impact of the recent rains on high-rise property in particular. Go to the Walk The World Universe at https://walktheworld.com.au/
Category: Home Prices
Higher Rates, And Risk Of Recession, As Weaker Lending Is Expected
We look at the latest data as forecasters indicate a rise in mortgage rates as the RBA tackles inflation, leads to reduced lending, and risks of stagflation or recession.
Today’s post is brought to you by Ribbon Property Consultants. If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you. Buying property, is both challenging and adversarial. The vendor has a professional on their side. Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make. Edwin understands your needs. So why not engage a licensed professional to stand alongside you. With RPC you know you have: experience, knowledge, and master negotiators, looking after your best interest. Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.
Households Hit Hard By The Property Crash!
It started as an act of protest by fed-up apartment buyers in a single project in a city in central China.
Now tens of thousands of people around the country are withholding payments on their mortgages for homes that developers, including China Evergrande Group, have yet to finish.The movement has since spread to at least 301 projects in about 91 cities according to figures from a crowdsourced document titled “WeNeedHome.”
Tracking the extent of the protest has grown increasingly difficult after China began censoring in mid-July crowdsourced online documents tallying the number of boycotts. Such shared files have been a key source of data for global investors and researchers.
Real estate accounts for about 78% of household wealth in China—double the US rate—and families typically save for years and borrow from friends and family to purchase a home. As the Evergrande debacle unfolded last year, many market watchers said that the financial contagion would be limited by the fact that homebuyers in China often pay in cash.
But some did use mortgages, and the boycott underscores how much of the pain of the crisis has fallen on households. China’s outstanding mortgages stood at 38.3 trillion yuan at the end of 2021, according to the People’s Bank of China. GF Securities Co. expects that up to 2 trillion yuan ($296 billion) of mortgages could be impacted by the collective refusals. That’s the total balance of the loans; the amount that could be withheld will be smaller.
Should every buyer default, that would lead to a 388 billion-yuan increase in nonperforming loans, Jefferies’s said. Banks say the impact is much lower still. Lenders have detailed about 2.11 billion yuan of loans at risk from the protests, according toa tally of banks that have disclosed their exposure.
The wildcat boycott on loans worth as much as 2 trillion yuan ($296 billion) threatens to deepen China’s real estate slump by shifting focus from the country’s embattled property companies to its massive banks. Lenders have relied on mortgages as their safest source of revenue as Covid lockdowns stifle growth.
Go to the Walk The World Universe at https://walktheworld.com.au/
Downgrading Housing Forecasts – Fast!
It is becoming a new sport, it seems – trying to assess the potential fall in property values across many markets here and around the world.
Indeed, Christopher Joye in the AFR writes: the great Aussie housing crash is accelerating, and it is being driven by the fastest and largest interest rate shock households have faced in modern history. Sydney house prices have now plunged almost 5 per cent since their peak only months ago according to CoreLogic. Home values in Melbourne are not far behind.
But let’s look at another market, because property price falls are being predicted around the western world, as Central Banks, appear at least, to be coordinating rate rise increases.
We might want to pause to consider the group-think, which has been exhibited for the past two decades – cutting rates after the 2007 and 2008 crisis, cutting them again radically ahead of COVID, to say nothing of the quantitative easing which has flooded markets with cheap money, and rate control, plus handing ultra-cheap funds to banks. I will leave you to judge how independent each central bank was and the degree of collusion, versus common reactions to the same economic out-turns, but the current mode of operation is driving highly inflated home prices which were driven by their bad policy – sharply down as they tighten. Some would suggest the High Priests of Finance, are not as powerful as they may like to appear.
So, let’s look at Canada’s housing market which has sharply shifted since the Bank of Canada began raising its benchmark interest rate from record lows in March. The central bank, seeking to rein in inflation that is running at its hottest in four decades, unveiled its largest one-time interest rate hike since 1998 last week. It raised the benchmark rate a full percentage point to 2.5% and promised more increases to come.
Go to the Walk The World Universe at https://walktheworld.com.au/
Operation Anti-spruik Episode 5: Western Australia!
More analysis of recent price changes for property – this time in the West, and again strong correlation with high levels of mortgage stress. Thanks for Cookie Boy for doing the research.
We focused on more affordable houses, and spruikers note, prices are down.
Go to the Walk The World Universe at https://walktheworld.com.au/
Shhh! You Can Hear House Prices Falling: With Tarric Brooker
My latest Friday afternoon chat with journalist Tarric Brooker, in which we explore home price dynamics, politics, and much more besides.
https://avidcom.substack.com/p/charts-that-matter-22nd-july-2022 for copies of the slides.
https://avidcom.substack.com/p/rising-rates-and-australias-over
Go to the Walk The World Universe at https://walktheworld.com.au/
Operation Anti-spruik Part 3: Queensland
Another set of asking price cut case studies, from QLD, courtesy of CB, inter-cut with relevant data from the DFA models. Still think prices are booming in QLD?
Go to the Walk The World Universe at https://walktheworld.com.au/
Australian Housing Is Broken!
The proportion of Australians who own their home outright has halved over two decades for most age groups while the proportion of people with mortgages in retirement years has tripled.
Data from the Australian Bureau of Statistics shows that outright home ownership has more than halved for 25 to 54-year-olds between 2001 and 2021. At the same time, the number of mortgage holders and renters across all age groups has ballooned.
The number of Australians who own their homes outright has plummeted over the last 20 years.
The proportion of Australians who completely own their property has fallen by 11 percentage points according to the latest census data.
According to the recent Census data, which counted 25,422,788 Australians the proportion of Australians who own a home outright dropped from 41.6 per cent in 1996 to 31 per cent in 2021.
The same data also noted that, over the last 25 years, the number of Australians who owned a home with a mortgage also doubled, rising by 96.8 per cent.
Go to the Walk The World Universe at https://walktheworld.com.au/
The Property Crash Is Just Getting Started…
Following the Reserve Bank’s double rate hike, big banks have lifted all their variable mortgage rates by 0.5 percentage points.
As a result, the average variable borrower will have seen their rate rise by 1.25 percentage points since the start of May.
That means someone with a $500,000 mortgage, with 25 years remaining, will see their repayments increase by an estimated $333 in total across the three hikes, RateCity.com.au said.
While variable rate borrowers with loans with CBA, NAB, and ANZ will be charged a higher interest rate starting today, it will take weeks for their monthly repayments to rise. In fact, the increase in monthly repayments many of these customers are currently seeing resulted from the May hike.
This is because banks typically give 20 to 32 days’ notice before lifting their monthly repayments, despite charging their customers the higher rate from the effective date.
Even then, the increase to their monthly repayment might not take effect for another few weeks, depending on when they are due.
UBS has predicted interest rates will peak at around 3.5 per cent in March next year, but said this will still hit the housing market hard.
“We still think market pricing of about 3.5 per cent – if delivered – would likely crash housing, and see the economy nearing a recession,” George Tharenou, chief economist at UBS, told The Australian.
If interest rates were to rise to 3.5 per cent it would likely see the average variable mortgage rate hit a whopping 6 per cent and could plunge the economy into recession, according to the investment bank.
“Interest payments across the economy next year for the household sector will close to double from now,” Mr Tharenou said.
“We have never seen such a sharp increase in repayments. That really crushes household cashflow next year when you have cost-of-living issues.”
Go to the Walk The World Universe at https://walktheworld.com.au/
Today’s post is brought to you by Ribbon Property Consultants.
If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you.
Buying property, is both challenging and adversarial. The vendor has a professional on their side.
Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.
Edwin understands your needs. So why not engage a licensed professional to stand alongside you. With RPC you know you have: experience, knowledge, and master negotiators, looking after your best interest.
Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.
New Zealand Home Prices Take A Dive In June…
The REINZ released their latest reports to June 2022, and were are pains to talk about the annual price movements, not the monthly changes, which was down 1.9% overall.
And according to their HPI you can see why. There is the remnants of a run up, which masks the falls following the RBNZ rate hikes which started late last year. Falls are in play almost universally, including the Upper North Island, Lower North Island and the South Island. But there are some variations.
The largest one-month falls were in Wellington City, down 5.7%, Dunedin City down 3.6%, Nelson down 2.9% and Queenstown down 2.4%. In the North, Turanga City fell 4.3%, Hastings 3.9%, Palmerston North 3.3% and Auckland City 2.8%. On the other hand, Rotorua was up 2.3%, Upper Hutt up 1.6% and Christchurch City up 0.6%, the same as Auckland’s North Shore City.
They did concede listings were up, days on market were increasing, and the proportion of sales via auctions were falling.
They refer to their median price calculations, where the median change was up 1.2% across the country, or 1.5% seasonally adjusted. But the spin machine was in full misdirection mode in their report.
Go to the Walk The World Universe at https://walktheworld.com.au/