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Property bubble fears grow as IMF says (Aust) houses overvalued

 
Anonymous Coward
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08/10/2009 05:24 AM
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Property bubble fears grow as IMF says (Aust) houses overvalued
Property bubble fears grow as IMF says (Aust) houses overvalued


By Stuart Fagg, ninemsn Money 10/08/2009
Fears of a property bubble are growing in Australia as house price
Australian house prices are overvalued by around 20 percent and the size of the average mortgage has reached an all time high, fuelling fears of a property bubble.
In its latest assessment of the Australian economy, the International Monetary Fund (IMF) has warned that Australian house prices are overvalued by up to 20 percent and that low rates, government subsidies and ongoing strong immigration will continue to push house prices higher.
However a "sharp fall in house prices" remains a risk. The problem is being exacerbated by a growing gap between household incomes and house prices, the IMF said.
The Reserve Bank of Australia recently flagged its concerns that a combination of easy credit, low interest rates and lack of supply could create a property bubble which could burst in the longer term, causing a collapse in house prices. Concerns over a bubble are being exacerbated by frenzied activity in the property market.
The average value of a new mortgage in Australia has risen to its highest ever level as property investors return to the market, according to the country's biggest mortgage broker.
The average new mortgage lodged in Australia rose to $354,137 in July, eclipsing the previous record of $353,223 in October 2008, according to data from mortgage broker AFG released yesterday.
Anonymous Coward
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08/10/2009 05:33 AM
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Re: Property bubble fears grow as IMF says (Aust) houses overvalued
By Stuart Fagg

.. enuf said
Anonymous Coward
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08/10/2009 05:35 AM
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Re: Property bubble fears grow as IMF says (Aust) houses overvalued
but for every view there is always its counter:

[link to www.rpdata.com]

Residential Property Values Bounce Back in March Quarter ‘09

Australia’s housing market has continued to defy the sceptics during the first quarter of 2009 with the indicative capital city RP Data‐Rismark National Dwelling Value Index up 1.6 per cent in the three months to end March 2009. (This result compares the monthly index values at end March 2009 with end December 2008.) Most of the growth in residential property values has come in February (+0.9 per cent) and the March indicative estimates (+0.6 per cent). The month of January was flat.

Australia’s residential property market has proven to be consistently resilient and follows on from modest circa 3 per cent falls in the value of capital city homes during 2008, which was primarily a result of mortgage rates peaking at 9.6 per cent in August 2008.

By comparison, the ASX All Ordinaries Accumulation Index fell in value by ‐31 per cent over the 12 months to end March 2009 while the Listed Property Trust Accumulation Index fell by ‐58 per cent.

RP Data/Rismark International confirmed that improvements in housing affordability are central to what appears to be the start of a slow house price recovery.

According to Christopher Joye, Managing Director of Rismark International, “This gradual recovery in Australian house prices has been driven by the 40 per cent fall in home loan rates to 5.7 per cent, which are now at their lowest levels since July 1968.”

"The ratio of total household interest payments to disposable income has fallen rapidly from 15 per cent to 10 per cent as a consequence.

“Consumers are also voluntarily deleveraging through higher levels of savings with Australia's household savings rate now at its highest level since the late 1980s. This augurs well for the ability of future home buyers to service their debt.”

According to Tim Lawless, RP Data’s Director of Research, the stabilisation in the Australian residential housing market should be viewed as a positive sign by the construction sector.

“These results represent good news for the building industry and should provide a boost to developer confidence,” he said.

“As the market improves further we would expect the construction industry to ramp up new dwelling commencements in a much needed attempt to remedy Australia's large housing shortage.”

“A lift in construction activity will certainly have a positive effect on the economy by boosting jobs, incomes, demand for building products and services, and retail sales for home appliances and furnishings,” Mr Lawless said.

However, Mr Lawless does have some concerns about current government charges and levies; he believes these still present a major hurdle to a wholesale recovery in the construction sector.

There have also been some misplaced concerns that the boost to the First Home Buyers Grant has artificially driven price growth across the entire housing market.

“While the Grant has certainly helped spark demand, the key driver of the housing market’s resilience has been the fall in mortgage rates to 40 year lows. It is important to remember that first-time buyers represent less than 30 per cent of all property sales.” Mr Lawless said.

In addition, he said that in many of the mortgage belt markets where first home buyer sales are now occurring there had been a level of underperformance with both real and nominal house price falls recorded between 2004 and 2008. This was particularly true in the western suburbs of Sydney.

“Price growth in these areas in 2009 is likely to be a welcome change for existing owners,” Mr Lawless said.
Anonymous Coward
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08/10/2009 05:56 AM
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Re: Property bubble fears grow as IMF says (Aust) houses overvalued
By Stuart Fagg

.. enuf said
 Quoting: Anonymous Coward 678052


apologies to Mr Fagg - hes actually a good journo and does his bit for the community

hiding
Anonymous Coward
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08/10/2009 10:56 AM
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Re: Property bubble fears grow as IMF says (Aust) houses overvalued
By Stuart Fagg

.. enuf said
 Quoting: Anonymous Coward 678052

what are you afraid of a name too...

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