Australian property is booming, Sydney recorded the strongest yearly growth across the capital cities, with an annual rate of 14.5 per cent in 2013. Is it a good time to buy property in Australia?
http://www.australian-real-estate.net.au/investing/2010/09/22/australian-house-prices-over-the-years-1980-to-2010/
(other cities in link)
http://blog.rpdata.com/2010/11/house-values-across-the-capital-cities/ (other cities in link)
Sydney House prices:
Here are some good sites for property research:
Pricing for each suburb:
NSW Government quarterly Sales and Rent report:
http://www.housing.nsw.gov.au/About+Us/Reports+Plans+and+Papers/Rent+and+Sales+Reports/Latest+Issue/
http://www.housing.nsw.gov.au/NR/rdonlyres/B5115E02-718C-4B9B-A73E-1DD64E46D0DE/0/Sales_Metro_Pcode_2013q2.pdf (by postcode)
Domain Sydney Property Guide:
Residex State Market Report NSW/ACT:
RP data, property research:
RBA Urban Structure and Housing Prices: Some Evidence from Australian Cities:
Get previous sales history and estimated price on property:
Home loan calculator:
Stamp duty calculator:
Now the real question is Australia in a property bubble and can these price growths be sustained?
The Economist believes that Australian house prices are 49% overvalued based on rents:
The WSJ reports Australia House Price Jump kindles Bubble Fears:
2013 Nobel prize in economics winner Robert Schiller warns of Australian housing bubble:
Respected US economist Harry Dent warns of Australian property bubble:
http://www.news.com.au/finance/real-estate/us-demographer-predicts-hit-to-aussie-home-prices/story-fndba8uq-1226816510923
The following explains the bubble perfectly, if house prices are far outpacing income how can prices continue to rise?
Table below presents the calculated affordability for each capital city. The figures are based on the median house price and a home loan interest rate of 5.65%. It assumes an 80% loan and an average tax rate of 17.2% for the family.
“The risks to Australia from the inflated housing market are systemic also. Housing assets of A$4.9 trillion are 3.3x larger than Australia’s GDP. Moreover, residential property represents more than 60% of the big four Australian banks total loan books. Given these banks have an average leverage of 20x (assets/equity), it would take less than a 10% fall in residential property prices for equity in these banks to be wiped out.
Interest rates are at lowest mark since 1959, they can only go up:
Once mortgage interest rates start rising back to historical levels how will this impact property prices?
The RBA has decided to stimulate the economy by reducing cash rate to record low rate. If the economy overall was in good shape why would the RBA need to have record low interest rates especially when Aussie dollar has dropped over 10% during the last 12 months (great for our exports)?
Unemployment is rising, many people are working part time seeking full employment yet the work is not available yet these people are not considered unemployed. Furthermore when we consider historical unemployment rates it is quite realistic that we may see unemployment rates at higher levels...if unemployment was to rise how would this impact property prices?
Property purchase is a long term investment as it carries considerable costs such:
- stamp duty on purchase
- legal fees on purchase
- real estate agent frees on sale
- legal fees on sale
- potential capital gains tax on sale
Right now the Australian property market has huge momentum and common sense would suggest that in the near term property prices will continue to rise. Yet the more appropriate question is where will property prices will be in 1,3,5,10 years time. Will prices go up? or only keep up with inflation? or will prices go down?
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