Sydney real estate and cost of living
Dec 30th, 2010, 04:45 PM
#21
Join Date: Jul 2008
Posts: 111
Likes: 0
Received 0 Likes
on
0 Posts
scrb11, I think you are very wrong on that last point about the GDP here as I understand things.
One thing you must remember is that if you have 200 people wanting a house and you have only 100 houses then the 200 people will try to get the house whatever they have to pay. No bank in Australia will give a mortgage to someone who has not the power to repay the debt. The number of people wanting homes in Sydney and Melbourne is not going to change so therefore neither what factor it going to cause a crash? This is not like the US or like Canada and its the people who set the prices not anyone else - in the end a house is only worth what someone will pay for it.
What I find interesting is you obsession with the whole issue.
One thing you must remember is that if you have 200 people wanting a house and you have only 100 houses then the 200 people will try to get the house whatever they have to pay. No bank in Australia will give a mortgage to someone who has not the power to repay the debt. The number of people wanting homes in Sydney and Melbourne is not going to change so therefore neither what factor it going to cause a crash? This is not like the US or like Canada and its the people who set the prices not anyone else - in the end a house is only worth what someone will pay for it.
What I find interesting is you obsession with the whole issue.
Dec 30th, 2010, 07:01 PM
#22
Join Date: Feb 2006
Posts: 728
Likes: 0
Received 0 Likes
on
0 Posts
Even if Australian housing is overpriced – and it may be…just what will cause a crash scrb?
There seems to me to be only two cases that might directly affect the market in the short term. One is the sudden loss of employment – hardly likely even in the middle term, given Australia’s booming economy. The second would have to be major buyer withdrawal from the market, either through rising unemployment (and following on from my first comment, this is not going to happen soon), or a reduction in immigration, also highly unlikely.
Recent rate raises (that have been used to try to check the market) have not caused any appreciable slow down, so just what will affect the market is something certainly unrelated to your comparison with the American situation.
Changes in government policy , or a demand meets supply scenario are likely to affect the market, but a “crash” like America’s which was caused by the type of loan , the unregulated banking and loan industry, and lack of adequate housing insurance against losses in value will not be the cause of an Australian housing crash.
None of those poor practices exist in Australia.
Australia’s banks have to undergo stress tests to determine if they could cope in the event of a severe mortgage distress, and even IF a crash were to occur (and I would argue this is unlikely) losses are manageable. Australia’s stringent lending criteria and improving loss ratios for insurers after premium increases help protect financial institutions (and thus borrowers) from the type of chaos the American market is facing.
There seems to me to be only two cases that might directly affect the market in the short term. One is the sudden loss of employment – hardly likely even in the middle term, given Australia’s booming economy. The second would have to be major buyer withdrawal from the market, either through rising unemployment (and following on from my first comment, this is not going to happen soon), or a reduction in immigration, also highly unlikely.
Recent rate raises (that have been used to try to check the market) have not caused any appreciable slow down, so just what will affect the market is something certainly unrelated to your comparison with the American situation.
Changes in government policy , or a demand meets supply scenario are likely to affect the market, but a “crash” like America’s which was caused by the type of loan , the unregulated banking and loan industry, and lack of adequate housing insurance against losses in value will not be the cause of an Australian housing crash.
None of those poor practices exist in Australia.
Australia’s banks have to undergo stress tests to determine if they could cope in the event of a severe mortgage distress, and even IF a crash were to occur (and I would argue this is unlikely) losses are manageable. Australia’s stringent lending criteria and improving loss ratios for insurers after premium increases help protect financial institutions (and thus borrowers) from the type of chaos the American market is facing.
Dec 31st, 2010, 01:09 PM
#23
Original Poster
Join Date: May 2010
Posts: 4,946
Likes: 0
Received 0 Likes
on
0 Posts
Obsession?
No just some observations.
It sounds like Australia runs a trade surplus or at least with a key trading partner like China?
That doesn't sound like an indestructible economy.
That is true, Australia's financial markets may not be trading securitized mortgages like the rest of the world (though an exception in the case of Canada).
The only comparison I was drawing was the levels of personal debt, not just for mortgages but sounds like credit card debt may rival levels in other countries before the crash.
No just some observations.
It sounds like Australia runs a trade surplus or at least with a key trading partner like China?
That doesn't sound like an indestructible economy.
That is true, Australia's financial markets may not be trading securitized mortgages like the rest of the world (though an exception in the case of Canada).
The only comparison I was drawing was the levels of personal debt, not just for mortgages but sounds like credit card debt may rival levels in other countries before the crash.
Dec 31st, 2010, 04:33 PM
#24
Join Date: Jul 2008
Posts: 111
Likes: 0
Received 0 Likes
on
0 Posts
Perhaps you should read this from the Government's Treasurer regarding the comparison between the debt ratio to GDP in Australia and other OECD countries.
..........
Treasurer Wayne Swan released last week, indicate that net public debt will peak at 6 per cent of gross domestic product in 2012-13, negligible compared with other developed economies. Japan's debt will be equivalent to 154 per cent of its GDP by 2015, when US debt will be 86 per cent of GDP. A year earlier, Britain's debt will have reached 84 per cent of GDP. Yet even in these countries no economist seriously suggests that there is a risk of imminent economic collapse because of debt levels. On the contrary, debate is focused on whether stimulus measures should be wound back now that the financial crisis has passed, or whether they should be maintained to avoid a so-called ''double-dip'' recession that could trigger a full-scale depression. And that risk is grave, according to Nobel Prize-winning economists such as Joseph Stiglitz and Paul Krugman.
..................
Now as I read this it says that public debt is 6% of GDP compared to the US with 86% debt of GDP so I do not know where you are getting your stats from but I know for sure that if you cross your fingers and pray hard enough for bad things to happen to Australia, it just might and then you can feel happy!
..........
Treasurer Wayne Swan released last week, indicate that net public debt will peak at 6 per cent of gross domestic product in 2012-13, negligible compared with other developed economies. Japan's debt will be equivalent to 154 per cent of its GDP by 2015, when US debt will be 86 per cent of GDP. A year earlier, Britain's debt will have reached 84 per cent of GDP. Yet even in these countries no economist seriously suggests that there is a risk of imminent economic collapse because of debt levels. On the contrary, debate is focused on whether stimulus measures should be wound back now that the financial crisis has passed, or whether they should be maintained to avoid a so-called ''double-dip'' recession that could trigger a full-scale depression. And that risk is grave, according to Nobel Prize-winning economists such as Joseph Stiglitz and Paul Krugman.
..................
Now as I read this it says that public debt is 6% of GDP compared to the US with 86% debt of GDP so I do not know where you are getting your stats from but I know for sure that if you cross your fingers and pray hard enough for bad things to happen to Australia, it just might and then you can feel happy!
Dec 31st, 2010, 06:56 PM
#25
Original Poster
Join Date: May 2010
Posts: 4,946
Likes: 0
Received 0 Likes
on
0 Posts
I think that's referring to the fiscal debt, the accumulated debt of the govt.
The article that cold linked refers to debt held collectively by Australian consumers, in terms of their mortgage and other personal debt:
From page 2 of that link:
>>Timo Henckel, a research fellow and lecturer at the Australian National University in Canberra, says the country’s property market is inflated, and a series of interest rate increases are starting to squeeze overleveraged homeowners. Australian mortgage debt when coupled with personal debt is nearly 100 per cent of the country’s gross domestic product – higher than it was before the global financial crisis.
“I can’t see how it can be sustained … a crash is a real possibility,” he says.<<
The article that cold linked refers to debt held collectively by Australian consumers, in terms of their mortgage and other personal debt:
From page 2 of that link:
>>Timo Henckel, a research fellow and lecturer at the Australian National University in Canberra, says the country’s property market is inflated, and a series of interest rate increases are starting to squeeze overleveraged homeowners. Australian mortgage debt when coupled with personal debt is nearly 100 per cent of the country’s gross domestic product – higher than it was before the global financial crisis.
“I can’t see how it can be sustained … a crash is a real possibility,” he says.<<
Jan 2nd, 2011, 01:43 AM
#26
Join Date: Jan 2007
Posts: 3,124
Likes: 0
Received 0 Likes
on
0 Posts
Coming back to scrb's original post - yes, the areas around Dover Heights do have pricy real estate, as does much (not all) of the Eastern Suburbs. In the case of Dover Heights / Watson's Bay, it is indeed water views, ocean or harbour (you get high-lying areas there particularly), that make real estate expensive. Sometimes it's just the fact that a house is in this area that makes it cost more. And of course it's more or less close to the city (where people didn't live much until around the Olympics, when developers started building housing in the city again). Much of the older parts of Sydney (including most of the East) have smaller blocks of land because this is the land concept that was imported from Britain. You get suburbs where houses are packed together like sardines (think Paddington in the east or Balmain in the west), because the inhabitants were working-class and poor. Transport also figured in the size of land allotments - when the railway lines opened up suburbs, housing lots also became more generous. Strathfield (the outermost edge of the Inner West) was at one stage the end of the railway line, and many managers made it their home. Houses were built on a grand scale, and allotments also featured tennis courts (and later swimming pools and granny flats). You can still see this today.
As for the ice cream being expensive, yes, Bondi Beach is a tourist trap. And the parts of the east frequented by tourists, yes, they charge like wounded bulls too. It's almost impossible to avoid this because anywhere that's picturesque or interesting is where you'd want to go, and someone's figured that out. Buy the same ice cream in Randwick (a fine suburb in the east but no tourists) and I guarantee it would be cheaper.
Lavandula
As for the ice cream being expensive, yes, Bondi Beach is a tourist trap. And the parts of the east frequented by tourists, yes, they charge like wounded bulls too. It's almost impossible to avoid this because anywhere that's picturesque or interesting is where you'd want to go, and someone's figured that out. Buy the same ice cream in Randwick (a fine suburb in the east but no tourists) and I guarantee it would be cheaper.
Lavandula
