IS the Australian property market about to collapse and the bubble burst?
Are our homes soon going to be worth 30 per cent or 50 per cent less than they are today?Well that depends on who you ask.
If you ask US based Jonathan Tepper, the founder of macroeconomic research group Variant Perception, it is not a matter of if, but when it will happen.
Mr Tepper predicted on the 60 Minutes television program on Sunday night that a drop in values of between 30 per cent and 50 per cent would hit the Australian property market.
But Australian property industry experts reckon he is way off the mark.
AMP Capital chief economist Shane Oliver has heard similar claims for the past 12 years and doesn’t put much faith in them.
“I am a bit amused,’’ he said
“I am not surprised that this story keeps getting wheeled out because it’s a good story in a way, there’s nothing better than a good old fashioned scare to get people to take notice.
“In a way I think it is a bit of a joke, this sort of story has been wheeled out almost continuously now since 2002, 2003. We had a big run up in property prices then and it did become a bit bubbly around that time and of course various people were inclined to think that property could crash. Even at the time I thought there was a risk it could crash, because we had gone up 20 to 30 per cent. Then as the years rolled on I began to realise and I think most people in Australia realised, that the Australian property market is a lot more complex and a lot more stable than people give it credit for and the reason prices don’t crash is because we don’t have an oversupply like America did at the time of the GFC.’’
Terry Ryder of Hotspotting said the claims were just regurgitating a very old story.
“I am acutely aware of it, because I did a research exercise towards the end of last year and what had been in media since year 2000 about real estate and what the outcomes were and found that those sorts of claims that the market was going to collapse and values were going to fall “x” per cent have just been a constant part of the media landscape for the last 15 or more years and none of them have come true and are very unlikely to.’’
He said such predictions were just ludicrous.
“Even the worst basketcase economies in the world post GFC have never had the sort of price collapses which have been predicted for Australia, we just don’t have those conditions.’’
He said while there would be small pockets or regional towns such as Moranbah in Queensland where values had dropped substantially, that was as a result of a set of circumstances exclusive to those towns and would not have the same affect across the country.
Mr Ryder said Australia had a very heavily regulated lending sector and lenders were extremely cautious, particularly since the Australian Prudential Regulation Authority (APRA) had tightened up lending conditions even more in the past year.
“You do have to jump through a lot of hoops to get a loan in this country,’’ he said.
Real estate expert Andrew Winter said commentators who expressed this kind of “drama” about the market were forgetting what the commodity was.
“This commodity is property, residential property and that is where all the calculations fail.
“For the simple reason is we can live without gold, we can even now live without oil, we can live without stocks and shares, we can live without just about everything now, but we can’t live without somewhere to live.
“There is this whole crowd of people who love to give the property market a hard time as it if it is a bad boy for making people money.
“The problem I have with that is if it didn’t as a nation we would be stuffed and so would a lot of other countries too.
“We have used it for the last century to backup our finances and now that is not just the big rich kids, the people with lots of properties, that’s your normal mum and dad.’’
“For someone to say it is going to go down 30 to 50 per cent and not say just in a mining town or just in a regional coastal area that had a penthouse released for $2m and they have all gone down 50 per cent or whatever, your general house in New South Wales and your general house in Queensland is going to drop 50 per cent, is not only just a headline grabbing thing, it is actually really dangerous.’’
Original Publish: http://www.couriermail.com.au/
How the house price boom could threaten business start-ups
Whenever the topic of rapidly rising house prices is raised, there are always concerns about what the future will look like for younger generations when it is time for them to try and buy the roof over their head.
There are fears of financial insecurity, rising wealth inequality and, eventually, a group of people retiring with a rental bill hanging over their head or a mortgage yet to be paid off. For those unable to get onto the property ladder early enough, the outlook is bleak.
But during the federal government-introduced inquiry into housing affordability and supply in Australia this month another concerning outcome of rapidly rising prices was raised that doesn’t get talked about enough.
Independent economist Saul Eslake recently told a public hearing for the inquiry price booms and a market unfairly weighted towards property investors could soon affect the number of start-ups launched across the country.
“It’s very common for someone who starts a small business to have their house on the line in order to get the finance they require,” Eslake said.
“Indeed, among the longer term adverse consequences of the decline in homeownership rates in Australia is that it may be more difficult for people to start and operate small businesses because fewer of them will have homes that they can use as security for business loans.”
Could this be yet another unexpected and adverse outcome of the latest property market boom? Time will tell.
But there is some research suggesting that Eslake’s concerns that the dynamism of the small business sector is uniquely at risk from changing levels of homeownership is a fair analysis. A Reserve Bank research paper from 2015 by Ellis Connolly, Gianni La Cava and Matthew Read found households who own small businesses are more likely than employee households to owe residential-secured debt. This was typically second mortgages or property investor loans.
And for newer small businesses this was even more evident, with these households owning a young start-up less likely to owe business debt but just as likely to owe home debt or credit card debt.
“This could be consistent with these households finding it harder to raise business debt and instead relying on personal lending products to fund their young business,” the researchers said. In other words, it’s tricky to get lenders to put up the money at reasonable interest rates to launch a risky new venture.
And when founders look for other ways to fund their small business start up, the value built up in their home is often one of the more common sources they tap into. If you don’t have a home, this is not an option available to you. If you have taken on a bigger mortgage than you can afford to get onto the property ladder, this might also no longer be an option.
On the other hand, rising home values could actually spur on small business creation for those who own property already.
A 2013 European Central Bank paper from Stefano Corradin and Alexander Popov examined the relationship between entrepreneurialism, home prices and home equity in the United States where homeownership rates are relatively high. It’s arguable how much this would apply to Australia, but it’s possible these trends are similar here.
The research noted that those who might otherwise launch a business could be discouraged from becoming a founder if they have low levels of wealth or other borrowing constraints, but owning a property in a rising market was found to help provide the funds to become an entrepreneur.
“A 10 per cent increase in home equity increases the probability that a non-business owning household will switch to entrepreneurship in the future by up to 14 per cent,” the research says. Conversely, a fall in home values and a drop in equity could have the opposite effect.
As homeowners and home buyers know, the housing boom in Australia is still underway, but there is evidence of a slowdown on the horizon.
The Commonwealth Bank is forecasting national property prices to increase 7 per cent in 2022, followed by a 10 per cent decline in 2023 should interest rates rise.
But determining whether the double-digit property price rises seen this year have been good for the small business sector now and into the future is tricky.
While there is a risk those who have failed to get onto the property ladder will be unable to launch new start-ups, the price rises have helped some existing small businesses weather through the coronavirus-driven economic storm. The outlook was grim when the pandemic initially hit the world and economists were steeling for sky-high unemployment rates alongside a tidal wave of insolvencies that would leave the nation in a mess not seen since the Great Depression. Instead, there has been record levels of government support, the relatively rapid development of vaccines and a spending and hiring spree post-lockdowns.
We might need to thank house prices for some of that. The RBA’s October Financial Stability Review says small and medium businesses were provided significant amounts of government support to keep them afloat during the pandemic-induced recession, but it wasn’t the only source of protection.
“One potential mitigating factor from a financial stability perspective is that around 30 per cent of bank lending for small and medium enterprises (those with an annual turnover of less than $50 million) is secured by residential property, meaning that the recent increases in housing prices will likely help some businesses avoid insolvency,” the review says.
This benefit, at least, should not be understated.
Article Source: www.brisbanetimes.com.au
What residents get at the full-floor La Mer, Main Beach apartments
The goal for developer Polites Property Group was to create a luxury tower than residents wouldn’t have a need to leave.
Residents of the new luxury Main Beach apartment development, La Mer, will have the ultimate Gold Coast lifestyle on their doorstep when the whole-floor apartments are finished in late 2023.
Across the road from the beach on Main Beach Parade, La Mer comprises just 29 apartments across its 34 levels. Only a handful of apartments remain, with high demand for a higher level of luxury continuing to sweep the Gold Coast.
It’s just a stroll to the bustling Tedder Avenue, one of the most well-known strips on the Gold Coast for high-end fashion shops, convenience stores, restaurants and cafes.
A little further along the path is the Southport Yacht Club, which hosts live music, and the Marina Mirage, one of the most popular fresh fish eateries in the area.
But the goal for developer Polites Property Group was to create a luxury tower than residents wouldn’t have a need to leave.
Archidiom, the local Gold Coast architecture firm who handled the design, said the development takes the opportunity for the design of a contemporary, innovative subtropical building to provide a ‘relaxed beachfront’ living.
“The development will contribute positively to the character of the area by replacing the existing tired low rise building with a project displaying fresh, simple architectural lines to create modern urban living,” Archidiom says.
“The large liveable apartments which maximise natural light and cross ventilation through the provision of spacious living and balcony areas will be appealing to a large demographic of potential buyers.”
Just whole-floor apartments, starting from 307 sqm, La Mer is pitching itself as the ultimate downsizer development. “Transitioning from a house to an apartment has never been easier,” NPA Projects, who are marketing the development, suggest.
Cris Edwards, at Mannigan Interior Design, a boutique design house with offices in California and on the Gold Coast, handled the interiors of the luxury apartments.
Each apartment features at least three bedrooms, two ocean-view balconies and a luxury kitchen with a large walk-in pantry.
Each apartment also has the convenience of a dedicated storage cage and two parking spaces.
Communal recreational facilities also sprawl across an entire floor, a blend of physical wellbeing and entertainment facilities.
There’s a 13-metre pool, which is cleverly designed to be private, while also being open plan to take advantage of the consistent Gold Coast climate and the views to the beach.
There’s private sun lounges, a yoga lawn, and a number of dining areas with barbecue facilities.
The two-level penthouse in La Mer was snapped up by a Gold Coast local for just short of $6 million earlier in the year.
Why Aperture, Broadbeach apartments are attracting the local and interstate buyer: Five minutes with Little Projects Director Leighton Pyke
“We wanted to put a slightly different spin on what the Gold Coast usually offers – giving it an injection of an outside perspective,”.
The Melbourne-based Little Projects has sought to meet the ever-growing demand for high-end apartments at their latest Gold Coast apartment development, Aperture.
The Broadbeach tower will be home to just 29 apartments across its 35 levels when it is completed in mid-2023, with buyers already showing interest due to the 200 sqm plus of living space across each apartment.
Leighton Pyke, director at Little Projects, said that after the sell-out success of Signature around the corner, the team wanted to create something a little different.
“Signature was obviously higher density with 245 apartments, a project of that scale takes considerably longer to move,” Pyke said.
“We saw there was a good level of demand for that larger product and wanted to take something to the high-end owner-occupier market quickly to try and meet that demand.”
Pyke and the Little Projects team engaged the Melbourne-based architect, Elenberg Fraser, to create the 120 metre tower, having worked with them previously on the design phase of a development of around 1000 apartments in Fishermans Bend in Melbourne.
It’s only the second time the architecture firm has designed an apartment project on the Gold Coast. The only other is the mixed-use hotel and apartment development Mondrian at Burleigh Heads, currently in market.
“We wanted to put a slightly different spin on what the Gold Coast usually offers – giving it an injection of an outside perspective,” Pyke says.
“Their involvement certainly sets us apart, potentially bringing a few new ideas to the Gold Coast.”
Pyke says there’s already been a big wave of Sydney residents enquiring on Aperture.
With house prices rocketing in the Harbour capital, some downsizers and retirees are happy to take advantage of current market conditions and cash in on their longtime family homes and buy something smaller as a city base, freeing up money to secure a more expensive holiday home that they will spend a significant amount of time at.
Pyke however added that the same sentiment is felt with the local market, where there’s also windfall house sales.
House prices in Broadbeach – Burleigh experienced the highest annual growth in the Gold Coast in the 12 months to August 2021, with gains of over 38 per cent, according to data from the data-driven buyer’s agency, InvestorKit.
Apartments in the same area grew by 15.7 per cent over the same period.
“It’s speeding up that transition to downsize, which is why we are seeing huge levels of owner-occupiers wanting to buy something that might be toward that higher price point.”
Pyke says the team have a firm belief in the longevity of the Gold Coast apartment market, and are working towards securing more development sites heading in to 2022.
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