Or get kill and beaten up in crappy Oz.
http://www.businessweek.com/news/20...australian-home-prices-almost-twice-u-s-.html
Housing Shortage Makes Australian Home Prices Almost Twice U.S.
July 05, 2010, 10:17 AM EDT
By Nichola Saminather
July 6 (Bloomberg) -- Tamara Jenkins has been outbid about 20 times in her nine-month quest to buy an apartment in Melbourne’s inner suburbs.
“I started with such enthusiasm,” the 36-year-old public relations director said in an interview. “I’m so frustrated with the process. I’m ready to buy, but I keep missing out.”
The source of her frustration -- a shortage of 200,000 dwellings -- is helping fuel Australian home prices, which are 82 percent higher than in the U.S., and disproving investors such as Jeremy Grantham, who says they will fall 42 percent as interest rates rise in one of the world’s priciest home markets.
“It will take years to turn the shortage around,” said Matthew Bell, an economist at Australian Property Monitors, a researcher cited by the central bank. “When it comes down to it, that’s fundamentally what’s going to drive the market.”
Australia’s median home price was 6.8 times gross yearly income last year, compared with 5.1 times in the U.K. and 2.9 times in the U.S., according to the annual Demographia International Housing Affordability Survey. The nation of 22 million people has six of the 10 most unaffordable cities among the U.S., U.K., Canada, Ireland, New Zealand and Australia, the survey showed.
The median home in Australian cities cost A$468,000 ($395,000) in May, figures from real estate monitoring company RP Data show. The median price of a new home sold in the U.S. in 2009 was $216,700, according to government data.
Population Cluster
Australia, the world’s sixth-largest country by size with a land mass of 7.7 million square kilometers (3 million square miles), had two-thirds of its people living in less than 0.5 percent of that area in June 2009, according to statistics bureau data. Its eight state capital cities, with a population of 14 million, occupied 38,280 square kilometers, the data show.
State governments on the driest inhabited continent -- 70 percent of Australia is arid or semi-arid -- aim to keep more than half of new developments within the existing borders of the biggest capital cities. That’s to minimize the impact of population growth on the environment, develop underused land, and locate homes closer to existing services and infrastructure, according to the National Housing Supply Council’s State of Supply 2010 report.
Home prices in Australia surged 20 percent in the year to March in an economy with a 5.2 percent jobless rate, about half U.S. and European levels. Melbourne and Sydney, the most populous cities, led the way with jumps of 28 percent and 21 percent, respectively, statistics bureau data show.
Rates Concern
Grantham, chief investment strategist at Boston-based Grantham Mayo Van Otterloo & Co., says higher rates may pop Australia’s housing bubble. The nation’s home prices need to fall 42 percent to “return to trend,” he said, without giving a timeframe or by how much interest rates would have to rise before that happens.
“It’s like a time bomb, just waiting for the rates to become increasingly impossible to support,” he said at a media briefing in Sydney on June 15. “All bubbles break, they’re the only thing that matter. They break because we live in a mean reverting world. Things go back to normal, even Australian housing prices.”
‘Colossally High’
Government stimulus and demand for raw materials from China helped Australia skirt a recession and escape a housing slump since the onset of the global financial crisis.
“The Australian housing market went through 2008 well,” said John Taylor, who oversees $7.5 billion at FX Concepts LLC, manager of the world’s largest currency hedge fund. “But I wonder about the 2011 and 2012 period.” Relative to incomes, average house prices in Australia are “colossally high,” Taylor added.
The credit crisis that triggered a tumble in the U.S. and U.K. housing markets made Australian banks tighten requirements for home loans and curb financing for new developments. That’s prevented mortgage defaults and over-construction, the two traits common to housing collapses, said Alan Oster, chief economist at National Australia Bank Ltd.
‘Under-Built’
“There are a couple of things that are really important in a structural sense: the growth of population and whether you’ve over-built or under-built relative to that population,” Oster said. “The answer there is that we’ve significantly under- built.”
Over the next 10 years, Australia needs to build about 420,000 homes more than were built over the past decade to meet demand, said Harley Dale, chief economist at the Canberra-based Housing Industry Association, the nation’s largest residential building organization.
Housing starts will fall 3 percent in 2011 from the 165,940 forecast this year, the HIA said June 28, because of a lack of land for development in the nation’s cities, falling demand from first-home buyers and rising borrowing costs.
At the same time, Australia’s population growth and trend toward smaller households are fuelling demand for housing. The population expanded 2 percent in the December quarter from a year ago to 22.2 million people. It is expected to swell to 35.5 million by 2056, with net migration of 180,000 a year, statistics bureau data based on current trends show.
Supply Shortage
The average household size will fall to 2.3 people by 2026 from a little under 2.5 now, with single-person homes increasing to almost a third of all households by then, the data show, adding to demand for dwellings.
The gap between demand and supply of residential properties grew by 78,800 in the year to June 2009, according to a report by the National Housing Supply Council, established in 2008 by the government to monitor housing demand, supply and affordability. The shortage will surge to 436,300 by 2019 from about 200,000 now, the council forecasts.
Building approvals slumped 6.6 percent in May to a little over 13,400 after government stimulus that gave as much as A$21,000 for newly built homes was cut.
Christopher Wood, chief equity strategist at Hong Kong- based CLSA Asia-Pacific Markets, said the first-home buyer incentives in 2008 and 2009 -- at a time when interest rates were at a half-century low -- may have put Australia on the path to its own version of the subprime mortgage crisis.
‘Boomerang’ Effect
“In the long term, that policy will boomerang back on the Australian economy and the government because all they’ll have succeeded in doing is incentivizing people to buy houses who can’t afford them -- very similar to the subprime issue in America,” Wood said.
Australia’s household debt to disposable income ratio was 158 percent as of March 31, based on RBA data. That compares with 133 percent in the U.S. as of 2007, prior to the housing collapse there, according to Federal Reserve Bank of San Francisco figures.
RBA’s Stevens said June 9 that there are signs Australian households have “sensed” the risk of increasing levels of leverage and are showing “a certain caution.” Home-loan approvals fell in April for a seventh straight month, and auction clearance rates dropped in the week to June 27, according RP Data, the fifth consecutive week of declines.
http://www.businessweek.com/news/20...australian-home-prices-almost-twice-u-s-.html
Housing Shortage Makes Australian Home Prices Almost Twice U.S.
July 05, 2010, 10:17 AM EDT
By Nichola Saminather
July 6 (Bloomberg) -- Tamara Jenkins has been outbid about 20 times in her nine-month quest to buy an apartment in Melbourne’s inner suburbs.
“I started with such enthusiasm,” the 36-year-old public relations director said in an interview. “I’m so frustrated with the process. I’m ready to buy, but I keep missing out.”
The source of her frustration -- a shortage of 200,000 dwellings -- is helping fuel Australian home prices, which are 82 percent higher than in the U.S., and disproving investors such as Jeremy Grantham, who says they will fall 42 percent as interest rates rise in one of the world’s priciest home markets.
“It will take years to turn the shortage around,” said Matthew Bell, an economist at Australian Property Monitors, a researcher cited by the central bank. “When it comes down to it, that’s fundamentally what’s going to drive the market.”
Australia’s median home price was 6.8 times gross yearly income last year, compared with 5.1 times in the U.K. and 2.9 times in the U.S., according to the annual Demographia International Housing Affordability Survey. The nation of 22 million people has six of the 10 most unaffordable cities among the U.S., U.K., Canada, Ireland, New Zealand and Australia, the survey showed.
The median home in Australian cities cost A$468,000 ($395,000) in May, figures from real estate monitoring company RP Data show. The median price of a new home sold in the U.S. in 2009 was $216,700, according to government data.
Population Cluster
Australia, the world’s sixth-largest country by size with a land mass of 7.7 million square kilometers (3 million square miles), had two-thirds of its people living in less than 0.5 percent of that area in June 2009, according to statistics bureau data. Its eight state capital cities, with a population of 14 million, occupied 38,280 square kilometers, the data show.
State governments on the driest inhabited continent -- 70 percent of Australia is arid or semi-arid -- aim to keep more than half of new developments within the existing borders of the biggest capital cities. That’s to minimize the impact of population growth on the environment, develop underused land, and locate homes closer to existing services and infrastructure, according to the National Housing Supply Council’s State of Supply 2010 report.
Home prices in Australia surged 20 percent in the year to March in an economy with a 5.2 percent jobless rate, about half U.S. and European levels. Melbourne and Sydney, the most populous cities, led the way with jumps of 28 percent and 21 percent, respectively, statistics bureau data show.
Rates Concern
Grantham, chief investment strategist at Boston-based Grantham Mayo Van Otterloo & Co., says higher rates may pop Australia’s housing bubble. The nation’s home prices need to fall 42 percent to “return to trend,” he said, without giving a timeframe or by how much interest rates would have to rise before that happens.
“It’s like a time bomb, just waiting for the rates to become increasingly impossible to support,” he said at a media briefing in Sydney on June 15. “All bubbles break, they’re the only thing that matter. They break because we live in a mean reverting world. Things go back to normal, even Australian housing prices.”
‘Colossally High’
Government stimulus and demand for raw materials from China helped Australia skirt a recession and escape a housing slump since the onset of the global financial crisis.
“The Australian housing market went through 2008 well,” said John Taylor, who oversees $7.5 billion at FX Concepts LLC, manager of the world’s largest currency hedge fund. “But I wonder about the 2011 and 2012 period.” Relative to incomes, average house prices in Australia are “colossally high,” Taylor added.
The credit crisis that triggered a tumble in the U.S. and U.K. housing markets made Australian banks tighten requirements for home loans and curb financing for new developments. That’s prevented mortgage defaults and over-construction, the two traits common to housing collapses, said Alan Oster, chief economist at National Australia Bank Ltd.
‘Under-Built’
“There are a couple of things that are really important in a structural sense: the growth of population and whether you’ve over-built or under-built relative to that population,” Oster said. “The answer there is that we’ve significantly under- built.”
Over the next 10 years, Australia needs to build about 420,000 homes more than were built over the past decade to meet demand, said Harley Dale, chief economist at the Canberra-based Housing Industry Association, the nation’s largest residential building organization.
Housing starts will fall 3 percent in 2011 from the 165,940 forecast this year, the HIA said June 28, because of a lack of land for development in the nation’s cities, falling demand from first-home buyers and rising borrowing costs.
At the same time, Australia’s population growth and trend toward smaller households are fuelling demand for housing. The population expanded 2 percent in the December quarter from a year ago to 22.2 million people. It is expected to swell to 35.5 million by 2056, with net migration of 180,000 a year, statistics bureau data based on current trends show.
Supply Shortage
The average household size will fall to 2.3 people by 2026 from a little under 2.5 now, with single-person homes increasing to almost a third of all households by then, the data show, adding to demand for dwellings.
The gap between demand and supply of residential properties grew by 78,800 in the year to June 2009, according to a report by the National Housing Supply Council, established in 2008 by the government to monitor housing demand, supply and affordability. The shortage will surge to 436,300 by 2019 from about 200,000 now, the council forecasts.
Building approvals slumped 6.6 percent in May to a little over 13,400 after government stimulus that gave as much as A$21,000 for newly built homes was cut.
Christopher Wood, chief equity strategist at Hong Kong- based CLSA Asia-Pacific Markets, said the first-home buyer incentives in 2008 and 2009 -- at a time when interest rates were at a half-century low -- may have put Australia on the path to its own version of the subprime mortgage crisis.
‘Boomerang’ Effect
“In the long term, that policy will boomerang back on the Australian economy and the government because all they’ll have succeeded in doing is incentivizing people to buy houses who can’t afford them -- very similar to the subprime issue in America,” Wood said.
Australia’s household debt to disposable income ratio was 158 percent as of March 31, based on RBA data. That compares with 133 percent in the U.S. as of 2007, prior to the housing collapse there, according to Federal Reserve Bank of San Francisco figures.
RBA’s Stevens said June 9 that there are signs Australian households have “sensed” the risk of increasing levels of leverage and are showing “a certain caution.” Home-loan approvals fell in April for a seventh straight month, and auction clearance rates dropped in the week to June 27, according RP Data, the fifth consecutive week of declines.
