IMF Warns of Global Housing Bubble
There are a wide range of doomsayers who are predicting an Aussie property bubble, but an equal number who point to immigration and tight property supplies as a reason for a continuance of the boom. The debate goes on. However, the International Monetary Fund says that there is a global
housing bubble which must be tackled through tighter regulation of lending. Speaking to Germany’s Bundesbank yesterday, the IMF deputy MD Min Zhu said that rising house prices are a significant threat to the global economy and called for governments to do more. Mr Zhu said that tightening lending requirements and putting greater capital requirements on mortgage lenders is required, along with restricting access for foreign investors to overheated markets. Mr Zhu’s call for constraint echoes earlier statements from the IMF about an overheated Australian real estate market. The IMF Global Housing Index shows that prices are 23 per cent above where they were in 2000 and 3.1 per cent up on last year.
If the housing bubble is to burst … where’s the pin?
Credit Suisse analysts say home prices should remain stable for a while, because the catalyst for a big fall – or a continuation of the boom – isn’t clear. Home prices have fallen over the last few months, with no growth in home loan approvals in April and the biggest monthly fall in five years in May. But Credit Suisse suggests that’s a signal for a slow erosion of home values in real-dollar terms, rather than sharp changes. Prices fell between 2003 and 2009 by 15 per cent under similar conditions. Read the full story here.
Is construction meeting demand in Sydney?
Planning NSW argues that construction in Sydney appears to be lagging behind strong population growth, relative to other periods of growth over the last 20 years. Between 2006 and 2009, Sydney's population had expanded by 85,400, a change largely driven by an increase in net migration, with no meaningful response in the supply of housing. This flies in the face of Melbourne’s response to population growth – a massive increase in the number of apartment units approved for construction – and belies recent arguments from bankers that explosive increases in housing supply pose an investment threat to residential housing. And, indeed, the number of homes approved to build are at the second-highest level ever. But the margins remain thin for builders and the numbers appear too low to accommodate strong population growth, Planning NSW argues. Read the full story here.
First time homebuyer’s grant in NSW extended to homes of $750,000
The NSW government extended the eligibility threshold for up to a $15,000 first home owner benefit, raising the property value limit by $100,000, to homes up to $750,000. It’s viewed as too-little, too-late by some real estate observers, who fear that young families will remain priced out of the market, particularly since it only applies to new construction, over which investors have been scrapping with homeowners. The lion’s share of loans from Australia’s banks on new construction has gone to investors, not homeowners. Read the full story here.
Aussie banks are undermining New Zealand’s interest rate regime
The New Zealand subsidiaries of Australia & New Zealand Banking Group Ltd., National Australia Bank Ltd., Commonwealth Bank of Australia Ltd. and Westpac hold about 90 percent of New Zealand’s mortgages. And these banks are flooding New Zealand with cheap loans just as New Zealand has been trying to tighten its money supply with interest rate hikes. The moves by Australian banks have been enormously profitable – an average 14.3 percent in the first half of the year – twice what they’re making at home. They’ve also systematically pushed Kiwis out of variable rate mortgages into cheaper fixed-rate loans, blunting the effectiveness of New Zealand’s central bank. Read the full story here.
Craig-y-Mor to Craig-y-Uproar: a foreign investor rubs Sydney the wrong way with flashy construction
The razing of Craig-y-Mor, a 106-year-old mansion on the Sydney coast purchased by a Chinese politburo princeling, appears to be fanning the flames of negative sentiment toward foreign investors in Australian real estate. The new owners, Zeng Wei and Jiang Mei, are trading the two-storey brick house for a five-level concrete-and-glass palace that offends the aesthetics of neighbours. “They are knocking down something that was modest and thoughtful and replacing it with something that doesn’t even have a thought in its head,” said Sydney architecture critic Elizabeth Farrelly. Read the full story here.
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