The real estate auction market closed the week with a slight decrease to a 66.7 per cent clearance rate on 1675 auctions, compared to 68.4 per cent of 1544 auctions the week before, according to RP Data. Sydney's auction volume is up 63 per cent year over year, reflecting continued growth in housing stock and robust demand. Adelaide is up 48 per cent in volume, year over year. Melbourne cleared 64.1 per cent of its 749 auctions, but Brisbane continues to struggle, closing only 52 per cent of 134 auctions. Read the full story here.
Australia flirting again with the non-conforming loan market
Mortgage-backed securities – the slayer of the American financial market – have re-emerged in Australia, with 10 new non-conforming residential mortgage backed securities (RMBS) transactions worth $3 billion issued in the last 18 months. This indicates growth in non-conforming loan portfolios at the major Australian banks. Only three countries have non-prime RMBS markets – the US, the UK and Australia. The Aussie market for low-documentation loans didn't crash as hard, largely because no rise in defaults occurred. The issuers note that the quality of the mortgages in these securities surpasses those of non-prime transactions pre-GFC. Defaults in general remain at historical lows in Australia, even for non-conforming lows. 30-day delinquencies for non-conforming loans rest around 3 per cent in Australia …compared to 36 per cent in the United States. Read the full story here.
Infrastructure development an expensive mess for property owners
Ande Bunbury’s house in Melbourne’s Clifton Hill was worth between $900,000 and $950,000 when she bought it, and worth about $200,000 less three weeks later when the government published plans to build the East-West Link tunnel right in front of her house. Her neighbors' houses will be torn down by the state to build a service road for the five-year project. Development is a double-edged sword. Years from now, the new infrastructure will pay off in higher value, but in the meantime she's going to be navigating construction crews. Read the full story here.
Australian real estate may be overvalued by as much as 30 per cent; report
Watch for a shock, said Jeremy Lawson, global chief economist of Standard Life and a top economic expert. Lawson suggested in an interview yesterday that the housing market is 20 to 30 per cent overvalued, leaving Australia vulnerable to economic reversal in another global shock. Lawson knocked the low interest rate regime of the Reserve Bank of Australia for decoupling the housing market from fundamentals. He attributed the RBA's reluctance to use tools beyond interest rates to manage the economy to the insularity of its board and organisational groupthink. He also argued that disposable income isn't rising fast enough to justify current valuations. Housing credit has grown twice as fast as wages, pushing household debt-to-income ratio over 150 per cent, just below pre-crisis levels. Read the full story here.
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