S&P warns of risk to Australia from property bubble in China
Credit rating firm Standard & Poor’s is warning that Australia’s economy and housing market is exposed to the risk of a softening Chinese property sector. S&P chief economist for Asia-Pacific Paul Gruenwald has told the Sydney Morning Herald that we shouldn’t be worrying so much about high prices in Sydney and Melbourne saying that they are “smack in the middle of the pack” of property price rises in the region. However, he warns that if the Chinese property sector continues to decline to the point where it really impacts on the Chinese economy then Hong Kong will suffer, followed by Australia. The related risk is that with rents not rising as fast as prices in Australia and yields therefore low, the large contingent of foreign investors may need to sell, forcing prices lower.
Melbourne city planners have little bargaining power with developers
City planners in Melbourne say they have little in the way of bargaining power to persuade developers to build the desperately needed affordable housing. The council wants to be able to offer bonuses that would enable developers to build taller towers in return for new affordable homes but it says that the Victoria government does not enforce height controls, taking away the council’s deal-breaker. Councillors are likely to agree to a plan for 1721 new affordable homes in the city by 2021. Planning Minister Matthew Guy is not a fan of affordable housing, claiming that it only serves to drive up the cost of housing for everyone else due to the subsidies.
Sydney’s high prices are not making owners feel any richer
During the housing boom in the early part of the last decade, Australians felt richer thanks to increases in the value of their homes. This time things appear to be different. While prices are booming in Sydney, the average homeowner has a large burden of debt; up to 90 per cent of disposable income. While in past booms the growing value of homes may have encouraged owners to ‘unlock’ the cash in their dwellings, with current levels of household debt they are unwilling or unable to do so.