The bloated aussie property market is headed for a forced diet

What’s the truth? Well, the most definitive research I’ve found on the impact of foreign investment on property prices comes from none other than the federal government’s Treasury Department.

Today’s article includes a liberal selection of extracts from the report to determine what the Treasury has identified as the ‘meat and vegies’ and what it has identified as the ‘spices and gravy’ of the Aussie property market ‘meal’.

‘ But despite Melbourne receiving more foreign investment approvals than Sydney, price growth in Sydney has been much stronger than in Melbourne over the period. Jain irrigation systems ltd contact details As such, it is difficult to directly attribute price growth in Sydney to foreign investors alone.’

If foreign investment had the major influence that popular opinion suggests it does, Melbourne property prices would be as high as, or even higher than, those in Sydney. French flag icon But they’re not.

When you consider the property pool we have in Australia, the number of existing dwellings far exceeds the supply of new properties being released on the market.

‘ The increase in prices attributable to foreign investors is small when compared to the average quarterly increase in property prices of around $12,800 in Sydney and Melbourne during the study period. Fantasy football 2016 rankings ppr Across Sydney and Melbourne, the models which we consider to be the best specified indicate that, for a typical postcode, foreign demand increases prices by between $80 and $122 on average in each quarter… As such, it can be seen that foreign demand has accounted for only a small proportion of the increase in property prices in recent years.’

‘ Interest rates affect property prices by affecting the size of the loan that can be serviced at a given level of income. Fantasy basketball When interest rates are lower, larger loans can be serviced and prices are bid up, because in the short term the quantity of housing is fixed. Landscape supply stores near me This has been witnessed in Australia (Tumbarello and Wang, 2010; Williams, 2009; and Otto, 2007).

‘ Successful inflation targeting by the Reserve Bank of Australia since the early 1990s has helped to lower nominal interest rates structurally, which has supported property price growth. Landscape materials The impact of interest rates on house prices is generally considered to be cyclical because interest rates typically move to help manage fluctuations in the economic cycle.’

‘ Rising incomes enable more to be spent on properties and more people to enter the market for dwellings. Garden design software free This increase in the quantity of funds competing for the same number of properties should result in higher prices, at least in the short term before supply can respond to higher prices. Football schedule 2016 This has been found to be the case internationally as well as in Australia.’

You’ve got to love the turn of phrase ‘ successful inflation targeting by the [RBA]…’ Please spare me the BS. Isa softball Inflation has been trending down because of globalisation…more supply being added to the global economy from ultra-low and low-cost developing markets.

Our so-called economic success — recession-free for 26-years — has been a result of nothing more than an ever-increasing amount of debt being funnelled (or pumped) into the economy.

‘ Population growth resulting from natural change and/or net overseas migration can increase the demand for dwellings, as can a reduction in the average number of people per household.’

‘Boomerang’ children — young adults opting to move back home with their parents because of cost of living pressures, higher education costs, being unable to face the real world, or boomer parents not adjusting well to the ‘empty nest’ syndrome…whatever the reason, there’s a trend towards ‘failure to launch’. Irrigation direct canada This cohort was once the homebuyer of today and tomorrow; instead, they’ve become ‘squatters’.

Immigration is a potential political hot-potato in this climate of ‘let’s blame the foreigner (and not our indulgent selves) for all our ills’. Landscape plan Therefore, immigration numbers could fall, and this would impact the amount of ‘gravy’ being added to the meal. Jain irrigation systems limited But it’s the ‘meat and vegies’ we really need to focus on.

‘ …higher rates of unemployment make servicing mortgages more difficult, resulting in pressure to sell, which puts downward pressure on prices. Little league pitching rules 2016 This applies to both owner occupiers and investors.’

The US share market is registering new highs on nothing but the ‘bigger fool theory’. Types of irrigation Did you know that, since 2012, the US market is up 75% on nothing more than an expansion of the PE (price/earnings) multiple? Earnings have gone nowhere. Little league pitch count sheet Investors (and I’m loathe to use that term because no sane investor would simply bid up prices without an improvement in the basics) are paying more and more for a dollar of earnings. Landscaping tips Madness.

The potential for disruption to Aussie household incomes from international forces, combined with the fact that we’ve pretty much reached the limits of our personal debt capacity, means the Aussie property market is vulnerable.

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