First homebuyers grant boosts loans
Linky-dink
Fist home buyers are now making up 23.5% of the housing market - the highest in years. This is a rise of 1.3% on last quarter, but overall building approvals are down from 65,000 to 43,000, and home oan approvals slumped 13%.
So, it seems that the government grant is doing its thing - getting more people out of renting and into debt. But it isn't arresting a fall in overall construction, because investors are fleeing a market where prices are decreasing. Which is interesting because rental returns are at decade-long highs of between 4.5% and 6.5% per annum in some areas - which means that if the market were stable people would be stupid not to do the good old Aussie trick of buying 64 houses and negatively gearing the lot of them. This is especially true when we consider that the Reserve Bank will probably be slashing rates by 0.5 to 1% next month.
So, the market is acting irrationally by all Real Estate institute metrics. A rental crisis has forced rents up to a level where its a no-brainer to invest in apartments and investment properties, but there's just no building going on. The government grant has provoked a response, but it isn't saving the bacon - consider that 22,000 dwellings per annum is a contraction of about $8.2Bn in the lending sector. Considering that the housing sector contributes around 40% of GDP...this is serious stuff.
Consider that the 23% new home owners represent about 8,700 dwellings per year. This is atrocious at addressing the rental situation - I'm pretty sure more than 9,000 new couples are coined every year and the balance must rent. Except there are only 30,000 new houses being built (and this is hatrdly enough). So unless housing prices fall to a level where we can encourage first home buyers to become 50% of the market, OR we can build 75,000 new dwellings per annum, we are going to have a disaster.
This will either be a boom and crash of rents (if rents go up while house prices fall eventually there's a rush to ownership with desperate investors cashing out of property), or society will break down into an underclass of renters, squatters and people who cannot participate in society because rents are too high for anyone to sustain and housing prices are too high for anyone to enter the market.
I'm not sure how we've got into this munted situation. Perhaps its regulatory - not enough land being freed up, etc, etc. Perhaps it is a predestined situation in the market - a double-edged sword set up so that property tycoons can make megabucks and everyone else is relegated to rental slaves, mortgage slaves, or vagrants.
Either way...a high unemployment rate will turn the taps off on the debt servicing, or the renters (who service investor debt).
Fist home buyers are now making up 23.5% of the housing market - the highest in years. This is a rise of 1.3% on last quarter, but overall building approvals are down from 65,000 to 43,000, and home oan approvals slumped 13%.
So, it seems that the government grant is doing its thing - getting more people out of renting and into debt. But it isn't arresting a fall in overall construction, because investors are fleeing a market where prices are decreasing. Which is interesting because rental returns are at decade-long highs of between 4.5% and 6.5% per annum in some areas - which means that if the market were stable people would be stupid not to do the good old Aussie trick of buying 64 houses and negatively gearing the lot of them. This is especially true when we consider that the Reserve Bank will probably be slashing rates by 0.5 to 1% next month.
So, the market is acting irrationally by all Real Estate institute metrics. A rental crisis has forced rents up to a level where its a no-brainer to invest in apartments and investment properties, but there's just no building going on. The government grant has provoked a response, but it isn't saving the bacon - consider that 22,000 dwellings per annum is a contraction of about $8.2Bn in the lending sector. Considering that the housing sector contributes around 40% of GDP...this is serious stuff.
Consider that the 23% new home owners represent about 8,700 dwellings per year. This is atrocious at addressing the rental situation - I'm pretty sure more than 9,000 new couples are coined every year and the balance must rent. Except there are only 30,000 new houses being built (and this is hatrdly enough). So unless housing prices fall to a level where we can encourage first home buyers to become 50% of the market, OR we can build 75,000 new dwellings per annum, we are going to have a disaster.
This will either be a boom and crash of rents (if rents go up while house prices fall eventually there's a rush to ownership with desperate investors cashing out of property), or society will break down into an underclass of renters, squatters and people who cannot participate in society because rents are too high for anyone to sustain and housing prices are too high for anyone to enter the market.
I'm not sure how we've got into this munted situation. Perhaps its regulatory - not enough land being freed up, etc, etc. Perhaps it is a predestined situation in the market - a double-edged sword set up so that property tycoons can make megabucks and everyone else is relegated to rental slaves, mortgage slaves, or vagrants.
Either way...a high unemployment rate will turn the taps off on the debt servicing, or the renters (who service investor debt).