Charles Bukowski

Aussie home prices world's most-overpriced: survey

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Aussie home prices world's most-overpriced: survey

Simon Johanson

March 4, 2011 - 11:06AM

Australian house prices are 56 per cent overvalued, The Economist estimates - a higher rate than in Paris or Hong Kong. Photo: Glenn Hunt

Australian house prices remain the most overvalued in the world, according to the latest quarterly ranking of global house prices by The Economist magazine.

Based on a historical gauge of home prices to rents between 1975-2010, the magazine estimates that Australian residences are 56 per cent over-valued, exceeding the 54 per cent over-priced rate in Hong Kong and 48 per cent in France.

“There may be good reasons for Australian prices to have risen so far, but people made similar, and ultimately incorrect, arguments for the run-up in prices in the West,” The Economist said in a statement accompanying the survey's release.

The report may stoke debate on whether Australia's property market is a bubble waiting to pop.

The Economist's survey of 20 countries follows recent house price data released earlier this week which shows capital city value fell nationally by 1.6 per cent in January, a result of higher interest rates and floods in Queensland and Victoria deterring buyers./quote]

http://www.watoday.c...0304-1bhhy.html

Edited by RumpledElf
don't post full article text please

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The Economist suggests the best way to limit the damage from a property bust is for regulators to exercise direct control over the amount of debt available to property owners and developers.

What do they do when it's too late? Our government will take this as a call to arms and raise funds directly for the property industry. Oh thats too late, not only have we allowed rampant build up in private debt the government is now assisting the process as much as possible right when it is entering into an exhaustion phase.

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Perhaps it would be better to call Australian housing the 'Least Undervalued' in the world?

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Perhaps it would be better to call Australian housing the 'Least Undervalued' in the world?

Cheapest rent in the world? If I was a paid pundit that would be what I said.

Better buy now before the rents go through the roof.

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Cheapest rent in the world? If I was a paid pundit that would be what I said.

Better buy now before the rents go through the roof.

As requested, tor. houses aren't overpriced, rents are too cheap!

I love the title of the article, too. It is both highly creative and doesn't sound at all desperate...

Don't Believe The Reports on Australian House Values

Australian house values

James Kirby

March 6, 2011

ARE they all wrong? The IMF, the OECD and now, ladies and gentlemen, those anonymous analysts at The Economist who have branded Australia ''the most overvalued housing market in the world''?

It's quite a call - our house prices are more overvalued than anywhere you'd like to name - Shanghai, Sweden or Switzerland. According to The Economist Australia's home prices are 56.4 per cent overvalued. And that's comfortably above the second-highest figure of 53.7 per cent in Hong Kong.

We stand in contrast to the US where the top 10 cities are approaching fair value at 3.7 per cent overvalued, and in wild contrast to Japan, which has been going nowhere since the early 1990s and is now estimated at 35 per cent undervalued.

Advertisement: Story continues belowThese reports - and they are now as regular as Charlie Sheen meltdowns - understandably spook us in a land where the bulk of family wealth is in the home. And if it is beyond dispute that Melbourne and Sydney homes cost more than Hong Kong homes, then we are in a bubble.

But hold it one second … what exactly did The Economistmeasure? The ratio of home prices to rents in 20 economies.

It's a single measure - and a leaky one at that.

You could simply say Australia tops The Economist list because our average rents are too low - rental yields have remained unchanged at about 4 per cent for many years, though they are beginning to rise.

More likely our home values are justified by one of the best economies in the developed world - even if it is a two-speed model in which mining industries thrive and other sectors struggle. And that's before you factor in the exceptional tax shelter encased in the family home along with the concentration of our populations in four cities.

What's more, the factors that could start to immediately move prices - higher or lower - are dormant. Investors as a proportion of the market have remained unchanged since the GFC while the housing shortage remains virtually static.

Paul Braddick, head of property research at ANZ, points to lower home approvals. In trend terms, home building approvals have been falling for nearly a year, although it has to be said the most recent statistics on home building approvals have been skewered by the Queensland floods crisis. Indeed, the floods highlight the problem with housing statistics. The statistics are riddled with localised exceptions.

When you start comparing international house prices, the problems are enormous.

Back in the domestic market, the median dwelling price in Australia today is about $412,000, which is useful to almost nobody. If you are looking for a home in Sydney's harbour suburbs the average price belongs to another planet; if you want a house in rural Victoria the same holds true.

It's clear the factors driving the housing market have been stalled by successive interest rate rises.

But there are few signs that prices are now going to plunge.

It is much more probable that they will drift for at least a year after slipping by an estimated 1 per cent in the 12 months to January. And this is not a bad outcome for most homeowners whatever this report or the next report might care to say.

kirbyjourno@hotmail.com

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As requested, tor. houses aren't overpriced, rents are too cheap!

I love the title of the article, too. It is both highly creative and doesn't sound at all desperate...

Oh dear. When spruikers are following the path I would choose they are making a mistake. My company does zero marketing because we are so damn bad at it :)

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