HOUSING is the biggest market in Australia and a house is the single largest purchase a person is likely to make in a lifetime. Yet there is no central database that records transactions and prices.
This vacuum of reliable information is filled only by estimates and surveys from the slew of industry peak bodies and assorted real estate spruikers, all of whom are tainted by a vested interest in pushing the market higher.
Today, BusinessDay begins a week-long series on the nation’s residential property market. The aim is to cover all the key issues, from the rise of foreign buyers and the issues surrounding valuation against other markets here and abroad, to the effect of government stimulus and policy on demand and supply, to state markets, cultural factors, economic fundamentals, prestige homes and the conduct of the mortgage market by the banks.
Jacob Saulwick: Melbourne and Sydney lead price surge
Global markets still grappling with house price collapse
Economists baffled with robust local real estate market
Clearance rates up: residential auctions back in favour
As with any market, the golden question is: is it going up or down?
In the wake of the global financial crisis the housing market in Australia has blown away its international peers with valuations rocketing by 12 to 14 per cent, depending on which estimate you believe.
One of the fundamental problems with most of this analysis is that it relies on a “median” calculation of prices. Relying on median rather than average methodology can distort the outcome. We will take a look at this subject later in the week.
Whereas housing markets in the United States and Britain lost 40 per cent of value from their 2007 peaks and are only now tentatively recovering, the Australian market appears only to have dipped slightly in 2008 (the pain was contained to the top end) before shooting up again in the past 12 months.
Why so? Clearly, Australia’s emerging status as a proxy for the resounding growth of China, our fortuitous mineral wealth and consequent economic stability can account for much of this performance. So can our concentrated and relatively robust banking sector where balance sheets barely felt the ravages of their global peers.
But the banks have changed their attitude. Where they used to push 100 per cent loan-to-valuation ratios (LVRs) now they lend 80 per cent over the value of the asset before demanding a swag of fees (usually labelled lenders’ mortgage insurance).
Their approach to risk has changed. The banks are more cautious; a 20 per cent deposit is required. Valuations are tighter, too.
Are we now at an inflection point in the great Australian property market? Loan approvals have fallen for five months in a row, while auction clearance rates are high and prices appear to be ticking ever higher. People are talking “bubble” . Can prices continue to rise while the rate of credit to the housing sector has been falling?
BusinessDay has brought together an expert team of finance writers, including the likes of Property Editor Jonathan Chancellor, Paddy Manning, Jacob Saulwick, Clancy Yeates, Jessica Irvine, Eric Johnston and Stuart Washington to deliver the most in-depth market coverage.