Amber Haddock "Investors watch out: bubble is due to burst"

Blog 13

Christopher Joyes article published by the dominion post outlines how the Australian housing market is now overvalued by 10% and months away from having the most expensive residential property values in history. One question that needs to be asked is how steep are the price falls likely to be when borrowing costs are normalized? A housing recovery was called at the start of last year, as the reserve bank of Australia decreased its cash rate to 2.5% house prices would reach double digit inflation. The Australian reserve bank were worried that if prices increased almost tripling the increases of wages which means “Aussie homes could become dearer than fundamentals warranted”. Figures show that house prices have increased by more than 10% over a year however disposable income has only increased by 1.7%, which in turn says that price ratio income is 4.4 times the average disposable income.

In Sydney investors make up the largest share of new loan approvals, the interest only loan have increased to over a quarter, and those home buyers that have a deposit less than 10% make up over 15% of loan approvals. In order for the reserve bank to get discounted mortgage rates back to 6.6% the reserve bank would increase borrower repayments by 30%.

The graph presented below shows the Aussie House price growth in comparison to New Zealand, Canada, UK, and United States. When analyzing the graph New Zealand has increased to a similar % to Australia however prices are still moderately lower than Australia’s. Although this article is not based around the New Zealand property market the Australian housing situation is much the same as the New Zealand property market proving that the Australian property market and probably other property markets all over the world are in the same situation.

Main focus point featured in the article: Australia property values are at an all time high also the same as New Zealand.

This article published by Fairtax relates to Welly Real estate as it gives insight into property market all around the world and in comparing New Zealand to other contries.

Advise for Welly real estate related to this article would be to focus on the high end scale of the market as prices for houses are increasing and in return sales for houses are increasing meaning more commission for this company. Although the market situation may be deemed unstable if the company focuses on optimum properties then there will always be people that are willing to pay high prices for luxury houses regardless of inflation, price increasing and instability.

Works Cited

Fairtax, NZ. “Investors watch out: bubble is due to burst”. Dominion Post. 21 April. 2014. A3. Print

Fairtax, NZ. "Asians see NZ as property hot spot". Dominion Post. 7 April. 2014. A3. Print

Gibson, A. "Hotel operator planning up to $50 million investment in New Zealand". Web. March 25. 2014.

http://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=11224913.

Fraser, T. "Hotel operator planning up to $50 million investment in New Zealand". Web. March 25. 2014.

http://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=11224913.