The Australian apartment market – will the luck run out?
An article by Duncan Hughes in today’s Australian Financial Review entitled “Off the plan apartments prone to 30 per cent falls” discusses the need for buyer caution.
“Like the Australian mining industry, the real trouble will come if the Chinese stop buying” said Tony Kelly, managing director of valuation group Herron Todd White (Melbourne).
Just in case you don’t think the apartment market is in a bubble, Gerald Minack from Minack Advisors has produced some excellent analysis comparing the average house price in Sydney (12X median income) and Melbourne (10X median income) with the average house price in the larger cities in the UK, Canada, New Zealand, Ireland and the US – and these typically average 5-6 years of median income.
Also, in the forty-five year period from 1965-2010, apartments under construction in Australia trended up at a compound annual growth rate of 2.5 per cent from 20,000 to 60,000 per annum and this compares with the current annual build which is in excess of 150,000.
As we have written about in the past, housing as a percentage of the Australian Banks’ credit outstanding has jumped from sub 25 per cent to above 60 per cent over the past twenty-five years.
You can read Duncan Hughes media article online here.
Chief Executive Officer of Montgomery Investment Management, David Buckland has over 30 years of industry experience. David is a deeply knowledgeable and highly experienced financial services executive. Prior to joining Montgomery in 2012, David was CEO and Executive Director of Hunter Hall for 11 years, as well as a Director at JP Morgan in Sydney and London for eight years.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
Andrew
:
David, the current housing market has at least 20 % uplift to go maybe as high as 40% for detached dwellings. This will bring apartment prices higher not lower. The reported increase in stock simply hasn’t eventuated and as such off the plan purchasers are lining up in droves hoping that the blue chip returns of the past 10 years keep on coming. You don’t know your in a bubble until it bursts.
Guy Davis
:
Hi David, totally agree with the sentiment of the article. However I have recently moved to Auckland and am staggered by the housing bubble here. It is running at 12x median income here too, so I’m not sure which cities Gerard Minnick was referring to but certainly Auckland is comparable to the Australian East Coast and in fact Nz is running at higher levels of household debt to household income than even Australia. Ithe seems a fair amount of hubris has crept in tour the Antibodies after a relatively easy GFC.
john volf
:
The link you provided only allows subscribers to read the article
Roger Montgomery
:
Feel free to subscribe. It’s free.