How the Boom Happened

According to Money Morning....
1.4.16


How the boom is happening in Sydney and Melbourne
Immigrants driving the boom, especially those from China and India.

Also important to note here is this one way tying house prices to wages can break down. These migrants are often bidding as families.

But Bloomberg ran a story on this today. They profiled an accountant called Han who just bought a three bedroom house in Ringwood for over $900,000.

‘“It comes as a tradition in China to buy a home for a son to establish a family,” said Han who lives in the house with his 29-year-old wife Chen Junyang. “Without my parents, it would still be difficult for us to bear the large mortgage loans.”

‘Han is among scores of buyers who with the backing of relatives in China are underpinning a housing market in Australia that’s coming off the boil. More than half the buyers of Chinese origin are supported financially by relatives residing in the world’s second-largest economy, according to McGrath Ltd., Australia’s only listed real estate agency.’

What’s even more interesting is that Han mentions houses here in Australia a cheaper, bigger and better quality than whatever he could get back in Beijing. China expert Shaun Rein told me the same thing on my podcast last year.

It’s certainly true however that it’s getting harder and harder for average families to afford a detached house with a back garden close to the capital cities.

Whilst rental yields for units are stagnating at best, rents for the old suburban house on a quarter acre block are doing the opposite. For example, Warranwood has the fastest growing median house rent in Melbourne, now at $500 per week.

Warranwood is situated 27km north-east of Melbourne’s CBD, close to the suburbs of Warrandyte and Ringwood. The suburb features detached family homes, on large unbroken land blocks in quiet residential streets and close to good schools.

These types of properties are highly likely to outperform over the real estate cycle.


Certainly seeing the middle ring Melb outperforming today


MTR

 

The boom was caused by the perfect storm.....low rates, foreign investors, stagnat prices, enviable country and the clap...of thunder.

 

But isn't the boom caused by greedy landlords buying negatively geared properties.
And elderly widows still living in the homes they built 50 years ago to raise their families.

 

At least someone has been paying attention and know what's been happening and why

Must be about time for a few re runs of the script ?

 

Those widows don't need those inner city houses they have lived in for 50 years. They should be given to 25 year old hipsters for half price!

 

Yes i would agree-a mix of various factors. Sydney did have stagnant prices for a period before the boom. ..which would have allowed a period of time when salaries were generally on par or higher than house price growth. I think that needs to happen again for decent growth in the sydney market.

 

Generally speaking when booms occur it starts off in inner city areas and then you get the ripple effect.

However, what was interesting this time was the last/recent boom cycle in Sydney it actually started in the outer western suburbs and this was due to high immigration/professionals from India, they targeted these areas because it was affordable, and some of these areas had the strongest growth during this boom cycle.

 

Really interesting dynamics this time how the boom happened. Interesting if next time around if the boom will start inside out.

 

Another interesting fact is investors always look at the past history when it comes to cycles to determine what will happen next.

In the past Brisbane/QLD boomed after Syd/Melb because of affordability. However fast forward today this has not happen, immigration is driving the continued strong market in Melb and Brisbane has yet to boom.

As an investor I can see we need to throw what happened in the past out the window and look at what is driving markets today to determine where to buy moving forward.

MTR

 

So as a bne bull. What's going to do it for bne? Chinese aren't so interested in bne

 

All the newly cashed up Southerners seeking value up there?
But probably a mix of factors like this one.

 

Sounds vague.
Rates are still low. But not a huge amount of Chinese interest in qld.
The only thing I can see is the yield being attractive to Sydney investors but I don't know if that will create anything like what happened to Sydney.

 

What can I tell you - everyone's an expert upon reflection.
What was different in Sydney before the boom?

 

The chinese interwst going forward will nowhere be ythe same as yesteryears sydney/glen waverley interest, although their interest in brisbane is increasing.
What will do it for brisbane is the continual transitioning from a backwater hole in the ground mining dominated place to a diversified economic centre as its currently in progress but in early stages.

 

Sorry not meaning to criticize just interested in why bne is seen as a good investment given its also affected by the same macroeconomic factors as Sydney but without the levels of immigration or interest. The only factor I can see is its relatively cheap with relatively better yields and looking athistory it shouldn'tbe so cheap but picking upon mtr that the history doesn't preduct future. Need real demand. Just being relatively cheaper isn't enough eg refer cunnamulla.

 

market cycles are based on human psychology and mostly predictable over time.

 

No Cookies | The Courier Mail

"CHINA’S cashed-up property buyers have their sights set firmly on Queensland’s real estate market, with sales to Chinese nationals up nearly 90 per cent to $870 million in the past financial year."
-From October last year.

 

China is doing everything legal and not so to stem the outflow:
PressReader.com　世界の新聞
Edit
China Innovates: A New Way to Lie with Numbers

 

Yes. The chinese interwst in qld (bn and gc) is increasing. .however wony be the same extent as the free for all gold rush sydney and gw experienced in the past. One reason is because of capital controls the chinese govt is implementing to reduce flow of capital out of the country. Another reason is because tjeir speculative wealth has reduced, and another is because they dont know qld as well as sydney/melbourne.

 

It's a double whammy:

• China does not want outflow
• Australia is tightening inflow.

Gate is closing fast on Chinese individual investor's to invest in Australia.