Thursday, February 25, 2016

A Little "Hot" Down Under?


"Insane. That's the best word to describe the Australian housing market."

I just saw this video and it's crazy. I knew housing in Australia was crazy when I first heard about the interest-only mortgages, but I didn't know that 50% of all new mortgages were interest-only!

If you read the recent 12th Annual Demographia International Housing Affordability Survey, you will see that surprisingly (at least to me), Australia is considered more expensive than Singapore, with Syndey coming in as the 2nd most expensive city just behind Hong Kong.

Watching this clip reminded me a lot of all the financial movies that I've seen. People being oblivious to risk and just partying as if the good times will roll on forever.

The question isn't "if" the Australian mortgage bubble will burst, the question is "when?".

11.52: "It's not a bad house. It's a bad price."

Personally, I think that the US equity markets are in a similar mania with people being almost completely and totally disassociated between liking the company for their services and products, and then making a fallacious link that that means their stock prices would sky rocket as well.

I don't think the Singapore property market is in such a similar mania. If the government hadn't stepped in with cooling measures like they did until 2013, the peak we saw in mid 2014 could have extended all the way until now, where you see property markets, especially the big ones like Hong Kong started to stall.

HDB has just launched its first exercise of the year and we're looking at 20% more units this year compared to last year, which had the "bumper crop".

With more supply coming on and volumes drying up, I doubt the housing market is going to pick up any time soon. Honestly, with things chugging on so slowly, by the time I want to buy a house I'll be 35 and eligible to buy an HDB already, haha!

1 comment:

  1. Nice write up! I wonder if the saying - the rich gets richer is true in this case. As they have the cash on hand, buying a few of these properties and paying on interest on mortgages allow them to amass sizeable units and refinance it to grow their portfolio.

    With the SGD/AUD on parity now, it makes more parents sending kids to Aus to study and consider investing in an apartment for a few years also an attractive offer.

    The same goes for the rich in indonesia, malaysia, china coming to snap up our condo units years ago and rent out the units.

    HDB to me will still be the best investment as we enjoy many subsidies that others don't. So have one unit at least and invest the rest.

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