Real Estate

Real estate is funny. Historically, it's been one of the best ways to build wealth, yet it scares the pants off most people. Everyone has an uncle or cousin who "lost big" in one of the real-estate crashes, yet admit it: A part of you still wants to invest.

This index seeks to determine which of the 50 most populous U.S. metro markets were most likely to have provided strong returns for residential real-estate investors between early 2014 and early 2015. This index measures both appreciation and gross rents as a percentage of average purchase prices.

Within the dates studied by the index, let's look at the 10 biggest real estate winners.

1. Dallas

Dallas tops the list of real-estate markets over the period studied, exhibiting strong price appreciation, while remaining a market in which investors saw strong rents relative to property values. Investors in Dallas stood to earn an almost 20 percent unleveraged return for residential real-estate investments before expenses.

2. Denver

Falling closely behind Dallas, Denver takes the number-two spot, driven largely by the strongest appreciation in home values of any major market studied over the period. Residential real-estate prices increased a staggering 13.4 percent year over year across the Denver metro region.

3. Miami

Miami is one of three Florida markets on the top ten list, boasting an impressive 18.6 percent year-over-year return for investors.

4. Houston

Houston is the most populous city in the top 10 list, with more than 2.2 million residents. Investors on average saw a gross return of 18.5 percent over the past year.

5. Atlanta

Investors in the Atlanta market saw a 16.4 percent return over the past year, led by almost even gains in cash flow and appreciation.

6. Tampa, Fla.

Tampa Fla, probably best known for its football team, made the number six spot on our index, led by strong cash flow. Like its neighbor Atlanta, investors in Tampa saw a 16.4 percent return.

7. Detroit

Detroit has had an interesting real-estate past, and it's still possible to buy real estate for less than the cost of a used car. However, Detroit is also clearly climbing its way out of the pit, emerging as number seven on the list for overall return for investors, sporting a cool 16.2 percent return.

HOUSING BOOM REMARKING AUSTRALIA'S SOCIAL CLASS STRUCTURE

 

The persistent housing boom in Australia’s cities, especially Melbourne and Sydney, is often framed as an intergenerational clash in which younger generations are being priced out of the market by baby boomers. However, sociological theories of social class suggest parents’ wealth and social status will ultimately be passed onto their children anyway.

So, by focusing on intergenerational inequalities that will sooner or later be reversed, we are framing the housing affordability question the wrong way. At the same time, the impact of the housing boom is so deep that some long-established thoughts about social class may be no longer relevant.

The housing boom has blurred on hand boundaries between upper, middle and lower classes that applied to the baby boomers and previous generations. New social class boundaries and formations are being produced.

·        In the industrial city, the term “working class” was distinct from the experiences of low-income workers in manufacturing jobs. Yet in a post-industrial Australian city it makes more sense to talk about the “renting class”. Not all renters are deprived, and not all poor households are private renters. However, the correlation between the two is important and strengthening. The percentage of private renters in the total population is slowly but surely increasing – from 20.3% in 1981 to 23.4% in 2011.

·        More than just a status symbol, home ownership has become ever more central to the way most Australians accumulate wealth. About half of the homeowner's wealth is held in their own home. Each housing boom enriches them additional through tax-free capital gain on their homes.

·        The housing boom also generates work in the construction industry, which is the third-largest employer in Australia with more than one million workers. These are no longer working-class occupations, with most skillful jobs paying average weekly earnings of close to A$1,500. So, it is arguably the home-owner class that benefits most from each construction boom.

·        The housing elite is satisfied by the housing boom well beyond the capital gain on their own homes. Much of the enormous wealth of Australia’s elite is generated through the housing market – through investment, construction and financing of housing.

The deepening fusion between Australia’s housing system and its social class system creates a dangerous sequence. The further house prices grow, the more significant housing becomes as a determinant of social class. And when social class is ever more defined by the housing, people are willing to bid even higher to enter home ownership or the housing elite.

GOVERNMENT'S RESPONSIBILITIES FOR AUSTRALIANS RIGHT NOW

 

Local governments have both direct and indirect impacts in the terms of affordable housing. Direct involvement refers to the authentic provision of housing by local governments acting individually or in partnership with others. Indirect involvement refers to the role that local governments play in facilitating the provision of housing by others.

There is no obligation to meet international obligations within State and Territory legislation. Australian sub-national jurisdictions are not vital to house all their citizens adequately. Most Australian households are well housed but we have a growing shortfall of reasonably priced and available housing for our lowest income households, estimated by the National Housing Supply Council as 539,000 properties. This creates a big level of housing stress for low earnings households. The earlier Rudd and Gillard governments developed a new National Affordable Housing Agreement which was broader in scope but retained a narrow focus on welfare housing and did not address historic concerns over transparency and accountability and which does not deliver sufficient funding to States and Territories to address the long-term supply shortfall. They did however provide momentous additional funding in the areas of social housing provision, a new National Rental Affordability Scheme and new national partnership agreements on homelessness and remote Indigenous housing.

Against the backdrop of growing house prices since the mid-1990s, there has been important public debate around issues associated with housing affordability. In 2003 the Australian Government requested that the Productivity Commission undertake a query into First Home Ownership. ALGA's submission to the Inquiry clearly articulates local government's role in housing and its impact on residential building and development. The Commission's report (PDF) was published in March 2004.

At its meeting on 13, February 2004 Local Government and Planning Ministers met with members of the Housing Ministers' Conference. At this meeting, it was decided that housing affordability is a major national issue. Ministers agreed that local government and planning portfolios are vital stakeholders and partners in the development of affordable housing policies at Australian Government, State and Territory, and local government levels, and in the implementation of affordable housing projects. Alignment of strategic and policy development processes between the local government, planning, and housing portfolios would produce greater outcomes than an action by personage portfolios. To this end, Local Government and Planning Ministers agreed to again meet with Housing Ministers following the conclusion of the National Affordable Housing Project and the completion of the final report of the Productivity Commission.

Buy and Sell in South Australia

We can see the new overseas market for prime South Australia produce as a major spur to future real estate market. The Kemp real estate principal and joint winner of RIESA valuable Sir Robert Torrens award says buyers and sellers had several reasons to feel confident in South Australia market.

South Australia has some fantastic opportunities to grow and produce exports. There is a jobs spin off from such contracts, which goes straight into the real estate market .These are being driven mainly by seafood, our wines and dairy products. Ironically South Australia, naval and submarine contracts is also the reason to feel confident about the property market. Those contracts are going to fill some big holes in the economy for years to come as far as jobs go, the benefits will flow on directly into the real estate market and industry.

The lifestyle is attractive and will remain a key in a buoyant. It is one of the greatest places to live anywhere in Australia and probably the world , the future prospect of lifestyle is going to become even more important with aging populations ,especially in regard to retiree and aged housing demand .In few years down the line, agents may become a one-stop shop for property . 

ABOUT REAL ESTATE BUBBLE

A housing bubble is a run-up in housing prices fueled by demand, speculation, and exuberance. Housing bubbles generally start with an increase in demand, in the face of inadequate supply which takes a relatively long period of time to replenish and amplify. Speculators enter the souk, further driving demand. At some point, demand decreases or stagnates at the same time supply increases, resulting in a sharp drop in prices — and the bubble bursts.

Conventionally, housing markets are not as prone to bubbles as other financial markets due to the large transaction and carrying costs related to owning a house. However, an amalgamation of very low-interest rates and a loosening of credit underwriting standards can bring borrowers into the market, fueling demand. A rise in interest rates and a contraction of credit standards can lessen demand, causing the housing bubble to burst.

Adjustable-rate mortgages began resetting at higher rates as cryptogram that the economy was slowing emerged in 2007. With housing prices teetering at lofty levels, the risk factor was too high for investors, who then stopped buying houses. When it became evident to home buyers that home values could actually go down, housing prices began to plummet, triggering an enormous sell-off in mortgage-backed securities. Housing prices would eventually turn down more than 40% in some regions of the country, and mass mortgage defaults would lead to millions of foreclosures over the next few years.

The questions of whether real estate bubbles can be identified and prevented, and whether they have broader economic significance are answered differently by schools of economic thought. The financial crisis of 2007–08 was related to the bursting of real estate bubbles which had begun during the 2000s around the world.

Economic bubble characterized by quickly increasing property values until they outperform other elements of the economy and then is followed by a decline in the property value.

THREAT TO BANKS DUE TO AUSTRALIAN COMMERCIAL REAL ESTATE

"Relative to other parts of the globe, we've been more cautious on Australian bank risk, particularly giving the reliance of Australian banks on foreign funding," said Mr. Shah. 

The economic slowdown in China, along with a crackdown on foreign investors has emerged as one of the factor that has undermined the residential property market.

 According to the research note, there is a growing likelihood of an eventual house price "correction" – which means a fall of 10 per cent from peak levels – because of "imbalances" in the market which include the dominant role of investors and pressures on affordability.

Analysts Ilya Serov, Patrick Winsbury and Stephen Long argue that although banks' balance sheets are strong yet several statistics show these "imbalances" are deepening, making a correction more likely.

In particular, they highlight the fact that some households are spending a greater share of their incomes on their home loans, even when interest rates have fallen.

The recent data says that total housing debt has reached a record high of 140 per cent of disposable household income.

Australia is going through a period of sustained house price appreciation and an increase in household debt. These trends pose a threat to Australian banks because they increase the risk of the correction in the housing market.

This increased supply and tighter financial availability raises the risk of non-settlement, and could expose residential property developers to elevated levels of financial risk. Moreover, it could depress overall market sentiment and put downward pressure on general house prices.”

The hustle-bustle in the housing market are also relevant in considering risks in commercial property markets. This area of Australian business activity has strengthened over the past years, unlike most other parts of the business sector. Australian commercial property has allured strong investor demand, both domestic and foreign.  Any significant reversal of this demand could expose the market to a sharp repricing. At this stage, however, the broader risks to financial stability from this source remain modest, because banks’ commercial property exposures are a smaller share of banks’ total assets than prior to the crisis.

Australian Apartment Correction: Not Just a Price Hike

Australian Apartment Correction: Not Just a Price Hike

The so-called “correction” in the prices in Australian apartments is going to be more than a bad news for Australian Real Estate. If the sources are to be believed, this “correction” is about to heavily decrease the prices for homes in Australia. In addition to this, experts are also predicting a nationwide recession due to the issue. The Australian housing cycle has reached its peak and thus, household debt is certain to extend the property bubble of the country.
Shifting of big banks to have the lending standards tighten is considered the prime reason behind this. For the cheap apartments, this will certainly be a blow. But it is inevitable to spread and lead the defaults for the other smaller developers dropping the construction considerably.
Some dangerous consequences to the current situation are being foreseen by the experts. According to them falling of prices in almost all the areas may lead the country to recession. Almost all the big banks seem to share their concerns on the topic. Right now the scenario is that the debt for a household is overextending Australia’s real estate bubble. Moreover, foreign money’s intervention is also having some adverse consequences on the housing market. According to many big banks in Australia, many developments in Australian Real Estate market are being funded by some offshore banks while money from them has almost come to a halt.
Since last year the prices have increased by almost 7 percent which is a point of concern. For more information on the topic and other Real Estate issues, follow us.