Uk Only 2nd Most Overvalued Housing

[Te Mata]

Not just in cricket...well usually anyway , housing overvaluation now.

http://finance.news.com.au/story/0,10166,1...424-462,00.html

AUSTRALIA has beaten the world in over-valuing its homes – and property owners should prepare for price falls until late next year.

A Organisation for Economic Cooperation and Development (OECD) report into housing markets in the world's richest nations has found Australia is the most over-valued property market.

The report was prompted by sharp spikes in property prices in developed nations in recent years.

The OECD found the estimated over-valuation of Australian homes in 2004 was 51.8 per cent. The next highest over-valuation was in Britain at 32.8 per cent.

That over-valuation was coupled with the second highest mortgage rates in the developed world, at an average of 7.1 per cent – only eclipsed by New Zealand where they were eight per cent.

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There have been plenty of signs of the slowing property and housing market since prices peaked early last year.

But the OECD believes prices are likely to fall for some time.

Since 1970, Australia has had six upturns in the property market – the highest number of the developed world. Those upturns have averaged 14.3 quarters, or about 43 months.

During those upturns, average prices have increased 31.6 per cent.

But between the first quarter of 1996 and the first quarter of 2004 Australian real house prices climbed 84.7 per cent.

Downturns in the Australian house market have averaged around 10 quarters, or 30 months, with an average price fall of 10.1 per cent.

The current downturn started in Sydney and Melbourne early last year, which means on the OECD's figures, prices are likely to fall – or not rise – until the fourth quarter of 2006.

The OECD said the strong growth in house prices in developed nations was unprecedented, partly because of how it has not mirrored the global economy.

"The current house price boom is strikingly out of step with the business cycle," it found.

The OECD pins down several factors for the way people had bid up the price of houses across the developed world.

It suggests a lack of housing stock, higher migration levels, low interest rates and more competition from lenders have all contributed to the strong rises in prices.

"A combination of generalised low interest rates across OECD economies, coupled with the development of new and innovative financial products, have no doubt played an important role," it said.

"In Australia, increased competition among credit providers has contributed to the doubling of the number of products provided by lenders."

Another factor with special importance to Australia is the growth in people investing in property specifically to rent.

Buy-to-let mortgages, as they are called internationally, have grown in most nations. Around seven per cent of loans in Britain are for investment, while in the US 15 per cent of home sales last year were for investment.

But in Australia, around 30 per cent of mortgages (by late 2003) were for investment. In New South Wales the rate was 42 per cent of all mortgages, and in Victoria it was 35 per cent.

The OECD said even a small rise in interest rates could prove problematic for the housing sector.

"If house prices were to adjust downward, possibly in response to an increase in interest rates or for other reasons, the historical record suggests that the drops might be large and the process could be protracted," it found.

[homeless]

i think ireland is most over-priced, the prices there would drive an aussie to drink

[Buddleia]

i think ireland is most over-priced, the prices there would drive an aussie to drink

You're right - Ireland is shagged. Know lots of people who can't get a look-in in Dublin and are forced to rent fairly dismal student-quality accommodation ... you know the sort ... freezing ancient bathrooms, draughty dirty bay windows, smell of old dogs ...

But - hey-ho! Rumour has it ECB rates going up 0.5% on thursday! Bring it on.

[libitina]

The report warned of the danger of an extended period of large falls in house prices with implications for a slowdown in consumer spending.

The organisation said the current housing boom was unusual because of its duration, size and the degree to which it was widespread among OECD countries.

The OECD forecast that the Bank of England's main interest rate would remain at its current level of 4.5%.

However, it warned that "house prices have become potentially more sensitive to even modest changes in their (interest rate) levels".

http://www.sky.com/skynews/article/0,,30400-13472018,00.html