"Manhattan's Housing Market Ends 2012 With a Sales Rush"

Here's an interesting read that I picked up during a recent trip to America. It's from the New York Times and was written by Michelle Higgins.


"The Manhattan real estate market went out with a band in 2012, with the number of sales rising by as much as 40 percent in the last three months of the year - mainly because sellers were in a hurry to close deals before new tax laws kicked in with the new year.

At the same time, inventory across the board has continued to fall, leading those in the industry to predict that the scarcity of apartments will bring higher prices in 2013.

“The consensus is prices are going up,” said Pamela Liebman, chief executive of the Corcoran Group, which reported available listings down 16 percent in the fourth quarter of 2012 to 6,514 – seven-year low.

Corcoran’s report also said sales in volume was up 20 percent in the fourth quarter, to 3,200 closing, compared with the same period a year ago, and the median price rose 8 percent, to $827,000. While the rise in prices is good news for sellers, Ms. Liebman said, for buyers, “it’s a very frustrating market.”

And there is little relief in sight.

“Product has dried up, there’s not much available and I don’t see a sudden surge of properties coming into the market,” said Dottie Herman, the chief executive of Douglas Elliman, which showed in its report that listing inventory fell to 4,749 apartments in the fourth quarter – the lowest level in 12 years. Depending on the location, she estimated prices could rise, “anywhere from 5 to 10 percent,” in 2013 because of the lack of inventory.

Despite the scarcity of apartments, however, fourth-quarter sales were robust. Rushing to close deals in anticipation to tax laws, wealthy buyers helped push the total number of sales to 2,297 – 40 percent higher than in fourth quarter of 2011, according to reports by Brown Harris Stevens and Halstead Property. The sharp increase in luxury sales bumped the median apartment price up 6 percent to $836,000 compared with the same period a year ago. The number of sales over $10 illion rose 44 percent, to 23, from 16 a year ago.

“All the managing agents in town were just inundated with pressure to close,” said Hall F. Willkie, the president of Brown Harris Stevens Residential Sales. “Without the tax law changes, a lot of that would have gone into January and February.”

Though the end-of-the-year frenzy caused sales to pick up, prices have yet to reach the pre-recession highs.

“If we’re looking at average or median prices, you’re still about 6 to 7 percent below where you were, over all,” said Gregory J. Heym, the chief economist for Halstead Property and Brown Harris Stevens.

Still, brokers are optimistic. Corcoran said a wide majority of its Manhattan agents indicated in a recent survey that for the first time since 2009, they felt the market was ‘strong’ as opposed to merely ‘stable.’

“It’s now been three years since the recession and each year you see it building with all positive signs,” said Diane M. Ramirez, president of Halstead Property, citing historically low interest rates and pent-up demand. “Customer confidence is coming back. The buyers are motivated. The builders – their confidence is definitely back. I’m very optimistic.”

But despite anticipated price increases in 2013, Sofia song, vice president of research at StreetEasy and author of the company’s market report said: “In a healthy market, inventory would be low because of high demand. Buyers from all segments, not just entry-level and luxury, would be clamouring to take advantage of the record-low mortgage rates. But instead, sellers are slow to enter the market and midsegment buyers are feeling trapped.

Douglas Elliman said fourth-quarter sales volume was the highest in about 25 years, but its price indicators were mixed as luxury sales outpaced the overall market and the price of condominiums was relatively stable. Over all, the report showed a 2 percent drop in the median sales with a price to $837,500.

“Basically the market is flat,” said Jonathan J. Miller, the president of the appraisal firm Miller Samuel and the author of Douglas Elliman’s report. With credit expected to remain tight and inventory expected to remain low, he said, “the market we’re going into is going to be this artificially induced improving market.”"

"Where to for house prices in 2013?"

Here's another article for you to read. This one is sourced from BusinessSpectator.com and written Steve Keen. Steve Keen is Associate Professor of Economics & Finance at the University of Western Sydney and author of Debunking Economics and the blog Debtwatch.

"The usual suspects are talking up the prospects for Australian property prices as the New Year approaches, with permabull and Australian Property Monitors senior economist Andrew Wilson forecasting 3-5 per cent growth nationally, and BIS Shrapnel managing director Robert Mellor calling for between 2 and 8 per cent growth for Sydney.
Such calls range from just equal to, to well above, the expected rate of consumer price inflation. So they’re a return to the usual property mantra that house prices always rise faster than consumer prices because of the “fundamentals” of (a) a rising population and (b) tight supply. Unfortunately, that once popular rap is out of tune with the actual performance of the market for the last two and a half years. House prices peaked in June 2010, and have fallen 4.1 per cent in nominal terms and 9.8 per cent in real terms between then and September 2012 (the most recent date for the ABS existing dwelling price index). There was a slight uptick in nominal prices in the last two quarters, but the first of these was equal to the rate of consumer price inflation, and the second was slightly below it – so that real prices at best flatlined, and then fell, as figure 1 shows. Figure 1: Australian house prices since US house prices peaked in January 2006
For the permabulls’ dreams about 2013 to come true, the slight uptick in nominal prices over the last six months would need to accelerate (though it’s currently decelerating). What are the odds? Call me a permabear, but I’d say, not good. Firstly, the “this place is different” argument that says we can ignore what has happened overseas is not holding up so well after just over two years since its peak. While Australia’s house price fall post its bubble peak is clearly different to America’s crash, it’s on par with that experienced in Japan’s long slow melt (see figure 2). That was the basis of the comment that dragged me into the property debate back in 2008, that Japan had experienced a 40 per cent fall from its bubble peak over 10-15 years, and I saw no reason for Australia to be different. So that call is looking healthy. Figure 2 But Australia clearly hasn’t had a crash like America’s. Does this hold any hope for Australian property speculators (sorry, investors) that prices might resume their pre-2010 rise in 2013? The bulls would say yes, on the basis that the key difference between Australia and the US was that there was massive over-supply there, while there has been none here (except in Victoria). While the over-supply difference between the two countries is real, as Macrobusiness regularly observes, that cuts both ways: a rigid supply of housing would amplify downward movements when there were downward shifts in demand. So it alone can’t explain the difference between the two countries. On the other hand, the demand side factors that I emphasise – the level, rate of change and rate of acceleration of mortgage debt – show huge differences between the US and Australia that can account for their very different post-bubble paths. Firstly, Australians have not delevered, whereas American households have done so massively. American mortgage debt peaked at 86 per cent of GDP and has since plunged to 68 per cent. Australian debt peaked at 87 per cent, fell to 84 per cent, and has since risen to 85 per cent (mainly because nominal GDP is growing even more slowly than mortgage debt now is). Figure 3 The fact that mortgage debt in Australia is growing more slowly now than at any time since records began is well known. But a slowdown in the rate of growth is one thing, an outright fall in mortgage debt is quite another. A slow growth rate aside, mortgage debt is still growing in Australia, whereas it has been falling in the US since 2009, and is still falling now (see figure 4). Figure 4 So far it’s 'vive la difference'. But differences disappear with my primary riposte to the bulls' “population growth drives house prices” argument, that it isn’t people who buy houses – it’s people with mortgages who do. For prices to rise, the flow of new mortgages has to exceed the flow of properties onto the market, and that requires mortgage debt to not merely rise, but do so at an accelerating pace (there’s a lot more technical detail to this general economic argument about the role of private debt in effective demand, which I cover here). The very different paths of Australian and US house prices were driven by the same dynamic of accelerating and decelerating mortgage debt (see figure 5 and figure 6). Figure 5 Figure 6 And therein lies the rub for the Australian housing market. To get sustained house price rises above the rate of inflation, accelerating mortgage debt has to be maintained for some time. But just as it’s hardest to make a car accelerate when it is close to its maximum speed, it’s hardest to maintain accelerating mortgage debt when the debt burden is already immense. Australia, with a mortgage debt to income ratio that has barely budged from its 87 per cent of GDP peak, has precious little room to maintain accelerating mortgage debt. America, on the other hand, has some headroom because of the fall in mortgage debt from 86 per cent to to 68 per cent of GDP. These differences are now apparent in the data. Even though US mortgage debt is still falling, it is falling more slowly and therefore accelerating – see figure 5 – and has been doing so for some time. The rising demand has pushed up house prices, which are now rising in real terms. The recent tiny uptick in nominal house prices in Australia was driven by an acceleration in mortgage debt too – even as the rate of change of mortgage debt was falling – but it wasn’t enough to reverse the trend for inflation-adjusted prices to fall (see figure 6). It already appears that this acceleration is petering out, and the rate of growth of nominal house prices is falling further below the rate of inflation as a result. So American property bulls have some prospects of a rosy 2013 – though that is not guaranteed, since the rate of acceleration of mortgage debt there declined in the most recent flow of funds data (see figure 5). But Australian property bulls are likely to be disappointed. Insert crocodile tears here. Figure 7 "

"Investors Confident of Property Outlook"

Here's another article that I have recently come across that I thought might be interesting.

A recent survey has found that 68 per cent of people believe Australian property prices are either set to increase over 2013 or remain stable.
The ninth annual National Consumer Sentiment Survey from Mortgage Choice has found that just 16 per cent of people believe further drops are expected in the property market, suggesting we have reached the bottom of the cycle.
Of the survey recipients, 39 per cent of people intend to buy over the next two years. The largest response came from investors, numbering 45 per cent of this total.
“Investor confidence is very good news. With interest rates the lowest they have been for some time and property prices remaining subdued in parts of the country, it is clear from the research many investors feel this presents a good buying environment in Australia,” said Mortgage Choice’s head of corporate affairs, Belinda Williamson.
In total, 23 per cent of buyers will be considering getting in to the market over 2013, if rates continue to decline.
Overall, “Confidence in the Australian economy for the year ahead has dipped slightly year-on-year but it is pleasing to see more than half of all those surveyed still see a positive economic outlook for 2013. In fact, 59 per cent of the state said that the financial market turmoil has influenced them to save more, which is encouraging for their long-term financial plans,” she said.

This information was sourced from Smart Property Investment Online.

"PERTH Property Prices UP!"

Perth house values jumped by 1.2 per cent in November and are now solidly in positive territory over the past year.
The TD Securities-Rismark measure of home values showed overall dwelling values in Perth lifted by one per cent last month.
House values were up by 1.2 per cent to be 3.1 per cent higher through the quarter.
For the year so far they are up by 0.3 per cent while for the past 12 months they have climbed by 3.4 per cent.
Unit values fell by one per cent last month although through the quarter they are up by 2.4 per cent.
For the year to date, Perth unit values have increased by 2.5 per cent.
Nationally, dwelling values were flat although this was largely due to a one per cent fall in Melbourne.
Values were up by 1.3 per cent in Canberra and by one per cent in Darwin.
RP senior research analyst Cameron Kusher said Perth was the standout among the major capital cities in November although there was space for more improvement.
"Home values in Brisbane and Perth remain below where they were five years ago whereas the other mainland cities have all increased over this period," he said.
"This has meant that relative to the other capital cities, Brisbane and Perth have experienced affordability improvements and subsequently we may see them become more popular from both an owner occupation and investment perspective."
While house prices improved, overall prices fell last month according to TD Securities and the Melbourne Institute.
Their monthly measure of inflation showed prices dropped by 0.1 per cent in November.
Fruit and vegetables, petrol and holiday travel and accommodation all dropped in cost last month. They were offset by small increases in bread and cereal products, newspapers and dairy products.
Over the past 12 months, inflation as measured by TD is up by 2.5 per cent - right in the middle of the Reserve Bank's target band.
The Reserve board meets tomorrow with financial markets fully pricing in a quarter percentage point cut in official interest rates.
But TD's senior analyst Annette Beacher is one who believes the bank will hold fire at its last meeting of the year.
"Better global activity data continues to trickle through, especially from the United States and China, while underlying inflation appears set to remain mid-target, well away from the bottom of the range," she said.
"While it is appropriate to leave an easing bias on the table, we cannot identify a smoking gun for a near-term policy adjustment."
 

PERTH Property Prices UP!

This material was sourced from Acton Real Estate Corporate Newsletter.