Global attention on Aussie property

As the United States Senate last night voted in favour of legislation to raise the debt ceiling by a further $2.4 trillion in exchange for $2.1 trillion of Federal spending cuts over 10 years, on the Australian front equity investors are shifting attention back to property, according to Queensland University of Technology professor of property economics Chris Eves.

After last night’s decision to raise the ceiling debt further the Australian stockmarket today saw around a $30 billion drop following the falls in the US indicating that investor confidence had not risen as expected but had instead plunged.

“There’s still a lot of concern about the equities market and what traditionally happens after a big fall like that is the interest shifts back to the property market,” Eves said.

Australia is increasingly being seen as a desirable nation to invest in as nations like the US plunge further into “doom and gloom”, said Eves.
He said this factor alone could help prop up the Australian housing market.

Back in the US, while the ink is still drying on new legislation to raise the debt ceiling further, in the background banks are increasingly bulldozing foreclosed homes and donating the land to local governments in an effort to reduce supply and increase property values again, according to Time magazine.

Nearly 1.7 million homes in the United States (US) are either already foreclosed or are in the process of being foreclosed with more on the way, said Time magazine.

With many US bank economists concerned about US house prices remaining low for a long stretch ahead due to the glut in these foreclosed homes, banks are opting to demolish rather than sell the unsellable dwellings and, to avoid paying taxes on the remaining land and claim a write off, are donating the lots to government authorities to use for future development or green space.

Eves said the act of bulldozing houses and handing over the land to local government authorities is an extreme measure to deal with the falling house prices in the US, “but it’s an extreme measure for extreme times”.

He said the other option would be to hand out the houses at nil price to individuals but it would distort the market because it would reduce values of other property assets and would mean a lot of mortgagees jumping ship to give up their high debt houses for the free ones.

Time magazine said while President Obama is looking at ways to assist victims of imminent foreclosure stay in their homes, others are considering how to speed up the foreclosure process in a nonsensical effort to speed up the housing recovery.

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