House prices to keep falling for years

gfresh · 2 September 2008

Building approvals out today. -0.6% month-to-month (-2.3% seasonally adjusted). -3.1%/-3.7% respectively on same time last year

Generally seen as a leading indicator of prices. And approvals still falling so...

http://www.abs.gov.au/ausstats/abs@.nsf/mf/8731.0?OpenDocument

Personally I think rates should be kept 8%+ for several years, and let the market sort itself, but unfortunately everybody wants to play the pander game with keeping rates low. Then no doubt 3-4 years back to the speculation game

Although it should be noted approvals have been falling well before the credit crisis.. something has been going wrong out there for a while. Could well be red tape and the states and councils mucking with the approval process, doesn't help new properties being built.

1. Private sector houses approved 12 months
2. Private sector houses approved trend

pepperoni · 2 September 2008

gfresh said:
Personally I think rates should be kept 8%+ for several years

Amen, but the powers that be arent happy unless they are sucking the next 30 years growth out of borrowers today.

pepperoni · 2 September 2008

dhukka said:
Maybe someone can offer an informed opinion on this because I am certainly in no position to make one. I keep hearing in the media and from property bulls that there is a shortage of housing in Australia. I came across this page that looks at census data from the abs. The period from 2000 - 2006 shows;

Aust Population growth 5.8%
Growth in Total dwellings 8.2%
Growth in Occupied dwellings 7.4%
Growth in Unoccupied dwellings 15.67%

The rest of the page is well worth reading. Another interesting read here at Contrarian Investors Journal.

Good find - confirms what I think to be pretty obvious but goes contrary to the nonsense you hear from the property bulls.

xoa · 2 September 2008

dhukka said:
Maybe someone can offer an informed opinion on this because I am certainly in no position to make one. I keep hearing in the media and from property bulls that there is a shortage of housing in Australia. I came across this page that looks at census data from the abs. The period from 2000 - 2006 shows;

Australian Population growth 5.8%
Growth in Total dwellings 8.2%
Growth in Occupied dwellings 7.4%
Growth in Unoccupied dwellings 15.67%.

I'd love to see the permabulls spin those statistics in their favour.

But immigrants and China will save us, they say. :

dhukka · 2 September 2008

gfresh said:
Building approvals out today. -0.6% month-to-month (-2.3% seasonally adjusted). -3.1%/-3.7% respectively on last year

Generally seen as a leading indicator of prices. And approvals still falling so...

http://www.abs.gov.au/ausstats/abs@.nsf/mf/8731.0?OpenDocument

Personally I think rates should be kept 8%+ for several years, and let the market sort itself, but unfortunately everybody wants to play the pander game with keeping rates low. Then no doubt 3-4 years back to the speculation game

Although it should be noted approvals have been falling well before the credit crisis.. something has been going wrong out there for a while. Could well be red tape and the states and councils mucking with the approval process, doesn't help new properties being built.

1. Private sector houses approved 12 months
2. Private sector houses approved trend

A couple of points about approval numbers. Firstly as can be seen on the graph the month to month swings are extremely volatile. Secondly, there are major revisions to prior months. In July the vast majority of those revisions were upward. May approvals were revised up by 2.6% whilst June was revised up by 5.5%.

pepperoni · 2 September 2008

Id bet my bottom dollar the number of approvals obtained without intention of building is skyrocketing - every second rpoperty sold with some nonsense DA nobody would build, but people invest 20-30k on these things as in property bull la la land DAs add 20% to the price.

The RBA should be shot if they drop rates today ... I can hear it all coming back "sure you should borrow more than you can afford ... you will get regular pay rises wont you."

God help us if we have a real recession in the next 30 years.

WaySolid · 2 September 2008

pepperoni said:
Good find - confirms what I think to be pretty obvious but goes contrary to the nonsense you hear from the property bulls.

It's an interesting subject, I would like to see some unbiased information, the linked page doesn't qualify in that regard in my opinion.

If you have a 5% increase on 20M then that is potentially more significant than a % increase twice as big on a much lower number, a strange interpretation of statistics on that bublepedia page.

I guess you can obfuscate to support any opinion, but the market might be a pretty good reference point to seek the truth, not perfect.. but not bad either. Rents would be my pick for a guide as to what is really going on with supply v demand. In my areas of interest they having been growing at a rate around 10% or so for a few years now, pretty robust demand still, vacancies are low for Brisbane (around 2%) but I haven't noted any rental auctions or things like that.

xoa · 2 September 2008

WaySolid said:
It's an interesting subject, I would like to see some unbiased information, the linked page doesn't qualify in that regard in my opinion.

How can those statistics (provided by the unbiased Australian Bureau of Statistics) be consistent with a housing shortage? If there's a shortage, why has house construction outpaced every index of population or household growth?

dhukka · 2 September 2008

WaySolid said:
It's an interesting subject, I would like to see some unbiased information, the linked page doesn't qualify in that regard in my opinion.

If you have a 5% increase on 20M then that is potentially more significant than a % increase twice as big on a much lower number, a strange interpretation of statistics on that bublepedia page.

I guess you can obfuscate to support any opinion, but the market might be a pretty good reference point to seek the truth, not perfect.. but not bad either. Rents would be my pick for a guide as to what is really going on with supply v demand. In my areas of interest they having been growing at a rate around 10% or so for a few years now, pretty robust demand still, vacancies are low for Brisbane (around 2%) but I haven't noted any rental auctions or things like that.

That stats are taken directly from the abs, so unless you think the abs has an axe to grind there is nothing biased in the numbers but point taken that the percentage changes can be misleading. If you read on however you will see that the number of dwellings constructed over the same period has outstripped household formation.

explod · 2 September 2008

WaySolid said:
It's an interesting subject, I would like to see some unbiased information, the linked page doesn't qualify in that regard in my opinion.

If you have a 5% increase on 20M then that is potentially more significant than a % increase twice as big on a much lower number, a strange interpretation of statistics on that bublepedia page.

I guess you can obfuscate to support any opinion, but the market might be a pretty good reference point to seek the truth, not perfect.. but not bad either. Rents would be my pick for a guide as to what is really going on with supply v demand. In my areas of interest they having been growing at a rate around 10% or so for a few years now, pretty robust demand still, vacancies are low for Brisbane (around 2%) but I haven't noted any rental auctions or things like that.

It is near to work places (ie. city centres) where rents have taken off. Outer areas, such as where I live they are static or falling and this trend is very much following the rise in oil (transport).

Having had experience with ABS figures in the past (professionally), they are spot on but as of the day of issue they reflect the past by some degree, not what is happening now. Earlier this year a lot of property was still on the rise which is mixed with figures now on the decline.

As you say, interesting subject

pepperoni · 2 September 2008

More interesting is how much faster than rent property holding costs have increased ... not just interest costs but things like property maintenance/renovation, rates, mgmt fees etc.

Alot of people that bought to let 5 years ago are still finding they are not remotely approaching positive gearing after having swallowed six figures in interest alone. And in alot of cases (eg castle hill etc) they are waking up to their folly but are too scared to sell for fear they wont get what they paid!

Nobody wants to admit their mistake on such a huge scale so they hold on ... at the expense of their net worth. This is a big factor supporting property prices.

These people are struggling to stay above water ... its only our banks that are creaming it!

Leave rates high and let them go bankrupt for their own good ... most will be better off for it in 3 years then they come out debt free. Instead of supporting bank profits, the economy and ridiculous property prices with their blood sweat and tears ... and ending up with not much many years down the track.

Better to take the medicine sooner rather than later.

In fact I think the US non recourse home loans may have helped recent falls but are probably healthier in the medium term.

pepperoni · 2 September 2008

explod said:
It is near to work places (ie. city centres) where rents have taken off.

IE demand for *amenity* is outpacing supply. This is recognised and is intended to be addressed with metro style rail, bus lanes, decentralised business parks etc.

Medium term any amenity gains can diminish or be reversed.

robots · 2 September 2008

hello,

another great day,

so we have 2 big four inchs nails driven into the coffin now:

mass unemployment - hasnt turned up

huge increases in IR - just been cut

man how good is it, pedalled all day long

thankyou
robots

Pommiegranite · 2 September 2008

robots said:
hello,

another great day,

so we have 2 big four inchs nails driven into the coffin now:

mass unemployment - hasnt turned up

huge increases in IR - just been cut

man how good is it, pedalled all day long

thankyou
robots

I expect even less home sales now as the few who were willing to buy will probably hold off on borrowing to purchase. Sad to say that it is a lose lose situation for the RE market.

robots · 2 September 2008

hello,

i hope everyone enjoys seeing the interest rates on those online savings accounts decrease,

the websites would all be updating with new rates as we speak, ING, Bankwest who?

the cash rate fanatics will be getting cold sweats

thankyou
robots

BSD · 2 September 2008

Dunno Robots

7.75% risk free looks better than the 5% GROSS yield I could get on my inner city apartment

Particularly when after body corps and rates it gets closer to 3%.

Long way to go yet buddy.

Keep pedalling!

robots · 2 September 2008

BSD said:
Dunno Robots

7.75% risk free looks better than the 5% GROSS yield I could get on my inner city apartment

Particularly when after body corps and rates it gets closer to 3%.

Long way to go yet buddy.

Keep pedalling!

hello,

no worries BSD, have a great day

thankyou
robots

pepperoni · 2 September 2008

BSD said:
Dunno Robots

7.75% risk free looks better than the 5% GROSS yield I could get on my inner city apartment

Particularly when after body corps and rates it gets closer to 3%.

Long way to go yet buddy.

Keep pedalling!

Haha ... spot on about apartments ... pedalling hard and going nowhere!

Bankwest just advertised 8.5% AT CALL ... Im only getting 7.4 at CBA (market rates were falling long before the RBA announcement) and frankly Id be happy with 5% while everything else if flat, going backwards, or too volatile to be worth the headache!

Personal banker calls with 1 month rate, I say ok, and money goes back in until the right property pops up.

robots · 2 September 2008

robots said:
hello,

another great day,

so we have 2 big four inchs nails driven into the coffin now:

mass unemployment - hasnt turned up

huge increases in IR - just been cut

man how good is it, pedalled all day long

thankyou
robots

hello,

just in case some ASF members missed it, as a lot of traffic just recently

now only if number can post up some ABS stats

thankyou

have a great day

robots

WaySolid · 2 September 2008

xoa said:
How can those statistics (provided by the unbiased Australian Bureau of Statistics) be consistent with a housing shortage? If there's a shortage, why has house construction outpaced every index of population or household growth?

You would hope the statistics are indeed unbiased. Conclusions made from statistics can point in many different directions however.

House prices to keep falling for years

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