Demand for mortgages has dropped for the third consecutive month in December, with approvals falling a seasonally adjusted 5.5 per cent according to official ABS data. This follows falls in November of 6.1 per cent and October of 2.85 per cent and brings the quarter fall to 13.74 per cent.
There has been two significant falls in mortgage numbers since 2000. The falls in 2003 (when Sydney homeowner’s hit peak debt) and in 2008 (after the start of the GFC, but before the First Home Buyer’s Boost) both resulted in falls in house prices in subsequent months as demand for houses evaporate.
ยป Home Loan Approvals Retreat – Herald Sun, February 10th 2010.
I’d say the governments got less than six months to get re-elected before the troops find out what he’s done to their “wealth creation”.
Well, it will be interesting to see if this effects RE prices, as they certainly are heading for the moon. The graph and logic tell us that there is a lag time. ….thanks to the owner of this site for putting up the info. It’s interesting.
The first homebuyers space is empty now.
There are still a lot of amateur investors looking at investment properties now though – mums and dads.
Its a worry.
J Hill, I noted your post on the other thread. Been involved in the industry for 15 years and paid a visit to a village in the same area last Dec. Never seen anything like it. DEAD. Interestingly, you mention investors. Tarneit was running a 13% vacancy rate late last year on new houses priced at $350pw or thereabouts. The market has spoken, they now yield about $270pw and the rate has naturally come back to about 6% (still extremely high mind you). Some investors would be taking a bath on them. Something stinks……i think it’s called the REIV!
House prices are absolutely justified, as long as bananas can crack $55 a kilo.
Arthur,
Did you see what the REIV did to the proposed development in San Remo (near Phillip Island)?
A property developer bought a large parcel of on the border of San Remo, with a proposal to turn it into 1,000 blocks of land (700m2 blocks each) and effectively double the size of the town. Demand was strong, and they already had people on a wait list to purchase nearly 300 of the blocks in the $160k to $200k bracket. The local council area approved the development (due to the fact they would receive much more annual rates from it), and the state government approved the development (due to the fact they would receive stamp duty from the sale of the land).
The REIV took the matter to a VCAT adjudication, arguing that it would create an oversupply in the area and potentially reduce the land price in the area by 20%. VCAT then referred this to a mysterious “Property Advisory Commitee”. No detail was provided on who made up the commitee, but I’m sure that the people that sit on this so called independant commitee probably have something to do with the REIV anyway (lets face it, who within the industry doesn’t).
The outcome – A small development was allowed to proceed with no more then 50 blocks to be sold in any 12 month period (not to create an oversupply). All 50 blocks have since been sold, and all fetched over $300k per block.
The REIV is limiting the supply of land to the market, not the state or local governments (as it is in their financial interests to develop it).
In reference to Rental Yields – I current rent an apartment in North Melbourne (close to the CBD). I got my renewal and my rent has only gone up $10 per week. This is only a 3.5% increase and roughly in line with CPI inflation. However, the Melbourne property market has risen by 20% in the last year. Long term property investors that are positively geared are still doing fine, but all the mums and dads entering the booming investment property market are going to struggle to find the tenants willing to pay.
A bloke I work with would like to invest in an investment property – but said that rents would need to rise by about $100-$150 per week for most inner city apartments for him to consider it.
There was also a story in The Age a few weeks ago about a lady that bought an apartment off the plan at Docklands for $700k – the real estate agent told her that she could expect to rent it out for $700 per week (2 bedroom place). Needless to say, she didn’t find a tenant willing to pay that much, and ended up having to rent it out for around $550 per week. She held onto the property for 4 years. During that time, the body corporate fees jumped from $3,000 to $7,000. She eventually sold the property 4 years later for $600k to a chinese investor – the negative gearing benefits were eaten away by the fact she simply couldnt afford it.
Do we all think that more examples like this are on the way given prices are booming again?