Bad Weekend!

November 8, 2010 admin Australian Economy, Australian Housing 35

It has been a bad weekend around the country for Real Estate. News Limited reported auction clearance rates have “collapsed” in Australia’s largest housing markets.

According to the paper the total volume of homes traded at auction over the weekend in Sydney, Melbourne, Brisbane and Adelaide was only $242.3 million, down 50 percent when compared to the same period last year.

Australian’s are starting to question if in fact we are “different” in Australia, if houses do double every 7 to 10 years, where the pent up demand has gone and if we do really have a shortage of homes.

» Auction clearance rates fall on rate rise – News Limited, Monday 8th November 2010.




35 Comments

  1. And with another 3,000 auctions over the next 3 weekends – will the demand side of the equation get worse?

    No FHB’s in the market, professional investors sitting on the sidelines & mum and dad investors starting to get shakey..

  2. All this over 0.25% RBA and 0.45% CBA increase in interest rates? I’m thinking if this Economy was good and strong, peoples attitudes would be a little different to this.

    “If you can’t afford the house now, you can’t afford it in 7 years when it doubles in value.”
    – Robert Kiyosaki.

    I know Robert has said some very silly things, but he’s also said some profound things too. I don’t point that quote to the prudent that can take debt, and turn it into a profit for themselves. Its’ for the bozoes that thought they were rich by holding a large sharehold in the National Debt.

    Also the mainstream media has reported that the Australian Economy, all sectors, are on the up and up. This was based on a business survey on their expectations for next year. I wonder if people say that just to try and get more bank loans? I don’t know, I do know more money will be going into mortgage payements.

    “If you won’t deleverage, we’ll make you do it.”
    – My interpretation of the RBA & CBA raising rates.

  3. This will continue to get worse. People have over captialized and their debt levels are coming back to bite them. I still think at some point next year that it will be so bad the RBA will have to lower rates. The question will be can the banks follow. Also China are about to start increasing their rates causing their demand for Australian resources to decrease. The market needs to correct itself. What goes up must come down? Always has and always will. What frustrates me the most is it was the govt that caused all this by stimulating the economy 2 years ago when they should have left it alone.

  4. FHB’s are irrelevent unless there is FHB Grant involved.

    The investors are the ones in control of the market and have been for a good 8-9 years.

  5. Mum & Dad Investor Profile:

    Age: 35-50

    Situation: Typically have paid off/nearly paid off primary property and want to get second property to fund gaps in retirement savings

    Likely Plan: Hold investment property until retirement, and then sell when the negative gearing benefits no longer apply

    Likely Outcome: Mass properties fall onto the market as the current 35-50 year olds retire. It will also be during this same time frame that their ‘independent’ parents in there 70’s & 80’s that are currently clogging up the inner ring in most cities will pass on..

  6. FHB’s are irrelevent? lol

    If you think the investors can support the market and all the construction work that comes from new homes getting built without the FHB’s you have rocks in your head mate! please go and get informed about the real world because I can tell you that if the FHB’s dont start to come back into the market soon the building industrie is toast and then the econ will follow it down the drain. Just stop and think about things for just one second before you start to type such rubbish.

  8. @G Macca,

    To see pictures of the appartments type or paste, Port Bouvard Oceanique luxury apartments, into Google images. I think still too much (as in expensive). I wonder if the comments were on similar lines, did you read and remember any of the comments?

  10. If you take away first home buyers, you take away 30% of the market that would be otherwise selling their homes to upgrade. These potential upgraders are unable to upgrade as the market is not there to buy their house. The next level of upgraders are unable to do so and so on.

    It would be foolish to think ‘investors’ could pick up all the slack-especially at the higher levels of the market.

    The market last year worked in the opposite fashion when the 14k and 21k grants were about.

  11. @BotRot,

    No, can’t quote any comments verbatim, but were definitely along the lines of bubble bursting, people having paid too much and current owners who may have bought in 2007 with the idea of selling now at a considerable gain, selling against similar properties by the developer at almost half the price they paid.

    Nothing directly abusing the developer from what I can remember.

  12. I note with interest that the jobless rate in Australia jumped up much more than all the (so called experts) expected, well I called this back in June (any one with half a brain could see thing going this way) back then I said that the unemployment fig’s would start to head north befor xmass and thats just whats starting to unfold. This is just the start of the problems that Australia is going to face with higher interest rates and the amount of debt out there in the econ + over valued house prices. This now locks in house price falls, how big the falls get remains to be seen, just dont expect to make money out of investing in houses for quite some time people the party is OVER!!!

  13. LBS says :
    What frustrates me the most is it was the govt that caused all this by stimulating the economy 2 years ago when they should have left it alone.

    Look, it the govt had done nothing and the economy limped into recession, what would the electorate be saying ? PEOPLE GET THE GOVT THEY DESERVE AND THEY GET THE POLICIES THEY DESERVE. If the bubble bursts and families are hurting, THEY WOULD BE GETTING WHAT THEY ELECTED AND WHAT THEY DESERVE.

  14. @2bob, I too have been saying that, just not here, and I would get the “DUMBO” stamp of my forehead. I have been eagerly following the unemployment rate, as commonsense comes slapping me in that face that this economy doesn’t look like a low rate unemployment economy. Off I went on my search and research and found blog sites using the ABS’s own methodoly in determining unemployement, then removing a few factors/parameters like;

    – Consider the 1 hour a week (which is not literal) as unemployed
    – Consider the “I’m on a help me get a job course” via Mission Australia or The Salvation Army as unemployed
    – Remove hoax weighting measures like the birth-death model
    – Few others…

    And unemployement in Australia increased from 14.9% in July 2009, to 17-18% presently. Speak to anyone from Mission Australia (I know someone there), or CentreLink and they’ll confirm that unemployment is not 5.4%, not even 7.5%.

    Speaking of July 2009, that was the month Australians managed to rack up $AUD 1 Billion in credit card cash advances. I’m not sure if it was that month alone, or up to that month. I think there is more than one party over though.

    @nsw2206, what a fantastic blog site. Amazing, spent all day reading most of the articles, and links off those articles which you should do to appreciate the info. Didn’t get any work done today because of it, but didn’t feel as though I wasted anytime reading that site. Thanks for sharing that link, hope that guy “Graig” doesn’t get up ya’ for it.

    Go well Bloggers.

  15. This site is all about facilitating discussion and awareness of the issues that face the economy. Please do continue to post any links provided they are on topic. Craig.

  17. people, we are in big trouble now ! with unemployment going up, perfect recipe for housing and economic crash !

  19. People need to stop blaming everything on the banks. Yes, they’re not perfect – largely thanks to government intervention/regulation. The bigger issue is government and central bank policy. Rates need to rise to correct the malinvestments etc that artificially low rates have created in the economy. Unfortunately, we will have a recession in the next 24 months. Rates should be left to the free market, not the RBA. They should be a function of consumers time preferences/savings.

    http://www.mises.org

  20. Housing provides very little benefit to Australia’s economy apart from the initial construction activity. Conversely, investment in commerce, technology and education drives employment and offers permanent benefits to the economy. The huge outflows of capital directed to trading existing houses should be directed far more productively to more appropriate areas of our economy. Australia’s skyrocketing housing related debt has provided little of benefit to most Australians. Although this exponential rise in credit may might add to GDP, it doesn’t create productivity gains. Rather, it is an indication of excess consumption, because the bulk of housing credit is ploughed into transferring existing housed between each other, instead of building new dwellings.

    Alex Barton
    Australian Property Forum

  21. @FreeWilly,

    You miss the point, its got nothing top do with the %(by value) of investment, that gets effected by investors often buying pre existing propertys, its that if FHB’s stop taking out loans then the amount of new homes getting bulid will crash, this then flows on to the developers and construction industrie and when thats crashs look out.

    People that choose to look at reports like the one produced by smartcompany and form views about how the market is going to track may as well go play black jack for all the good it will do them.

    Bean counters dont make that world go around they just tell us what has happened after the show is all over.

    So I stand by my comments and if your smart you will look into things a bit deeper and save youself a lot of money!

  22. @2bob

    The point I’m making is that FHB’s don’t drive the current market and haven’t for a very long time. You implied that they make a difference and they don’t. When credit dries up and the speculators make a run for the exit then we will see a difference.

    Speculators have sustained the increase in prices in housing for the past 15 years.

    Note that the number of new house built vs traded is appalling.

    Try looking at some numbers before making bold sweeping statements.

  23. Sure, first home buyers don’t drive the market, but are an essential part. Like any dynamic market you can’t ignore a segment in order to justify your beliefs, hopes and expectations. A mindset such as this will have you heading to the cleaners.

    For example, in 2007 the US were continually told the subprime mess (small portion of the overall market) was contained and would have little influence on the larger overall market (and the rest of the US and world economy). It set the ball rolling and the rest is history. Who would have thought the subprime market could have brought the world economy down???

  25. My point exactly average bloke!

    I was giving an example mindset, rather than making a direct comparison between the two!

    As they say, ‘Hindsight provides new eyes’

  26. Interestingly there was an article on news.com.au (13th Nov) that stated that should rates rise another 1.5% then 25% of all mortgage holders would have a forced sale on their hands and even more interestingly the majority of these people would be baby bombers……

    How odd…… I always thought the biggest fools were the FHBs, but not apparently so, you then have to ask how come the baby boomers? From what I’ve always previously read, they got all the free kicks…. everything was free for them, real estate was even supposed to be cheap at the time as well…. so how come this scenario exists? did these fools mortgage their place and go after additional real estate believing the myth would always hold true?

    If true then I assume they hold their additional places in inner Melbourne where massive mortgages are required…..

    If I can find the link to this article I’ll post it.

  28. Romsey, when I first read that article yesterday it brought back the comments from the Reserve Bank of Australia, that the level of debt we have is quite o.k. as the majority of it sits with the older population who can most afford it . . .

  29. @FreeWilly,

    Its clear that you choose to only see what you want to see, so I will not waste any more time trying to explain it to you.
    FHB’s are the building blocks of the whole market and if you dont understand that then you have no idear! You dont have to agree with me thats fine, just see how the next year unfolds as it will prove my point as the market implodes. Good luck with your investments (and i do mean good luck) as from what you have said to this point you are going to need all the luck you can get 🙂

    @James

    It is good to see that some people like yourself still understand how important it is to view the overall market when trying to judge what the future outcomes will be and not just pick out the parts that paint the picture you would like to see.

  30. Where are the latest clearance rates stats??? Seem to be kept very quiet over the last two weeks…

  33. Hey Craig,
    Tried to show a friend this link (on credit crunch) and couldn’t open it…in fact couldn’t log on at all and wasn’t able to contact the administrator even. Do you know if there’s some bug in their system?
    Cheers

  35. @2Bob

    If the market implodes in the next year, it won’t be because the FHB’s have left (they already did that pre the FHB boost) it will be because the ‘investors’ are exiting in droves and its called a market correction.

    No different to the stock market, just slower.

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