It wasn’t that long ago the property lobby was screaming of a shortage of houses. In the last six months we have seen a surge of houses listed for sale, and it now appears these are overflowing onto the rental market forcing landlords to drop rents. Owners, unable to sell homes for the price they demand, are pulling their properties off the market as we come into the slower Winter sales period and placing them on the rental market. This has resulted in many rentals properties sitting vacant.
Stats from RPData posted on the Macro Business Blog show there are 22.8 percent more properties advertised for rent than a year ago. In the Northern Territory, the figure is closer to 77 percent, and in South Australia, 40 percent.
The recent surge of available rentals may also be attributable to consolidation among renters. At a stage during the housing bubble, rents were rising faster than inflation, and with other rising costs (energy, food etc) renters may be forced to move back home, or move in with friends as landlords price their properties out of reach.
The Burb Watch Project (http://www.burbwatch.com.au) also show a steadily rising number of rentals advertised and rent reductions around the country.
I have noticed that there are more properties for rent at the moment in my area in inner Adelaide. I have also noticed a rise in properties in rural and regional areas, coming from a rural coastal town in SA that saw house prices sky rocket from investors, many of these people are tying to sell to a flat (dead) market. They are then placing properties that are for sale on to the rental market for prices that are quite frankly out of reach of most people that would be looking to rent in these rural areas; or at very least not worth the money as they are often asking for rent that is on par with the Adelaide metropolitan region. Considering wage rates and job opportunities are lower in these rural areas the houses remain on the market, can’t sell them, can’t rent them.
It would be great to see some data that highlights what is going on in rural Australia, particularly (former) investment and holiday home hotspots.
The rent tide has turned. It’s the mortgage biting at the lifestyle choices of many 2008-2010 vintage loan greater fools. Its a natural reation to mortgage stress, move back to Mum’s and get some rent to help service this debt which was making many young Australian debt slaves to the lenders. No Thanks……
Full recourse loans are alot harder to get rid of. No jingle mail in Australia. How illiquid are houses to sell?
If the greater fools are angry they should visit their local member of parliament and express their concerns and question the intention of our elected leaders with the grants to lure more fools into the ponzi scheme.
Yoda say – “Thank you investment property owners for subsidising all the renters cost of living. I hope you get the capital gains at the end to make up for all the years of finding and pouring your cash into a loss making investment.” Enjoy !
It’s no surprise. The party’s over and everyone knows it. Vendors are taking their overpriced homes off the market and putting them up for rent because they can’t sell! It was obvious asset prices couldn’t keep rising forever!
Australia has a serious debt problem that needs to be addressed. But at the moment it
FACT… Credit creates deposits
Defn: Depression
The Mining Boom and Negative Gearing is able to keep the irrational housing market alive longer than you think.
For what it’s worth, i’l try and release share-listings trend in the next update 🙂
That will also help us all get a handle on what is going on.
As for what is going on in the regional (non capital-city areas), i’m sorry but I only have some limited data there (sourced from nestoria.com.au)….i’ll see if I can get that charted for the next release, too (next release is probably in about 4 weeks…)….for now, it’d be better to see what info you can glean from RPData, SQM and the likes, WRT sales and rental listings.
FYI: BurbWatch IS getting automated (i am doing this at the moment in some of my spare time!), which means that, eventually, huge amounts of data from even regional areas will be available at a click…but this is a good 6 months away, i’m afraid (exciting, though, don’t you think?!?!?!)
Anyhow, great site, and thanks for the link to BurbWatch.
Keep it up,
Stewart
Averagebloke you have absolutely no idea of what you are talking about…
You clearly have NO IDEA how money works
The mining boom transfers existing USD from the USD deposit account of the PBoC to the USD deposit account of Australian miners.
How does that create AUD??????????????????????????????????
If you can answer that question I’M ALL EARS
I don’t understand your point?
Averagebloke…
You have answered my question… I will paraphrase it… As you say… “You don’t understand”
Averagebloke….
Blurting out… “THE MINING BOOM” and “NEGATIVE GEARING”…. As a response to almost every element of these discussions… especially macro monetary perspectives, is some-what… Useless with respect to any deeper understanding of the issues. Maybe that’s your own begining and end to the debate, but it’s mind numbingly repetitive and nieve.
Agree with Peter, Average Blokes contribution is reduced mostly to one liner refereing to negative gearing and mining. ………for months now.
Not really mate,
Like I’ve said numerous times I actually work with or know people/family who are long time Property Investors. These people are not worried one bit as long as no touches their sacred cow …NG. Many are looking around and low-balling for their next Property Investment/Tax Shelter. Tax-time is a great time of the year for them as they can re-invest their monster tax returns( they are I’ve seen them) in their next property.
Granted, the swelling number of first time property investors is somewhat of a concern. But I know a few of them as well and they have no problem with getting tenants, especially when you have a government that helps out their low-income tenants with ‘rental-assisstance’.
I have a few blokes where I work already putting in resumes for 120k+jobs in the mining industry, guess what they plan to invest their new high incomes on?
Fantastic Averagebloke
BUT how does that translate to creating a surplus of money… i.e. Money creation in excess of the demand for money payment????????
Australia is in a money contraction = Money deficit = deflation = money shortage = deflating assets = more money deflation = more deflation of assets = unemployment = more contraction in money creation = further money deflation = exponential contraction in asset prices.
Tax reciepts collapse under this scenerio because people loose jobs (don’t pay tax) and welfare rises (require tax to pay welfare benefits)
NG is $8 billion out of @ $300 billion tax base
How does NG increase the money supply?????
Presently the money (shortage) deficit is 5% of GDP = $60 billion
AverageBloke, I too know people that invested in property, and they are wanting to sell as quickly as they can. The irony of this (from them), is they keep saying what a great investment and what great tax incentives investing in property is. No sooner they (I only know two people) then say, want to buy one of my units? This is because the walls are closing on them, and they need the money as in cash. Between $450.00 – $620.00 per week rent (depending on the Unit) + tax incentives (or advantages) just doesn’t cut it for them anymore. You’ve seen how many for sale signs are around? And the ever increasing For (P)Lease signs? I’ve seen a few signs with ‘P’ graffitied before the ‘Lease’.
The rent assistance from the Government, isn’t it a maximum of $83.00 per fortnight? I think, could be wrong, I know its’ not much, but its’ no blue sky full of silver lined clouds. If that’s what a Landlord (or Investor) is counting as a main factor in determining an investment, then don’t touch.
As for the Mining jobs, wait until 3/4 of the population (up from half) apply for these jobs, people will offer to put their kids down the mines. And $120K per year won’t help many people these days, I wouldn’t but a house with that income.
PETER W, some of the factors in the equality “=” statement are worse than we know it to be, especially unemployment.
Also AverageBloke think about why the ATO this year is coming at everyone (even CentreLink recipients) with an iron first. Just like thugs in an economy with not as much money anymore.
errr! umm! As long as you have High-Income earners buying and maintaining multiple Negatively-Geared properties combined with massive returns from the mining industry you have a self-sustaining system.
If I’m wrong why hasn’t the housing market crashed yet? And I mean ‘crash’ like -40% not flat like we are experiencing now.
If you can discover how digging up dirt, exporting it, receiving USD into your account somehow creates AUD then please tell.
All AUD deposits (AUD bank account balances) came into existance from the creation of AUD debt.
Exporting dirt for USD does not create AUD, therefore the ‘dirt or USD wealth’ cannot be spent into the Australian economy to pay a single cent of AUD interest due on an AUD debt.
NG ownership is a fraction of all dwellings and they do not set the dwelling price. Credit quantity sets the price.
We are in a credit deflation = credit crunch = falling prices.
NG by definition is a ‘loss’ in the P/L account. If as you say High Income earners want to borrow to loose money in the P/L more fool them.
Pete NG is rapidly increasing as Investors and Upgraders are the only ones who can afford to buy at the moment.
Remember there is a big difference between those who have recently jumped into the NG ponzi scheme and those long term Property Speculators who simply want to ‘hold’ the property for future capital gains.
Averagbloke, you have answered your own logic as a circularity, which demonstrates you have no understanding, the rhetoric is great but it contains no factual logic.
A fundamental rule of business is this… How an asset is financed does not change the value of the asset.
Capital gain in all business is a consequence of profitability… i.e. the P&L. With NG it is perpetual losses.
If you pay out the debt, what you can extract long term from now untill etirnity is the net rent @ 3%.
Check the shareprice of all the companies that perpetually loose money (Dot Com is an example)
The entire past capital gain in housing is a consequence of net new credit creation exceeding the cost of credit = money supply inflation causing asset price inflation.
We are now in money deflation = asset deflation
You are acknowlaging this is a debt driven asset market by your constant reference to NG which by definition implies large debt leverage to acquire the asset.
Investment credit was growing at 25% early last decade it is now growing at 3.5% and the cost being demanded by the depositors + banks = 7.5%
So what spending into the economy are NG’s forfetting to satisfy the 4% (supply/demand) money contraction that is no longer being supplied by credit creation?
Credit creation is certainly not being generated by the NG community.
AverageBloke, would you know how much of this waterfall of money incoming from minerals is forwarded to home loans, or loans to property investors? How many high income earners can afford another house/unit (excluding the one they’re trying to keep living in)? Can all tax payers continue to afford funding Negative Gearers, in this economy? (Without the introduction of a new tax… No alright I won’t go there).
OK the questions are rhetorical I can’t really answer them myself, so can I entice you into making a call, and to be fair I’ll make one too;
Residential property prices/market within the next 2-3 years
– Up
– Sideways
– Down
I’ll say down, and by that I mean even if prices remain higher than the purchased price after a drop, the (big, large, huge, shocking) amount debt many people “home owners” are carrying means they would not be able to wipe their collective debts mortgage + credit + personal finance, out by selling their property(ies). That’s not a good situation to be in, because they can’t really afford to buy either in such a situation. Unless of course the bank loads them up with more debt, but then Australians (not all) will learn what underwater means.
Mortgage + Credit Card + Person Finance < $1.4 Trillion, so personal debt must be huge for many people.
It could just be me and my gut feeling, I get the feeling we're on the cusp of something coming and this something isn't good. I wouldn't look at property as a safe haven nor saviour, I have no idea what could be. I'll keep renting though, and all that tell me "if you bought such and such at this time you'd be this far ahead", are the same two people that are trying to sell their units off, and haven't for quite a while now, and that's in Sydney's Eastern Suburbs. One is trying to sell a semi in Maroubra and the price has gone from;
1.02 Mil, 980K,…, 910K, 885K, 880K, 850K, 845K, 830K, and still no takers (They refused an offer of $770K cause they would have come out with a little more than nothing). 3-4 years ago that would have been sucked in over an auction fight for 1.2-3 Mil, like other semis in that area were going for. That's not a sustainable sideways trend AverageBloke, that's bad news. Mining Boom ain't saving anyone. This is just a street view of things.
Averagebloke
Business is in a severe money deflation. Money growth is negative 1.5% the cost of money for business is 8 – 10%
NG investors are in severe money deflation. Money growth is 3.5% the cost of money for investors is 7 – 7.8%
Owner occupiers are in mild money deflation. Money growth is 6% the cost of money is 7.5%
Money is debt.
To create more money needs the creation of debt
The cost of money is higher than the supply of money (the creation of money)
To pay the interest on money, more money must be supplied (more debt created) If money is not being supplied (debt created) at a rate demanded to pay the interest on money, the spending of money into the economy falls. The spending contraction starts with discretionary spending.
Notice how discretionary retail business is collapsing into a recession. Notice how business money growth in total is at recession levels. Notice the 50% collapse in the quantity of investor money growth and 85% collapse in the growth rate of investor money (NG)
It is up to you to decide if you want to understand any of this. You should be far more sanguine about the 1.85 million people engaged in NG in this climate.
There will be no crash. A slow deflation maybe but no crash for the reasons I have explained.
Also, if you think there will be any changes to NG you are kidding yourselves. Lab/Lib won’t touch NG as it would be political suicide.
The Longterm Property Investors I have been referring to are sniffing about for their next IP. Plenty of desperate First Home Buyers and Investors who fall prey to these guys and wind up having to rent in a tight rental market.
Goodtimes for ruthless Property Investors.
AverageBloke
You are full of rhetoric but continue to supply near on zero meaningful macroeconomic facts, and yet you clearly desire to remain willfully ignorant
‘The Long term Property Investors I have been referring to’… This statement encapsulates your micro economic perspective through your microscopic lense.
Pass on my best wishes and best of luck to the many dozens if not hunderds of them you know.
No more posts from me… You are tedious, tiresome, and clearly prefer ignorance.
Almost certain AverageBloke Negative Gearing is here for the long haul, granted. After trolling around the area I live yesterday morning (Saturday Mornings there is much real estate activity going on, not necessarily sales), Mosman Sydney, 7 bedrooms + 7 bathrooms, big chunk of property (big front and back yard), old but good condition house $1.69 Million. That’s not a “slow deflation maybe” ($250K was swipped to try and hurry the sale of this), that’s something you may want to tell the longterm Property Investors about too.
There is an absolute tonne for sale from Mosman to Lane Cove, many are sold, many are not, many have been for sale for quite a while, auctions where the only one talking is the auctioneer. The deflation here is not on the maybe scenario, its’ significant. Comparing this to 3-4 (even 2) years ago, the house mentioned above would have been well in to the $2 mil at least.
Negative Gearing seems like it will be the privilege of a very few, I do see property prices coming down much further. There just isn’t as much money in the Economy as there was, and if more debt is issued to prospective (not too prudent) property buyers, woe to many people and champagne for a very few, new class of property barons and tycoons.
I’ll claim property ain’t going to see better days anytime soon.
Peter W: Good points.
But where can you get loans for business at 8-10%? Small business certainly can’t. I have been quoted over >15%
Notice how Business have stopped borrowing, true investors (smart operators) have stopped borrowing. It’s only ‘mom and pop’ ‘property investors’ still borrowing? This shows that those with an understanding of economics know things are in reverse (small business and retail aren’t flat, they are reversing at rates unseen for two decades, this includes the last recession in the nineties). Only those who are ignorant/arrogant of the facts are loading up on debt…..
Yeah, yeah, I hear the screams ‘but we are a normal family and we are using our credit card more and more’……That’s the damn problem, the normal family pushed the envelope without considering what can go wrong.
Isn’t the first rule of investing ‘protect and minimise the downside’? A rule many never considered should be applied to their lives.
Botrot, 1.69 million dollar properties in Mosman? I’m talking about bread and butter mid of the road Investment Properties 350k- 600k.
Of course the big end of town always goes down early in a housing slump because the number of Owner Occupier Buyers that can buy or trade up to 1.69 million dollar houses is very small.
‘AverageBloke’ (who appears to be a market player, not an average bloke at all), the ALP are now strongly considering neg gearing breaks from all but the first property, to discourage people from doing what you’re proposing — buying multiple IPs that will make a permanent loss and contribute to the haemorrhaging of money from Treasury, which is going up exponentially each year in the ‘economic delusion and madness of crowds’ which you are so wholeheartedly embracing. Treasury will not continue to lose that sort of money YoY, especially with Gen Y screaming at them and losing votes, and everything has a natural economic limit and automatic stabiliser in the end. What happens to your grand theories once the neg gearing rug is pulled on you and the people you are representing here?
> Terence King
> Australian Property Price Crash Forum
That’s funny, the forum is not called ‘Price Crash Forum’ at all, ‘Terence King’ seems to have inserted those words for some reason. Wonder why. He has made a very cogent and sensible post about the problems facing the market though.
Hi Sean,
Sorry mate you’ve got me completely wrong. I deplore the current NG rules and I firmly believe it has created a ponzi housing market that favours only a select few whilst making the rest of us suffer financially.
I used to over-react and think that NG should be abolished but after spending the last few years learning about it’s histroy and how it works I think that making a few adjustments to NG so that it encourages ‘New Housing’ being built and stops the appalling trend of multiple IP hoarding.
That’s fine, Average Bloke, but you have to keep up with the program — the ALP right now are discussing removing NG breaks on all but the first property (and could go further) to act as a disincentive. It was all over the newspapers a month ago. What is made tax law can be unmade in a heartbeat, the speculators often don’t realise that.
The other thing is you are claiming there’s a world of difference between people buying into the NG ponzi and people holding for long-term cap gains — I would say there is no difference, they are exactly the same people — the current crop are buying at ponzi prices wishing they could have emulated the people who bought in the 70s cheaply and have made massive cap gains in an inflating market due to easy credit — and are then using NG to achieve the dream in the short term and keep their heads above water, just waiting for those massive cap gains to pour in when in fact they are very unlikely to do so — the cap gains of the past decade have been all about easy credit and low interest rates, now reversing as an automatic correction in the market — the coet of money is going up, LVRs and offering amounts are going down, etc. So they’re basically doomed, and all that is left is for the REIs and property managers to keep jacking rents so their speculators don’t go bankrupt too quickly.
Yes, I’ve been putting that scenario to my Property Hoarding friends. The long-termers aren’t worried and have already made adjustments for the flat market, whilst still using their ‘vulture funds’ to scout for distressed sellers.