Eight months into the Australian housing recession

September 30, 2011 admin Australian Economy, Australian Housing 14

Eight months into Australia’s housing recession and there is no signs of letting up, not that we would expect any let up unless the government decided to intervene. According to the RP Data-Riskmark Hedonic Index released today, nationally house prices fell a seasonally adjusted 0.4 percent in the month of August. The mining state capital lead the falls, with Perth house prices plunging 2.0 percent for the month.

Year on Year, Perth is now down 7.1 percent, Brisbane 6.1 percent, Hobart 5.3 percent, Adelaide 4.9 percent, Melbourne 4.3 percent, Darwin 3.4 percent and Canberra 2.1 percent. Sydney is the only capital to record a positive result year on year, nudging just 0.3 percent higher. The falls are now bigger and longer than first experienced during the Global Financial Crisis.

There has been a swag of housing news out this week, mostly negative. On Tuesday, research from RateCity showed there were 40,000 fewer first home buyers (or 31 percent) in the property market in the last 12 months compared to the 12 months earlier. This has seen mortgage lending fall $11 billion dollars.

With Perth prices falling 7.1 percent over the last 12 months, Wednesday’s RP Data annual equity report show about 1 in 20 Perth home owners (or 4.9 percent) had negative equity in the June Quarter – that is, their homes are now worth less than the mortgage. The other ‘mining’ state is in a worse position with 6.3 percent of Queensland owners now having negative equity. Across the country, 3.7 percent of homes are now under water.

Meanwhile, credit rating agency Moody’s has shown the number of mortgage delinquencies are trending up. Mortgage holders more than 90 days behind has increased from 1.36 percent in March to a 10 year high of 1.67 percent in June. According to Moody’s there was a spike in 2008 (prior to the RBA dropping interest rates and the government introducing the First Home Owners Boost) but current delinquencies are now above that spike.

Following the same mining boom theme, Arthur Karabatsos a senior analyst at Moody’s said in the Sydney Morning Herald, the two biggest declines in mortgage performance were in mining boom states Western Australia and Queensland. ”What I’m saying is, if you’re in mining, you’re sweet, if you’re not, you’re screwed,” ”What is happening is that not everyone is employed by the mines. Not every labourer is getting $100,000 a year, which you are if you’re in the mines.”

» Australia First-Time Home Buyers Down 31% In 2011 – RateCity – The Wall Street Journal, 27th September 2011.
» Homes in five WA regions among nation’s worst rate of negative equity – Domain, 29th September 2011.
» What boom? Defaults rise in two-speed economy – The Sydney Morning Herald, 29th September 2011.




14 Comments

  1. There is so much not right with everything stated in this article. RP Data (R.I.P Data?), are softening the price downturn. There are far too many properties for sale and now for lease as well. I’m sure RP don’t need an excuse to buttress good data. OK That’s a personal opinion rant.

    I do believe that data regarding Sydney’s small increase, but every property I have seen listed has sold for significant price decreases. Except the few (I have seen) in Sydney’s Sutherland Shire, especially Engadine and Sutherland, go figure!

    I think (and emphasis I think), the mining sector being tied into the Economy, property market, even peoples general well-being by the media, and other finance agencies is an attempt to cover or soften the true extent of what really is going on and what’s about to come.

    I’m not the only one seeing anywhere between 2-7 EFTPOS or credit cards being declined at super market check outs or petrol stations, where the person (after leaving their details) takes off in their Audi or Lexus 4WD (they’re the funny ones). Many everyday cars too. Its’ now become a conversation opener when meeting up friends, I get the, “guess what I saw at coles today?”

    Mining accounts for 1.7-1.8% employment (Sorry blog I know you all know that) and (I think) 8.4% GDP. I’m thinking if U.S. and British interest (Finance Oligarchs) own most of the oil in the Middle East, what do Australian interests own in terms of resources here? So, how much wealth stays here? Not everyone in mining is on $100K+. Depending on your circumstance $100K+ may be a thin spread of butter. I won’t be surprised if we start hearing how cheap labour is entering the mining sector, all other sectors are being flooded with cheaper workers. I.T. being a case for this.

    I get the impression Australia’s property market is a dam with thousands of holes popping through the dam wall, and thousands of fingers plugging them. Too many powerful interests are trying to stop the downturn. Same thing happened around world, nothing different here.

    @AverageBloke, we could be seeing the results of Negative Gearing + Property Owner Arrogance + Property Industry Spruiking at play. I’d say you’re correct, what else is keeping this show afloat?

  2. And I can see the faces of the Negatively Geared right now as the truth begins to sink in! More and more will head for the doors and try to sell thus increasing the rate of falls. OH but they said it would not happen it cant happen we are so different hear in OZ! When the EU debt plan falls apart then look out people with investment propertys.

  3. “The mining state capital lead the falls, with Perth house prices plunging 2.0 percent for the month.”

    Fat lot of good the mining boom is doing for the “conomy” over there…

  5. This week TWO very experienced real estate agents in Melbourne told me the housing market is 10-15% lower than its peak in mid 2010. The whole thing is at a tipping point. The number of properties for sale in Melbourne is now 100% more than it was in mid 2010. Don’t believe the shit from the real estate spruikers anymore, including RPData. Douglas

  7. @Tom

    Yeah, I just love the part;

    “Commonwealth Bank of Australia economist Michael Blythe rejects Mr Dent’s view of the housing market.
    ‘Our housing market is a bit different frome everybody else’s,’ Mr Blythe said.”

    He’s so correct, the slap in the face will be harder here than everywhere else. I wonder just how many mortgages, the deliquent kind, the Conmanswealth Bank is holding.

  8. Steve Keen’s website lists the hedge fund BBN Assett Management who is shorting Commonwealth Bank and Westpac, our leading sub-prime lenders. I might have to invest. If the banks go under you double your money.

  9. In an effort to try and stop the rot, realestate interests appear to have funded some bullcrap story in The AGE using stats from up to a year ago concerning burbs where housing has broken the million dollar mark, I think they use the term “magic million”, though I don’t see what is magical about this crap and their old stats…… wonder how things are now fairing out in the real world…..

    http://www.theage.com.au/business/property/count-them-in-40-suburbs-hit-magic-million-20111002-1l3zf.html

  10. It just shows the stupidity of the RE industry Romsey. At a time when they should be fighting for their survival by managing vendor expectations and talking things down to keep transactions going, they try to extract more blood from a stone.

    Why? Because I reckon most of them made the fatal error and started believing their own bullshit. They’ve now got the same noose tied round their neck and are too late to desert the sinking ship. Couldn’t have happened to a nicer bunch of leeches!

  11. And to think Kev Rudd was going to tax the miners more for the greater good of the country. How short sighted to dismiss this guy where you have great examples of countries enjoying sovereign wealth such as Norway, UAE and Saudi.

    Now the miners are enjoying runaway success and there’s no trickle down wealth effect and the housing industry is not saved.

    Myopic madness.

    Still doesn’t explain why Sydney continues to perform so well if this is the right word to describe 0.3%.

  12. Bear in mind, the avergae punter believes house prices always rise, so it will take a generation change to adjust society to the new norm of falling prices.
    Darwin prices should keep falling for a long time, $900,000.00 for a average new 4 bedroom home in past swamp land near the Darwin hospital? Go figure Apparently nothing moving up there.

    Yoda think money better spent buying manure and selling to Parliament house as canteen food for pollies.

    If this tax forum reduces benefits of Neg gearing, should be a good fire sale on offer. Remember folks, that the objective of our government is to keep its people poor and in debt so they have now power to revolt. Long live the democarcy!! Heir Commrades

  13. Keep dreaming Yoda.

    Swanny has stated very clearly that he will not touch the Negative Gearing Ponzi Scheme.

  14. @AverageBloke Neg Gearing is not preventing the fall in the market from gathering pace. if anything its helping it fall now that the rot has set in., down down down they go just like I said they would. Whats the point in loosing money on a property that keeps droping in value? thats correct there is no point so you sell it! Like I have stated in the past NG can work to drive up prices and to drive down prices, All it dose is create bigger ups and downs in the direction of the market! and because it has taken so long to get up so high in value, the falls are going to be bigger than normal, long term investers will get skinned in the one mate.

Comments are closed.