Last Monday, the Federal Government released its Mid Year Economic and Fiscal Outlook (MYEFO), hoping growth in the residential housing construction sector would take over from our deteriorating mining boom and save Australia from pending recession.
Household consumption remains solid in aggregate and there are tentative signs that residential building activity may be starting to improve. As resources investment passes its peak, the forecasts are for low interest rates and rising incomes to support modest growth in dwelling construction and non-mining business investment in 2013-14. These forecasts incorporate the 150 basis point reduction in the official cash rate since November 2011 and broadly reflect the market’s expectations for future movements in official interest rates.
A Housing Industry Association (HIA) report released today show residential construction activity continues to decline as the number of new home sales fall a further 3.7 percent in September to an now 18 year low.
» HIA says new home sales continue to slide amid crisis in consumer confidence – The Australian, 30th October 2012.
» Builders struggle as new home sales fall – ABC News, 30th October 2012.
After the budget, Swanny will start Ponzi Property Stimulus 2.0 with massive FHVB’s on new homes.
… I am Average Nostradamus.
http://www.macrobusiness.com.au/2012/10/government-to-stimulate-next-month/
@AverageBloke. I read Macrobusiness thinks this could happen as soon as next month. Swan has only budgeted 5.5% unemployment for the next couple of years. Unemployment is currently 5.4%, and will push though 5.5% Thursday week. Swan said, this would trigger stimulus. If they are relying on a bigger housing bubble, you can bet this will include a massive FHVB.
more stimulus? good, blow t bubble even bigger, cant wait to see when it burst.
Yep, It’s like heroin and the group seems to looking for another fix…
When your economy IS a mega asset bubble you’re already trapped in the addiction. You have to keep feeding the addiction or suffer the withdrawal consequences
The average addict surrounded buy a support group of addicted friends, has a near zero chance of success going cold turkey
Average household (voter), average politician, average banker, average tax accountant, average builder, average realestate agent = the collective group of average addicts.
Nothing special about an average group of addicts other than the ability of their addiction to ultimately destroy their lives, their families lives and their community.
There are better ways to stimulate jobs in the building and construction sector. Look to the success of pink batts and let your imagination run wild!
More info than the title states. Speaks of Canada too. Think its different here, its different in Canada too, same difference as here. Lots to worry about if this is on the right track.
EU crisis: Riots in Spain and Greece
http://www.youtube.com/watch?v=S2zjRgKuNJ8
To paraphrase,
“…no bubble have actually burst yet, there has been deflation…”, and “…we are still closer to the top than the bottom…”. The last quote is in reference to Europe and the US.
Credit data points to an imminent price crash
You have been warned!
Love your work Pete………………………………………..
The FHB grant is pure evil. All it does is inflate the bubble at the low end and put young people into even more debt. FHB grants are nothing more than a transfer of money from the serfs to their feudal lords via the government. God, I hate the Aussie system. It’s completely and utterly f*cked. I’m very much hoping it immolates and implodes.
@ Peter W. Could you elaborate a little bit more on how its related and all unfolds? I’m still trying to get my head around how it all works! I appreciate your information. cheers.
@gavaroo – Please, please, please peruse this site and all it entails – you’ll then be able to figure out the whole house of cards for yourself, and it’ll make you very, very angry. Happy reading.
Gavaroo
Lets keep this as simple as possible…
Houses are houses
Money is money
These two are not the same thing
The equity in your house IF YOU SELL = the cash deposit + NEW mortage debt provided by the buyer – the existing mortgage debt the seller (YOU) presently owe.
This is exactly the MONEY settlement maths that occurs 90 – 120 days after an ‘auction weekend’
If the NET NEW AGGREGATE mortgage debt CREATED in THE AGGREGATE is ZERO (as an example), the equity in houses MUST eventually converge on THE BUYERS DEPOSIT.
Under a ZERO NET NEW credit monetary environment, EQUITY = DEPOSIT
Of course, we dont get to that situation in a few days or weeks, but if it persists (ZERO NEW CREDIT = ZERO NEW MONEY) the EQUITY = the DEPOSIT, it’s the only possible outcome.
The arms of Government and Financial system will fight ‘tooth & nail’ to prevent this…
Silly policies for a silly people I’m sorry to say.
Wake UP people!
@ Peter W. Thank you.
@ Rupert I have been following this site and gaining a lot from everyone else’s comments, however, some information takes a bit of understanding. I realise its all a scam, that keep people in debt for their whole lives and it’s one big ponzi!
Im just feeling a sense of urgency to get on the land. I feel guilty sometimes thinking how many people will be hurt when house prices really go down in value and i’m wanting it to happen……
This outlines the quantity of Australian household financial assets.
http://www.rba.gov.au/publications/bulletin/2012/jun/4.html
“In contrast, the share of deposits has increased from 18 per cent to 27 per cent. Consistent with this portfolio shift, surveys show a significant increase in the share of people nominating deposits and paying down debt as the ‘wisest place’ for saving”
What the majority of the market do, dictates the market because, THEY ARE THE MARKET
If the Federal Govt is serious about reducing the deficit negative gearing should be phased out. A very simple way to save taxpayers funds. We should all petition WHAT WENT WONG at Finance Department in Canberra.
Two wongs don’t make a right.
I’m a ‘loser’ slumming it at mums, spent the last 6 years hearing my mates lord it with their equity bonanza. When it gets real bad i would’nt dare lord it over them, i’ll just be the same old loser’ who just saved himself 100 odd grand!!!
Check out this article: http://www.news.com.au/realestate/buying/are-we-safe-as-houses-from-the-global-market/story-fndban6l-1226514162748
So full of facts and undeniable points…..
Oh, hang on…..That’s an entire article about the authors opinion….without one single independant observation.
Unfortunately, there are people out there that will read this article and say “Told ya’s. You bears are suckers.”
Oh well, you can lead a horse to water…..
OZ is systematically risky over property bubble. Latest discussion is about the “deflation” or “crash” mode of the bubble. Personally I believe it will adopt the crash mode rather than what suggested as the slow deflation process. We may need to refer to more offshore studies rather than the domestic ones. This is also what concerns me more. Economists in OZ are “interest parties” of the bubble. They have lost most valuble parts of their ethnics, being independant and objective. When judgements are based on cooked data and misleading opinions within the country, it would be better to have no judegements. We need truth from reliable sources. Even blogs are more reliable than mainstream media today.
@Matty – it’s a petty excuse for journalism written by a property ‘expert’ with a vested interest in keeping prices high. We had loads of these types of so-called ‘articles’ in the UK – but they slowly dwindled as the smart money was betting on a crash.
I love the way he says – “But Australia has a different banking system, a different approach to debt and responsibility to our mortgages and extremely low default rates.” and “…we have lower agent commissions and entirely different real estate systems.” I nearly off my chair laughing. This guy is living in cloud-cuckoo-land!
its good to see there are still smart people out there.
http://www.news.com.au/realestate/desperate-ken-slamets-unreal-estate-offer/story-fncq3era-1226514156328
@ admin
A friend of mine has just been through the real estate purchase nightmare.
First step was to build. Builders here in SA are out of work. He too is in construction. He made various offers on plans. He was rudely, aggressively told his prices were ‘stupid’. He then mentioned that the banks were only willing to loan him so much…..then the shocker “here, go see this finance guy, then come back to me”
Second step, if the builders are going to play that game, stuff them, I’ll buy established. Made an offer on an existing place. Guess what? The real estate agent was rude, aggressive, and ‘offended’ by his offer. Mentioned that the banks would only loan so much…Guess what the reply was? “here, go see this finance guy, then come back to me”
In hind sight I’m not surprised by this. But this pattern has three major concerns.
1: The real estate agent is clearly acting illegally by not representing seller and buyer in a transparent manner.
2: Does anyone need further evidence that access to finance is the reason prices rose so fast, for so long and so out of sync with the real economy?
3: This behavior will result in an even larger price correction than I first imagined.
This is worthy of 4 corners story. I guarantee, that in the mess that follows the full crash, these sorts of stories will be rife.
Again, how many times will people be told not to purchase at these dizzying heights? Regardless of the figures from RP data, Rismark etc, there is no doubt prices are in reverse, and have been for quite some time.
At this stage in the economic cycle, debt is deadly on any asset that is not productive. Savings in the bank may be earning low interest………
But it’s guaranteed by the federal government. Is your house value? Ironic or food for thought?
Sometimes to get a clearer picture of what’s happening in the Real Estate market you need to think outside the square. For example what I did was look for annual reports on industries that feed into the building industry itself. Take Boral for example as it is heavily involved in the building and construction industry.
And when you read the 2012 annual report – only the first 2-3 pages, it becomes very clear that the residential building industry is in big trouble.
It quotes ” An approximate $120m EBIT decline was due to lower volumes in Australia, with around $80m in Building Products, as a result of the severe decline in housing activity.”
Boral have also done the following.
37% reduction in installed brick capacity and 20% reduction in roof tile capacity.
see the link for full report.
http://www.boral.com.au/Images/common/pdfs/annual-reports/Boral-Annual-Report-2012.pdf
Bad times are coming.
Not Spending:
Thanks for the valuable suggestion. A little problem is that sample may not be big enough although much closer to truth, alternatively vast amount of time to know about the industry, which is partially reflectively of the whole picture. I mean if I am arguing formally against the interest partied “ecnonmists”, stronger evidence may be needed.
@ Not spending
Correct, word on the street is that “Laminex” downgraded 12-13 sales forecast by 50%
How many businesses can survive that for any length of time?
Unihorn:
You are correct, I certainly wouldn’t base my decisions on just one piece of information that could have multiple sources.
Whilst I was reading a story from The West Australian about how first home buyers are getting back into the market here (apparently so), in recent months the entry buyers have taken on more than a third of all new mortgages, compared with the traditional average of 27 per cent.
Mr Darby (The Housing Industry Forecasting Group Chairman ) said the expected jump in new dwellings would also come from strong population growth from more than 1000 interstate and overseas arrivals each week.
I don’t know where he got his figures from but hey, Rule no. 1 of Journalism – Never let the truth get in the road of a good story.
There are certainly a lot of tradies in Perth at the moment – you just have to look at the construction sites and there are a mix of Vic, NSW and QLD number plates everywhere. No denying that.
However, from a national perspective, I found this about Stocklands Property Developers recently.
Property developer Stockland says earnings will fall by at least 10 per cent in the 2012/13 financial year because of the severely weakened housing market. Stockland’s net profit of $487 million for 2011/12 was down 35.5 per cent from the previous year.
Stockland’s residential business began the 2012/13 year with 700 fewer contracts on hand than 12 months earlier, and with no improvement in deposits in the first quarter property settlement volumes will be lower than the previous year, Mr Quinn said.
http://au.news.yahoo.com/thewest/business/a/-/national/15140361/stockland-falls-on-profit-warning/
Food for thought.