Real Estate ‘Downfall’

Written by admin on November 27, 2008 – 8:40 pm


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Property price fall worst in 25 years

Written by admin on November 24, 2008 – 8:38 am

THE once booming Perth property market has recorded its third consecutive quarterly fall in the median house price – a phenomenon not seen in 25 years – as talk of a recession eats into consumer confidence.

Real Estate Institute of Western Australia president Rob Druitt said the Perth market was moving into uncharted territory with a combination of falling house prices and dwindling sales

» Property price fall worst in 25 years – The Australian, 24th November 2008.


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ASX losses fall through 50%

Written by admin on November 20, 2008 – 7:50 pm

Today seemed like just another “normal” day on the market. The All Ords fell 150.6 points to close the day down at 3332.6. However the significance of today’s close is that the market is now down 51.4% from its peak of 6853.6 points recorded just a little more than a year go.

The Australian reports today’s close marks the second-biggest bear market in the history of the Australian sharemarket. During the bare market of 1987, shares fell 50.1%. The 1973/74 crash saw falls of 59.3%

With large job losses yet to crystallise, and more loss of confidence and discretionary spending as the housing market tanks, it is hard to even begin to call the bottom.

» Australian stocks in second-worst bear market ever – The Australian, November 20th, 2008.


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End of easy credit over as banks tighten lending standards

Written by admin on November 19, 2008 – 10:22 pm

The New’s reports today that the CBA has banned no-deposit loan, while the ANZ has moved to tighten eligibility requirements.

JP Morgan banking analyst Brian Johnson says “The era of getting very easy credit to buy a house is over”.

John Symonds of Aussie Home Loans said the change signals a return to sensible lending practices. “People buying home in Australia with little or no deposit is flawed process.”

» End of easy credit over as banks tighten lending standards – News Limited, 19th November 2008


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House prices “shouldn’t” crash: RBA chief

Written by admin on November 19, 2008 – 8:26 pm

Australia’s house prices will soften but should not crash because of the world economic crisis, Reserve Bank governor Glenn Stevens says.

Answering a question from the floor at a business dinner in Melbourne, Mr Stevens said the ratio between house prices and household income was historically “very high”, partly because Australia needed to boost its housing stock.

Since as early as 2002 the Reserve Bank of Australia has been warning about the housing bubble, but today it appears the Housing Industry Lobby groups have now recruited Glen Stevens to distribute their spin of a shortage of houses.

This follows comments last month from Ric Battellino, the RBA’s Deputy Governor that Australia’s housing market has already crashed, and that we are leading the US & UK. Battellino’s comments came just days before the ABS released stats showing the biggest housing fall in 30 years suggesting we are actually lagging the US and UK as below.

As for the shortage myth, both the UK and US reported a shortage of houses during the boom. During boom times cashed up households buy holiday houses and investment properties. If developers don’t get their asking price, they would rather keep homes and apartments empty because everyone knows houses only go up. Some brand new apartments have been empty for years. However in a downturn and faced with job losses or lack of bonuses these holiday homes go on the market. Developers also bail out at any cost.

Other data from the ABS suggest there is no such thing as a housing shortage, and that the concept is merely in the minds of the Real Estate Lobby groups. The table below show the Average persons per household and that each year we build more homes to accommodate the population growth given that today the average household consists of 2.5 people.


Shortage of houses? : Lines of new houses for sale in Newbury Estate, NSW.


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It’s never a better time to buy

Written by admin on November 17, 2008 – 8:43 pm

With falling Interest rates and the increased first home buyers grants, many real estate experts are saying it is never a better time to buy. Actually, when you come to think of it – when isn’t it the right time to buy? My stock broker will give buy and SELL recommendations for stocks, suggesting some are overvalued. Yet, when was the last time a real estate agent said housing was overvalued, we are at the top of the bubble and that perhaps it’s not a great time to buy?

None the less, Interest rates are falling and at a scary pace. Predictions are for a further 100 basis point cut come next month.

But while Interest rates are cheap, we have accumulated a lot more debt that previous generations. Houses are at ridiculous price to income multiples. The size of the debt really shows when you look at data from the RBA on Interest Payments vs Household Disposable Income.

When the boomers had 17% interest rates that they will never let anyone forget, house prices and debt was reasonable. As a result, the average Australian household put away a little more than 5% of household disposable income to service the mortgage. Even with rates today a faction of what it was in 1989, we have so much more debt and as a result the average household has to put away 11.4% of household disposable income to service the mortgage.

So is it really a great time to buy? If house prices do begin to correct back to normal levels, then all you do is lock that excessive debt in so you can spend the rest of your life paying for it.


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Sydney: Massive job losses loom, taskforce says

Written by admin on November 16, 2008 – 6:39 pm

SYDNEY could lose 87,000 jobs if a massive drop in building approvals recorded in the September quarter was sustained over a full year, developer lobby group Urban Taskforce said.

Chief executive Aaron Gadiel said an analysis of the figures showed the impact on jobs would be “startling”.

» Massive job losses loom, taskforce says – The Sydney Morning Herald, 16th November 2008


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Brisbane: More projects dumped with more jobs in limbo

Written by admin on November 15, 2008 – 6:58 pm

The Gold Coast Bulletin reports the sale of high rise units have slowed significantly with many owners pulling out of contracts prior to settlement. Since May there has only been one high rise building released.

Like other states, many new developments are being put on hold putting many jobs at risk. The 201 unit Reve on River Terrace and the 232 unit Paradise Resort Tower One projects have been halted and the sites made available for sale.

This adds to uncertainly over the Southport Central Tower 3 and the new Hilton Hotel being developed by the Raptis Group after they were placed in Administration two months ago.

» From outhouse to the penthouse – The Gold Coast Bulletin, 15th November 2008.


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Melbourne: Tens of thousand Construction jobs in limbo

Written by admin on November 13, 2008 – 7:51 pm

The Australian reported today :

THOUSANDS of Melbourne construction jobs are on the line, with major building projects in and around the CBD under severe threat.

Unions are bracing themselves for steep job losses, estimated by some to be as high as 10,000, as major commercial project and high-rise apartment projects are abandoned or delayed because developers are unable to obtain construction finance in the global credit crunch.

Just some of the Melbourne projects under threat are :

$700 million Bourke Junction development in the Docklands (Cbus)

$850 million Docklands office park at 735 Collins Street (Walker Corp & Kuok Group)

$1 billion Wholesale Fruit and Vegetable Market at Epping (Mirvac)

$800 million Cub site project at Swanston Street (Grocon)

$400 million St Kilda triangle (Citta Property Group/Babcock & Brown)

» Construction jobs are at risk – The Australian, 13th November 2008.


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China facing rapid economic slowdown

Written by admin on November 13, 2008 – 7:37 pm

China has received more evidence that its economic growth is slowing drastically.

The growth in China’s industrial output slowed to 8.2 per cent in October, compared to 11.4 per cent a month earlier.

» China facing rapid economic slowdown – Yahoo 7 Finance, 13th November 2008.


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NSW Government to join Federal in encouraging young first home owners to take on large debts.

Written by admin on November 8, 2008 – 11:05 am

On the 14th of last month we reported that the Australian Government announced increased grants to encourage people to take on more excessive debt. The Federal Government increased the FHOG to $14,000 for first home owner buying established dwellings and to $21,000 for first home owners that were building.

The Federal Government’s excuse for the grants trying to keep the housing bubble afloat and encourage more Australian’s into huge debts at the top of the biggest housing bubble on record was to stimulate the house building market which has already been savaged, but has far worse to come.

Mirvac, the biggest house builder in NSW slashed it’s earnings estimate this week by almost 50% after poor sales of its residential dwellings. This comes after it axed 160 jobs. Dwelling approvals in NSW fell 26.2% in September to a 43 year low.

We believe if the Federal government genuinely wants to simulate building, then the grants should have only gone to first home buyers building new dwellings.

With plunging house sales and dwindling prices in NSW, the NSW Government today announced it will throw in another $3,000 to first home owners building new dwellings under $750,000, effective next Tuesday. While this is better than the Federal Government’s increased grants across the board, it’s hard to see what $3,000 will do in a market with falling prices. Quite possibly that $3,000 will evaporate in less than a month.

But is the governments really concerned so much about construction workers? Why not prop up the ailing automotive or retails sectors as well? Why is there such a vested interest in Housing?

The answer may be in the NSW’s mini budget. NSW had a projected surplus in the June budget of $268 million. However in the mini budget to be reviled on Tuesday, it will show a deficit of between $900 million and $1 billion. This will be the first deficit since 1997 and the biggest since 1992.

So how can this position change so fast? NSW Treasurer Eric Roozendaal said “The impact (of the global economic slowdown) on us is huge, in terms of a reduction in revenue from duties generated by land transfers”. It’s been reported stamp duty receipts were down by $270 million alone in the first three months of this financial year.

Looks like NSW Government income is as safe as houses.

» $24,000 for first home buyers – The Sydney Morning Herald, 8th November 2008.
» Mirvac halves its earnings estimate – The Age, 6th November 2008.


Posted in Australian economy, Australian Housing | 1 Comment »

SA Treasurer Foley ‘terrified’ by financial crisis

Written by admin on November 8, 2008 – 9:54 am

TREASURER Kevin Foley is cutting short his overseas fact-finding mission on the global financial crisis as he warns South Australians to prepare for “heartache”.

Speaking to The Advertiser after arriving in London from the U.S. yesterday, Mr Foley says he is “terrified” after five days of meetings with banks, fund managers, rating agencies and financial analysts.

South Australians do not yet “anywhere near appreciate what is going on” regarding the full extent of a “terrifying financial meltdown“, he said.

» Treasurer Foley ‘terrified’ by financial crisis – The Advertiser, 8th November 2008.


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Allco’s collapse may bring down house of cards

Written by admin on November 8, 2008 – 9:52 am

THE collapse of Allco Finance Group into receivership is in danger of creating a domino effect among its listed real estate and investment offshoots, after a flurry of statements yesterday warned of likely defaults on their debt repayment deals.

Allco’s demise has already taken with it the group’s subsidiary which owns the management company that runs its Rubicon property trusts – Rubicon America, Rubicon Europe and Rubicon Japan.

» Allco’s collapse may bring down house of cards – The Sydney Morning Herald, 8th November 2008.


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ABC Learning in Administration

Written by admin on November 7, 2008 – 8:32 pm



ABC Learning : Safe as houses.

After delaying the release of its annual results for the third time, ABC learning centers was yesterday placed in the hands of voluntary administrator, Ferrier Hodgson. The company has 1,200 child care centers in Australia and New Zealand, and another 1000 in the United States.

ABC has loans from the CBA for in excess of $240 million. ANZ is believed to have an exposure of $182 million, while Westpac’s exposure is closer to $200 million. NAB has indicated its exposure is $140 million. Jointly the banking syndicate have appointed McGrathNicol as receivers.

Meanwhile, the Government has committed $22 million dollars to keep the centers operating until the end of the year. This will keep ABC Learning’s 16,000 staff in jobs and the 100,000 children across Australia in Child Care as a potential sale is sought.

» ABC child care goes under – The Sydney Morning Herald, 6th November 2008.


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Mirvac halves its earnings estimate

Written by admin on November 6, 2008 – 9:37 pm


Empty homes built by Mirvac litter Newbury Estate

Mirvac, NSW’s largest home builder has dramatically revised its earnings estimates down almost 50% as confidence continues to slide in the new home market.

Managing director Nicholas Collishaw told investors the revision reflected “a conservative assessment of forecast residential settlements and sales based on current market conditions, which are being impacted by negative consumer sentiment and low home ownership affordability”.

The latest government figures show dwelling approval in NSW, where Mirvac dominates, fell 26.2% in September to 1594 approvals — a 43-year low.

» Mirvac halves its earnings estimate – The Age, 6th November 2008


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Pressure on banks to become landlords

Written by admin on November 6, 2008 – 7:48 pm

The Federal Government is calling on the major banks to have a good look at their hardship provisions as more Australians default on their mortgages.

One option under serious consideration in Australia, the United Kingdom and the United States is for banks to become landlords.

With the global financial crisis shifting all the goal posts, the pressure is on financial institutions to stop foreclosing and start looking at potential home defaulters as tenants.

» Pressure on banks to become landlords – The ABC, 6th November 2008.


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Chinese Factories Closing by the Tens of Thousands

Written by admin on November 4, 2008 – 9:52 pm

First, Tao Shoulong burned his company’s financial books. He then sold his private golf club memberships and disposed of his Mercedes S-600 sedan.

And then he was gone.

And just like that, China’s biggest textile dye operation — with four factories, a campus the size of 31 football fields, 4,000 workers and debts of at least $200 million — was history.

» Chinese Factories Closing by the Tens of Thousands – Los Angeles Times, 3rd November 2008.


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RBA slashes cash rate by 75 basis points

Written by admin on November 4, 2008 – 8:23 pm

In a sign that the state of the economy is far worse than initially expected, the RBA has once again surprised the market with a 75 basis point cut to official interest rates. Market consensus today was for a cut of only 50 basis points.

This follows the RBA’s surprise 100 basis cut last month. The official cash rate from tomorrow is now 5.25%.

Full marks to Steve Keen who earlier predicted the 0.75% cut. Steve Keen’s view is official cash rates will fall to 2% by the end of 2009 and to 0% in 2010.

Following Japan’s Housing Asset Bubble which peaked in 1990, the Bank of Japan cut rates to zero percent. While this sounds like great news, at the time it was still not enough to stimulate the economy as banks were too afraid to lend and just as many consumers were too afraid to borrow.

Futures Markets suggest the cash rate would fall to 3.5% within a year.

The Aussie is trading at $0.6651 at 5pm AEDT, down 2.5% from yesterday’s close and is likely to be further sold down overnight.

» Monetary Policy – RBA Media Release – 4th November 2008
» Australia slashes cash rate to 5.25% – Market Watch, 4th November 2008.
» UWS professor tips Reserve will cut rates to 5.25pc – The Australian, 4th November 2008.
» Australian dollar falls after big rate cut – AAP, 4th November 2008.


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Australian house prices fall 1.8% : ABS

Written by admin on November 3, 2008 – 10:07 am



The Official House Price Index released by the Australian Bureau of Statistics today show Australian house prices have fallen 1.8% for the September quarter 2008.

The biggest fall was experienced in the Brisbane, with prices heading south by 3.3%. Canberra was just behind at -2.5%, followed by Melbourne -1.9, Sydney -1.8, Perth -1.1 and Adelaide -0.1.

Hobart and Darwin both recorded rises, 0.7% and 0.1% respectively.

» 6416.0 – House Price Indexes: Eight Capital Cities, Sep 2008 – The ABS, 11:30am 3rd November 2008.


Posted in ABS House Price Indices, Australian Housing | 2 Comments »