House price data for the UK market compiled by Nationwide shows in the 12 months to February, shows house prices fell 17.6%. This, the 16th consecutive contraction is now the biggest fall since Nationwide started to collect data in 1952.

Meanwhile Standard and Poor’s have released the latest update to the S&P/Case-Shiller 20 city composite index which shows in the 12 months to December, house prices in the US fell a record 18.5%. From the peak of the US housing bubble in quarter 2 ‘06, US house prices are now down 26.7%.

» British house prices in record fall - AAP, 26th February 2009.
» U.S. housing market bottom may be a year away: Case - Reuters, 26th February 2009.

In what could be interesting legal precedent, the Sydney Morning Herald today has reports of two “property speculators” who has been given permission from a Supreme Court Judge to walk away from a contract and recover the deposit to purchase a terrace off the plan for $1.07 million.

The decision comes on the grounds that the Real Estate agent and promotional material made some predictions with no reasonable grounds that they would in fact come true.

The agency’s advertisements promised that Green Square, a planned business centre next to Victoria Park, would become the “next city centre in Sydney”; they forecast a seminar which would advise how to buy “the hottest investment location in Sydney” and they promised a “one-year 5 per cent rental guarantee”.

“According to Mr Zhang, he and Ms Liu were reluctantly persuaded to buy the Victoria Park terrace by being assured that the property market was continually rising; that the market doubled in value every seven years; and that in two years the terrace would definitely have increased in value,” Justice White said.

Such claims are common hype in the RE industry and with the market now falling this could open the flood gates for buyers to walk away from contracts. The Real Estate Institute of NSW spokesperson, Julian Brophy said the Institute was reviewing the judgment and the implications it held.

» Judge tears up $1m property contract - The Sydney Morning Herald, 24th February 2009.

As U.K. Prime Minister Gordon Brown calls for the return of traditional banking methods in Britain and the abolishing of 100% mortgages, Australian banks are scrambling to prevent Kevin Rudd’s First Home Owners Boost turning into a subprime frenzy.

Today, the Commonwealth Bank of Australia announced the tightening of borrowing rules directed towards the surge of first home buyers in a frenzy to grab the government grant before it expires. The CBA will no require home buyers to have a 3 per cent deposit excluding any government grants.

The Australian reports :

The move is in response to growing industry concerns about the quality of loans to the fast-growing, first-home buyer market and is in anticipation of interest-rate hikes in coming years, due to the expected inflationary impact of the large, recent increase in household income.

This follows moves from the NAB in January cutting its maximum Loan to Value Ratio (LVR) to 95% and ANZ in November cutting its LVR to 90%.

With the prospects of new owners having negative equity in years to come, this goes a small way to bring back responsible lending, although we are still a long way from the days of once requiring a 20% deposit.

» Brown moves to end 100 per cent home loans - The Independent, February 23rd 2009.
» CBA tightens mortgages amid new deposit rules - The Australian, February 23rd 2009.

New data from the Real Estate Institute of WA posts a worst picture of Perth’s housing market than originally thought. On the 14th of January the Institute reported preliminary data showing the Perth medium house price closed the year at $418,000, down 11.44% from $472,000 the year prior.

It now appears the final December 2008 price is $412,500, making a 12 month decline of almost $60,000 or 12.61%. Falls accelerated in the December quarter, with the three months attributing 5.12% to the yearly decline.

The West Australian reports that REIWA president Rob Druitt said Perth had not seen four consecutive quarterly falls since 1982.

» Property slump worst since ‘82 - The West Australian, 21st February 2009.

Mr Stevens told the House of Representative Standing Committee on Economics today that “there is considerable pent-up demand” for housing in Australia. If you didn’t know who Glenn Stevens was, you would mistakenly think he is yet another Real Estate agent spruiking their bread and butter market.

But Mr Stevens is not a Real Estate agent, but rather Australia’s Chief Banker.

In this address, he stated “Consumers have pulled back discretionary spending sharply, are more inclined to save and are looking to repay debt”. This would come at no surprise given the size of household debt and the lack of household savings.

He focused on China, and made no reference to our largest trading partner, Japan who has just fallen into depression with annual GDP down 12.7%. “There are some tentative indications of a turn for the better in China, in some of the most recent data, although it is too soon to know yet whether that will continue.” He believes Australia will continue from China’s emergence and “there is no reason for any downturn to be a deep one”. Perhaps all we need to do is find a way that global citizens can continue to spend more than the earn, so China can continue to produce goods to service that unsustainable demand.

Overall his assessment was upbeat, maybe too upbeat suggesting a new boom aka expansion. “So there are reasonable grounds at this stage, I think, to believe that the Australian economy will come through this difficult episode not unscathed but well placed to benefit from a renewed expansion.”

» Opening Statement to House of Representatives Standing Committee on Economics - The RBA, 20th February 2009.
» Hansard Transcript - Commonwealth of Australia, House of Representatives, 20th February 2009.

Japan has sunk into Depression with annual GDP falling 12.7% from December 2007 to December 2008. This is Japan’s worse result in 35 years and has prompted economists to fear the worse for Australia’s chances of staying out of recession.

“That in turn, I think, will make it very difficult for Australia to avoid a recession”, said AMP Capital’s chief economist Shane Oliver.

» Japan plunges into depression - The Age, 17th February 2009.
» Australian economy to sink with Japan: economist - The ABC, 17th February 2009.

The First Home Owners Boost and a rapid fall in interest rates have spurred on First Home Buyers. The official cash rate has more than halved in 6 short months from 7.25% in August 2008 to 3.25% in February 2009 as the RBA struggles to keep Australia from plunging into debt fueled recession. Data released by the ABS show housing loan approvals for December is up 6.4% with the highest portion of First Home Buyers since 2001 contributing to this result. 25.4% of loans were taken out by First Home Owners, up from 23.6% the month previous. While the results do look positive, annual results show quite a slide. The number of loans is down 18.1 per cent for the year and the value of loans is down 11.4%. The rapid fall in cash rates have also fueled Real Estate spruikers into trying to encourage first home buyers into a life of excessively high debt. They now argue that mortgage repayments are almost as cheap as rent. While this is still a little stretch but none the less getting close, they have not factored in the effects of falling house prices. Between December 2007 and October 2008, the Perth medium house price fell 10% or $46,000 from $472,000 to $426,000. At falls of $4,600 a month that’s a lot of “free” rent money. Likewise between July 2008 and January 2009, the Melbourne medium house price fell 5% or $22,500 from $450,000 to $427,500. This works out to be falls of $3,750 a month. This could just prove to be a beginning of a suckers housing rally. Time will tell what effect unemployment will have on the huge debt levels required today to purchase basic housing.

» 5609.0 - Housing Finance, Australia, Dec 2008 - The Australian Bureau of Statistics, 11th February 2009.
» Rate cuts boost home loan approvals - The Age, 11th February 2009.
» Housing lending shows policy impact - The Australian, 11th February 2009.

With the number of house sales falling of a clift, have you ever wondered what a Real Estate agent/professional does to fill in spare time before they receive their redundancy offers?

Yesterday quality newspaper, the Australian runs an article “Mum ready to go shopping for second home”

The article reports :

THE memory of her mortgage rate rocketing above 9 per cent last year is not enough to scare Kirsten Friedli away from the property game.

Following the Reserve Bank’s decision yesterday to drop the cash rate 100 basis points to a 45-year-low of 3.25 per cent, Ms Friedli is ready to go shopping for her second home.

With $220,000 left to pay off a $350,000 home loan, Ms Friedli, 35, and her partner Matthew, 40, plan to take on another mortgage to buy an investment property.

Cool, so this Mum from Port Kembla thinks it is never a better time to buy property. But hang on, doesn’t Real Estate Agents think it is never a better time to buy? Umm.

What does a google search yield us? Umm, she has a facebook profile.

Looks like Kirsten is from Wollongong - that’s next to Port Kembla. Hey, she works for Dougmal Real Estate as Marketing Manager. She even features predominately in Owning a Dougmal Franchise.

But surely the industry isn’t riddled with this misleading “advertising” dressed up as good news articles? Surely it’s just a once off?

Today, The Sydney Morning Herald’s Alex McDonald writes an article “Homebuyers hit the streets after interest rate cut”

It reads :

RANDWICK was the perfect place to take a punt on the housing market, said Albert Talarico. After buying a new family home there, Mr Talarico was now on the lookout for a second Randwick property as an investment.

He believed the housing market was close to bottoming out. “I don’t think it’s got much more to go down,” he said. “There’s a bit of oversupply in certain areas, but Randwick is one of those areas where, if you can get into the market, now is the time [to buy].”

Hey, we have another chap who has just brought a house and is now looking for an Investment. Again it’s never a better time to buy, and the article never has a whiff that home buyer and investor to be, Mr Talarico could be an Real Estate Agent.

Yet, our friend - Google shows Albert Talarico is an agent with Lisa Steele Real Estate in Double Bay having over 11 years industry experience.

What is just as worrying as the misleading articles, is what will happen when Real Estate agents stop buying houses? It appears they are the only ones keeping the market afloat.

The next time you read an article in the paper about someone buying a house or investment property, be sure to run the new owner through Goggle to see if they are an agent. There is extremely good chances they are.

The ABS released its official House Price Index today for the December 2008 quarter. The Weighted average of eight capital cities fell 0.8% for the quarter, taking the yearly fall to 3.3%.

On the positive, the figures were better than expected. Most economists surveyed expected a 1% fall.

The fall has also slowed for the last quarter suggesting Kevin Rudd’s economic stimulus package providing more generous grants is having an effect. However, unless Rudd can continue to offer them indefinitely, it will appear as just a blip in a falling market.

» 6416.0 - House Price Indexes: Eight Capital Cities, Dec 2008 - ABS, 2nd February 2009.
» House prices fall for third consecutive quarter: ABS - The Australian, 2nd February 2009.