“There is a shortage of housing in Australia” – Wayne Swan

Treasurer Wayne Swan has told the ABC he doesn’t agree with the IMF report indicating Australia’s house prices are overvalued by 10 to 15 percent.

“I don’t share its assessment in terms of housing. There is a shortage of housing in Australia. A structural shortage of housing,” he said.

Despite the comments from the Treasurer, data from SQM research released last week showed there are now 362,793 houses listed for sale Australia wide, representing an increase of 24.3 percent when compared to the same period last year.

Melbourne has the biggest change, with 65.3 percent more listings compared to a year ago. SQM Research’s Louis Christopher says ”It represents what I now regard as a massive oversupply situation for the city and I believe it will translate to further house price falls from here,”

With the number of homes for sale increasing, we are starting to see home grown videos surface on the internet eerily similar to 60 minutes footage of the United State’s housing crash.

While the source and location is unverified on this one, it’s believed to be Yamanto in Queensland.

» Swan welcomes ‘enviable’ IMF report – 8th October 2011.
» Australian Homes for Sale Jump 5.6% in September, SQM Says – 6th October 2011.
» Rich pickings for the canny as city prices soften – 8th October 2011.




40 Comments

  1. Just because there’s lots for sale doesn’t make them affordable. When they’re still 8x the median income, they’re likely to remain unsold.

  2. I think it’s because behind closed doors Labor is crapping bricks because they know they will get absolutely smashed next election.

    So they idea of doing the right thing for country compared to potentially losing 1.7 million Negative Gearing Specufestor votes shows Labor’s spineless attitude towards government.

  3. Arrrggghhh – the mortgage belt has expanded to the wastelands of Ipswich. Looks like good value, close to transport, schools, shops and employment NOT.

    Hope the eventual owners can afford Air Con in these hot boxes with Waynes Carbon legacy coming into law today.

    Dog boxes for the sheeple, I wonder how the developer is sleeping with nothing selling? Tick tick tick……..Ring Ring “Its the bank again honey, there are coming around today. Have you got their money yet?”

  4. I should film our local industrial sites south of Melboune. Same deal as the video, streets festooned with dozens of signs in front of empty factories, only difference is that they are all ‘For Lease” signs. Strange thing is, all the busineses have gone bust and everyone has lost their jobs but don’t seem to appear in the unemployment data.

  5. Swan must be listening to the REIV. REIV reported the results of 150 auctions (Melbourne) for last weekend with a clearance rate of 55%. There were actually 565 auctions. I bet the missing 415 auctions were not reported because they didn’t sell or no one showed up. That makes the true clearence rate of 15%.
    Next weekend there are 730 auctions listed for Melbourne. Lets see how many are reported by the REIV in the Fairfax papers on the following Monday. (I bet its under 200)
    Only a dickheads from the RBA or Treasury are stupid enough to base economic policy on such figures.

  6. @michael francis, if you do film some video clips and upload them to YouTube, can you let us know? Love to see people doing it here. I’ve seen tonnes on YouTube on California and Detroit, both (empty) residential and (For Lease) Commercial.

    Also just what I have seen (better still) looking at around my vicinity there are crap loads for For Lease, For Sale, For Lease or Sale commercial properties. It has been that way since 2008. Yet Unemployment didn’t budge? Where did all those businesses go? When the Government (not just here, its’ a global measure) considers one hour per week of work (which doesn’t exist) as work, and Commercial Property vacancies are what you can see. It is more than just guessing that unemployment would be hovering around the 14-17% mark.

    Well I am wrong on that too, last week 2GB radio interviewed a Professor twice that has been counting unemployment in Australia, he put unemployment here between 17-22%. He gave much proof and explanation, I mention this because the 4.9-5.3%’ers, never back their claim. No matter whose mouth it comes from.

    I will make a statement that has infuriated even the closest people to me, had me dismissed as stupid many a time. In 2008 the Australian economy went down with the rest of the world and didn’t come out of it. And when the tide of credit and debt issuance recedes, you’ll see what is really on the ocean floor. What is happening now didn’t just come about unexpectedly.

    In 2005, I knew (still know them) a Conmanswealth Bank employee (in the phone call to ask for payment department) telling me how many people were skipping mortgage and credit card payments. It was a concern back then!

  7. Interesting video, and I don’t doubt housing prices will be coming off, as people shy away from debt burdened lifestyles etc.
    What will be interesting, and what I haven’t seen any data/reports on is that in Australia you can’t just hand in the keys and walk away. So basically if you have the money to pay the mortgage you must continue to do so, even if prices come off.
    I think this may make the rate of decline dynamic different to the USA situation, of course this assumes Aust. employment holds up. In effect I see people will be tied to the debt of their houses like an anchor.
    What happens from there difficult to tell.

  8. Wayne ‘Baghdad Bob’ Swan… Housing… “They are not anywhere”

    A shortage of 228,300 according to the national housing supply council.

    So somewhere in Australia 340,000 – 1,000,000 people are sleeping in tents waiting for NEW dwellings to be built.

    Despite building 1 dwelling for every 1.5 person population increase during the 15 years 1990’s to mid 2000’s we have a 228,300 shortage

    It’s OBVIOUSLY OVERCROWDED in Australia with a national 2.65 person occupancy ratio and more than 1 million elderly living ALONE in dwellings with 4 or more bedrooms. Golly, if they pop off in the next few years 1 million empty 4 bedroom dwellings to accomodate 4 million.

    http://www.youtube.com/watch?v=CXl1GkWWGmA

  9. @MrV, the number of states in the U.S. that are truely and fully non-recourse is a small number. See my comment in the previous blog post here;

    http://www.whocrashedtheeconomy.com/blog/?p=1778

    States like California have non-recourse loans *BUT*, the lender does *not* have to give you one. The Lender may offer a non-recourse loan if you have many other assets to your name. Texas has non-recourse loans *BUT*, the lender may pursue a deficiency judgement to your favour when you “hand in the keys”. Many other states have laws set in place so the (mortgage) lender can come after other assets you may have, if you hand in the keys. Arizona has true and full non-recourse loans. Then there are the one action states (see the list).

    The rest and most of the other states have recourse loans. Michigan has harsh recourse laws/penalities for defaults, and it also has Detroit (get the drift?).

    And what about the rest of the World, ie Japan and Ireland have penalities for dis-honouring a mortgage/loan, yet both had significant price drops. Its’ different everywhere MrV.

    The way Australians go on about (mis-understand) U.S. Non-Recourse loans, I get the impression they’d love to have them here given their circumstance.

  10. I think this extreme is more a locational thing, the bubble tends to vary in size depending upon region and location, I’ve been watching here in metro Melbourne in the hope of buying something in the eastern suburbs out about 25~30km from Melbourne, but unfortunately I’ve noted that properties are still selling much to my disappointment.

    I’m even sitting on an untapped loan I had arranged in the event an opp came up, so continue sitting I shall.

    QLD has a lot of housing built in remote useless areas that would be more prone to supply/demand problems, with VIC being so much smaller there is the likely hood that this issue would be somewhat reduced here.

    I can only hope such a situation might spread to here, but I’ve started to accept that it may not after all.

    Also I thought they retired the F-111s from service a while ago?

  11. If there are not enough houses to go around then it follows that it is contrary to the Australian principle of a “fair go” to encourage investors to purchase existing housing stock and give the haves a tax break for their efforts at displacing the have-nots.

    This should be the central attack on any politician, of either persuasion, should they continue to deny the issue.

  12. BotRot

    Will try and get something posted soon. Just got back from Frankston. Drove along Nepean Hwy which runs parallel to the beach and there are For Sale and For Lease signs everywhere. New houses and apartments, old houses and apartments, vacant land, comercial property- a real mix. Signs everywhere. Will try and post footage soon.

  13. 1 in 8 sales in Victoria are because the loan is in arrears

    The Banks are cannibalising dwelling prices with financial forced sales

    Prices are falling

    40% of all new lending is refinancing

    Lowering interest rates will accelerate deleveraging

    This is collapsing

    WAIT 5 – 7 years

  14. Botrot, I agree about non-recourse loans.

    AFAIK the USA has non-recourse loans in only 11 states. 11! But it’s myth that it’s across the continent.

    More ignorance on behalf of the Australian property investor.

  15. Help.

    The wife has just seen the perfect plot of land to buy for us to build on and we simply “must buy it”….after all, she’s learnt that prices in Perth are “going to go up by 20%” in the next 3 years.

    Life was easier when I was a secret agent I tell you.

  16. Yamanto is considerably further out then say Springfield/Forrest lakes/ Brookwater. None of which are experiencing an over supply. Just wondering if the estate in the footage is the ‘ripening’ stage it’s of development and hasn’t been sitting there for months on end sans any takers? Just a thought. These fringe estates do go up in a hurry. James.

  17. My rough estimate of forced sales from BOQ arrears rate numbers (out today).

    BOQ arrears rate is 1.71%
    Present Sales turnover of total stock is 2.68%

    1.71/2.68 = 64%

    These are forced sales… these are loans in arrears… Bank forced sales are 64% of all QLD sales turnover.

  18. BOQ impaired assets (non performing loans) to shareholder equity, (in only one year) has jumped from 6.9% to 17.6%

    The BOQ (Bank) shareholders are rapidly effectively owning more and more houses with less and less equity as the price of houses falls.

    Kaboom

  19. The total value of dwelling sales over the 2010-11 financial year was down -18.2% from the previous year – the lowest it’s been in at least ten years (according to “the horses mouth” – this weeks RP Data report).

    Imagine the revenue loss for state and local government (stamp duty, council rates, land tax). Is it any wonder politicians are spruikers?

    Here’s a humorous take on “Australia is different”:

    http://www.youtube.com/watch?v=CroTAVVcr9k

  20. I have spoken with People from CBA, ANZ and BOQ. They all confirmed that banks are growing huge property portfolios by buying properties of customers who are defaulting, rather than selling them. Doesn’t this assist in keeping property prices high, and if they are not renting them demand high? According to my contacts the CBA already has a huge property portfolio, and other banks like BOQ are only just starting to build theirs. I would love to hear groom some real analysts on this issue, how far can the banks go? Can they really keep the market inflated forever?

  21. If the banks are holding large numbers of NPL (arrears housing loan assets) on their books at 12 – 15:1 Leverge… Well good luck to them… the banking system is about to collapse if that’s what’s happening!

    The Banks will run out of tier 1 risk capital and will not be able to lend at @ 133,000 – 266,000 dwellings on the books i.e. 1.5 – 3% of all dwellings.

  22. @michael francis, looking forward to it and I hope you can get the time to do it. It has inspired me to consider doing something similar. Yesterday I went for a drive up the Pacific Hwy from North Sydney to around Lindfield, veering off and back on the Hwy where there are Commercial districts. There are tonnes of For Lease, For Sale, For Lease or Sale all over the place. Especially Crows Nest, St. Leonards, and Artarmon. There are many such signs all over this region, those three suburbs have a grand tonnage of them.

    @Matty, I think Australian’s opinion on U.S. Non-Recourse loans is more based on denial than seeing through the myth it is stated to be. Even with the 11 non-recourse states, there are many terms and conditions (like California and Texas has). Arizona is truly non-recourse. Arizona is also the Militia State, heavily armed citizens. I wonder if there is a relationship between Militias-Armed Citizens and some banking practices? If so I have found a political party here I can have a little bit of faith in, The Shooters Party! (Kidding, kidding…).

    @nsw2206, is Kiama where all those MacMansions were built? I went down the far South Coast over a year ago, there seemed to be quite a number of For Sale signs around. I remember someone wanted over $300K for a very small wooden house, land was quite sizable though. Still though it was hugely expensive, think it was around the (Old?) Ewroll Bay area.

  23. Although we were overbuilding for decades and have huge oversupply of homes, it is interesting to see Wayne Swan admitting he is not competent to provide basic need (housing) to his citizens. I guess is better to admit incompetence, than to say

  24. RBA reported risk weight of total banking systems (ADI’s) mortgage loan book Table 2. = 26%

    http://www.rba.gov.au/publications/bulletin/2010/sep/6.html

    The banking systems capital leverage ratio to the entire residential mortgage loan book is roughly 48:1

    This is why the community is bombarded with a torrential quantity of residential price spruiking from the politico housing complex!

    If the politicians, RBA and APRA, actually enforced the BASEL II rules the entire banking system would need far more risk capital for the residential mortgage book.

    Instead the politico housing complex allows the banks gamble and game the household sector with a torrent of spruiking and fantasy modeling…

    RBA… “Some banks, including the four largest, use an alternative Internal Ratings-based approach whereby risk weights are derived from their own estimates of each exposure’s probability of default and loss given default.[4] APRA grants approval to use this approach only after a bank has met strict governance and risk modelling criteria.”

  25. That is an interesting commercial point BotRot

    A 16% Return On Asset over 2 1/2 years should be dragging in the largest companies in Austrailia with 5:1 leverage to borrow at 7,5% and generate 42,5% pretax returns = 29.75% after corporate tax = 11.9% return on equity, NOT INCLUDING RENT.

    That’s getting close to the after tax return on Bank shareholder equity.

    Maybe the banks should be holding as many arrears dwellings on their books as they can, it would certainly make a tone of money for their shareholders according to BIS.

    The banks are listening to the wrong dudes here BIS are the experts, APRA, the RBA, and the Bank of International Settlements BASEL accord are obviously fools when it comes to making money for the bank shareholders!

  26. @RVA – I am an expat living in ireland since 2001. The law here also is the same as Oz however if you go bankrupt then it 12 years before you relinguish that status. There are up to 70,000 homeowners who are now in negetive equity and stuck in apartment all over the country. There are thousands of ghost estates like the video above. Aus hasnt had the massive delevaraging that Ireland is now experiencing but it will happen. The signs are identical to what I experienced in 2006.

  27. Moodys also seems to disagree with BIS. BOQ bank should not invest in lots of houses. Moodys are suggesting to the people who lend their money to BOQ that they should be charging more interest because of the increased risk in the BOQ ‘investment strategy’

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