Buyers remain on strike, the “property industry’s worst nightmare”

Vested interests may be spreading the word of rising house prices as a ploy to encourage buyers into a soft market, but data released from the Reserve Bank of Australia today show potential owner occupiers remain firmly on strike.

Growth in housing finance in the 12 months to July trickles in at just 5.1 per cent, recording no change from last month. At 5.1 per cent, growth remains the lowest since records started 35 years ago.

For owner-occupiers, growth in lending for homes has fallen to 4.8 per cent in July, down from 5.1 per cent in May. This is also the lowest figure since records started 21 years ago.

Investors are the only ones listening to advice from our spruikers, with lending for investment housing increasing to 5.3 per cent – in hope to make a quick buck. Finance for investor housing has exhibited consecutive increases since January’s low of 4.8 per cent.

The Sunday Age’s property reporter, Chris Vedelago, wrote today on what he calls the property industry’s worst nightmare – potential buyers who are sitting on sizeable savings but refuse to take the plunge. Are you a member of this growing army?

You can read his excellent article, Buyers who refuse to buy – here.

But with the potential of sizable falls as Australia’s property market makes its way back to planet earth, it appears any number of incentives including rebates, cars, furniture, holidays and even a $65,000 Mercedes is having little effect on Melbourne’s oversupplied apartment market as developers race each other to the bottom.

For further information on this story, read Chris Vedelago’s article from Sunday, Gifts galore boost flagging unit sales

The Australian Bureau of Statistics will release the quarterly update to official House Price Index tomorrow.

Don’t buy now.

» Financial Aggregates, June 2012 – The Reserve Bank of Australia, 31st July 2012.
» Buyers who refuse to buy – The Sydney Morning Herald, 31st July 2012.
» Gifts galore boost flagging unit sales – The Age, 29th July 2012.




8 Comments

  1. I wouldn’t call them ‘investors’, but rather ‘Greater Fools’.

  2. There is no Financial Services Investment Advice Requirements for Realestate NG so the desire to reduce income tax will come at a very expensive cost of capital, with no recourse to your tax accountant for helping you into this.

    The growth rate of housing credit for the past two months (s.a.) has been 0.3% = 3.66% p.a. That’s intriguing because the RBA has lowered effective mortgage interest rates by roughly 1.25% during the past 6 months and yet it appears credit growth has declined by almost exactly the same amount!

    This is called, ‘pushing on a string’. Money is pulled into the economy via credit demand (the desire to NG etc), but it cannot be pushed into the economy by the RBA and the banks.

    It’s quite possible that credit growth (graph above) will get to zero growth and the outcome will be very painful. The collapse in housing has been a collapse in sales volume mainly, the next phase is a collapse in prices.

  3. ‘the desire to reduce income tax’ …. hmm sums it all up really when you think about it.

  4. The spruikers game is up , and the next phase will see RE agents succumb to reality.
    With so much infomation available to the general public these days there bullshit just won’t work any more.

  5. @Peter_W

    Correct, the massive drop in volume will be followed by drop in prices. All commodity trading has followed this course, human emotions dictate this.

    The falls already seen coupled with volume collapse guarantee that prices will collapse also (unless some external force is applied to the market eg. some stupidly generous FHO grant)

  6. Yes, I am in this army! Very few sensibly priced properties where I’m looking, and I’m in a pleasant and affordable rental for at least 12 months. Not even looking over winter. Savings in a term deposit. Spruikers and touts can harass someone else.

  7. The possibility of an extended period of zero or near zero aggregate housing credit growth in the not too distant future is very real IMHO… the credit graph is frightening if you truely understand what it means. There are a few numbers that can be manipulated to estimate what would come of an extended period of zero or near zero credit growth… The losses are staggering… in the trillions!

    What would I know… there maybe one more ‘rabbit in a hat’ I have not anticipated.

    If I’m right and you’re saving and waiting… History suggests you should wait many more years yet, for a final stabilisation of prices!

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