The hopes of a real estate recovery took a blow today with figures released by the Housing Industry Association (HIA) showing the number of new home sales fell 5.6 per cent in July 2012, following three consecutive rises from April through to June.
ABS Census data released in the first week of July showed Australia had a substantial oversupply of 341,000 homes after incorrect assumptions were made that the composition of households would continue to follow normal trend after the GFC. Prior to July 2012, it was assumed Australia suffered from an acute shortage of 228,000 homes.
Both the sales of new and used homes are suffering from a significant land bubble in Australia as further explained in Macro Business today.
» New Home Sales off to a weak start in 12/13 – Housing Industry Association, 28th August 2012.
Thanks for the link to the HIA media release. The chart in that release is an absolute shocker and tells you everything you need to know about where house prices are headed for the foreseeable future. The chart shows that in the last 3 years around 300,000 more new dwellings have been built than have been sold. Three is clearly a growing inventory overhang and until that starts to reverse I can’t see how prices can pick up. (note – when interpreting the chart, the authors have used different scales for sales and approvals)
Construction costs will start to fall even more as tradies get laid off from mine sites and return to the cities bidding for what work is available with lower prices.
Give it 2 years, offer cash at $20 per hour and you’ll have a line of tradies bashing down your front door to get the job.
Perth is still looing for “rock bottom” . . .
HOUSE sales in WA plummeted 14.4 per cent in July, despite previous claims that the state’s housing market had hit rock bottom. http://www.perthnow.com.au/news/wa-house-sales-worst-in-australia/story-e6frg12c-1226459868708
Agree Michael Francis, yet people still believe build costs cannot fall! Tradies with the volume builders have seen their work slashed by more than 50% (non-core gangs are lucky to get 2 days a week). It’ll be interesting to see how this plays out if it is sustained, not to mention the impact on materials as demand continues to drop. A number of painters I know are struggling to get payments out of the majors and the only decent work they’re seeing is the odd reno job. Paint suppliers like a friend of mine are naturally nervous.
Then again the Somersofters are getting all excited again at the WA market and the decline in listings. A little presumptuous you’d think considering prices are going nowhere, miners are upping stumps and the iron ore price chart in a steep vertical decline.
One of the greatest myths of the last 20 years, that building costs cannot fall. What a laugh.
As someone with a family business in that game I can tell you that costs can and WILL fall. Hell, for years people I know have been quoting on jobs they didn’t want at prices they were sure to loose the job on. But they very rarely lost a job! Imagine your business running at maximum profit, year after year after year……
No wonder most tradies have 2 4wds, a boat, a holiday house, a trophy wife, big LCD’s, $30k bbq’s etc. etc.
And they wanna sook that they have no work and can’t survive and the government MUST step in? Puu Leeeze! What about the poor souls in retail who have had the worst last 3 years of their lives.
They’re now spruiking it’s cheaper to buy than rent…..But people have caught on to the falling prices…and might wait to see if they fall more before jumping in. Self fulling collapse is here.
Wonder how the negative gear’ers are gong getting their tax returns back this year?
Add the fall in Mining which is the largest percent of GDP then its going to get even worse.
The comments here tie in quite nicely with the “reality issue” that the general public seem to suffer from in this country.
The story today about the report concerning Australia’s future after its failure to correctly take advantage of mining boom that’s ending.
“Entitled Australia: The Unlucky Country, the report from Variant Perception argues that Australia faces a classic case of Dutch Disease, the erosion of capability that flows from a resources boom and an overvalued exchange rate.”
This report is an interesting read, sensibly pointing out many facts derived from the observations of other countries that have taken the same road and behaved in the same manner.
The thing though, that I find most interesting is the reader comments section of the AGE, I always use this gauge the general intelligence / understanding of the general public – and as usual the public are deluded into believing that this report and any other warnings about the future are just pathetic wining / lies / jealousy by others.
Its amazing…. I don’t think I’ve ever seem people so unwilling to accept reality and possibly, so unprepared.