We have seen the figures, now we are hearing it first hand from the industry. It’s reporting season and Matthew Quinn, managing director of property developer Stocklands has said the property market is the worst in 20 years.
“The market, 20 years ago, was 20 per cent stronger than now. We believe the structural change will be with us for some time to come,” said Mr Quinn.
It appears to be an honest and frank assessment of the market with his mention of structural change.
» Property market ‘worst in 20 years’: Stockland’s Quinn – The Sydney Morning Herald, 8th August 2012.
» Housing market weakest in 20yrs: Stockland – The Australian, 8th August 2012.
Face it Stockland the game is over, has been for quite a while actually! Hopefully you’ve been prudent and saved your profits during the boom times?
I think this Country is in for a huge wake up call, as more companies start to fail and unemployment continues to rise. The simple fact is nobody wants to take on debt when they don’t have job security. It’s going to be tough times ahead for everyone!
Even this statement is poorly reflecting the reality.
Many, many guys in business I have spoken to advise that the economy/business is the worst it’s been in their working/business life, and that’s often over 40 years!
An issue that’s yet to hit the media or politicians is: All these self employed/small business owners that are 50 years+ were preparing to retire, they are often wary of the stock market and/or other investments, rather investing in their own businesses, but with the economy in a diabolical frozen state, they have no income, no equity in their business, and no buyers for their business….and they have no super. Who will clean this mess up?
And yet, our political “leaders” think it’s appropriate to deliver their “message” in rock star style. True leadership.
I hate the thought, but believe a full scale Ireland like implosion is on track.
Long term interest rates are lower than short term (yield curves flipped), retail, construction, retail car sales, housing volume, etc. are all in major trouble. Stock market valuations are far from highs, profits are steady/falling.
And credit growth is flat.
Mortgage lending is slightly up recently (generally too property investors- lending too owner occupies has fallen off a cliff), house prices slightly up in a low sales environment. Is this due to the announcement of multi-billion dollar infrastructure projects such as new railway lines and new ralway stations 3 months ago by both NSW and Victorian State Governments. Is this bringing out the last of the greater fool property investors who think they can make a quick buck by speculating that properties along these new transport corridors will soon double in value. I reckon this is driving the recent, very minor increases in property Prices and property investment lending.
“Mr Quinn said three things affected a consumer’s decision to buy a house: job security, interest rates and the price of the house.”
Err, partial credit Mr Quinn.
1. Credit availability generally and Debt serviceability specifically
2. Rate of house price appreciation/depreciation (Wealth effect, Property ladder lie)
3. The Politico-Housing complex’s “Big Spruik” (NG, grants and endless jaw-boning)
Each of these comprise many sub-factors.
Plenty of people with insecure employment but able to service a loan bought on expectation of rising prices.
For those who bought its like a chair with wobbly legs where if they sit really tight there is an appearance of stability. It doesn’t take much to knock it over completely. To make matters worse its as though the various interventions have the effect of shortening and lengthening each of the legs under them.
For those considering purchase the anology holds true. The ability to hold steady is contingent on those factors remaining in some form of equilibrium. The more the legs are shortened gives the appearance it is a shaky thing to sit on.
With an expectation of tighter credit conditions, falling prices and a large shift in public perceptions I’ll happily ride it out on the sidelines a while longer.
1.44% new dwelling construction rate (130,000 / 9,000.000 = 1.44%) at a price of 2.93 X GDP = 4.22% of GDP p.a. dwelling construction rate
Dwelling credit growth is 0.3 – 0.4% per month on 86% of dwelling debt/GDP = 3.14 – 4.2% GDP p.a. dwelling credit growth
Construction margins are presently 0 – 2%
There have been hunderds of construction companies go insolvent or bankrupt this year
Insufficient credit creation to purchase all the current dwelling construction and ZERO additional net credit to fuel equity expansion in pre-existing dwellings.
It’s game over!
Just another indstry using media to lobby for Government assistance. They look at the car industry subidies and say “hey wheres our subsidies”. The scary part is, they will probably get them, because the property market affect almost everyone, including the banking system and government revenue.