Australian Finance Group released its December mortgage sales numbers yesterday and the reading was sobering for the housing recovery. The AFG focused on the annual aggregate growth in mortgage issuance for the year, which looked good:
The volume of mortgages arranged increased by 15% in 2012 over 2011 according to AFG, Australia’s largest mortgage broker. AFG’s Mortgage Index, published today, shows that the total volume of mortgages arranged by the aggregator was $32 billion, compared to $28 billion the year before. AFG has approximately 10% the total national mortgage market (Source: ABS and AFG data). AFG’s 15% increase may be in part due to improved market share as well as overall market growth.
Fair enough, but the December numbers were much less flattering. They tumbled from November issuance (which is a seasonal phenomenon of course and we will return with Nathan Webb’s seasonal adjustments in due course) but for the year on year calculus, the number of mortgages originated for December grew 6%, which is likely partly attributable to market share gains.
As a comparison, the ABS housing finance series, which captures the entire market, showed 4% growth in the total number of mortgages (excluding refinancings) issued in the 11 months to November 2012 versus the previous corresponding period.
Moreover, AFG itself was unreserved in assessing the internals, which were dire for first home buyers and therefore the property ladder:
Figures for December show that the mortgage market is becoming a tale of two seaboards with investors dominating the NSW and QLD markets. Home loans for investors comprised 46.3% and 35.9% of all home loans arranged in the two states respectively. The reason for this was that the average long term share of home loans arranged for First Home Buyers, usually between 12% – 15%, collapsed to just 4.2% in NSW and 4.5% in QLD during the last two months of 2012, after first home buyers grants were withdrawn in both states (except for new housing).
Meantime in WA, First Home Buyers comprised 23.2% of all new home loans in December, while investors took up 30.5% of mortgages. Strong migration, escalating rents, improving property values and low interest rates are encouraging many onto the WA property ladder.
Mark Hewitt, General Manager of Sales and Operations says:
‘As we enter a new year, the mortgage market is in need of two dynamics: more competition and greater consumer confidence. It is still the case that just four institutions account for nearly nine out of every ten mortgages arranged in Australia. That level of concentration doesn’t serve consumers well. It’s also pretty well established that despite strong employment levels, low interest rates and greater savings, many people simply don’t feel sufficiently confident in our economy to buy their first home, upgrade or invest. This is particularly the case for first time buyers of established housing and more needs to be done to encourage younger people into buying their first home.
As UE pointed out yesterday, these are twenty year lows for FHBs. No doubt numbers will rebound from here given the draw forward and give back effect of the grants but how quickly and how much will be fascinating to watch. The grants had been in operation for almost a generation and they have never been removed so completely before (sensibly shifted to new homes). The rebuild may be more slow that in the past.
What is clear is that the eastern seaboard housing markets remain sick: distorted by grants, unpopular with the young and dominated by older investors. There’s nobody on the bottom rung of the ladder anywhere but Perth, making price gains everywhere else intrinsically difficult.
mortgageindex-january-2013-national.pdf by
It’s great to see that the first home buyers strike is going very very strong! And the spruikers said that it would amount to nothing. They probably can’t even see the connection now. Good stuff!
Hmmm…maybe…there does appear to be a new-found skepticism of pricing at large, confirmed anecdotally.
But this slump is clearly the result of the FHB policy reversal. It is interesting to ask, given the former FHB policy clearly boosted prices, whether its removal will result in price falls.
I think the FHBs strike was just part of the general mind-shift but a key part. You did write the “Beware a “buyer’s stike” in property” article and I do think it has played a big part in this. FHBs are being priced out but the strike put it in their heads that they were not alone in their anguish and to hold strong.
Should have added – I’m one of them that it affected and I’m remaining on strike indefinitely! It drew me here after all.
I’m the same reusachtige. I reckon that DBN has saved me many tens of thousands over the last two years.
Yep, Don’t Buy Now! will go down in history and has, no doubt, saved quite a few people from making the biggest mistake of their lives.
Same.
In fact, I think we should start to add to it.
How about a ‘BSN’ campaign
“Better Sell Now’
Anytime soon, the realisation that Growth is not coming back to the world’s economy, and the effect of that fact on dear little ol’ Straya and its quaint little housing market, will hit home.
Try this for size:
Why Is the Economy Shrinking? – Richard Heinberg
Err,
http://www.dailymail.co.uk/sciencetech/article-2259012/Global-warming-Met-Office-releases-revised-global-temperature-predictions-showing-planet-NOT-rapidly-heating-up.html
“..the realisation that Growth is not coming back to the world’s economy..”
Not unless new sources for debt slaves can be found. It’s the most basic fundamental of how the Ponzi scheme of all-money-is-debt-at-usury works .. the financial “system” as a whole must continue to find new sources to lend to, in growing (hence, “GDP” “growth”) volumes. Failure to do so equals deflation/implosion/Ponzi-scheme collapse.
Problem is, the Ponzi-schemers are not removed when the collapses occur. So, by permitting the money-as-debt-at-usury system to remain in place, our world continues on through so-called “cycles”. Of “growth”, and “recession” or “Depression”.
Bad for the environment. Bad for the vast majority of people living in the environment.
Errr, GSM, try
Global warming NOT stalling despite ignorant claims
Opinion8red, yes, that and energy constraints, and environmental constraints. A trifecta of nasties.
There is no home buyers strike, that’s the greatest load of twaddle that I have read in a week.
The slowing in FTB market entrants is completely due to a complete and utter failure of state governments to grasp reality. Their changes to the FHOG to favour construction amongst FTB’s was always doomed to failure. This is the most vunerable group on the ladder and tempting them into construction is an act of moral betrayal by government – it was ludricous in the extreme.
The policy might lead to a very short term period of greater affordability, but that must then be followed by a prolonged period of even worse affordability and a greater share of the housing market being GIVEN to investors. Please note that AFG wrote 12.5% more business in 2012 than they did in 2011, so transaction haven’t slowed.
If state governments were being either run as a business or a charity they have failed miserably to respond to the needs of their people – it’s a disgrace.
let’s be clear on this – the FHOG and any stamp duty concessions are not free money for the home buyer – nowadays it is at best a discount on the highway robbery committed under legislation.
If you were drawing up a plan to bring better supply to the market with the intention of reducing prices – then this is how NOT to do it.
Why you cheer is quite beyond logic.
Well you can call it whatever you like old coq – but it would seem they arent buying (after 175bp in rate cuts over the last 18 months) and wouldnt appear likely to resume doing so at any time soon.
I take PF’s rant here as a sign that real estate agents are now turning on construction guys.
Pass that popcorn!
No it’s just that I would like to see reasonable affordability for people in the future – I should apologise, clearly my wants and ambitions conflict with the wants and ambitions of the others here – apparently.
No ‘market’ in Australia is likely to provide long term cheaper housing for anyone…
The only way the ‘market’ can provide the cheaper housing is if all the distortions FHOGs, land banking, stamp duty, pushing on monetary policy string (rates) etc is removed.
The only way the ‘market’ would provide cheaper housing through removing of the above is by a suden jolt downwards (lets call it a collapse).
The government will support the ‘market’ such as it is from collapsing because if it collapses Australias financial system goes with it, and the government stands behind that.
That means if you are seriously interested in Australia having cheaper housing over the longer term without having a market collapse, then it would be highly likely to involve the governments of Australia going back to the era of building the housing themselves.
The ‘market’ will not do this as the ‘market’ as we know it in Australia is about maximising the returns for those already in the ‘market’ – which is why those outside the ‘market’ find it a very very straightforward exercise to determine that the ‘market’ is bullshit.
Which presumably means that sometime over the coming years there will be a lot more discussion of ‘markets’ and the outcomes they lead to for ordinary individuals – providing a lot more opportunity for the bots, sock puppets and members of what some poster memorably called the ‘far right luvvy moron club’ to huff in righteous indignation about the inviolate preeminence of their ‘market’.
Again, you are wrong, as usual. There is a buyers strike, totally.
Based on anecdotal evidence from my children and their mates, yes, there is a buyers’ strike.
PF seems a little peeved this morning, so that could be a sign it’s working.
Hey Peter, we’re looking for a new Office cleaner if your interested!
My partner and I are on strike as well. Keeping an eye on the market, but have been ‘on strike’ for 3 years now. I know of 4 other friends in the same boat. They are just not interested in buying at the moment with the ridiculous prices on offer. They’re all 30 something professionals with good incomes.
Add my wife and I plus two of our friends.
“..but that must then be followed by a prolonged period of even worse affordability”
Please talk us through this part of your analysis Peter.
Supply is everything Pat. If 10 people walked into a Harvey Norman store wanting to buy a TV but they only had one on offer, it would be bought by the highest bidding buyer rather than the lowest offering seller.
Houses are not creatures, they can’t multiply by themselves, each one must be built brick by brick.
I we stop building today in a nation with a growing population, supply must fail to keep pace with demand, and so homes are then sold to the highest bidder whilst the rest miss out or are forced to borrow more to become the highest bidder.
Pretty simple isn’t it.
but given the FHB grant still exists for new homes this should surely torpedo your argument. All they’ve done is remove the grant for existing homes, which don’t contribute to supply.
I find it hard to fathom your argument that more supply will worsen affordability.
Peter, your argument is that people need to buy houses, so houses will always sell, and a house price is always reasonable.
The reality is that people DO have an alternative to buying houses. They can rent, or live with friends, or live with family, or (to a lesser extent) move overseas.
They will do this when house prices are too high to justify a purchase.
Which is what is happening now.
Far fewer people are buying. The reason is that houses are too expensive.
Building new houses will not fix the problem as long as the prices stay too high.
There are structural difficulties when a bank lends to a resource deprived FTB to build a home that don’t apply to an upgrader with solid equity.
They can buy an existing home on a 5% deposit, but building a home with a 5% deposit has many traps for inexperienced and under resourced wannabe home owners – in short they are better off buying an existing home – building is in the too hard basket for them IMHO.
If the objective is to build more homes, the state government would be better off letting FTB’s buy existing homes and then encouraging upgraders to build. Exactly what incentives they offer would be something for governments to work out. Money is the easy and obvious incentive, but there may be other incentives they could look at.
My argument is actually that LESS supply will worsen affordability – my apologies if I have been inarticulate in presenting my thoughts.
Peter – useful reply, and several good points made. my views:
“There are structural difficulties when a bank lends to a resource deprived FTB to build a home that don’t apply to an upgrader with solid equity.
They can buy an existing home on a 5% deposit, but building a home with a 5% deposit has many traps for inexperienced and under resourced wannabe home owners – in short they are better off buying an existing home – building is in the too hard basket for them IMHO.”
Yes – agreed.
“If the objective is to build more homes, the state government would be better off letting FTB’s buy existing homes and then encouraging upgraders to build. Exactly what incentives they offer would be something for governments to work out. Money is the easy and obvious incentive, but there may be other incentives they could look at.”
Rather than more $$ incentives which risk further elevating prices, a better solution could be to reduce land costs (by releasing more land, breaking the developers’ hoarding of land and taxing the holding of empty land).
“My argument is actually that LESS supply will worsen affordability – my apologies if I have been inarticulate in presenting my thoughts.”
Poor affordability is not caused by lack of supply. There is plenty of supply. Just no-one buying (see entire article above).
We need to lower prices. Not build more houses. Not hand out more cash. Just let prices drop to a more raional level (something developers are resisting – again – see entire article above).
“Pretty simple isn’t it”
So simple it’s wrong.
Your “moral betrayal” theory on FHB grant for new dwellings assumes the buyer is building the dwelling. In the vast majority of cases the new dwelling is already built.
Where is the “moral betrayal” there?
“Supply is everything Pat. If 10 people walked into a Harvey Norman store wanting to buy a TV but they only had one on offer, it would be bought by the highest bidding buyer rather than the lowest offering seller.”
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Your a funny guy Peter, except you have your analogy back to front. Its more like 1 buyer walking into a JB Hi-Fi *** store with 100 TV’s on offer. If the price is too high, they walk and stick with what they have until such time as there is a SALE! Precisely what I am seeing now, lots of stock available and yet people continue to hold off. (excepy dam);-)
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I think for those that have waited its not a matter of becoming impatient, they see the tide is shifting and know its all working in their favour so now is definitely not the time to capitulate!
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*** Query, who in their right mind even shops at Harvey Norman anymore?
You’re wrong on the “there is no home buyers strike” Peter (although of course not everyone is participating). I’m in Melbourne, am lucky enough to have a 50% deposit, and refuse to enter the market at these prices. I signed the Getup pledge not to buy until the market corrects and I mean to do so. However, I do admit my self-interest in not being willing to lose my hard-earned in a falling market when it is growing nicely on the sidelines.
I’m part of the strike. It is real. I just hope it works.
Commonsense, I am with you, I have a good sized deposit which is slowly growing, but I am not going to buy until I see a decent price drop, if it don’t happen I will go buy in the country or over seas. Peter P, i would seem many on this website are part of the buyers strike, the reason why you come out and say there isn’t one is you don’t want to add to the momentum of this movement. Yes, you are correct in some of the things you say, but you are also incorrect for saying there is no buyer strike. Simply put, I am on a buyers strike.
Alright you guys win – there are four of you. You almost have enough for a quorum.
Peter, four posters on a blog are neither here nor there, what you can’t deny is the graphs in the article.
People (mostly) aren’t buying.
Arrow2 there are no graphs above, but let me supply one for you -
http://www.propertyobserver.com.au/images/stories/2013/01/fhbjan15.gif
FTB participation has fallen of a cliff in November, and yet finance held almost steady – why?
Every house can be bought by an investor, that doesn’t matter to the banks, but it matters to the younger generations. Do we want a society where we have 70% home ownership or 40% home ownership as occurs in parts of Europe.
Which would you suggest is the better option for our society?
Peter, with your claim of only 4 people being on a buyers strike you have just confirmed your arrogance and ignorance as to what is actually going on. It doesn’t have to be a declared strike for it to still be one. A whole lot of us just refuse to turn up to work because the conditions are bad. Go ahead – sack us!
@bskerr2
” I have a good sized deposit which is slowly growing, but I am not going to buy until I see a decent price drop….”
I dont disagree with your strategy but I am somewhat surprised that you cant find a much more attractive use for your capital than Housing. My point is that if anything is grossly overvalued, in my opinion, than I move on and find a better investment. I don’t leave my capital poorly deployed (low interest bank account) while waiting for the house prices to drop.
My approach of finding better long term investments seems to put me firmly in the minority, but I’m very interested to understand this Aussie majority approach.
Bob, I am in that camp too – At the moment I think there is a fair bit to be said for remaining relatively liquid, and to be honest I dont see any great investment opportunities (maybe equities of late – but I think they will be very dependent on further/continued QE from about here) – maybe housing in parts of the US (where some is very very cheap at the moment but it isnt liquid in Australian terms)
I agree with looking for better investments but at the moment are all capitve to risk on FX, or prone to illiquidity. That said I am in another global currency to hold cash, and moving between a number of global currencies short term.
Peter – apologies, graphs are on the previous day’s article: http://www.macrobusiness.com.au/2013/01/nsw-fhb-mortgage-demand-hits-20-year-low/
Interesting point on your claim theat lower home ownership is “bad for society”.
I don’t think lower home ownership is automatically bad for society. Renting is fine, if people can secure stable leases and a price they can afford, and invest their spare income somewhere more productive.
But in any case, the next generation will eventually end up inheriting houses if they can’t afford to buy them. Baby boomers by definition cannot hold them forever.
What IS bad for society is increasing indebtedness, with more and more income being tied up buying a house (the same house) instead of being invested or spent to increase standards of living in other ways.
If the way to correct this is to refuse to pay too much for a house, that’s good for society.
@Gunnamatta
I’m not sure I understand the FX risk.
Short term I have no idea where the Aussie will go, a year ago I was convinced that it would fall back to about 0.80 USD but clearly i was wrong. I think I underestimated the worldwide race-to-the-bottom effect that QE3/4 unleashed.
It seems to me that the RBA was also blindsided by this but I suspect they have some plans brewing to peg the Aussie at some value, any other response would be irresponsible.
Regarding attractive investments. The most attractive investments that I’m finding involve forms of parallel importation “grey market imports” with web based sales.
This business directly benefits from a higher AUD so it helps offset FX losses from my other USD exposed investments. It makes a kinda natural business hedge.
“Alright you guys win – there are four of you. You almost have enough for a quorum.”
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It still outweighs your vested interest opinion Peter.
On CNBC last Monday a Mr Corrigan, chief investment officer of a UK investment firm discussing the UK housing scene said something along the lines of ‘What is wrong with renting? Why can’t we be like the Europeans where about 80% rent their homes and then invest our balance in useful investments?’ This is along the lines of what China-Bob @11.45 has said. Problem in Oz is where does the average person invest? After inflation and tax most savers are going backwards and the other major area of investment,the stockmarket, is just as big a ponzi scheme as property might be.
Unfortunately there are not many areas for the small investor/saver to put funds in today that will benefit Austrlian businesses.
Yep, it’s very real. The 20-year-olds in my crowd have watched the 30-year-olds lose their social life while struggling to pay off homes that have dropped in value back to 2006 prices.
They’re smart, these kids. They’re not falling for the spruik. They will rent forever if they have to and enjoy life. A definite generational shift in thinking.
Very much what I am seeing too!
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I am guilty of schadenfreude I must admit, but when it comes thoroughly deserved its like xmas all over again!
These times will suit ‘em to a tee. Nil opportunity cost if they DBN.
And if oz house prices don’t stack up for ‘em in 10yrs, well they camp O/S.
Using their brains. Bloody unaustralian.
I am in the same boat as ‘Commonsense’…
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50% deposit and growing all the time!
There’s a theory that you can signal the end of a revolution when the language used by its proponents starts to turn negative. This little rant by PF has just provided a huge contrarian indicator for property!
Doesnt take much to rattle ole PF does it.
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Poke him with a stick and he reveals what a self serving p**k he really is.
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Funny that the more defensive he gets the more it reinforces everyones view of both him and the market…..brilliant!
Peter,
So 20 grand enables a FHB to outbid an investor, does it? I doubt it.
I’d like to know what price to income multiple you would call affordable, 3/4/5/6/7 times?
In addition to claim that the govs have deserted FHB is rubbish as well. Without that support prices will have to match the market, also if you go back 30 yrs FHB (in Perth anyway) had the new house/land packages on the outskirts of the city like Padbury etc with very few buying established.
I found MB around near its start and I’m pretty sure you were here already and I see a marked shift in your posts from back then to now.
I’m a FHB on strike.. We are Legion.
I am also a FHB on strike. In my circle of late 30′s friends, I am the only one on strike suggesting I might buy a house at some point in the future. For my friends, purchasing a house isn’t even a consideration. They gave up long ago. (long time reader first time poster)
Not sure whether the FHB strike has become common theme amongst the candidate FHBs group, but certainly there’re majority people (regular MB readers) that are in similar situation i.e. big deposits, yet not buying.
Pete, I think you’re preaching at the wrong crowd
Let me say one more time: Don’t Buy Now !
FTB : Don’t Buy Now !
which is great, isnt it ? FTB let investors purchasing the opportunities and rent from them, everyone happy
FTB : Don’t Buy Now !
The investors cannot withstand regular losses without firm prospect of capital gains in the near future. I mentioned that at my post below.
FTB let investors purchasing the opportunities and rent from them, everyone happy
From rational point of view, the FHB let irrational speculators to buy the “ticking bomb” and help them with cheaper rents. The renters are happy, not sure about the speculators when the bubble burst though ?
Dam,
At first I thought you were just another bot, but with every new post you make I realise I was wrong!
Comedy Gold!!!
They don’t have to build the house themselves do they?
Cant they buy a newly built house or apartment constructed after a certain date and never occupied?
Can’t they simply get a chartered builder or similar to check the construction?
I think you might be overreacting based on a misundertanding.
First Home Buyer’s strike +1
Don’t Buy Now!!
If I were to buy the same place I am currently renting, I will have to pay almost twice as much every month…for next 25 years. Who in the right mind will buy in such situation?
spot on same here in coastal tasmania, and we are a glimpse into future of aging demographics/migratory loss/low socio economics etc. but the mainland money is leaving fast now. house next door on 10 acres with views was for sale for over 400k for 2 years. no sale. relisted in last few weeks for over 310k! i smell blood……….
For me it’s almost 3 times!! (check out rents around Strathfield and then how much the house is worth on onthehouse – investors get a whooping 1.5 – 2.5% gross return or so – lol) I’m saving all that money and it’s doing me very well in much more profitable investments. Buying housing is a total mugs game for the unintelligent at the moment.
Curious where your investmrnts are
Also on strike here. 26 years old, have good savings in stock market, a good deposit if i liquidate. I live rent free with my older brother so why buy? It seems like an extremely foolish thing to do.
Priced out and scared about losing their jobs combined with falling property prices resulting in little motivation for first home buyers to act.
The Ponzi scheme only works when they are feeding in at the bottom of the pyramid. The Baby Boomers have relied on first home buyers to supplement their lack of savings. Not sure whether that strategy will continue to work with more evidence of ponzi weakness.
Housing credit growth of 4% is still sound per ABS. When this dips into negative territory, there will be real pain. Our property bubble has demonstrated an amazing ability to stay inflated with of course the assistance of goverment stimulus, money printing, etc on a global and unprecedented scale. Unnatural (government) intervention in markets has a limited life before causing substantial unintended consequences. In the mean time, keep calm and carry on.
“The Ponzi scheme only works when they are feeding in at the bottom of the pyramid.”
no need FTB, Investors are picking up the tab, 70%, renters and investors, have and have not society, already 70% of units are owned by investor at Brissie
Spot on dam.
Housing credit (debt)still growing. House prices stable. We are still building 150k new dwellings per year.
Remove the grants, remove the stamp duty, stop cutting rates, get out of the way and let the thing reset.
and a land tax – dont forget the land tax…
Sorry, of course.
no need FTB, Investors are picking up the tab
This is not sustainable. The FIRE industry and property spruikers know that the investor classes are mostly middle income mom-and-dad types and they do not have big financial capacity to withstand regular losses in the long-term when there’s no capital gain prospect in view. The property class are more prone to panic selling compared to FHBs who will always need a home anyway regardless the price fluctuation.
negative gearing is disappearing with these interest rates (especially if the RBA cut again which is likely if thing go downhill a bit )
negative gearing is disappearing with these interest rates (especially if the RBA cut again which is likely if thing go downhill a bit )
Yes, and you think this low interest rate regime will be for ever ? I guess it is nice if you can have the guarantee, right ?
@deo
yeah low pretty much forever, my bet is with be close zirp (or even negative) for 2 generations.The world has changed dramatically and the investors are protected by their sheer numbers and the staggering amount of debt.
yeah low pretty much forever, my bet is with be close zirp (or even negative) for 2 generations
Well this is a bit contradictory right ? If the economy will be that bad to require ZIRP for 2 generations…then the property price probably will be dramatically lowered by that time, right ? So still bad news for property speculators ?
So no matter what the government / RBA will do, I believe that things that can’t be sustained, won’t be in the future. Timing wise, I cannot tell but this is universal truth.
I never could fully get my head around why FHBs were considered so important to the broader property market.
‘The Ponzi scheme only works when they are feeding in at the bottom of the pyramid’.
I think this simple statement goes a long way to explaining it.
The Ponzi scheme only works when they are feeding in at the bottom of the pyramid’.
This is universal truth in any ponzi scheme i.e. you need the next and greater fools to take-over the ticking bomb you took a while ago. The ideal greater fools will be the FHBs because they don’t have much financial skills and experience and tend to be sticky (i.e. hold the ticking bomb property regardless price fluctuation). By comparison, the property speculator class tend to be jaded and tight with their money and more prone to panic selling if they start to think that their negative gearing losses would not be compensated by firm capital gain prospect in the near future…
Hence, the panic amongst the property spruikers…though they said that they’re glad that the investors replacing the FHBs in the market, they know deep-down…that this is not sustainable.
HnHs
A little thing I’ve had in the past is to try and point out that the AFG data is applications provided to banks and not settled loans which can make analysis of the data more problematic.
According to the above article AFG arranged $32Bn of loans in the year December 2012 or indeed at 10% of the market the total market was $320Bn.
This does not reconcile with ABS data as outlined by Leith in
http://www.macrobusiness.com.au/2013/01/housing-finance-fell-in-november-missing-analysts-expectations/
For anyone who understands how the AFG system works, that its application data seems obvious
But please tell me where I’m wrong.
Clearly you are not wrong. I’m using this data only because of the screaming tale it tells about FHBs…
On the FHB point, the application data is highly significant and tells a big tale.
FHBs will not return in numbers until land prices decrease. That’s the grant all governments should be working on
you are wrong…..
Nice argument…
I have advised DT before this. AFG settle between $2B and sometimes over $3B every single month.
Would you like me to define SETTLED?
They did expand which would explain some of the increase. Perhaps some changes within the industry explain some more of the increase as some brokers exited from the industry, but 12.5% is a very large increase.
However the discussion is about whether these numbers are application lodged or settled – I repeat they are settled loans.
Can I be more specific?
Hahaha
Hi Peter,
I saw this article on Business Spectator and thought it was pretty well presented:
http://www.businessspectator.com.au/bs.nsf/Article/residential-property-house-prices-housing-mortgage-pd20130115-3Y4BY?OpenDocument&src=sph
Since you are MB’s only residential property contrarian that I actually think is worth listening to, I was interested what is your take on it?
http://www.macrobusiness.com.au/2013/01/is-the-basel-process-broken-you-can-count-on-it/#comment-204666
Phillip Soos works backwards from his agenda to ensure that he arrives at the desired conclusion – so do a lot of bull writers, so maybe it’s par for the course in the industry. Phillip has written this article many times.
No I don’t think that housing is a ponzi scheme although it has similarities at times. Like shares you buy an assset that should rise in value over time although shares can be volatile. The housing market can never resemble a market where produce made made for consumption is sold – eg wheat, oil, lean pork bellies etc.
In a Ponzi scheme you buy nothing except the promise of a high return that later turns out to be nothing – a house is at least shelter regardless of what happens to it’s sticker price.
The housing market is almost illiquid, it can’t be turned over in a keystroke as shares and commodities can. Watching it correct can be painfully slow.
I know from experience and observation that the market is still overvalued, exactly how much I’m not sure. Japan and the USA are undervalued. The USA might correct in 5 years or it could take 10 – in Japan they might see several generations who know nothing else but cheap housing although it’s about on par with our prices on an income to price comparison the last time I looked, which was in December 2012.
In Australia we might see a period of more than one generation where prices remain elevated, or we may not. Who knows what will happen in the world over the next 20 or 30 years?
Many people will tell you what they expect to happen, and that’s fair enough we all speculate, but as for predicting a 100% guaranteed result I can’t give you that, and nor can anyone else.
There are times in life when we know we are paying too much for something that we need, but if our need is great enough we suck it up and pay, others may not pay – the choice is yours entirely.
“There are times in life when we know we are paying too much for something that we need”
Luckily a house purchase is not a need.
Particularly if such a purchase means “suck it up and pay (too much)!”
Australians are increasingly realising this. Saving and renting – and waiting. And not getting screwed.
So RE prices hold at overvalues..or not’..What would the effect be of this later section..Pete,could it end,having a real negative effect,on the younger groups that purchased an over-valued home back when,when it comes to future investment in a business..say over the next five years,Pete
JR
Phillip Soos works backwards from his agenda to ensure that he arrives at the desired conclusion – so do a lot of bull writers, so maybe it’s par for the course in the industry.
Maybe so, but the majority of bias article have come from bull-camp till recently. The other consideration is the bull writers are mostly having conflict of interests i.e. they’re related to FIRE industries while most bear analysts are independent analysts and academics.
In a Ponzi scheme you buy nothing except the promise of a high return that later turns out to be nothing – a house is at least shelter regardless of what happens to it’s sticker price.
This can be ponzi if the overpriced property was bought by so-called investors (but actually speculators) which only consider it as their free-lunch ticket for big capital gain and nice retirement in the future by having the next-fools buying the property from them.
There are times in life when we know we are paying too much for something that we need, but if our need is great enough we suck it up and pay
I am not used to pay too much on anything in my life…that’s bad habit me think ?
Pete is trying hard to find common ground with us bears, and I respect him for that.
Is he perhaps the only likeable property permabull in Australia?
Forget FHB grants instead lets consider FSB grants you guessed it, First Small Business Grants.
Think about the startup capital hurdle faced by most small businesses and the long term value that a $20K FSB grant could create. Sure most of the grant would be dissipated with little or no net increase in surviving businesses, but the experience of running their own business is something that would last a life time. Even just the knowledge that “the man” is not really ripping them off because there are so many unseen costs in running any business, is priceless. Imagine the long term effect that this FSB grant would have on the average Aussies understanding / acceptance of ever increasing taxation and regulation.
I’m sure I’ll be reminded that the real purpose of the FHB is to get young families started on the first rung of the debt ladder and addicted to the housing game (aka ponzie scheme), addiction creates such compliant workers, that they even convince their partners to abandon the kids and get another job so the family can achieve level??? of the housing game.
and as a bonus that 20k would essentially be dispersed into the community, unlike a leveraged FHB whihc just goes straight to the bank one way or another. Would make a much more efficient stimulus I imagine.
I agree with the sentiments but it would be simpler to just ensure less red tape that increases the hurdles and costs in getting a small business up and running.
Less zoning restrictions on where a business can be located ( corner shops were once glued to a house for a reason), less regs etc that require a law degree or the need to pay someone who has one.
Lower the barriers of entry and the penalties (apart from doing your dough) associated with getting details wrong and a lot more people would have a go at employing themselves.
When they master that they might think about employing someone else.
I can’t imagine the circumstances under which I would argue that more red tape or regulation is a solution, so I’m firmly with you. However, changing rules and regulations, regardless of how silly they are, is probably the most difficult step that any economy can achieve. To a large extent this reinventing the rules, is what is happening in Greece today, but considering the crisis required to achieve this I’ll stick with more modest goals, like a FSB grant!
Yes – it is certainly a better idea than FHOG.
Goverment already provides assistance for small business.
http://www.business.gov.au/businesstopics/grantsandassistance/Pages/default.aspx
Yes!
The moment this happens, I’m going to start 10 “export businesses” specialising in emerging markets and achieving a margin based on Australia’s central location to the trading centres of the globe.
And for some reason, after I buy a bunch of gold coins, each of the businesses will valiantly struggle to survive and I’ll “quit while I’m ahead”.
Imagine the long term effect that this FSB grant would have on the average Aussies understanding / acceptance of ever increasing taxation and regulation.
Taxes in Australia haven’t gone anywhere but down for thirty years. We are one of the lowest taxing developed countries in the world.
There may be an argument to be made about over-regulation, but since nobody complaining ever highlights any specific examples, it’s hard to say.
I’ve always felt that FHB have been irrelevant to the Australian Property Market for quite a while.
Everything seems geared towards Investors … especially the overgenerous Negative Gearing Tax Minimisation Scheme. Throwing grants at dwindling FHB’s always struck me as a bit of theatre for vote buying politicians.
Why is there not a “Land Reform”, single issue political party in Australia?
I would have thought they could easily get enough votes for a balance of power in the current political climate.
In an election where it appears things will be tight, I reckon now is the time for the affordable housing party
Not enough people understand the problem.