Melbourne’s dour RE market

Our own Unconventional Economist was warning of the coming trouble with the Victorian real estate market throughout 2012 due to delayed supply response that is seeing large amounts of new product coming into the market as prices begin to fall. In addition, sales in new housing developments have fallen rapidly  and the bearish trend in mortgage data appears baked in which has the possibility of pushing up unemployment. On top of that, like other states, Victoria is looking at some form of fiscal consolidation this year which again is likely to have a negative impact on the state’s economy in the short-to- medium term.

Current interest rate settings are obviously providing a buffer from the economic headwinds, but as the RPData release showed yesterday, this doesn’t appear to be providing a compensatory force of the magnitude required to hold up Melbourne prices. So, as Leith has been warning over the last 12 months, Melbourne is at risk of seeing further price falls over the coming years. Chris Vedelago reported much the same in The Age today.

Melbourne’s property market has posted its weakest performance in nearly a generation as home prices continue to fall despite deep interest rate cuts.

Defying hopes of home owners for a recovery, the city’s property slump is set to continue as new figures show prices fell nearly 3 per cent last year.

Values have now slid 8.4 per cent from their peak just two years ago – the biggest fall for the Melbourne market since price records began in the mid-1990s, according to research firm RP Data-Rismark.

But while industry experts warn that a city-wide recovery could be up to two years away, low mortgage rates and price falls in many popular inner and middle suburbs are tipped to make these enclaves more affordable.

”The interest rate cuts have probably shielded the market somewhat from bigger falls over the last year, but I think Melbourne will continue to be one of the weakest performing markets in the country,” said RP Data analyst Cameron Kusher. ”I wouldn’t be surprised to see values fall again over the next year.”

The prediction will be welcome news for buyers but a bitter pill for home owners, who saw prices soar nearly 37 per cent in 2009-10. That boom, fuelled by record low interest rates and the generous first home buyer grants on offer during the global financial crisis, is being blamed for the serious affordability problem in the city.

”Prices have gotten too high in Melbourne and it hasn’t taken its medicine yet,” Mr Kusher said.

BIS Shrapnel analyst Angie Zigomanis said Victoria was facing a ”trifecta” of issues – a weak economy, unaffordable housing and an oversupply of new homes and apartments – that was blunting the impact of recent interest rate cuts.

”Melbourne came out of the blocks the strongest after the global financial crisis and many of the problems we’re facing now are the hangover from that,” he said.

This is a repeat of the warning that the usually bullish BIS Shrapnel gave back in December.

Victoria will miss out on the recovery in the property markets of the other major states, according to BIS Shrapnel…

Victoria will be left behind, facing level growth for at least the next three years, says BIS Shrapnel, which forecasts vacancy rates will rise in the next year due to a big influx of residential developments currently in the pipeline coming online.

Certainly not the usual optimism I expect from BIS Shrapnel.

Of additional interest is the poll at the bottom of the article by Chris Vedelago , which currently has 77% of respondents answering “yes” to the question “Do house prices need to fall further”. I actually didn’t notice the poll at first, probably because I take these sorts of things with a pinch of salt and would usually ignore them.  The only reason I did noticed it, and mention it now, was due to the seemingly overzealous reaction from the REIV to the result.

149 Responses to “ “Melbourne’s dour RE market”

  1. TheRedEconomist says:

    That is amazing the REIV openly trying to censor the Poll

    In Sydney town more sickening, misleading dart throwing.

    No science in some of these statements.

    Where are the property group trying to censure McGrath????

    http://www.smh.com.au/business/property/sydney-property-rise-tops-bar-one-20130102-2c5nj.html

    John McGrath, chief executive of McGrath Estate Agents, is bullish about Sydney’s prospects this year, particularly for property priced under $1.5 million.

    ”Sydney remains the BHP of Australian real estate – the big blue-chip market that generally outperforms the rest, particularly in the recovery period of a national market cycle,” he said.

    Let hope Sydney is Like BHP. Was up near $45 a year or so ago and went down to low 30′s.

    Times are desperate. More meaningless spruik.

  2. Tarric says:

    The REIV are like a country run by a dictator the more they deny something is going on the more people believe the exact opposite.

    As DE said the interesting thing is the fact they felt the need to respond, are things really so dire in the Melbourne property market that they feel the need to respond to a single internet poll?

    Based on this perhaps I should be revising my prediction of Melbourne down 5% in 2013 to down 10-15%?

  3. james says:

    We will be moving to Melbourne from Sydney in May. A big part of our decision was not only the lower cost of living but also the cheaper rents and the possibility of perhaps buying property a few years down the track.

    We realized we could save more than 7k a year in rent alone if we moved.

    I wonder how many other Aussies will take the plunge.

    • bskerr2 says:

      Only the ones that have a job to come to, VIC is contracting big time so the migration may slow down some what. People who don’t have jobs or money most likely won’t or can’t come.

  4. Tarric says:

    Another reply from Chris Vedelago on Twitter.
    https://twitter.com/chrisvedelago/status/286643722681196544

    “We never claimed to be Gallup @REIVictoria. But the finding really bothers you, doesn’t it? “

  5. DE, thanks for this mate and I too was reading this latest crop of articulate journalism which is a far cry from the mediocre reporting which facsimiles the RE Lobby’s press releases.

    Seems to me REIV are in a flap and as usual cry fowl when the bird drops a rotten egg for them … maybe we should disregard all REIV Poll’s in future as being “opinion only” which is pretty much what the REIV is from what we have seen to date anyhoo… maybe they too are irrelevant and an unnecessary middleman between a truly efficient open market that has transparent reporting and open data?!

    On another far more positive note I have to say well done to Leith, his economic observations have to be the most accurate I have ever read.

    He predicated the slow melt I am sure over 2 years ago and as much as I did not like the analysis (I prefer the big Pop theory or crunch) he has proven to be correct and likening the Australian housing deflation to japan is very apt.

    So well done to Leith and the MB team your a trusted, reliable source of evidenced based and objective reporting for one I feel the richer for reading.

    Thank you, TM.

  6. ceteris paribus says:

    Yes, Melbourne has “more medecine” to take. But I have been surprised by just how sticky prices have been since December 2010.

    Harry Dent’s prediction of up to a 60% drop in house prices was a hoot. I have always wondered why we give these US travelling circuses air.

    • I don’t know I think Harry may have been a ‘tad’ high but he has a good eye for demographic change – think Leith read a bit of his work and shared some accurate insights there too.

      It may well be we’re closer to a Minsky Moment in 2013 (http://en.wikipedia.org/wiki/Minsky_moment) and that we could see a significant drop mind you is Melbourne RE down around 10-12% in real terms in the last two years?

      That has to hurt!

      The only other demographer I can think of is Bernard Salt and he is skewed to a big Australia with BB aspirations that suit his agenda and not mine!

      Don’t know of any other Aussie commentators alike Salt or the fly-in Dent?

      ;)

      TM.

      • ceteris paribus says:

        Yes, TM. Circa 10% in real terms is by no means insignificant. I certainly agree with your point here.

        I guess I am probably reflecting on the volatility of other asset classes, like shares that dropped 54% in nominal terms fron late 2007 till March 2009. Property seems a lot stickier.

        But just don’t get me started on people like Dent. I hold no sympathy for these jokers and their loud speculation should be called for what it is.

        Just my opinion, TM, that if people can be useful, they should desist.

        Best
        CP

      • Hey CP,

        ouch – 54% is a lot more painful no dispute there … in regards to commentators agree with the seagull moments for FIFO exerts … but I guess whom else is there at least we had some debate!

        In regards to your opinion it is one I have held with respect on MB for quite sometime.

        Kind regards, TM.

      • flawse says:

        cp Would Dent be so far wrong if we were not willing to sell off our national resource assets to fund our over-consumption which includes our housing market?
        My problem with trying to predict anything is that I never believed that Australia would ever sell its soul as it has.
        Maybe Dent couldn’t imagine it either?

        I guess the other big factor holding up the market generally is that we keep bring more and more migrants and just dumping them on the edges of capital cities. They produce nothing. We get ‘economic growth’ from the necessary infrastructure builds, housing and living but, in teh final analysis, it is all just based on more debt.
        Immigration in this country is just one more ponzi scheme.

  7. Tarric says:

    Chris Vedelago’s poll has been taken down by The Age.
    http://www.theage.com.au/polls-2c5g1.html

    “Sorry your page was not found ..”

    Its shameful that a supposedly impartial source of news and editorial content would take down such a page.

    Although it shows just how powerful the powers that be like the REIV actually are.

    I will however say Kudos to Chris Vedelago, well played good sir. I will follow your articles from now on, provided The Age doesnt tie your hands behind your back with regards to content.

  8. Fundamentally, a problem with nearly every piece of property analysis is that it’s created inside a vacuum. Recent “trends” are misinterpreted as something more than they are. Valuations are anchored to what happened last month or last year. Of course taking a few steps back and valuing property in the same manner as any other asset would yield very (very!) different levels of Fair Value.

    What we have at the moment is the vast majority of our population (probably 21 million+ of them) who don’t understand the basic maths or economics behind “values”. It’s not necessarily their fault – when they turn to self-proclaimed experts they get fed garbage.

    Most other assets are better understood because their benchmarks can be relatively easily understood and compared by the average punter. Most people understand the basics of RoI, RoA, RoE…even a fair chunk (10%?) “get” DCF & risk adjusted returns.

    …and yet here we are. The property spruik continues and the gullible get-rick-quick squad are trying to keep the bubble alive. Quite disgraceful, really.

    • Sean G says:

      Never underestimate the motivational factor of greed… I saw a really good TV story on Danny Kaye’s get-rich-quick property empire a few years ago and his techniques for getting people sucked in.

      There was a confidential training video for his sales people in which he was very frank about exploiting a potential client’s aspirational values. “Create pain” was his mantra – make people realise that they won’t be as wealthy as the people next door and that they won’t have an overseas trip every year or a holiday house at the beach (like the Joneses). That was the key to getting people in – make them realise that they’ll struggle to impress others if they don’t have that new car every year – and so on.

      It worked really well for him right up until the collapse of his empire around 2005 (I think?). I’ve tried to find the footage again on the internet but to no avail – someone else might know more about his multi-level marketing scam (perhaps I got the name wrong)? There are plenty of other ‘overnight property millionaire’ spruikers still left, that’s for sure. I made the mistake of signing up to a real-estate site for alerts some time ago and I’m still getting “property millionaire” emails…

      • Mining Bogan says:

        Henry Kaye.

        I remember reading somewhere that he’s attempting a comeback with his spruiking filth.

      • Sean G says:

        Thank you, Mining Bogan, I knew I was getting something wrong – I was confusing him with the entertainer.

        His scheme was really aggressive from memory, he encouraged you to get friends and family on board and then foreclose on them if they missed a payment -

      • Jack says:

        He was agressive in using deposit bonds and off the plan purchases as I seem to recall as well.

      • Absolutely.

        For every Kaye there are a dozen ‘less famous’ spruikers out there. Certainly not limited to property, but it’s the property spruikers that tend to play with bigger numbers and so there (seems to be) more of an incentive to go for broke.

        I come across a lot of people who are on the cusp of buying into property – some are railroaded by the spruikers (The Investors Club is a prime example) – but three times as many are driven by peer pressure. There is still the mentality among a big chunk of the population (“baby boomer” generation, in particular) that the lump of land they paid $50k for 15 years is “worth” $1m+ today, and that this trend will continue indefinitely.

        Strangely (and I can’t explain this) a lot of 30-somethings are smart enough to know the numbers don’t work, but still feel compelled to buy something just to get their parents & friends off their back.

        There is a sense of camaraderie in having your life ruled by the Mortgage Overlord.

  9. Pfh007 says:

    Certainly on-line polls need to be treated with care but my general impression is that 4 years after the GFC, there is a growing number of people in the broader community who have boiled the lessons of the GFC down to the following.

    * House prices may stop rising and can even fall.

    * Excess debt can be very painful if they do.

    This does not mean that the RBA or government cannot overcome growing household reluctance to take on debts for expensive real estate but they are clearly going to have to work a lot harder than in the past and with a reduced supply of ammunition.

    4 years may seem a long time for attitudes to change and messages to sink in but most people do not follow economics and many rely on occasional comments made at BBQs and in the tea room.

    Attitudes are slow to change and attitudes to debt can be generational.

    Many of those burnt by the 1930s were debt averse for the rest of their lives.

    There is no guarantee that those who have formed a negative view of debt over the last few years will ever be persuaded to change their mind.

    Even assuming that it is possible for the RBA and the government to drive people into or deeper into debt-land using interest rates and FHB grants etc – is that appropriate policy?

    Do we really want to drive economic growth with increasing levels of debt?

    • Sean G says:

      The 1890 crash was far worse and because it was over 120 years ago nobody thinks it has any relevance. Nearly every bank in Victoria went broke and the population of the colony went backwards for a while – it was over 20 years (the end of WW1) before property prices actually started to recover.

      I strongly recommend the book on the subject “The Land Boomers” by Michael Cannon… the greedy speculation that led up to the huge crash in real estate goes to show that not only is it possible but it’s actually happened here before…

      • Peter Fraser says:

        In 1890 very few people (commoners) owned property. At the end of WW1 the returning soldiers were helped with land grants (soldier settlement blocks)

        Generally it failed, but it was the start of home ownership in Australia.
        http://en.wikipedia.org/wiki/Soldier_settlement_(Australia)

      • Sean G says:

        Peter, have you actually read the book? Land and house ownership was sold to ordinary people as the key to riches – there’s so many parallels to today that it’s not funny.

        You didn’t have to be very wealthy to speculate in property in the 1880′s – it was a bit like the share market in the 20′s – everyone was getting in on it. Some people who had little or no assets were encouraged to use what little they had as a deposit; in one case a farm worker put a bag of flour up as a deposit on his own block.

        You are right in that home ownership wasn’t common back then but land and house speculation certainly isn’t a 20th century thing.

      • Peter Fraser says:

        Sean G – you are right, land speculation isn’t new, but in 1890 probably less than 30% of commoners owned property in Australia.
        http://www.ahuri.edu.au/publications/download/20017_pp
        In the UK it was probably about 10%.
        http://www.newstatesman.com/life-and-society/2011/03/million-acres-land-ownership

        I am unconvinced that everyone was getting into it. The fact that it did follow a mining boom (gold) will have relevance, but was there any safety nets, Consumer Credit Insurance, hardship assistance etc or was it a sink or swim economy?

      • Liu Mianzhi says:

        Unless I am missing something, Peter’s 30% figure for home ownership for “commoners” in the 1880/1890s boom does not seem quite right.

        I have not been able to find the exact data for 1890.

        But I note that figure 1 in the AHURI report that Peter has linked seems to show Australian home ownership in 1911 of just under 50% (versus about 45% private rentals).

        There is no reason to believe that ownership rates in 1911 were higher than at the peak of the boom in 1890 (the soldier settlement schemes obviously came after 1911).

        In fact, absent an explanation for any increase, they were likely to be higher at the peak of the boom than they were in 1911, particularly in Melbourne:

        - rates of property ownership tend to decline as the boom unwinds (see the recent US experience: http://www.bloomberg.com/news/2012-04-30/homeownership-rate-in-u-s-falls-to-lowest-since-1997.html ); supporting this, bank credit began declining in the early 1890s and was still declining in 1911 ( http://www.rba.gov.au/publications/rdp/1999/pdf/rdp1999-06.pdf )

        - as Melbourne was the focus of the boom, the property ownership rates were probably higher at the peak of the boom when compared to the AHURI figure, which is averaged over Australia.

        All in all, if home ownership rates in Australia were just under 50% in 1911, they were likely well north of 50% in Melbourne at the peak of the boom.

        That said, I have not read Land Boomers and I am not sure if the 1890s comparison holds in general. The bank system is quite different these days (existence of a reserve bank, APRA etc), but there is probably some similarity in the psychology behind the boom, outsized growth of private credit and reliance on offshore funding, with the associated risks of a sudden change in popular mindset, offshore funding shock and in the event of a crash, an amplified impact due to the debt hangover and effect of private credit defaults on the financial system.

      • Peter Fraser says:

        Lui – I said “probably less” I can’t find hard data on that either. I based my guess on the fact that in the UK only 4.5% of residents owned property in mid 19th century (about 30 years prior to 1880) and according to the AHURI study only 10% of UK residents owned property in 1914. As we were then closely modelled on Britain I thought that the data had some relevance.

        Almost 50% of Australian owned property in 2011, but that is 30 years after the date in question, so perhaps my guess at 30% is inaccurate, but it is likely to be indicative.

        Victoria in the late 19th Century was rocked by a fast fading gold mining boom – all land prices would have fallen regardless of whether there was a land boom during the good times.
        http://books.publishing.monash.edu/apps/bookworm/view/Struggle+Country%3A+The+Rural+Ideal+in+Twentieth+Century+Australia/140/xhtml/chapter04.html

      • Bakunin says:

        Sean, I’ve been told by an academic on Melbourne business history that the “Land Boomers” has some factual errors but none the less, it is a very good book. I actually have three copies. :)

        A lot of so called “intelligent” people in this town who think that property never goes down should read it.

        Peter Frazer, Melbourne was built on debt and speculation and has a long history of a boom and bust cycle.

        Also, middle class social welfare and other safety nets will not save the property market and hasn’t yet kept property prices up. What safety nets are you referring to exactly Peter? Try paying a mortgage on $35 a day! You say that you don’t work in the property industry but you certainly do have a bias towards property for some reason. Cognitive dissonance Peter? Cheers.

      • RobWindt says:

        Extracts from the book “The Land Boomers” by Michael Cannon, published in 1966… Victoria was made rich by gold, and populous by the immigrants who sought it.

        Two great economic booms and depressions had already shaken nineteenth century Victoria. The first occurred shortly after the early Melbourne land sales of 1837, reaching its peak about three years later. The discovery of gold sparked off the second great boom, which reached its peak in the 1850s. People had money to burn, and either dissipated it in wild extravagance or bought property at inflated prices. But because of the continuous rich flow of gold, there was comparatively little suffering when the inevitable crash followed.

        Then came the land boom of the 1880s. This time every type and degree of man was involved. Clergymen, labourers, widows, schoolmasters all grasped at the chance of quick wealth and invested their savings.

        The land mania of the 1880s took two main forms. The first was based on a plethora of building societies, whose optimistic officials were relieved that every family in the colony could simultaneously build their own house, keep up the payments through good times and bad, and support an army of investors who were being paid high rates of interest for the use of their money. The second form of mania was the deeply held belief that it was impossible to lose money by investing in land, a belief that persists to the present day.

        The boom continued to gather strength. In 1885 the harvest was prolific, the price of wool was high, the railways made a profit for the first time in the colony’s history, and optimism reigned supreme. A few warning voices were raised overseas, but heard as from afar.

        In 1886 it appeared to some of the associated banks that the land boom had reached its zenith and would now plunge downwards. They became alarmed at the large withdrawals being made to meet land payments, and increased the interest rate on deposits and overdrafts by 1 per cent. For a year land speculation became less profitable

        Then in 1887 there began a new wave of speculation, the land boom proper, so forceful that it over-rode all considerations of interest rates. Land selling in Surrey Hills for 15 shillings a foot in 1884 rose to 15 Pounds in 1887. Land at Burwood rose from 70 to 300 Pounds an acre.

        In the city there was fantastic competition for blocks, fanned by constant reports of fortunes which had been made by holding on to the blocks for a few months and reselling.

        Once again the banks, dismayed by wildly fluctuating values, began calling in overdrafts. Unfortunately, some of the leading banks had encouraged speculation when money was plentiful, and ruthlessly suppressed it when the inevitable reaction set in. This traditional banking policy, aimed primarily at safeguarding the banks’ own interests, proved utterly ruinous to the general community.

        The land promotors began looking elsewhere for easy finance. Thus the years 1888, 1889 and even 1890 saw the formation of most of the disastrous land and finance companies, and so-called land banks. Under the loose banking and company laws of the time, they were able to take savings deposits, issue shares, float loans, discount promissory notes and other commercial paper, and in general perform all the functions of an established bank.

        The boom soared upwards to dizzy new heights. How could such values last? The maximum rentals which tenants were willing to pay often amounted to only 2.5% return on the money spent on sites and buildings. As the boom petered out, many tenants could not pay even that. A few experienced speculators realised what would happen, and quietly began to sell off their shares and land while there was yet time.

        Simultaneously, there began a series of calamitous industrial conflicts between employers and the developing unions, mainly in the maritime and pastoral industries. The strike collapsed. But business never fully picked up again.

        For a few months, many investors still appeared to be hypnotized by the boom. By the time they realised that the crash was indeed final, practically every land company was in liquidation and calls on their shares had gone forth. The same pressure was felt by the land banks, many of which owned shares in associated speculative companies. Some were able to use the public’s cash deposits to stay open a little longer. But one after another they toppled, the pressure multiplying each day as their depositors took fright and withdrew their cash. From July 1891, when the Imperial Bank suspended payment, to March 1892, when the Australian Deposit and Mortgage Bank suspended, no fewer than 20 major financial institutions, with liabilities of nearly 20 million Pounds, closed down.

        Every day brought news and rumours of fresh disasters, of another land company folding up. And when they folded, there came the inevitable calls of capital on their partly paid shares to help pay the creditors.

        Suicide became a commonplace solution.

        By the end of 1891 the bottom had completely dropped out of the land market.

        As bank shares and other stocks began to slide in value, the Directors of certain companies sent out dummies to buy their own shares and prop up their value temporarily while the Directors sold their personal holdings.

        Said Table Talk, just before Christmas 1892, “Never before in the history of the colony has a Christmas holiday been shrouded in such deep gloom. Shop-keepers complain that their customers appeared to have forgotten that the season of good cheer was at hand, and started on being asked for the accustomed order, as if reminded of the changed condition of their purses that does not admit of luxuries or extras.”

        The year 1892 may have been sombre, but the disasters to come in 1893 were quite unprecedented. Enough misuse of financial power had been revealed to make every man suspicious of the soundest institutions, and to be fearful about the safety of his own bank deposits. Quietly, and then more quickly, a general run on the established banks began.

        Public disquiet was multiplied by the suspension of the Commercial Bank on 7 April 1893, following heavy withdrawals and a slump in the value of its shares.

        On the weekend of 29-30 April 1893, the great and powerful National Bank privately advised the Premier that because of the continuous run on its deposits, it intended to suspend business on the Monday. On Sunday 30 April, Cabinet met secretly and decided to declare the whole week a banking Holiday. On Monday 1 May 1893, men picked up their morning papers to read the incredible news that the colony’s entire banking system had apparently broken down.

        The Angel of Death came early and stayed late in the Melbourne of 1892 and 1893. The collapse of the boom economy was sudden and dramatic. As each company closed its doors, it dragged others down with it. Clerks, surveyors, accountants, builders, and every other kind of employee was thrown out of work, and onto a labour market which was harsh enough in good times, but almost non-existent in bad times. Their savings ran out, and still there was no work to be had. Nor was there any form of help, beyond private charity which usually came too little and too late.

        In the absence of trustworthy statistics, it is difficult for us today to form a complete picture of the extent of unemployment and the human suffering it produced. Some contemporary observers claimed that every second man was out of work, but these estimates could only be guesswork. Thousands of people were privately supported by others. Thousands left Melbourne. Thousands lived on scraps and municipal handouts. All we can say for certain is that this was the worst depression in Australian history, before or since.

        Read more: The Land Boomers http://dailyreckoning.com/the-land-boomers/#ixzz2Gxg1mnOx

    • Jack says:

      Not being a melbournian, how does Docklands compare after 10 years?

      I seem to remember a lot of people getting burnt in 2003/2004. I recall alot of people being zapped by Henry Kaye and his use of deposit bonds and off the plan purchases.

      Unfortunatly we have an economy driven by debt either private or public debt like most of the western world.

    • Gunnamatta says:

      Spot on.

      Do we want to drive economic growth with increasing levels of debt (particularly starting from where we are debt wise)

      My grandparents passed on their views about debt to me….It essentially boiled down to ‘Never let the bastards own you, they wont own you unless you are in debt to them….’

      I think you are right about the generational thing. There is a big baby boomer Gen X and Y divide on this.

      And yes, I do think there is an element of Schadenfreude on the part of non owners about the predicament of those in (often up to their eyeballs) and struggling.

      For many it represents a generations worth of marginal to incompetent types sitting in senior positions in large employers (often pontificating about buying RE), loads of (generally older) others pontificating about RE, a large dose of people who have had their RE aspirations pared by those prepared or having the capacity to go deeper into debt than they, inordinate amounts of media ramming that aspiration down the collective societal consciousness (even in the car this morning I heard ‘there has never been a better time to buy’) etc etc etc

      what goes around comes around – and in Melbourne at least, that is highly likely to be a kicking…

      The Land Boomers is a great book

  10. Peter Fraser says:

    The market in Melbourne won’t stay dour forever. Maybe two years.

    • willynilly says:

      Mmmm and then what will drive the growth?

    • LBS says:

      Yeah Peter if the job market picks up by then which is doubtful.

      • Peter Fraser says:

        You assume that neither the Federal Government nor the State Government will act to attract jobs, population, and industry.

        That’s a brave assumption that has several precedents working against you in Victoria.

      • LBS says:

        I think Australia will be in the middle of its GFC that it should have had with everyone else. The problem is debt private and public.

      • Peter Fraser says:

        Laughable thought with little or no substance to it.

        Cheers…

      • LBS says:

        Keep laughing you wont be much longer……. Debt levels are still higher than Europe and the US at their peaks.

      • Tarric says:

        While I agree that debt levels are far too high and the housing ponzi cant go on forever, at the moment Peter may be correct.

        In the near future the government and RBA are going to do their best to keep prices at there current level.

        The real question is what are acceptable losses for these organisations.

        Will they be happy with a continued slow melt 3-10% p.a losses in real terms? Will it take more, will it take more that is the million dollar question.

        It seems to me and correct me if i’m wrong that Peter is basing his thoughts for future growth for Melbourne on continued government interference in the property market. He aptly said that it was as close to a free market as a Ferrari was to a bicycle.

        Based on that assertion he may be correct the market might have a few bad years before taking off back to the moon until the inevitable crash does come (they always do eventually).

        However the crux of it is, how much ammo does the RBA, State and Federal governments really have in both a political and economic sense?

        It seems to me that the RBA is running out of ammo, rates are heading towards our own version of ZIRP and will be there shortly.

        The State government in Victoria is gunning for a surplus that isnt going to happen. They are already out of ammo unless they find the political will to borrow like mad to fund a future property price boom.

        The Federal government has renegged on their surplus pledge which gives them a fair bit more room to move, which in my opinion makes them the most likely of the three to continue to prop up the market. However with an election on the horizon such grants may be politically difficult especially considering the debtate over Labor’s economic management.

        In summation I think that losses below 8-10% p.a will likely be left alone, however anything exceeding that I expect all the interference the 3 relevant organisations can muster. My personal expectation is property in Melbourne down 5%+ nominal for 2013.

      • flawse says:

        Well said Tarric.

        Although the RBA et al APPEAR to be running out of ammo in reality they have a lot left.
        The whole scheme of this economy is being kept afloat by our willingness to sell our assets together with a related willingness on the part of the rest of the world to send us speculative capital.

        It seems to me that there is not a single economist anywhere, in academia, MSM, Banks etc that is prepared to call this. It’s in the too hard basket. So we can expect the current situation to continue.
        China has roughly 2.6 T bits of useless US paper that it is in the process of exchanging for real resource assets. We’re happy to accept them to finance our current lifestyle.

        I’m a ‘boomer’ of a slightly different hue to most and have wished this property BS to crash for a very very long time…like 30 odd years!
        Now I’m convinced we don’t care anymore. We have no sense of nationhood, no national pride.
        So this situation will just go on for the moment until it can’t.

        P.S. A bogan drunkenly waving a Boxing Kangaroo flag while we beat Sri Lanka at the cricket does not constitute national pride.

    • russellsmith55 says:

      My completely random and poorly educated opinion is that there are few scenarios it could occur under.

      One is the slow melt turning into a quicker crash (>10% nominally in one year or two), followed by at least 6-12 months of price stabilization. Given enough time at more affordable (not necessarily actually affordable prices) the bottom will be called in the MSM and people will start to come back slowly. The more dramatic the crash, the faster the potential recovery speed.

      The other is flat/gentle declines paired with an AUD/USD rate around 0.80 or lower for a few years (which assumes a pretty bad Australia wide / global environment). This would allay crash fears and allow a lot of Victoria’s export manufacturing and services industries to start rebuilding. The return of buyers would be very slow in this case.

      Without either event, I think it could be a lot more than 2 years of stagnation; we’re not doing very well down here on all fronts.

      How do you think it could/couldn’t play out Peter?

      • Peter Fraser says:

        Your scenarios are quite possible russellsmith55. I’ve been wrong often enough to know that I’ll be wrong again.

        I do think though that if our dollar falls to $0.80USD then Victoria will reap some genuine long term benefits.

        As an Australian (A Queenslander) I would be more than happy to pay extra tax to assist key Victorian industries survive until our dollar falls. Maintaining a skilled work ready labour force is a must IMHO.

    • reusachtige says:

      LOL PF. Good spruik. You’ll be wrong as you have been for the last couple of years.

    • The Bear Jew says:

      Unless the Yarra floods.

  11. willynilly says:

    Perhaps the population decline in many burbs in Melbourne will not help.
    Figure 8.
    http://www.veac.vic.gov.au/reports/VEAC%20demographics%20report%20Final%2014.7.09.pdf

    • Peter Fraser says:

      You base your expectations on a 4 year old report that is now just a dust catcher in a library?

      Has there been no change of government or direction in Victoria in the last 4 years?

      I think you should have another look for something more relevant to today rather than a report that confirms your bias.

      • willynilly says:

        Such as this?
        http://abs.gov.au/ausstats/abs@.nsf/Products/3218.0~2011~Main+Features~Victoria?OpenDocument

        Yep, many burbs close to city in population decline and only will get bigger as the empty nesters grow.

      • Peter Fraser says:

        Yes it’s true Willynilly, the populations of some suburbs decline as the children leave home, and later the cycle repeats.

        And that proves exactly what?

        If you want a quick reference check the variations in attendance numbers at the local primary school.

      • willynilly says:

        “And later the cycle repeats”
        Really? I think not.
        To reply on past data, shows no appreciation for the changing data such as the fall in the Melbourne participation rate. I suppose you think that will have no effect?

      • willynilly says:

        So you avoided my question about what will drive growth in a couple of years, or is that just your ‘guts’ telling you so as a mortgage broker?

      • Peter Fraser says:

        If I was clever I would avoid all of your questions.

        Victoria added 89,000 to it’s population during 2012. They all need work and houses to live in.
        http://www.abs.gov.au/ausstats/abs@.nsf/mf/3101.0

        We know that home building activity has been high lately around Melbourne, but is now falling quickly. So you tell me on what date does the current small oversupply in Melbourne become exhausted?

        Do the math.

      • willynilly says:

        89,000 permanent, me thinks not. You had better check your permanent numbers and then your math will be quite different. 66% of our NOM are temp visa holders, are they not?

        You wish to avoid my questions as they challenge your ‘gut’ felling about things. So be it.

        I also note that hardly any people are moving interstate from VIC now compared to the past.
        http://www.ausstats.abs.gov.au/ausstats/ABS@Archive.nsf/0/047D31637AECF400CA257AD7000D11FE/$File/310102.xls

      • willynilly says:

        “The states with an oversupply are Victoria, South Australia, Tasmania and the ACT. Victoria has created 69,000 too many new dwellings since 2009 – that’s about a two-year oversupply.”
        http://melbourne-leader.whereilive.com.au/property/story/balancing-new-build-needs/

        And I suppose none will be built in the next two years?

      • flawse says:

        Peter you are assuming a constant for persons per household. In times of economic stringency this is demonstrably not the case.
        Any move towards domestic consolidation will have a massive impact on supply/demand.

      • Peter Fraser says:

        Yes flawse, I am not allowing for any great change to the occupancy ratio, and that would certainly have a dramatic effect on my expectations. The key for me is unemployment, which I believe dropped again(sorry no link)

        The other factor may be a change in the custom of homeowners. EG immigrants from Asia and the Middle East may prefer more family and extended family members sharing accomodation.

        I’m mainly concerned that Willynilly isn’t allowing for the likelihood of the immigration to soak up the oversupply. He is completely focused on what boxes passengers on airlines tick, and they tick that box largely for their own agenda, it’s not a reliable stat.

        I did say “maybe two years” for the oversupply to be soaked up – it may take more time than that. The immigration is undeniable, and it is a factor that must be considered.

        The other issue raised about the land boom and bust around the end of the 19th century, was after the gold rush, and likely to be at a time of falling population as the gold seekers left for other areas or pursuits. Hence I don’t see the relevance of any direct comparison, although it is interesting.

  12. willynilly says:

    Melbourne has never experienced population ageing before and so the prediction of house prices in Melbourne is simply a guessing game. One thing is for sure, headwinds prevail.

  13. willynilly says:

    And with nealy 50% part time/casual it is hard to see a way out for Melbourne.
    http://www.deewr.gov.au/lmip/default.aspx?LMIP/LFR/Vic_LFR_LM_Population_LabourForceStatus

    • Peter Fraser says:

      I think that you mean about 28% part time.

      • willynilly says:

        Can you read? 902K part time and 1984K full time. 28%?

      • Peter Fraser says:

        It was a quick guess – correction it’s 31.25%

      • willynilly says:

        Ok, you are using the total employed. So be it. Let us use your number. Do you think a state with 1/3 of its workforce as part time can afford more debt?

      • Peter Fraser says:

        I think that more people can demand and pay for more houses.

        Paul the populations isn’t going to contract for about 100 years, but please let me know then if I happen to be wrong.

      • willynilly says:

        Mmmm. like no major city burbs have declined already? When you are proven wrong you seem to add in new ‘gut’ facts.

      • Peter Fraser says:

        Paul, of course the populations of some inner city suburbs have declined, but that makes the situation worse until that suburb has a new rush on young home makers. I don’t know why you can’t see that.

      • willynilly says:

        So why the decline, where was the ‘rush’ of young buyers in the last 10 years? Oh, that’s right. They can not afford those burbs, thus the population decline. You logic is flawed as your asswertion would mean that they should not have declined at all. They did.

  14. willynilly says:

    Participation rates…,

    Date Participation Rate
    November 1978 60.8
    November 1979 61.9
    November 1980 61.8
    November 1981 61.1
    November 1982 60.3
    November 1983 60.7
    November 1984 60.7
    November 1985 61.6
    November 1986 62.1
    November 1987 62.1
    November 1988 62.5
    November 1989 64.2
    November 1990 64.8
    November 1991 63.0
    November 1992 62.8
    November 1993 63.2
    November 1994 62.5
    November 1995 63.5
    November 1996 64.2
    November 1997 63.1
    November 1998 63.0
    November 1999 62.4
    November 2000 63.3
    November 2001 63.6
    November 2002 63.3
    November 2003 62.9
    November 2004 64.1
    November 2005 64.2
    November 2006 64.2
    November 2007 65.6
    November 2008 64.5
    November 2009 65.4
    November 2010 66.1
    November 2011 65.5
    November 2012 64.9

  15. raff says:

    Great work in 2013 guys – I read very ofter but this is my first comment. Also thanks to Peter Fs comments, as it is nice to have some comments that aren’t 100% bearish :)
    To all the Melbourne comments above, wouldn’t be so sure about further declines… Don’t get me wrong, I live here and actually wouldn’t mind it (looking to upgrade my house and it would cost me less) :) Have been wathing inner suburbs and bay areas (places where I may want to move to) but have not seen any declines to speak of (have been watching weekly)… More the opposite really… Agree that there is some overbuild in some areas, but desirable suburbs seem to be doing very well. Also the positives of Melbourne: 1. Lowest mortgage debt, lowest mortgage stress levels, highest home ownership rates & even lowest rents are positives in my opinion -> more money to spend on the finer things in life :)generating more jobs too… Let’s see what 2013 brings, but my prediction is 1-3% gains over here. Whatever happens, if I find a home I like in a suburb I like, I will buy and move in the next few months…

  16. The Bear Jew says:

    Oy Vey,

    The moderation around here is odd, posters routinely calling PF a spruiker yet when I had a tongue in cheek dig at him on the 2013 predictions thread the other day my post was canned. Poor very Poor.

    • Peter Fraser says:

      Go for your life, but it’s odd that a guy impersonating a second rate breakfast TV presenter is calling anyone a spruiker.

      Have you watched the show that you don’t host lately?

      • The Bear Jew says:

        Pete,

        I don’t think I have ever called you a spruiker that kind of was the point of my post, and I prefer number 1 rating breakfast TV presenter thanks.

      • Peter Fraser says:

        Lol – you at least have a good sense of humour David.

        Actually I want logical criticism that challenges my beliefs, so please do criticise.

        I know that you’re still an impersonator, but you do have style.

        Cheers…

      • dumb_non_economist says:

        Hey Peter, do you want your entrenched bias challenged?? SMILEY!!

      • Peter Fraser says:

        Oh yes please DNE.

        I come here everyday hoping for some quality information or at least an amusing tale.

        I don’t want to put you under pressure, so do you know any good jokes?

      • Jason. says:

        yeah Pete,for this n,i can’t even remember writing my name on my skate board let alone a wall..But i can remember,fogging up your doll-style shop windows and seeing my green eyes light up when i was young,back in the early 90′s,i too was disappointed to have just missed out on the last doubling in prices,but a sign from a turn handle fell and a door opened,bottoms pushed n tables topped n i was found,as a Real estate lady owner was heading out,i was walking in,to a box shelved of debt as i bought her house,then still,
        with all the P’s,I fought with everything from recessions to termites for the following 13 years…to return the cautionary wiser,Today..No jokes. http://www.youtube.com/watch?v=irbFBgI0jhM

    • L says:

      I think the problem was more so that you mentioned the site which cannot be named, which often leads to a run of irrelevant comments coming out of the woodwork.

  17. Jack says:

    I am getting too old to make predictions re markets. I was reading that Australia is taking about 21,000 per annum Irish Immigrants and that we had net population inflow of 300,000 last year so there has to be demand.

    I am of the belief in the slow melt as the determination of government at all levels not to have a falling RE market outweighs logic.

    What is the net return to an investor on the top tax bracket for IP in victoria over the last 9 years ?

    Property in my area peaked in 2004 and is showing a negative return after inflation for that period. ( south coast NSW)

    • willynilly says:

      Jack, Most of our NOM is tempo visa holders and our emigration is peaking at over 87,000 people last year. Best to look at permanent arrivals and departures. International students and temp visa holders (approx 908,000) do not buy houses.

      • Peter Fraser says:

        Paul – please look at the way that departures and returning expats are collected. It’s not a solid statistic that can be relied upon. You have based your numbers on an incorrect statistic.

      • willynilly says:

        People who are Australian residents (non-OZ born) have to tick a card indicating how many years they will be away. I have checked my data. 32K of the 47K ticked 5 or more years.
        http://www.immi.gov.au/media/statistics/statistical-info/oad/perm-dep/permdep.htm

      • willynilly says:

        To sum up, your gut tells you that the oversupply of housing will be gone in a couple of years and that forms the sole basis of your assertion of only a couple of years before a recovery. You ignore population ageing, participation rates, interstate migration, % of part time workers, falling manufacturing jobs and some declining burb populations.

        Got it.

      • L says:

        I think the same statement can be made about clearance rates!

      • dam says:

        if you look at this table you would see the huge increase in settlers /long term arrival ( net 283,346, which is masked in the overall # by the increase in short term departure).I am sure there are plenty of subtleties in interpreting these numbers but the trend look clear, permanent immigration to the roof ( with the associated consequences for increased house prices & decrease in standard of living)

        http://www.immi.gov.au/media/statistics/statistical-info/oad/totalmovs/totmov.htm

      • willynilly says:

        Fail. permanent migration is shown here.
        http://www.immi.gov.au/media/fact-sheets/05emigration_1.htm
        Net gain 1978 – 123,000
        2008/9 – 77,000

        You can not use short term visitors for any meaningful housing data, unless it is a resort.

        You FAIL. Permanent immigration is not ‘to the roof’ at all. Our peaking emigration has killed the net gain.

      • aiecquest says:

        +1 permanent immigration has only increased at a modest rate while temps including students, guardians, dependents, 2nd year WHVs and 457 temp workers have been responsible for “population” increases (the latter more regional). These increases have been constantly spruiked by RE industry, media, anti immigration, anti population growth, anti any growth and racist lobbies; but are purely alarmist (or in case of RE hoping). Further, Chinese buying up, my understanding is that e.g. families of international students can only buy newly constructed apartments? (Curious no one bleats about white looking people buying up property?)

      • dam says:

        Chinese students (proxy of parents of course) are buying houses big time ;-)

      • Bubbley says:

        Not just Chinese students. The government opened up the doors to rich Chinese immigrants on a Sunday night just before Christmas. Perfect time to quietly slip it through the news net in a 20 second news snippet on the ABC.

        No age limits, no character tests, no education requirements. All they needed was $5 million or more in cash.

        So bring your triad money and your illegal earnings – all you have to do is prop up the faltering Australian housing market and we will launder your cash for you.

      • willynilly says:

        And have you any data or links to support such a claim?

    • dumpling says:

      “I was reading that Australia is taking about 21,000 per annum Irish Immigrants”

      Do they come with any money? If they had, why would they wish to emigrate in the first place?

      • Bubbley says:

        No,they don’t come with money. They come to Darwin and work in jobs that require a high vis shirt. Then they live 12 to a 3 bedroom flat/illegal backpackers, get drunk and start fights.

        The Irish are coming to Australia because there is no work at home. I’ve spoken to a home sick Irish guy who’s mother told him to stay in OZ because “there’s nothing for you here”

      • willynilly says:

        Correct and they the temp visa holders are not going home to Ireland. Our illegal overstaying Irish is a joke.

      • Jack says:

        Actually its everyone overstaying not just the Irish, the anecedote of them living 12 to a room applies to a lot of different nationalities and also overstaying their visa via false IDs is a big issue

  18. Jack says:

    They have to rent though.

    The euraka moment i think will be the catalyst or a terms of trade shock.

    The big thing for an invester is each year that a negative geared investor loses both the interest differential between rent and interest and the fall or even stagnation in capital values means that a bigger gain is required to make it a worthwile investment. So they hold on and each year the required return gets larger.

    If someone is 80% geared a 10% drop in value is a 50% loss of original capital.

    • willynilly says:

      Rent or share? My guess is most international students cram into share acccomodation.

    • And let’s not forget they’re taxed on any capital gain.

      The majority of capital growth is directly attributable to inflation on the land component (over very long term, it should almost all be). The structure is a depreciating asset.

      It’s not hard to see why it’s going to be nearly impossible to get your capital back with the same purchasing power as before the investment unless rental yields increase substantially.

      Of course there is only so much that a given qty of people can afford to fork out in rent, and we are at the high-end of that already…. thus logic will prevail and prices will need to fall to a level whereby yields offer sufficient returns to justify the cost and risk of investing in property.

      It’s not a prediction, it’s a logical conclusion that anyone with basic understanding of maths should be able to understand.

      The “property experts” that keep recycling the same old “buy now!” spruik really should be ashamed. RE agents can make a fine living churning properties without fuelling the Doc Wilson pipe dream

      • dam says:

        we have to invest somewhere, there is risk everywhere but frankly the risk of investing in properties is ridiculously low compared to most others vehicles at similar leverage, gold is in ponzi and shares are now only for suckers/speculators.
        at the end of the day i m not sure there will be any significant difference between all possible investments, but a property can be paid off and will not disappear, big plus, and big australia will make investment grade properties scarce, i should be fine, but as i said i dont expect much differences wherever i invest over the long term.

      • Jack says:

        Where to invest is the issue, I think culturally, the way in which the cards are stacked, immigration etc are all logical reasons to invest in property, but then i can come up with just as many logical reasons not to. The bottom line for me is that any leveraged play at the moment is a bit of a punt.

        Bank shares make me nervous but then they are TBTF so logically they should be all right but the CBA valuation at the moment equalling the banking system combined size of Italy and Germany with a combined population of about 100 million just doesnt feel right, and thats my feeling with property, no one wants a bucketload of debt when your employment is uncertain, particularly if you are in the public sector and I suspect they tend to be one of the larger sources of IP investors.

        The only thing I like at present is overseas assets because of our strong AUD and that is based on logic, but again i am cognisant of what Flawse often quotes, that what should happen is different to what is likly to happen.

    • flawse says:

      “The euraka moment i think will be the catalyst or a terms of trade shock”

      Yes When/if that happens interst rates uncontrollably up and all predictions go to hell and gone!

  19. The Patrician says:

    Of particular relevance to the dour outlook in Vic is the plummetting Govt revenues…ditto Qld and SA.

    This from SA.
    http://www.theaustralian.com.au/news/breaking-news/sa-govt-to-sell-off-buildings/story-fn3dxiwe-1226546173338

    Be prepared for more vigourous govt sales of govt owned commercial and res property as Vic desperately tries to fund its AAA rating and promises to the RE lobby.

    The continued Vic govt funding of the FHB grant on pre-existing properties whilst cutting stamp duty is a testament to the lobbying “squirrel grip” of the REIV

    • willynilly says:

      As Vic ages, the voting bloc who want high interest rates will grow. The REIV will come second to the ballot.

  20. Janet says:

    But gas is going to save the USA, and by extension all of us; or is it?! “…The PR/media happy talk racket is also aimed at maintaining various subsidiary fictions about the economy, such as the fibs that the housing market is bouncing back, that “recovery” is ongoing….Perhaps the most pernicious big lie is the bundle of fairy tales surrounding shale oil and shale gas, including the idea that America will shortly become “energy independent” or that we have “a hundred years of shale gas” as President Obama was mis-advised to tell the nation. It is pernicious because it gives us collectively an excuse to do nothing about changing our behavior or preparing for the new arrangements in daily life that the future will require of us…..”
    http://kunstler.com/blog/2012/12/forecast-2013-contraction-contagion-and-contradiction.html

  21. thomickers says:

    Chris Vedelago holding up the Fairfax fort whilst everyone else is on holiday… nice!

    • Gunnamatta says:

      The way Fairfax is heaidng its is probably best to use up the holidays while they are still open for business.

      If the word about the Guardian opening up an Australian version (web based) is true then Fairfax is starting to look like a carcass – there goes the readership looking for intellectual fodder and any sort of global frame of reference. Tha Fairfax strong suite after that would be coffee shop ratings and real estate spruiking.

      • Hi G-Matta,

        thanks for the tidbit about The Guardian I for one would be pleased to pay – oddly I would pay for that!

        Of course I would pay after buying my MacroInvestor sub! ;)

        Thank you for sharing.

  22. Bobby Fischer says:

    Edit: Bobby consider this your first and last warning. MB has no time for this sort of off-topic ad hominem

    • China-Bob says:

      Good one Bobby, sorry to be laughing at PF’s expense because I like the balance that his bullish tone brings to this forum.

      Personally I wont be buying any Syd or Melb RE anytime soon, however my reason is the equally deluded opinion that my capital is better invested in building my own company.

      My big lesson on Aussie mindset (re RE)came when several potential investors told me that they would be definitely looking for an exit, from my venture, if RE prices dropped by (between 10% and 30%) there were different trigger levels for different investors. My point here is that even the bears are just bulls-in-waiting. So far I have met ZERO investors that didnt basically tell me their dream is to own a big IP RE portfolio.

      I travel regularly to Japan and the US, and I can tel you for a fact that many (if not most) investors have no interest in self managed IP RE,
      REIT’s=maybe/yes
      Direct owned investment properties= absolutely NO

      One thing is certain RE prices can not double forever, especially while the rest of the externally productive economy suffers, BUT I doubt we are at the breaking point. I suspect the breaking point will be reached when a CAD blowout forces a RBA rethink about the true value export businesses within the Aussie economy.

      • Peter Fraser says:

        and China Bob – I thought that you had the intelligence to be above this garbage – sadly I was wrong.

    • dam says:

      you can ad hominem ( but it s not very classy) but PF has been pretty much spot on since a while.

      I dont know Melbourne but I would not be surprised if it get back on its feet within 2 years, long term immigration is to the roof, they usually mainly settle at Melbourne and unlike Aussies, they are not willing to live in noman lands, with no infrastructures, far from work.

      Give them 2-3 years to settle and be ready to buy, drop the AUD from them to bring their funds in and properties relatively close to CBD could do very well indeed, the slump area, probably not.

      • Christiaan says:

        How could I forget ‘dam’….. One of PF’s satellite bots/spruikers.

        The Real Estate industry must really be panicking if they are throwing more spruiker drones at MB.

        It only reinforces my stance to not go anywhere near property, although it is somewhat annoying to have to skip almost every second post due to its spruiker content. Good for a laugh though.

      • dam says:

        If you re not open to discussion and prefer your pre made conceptions/certitudes, fell free, close your eyes, bend over and be a nice little victim ( and pay your rent in time).

        this forum is already getting pretty boring with uniformity and property fear.

      • Christiaan says:

        If your bored dam you know where you can go.

    • Peter Fraser says:

      Bobby I can only say how disappointed I am that you would stoop to this unadulterated rubbish in an attempt to discredit me.

      None of your pseudo facts are correct, and in fact none of your said to be facts are ever correct.

      If you can’t debate above the belt then you are not a worthy person for me to exchange views with.

      ———————–
      Admin: Warning to ALL. Stay on topic and leave the personal attacks at the door. If someone doesn’t agree with you then explain in polite terms why you disagree with them. Insulting someone because you don’t agree with them is not a valid response.

      Let me google it for you

      http://lmgtfy.com/?q=dialetic

      —————

    • Bubbley says:

      As a reader of MB I find the vilification of one commentator by to be tiresome mob like behaviour.

      In this thread alone there have been multiple attacks on PF with no attention to facts, citations or relevancy to the topic. Insulting someone on the bases of their job is petty and bullying.

      Getting personal on the internet is a waste of time and lowers the intelligence levels of the poster.

      Really boys, just get over it.

      • willynilly says:

        One must take Peter’s data and world view against the backdrop of his profession. A mortgage broker. I thought that would have been obvious and then to look at his assertions and data and understand its bias.
        In reality I think that Peter would agree that rising house prices are not good for an advanced society however as a mortgage broker he would rather join them than try and beat them.

      • Peter Fraser says:

        How would telling an untruth on this website help my business Paul?

        Seriously – how would it?

        I’m sure that there will be times when I will be wrong, but there is no agenda, what purpose would it serve to look silly and wrong on the internet.

      • willynilly says:

        Personal bias confirmation. That is how it helps your mortgage business.

      • Peter Fraser says:

        Seriously Paul – that’s your best shot??

        What – no marketing stategies, no cross selling, no hedging against falling or rising markets, no ideas at all?

        OK then how do I monetise a bias? Let’s give that one a shot.

        Are you absolutely sure that you have been in business? Didn’t you once tell everyone that you were an academic?

        Do you have anything intellectually north of mimsy?

      • willynilly says:

        Yes was an academic and also had many businesses, employed people and now do app as 1 of the 2.5% of developers who make any real money. Even had a number 1 education app after 3 days of release. What is your point, of course I expect your ‘business’ to have many elements.

        Quite simply, your bias is that rising house prices far beyond the CPI and wages, are good thing for an advanced society. That is why you see house prices rising without consequence. If you believed they were not, you would stop residential lending. You start believing that rising prices are doom and gloom and that will not help your business.

        QED.

      • Christiaan says:

        “””what purpose would it serve to look silly and wrong on the internet.”””………………………………………………………………………………

        Funny that, seeing as that pretty much sums up 95% of your posts.

      • Peter Fraser says:

        Paul – show me where I said that house prices rising far beyond the cpi or wages was good for the economy. That is what you claim, now back it up.

        Paul you create strawman after strawman and never come up with evidence. Now show me a quote where I said that…

      • Peter Fraser says:

        Christiaan – well if 95% of my posts are silly or wrong, then it won’t be hard to find several of my assertions that are completely incorrect.

        That’s your task for homework. Off you go and see what you can find…

      • willynilly says:

        Peter, previously I have stated in a comment that I thought you did not actually fell house prices rising far beyond cpiu or wages was a good thing. So why push a buy bias?

      • Peter Fraser says:

        So you are wrong but you don’t have the fortitude to admit it…

      • willynilly says:

        Peter, I was not wrong. You feel house prices should not vastly increase more than the cpi or wages.

        Now, why do you sell residential mortgages with a belieft like that?

      • Peter Fraser says:

        Of course you’re wrong Paul, you are constantly wrong. All you are doing is telling everyone what you “think” that I believe. If I have actually said that somewhere you will be able to find a quote and link to it, but you can’t because no such quote exists.

        Now instead of displays of idiocy please supply this link to what you think that I have said, or drop your constant strawman arguments.

        Seriously Paul you have zero knowledge of what I actually do and how I earn an income – zero. Please stop making things up in future, I don’t do that to you, and I expect the same courtesy in return.

      • willynilly says:

        Peter, for you to clarify, are rising house prices beyond the cpi or wages a good thing for an advanced society? A simple anser will suffice.

      • Peter Fraser says:

        Over the long term – NO – that has always been my stance.

        Now please stop making things up.

      • willynilly says:

        Well now we get to it.
        Over the long term, no, ok got it.
        Stills seems an odd belief for a mortgage broker to have, but I live and learn every day.
        PS. Happy new year to your and your mob…. :-)

      • Peter Fraser says:

        Actually willnilly your exact words were [i]“rising house prices [u]far beyond[/u] the CPI and wages”[/i]

        No one wants to live in an unsustainable economy. Sometimes the rate of increase will be higher, and sometimes it will be lower, but the long term rate cannot be more than what people can afford.

    • Bobby Fischer says:

      That’s too bad. I thought it was quite good…

  23. Christiaan says:

    And here I was thinking Peter Fraser was nothing more than an annoying spruiker, when all along he is really in the business of manufacturing faith!

    Manufacturing aint dead afterall. ;-)

    • Peter Fraser says:

      On the other hand Christiaan – you have lived ujp to me every expectation of you.

      • Christiaan says:

        Ill give you one thing, your a little more subtle than ‘dam’, but as transparent as a glasshouse.

  24. Barell77 says:

    I posted a while ago (probably 8 months) about a 20 hectare/50 acre vacant block of land on the Mornington Peninsula that sold in Feb 2008 for $2.15 million and then resold in January 2012 for $1.35 million (purchaser understood to be international investor). I was doing some more research in the area a couple of days ago and noticed the same parcel is on the market again. I have been informed that the vendor wants $1.5 million (they’re dreaming) and the highest offer they have had so far is $1.2 million. If it does sell for $1.2 million or thereabouts this would be the largest decrease in sale price I have seen over this timespan for the same property.

    • Christiaan says:

      Our Australian based clients are predominantly asian (95%) and the vast majority of those are marketing their developments direct to asia (China / HK).

      FIRB is clearly looking the other way!

      The funny side of this is that alot of our clients are losing money hand over fist in holding costs and some are looking to sell out with just approved plans as they know they will go under if they attempt to build their projects. Their asking prices are still completely unrealistic so I dont see how they will get anything other than a massive haircut in the slide/crash that continues to unfold.

  25. jwest says:

    This is my take on it all

    The reason I believe there is what is now called a “slow melt” is because of a few things:

    the fhob have now moved out of these homes that they bought from 2008 onwards and are renting them at a loss.Probably moved back home to mum n dads.

    The Gen Y are buying them now as investments which is keeping the property sales ticking over. or should I say disguising the “slow melt”

    The lower interest rates make this relatively easier for them to afford. And the low interest rates are sucking more new punters a into declining market so they dont miss out!!!

    Rising unemployment on the back of a high $. I live in victoria and the amount of business that have gone bust in the last two years is clear for anyone to see if you know what your looking at. I would tip one business failure hits the news a month. Given whats going on overseas I dont see this getting any better.

    and then theres the mining slowdown. I have close friend who is in SA where mingin projects have been cut, he thinks he has 1 years work left.

    Migration – they are still coming, I wouldnt beleive any of the stats that come out given how skewed they would be, just look around outside, you will see how many more international migrants have moved to the lucky country.

    All these new SMSF funds peddling property investment, I read its the fastest growing form of superannuation. Given many of the the baby boomers on teh cusp of retirement, they would of retired a few years ago but the GFC stopped that, now they have re-budgted for their retirement and I would imagine they are getting ready to pull the plug on their super soon. I wonder how many of these baby boomers have taken out a couple of equity loans to buy a couple of properties…..

    Government intervention-now that the surplus has been discarded I would bet my left nut that there is some sort of government grant , removal of stamp duty etc election promise by the end of the year on both sides to help prop up the slowing construction industry.

    i put these together and dont see any sort of crash coming but agree with the slow melt scenario. at least for the next 6months anyway

    The one thing that is hard to gauge is what the governments will do, will they act like sheep and follow the US with more expansionary measures or will they have the heart to draw a line i the sand or a line in the ceiling. i tend to think not which will reiterate the can kicking like of the rest of the world.

    IMO the one thing that never gets mentioned amongst these posts is the attachment to the aussie dream of owning your own house or the aussie dream on steriods which is to own your own home and few investment properties.

    Whilst the so called aussie dream is stil fresh in our public psyche I would imagine people will put up with losses sustained in hope that they will get the return later on. But the day that changes……whether forced or not.

    Then I would be getting very worried for anyone who is betting on aussie property to bring them the good life

    PS: The P Fraser vs everyone else is always an interesting read. cheers

    • Rusty Penny says:

      It’s funny about this ‘slow melt’ keep popping up.

      We’ve had another year of losses, with 2 large states throwing stimulus money and record levels of transitory migration propping up rental accomodation.

      Up to August or September we were experiencing 1% falls MoM

      Annualised at 13.2%, that goes beyond slow melt.

      A the story is clear for anyone who understands calculus.

      Housing costs too much, it sucks up too much discretionary income that it leaves in sufficient spending for the rest of the economy.

      The rest of the economy needed people to access debt, until they reached peak debt.

      As Keen points out, a component of GDP is the marginal increase in debt.

      Housing will get a free card for a while, because the method of exerting downward price pressure on housing… homelessness, isn’t plausible.

      If you protect housing, you cost jobs, which will result in housing being lost anyway.

      I say rip the band-aid off in one foul swoop, it’s now been 5 years since the tail end of 2007 and nothing has got better.

      Repudiate the debt, give the assets to the secured lenders and start again.

    • McPaddy says:

      Jwest, don’t forget that it’s not just an Aussie dream. It was an Irish and American dream too…until it wasn’t. This is a lie that most nations tell themselves. Part of the “we’re just a better class of people than the rest of the world” illusion.

      • Mining Bogan says:

        This is something that keeps on getting lost in translation. It was a worldwide dream to live in your own home. It only takes one bailiff knocking on your door to change that mindset.

        The New Australians who have come here to escape economic hardship are in NO frame of mind to be buying real estate. They see it as poison.

        Soon enough so will the denizens of this country.