Earlier this year, I posted preliminary data from the Real Estate Industry of Victoria (REIV) showing that the overall number of home sales in Metropolitan Melbourne in calendar year 2012 (69,000) was nearly -3,000 less than 2011 and the lowest volume of sales since 1996, when 67,904 homes were sold across metropolitan Melbourne (see below chart).
Yesterday, the Department of Sustainability and Environment (DSE) released housing transfers and mortgage data for the month of December, which recorded the lowest number of annual transfers in the series’ 10-year history (see below charts).
In calendar year 2012, 169,559 housing transfers took place across Victoria, which was -3% below the levels recorded in 2011 (175,627) and -13% below the decade average of 195,172 transfers.
Below is a similar chart showing the rolling annual number of housing transfers from December 2002 to December 2012:
While the annual number of transfers has recovered marginally from the low watermark recorded in September 2012 (168,249), they remain highly depressed.
The DSE’s mortgage finance statistics are unique in that they provide data on both mortgage lodgements (i.e. new mortgages) and mortgage discharges (i.e. mortgages repaid in-full). Below is a chart showing both series on a rolling 12-month basis:
And below is the number of net new mortgages created, calculated by subtracting mortgage discharges from mortgage lodgements:
According to the DSE, the number of mortgages lodged in the month of December (13,596) was below the number of discharges (13,782). Similarly, on an annual basis, the number of mortgages discharged (190,306) continued to exceed the number of mortgage lodgements (188,804), meaning that -1,502 mortgages were lost in the State of Victoria in the 12-months to December. This compares to the average of around 12,800 annual net mortgage creations since the series began in 2002.
And below is a similar chart showing that the ratio of mortgages lodged to mortgages discharged:
Between 2003 and 2005, there were around 11 mortgages created for every 10 mortgages discharged. In the 12-months to December 2012, however, the number of mortgages lodged has slipped just below the number of mortgages discharged.
unconventionaleconomist@hotmail.com
Oh, my! Lower volumes on lower prices (and rates)… Certainly doesn’t look like the “as soon as prices fall, people will rush in to snap up bargains, pushing prices right back up” theory is holding true for Victoria.
You are righ bg0, as a potential buyer I am going to wait until at least 530 to %40 has been lost. The sharp increase though 2008 to 2010 was pure speculation driven by FHOB. But one has to wonder if it’s even now worth buying in VIC as it seems it is inline for a sharp decline. It is also a manufacturing/retail/education center but all those industries are failing. So, unemployment goes up which means it’s going to be hard to justify easy visa access for migrants.
While this transfers problem gets worse you also have all this new stock been built. It would seem somewhat like the US. As for subprimes, by what we saw in the senate hearing it would also seem AU has a big problem just like the US with that.
No wonder they are getting desperate in the property industry trying to teach investors and other people how to sell to people in other countries.
Top chart set, Leith. The decade-long trend in net mortgage numbers to negative is extraordinary.
This is no time to take up home ownership.
Don’t Buy Now!
As a Sydneysider I can, thankfully, ignore such data on the basis that our very own Dr Wilson of the SMH informs me that what happens outside of Sydney has as much relevance as what happens on Jupiter.
I shall return to my telescope!
http://smh.domain.com.au/real-estate-news/economist-tears-roof-off-affordability-study-20130121-2d2e4.html
haha, that is a good one, just like what happens outside of Australia has as much relevance as what happens on Mars.
But this is not true is it, everything is connected. For example, what happens if the VIC property market did colaspe, there is at least 2 Trillion of debt in the banking system here, 1 Trillion of business debt, 1 Trillion of private debt, which most of is mortgages. If there is a big problem in VIC that problem will affect the financial markets here, including maybe easy access to credit. Or, how about investors from Syd exposed to the Mel market and they need to start selling Syd properties to break even etc….
Definitely the potential for a domino effect if Melbourne tanks.
Fingers crossed!
Oh yes, just sit back and wait whilst saving and living with with the rellies or paying [i]less[/i] than 30% of one’s income as rent…
try angle brackets Ms (‘greater than’ and ‘less than’ signs)
Victoria has traditionally led Australia into every single recession ever.
There’s something to be proud of.
Another data set that I wouldnt mind seeing (if it were possible) may be transfers and home sales mapped against stock on market and possibly (if it were possible) known stock held off market and not either listed for sale or in use.
I actually have discovered places here in Geelong which have been up for sale more than a year ago, not sold, and are quite literally left vacant – not listed for sale, not up for rent, not anything (I have discovered the Jims mowing guy who goes around once a month to run over the lawns). I am wondering how big a phenomena it is, and if it is growing or not in relation to transfers.
+1 If my memory serves me right the most recent Mel SoM number was falling.
That reminds of some of the stories about homes in California when the US market was busting. They had no people, no signs just the monthly lawn mowers and in the dry states even green grass sprayers, they would spray dead yellow grass green on the bank owned mortgagee properties.
Another canary dead.
Are these figures updated as unsettled sales are finalised?
Actually I’m ok with these figures, more so if there is an update.
The RBA chart pack shows (by eyeballing) that:
1. Housing credit growth is still running about 4.5% and was as high as 20%pa during 2005 (ie totally out of control speculation on capital gain)and has not been lower than about 4.5% since 1996. So no deleveraging in housing on a macro basis even after inflation and population growth adjustments.
2. Personal credit growth which averaged about 12%pa from 1996 though 2006 went to negative 8% during 2008 and has averaged say 0% since 2008 and is recently slightly negative.
3. Business credit growth got as high as 24% during 2007 after being 0 in 2001, got down to -8% in 2008 up to 4% in 2011 and is recently turning/trending down.
So guessing at the weighting between these three sectors credit growth in the private sector is about 4% – just enough to avoid deleveraging in real terms overall.
But of course some cities/regions are getting more growth and others are getting little to no growth or maybe deleveraging a little.
No wonder house prices are flat!
Cairns is in free fall imo.
Rentals are getting a little tight as NG and IP folks run for the exits.
I spoke to a RE agent who was waiting under two weeks before stripping a house down from 335k to sub 290k. The house is a dogbox and I could mow the lawns in two laps.
I still hold that you really can’t look at Australia as just one market. As some folks are posting it will only take one major city to fall in the house of cards, so an average or overview assessment is worth little.
“you only need one organ to fail and the patient will die”
“I could mow the lawns in two laps”
That’s probably a good thing in Cairns in Jan…’cause you’d be mowing it again the next day.
Southern investors are running. Locals are still in because it’s too hot to care. They’ll be in full panic by April.
I’ve put here before that mate bought one of those dog boxes for 220k. They’ll go lower.
Third time I’ve seen this happen in 25 years.
But property only goes up?
Right?
Well, apparently not in the real world.
You’re Darwin, right? Two of my fellow bogans who own houses there are selling. They can see nothing but a down side to the market there. That’s a wow moment. Bogans never see a down side to anything…
Darwin bogans see downside risk? Wow! That anecdote trumps all data, all statistical bases. Game’s up!
Don’t Buy Now!
As per the observations above, there’s an owner-occupied property two doors down from me in Armadale (VIC) that’s been on and off the rental market for the last year. Occupied the whole time though (by the owner I believe) I think they are trying to move somewhere else but they just can’t get a tenant. Similarly I’ve noticed a lot of rentals empty in my neighbourhood, cycling on and off the market (both to buy and to rent). I think a lot of people are happy to wait while they get a tenant at the right price – the question is – is that tenant actually out there or not?
And how long do you keep copping a capital loss (or a crappy two percent return) until you get desperate and sell at a loss? I think the lower turnover reflects that fact that we aren’t there yet -
How long do you keep copping a capital loss? As long as negative gearing keeps your head above the water… The unemployment rate will be the key factor, unless of course our ingenious financial controllers introduce the innovative Home Vendors Negative Equity Grant – HVNEG….. a snappy sounding policy and a sure-fire election winner, designed to do away with negative gearing, paid for by the er.. em.. mining tax?
LOL – Home Vendors Negative Equity Grant. I love that one!
The exception (in Victoria) is the regional centres like Ballarat, lots of people still buying property in and around those areas because it’s so cheap.
Friends of mine live in a small town outside of Ballarat and one of their neighbours sold the house they were renting out to their (unemployed) tenants – somehow they got 100 percent finance through a broker for a house just on 200 grand. This is an unsubstantiated small town rumour of course but it supports the theory that brokers are doing everything and anything to put the keys in your hot hands…
Compare that to Melbourne where the stakes are much higher – there’s nobody who can afford to actually take mortgages on in this town any more. If they can afford a mortgage, they already have one – that’s the core of the problem and that’s why turnover is at a 16-year low.
Anyone got any budget ideas they’d like to share with Mr Baillieu?
http://www.premier.vic.gov.au/media-centre/media-releases/5771-coalition-calls-for-submissions-for-2013-14-budget.html
Perhaps Macrobusiness should make a submission?
Panic.
I’m serious though. I’d love to see MB put together a number of proposals. Things like removing stamp duty, and replace with land tax etc.
Yeah Ted,
For the sake of your new housing industry and your bottomline, remove the FHB grant on pre-existing properties.
Where are the HIA?
Saul Eslake talking sense on FHB grants
Lets hope Mr Eslake is making a submission to Ted.
Arrgh..lets try that again
“Mr Eslake said that first home owner grants were ”a complete waste of money” as they inflate the price of housing and do very little to increase home ownership.
However, he strongly supported the NSW government’s decision to replace the $7000 grant for existing homes with the $15,000 grant for new properties.
”If you are going to waste money in this way, at least by restricting it to people who buy new houses you are no longer bumping up the price of established dwellings and at least providing some inducement for the purchase of new housing,” Mr Eslake said.”
Perhaps Macrobusiness should make a submission?
Do you think they even bother to look at submissions? Money talks, good policy walks.. the amount of say over planning/budget policy is directly proportional to money you tip into the donation jar.
I fear the developers and REIV are way ahead in this game. Still, maybe we can have a MB fund raiser for Baillieu
What’s with all the double negatives in this? It’s not not hard to read.