After publishing my latest post I received the following e-mail from a reader.

I suspect you may be interpreting this REIV move incorrectly. If history is any guide the Real Estate Agents are in the process of “switching sides” figuratively speaking (as they are really on their own “side” at all times and everywhere).
If the REA’s cannot get the buyers to come up then the vendors must come down or ….. no sale and no commission. It was ever thus.
Think of this REIV initiative as a trial balloon. There have been a few since the beginning of 2011. IMHO this trend will escalate in the months ahead.

Apart from the bit about me misinterpreting the actions of the REIV I mostly agree with my reader. However I am not so sure it is the REI bodies who are driving this change. 

The problem for the real estate industry is they have had it so good for so long, and I assume they are again waiting for the government to come to their rescue once again this time. However in the meantime the “practitioners” are in a bind. The industry as a whole seems to want to keep trying to talk up prices, I can only assume because they believe that this will keep the industry viable in the long term. But in the short term the individual members need turn-over to stay in business.  This is creating a very interesting dynamic.

Just like falling prices it was difficult to detect in the beginning, so it actually took a bit of research and few dot joins to find the first evidence.  However from today it seems sales have fallen enough in some places that RE agents can no longer hold the line of their guild.

This from Harcourts RedCliffe in north east Brisbane. (h/t H4A via mrh)

… So what is happening with the property market in 2011? Very simply, it is a great market for buyers and slightly less exciting for sellers. It is fair to say this market is one of the most challenging for sellers since the mid-1990s when prices retreated about 20% from market highs and stayed that way for six years.

While no one has a crystal ball and it is impossible to predict market trends with 100% accuracy, there are some similarities between the present situation and the bear market of the 1990s. For instance, recent media reports have focussed on an oversupply of new houses in Queensland. This is a result of developers continuing to release new product on to the market faster than there are buyers for it. Another similarity is that the flow of interstate migration into Queensland has slowed. A recent article reported that Queensland was no longer the most preferred destination for Australians moving interstate.

So what does all this mean? The most likely scenario is that property prices will remain flat for some time, and may even fall to some degree if buying demand remains weak (which at present seems likely). Residential real estate is normally a fairly stable commodity, largely immune from the volatility of stocks and other investments. Yet property prices can fall, and most likely will fall if there are more people wanting to sell than buy over a protracted period. For buyers, the next year or two will likely bring some excellent opportunities to enter the market.

For sellers, the way to achieve the best result in a tough market is to invest in a proactive marketing campaign, exposing your property to the greatest number of potential buyers; and then respond to market conditions quickly and reduce your price if necessary to attract a sale.

Now is not the time for serious sellers to hold out indefinitely hoping a dream price will materialise. In this market, longer times on market may have the opposite effect.  

Oh boy. For an industry hell bent on doing an impression of the Iraqi information ministry this is a huge capitulation by one of its members and in my opinion likely to lead to many others following suit. With some already selling out and now others openly talking the market down it looks as if the REIQ has the beginnings of a mutiny on its hands.

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  1. It annoys me the way people use the ‘property isn’t volatile like stocks’ line. Just illustrates their ignorance.

    Yes, property is structurally less able to swing about on a day to day basis. But measure anything relatively infrequently and it’s going to appear less volatile.

    The chances of, say, a -20% year, a five year negative real return, etc, are right up there.

    (Except in Australia of course, where property is a 6% to 10% a year one way bet…..)

    Put “investment” (I use the term loosely, I’d much rather call most of the “speculative”) properties on an exchange and you can bet your life they’d behave much more like stocks.

    • Ben said: “Put “investment” (I use the term loosely, I’d much rather call most of the “speculative”) properties on an exchange and you can bet your life they’d behave much more like stocks.”

      Well the Verbose Chief of “Property is not volatile” wants to do exactly that: create property index CFD’s so you can hedge your property “risk” (i.e he and others mistake risk for volatility), whilst others can trade the heck out of another derivative over an already highly leverage asset class.

      Ignorance is bliss until you get the ear of the movers and shakers in the halls of power – all who believe that one market is “superior” to another, or swallow the claptrap that the property market is “efficient”.

  2. Did anyone see Bloxham’s piece in Business Spectator today? No Bubble here………..move along.

    Is this just another ex-RBA man toeing the line? Mind you, he was calling rate rises this year too, which I think won’t happen unless absolutely forced upon the RBA. No pre-emptive moves in 2011 methinks

    • I would guess that the longer Bloxham stays consistent with the RBA line, the longer he will maintain good contacts into the RBA via his personal relationships made over his career there… the more he acts as a “useful” outsider, the more useful they will be to him… not to suggest impropriety, just common sense on relationships and networks…

      In any case, it seems to me that there has been a major shift in the attitude of a lot of talking heads over recent years… up until the GFC – but most importantly, the dawning on all about the serious widespread consequences of the popping of national housing bubbles – many analysts with vested interests in equities would talk up equities over property and thus would point to the housing bubble…

      Whether it is just the realisation that the popping of the housing bubble will likely take equities (including the public interest in investing in them) down, or whether it is also the widespread understanding that if you want to get in good with the politicians, pointing at our housing bubble is not going to “quite” get you there, there is a definite aversion by analysts to talking about the housing bubble compared with pre-2008, in my view…

      Even the most bearish analyst on Australian property working in the private sector in Australia reckons there will be a soft landing essentially because that is what the RBA wants…

      I doubt that he’ll be proven correct… but I understand that it is probably in his employer’s best interest if that is how it pans out, and thus he walks that fine line of being bearish on property while suggesting the consequences of its deflation will have limited impact on the economy…

    • My goodness, some skewed remarks in that article! (link:

      “price to income ratio has tracked sideways for the last seven years at 4.5.” yeah right!

      And I like this remark: “Australia has the largest dwellings in the world, and they are of high quality.”

      Some people really have to start realising that homes in other countries are not smaller per sé, there’s just more varied stock. Also, I’m sorry to to say this, the quality of most homes in Oz doesn’t compare favourably to the quality of homes in (Northern) Europe, if only for the materials used and lack of insulation. 20 degrees variance up from the comfy 20C is still a 20 degrees variance…

    • And Business Spectator is an interesting one, in itself… (this also follows on from my comment above)…

      Most bears actually respected Alan Kohler up until the GFC… he seemed to be a voice of reason, even on the ABC news… now he seems to have changed his tune, both when working for himself at BS and for the Government on the ABC…

      My guess is that Karen Maley was taken on around that time to become the resident bear to free AK to be much less bearish on housing, thus sitting more comfortably with his other employer (not us, of course, because we only have democracy one day every 3 years)…

      And what about old Gottie (as H&H likes to call him)… a few months back he thought just about any policy related to big business being floated would bring down the housing bubble (when we didn’t have one in anycase)… “bring in the RSPT and the housing market is going to collapse”… “the Greens attack on banks is going to cause a housing collapse”…

      • Perhaps Business Spectator could change its name to “Baby Boomer’s R’ Us” to better reflect their editorial bias?

        Not that there’s anything wrong with being a Baby Boomer. Some of my friends (and former clients) are Boomers.

        And most of them are as concerned as their younger cohorts – going by the comments after Bloxo’s “analysis”.

  3. Having read Neil Jenman’s books one is left with the impression that REA’s are compromised from the outset. The realities of closing a sale are at odds with a true “agency” arrangement.

    Instead it should be more of a facilitative role. Then there would be nothing wrong because they’d simply be working to get an outcome for all parties.

    Industry Reform is the only solution here, well that and gagging the spruikers from giving anything resembling financial information.