Spruiking as they exit

You’d seriously think that the Real Estate Industry sponsored media in Queensland would have given up by now. With north Queensland, the Gold and Sunshine coast going through well publicised correction you wonder why they would bother spending the money. But I guess old habits die hard. So once again we are subjected to the wonderful investigative journalism from the Courier Mail.

The median house price in Brisbane is tipped to hit $1 million within seven years. The Gold Coast will follow in 2025 and the Sunshine Coast four years after that.  The projections are based on detailed suburb-by-suburb analysis of the changes in values over the past five years by the Real Estate Institute of Queensland.

Currently, just five of Brisbane’s 138 suburbs have a median price of $1 million-plus: Ascot, Hamilton, Pullenvale, St Lucia and New Farm. But the startling results show that by the end of this decade, more than three-quarters 105 suburbs will carry a seven-figure price tag.

And there will not be a single suburb in Brisbane, the Gold or Sunshine coasts with a median value of under $500,000. An REIQ spokeswoman said the projections were only a guide, and would be affected by economic conditions, interest rates, building costs and other factors.

Is reality one of those “other factors”?

Anyone who has followed real estate in Australia for more than a week is well aware that the entire system is morally corrupt. You can check out sites like bubblepedia or this little diamond in the rough to get a true sense of what I am referring to.

But with the REIQ predicting that everyone in Brisbane holding property will be millionaires in 14 years you would have thought that every member of the guild would be rushing in to snap up as much property as the banks would let them.

It seems however that is not quite the case.  Here is message from a reader who has a tale about their recent rendezvous with a certain south Brisbane property. ( Note: I have edited the message to remove personal information)

Hi DE,

We got some advice from friends that the market in our area was really slowing down.  So on that advice I contacted agents last week to see if they had any bargains going.  I made it clear we wanted to make deals (plural as our friend suggested their more likely to be interested if they think they might get a few sales) and indicated a price range which made it clear we were in the market for a bargain.

Surprisingly we got a response from a local agent the next day telling us that they had a property that may fit our criteria. It was going to go to open house next weekend but we were allowed to see it early and the agent was very clear that the vendors were “extremely motivated” and “will sell this property”. It has been an investment property for eight years so is in fairly original condition, looks ok but will need some work. As it has not listed yet I can’t find it on the internet to show you.

While we were looking around the house the agent kept repeating that the property was “definitely for sale” and they will “meet the market” and as we were parting ways said the sellers were “liquidating”. I found it odd that she made sure that we took a copy of the sustainability declaration even though we hadn’t even shown any interest at that time.

Later at home I was glancing through the sustainability declaration when I realised that I knew the sellers names because their office is a few blocks from my house. I have paid for a title search and there is no mistake they are definitely the vendors. I thought you would like to know just who is “willing to meet the market” and is “liquidating” their portfolio.

The reader also sent me a copy of the sustainability declaration, and since I received that e-mail I have been able to find the property on-line. So where is the office of “such a motivated vendor”?

http://www.bluerealty.harcourts.com.au/

Looks like it is “do what I say, not do what I” do in the REIQ.

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Comments

  1. Was on holiday in Noosa last week, have never seen so many for sale signs…..EVER…!!!

    No less than 5 for sale signs on every corner whilst I was driving around on Saturday. Ground Zero up in QLD.

    Enjoy the bust you spruiker b*stards.

    • Confirmed, I was on holiday in Queensland as well… lots of for sale signs!

      On the other hand I also noticed the overly optimistic 1.3 million dollar apartments being sold at the beachfront in Rainbow Beach. Guess reality hasn’t sunk in over there yet.

  2. Great piece DE. Fancy spruiking on one hand and offloading on the other! Quick get the spin doctors in……’we’re just rebalancing our portfolios’!

    And since when does basic extrapolation cover for a ‘detailed suburb-by-suburb analysis’. Nonetheless, I’m sure there are plenty of sheep who will swallow it hook, line and sinker.

    • Interesting anecdote I pulled from elsewhere in relation to this Mav.

      “I met a guy last week who works in a call centre for one of the “big 4″ banks. He has been there many years and is getting out. Why?

      It’s not the abuse he receives from angry customers – thats fairly constant and he accepts that their anger is against the bank not him – don’t forget he has been there many years.

      It’s the increasing number of calls from people, men as well as women, who break down into tears with emotional stories of why they do not have the funds to pay their mortgage.

      He told me I would be staggered at the increased number of mortgages that are now 1-3 months behind in payments.

      Interest rate increases, Christmas, the cost of kids going back to school, rising cost of utilities, food, petrol – co-incidence. I think not.

      Ahead, falling share prices? Rising taxes? More jobs going offshore? (Hi Telstra, Caterpillar, Cadbury, Schweppes amongst others announced recently) Mmmm.

      Banks will not disclose this info as there is still equity in these mortgages and so are not considered a problem – at this stage. Some people will no doubt battle their way through while others will eventually be forced to sell.”

      My discussions with some agents I know seem to suggest job losses/financial problems and marriage break ups seem to be growing reasons for market listings, as opposed to the usual want for climbing the property ladder.

      I thought Fitch went MIA for a while?

  3. Shocker – good work DE – we just need to keep linking to stories like this – the rest as they say will be history.
    Eat sh*t you scumbag spruikers!!!

  4. Sam Birmingham

    Great work, DE (and anonymous reader person!)

    First and foremost, this is a cracking anecdote… But, at the risk of sounding like the esoteric w-nker that I am, there is a back story here that I find truly fascinating.

    For decades, we had little choice but to put up with vested interests corrupting the MSM, dictating what we read and pushing their self-serving barrow.

    Now, however, we can find our own information (eg. your reader piecing together a few tidbits, performing a quick title search and *voila*), we can distribute that information to a broader audience (via websites and blogs that can be built quickly and cheaply) and communities of people with a common interest can then develop around those platforms…

    That is the beauty of what y’all are building here at the MacroBusiness community — keep up the great work!!

  5. FrankieFourFingers

    If I was stupid enough to believe the MSM I would buy as many properties as I could, and if the banks were stupid enough to also believe it they would recklessly lend me as much money as they could…. oh hang on.

  6. Hey, so what?

    They might be right that houses hit $1 million by 2025…

    …but what good is that if a Big Mac costs $20, eh?

    Ah, them’s be the issues, me harty: Nominal vs Real!

    No, what does the macro-world have install for us in the future? That is the question…

    😉

    • Stewart, the $20 Big Mac, $1million house is the best case scenario I’m afraid.

      Worst case is the $4.50 Big Mac, $150,000 house, with 10% plus unemployment…..

      • Wasted Opportunities

        Best case for whom? Mortgage debtors and the BTFD brigade maybe. Not the savers with a high proportion of cash holdings surely?

        High unemployment is obviously bad for everyone, and a housing bust will probably precipitate job losses like it did in the US. I’m not convinced that kicking the can along to inflate away/grow through the debt is better than taking our lumps and undergoing a correction, provided that serious disincentives against housing speculation are then implemented.

      • Wasted – sorry I was being sarcastic.

        I meant “best cases” for the inflationista brigade as you mention.

        Worst case is a deflation – for both savers (due to zero real interest rates) and debtors (due to unemployment factors).

        Kicking the can is what they (the brigade/MSM/CW) want – not what I want.

        I want a debt for equity swap and a re-setting, along with a paradigm change in credit tightening and re-regulation of land supply/development.

        I don’t want a $20 Big Mac. My wife can eat 3 of them at once. Gets expensive. (somehow she keeps skinny – how does that work?)

      • Wasted Opportunities

        True, I forgot that deflation is not great for anyone either. Hopefully the RBA can manage the great disleveraging as H&H is suggesting.

        Could you do a post on how a debt for equity swap and reset would work for us punters? I agree obviously on the credit paradigm

        Leith has posted extensively on the land supply deregulation, and I agree with his thoughts on its role in the bubble. But I’m concerned about environmental implications of deregulation for Australia. Much of the fringe land that could be easily released is valuable agricultural land.

        I am from Sydney, so let’s take the Hawkesbury basin for example. I can’t help feeeling that in 20 years we will be wishing we had market gardens there again rather than cheap housing. Plus the economies of scale for transport make sprawl seem less prudent than it would be in Leith’s case studies (Austin, Houston etc). Not to mention our disgraceful state government record for transport infrastructure. I do think increased planning flexibility for higher density development in the inner city would be helpful to alleviate supply side issues. We also have a shocking attitude of NIMBYism in Oz when it comes to transport infrastructure that needs to change.

        • Sydney has more natural constraints on supply than the other major capitals. Melbourne’s fringe land to the North and West is low quality and is not used for agriculture, so it is ripe for development. The same can be said for Adelaide and Perth (I’m not sure about Brisbane). Also, the evidence does not support the contention that regulatory constraints (e.g. urban growth boundaries) reduces sprawl. Evidence in Melbourne, Adelaide, Ireland, Spain and West Coast USA, amongst other places, shows that UGBs and zoning tends to push development onto neighbouring towns (i.e. they instead often increase sprawl). I discussed this issue in my Jumping the Urban Growth Boundary post.

          Strong land-use regulations also tends to create undesirable suburbs. Because of the high land costs, cheaply-built homes are clumped together on tiny blocks. These houses typically have tiny backyards and offer little privacy (because they are so close together). In many ways, they are the worst forms of suburbia. These types of homes were not built prior to the mid-1990s when land-use regulations were less onerous and land prices were far lower.

      • Wasted Opportunities

        Also, I think I’m like your wife when it comes to Big Macs (they are a guilty pleasure), and I seem to stay in shape OK.

        Similar to that guy in the “Super Size Me” documentary who eats two big macs a day.

        • Wasted, I too am in shape. Well, “round” is a shape.

          I will add your request for how I think a debt-for-equity swap would work to my (expanding) list of post ideas.

          I too am concerned about the environmental degradation of uninhibited land development.

          Unfortunately, the property and capital markets are receiving the wrong signals on how land like that is valued. My concern is that we have created an “efficent” system of agricultural land use, but not a robust one in terms of food and water security.

      • 10% unemployment, do you reckon it will come down to that rate Prince?

        Maybe you’re correct, 15 years is a long time.

    • By 2025…

      $1 million houses, due to spruiking and the wonderful world of government bailout-stimulus packages. All fake.

      $20 for a carrot, health is exclusively a virtue for the rich.

      $0.99c for a BigMac, debt slaves must be fed. You may get one on a coupon.

      Don’t get sick, unless you can afford it, illness also a virtue for the rich only.

      $1 million dollars (and more) is what one may end up paying for their $375K house since they’ll never reach paid off month, losing the race to interest rate rises.

  7. The combination of spruiking and (highly motivated (sic)) selling is a sign that RE companies who act as principals as well as agents (ie most of them) are starting to experience cash flow problems. How long before they start going bust?

  8. for inflate your way out of trouble or deflating bubble mildly math has to work like this:
    GDP growth has to be bigger than interest rates while debt-less than 100% GDP.
    Or put it in other words- someone still has to take the losses: either banks via negative real interest rates (haven’t seen in my lifetime) and writedowns or “investors” via “equity, mate” loss.

    Unfortunately it works like feedback loop affecting real economy and jobs, which in turn affects borrowers ability to service loans…

    like L.von Mises puts it: “there is no means to avoid final collapse brought by the previous credit expantion”.
    It’s too late.

    And hopes that RBA, government or anyone else could engeneer soft landing is no more than wishful thinking.