RPData reports no change

RPData has put out their latest newsletter today and once again it isn’t great news for the housing market.

The RP Data-Rismark Home Value Index results for May 2011 will be released next week and there is little evidence to suggest that there will be any significant change to market conditions with values likely to be flat to slightly falling across the combined capitals. Listings remain elevated, transaction volumes are running around 14% below the five year average, clearance rates are relatively weak and the market is typically a lot quieter during the middle of the year.

The number of new properties advertised for sale has fallen by -10.1% nationally over the last four weeks however, new listings remain 28.0% higher than they were at the same time last year. Across the combined capital cities, new listings were down by just -3.9% and are 15.6% higher than they were at the same time last year. Despite the fall in new listings, total listings have remained relatively flat. Nationally total listings are down -0.4% and are 36.7% higher than 12 months ago and in the combined capital cities total listings are down -0.3% and are 33.9% higher than they were at the same time last year.

The rate of new listings is definitely slowing but this can be expected for this time of year. The number total listing is trending off which sounds positive for the market even if the stock on market is so high. I however suspect that what is actually happening is that vendors who can’t sell are moving their houses off the sales listings and onto the rent listings ( something that I have previously talked about ). The latest rental data supports this theory.

The number of new rental listings during the past four weeks has increased by 1.4% compared to the result for the previous week. New rental listings are 22.8% higher than they were at the same time last year. Compared to the 12 month average, current new listings are 15.5% higher. Total rental listings fell by -2.8% over the week and are 9.5% higher than the 12 month average

The weighted average capital city auction clearance rates improved slightly last week, up to 44.7% from 44.3% the previous week. Auction clearance rates are quite weak at the moment, sitting below 50% during seven of the last nine weeks. The number of properties being taken to auction is still significant with more than 1,500 capital city auctions last week. In both of the two largest auction markets, Melbourne and Sydney, clearance rates fell to 47.9% last week. During the previous week clearance rates were recorded at 51.3% in Melbourne and 52.9% in Sydney.

The auction clearance rate trend from RPData is something I have collated previously. You can see that both Sydney and Melbourne are in a downward trend and have been since 2009.

I took a look at this year’s data today and you can see that both Sydney and Melbourne are continuing on their downward path and are now reaching into the 40s which is nearly 50% less than 2 years ago.

In a follow-up to their previous information on best and worst performing capital city LGAs (based on change in median price), RPData have released the same for regional areas.

The big topic in the housing market at the moment is population growth and I noted today that The Age had a somewhat hysterical take on the latest data.

Net migration to Australia is in free fall. In two years, migration has plunged by almost half, intensifying the skills shortages that threaten to drive up interest rates.

The Bureau of Statistics reports that net migration was just 171,000 in 2010, down sharply from 316,000 in 2008, and the lowest since the bureau changed its measuring system in late 2006.

Australia’s population growth fell to 325,500 in 2010, down from 467,300 in 2008.

Cameron Krusher has a little more responsible take on the data at the RPData blog and includes some nice charts to put some historical perspective on those “free-falling” and “plunging” numbers.

Mr Kusher also points out that once again Queensland takes the wooden spoon.

While overseas migrants have always had a preference for New South Wales (Sydney) and Victoria (Melbourne), Australian’s have always had a clear preference for re-locating to Queensland.  At its peak during the 12 months to September 1993, Queensland attracted almost 50,000 interstate migrants for the year.  Interstate movements into Queensland have been slowing since 2003.  Over the long-term, interstate migration into Queensland has averaged more than 27,000 persons annually, over the last 12 months just 7,243 persons migrated to Queensland from interstate, -73% below average.  It is no wonder Queensland is attracting fewer interstate migrants, the net outflow of residents from New South Wales is at its lowest level since the late 1990’s and interstate migration into Victoria is at its highest levels since mid 2002.  Add to this the lure of the mining dollar in Western Australia and the halting of the sea change migration trend and it is easy to see why interstate migration into Queensland is down so much.

The bad news for Queensland is also supported by a recent news item from RPData which has some pretty worrisome figures for those involved in the Queensland housing market. This item also provides some extra information that seemed to have been missing from their previous report, although I am not exactly sure what a “valuation adjustment” is in the context of housing.

Property Dexter found that in fact, when a valuation adjustment is made, Brisbane property values are down -9.7 per cent since the end of 2007, Gold Coast house values are down -19.9 per cent and Sunshine Coast values are down-13.2 per cent.

Some people are pointing to the January floods weighing down the south-east Queensland market.  Yes the floods impacted the market however, the market was weakening before the floods and has continued to do so after the floods.  The ongoing poor performance is being reflected by an increase in property listings, an increase in the time it takes to sell a property and greater discounts having to be offered by vendors in order to sell.

Vendor discounting is the difference between the price at which a property is initially listed for sale and the price it ultimately sells for.  As at March 2011, Brisbane vendors were discounting the asking price on houses by an average of 7.7 per cent and units by 7.9 per cent.  That means a house being advertised for $500,000 would, on average, sell for $461,500, a discount of $38,500.  At the same time last year (when the market was still not particularly strong) discounts were recorded at 6.0 per cent for houses and 4.7 per cent for units.

With vendors having to become more flexible in their price expectations in order to sell their properties, it is also taking longer for properties on the market to sell.  Throughout Brisbane it was taking an average of 66 days to sell a house in March 2011 and 63 days to sell a unit.  At the same time in 2010 it was taking 50 days to sell a house and 41 days to sell a unit.

Although time on market and vendor discounting has increased dramatically, the number of properties advertised for sale across Brisbane is now starting to ease.  Compared to the same time last year, the total number of properties available for sale at the moment is just 27.9 per cent higher.  Despite the large disparity the introduction of new stock is slowing with new listings currently just 0.3 per cent higher than they were at the same time last year.

Property Dexter believes that there are three main reasons why the South East Queensland housing market is so weak: a slowdown in population growth into the region (particularly from interstate), the weak tourism market and a hangover from the strong capital gains in recent years.

Quite simply people from New South Wales and Victoria aren’t moving to the region in the same droves as they once were.  Following the Global Financial Crisis (GFC), ‘sea changers’ are playing very little part in the current market and retirees are much more cautious about selling up their home and making the move to a coastal location.  Also over recent years the gap between housing prices in Queensland markets compared to Sydney and Melbourne has closed significantly.  With the recent under performance of the Queensland property market the gap is now widening again.

Although Brisbane isn’t exactly a tourism hotbed, the same can’t be said of the Gold and Sunshine Coasts.  The high Australian dollar and the GFC have dampened tourism numbers and this is impacting South East Queensland and most coastal markets of the state.

I also noticed that in RPData’s latest video-blog ( available at the end of the post ) that Tim Lawless snuck in a version of a chart that I had mentioned had gone missing in their most recent press release, so I thought I would show it here.

Overall I agree with RPData as I don’t think much has changed. We are still seeing declines across the board and long running trends holding. I still can’t see much in the way of pick-up even in the depressed markets where you would expect to see lower prices pushing up demand. It may be happening in pockets, but I certainly can’t see it in the data. Listening to Tim Lawless in the following video probably won’t fill you with much confidence in the market either.

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Comments

  1. My response to The Age’s “interest rate will go up” Bogeyman.
    .
    “I don’t know how Tim, allegedly a business journalist, can make that claim. Japan has super low interest rates in spite of near-zero immigration.
    .
    Clearly lacking empirical evidence, these scare stories about high interest rates are aimed at the xenophobic mega mortgage mugs in order to persuade them to put their financial interest above bogan/jingoistic emotions.
    .
    I must point out it is a vain attempt – bogan/jingoistic emotions always win :)”

  2. …enter rental glut…

    (yes, i know i keep banging on about it! 😉 )

    And, i must say that it’s good to see RPData being much less spruik-like, and much more the indifferent analyst (has anyone else noticed the change in approach over the last couple of months??)

    They also seem to be releasing a lot more “freebies”, which is great.

    Hopefully this all keeps up, and even gets better WRT to information dissemination, and we can all be quite informed about the housing market for once…

    • Bubblelicious

      If RP Data are less spruik like, heaven forbid what is actually happening in the “real market”.

      This is the problem with commercial data providers, consistent bias in the direction that suits them. The fact that they have advance knowledge of what’s coming means that they’re constantly revising their own history of commentary so that their projections are correct.

      All I can suggest is that this change in tone must imply that there are some nasty headwinds facing the property market…

      Funny how that fancy derivative product that let’s you short the market is suddenly being spruiked again!

      • But that’s part of the issue, ins’t it? Why should, ideally, data providers have much of a point of view at all?

        Just provide data.

        And if interpretation is something you want to add, then just say it how you see it, so you don’t smell too much like a bull or bear.

        RPData are doing that more so now, it seems at least (some hasty changing though!), but SQM seem to be ploughing the middle-ground of the ideal data provider more-so, IMHO.

        My 2c

        • Bubblelicious

          +1 Couldn’t agree more.

          My cynical side simply sees the revisionism as a result of their vested interests. The hope that there might be a rebound is now faced with the reality of sustained declines, so it’s time to “about face” in order to retain what’s left of their credibility.

  3. Can confirm here in Brisbane I have seen a number of for sale signs changing to for rent signs

  4. I also noticed in Brisbane that several properties in the neighborhood either have failed to sell at auction or are long term advertised – much longer than the average of 60 odd days quoted…

    Again – the issue of ‘RP data’ and mysterious ‘valuation adjustments’ just lends further support to the suggestion that the ABS should pull its finger out, show some nous, and develop a reliable and valid housing index of its own.

    This way Joe Public can examine the market in an objective manner, knowing the data doesn’t have the stink of corporate hands all over it.

  5. I remember seeing some historical data a few years ago that seemed to show population numbers in Qld as almost being tidal in nature. Washing in with the booms and out at the end. Be interesting to see this updated for Qld to show both OS and inter-state migration to date. Qld may have a bigger problem then it now appears (or alternatively the commodity boom may have ended or delayed the cycle).

  6. I have to agree with Burb Watcher that I suspect we are entering a rental glut in the major cities – I’ve certainly noticed it in my suburb, even in my street.
    When I first moved to Melbourne over ten years ago I had to queue to see a dumpy weatherboard in Newport; it seems to be the total opposite now. In the last six months I’ve seen several houses and flats for rent in my immeadiate area that sit empty for months before being discounted or moved onto the ‘for sale’ list (usually by the same agent trying to rent the place). As I have said in these forums previously, there are so many new rental apartments coming onto the market that its gotta spell trouble for the average landlord in our area (and discounts for the average tenant!).

  7. Meanwhile, my hometown becomes one of the exceptions to the downtrend/stagnation.

    Gladstone: median price $417 000 – the current all time high and an increae of 7% over the past 12 months.

    It is perfectly obvious as to why this is occuring of course, it’s the “boom” from the beginning of the LNG plant construction (four are to be built – nowhere in the world are there four in the one spot).

    While investors, and local real estate agents and mortgage brokers are breaking out the champagne, I am less enthused. There is a common perception that most people in Gladstone are on the big money – this is most certainly not the case. There may be more here than in most similar-sized places but they remain a minority. I consider a price tag of $400 000 + to be too expensive for the average income earning household to realistically afford. Case in point: I recieved a phone call from a mate on Monday morning, telling me that he was quitting his modestly-paid (but secure) job for a more highly paid (but less secure and with longer hours) job. The reason? He and his wife have recently purchased a house for $410 000 and have immediately found themselves struggling. His words to me were “I’m in mortgage stress already”. This is not a low-income earning couple, they are middle income earners (his wife’s job pays more). And yet here they are, struggling to make payments on a rather modest shoebox, NOT a Mcmansion.

    As an aside, here is an article on the effects of FIFO workforces on local communities.
    “CENTRAL Queensland is in danger of becoming a sea of 40,000 “dongas” housing the workforce of big mining companies, according to an academic report.

    The University of Technology’s Professor Kerry Carrington has completed two studies of mining communities, which showed they were more than twice as violent as the state average, dysfunctional, overstressed by fly-in, fly-out workers and dreading the impact of more mining expansion.

    She said regional Queensland feared more mining projects because of the greater use of a fly-in, fly-out workforce, but most would support more mining if 75 per cent of the workforce were residents.

    “While there is a common assumption mining activity brings money into these local economies, this survey has shown that many local businesses report they are actually suffering and even closing down because of the fly-over effects on the local economy and an inability to compete with mining wages,” Prof Carrington said.

    “The big cowboys in town (the mining companies) don’t do what they are supposed to.

    “The communities don’t share in the benefits of the boom. Overwhelmingly, the responses were negative.”

    She said housing was the biggest issue with many workers wanting to bring their families to central Queensland but were unable to because of high housing costs.”
    http://www.news.com.au/money/property/as-mining-booms-in-central-queensland-studies-disclose-risk-of-temporary-dongas-dominating-the-landscape/story-e6frfmd0-1226079666924

    I have already heard stories of people being forced to leave the area by spiking rents and house prices – yet the FIFO’s will contribute little in return seeing as unlike the semi-permanent workforces all other booms have brought us they already have homes and families in other parts of the country. They fly in, work their shift and fly out again – taking their money away with them, leaving us little more than inflated costs of living as landlords and investors rush to fill their pockets.

    And before you rush to mining’s defence 3d11k, know that I have nothing at all against the FIFO workers themselves – rather, it is the FIFO phenomonen that is introducing a destructive dynamic into local communities.

    • Lefty,

      I actually have a feeling that Gladstone is, perhaps in a simplistic sense, just a simplified version of what i have a feeling is happening all over the country in very recent times.

      That is, that there is the perception of wealth in the community, and combined with landlords becoming more debt-stressed themselves, they are “just putting up the rent(s)” – partly because they think they can, andpartyl because they are passing-on costs.

      However, just as the sales-prices ate up much of the reserves and wealth of buyers, so landlords are doing the same with renters.

      So, there lingers the belief that people can and will pay more for rent, but as rental-stress is now hitting its peak (IMHO) AND there are more rentals coming onto the market, such thoughts and actions of landlords are relics of a bygone era – much more, people can’t and won’t just accept such inflation in their cost of living, and will and are acting where they can.

      Hence, the recent rental increases nationally (except for a number of regional areas, which are actually deflating recently) are most likely going to plateau and start decreasing in the near-term (IMHO)…there’s just too many headwinds coming the rental market, and MUCH MORE than the sales-market in the short to medium term.

      So, Gladstone is an extreme example of people thinking eachother have more money (and consent!) than they actually do, when people are actually maxxing out on their “last hill”, so to speak.

      Anyhow, that’s just more of my thoughts on why the rental market is actually under more pressure than the sales market for the time being, and why it will be facing significant deflationary pressures in the short to medium term.

      Cheers,
      Stewart

      • “So, Gladstone is an extreme example of people thinking eachother have more money (and consent!) than they actually do”

        I think you’re spot on here Stewart. Even the ABS figures – I realise I’m on thin ice casting doubt on ABS data – simply don’t seem to accord with the actual reality on the ground.

        While my job is very modestly renumerated (good perks though, from my perspective – there is MUCH more to life than money alone) I simply couldn’t bring myself to believe ABS data released last year that purported to show that the lowest paid workers in Australia (hospitality and retail) were taking home a disposable income hundreds of dollars per week more than I. It also showed that these same lowest-paid workers were not earning much less than my wife – a university educated senior teacher with 20 years experience, at the top of her pay scale and with the only option for higher pay being to move up into administrative roles. This simply doesn’t make any sense and simply cannot accord with reality. Check-out chicks, fridge/shelf stackers and hotel room cleaners earning not too much less than heads-of-curriculum and deputy pricipals?

        Before he joined the macroblog, I seem to recall that Leith investigated this and concluded that real average earning were overstated by around one-third. This would mean that housing bulls are overestimating the ability of the average household to service debt by a large margin.

        • It would be good to revisit/hear more on this, don’t you think?

          I would love to see income distributions broken down into deciles – as finely divided as reasonably possible, IMHO.

          And I concur – there just doesn’t seem something quite right – who has all this money? Why is financial stress seem to be increasing (NOT just stressed sentiment) whilst we are all supposed to be receiving increases in incomes that outstrip inflation (and i think that for most commoners, inflation of actual living is significantly higher than CPI – it is definitely in my own experience).

          Anyhow, yes – income and inflation distributions, even on a geographical basis as well, would be very interesting indeed…

          • >And I concur – there just doesn’t seem something quite right – who has all this money? Why is financial stress seem to be increasing (NOT just stressed sentiment) whilst we are all supposed to be receiving increases in incomes that outstrip inflation (and i think that for most commoners, inflation of actual living is significantly higher than CPI – it is definitely in my own experience).

            The issue is that income is only half the picture, it doesn’t matter if income is growing at 10% a year (not that it is), if the cost of living and the price of/amount of debt is growing faster.

            In that regard there are 3 things that matter.

            a) Interest rates

            http://macrobusiness.com.au/wp-content/uploads/2011/05/RBA_cashrate.jpg

            b) Indebtedness.

            http://macrobusiness.com.au/wp-content/uploads/2011/06/HouseHoldIndebtedness.png

            c) inflation of household basics.

            http://macrobusiness.com.au/wp-content/uploads/2011/06/WhyYourPoorer.jpg

            and more to come.

            http://www.theaustralian.com.au/national-affairs/state-politics/states-cash-in-as-electricity-and-water-prices-rise/story-e6frgczx-1226081613156

            Those 3 combined give you a pretty clear picture of what is “actually” happening, and why we are seeing increasing arrears at a time of supposed prosperity.

            The other thing that I am not sure we have talked about on Macrobusiness that much is the effect that housing/credit bubbles have on overall pricing.

            Housing is left out of CPI, but its indirect effects are well known.

            Do you wonder why you pay $4.50 for a coffee ? It could be because the person serving you has a $400,000 mortgage. If they didn’t maybe you would only be paying $2.50.

          • >Do you wonder why you pay $4.50 for a coffee ? It could be because the person serving you has a $400,000 mortgage. If they didn’t maybe you would only be paying $2.50.

            Disco. Bingo. Bazinga.

            Probably the most erudite economic analysis you’ve ever heard, read or seen.

          • “Do you wonder why you pay $4.50 for a coffee ? It could be because the person serving you has a $400,000 mortgage. If they didn’t maybe you would only be paying $2.50”

            Well spotted! (and don’t forget the rising costs of water and electricity that went into making the coffee)

            Don’t many small businesses take on business loans using their house as collateral? The more equity rising prices has put in their place of residence, the more they can effectively borrow. Surely a long period of even stagnant prices let alone falling ones must bring this expansion to a screeching halt?

            But yes, as Stewart says it would be good to re-visit the issue of real average earnings – because something sure aint’ right here.

      • This has always been one of my issues with the rental market- agents and owners seem to be under the impression that renters will WANT to stay in an overpriced rental and do everything they can to do so. HA
        I might be willing to survive on baked beans and toast to help pay the mortgage for a place I have bought (but not for long) but there is no way I would even consider doing the same for a rental place. I doubt I am the only one with this attitude. I do recognise that in a captive market (and a lot of central QLD towns would fall into this) there is less possibility to do so.
        And renters have the flexibility to move, and to move into share places. I am noticing that the places that are priced reasonably are moving in the rental market, but the ones that thought they would try for more money are languishing in the listings.

  8. > And, i must say that it’s good to see
    > RPData being much less spruik-like, and
    > much more the indifferent analyst

    It would be utterly stupid of them to keep spruiking and going against the market sentiment. The slowing housing market will soon be too small to support the number of housing data reporting companies that we currently have so that’s why they are changing their behaviour and also fighting one another.

  9. don't count chickens

    Good see some impartial analysis by RP Data.

    Re price discounting, so far so good. I think the GET-UP campaign shifted the current pessimistic trend up a gear.
    The naive confidence of the highly rortable RE market is gone for many, fading for the rest.

    Slowly, slowly RE prices will decline unless govt ‘comes to the rescue’ with more bribes and other half-baked ‘solutions’.
    Unfortunately, I fully expect intervention as RE prices in Aus are a scared cow, not be subject to downward movements – even at the expense of the whole economy.

    Not sure what was intention of Rudd’s 50% increase in immigration numbers just after he took office (2007) – a favour to Chinese friends in high places? a source of potential debt slaves for the banks and RE industry? or an extra 170,000 future voters for the Labor Party (LP used to represent ‘working class’ once upon a time)?
    Who knows?

    Anyway, prices can take off again as:
    * RBA has plenty of scope to cut IR;
    * Govt can ramp up immigration numbers at drop of hat;
    * Govt can facilitate further sales of RE to foreign buyers;
    * Govt can tweak current overly-generours tax deductions even further in favour of investors;
    * State and Local Councils can play dumb and stuff around with land release approvals;
    * Banks could move from 95% LVR to 100% or higher (LVR was up to 105% in 2009);
    etc.

    In other words, don’t count your chickens.

    • Yes, they can do all these things – but I still think there is limited scope for prices to “take off” again in any sustained manner. Prices IMO have probably reached a critical point of affordability, especially when accompanied by rising costs of living.

      It’s difficult to see how sustained price growth can occur without a permanent downsliding of the rate of interest payable on mortgages. Said rates are currently only around 1.5 percentage points above their all-time floor – what are the chances of them moving down through that floor to reside at new, permanent lows under NORMAL circumstances? Exactly how much of the RBA’s lead would lenders be willing to pass on.

      Interesting thoughts – will we eventually need a ZIRP in order that Australians can manage to afford ownership of the basic human need for shelter from the elements?

  10. “ABS should pull its finger out, show some nous, and develop a reliable and valid housing index of its own.”

    haha, because we all know governments don’t fudge numbers in their favour.

  11. You just beat me to posting that Rob.

    OK, Brisbane isn’t as big on selling houses by way of auction as the southern state capaitals, and there were only 11 auctions anyway – but it’s still a woeful result that appears to accord with the notion of a steadily deflating Australian housing bubble.

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