House prices slide on in June

The RP Data-Rismark house price data for June is out and it’s basically an unchanged trend down. Seasonally adjusted, prices fell 0.2% (compared to 0.3% in May whilst the raw numbers slid 0.6% (compared with a revised 0.6% in May). The slide is looking rather like 2008, before the rescue.

Delusional Economics will return later with detailed analysis.

 

 

 

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Comments

    • >It’s 2008 all over again,

      With or without the stimulus ?? That is the big question.

      Interestingly it would seems that RP Data think without.

      http://blog.rpdata.com/2011/07/will-higher-interest-rates-affect-the-housing-market/

      “With Australian consumers focusing on saving and paying down debt, the prospect of higher interest rates isn’t likely to see any marked improvement in transaction volumes until we start to see a material improvement in levels of consumer confidence. Of course, the housing market is no longer high on the RBA’s list of priorities like it was back in 2009.

      Inflation is firmly in the cross hairs and interest rates are likely to rise to the detriment of key sectors across the economy including retail markets, lifestyle and tourism and of course housing and finance.”

      I must admit I have never seen Tim Lawless so bearish.. This is not a good sign for housing bulls.

    • Nah, it’s different to 2008 now. The “bubble” meme is firmly entrenched – stimulus will just be pushing on a rope.

    • You’d think that the government would have to be war gaming it as we speak. But what form would it take. They wouldn’t be so brazen as to boost the FHOG again, would they? Surely that goose has been cooked.

      • Can they get away with such measures if it is not clear to all and sundry that we are in another (same one, actually) GFC?

      • House prices continue trending down in June – I agree with that. June figure in isolation informs little in regard to trend. Wait a minute – is that the trend arresting…?

    • AFR interpretation: “Capital city house prices fell for the sixth consecutive month but the decline has been moderate.”

      So nationally down 2.3% pa when you could be getting 6.5% pa in an online bank. Ignoring transaction costs, tax, and gearing, you could be halving your potential wealth in 8 years if you go into residential property now.

  1. I wonder how much longer the downward trend will need to run before the commentariat stop referring to prices as “flat” or “stable.”

    • Thanks for flagging the BS piece Prince – that acronym could possibly also be used to summarise the quality of their analysis – but perhaps I’m being a bit harsh 😛

      That said, the data clearly shows a downward trend in nominal terms of close to 12 months, and the data just gets uglier when you look at prices in real terms.

      How anyone can continue to call this a flat market is beyond me.

      • Dr Joye says
        “I think the RBA is likely to raise rates at least once or twice more to address Australia’s burgeoning inflation problem, which means dwelling values will probably soften a bit further”
        .
        When will the spruikers learn to say “fall”/”falling” ?

        • Torchwood1979

          If you fall far enough and splatter you’re pretty soft I suppose. Maybe that’s what Dr Joye is referring to?

      • House prices “moderating” is another word that Joye likes to use.

        No bull dares say the “f” word.

  2. Tell anyone who’s had a house on the market for weeks and months, has been continuously dropping prices without any takers and all those ridiculous stats are nothing short of meaningless!

    • aGREED arthur – They (RP-Rismark) are always forecasting house price growth, so I don’t believe their figures on these falls because they hate to admit how wrong they are. Anecdotal evidence suggests the falls are much higher. Because what is happening is that the high end of the market is collapsing first. So you have a disproportionate number of expensive homes being sold and this is inflating the ‘average’ house price.

      Some of these mansion homes have lost 30-40% of their value from the last sale 3 years ago…but the way these stats are compiled, it would make it look like average house prices are still holding up.

      Wait to the crash flows through to the burbs and lower priced homes…the falls by the end of this year will be far more significant…and will only escalate as a deflationary mindset sets in.

      Not even Chris Joye and his ‘faith’ in the ability of the RBA to plummet rates will be enough to save housing

    • Green and White, no

      Newcastle Knights Colours, Blue and Red, yes – “real”

      Don’t forget Jan 05 is set at 100 so the movements are relative to that in the charts.

  3. Australian property halves in value in real terms every 7 – 10 years! Get in now or miss out on this golden opportunity to see your wealth evaporate forever!!!!!!!!

  4. This is an index of sold houses, not of unsold houses! When the index of sold houses is negative, it means out there is actually a lot worse.

    • I’d say it’s potentially worse – but until a spike in interest rates or unemployment or “cost of living” pressues cause a rise in stressed sales it’s calm before a storm that may pass us by or hit us hard.

      • Yes, many vendors are holding on… hoping for better times… but for how long? Where is the change catalyst coming from?

        I just saw a house in my neighbours selling for less than it sold in 2007, after being passed in at auction. Owners needed to move on as they already bought somewhere else.

        But there are many other houses where vendors are refusing to accept a price cut, and that is not reflected in the index. Wondering for how long they can keep holding on.

    • Take your pick – Tip of the iceberg or a developing Tsunami wave that is still invisible.

  5. There’s a lot of stubborn vendors out there, that’s for sure. I suspect that, just like many younger people I know are awaiting their next $900 stimulus cheque, many vendors are waiting a repeat of Rudd’s Folly (the FHOG Boost) and some ’emergency’ interest rate cuts to ensure the “iron law” of house prices never falling is maintained.

    I’m watching several properties that have asking prices that clearly indicate the vendor (or agent) have absolutely no idea that things have changed. The few that are selling then turn up a week later for rental… and then sit there unrented with an equally over-exuberant asking rental.

    Even so, it’s hilarious the way 15 to 20% annual inflation in house prices was cheered by so many for so long but relatively small declines over a small period are apparently putting us on the verge of Armageddon.

    • Yeah, second that. Double digit increases mean celebrations and rejoicing in the streets – we’re all so much wealthier! But a fraction of a percentage fall is greeted with horror and squeals for stimulus.

      I can’t help but think the government will be pressured to bring in some stimulus measures to arrest this ‘calamity’. But you would also think that if that were the case, the government would be preparing the ground for it.

      They are surely stuck between a rock and a house. They need stimulus so that house prices don’t fall too far and take the economy with them. But then again, they need that budget surplus to regain any shred of economic credibility.

      Tought one. What’s going to be sacrificed at the altar of high house prices?

    • I guess it will come down to how long investors can hold their nerve. For a slow deflation scenario to pan out, everyone needs to remain calm and accept losses in real terms over potentially many years.

      I’m not sure whether this will be the case, given that irrational exuberance drove prices up. I suspect that once the masses catch on to the fact that they are going backwards, there may very well be a mad rush for the exits.

      I think employment numbers will never be more important as they will be than in the coming months. A rise of any significance may well be a final nail in the coffin of confidence.

      • It’s the Prisoner’s dilemma. If the investors all hold on, then the “10 year stagnation as incomes catch up” scenario may come to pass. However, on an individual level it doesn’t make sense for them to take losses without capital gains so you’d expect them to sell. If they all come to the same conclusion, it’s going to get ugly.

    • This could very well be the perfect opportunity for Labor to climb out the hole they dig for themselves.
      Imagine how many votes they could get by saving the RE market with a few billion dollars.

        • Good thinking here. Here in mega-resourceville (Gladstone}, house and rent prices are going through the roof because landlords and IP owners have all come to the same conclusion at the same time – they can make megabucks hiking rents and house prices.

          So what happens when large numbers of IP owners in the rest of Australia come to the same conclusion at the same time – they’ll end up losing megabucks if they don’t sell post haste. Ugly stampede? Han’t happened yet but collective sentiment can turn rapidly.

  6. “…it’s hilarious the way 15 to 20% annual inflation in house prices was cheered by so many for so long but relatively small declines over a small period are apparently putting us on the verge of Armageddon.”

    Observation of the Day!

  7. Continually declining prices will change sentiment.

    Ultimately, sentiment is either the fuel or the problem (access to money or debt is the next step :))

    This is yet more negative for sentiment.

    • Agree – 6 months of declines is proof the bears are right and housing is correcting in Oz. Why would anyone want to rush in and buy now?

      • I wish Suzi Wong would come and comment…she will see the good news for house prices in this data…surely us bears are just missing the big picture!

        • outsidetrader

          I’ve just spotted it – things are alight afterall – we’ve just holding the chart upside down 🙂

          But seriously, barring government stimulus disguised as “affordability assistance,” or a cut in interest rates, I can’t see anything that could turn the current trend around in the short-medium term – sentiment appears to be shifting away from greed and towards fear.

  8. Price declines also disprove the basis on which many purchases were made – that prices only ever go up. The impact of a price decline is FAR greater than of an equal price rise. Hugely asymmetrical impact.

    • veru true – especially in Oz, as we have seen housing bubbles burst across the world and were told it wouldnt happen here…and now it is…it wont take long for the sheeple to realise they were conned and stop listening to the spruikers.

    • It’s asymmetrical by the value of LVR level

      If somebody buys for cash he/she will lose 15% of the invested money after the 10% fall; but if somebody buys with 97%LVR loan he/she will lose everything he/she invested even if price stagnates.

  9. Sydney’s keeping the national property price figures respectable, or should I say spinable. While that’s the case the spruikers can get away with characterising the market as “flat”.
    But this Spring should be a big test with the traditional spike in listings needing a similar or greater number of buyers to keep the discounting from blowing out. A rate rise, or even the threat of one should put paid to that.

    • I think you frightened her and Shadow away!

      Let me have a go — sure the slope (first derivative) is all down but the second derivative is positive so there’ll be a turnaround anydaynow!

      Housing shortage, immigration, everyone wants to live near the coast with broadband, yadda yadda yadda (just don’t mention debt/GDP ratio, US, Europe, or Japan).

  10. “Seasonally adjusted, prices fell 0.2%”

    Dude – the rule is to extrapolate that figure for the next 20 years. Well, at least that’s what the property spruikers did when the figure was positive 😛

  11. they should just do what the rest of the world did: build up. I’m talking in the burbs (oh horror)

    not massive blocks of flats but 5-6 storeys, modern 4brm appartments for $300k-$350k. Young people get their roof without selling their unborn child to the bank, houses hold their value because they’re houses, I dont have to mow the lawn anymore and the rest of australia keeps playing property ladder for another couple of decades. What am I missing?

    • You’ll require divine intervention to obtain council approval for a building like that.

      • True. By “they” I mean the councils, or whohoever is reponsible to give these approvals.

  12. David Collyer

    Thanks Mark @1.38pm for the citation.

    There is 1.25 million negative gearers whose strategy needs a minimum 6% price growth to break even. Sustained declines – even if modest – are wealth destroyers for this group. Unfortunately, they are trapped. This declining market simply cannot absorb selling on the scale needed to retrieve their capital and end the tenant subsidy. The risk is all on the downside. Residential landlordism is being revealed for what it is: a stupid game for stupid people.

    • David, Mark,

      Great article. I’ve been writing about 3030 and 3029 throughout the blog and commentsphere for the last 2 years. Perhaps warning is a better word. It’s an area I’m professionally acquainted with and your observations are spot on. I’m still waiting for the collapse of a few major builders/developers because of such behaviours – miscalculation, greed, excessive competition are all evident.