Melbourne leads supply glut

Following on from today’s post, Avoid Melbourne housing, SQM Research has just released its latest weekly newsletter  again showing Melbourne as the epicentre of the nation’s housing supply glut. According to SQM, Melbourne’s stock on market has increased a whopping 47% since June 2010 (see below table).

The only ‘good’ news coming out of the newsletter is that the number of homes for sale nationally has fallen by 2% since May 2011, mostly reflecting seasonal factors (winter is traditionally a slow period for property listings).

Below are the key extracts from SQM Research’s release:

Stock on Market June 2011

Figures released last week by SQM Research revealed that residential listings for the month of June 2011 fell by 5,650 to 363,839 nationally. This is a 2% decrease from May 2011, yet still a 23% increase when compared to the same month last year (June 2010).

Each capital city experienced a month-on-month decline excepting Darwin whose stock rose by 1% from May 2011.

The capital city to record the largest month-on-month decline was Hobart, falling by 6% since May 2011 to a total of 1,809.

The capital city to record the largest year-on-year increase was Melbourne, rising by 47% since June 2010 to 43,308.

No capital cities have recorded any declines in stock year-on-year, though Brisbane recorded the most modest growth, rising by 19% to 30,080 since June 2010.

This is the second consecutive monthly decline in listings and although to a certain extent this result can be attributed to seasonal factors as we enter into the quietest time of the year for new listings, it is possible that stock levels have now peaked for the cycle. 

Managing Director of SQM Research, Louis Christopher says “Real estate listings remain at levels high enough to record overall house price falls, however we note that the level of listings may have also finally peaked.

“It’s too early yet to call a bottom in the current housing downturn and even when it eventually does come, a recovery is very likely to be slow. But clearly we are much closer to a bottom in the market than where we were 12 months ago.

“Much is dependent upon the direction of interest rates and any type of meaningful government intervention in the market place.”

Leith van Onselen
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Comments

  1. my mates house passed in, so he has just let it out as a rental and moved back in with his parents. This strategy may limit the amount of ex FHB stock on the market.

    • My friend’s daughter did the same and moved in with her mother. I’ve heard similar stories from other people too. This will only increase the supply of rentals and hit property investors (FHBs moving out of their homes are not in this category). The demand for rentals will be lower not only due to decreased immigration but also much fewer O/S students. Whichever way we look at it there’s no upside on the horizon for the Melbourne property market and the FHBs will be underwater for a long time paying for something that they don’t use. Another factor at play is that so far the booming Melbourne job market has been supported by state and federal government infrastructure spending, importing people including students and building houses for them. Once this finally runs its course it will likely be very uggly.

    • its the boomers who in 5-10 years have to sell, or collect pal dogfood tickets from centrelink. the smarter 1’s will sell now, as prices come down because debt saturation, others will follow.
      Its not different this time. Bubbles are cool on the way up, on the way down not so much.

  2. these articles constantly talk about investors who wIll be caned by the collapse of the apartment market. The reality is that most apartments have been bought by FHB who’ll promptly move in when completed and won’t even be aware that they will be in negative equity for the next ten years.

    • Mostly its been chinese buying up the apartments. In the inner city they were too costly for locals FHBs to afford, $550k for 2 bedroom shoe box!

      • Ahhh the Chinese speculators…couldnt spot a bubble if they were in a bubble bath!

        Not their fault…they dont know how markets work

        Rather them lose their money then our youngsters to be honest…but I think the great China apartment purchase is a myth…something the srpuikers use to keep cofnidence that people are buying still.

        • I disagree. In Sydney both the Frasers developement opposite UTS and the Victoria Square developement are selling over 90%+ to cashed up asian investors (friends are doing the leasing/conveyancing work).

          The incentive on the Chinese is to get cash out of China, and less about making a sound investment.

        • Hehe, amusing sentiment.

          In 2008, I thought the relaxation of foreign buyers was potentially a master gambit.

          What we had done in effect prior to that was from a once in a millenium mining boom, use the extraordinary income to leverage with chinese loans to us, to pay more the same homes we already have.

          To leave the chinese holding the can and taking the losses would be sort of poetic in a bubble sense.

  3. i doubt many of the apartment buyers would be FHB’s – given the majority are in the 500k + bracket.

      • It’s all good. BIS tonight saying 15-20% rise in property Sydney, Brisbane, Perth – over next three years.

        It’s all good…

      • I don’t know too many parents willing to do this.. Most parents would rather buy investment properties for themselves, and rent them out to the children… then help the children buy a place of their own.. or maybe I just know bad parents.

        • My parents have “lent” me the money to invest in the development of a block of flats in the inner west. At the end of the sale they’ll take back the initial amount plus some interest and i’m left with the rest (about 7K). Note, I didn’t want to be a part of this. They’re just damn insistent I get into property whatever way I can. But even they wouldn’t consider a parent equity loan. The happiness I feel being debt free far outweighs the stress of mortgage debt and I’m not sure what it’ll take to change that.

          • If you are the investor and your parents aren’t putting their equity on the line, doesn’t that mean you’re on the hook??

  4. Wait till the boyfriend and girlfriend start blaming each other for the financial mess they got into , forcing them to split up and put the property in the market for sale.

    • yeah but that will only increase demand when one former household is now looking for 2 properties.

      Just kidding!!!

    • this is going to be a massive, massive problem. How many Ruddprime vintage borrowers bought jointly in non-long term defacto relationships !!

      How relationships will fail, and what to do if you sell the house at a loss, that would burn beyond the Rudd bribe??

      • Luckily for me I walked from my last relationship before the $700K FHB House was purchased. The Great Escape.

    • Totally agree Indo…I know lots of yonng couples who got their ‘dream home’ a sh!tbox 45 minutes from city and all they do is sit around trying to work out ways to save money – meanwhile, us silly renters are spending 20% of our income to live 5 minutes from the city and travelling the world every chance we get.

      Well played FHBers!

  5. “number of homes for sale nationally has fallen by 2% since May 2011, mostly reflecting seasonal factors”

    ??? According to the SQM chart for Melbourne, the April to October trend for 2008, 2009, 2010 has been for listings to rise.
    Nationally the trend from April to October 2009 and 2010 was up and down a little in 2009.
    Where are you getting this “seasonal factors” conclusion from?

    • Suzi, i’m pretty sure that Louis’ (SQM MD) comment, not Leith’s.

      Additionally, i’m pretty sure the 2% figure refers to the national sales stock, not Melbourne’s.

      Am i wrong?

      Stewart

      • No, the comment:
        “mostly reflecting seasonal factors (winter is traditionally a slow period for property listings).”
        is Leith’s comment. That didn’t come from Louis.

        • Fair point.

          Perhaps he’s referring to a longer-term, more typical/stable/generic pattern of reduced listings in winter?

          That would make sense to me that way – else, you’re right: the last few years for Melb/Vic have been little more than gradually increasing pressure via increased listings (despite the massive 2009 jump in prices!!)

        • suzi go with the flow, your properties are going up up and away these fools are jealous of you.

    • Suzi. Read my intro and then read Louis’ release (including his table) again. The 2% fall in listings since May clearly comes from the table (bottom right corner) and the “seasonal factors” comment comes from this section of the article: “This is the second consecutive monthly decline in listings and although to a certain extent this result can be attributed to seasonal factors as we enter into the quietest time of the year for new listings…” ???

  6. I think SQM is seriously understating the level of stock on market in Melbourne, due to the apartment boom.

    You might have, one, two or three listings for the entire apartment complex, that might yield 100+ apartments from that single complex !!

    Anecdote: my boomer relative bought a block in regional vic town in early 2010 and subsequently built all on borrowed funds, now can’t sell the Melbourne house for the price they want, so up the Melb house goes for rent !!

    • That might be a fair point.

      But, in all fairness to SQM, they only count current, individual listings…

      I know you probably know that, but, hey, perhaps i just like the sound of my own tapping on the keyboard? 😉

  7. Louis, if you’re reading this, is there any chance Sales and Rental listings could be released in the same article?

    Unless, of course, you’ve got your reasons for not – which is fine.

    Any chance of getting indexed sales and rentals on the same chart (BurbWatch style? SQM would do a better job, i’m sure….)

  8. “..clearly we are much closer to a bottom in the market than where we were 12 months ago.” and “Much is dependent upon the direction of interest rates and any type of meaningful government intervention in the market place.” So we are clearly closer to the bottom…unless we are not!

    • We’re clearly closer to the bottom than when prices started to slide by definition – we just have no idea where or how far away that bottom is.

      • “We’re closer to the bottom now than we were before” is just another economic catch phrase thrown around by commentators that says nothing really, we should add it to that list that was compiled a few weeks ago!

  9. The RP Data, um, data on sales supply show a slight dip in properties on the market during the winter months, but then a 15-20% jump in listings over Spring (except in 2009). While the SQM “stock on the market” numbers are still below 2008 levels, the RP Data numbers are 15% or so above their previous high (in 2010). Either way there’s downward pressure on prices at current levels it seems (at a national level anyway).

    Fast forward to Spring 2011: Demand is unlikely to pick up at any decent level (especially with no IR cuts of fiscal handouts in the pipeline). So if there are vendors holding off until Spring to sell in the same seasonal numbers as in previous years stock on the market could balloon.
    Market sentiment’s already been pricked – but will there be any reason for it to inflate again this year? This is when we’ll see whether the “underlying demand” theory is real or myth.

  10. This is article is crap designed to misslead people. The rise is in listings indicates that peoples expectations are unrealistic. At last things are starting to improve in housing affordability. We require more houses to get prices back to realistic levels

    • Or just less imbeciles being conned by the property investment cult creating unnecessary demand perhaps?

  11. Even if the bottom is 5 years away we are, of course, closer to the bottom now than we were 1 year ago.