SQM reports falling listings

The latest SQM research newsletter contains some more rays of sunshine for the property market.

Figures released this week by SQM Research revealed that residential property listings have actually declined during the month of August 2011, coming to a total of 362,793 nationally. Falling by 14,522 listings since July 2011, total amount of stock on market decreased by 3.8% month on month.

On top of the consumer confidence  figures this suggests some arresting of the falls in the housing market although, somewhat ironically, I don’t detect that level of optimism from RPData. Louis however puts it down to some other factors.

With all capital cities except Hobart experiencing a monthly decline in listings for sale, the current buyer’s market eased slightly for the month of August. However comparing these figures with that of the corresponding period last year (August 2010) we are still seeing a substantial swell in listings- with a national year-on-year increase of 23.6%.

The capital city to experience the largest monthly decline was Perth, falling by 7.1% (1,546) during the month of August, coming to a total of 20,207.

The only capital city to experience a monthly increase was Hobart, climbing by 2.2% (76) during the month of August, coming to a total of 3536.

Melbourne experienced the largest year-on-year increase in stock, rising by 56.8% (16,127) since the same month last year (August 2010).

No capital cities recorded yearly declines in stock, however Perth experienced the most modest year-on-year growth, increasing by 17.8% (3058) since this month last year (August 2010).

Managing Director of SQM Research, Louis Christopher says “The results for August have been surprising. We were expecting a rise in listings and instead we have had a noticeable fall. This still could be a seasonal effect and it also could be vendors withdrawing their properties in the hope of relisting during better market conditions.

“Nevertheless, our base case here is that listings will rise during the selling season. If that were to not materialise or only rise marginally, this would be one signal to us that the peak in supply would be reached. For now, it is a wait and see situation and of course, monitoring other indicators on the demand side.”

I guess we shouldn’t really be surprised by this analysis given Louis’s previous predictions. The latest data available in housing credit issuance certainly doesn’t instil me with any confidence that the downward trend in prices is about to abate and even so the long term downwards trend is still very much in play. I do however expect to see some temporary distortions in the market caused by some state governments fiddling with their duties.

Having said that, AFG did recently report a surge in business in August and I think it is still very easy to detect that there is pent up demand for housing in Australia even if I consider it misguided. It is therefore possible that the recent falls in prices mixed with the near-term outlook for interest rates has spurred the market into action. I have to admit I cannot see any of that particular behaviour in the data, but that doesn’t mean that I am not on the lookout for it.

Comments

  1. I think you will find that many people have taken the property off the market – and elected to rent it out in the hope of better market conditions.

    Have rental listings increased a little in Aug?

    • +1

      Yes I have seen that in the areas that I have been watching, house on the market for a few months, no sale and then up for rent. There have been a large number of those in the last two month, perhaps a result of the soft winter market.

      • Same in my area….rents are going to fall…more than they have been already…which makes property investment an even worst proposition…which should make more landlords consider selling…which will again push up listings soon.

        • Agreed, at our inspection last week they brought the valuator. They haven’t increased our rent since we moved in March 2009.

          • I know of three people’s rental amounts that have declined in the last 12 months.

            Inner city + lack of international students = desperate landlords.

          • Similar story here. Rent still what it was in September 2009 and they sent us a very nice letter saying how much they’d love to keep us on.

            I personally know three people in the past month who have taken their properties off the market and are renting them until things pick up in six to twelve months time. Good luck to ’em.

  2. Be very careful how you interpret the data.

    The quantity of NEW credit to BUY housing (NEW credit minus refinancing) has declined from ~$83 billion March 2010 to ~$48 billion presently. That is a 42% fall in NEW credit created to BUY.

    Clearance rates have fallen from 80 to 56 (if you believe the REIV) which is a 30% fall in sales transactions. The 12% difference between the fall in transactions and the fall in NEW credit (42 – 30 = 12) is made up by the price falling 1% per month.

    A jump in mortgage volume and a decline in listing volume almost certainly means that price falls are accelerating.

    The NEW credit data RBA D02 does not lie. (unlike the vested interests of the politico housing complex + MSM)

  3. For rent signs = cannibalization of the $30 billion private rental market

    Declines of 42% in NEW credit can translate itself into the market in many ways… At two extreme ends of the spectrum 1. A 42% decline in transaction volume over 15 months = real estate agents revenues decline 42% over 15 months OR 2. Prices fall 42% over 48 months = real estate agents revenues decline ~1% per month = 15% over 15 months.

    The investors are on borrowed (no pun intended) time.

  4. Nothing new to add here. We are in the Adelaide hills. 2 properties within 100m of our place have been for sale since last spring. They have both been removed from the market in the last month and are for rent. Another house under 300k up the road was listed 6 weeks ago and isn’t even getting a nibble. I would imagine conflicting data sets indicate even more turbulent times ahead?

  5. My 2c:

    It is Cyclical.

    See: http://www.burbwatch.com.au, charts 1, 6 and 8 for each state and for Australia-wide.

    Sale-rent listings ratio, which really does seem to be cyclical, has recently turned, and the ratio is now increasing again.

    ie. sales-rental listings seem to (currently, at least) exhibit a tight kind of “harmonic tension” – exhibited by the sale-rent listings ratios, which seems to be quite unique for each state (and, I would expect, would be unique for each region, also…). For example, see burbwatch.com.au, Australia, chart 14.

    If this is a fairly certain trend, this means one of the 4 following options for the next part of the cycle.

    1) Both sales and rental listings rise, with sales listings rising faster than rental listings (relative rate, %)

    2) Both sales and rental listings fall, with sales listings falling slower than rental listings (relative rate, %)

    3) Sales listings fairly flat, with rental listings falling

    4) Rental listings fairly flat, with sales listing rising

    Currently, I am observing scenario (1) in most state, and nationally.

    Cheers,
    Stewart

  6. A block of flats just got completed next to my place (inner-Melbourne), not sure how many there are in the block, but 4 are for rent already. I don’t know if there’s a single owner-occupier and one of the listings is offering 3 months free rent. Domain show’s 41 places for rent in what is a pretty small suburb. Desperate?

    • Are you talking about the pocket of recently finished ‘student’ apartments on Flemington Rd near the Royal Melbourne Hospital?

      There are about 3 complexes under construction in that precinct alone, and 5 or so more have been completed in the last 18 months. They are having trouble renting out the already complete ones, so good luck to them when another 60-70 come onto the market within the next 6 months.

      There also seems to be a lot of development around the Dudley / Spencer Street, West Melb & South Melbourne. Both of these areas are not as close to the University precinct (where prices are already dropping).

      My take on the inner city Melbourne market is as follows:

      – Premium end apartments have been dropping for 18 months. Significant rental discounts in the Docklands have occurred. I’d say that rental prices on the same apartments have dropped at least $100 p/w in that area over the last 18 months.
      – Because the Docklands has fallen cheaper, other areas within a 5km radius (South Melbourne, Southbank, West Melbourne, North Melbourne, Kensington) have also not raised rents. I know of two people at work that have recently moved from Kensington area down to the Docklands because the ‘rents were cheaper’ and we are ‘closer to work’.

      – The next ring out (i.e. Ascot Vale, Moonee Ponds, Brunswick West) have also seen a similar flattening.

      – The ‘popular ring’ from Brunswick, Carlton, Fitzroy, Northcote, Richmond, South Yarra has seen some price rises. These have roughly been in line with inflation

      – The outer suburbs have seen declines of $50 per week as interest rates are now biting a bit harder and there are more properties on the market.

      I honestly don’t see this year how rents will grow in line with inflation.

  7. The spring selling season listings glut is not eventuating so far in my neck of the woods. Regular listings count for the 5 suburbs analysed has fallen from 645 to 590 over the last 3 weeks. Six month average at 625. Most have been removed and/or transferred to the rentals list and the rest sold with the recent ‘Evans prime’ low rates jawbone con-job.

  8. Eastern suburbs in Sydney, very very few new listings in 1.25-2m bracket…the agents are running out of time to list property for auction before summer break…they wont be getting much com this year. So few places for sale I doubt we will get true indication of fall in market. But fall it is.

  9. Once the listings dry up, if they do, it is only the first week of spring after all, then the real estate agents will be going around trying to drum up listings and asking for reduced prices.

    I wouldn’t want to be working in real estate if that happens.

    Early days yet though. A few warm weeks in Sydney, the long weekend and the next full moon and all the listings will flood in.