Chart of the Day: Plenty of choice

Good news for Melbournians wanting to buy property, heaps to choose from with today’s chart coming from SQM Research:

From SQM Research

Here’s the latest dwelling unit commencements for Victoria from the ABS:

I’m sure we’ll here more about the Melbourne property market from The Unconventional Economist soon, having done Sydney recently (all special reports are available on the right hand sidebar, login or subscribe to read).

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Comments

  1. I live in Melbourne so this is great news. It’s around 30% higher than the GFC peak! I bet the previous month’s dip was proof of a soft-landing, bottom, recovery etc. Now that we have this latest data point we can see that things are getting worse in most cities. Perth is a bit better but it is falling the fastest.

    Cheers to the investors! Don’t forget your snorkels.

    Interestingly, the addition of this bad news leads the share market ever higher! It may have been oversold before but damn! Talk about overbought! At this rate, poor unemployment figures next week would be cause for a breakthrough rally!

    I think the markets have truly become dysfunctional when they rally on rumors, against worsening forward looking indicators.

    • I was thinking the same thing. The markets are rallying on a day when Mervyn King says we are in more excrement than in the Great Depression! Unreal.

  2. General quality of the offerings is poor. I’d love to know the proportion of ex-rentals that are being offered. My gut tells me investors are looking to offload.

    From my vantage point, agents are taking longer than ever to get listings advertised, which suggests the system (photographers, boards, legals, banks etc etc) are buckling under the strain. There are plenty yet to publically hit the market.

    • If that’s true (major pipeline supply), there’ll be a wipeout this summer. Look out below!

  3. The data here will be somewhat missunderstood, but I will give it a crack!

    What’s happening is, that in response to unaffordable suburban houses, the natural demand for affordable dwellings is being supplied by massive apartment building. The existing Melbourne ratio of housing / apartments is 70% : 30%. The present construction ratio is closer to 50% : 50%

    The suburban streets are slowly filling with for sales signs on overpriced houses.

    Thhe market response is that increasingly sales are switching to the more affordable dwelling prices of apartments in inner urban locations.

    Over time I expect suburban housing prices will have to fall back to the level of inner urabn apartments or LOWER given the massive increase in travel time cost and traffic congestion to attract a sale.

  4. @ Janet

    I believe this IS the reality.

    I work with people a generation younger than me. They cannot afford $700 – $1,000,000 for a 4 – 5 bedroom house with pool and double garage on 1000m in Templestowe or Glen Waverley. Instead they buy a $350 – $375,000 appartment with a $280,000 loan close to the city and a short 10 – 15 min bike ride to work.

    The demand for suburban McMansions at the present price & traffic congestion/inconvenience has collapsed for young workers! It may suit retirees who drive close to home out of peak hours but they better be debt free and self funded in retirement, because if the plan is to fund the retirement by downsizing the mortgage & McMansion there is almost no market at the present price.

    Welcome to reality!

    • EXACTLY!
      Someone always has to buy your place in order for you to sell it. Like I always tell my parents, you think your place is worth $1.5million today, but the generation below (incl me) cannot afford that. So it is going to be worth less if you plan to downsize or use it to fund retirement.
      .
      It is for this exact reason that Retirement Living and Residential Development do not fit together (sorry Stockland!) because one canabalises the other.
      .
      So, Peter_W, when these more well off people sell their McMansion in Templestown or Glen Waverley for what people can afford to pay for it (read, price drop) WTF do you think will happen to the price of the pokey 2 bedroom units that have sprouted up all over the place!
      .
      Which puts paid to your ealier comment “Over time I expect suburban housing prices will have to fall back to the level of inner urabn apartments or LOWER.”
      Crock…

    • Peter,

      I think there is another factor at play here, as well.

      There’s an old truism about having a horse: “Buying the horse is the cheap part – maintaining it is where the money goes”.

      I think this line of thought is becoming a consideration in respect of McMansions.

      With electricity and water prices where they are today, and where they are headed in the future, how much money needs to be set aside each week just to run the airconditioning and the pool pump?

      Throw in the extensive lighting throughout the house, the multiple plasma TVs, the gourmet kitchen, the Hummer-sized appliances, and the like, and one ends up with a very expensive horse…er…house.

      So, along with the mortgage, we now have two very large bricks around the neck.

    • It won’t work if unemployment rises. You can’t justify importing labour if we’ve got an excess already. That’s political suicide.

  5. @ Nick

    It’s not a living preference per se its a purchase price vs woefully inadequate transport infrastructure & inconvienience preference.

    The hard data and the massive inner urban cheaper apartment building speaks volumes about the choices being made in the market.

  6. NOT A ''TRUE BELIEVER"

    You think Melbourne has a problem, check out Youtube under “housing bubble Australia” and have a look at the situation in Adelaide as well as everywhere else !

  7. @ Nick

    We are in agreement. The price of expensive houses will fall alot, the price of pokey two bedroom apartments will also fall.

    The loss of ‘illusory’ equity will be many multiples higher in expensive housing vs cheaper pokey apartments.

    Notice in the SQM data yoy unsold housing stock rose ~125% apartments ~50% and I would suspect that rise in unsold aparment stock is mainly in outer urban suburbs.

  8. @ indo

    I think the 200 – 300% yoy increase in unsold housing stock in the peripheral suburbs supports my thesis.

    Motivated by faulty thinking from both the developers (borrow & buy our expensive land bank) & Government (population growth & borrow and pay our stamp duty but we are not going to spend a cent on infrastructure or services).

    It’s not cheap housing, its a nightmare to travel to and from, a huge cost in time, petrol, depreciation and inconvenience.

    IMHO… It will get alot cheaper!

  9. also review the superb work by stewert on burbwatch, the Victorian graph is scary and I wish I could short some houses in melb….
    once again Stewert welldone. cheers and thanks

  10. There is an articlepage 4 The Age this morning, talking about softening house prices ( Sales slide, rich pickings for the canny as city prices soften)
    The top house pictured, orrong road elsternwick is local. It sold oct 2009 for 1.26m and sold for 1.14 this month.
    They barely mentioned that it was delapidated in 2009, and someone has done an extensive renovate and totally landscape since that date, between the sales.
    I suspect that may hide a larger drop in price, as they are not comparing like with like.