Melbourne housing supply going ballistic

Yesterday I looked at the latest AFG data to get some idea of where the demand side of the housing market it headed in the short term. In timely fashion, now SQM Research have released their updated stock on market figures to give us a grasp of the state of the supply side.

Firstly, at the national level we still seem to be seeing a growth in the number of houses for sale, we are not quite at GFC highs but we are definitely on the way:

It should be noted however, that the national figures don’t truly represent just how very different each state market is performing on the supply side.

Sydney is still seeing some growth in supply which suggest that it will continue to follow its trend into slow deflation territory as there isn’t much in the credit statistics to show that demand has picked up yet. Obviously this week’s 0.25% rate cut may help there:

Next Melbourne … Umm … What to say?

This is now a big concern. There is nothing in the credit data to suggest that we are going see the magnitude of demand required to offset this supply side surge, and it will be well known to Melbournians that there is a large amount of new stock yet to enter the market (the peak in building approvals was only a year ago and they remain elevated). Unless there is some slowdown in supply, Melbourne is heading for a bust.

People with an interest in other markets may not be too concerned but it must be remembered that Melbourne is a very large market, it is therefore possible that any problems in Melbourne will lead to contagion. The last thing Australia needs at a time of global instability is for one of its major city’s housing markets to send tremors through the financial system.

To Brisbane:

That looks to me like a stall in the upward trend and it would therefore appear that Brisbane is stabilising on the supply side, but the stock level is still high. It should be noted, however, that the credit demand in Queensland appears to be continuing to weaken which will offset this stall somewhat. It is hard to tell exactly what will occur in this market, but in my opinion the “slow melt” still looks like the most likely outcome. Obviously the latest rate cut could spur some new credit demand and change my mind.

Finally Perth… and what actually looks like a reversing trend:

Again it must be noted that this is being offset by the low demand for credit in Western Australia, however compared to Melbourne is looks down-right super.

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  1. We are currently in the masterplanning stage of a 400+ housing development in a well known Melbourne suburb.

    These are Chinese clients with cash to burn (thats the bulk of our clients nowadays) and they already have the sales office on site.

    • the chinese buy for differnt reasons and dont care if prices rise or fall. they just want to get their money out of communist china where one stroke of a pen can see their wealth be taken off them. a 20% fall in house price is still a good return compared to loosing 80% to the governemnt.

      • Yes, this is also supported by the recent article below:

        Luckily, Australia is not considered as favorite destination by the rich Chinese, at least compared to the US and Canada. I think we may under-estimate the rich-waves from China and other growing Asian states like India, Malaysia etc that will come to developed countries and as much as I like to see OZ property bubble to deflate soon, I don’t have any confidence that this will be happening soon.

        • Well the Indians have no problem with Property rights. So what is it ? Lack of property rights or just finding a place to park cash?

          • I think many reasons for rich people in Asia to migrate to developed countries but the main ones will be:

            1) Basic rights, e.g. property rights, standard legal rights, etc
            2) Discrimination against minorities (on ethnic, caste, religious, etc).
            3) Low standard of livings, even the rich face limitation on access to good education, health-care, environment, infrastructure etc.
            4) High and growing wealth-gap between the rich and general population. The rich understand that this will create populist movement sooner or later against them just like what happened at socialist / communist revolution in the past.

      • Agree GB, plus, at least as important is their desire to dump their USD for real assets of any kind anywhere.

        • Thinks again…the Chinese I know are buying farms and mines not houses so perhaps I shouldn’t comment on RE.
          It’s true though that they are not much concerned with immediate return…just getting rid of paper dollars for something tangible.
          I think the writing is now on the wall for that necessity as well despite current denial by all and sundry.

          • And we’re happily selling it to them for a short term gain. Where’s the line between foreign investment and selling your country out for a quick $?

    • Given the recent events in China, I’d advise some barbed wire and security. Things could get ugly once you announce the discounts.

    • With the recent well publicised drop in property prices in china, we will see an increasing number of Chinese property investors looking for alternatives. This additional demand will only further inflate already high house prices in the region in particular Singapore (lesser extent HK). But unfortunately, We will also see a flow on effect here in Australia – well it will certainly put a floor for newly built apartments.

      • why would they take their investment dollars out of one deflating property/asset market and then invest them straight into a different property market that is also declining ?

      • This is inconsistent with observations of Chinese investors who were buying properties 2 years ago in my area which is very popular with the Chinese. After going through the pains and obtaining permits to subdivide and build units they have started dumping them. There are three sites like that in my suburb, one with 12 units (building in progress), one with three and one with two (with plans and permits). It’s a small sample but seems quite symptomatic.

      • So those fleeing dropping house prices in one country will choose instead to invest in another country with dropping house prices (and close to a record high exchange rate)?

        Makes perfect sense to me.

        • This is just bogus , do you see the Americans globe trotting to park their cash in real estate. No there equity has been destroyed and they cant.

          Did the Japanese actively buy after their bust?

          Global buying is transmission of wealth effect from home country. If the Chinese real estate market goes down , so does their wealth.

      • Why would you invest here in Australia (Melbourne) when you can purchase a bigger and better 2 bedroom apartment in Chicago’s Cbd for around two hundred thousand dollars less and get a better exchange rate.

  2. Nothing to be concerned about, DE. This thing has been in the making for 2 or 3 years, and anyone who’s anyone will be aware of what’s coming, and have made whatever plans they need to see themsleves through. Only those with sand on their heads are likely to get incinerated. The rest will hunker down; pay their mortgages on their overvalued properties ( but at lower mortgage rates 🙂 ) and soldier on.

    • darklydrawlMEMBER

      Janet, as a Melbourne resident I would have to agree the writing has been on the wall for at least 3 years.

      They are still many constuction sites all over the city, ranging from huge 30 storey apartment towers, to places being converted into dual occupancy blocks.

      We live 30 kms SE of the city and just in my local area alone there have been several dozen blocks coverted from a single dwelling into higher density apartments.

      Frankly it is everywhere and hard to see just how it is going to get soaked up in the present climate.

      On another note, mate just got back from a breakfast with his old team and one of the big four banks. Lots of unhappy folks – job cuts of 2000 in the pipeline and everyone on enforced leave over xmas. This was in the retail side of the business – not sure if the ‘2000’ quote was national for just for Melbourne.

      • This is a key point. I live in Oakleigh, and would like to buy around here in a couple of years time.

        I’m shocked by the number of house ads that spruik subdividing properties into units / townhouses.

        Anecdotally I would say maybe a third of ads don’t even bother to include pictures of the house, just a huge bold outline of the land area with a blurb geared towards subdivision (with the ever present ‘STCA’ disclaimer).

        I can’t fathom why anyone would do this with the stock on market we’re seeing, yet a lot of these larger blocks still go for 700k – 800k seemingly based on the idea that the ‘land value’ is worth that much.

        Personally I think we’re still a little way from Melbourne’s Minksy moment – my call is that this will happen when amateur investors realise that leveraging into a large block of land, subdividing, and building t/houses is not a rolled gold guaranteed path to wealth.

        Unfortunately, as Leith has noted umpteen times, these people will be caught in the middle of an avalanche of supply they failed to notice.

    • Janet, I wish people had known about this for 2-3 years. I’d say the notion of Melbourne property possibly being in a bubble has only been in the MSM for around six months, tops.

      I’ve warned friends since the GFC started not to buy. The ones that did were grinning for about two years and now it’s an elephant in the room that we don’t talk about.

      We’re talking $700,000 weatherboard places in semi-industrial areas….

      • darklydrawlMEMBER

        Yeah, I have been about the same time frame, and been shot down too for the same reasons.

        Personally I would like to be a bit wrong. I think prices should fall, but I would like to see slowly.

        The markets though tend to act like wildeebeast. When they panic and run they run hard and long. Nothing slow and steady.

        In the US it has been 5 years and prices are still dropping.

        As housing takes a long time to sell and move compared to shares and cash, they timeframes are necessarily longer.

        Guess we can only wait and see, I try to be un-emotional about it and read what the data is telling me. Not much of the data is good.


  3. The key is that the two largest markets have stock levels rising. A recovery in Perth and Brisbane can’t offset that. Particularly if house price declines begin to accelerate.

    Just wait for the revised budget hole as the real sales numbers replace the estimated. Anyone know when that will be?

    • I wouldnt call that a recovery in Perth or Brissy. More like a slowdown in the descent as potential vendors give up hope and take properties off the market.

      • I sell in Perth, last month was our worst in my 10yr real estate selling history. More properties are being withdrawn than sold. Not much of a recovery!

    • In Brisbane there are at least 10 apartment towers going up in the inner city area. They probably only have one listing for the 100+ apartments being sold off the plan. This could skew stock results somewhat.

  4. As Melbournian who is going to buy all those houses???

    It isn’t cashed up Chinese investors as they are the ones selling the properties (see above).

    Very few in my generation (Y) have the financial resources to buy in to the market at current prices.

    Those of us who could already have, I did and subseqently sold at the start of the year – thanks Kevin.

    Now after being a debt slave for 12 months I have no interest in having another loan in the $400k range and subseqently will just keep saving money until the loan is much smaller or nonexistant.

  5. I have been monitoring the Fremantle area for about 9 months for houses in the 500k to 800k range. Basically very few new stock is coming on the market and very few stock is being sold. The people I talk to who have properties say it’s a terrible time to sell, those who I talk to who are looking to buy say it’s a terrible time to buy, not sure how long this will last or what will be the tipping point I doubt that the interest rate cut will entice buyers.

  6. With only a small rise in demand from its low recent base a LOT of this housing stock is going to be on the market again in early 2012, along with the first time stock. What is this going to do to vendor sentiment, especially those who had planned on a Spring 2011 sale and now find themselves in a less competitive position?

    While the Sydney property market has helped keep the national price figures from falling too rapidly, it could be that the Melbourne housing market really drags things down. Which cap city market can conceivably raise their sales prices high enough to compensate? I agree there’s a real risk of contagion to othere cap city property markets if this Melbourne sales listing mountain tanks property prices there.

  7. The key point is, those that dont have to sell are not selling, its only those that have to or want to sell that are selling, and the only ones buying are those that are cashed up or have rocks in their head.
    Look to see increased immigration as a means of slowing this.

    • darklydrawlMEMBER

      There is only so much you can do with immigration, especially if employment is in decline.

      Not sure how much political will the Government of the day will have for that.

      In Melbourne, the numbers have been falling, albeit off a fairly high ‘base’.

      Some of this is due to the steep decline in foreign students due to changes in the regulations.

      I am sure the high AUD and better opportunities else where are also playing a role in people’s decisions to move here.

      I have spoken to a few chinese folks who have little interest in staying Oz where there are much better opportunities back in China and Asia – and less expensive too. Not solid evidence I know, but a while back I never heard anyone say that.

      • Demographic trends seem to indicate those who have to or want to sell will increase especially considering many (soon to be) retirees are getting lower returns on equities and also with (now) falling interest rates, their annuities.
        A for chinese investors is are they really going to be enough of them to make any appreciable difference? I mean there is a doubling of stock on the market in Melbourne since April 2008. That’s of course assuming the whim of Central government doesn’t prevent them from investing overseas at some stage to protect domestic asset values.

      • For future migration trends, have a look at this document:

        The key bit is on the third slide – NOM (Net Overseas Migration) forecast for the next few years. Now, I know this is subject to political winds, but based on the planned program numbers, immigration is _not_ going to save housing.

        You’ll note from that slide that this govt has intentionally decided to destroy the overseas student program. This in turn will heavily reduce the throughput to permanent residence (the ‘cooks and hairdressers’) that were such a feature of permanent migration from 2004 – 2009.

  8. Forgot to add that RP Data’s sales listing data from 2 weeks ago has Victoria with 61% more listings than the same time last year. The national sales listings figures are up 34% over the same period.

  9. Hi, perhaps it was obvious to others, but I was uncertain what the difference in colour on the charts represented. Could you please put that into a legend or into the article?

  10. Increased refugee intake and rent assistance as a last resort if you cant get the china dollar. However i suspect that pressure from the education lobby, will increase student intake. Heard today a call for more medical internships for foreign students studying medicine so that they dont go home

    • how are increased refugee numbers (whether by boat or plane) + rent assistance going to take overprice property stock off the market ?

      maybe in the fringe suburbs (I doubt Fed Govt refugee money is sufficient to cover a mortgage or even the rent on inner ring “bubble” prices) and in a small volume

      likewise with medical students, which would constitute a very very small % of total international student numbers, again on student visas (not full salaries)

      cannot see an increase in demand coming from either of these groups, sorry

      • 8 people in a 2 bedroom flat, a fair bit occurs in suburbs in sydney like harris park.

        even in canberra, ANU students from India with 1 family of 4 plus 4 students in a flat. Its wrong but it occurs, better to have a tenant underpinning the mortgage than being forced to sell. i would suspect that the tenancy rate should also be climbing

          • Seriously, your justifications appear irrational.

            You think that prices will be maintained by refugees, 8 indian students per 2 bedroom dwelling at the bedroom whispers of the PM’s defacto husband?

        • C.M.BurnsMEMBER

          so it takes 8 immigrants (including refugees in this term) to take one property off the market…

          that seems counter-intuitive to your argument that refugees will reduce the amount of property on the market.

  11. Most people for obvious reasons have their head in the sand and do’t want to face reality. A friend told me he recently purchased a two bedroom aprtment in inner Melbourne for well over 600K. I didn’t have the heart to tell him he should have waited at least 12 months or so. With the big 4 banks having almost 2.7 trillion dollars worth of assets, I realy can’t see where lending growth is going to come from to give the market another leg up. The RBA could always reduce interest rates which could help a bit I guess.

    • I am looking to buy a 2 bedder in Melbourne as well, and I am already seeing discounts of up to fifty grand.

  12. Walking around the inner west of Melbourne suburb where I rent a house, I am continually surprised by the number of un-occupied houses not on the market, some next door or across the road from new development. It strikes me that given the number of houses not on the market, waiting for something to happen, that even the charts above under state the potential over supply that exists in Melbourne, particularly in the absence of overseas students (there were a lot of students around this area when we moved in two years ago, but they seem to have melted away)

  13. Hi guys don’t think that there is stock drop in Perth as figures show.
    Houses are simply withdrawn from the market.
    A lot of young miners are thought by their parents that best way to invest your money is in IP. And they get rely a lot of cash. Though they all dream of Peppermint Grove mansions ( I guess every bloke dream is to live in his boss neighborhood ), which is a bit Boganic to me, but who am I to judge. Any way economy here is still solid and houses (like few in my street) sit on market for some unrealistic price. They bought few years back for 250k, cut the block and selling half of it for 250k and house for 450k and are wondering why people are not buying? Due to high income from other side (mines), they are not pressed to sell. Houses sit 6-9 months on market and then they withdraw them waiting for some better times. Once China slows down and Melbourne burst start discounting 50% the whole pyramid will bring all markets downwards. And with boomers selling of their IP’s and crisis shackling whole world, we will see unemployment raising to 10-15% – like in US. after all do some calc.
    We have 23mil people and have 1.9 tr$ debt,2.3 people per hoousehold 30% of households is debt free (all publicly available and undisputed data) and that equitation to 271k per household that is in debt (some are obviously debt free). That is 35k loss on mortgagee interest (lets say 50% house debt 50% credit cards debt), when you take that average household gets about 70k after tax money interest eats up 50% of their income. When you add some 800$ in consumption we are in 70-76k deadlock. People with debt are entering more and more debt (that is why banks have doubled minus allowed) but it can not run forever. It is easy to calculate that there is maybe 3-5 years before system MUST crash simply due to exponential debt. So the only question is. How much cash you will have to bargain with banks when they take over houses? I guess 450k house now would be 250-280 max on such market. therefore 120k would secure that bank will sell it to you.

  14. Mr SquiggleMEMBER

    Thanks Davel, units vs housing, very good. Now are units blue and housing purple or is it the other way around?

  15. So long a mortgage of over 300,000 is required “just to get into the game” you won’t see FHB’s flooding back.

    • It made sense while you were “guaranteed” to be a millionnaire in 7-10 years and you could expect pay rises to slowly ease you out of crippling debt, but I’m not convinced that by early 2012 it will still be seen that way.

      I even had a friend who I had fervently warned about the property market in early 2010 admitted today that she thinks of me every time new data comes out and wonders how I could forsee it (of course she’s trained as an economist and could therefore not be expected to foresee that kind of thing).

      • A relative spent the past two years pressuring the Wife and I to get into the property market and I told him straight up about 15 months ago that I expected the entire nation’s housing market to head down as of 2011.

        On a recent visit to Brisbane he expressed his sincere amazement that property was falling in value and exclaimed “Nobody had seen this coming, nobody!” *sigh*

        Anyway, by renting instead of buying into the Brisbane market in that 15 month period the Wife and I estimate that we’re about $40K better off than we would have been.

    • Agreed, but how do you think this will this be achieved?
      – Much lower prices?
      – $300k FHBG?
      – others…?

      • A combination of lower prices when they stop falling, enticing interest rates, low unemployment looking more long-term assured. I can’t see it happening anytime before late 2012 if the rest of the world doesn’t fall apart, but more likely early 2014.

        I can see no support for house prices at their current level given the international economy.

  16. I agree with alot of what has been said.

    There have been a few of our clients that have only received the planning permits and then have listed the properties for sale again (knowing full well that property is a dead man walking).

    It is kind of surreal as our firm has never been busier with regards to residential projects and yet the writing is clearly on the wall for those that get their head out of the sand.

    • Good that you have a realistic view. My guess is that its tough for people to change course – if you’re a developer, you need to develop. And you can probably find a bunch of reasons to carry on if you choose to.

      But some of these firms are going to get smashed. My belief is that we might see half-finished projects stopped as funding runs dry and firms go bust.

      • davel, I believe warren buffet said it most eloquently “Only when the tide goes out do you discover who’s been swimming naked”. To be honest its not really most people fault they get fed BS about investing that is actually speculation at least developers actually attempt to provide new value to the community. Its just that the majority has decided it is better and easier just to be a rent seeking vampire and bank the land.

  17. I pretty much agree with the analysis of those four cities. Melbourne is my big concern, they seem to be in for a big turnaround there. I know that there are enough buyers in China to soak up the surplus, but why would they?

    Brisbane and Perth I’m a little more bullish on, but not enough to draw swords over – which probably means we will both be wrong.

    • I would be very surprised to see Melbourne tank and another city skyrocket at the same time. If Melbourne tanks it will take others cities down with it regardless of supply.

    • C.M.BurnsMEMBER

      I keep reading this “chinese investors will buy our houses and save us” statement and cannot figure out why.

      The Chinese buy our country by the shipload as we’re one of the only producers of a raw material they need.

      Why does the same principal seem to be applied to housing automatically?

      We are not the only place for a chinese property investor/speculator to park their cash,
      All countries have houses for sale, most have some sort of property investment “industry” (gec, that made me feel sick to say) and nearly all of them provide better returns as an investment (chinese investors don’t get the government NE kick-back to offset their otherwise poor, negative cashflow investment decision.

      Is there a legitimate reason why a chinese property investor would park money in australian property and over any other country ?

  18. About a year ago I was quite bearish on Melbourne and Australian housing – regular reader of Steve Keen 🙂 but have now probably moved into more ‘neutral’ territory – surprisingly so…
    We all know the negatives mainly led by debt.

    One thing we forget about is Cost of building dwellings (ie. stock replacement). Anyone reading this that has recently built or known anyone that has built a dwelling will know what it costs to do so in this country – as a result I cannot see the large falls predicted by many bears. The arguement of “we will pay our tradespeople less” is not valid as we are not the US. The arguement of “we will build smaller dwellings” also does not address the current stock issue, would I not paying more for something bigger and better – is it not human nature? Also if our dollar drops, that would further increase cost of materials etc.

    In terms of Melbourne, I also see positives, mainly lowest mortgage stress, highest population growth and lower overall prices than Syd.

    All in all I take a more moderate view, that housing is not going anywhere fast (be it up or down) and will stay steady going forward (around CPI growth). Time will tell…

    • Think you will find construction costs (real) are a furphy … Leith has covered this in past posts.

      I like SK as well and I am a believer in the Minsly Moment – as a marketer I understand how value can be created in perception with brand alone let alone product experience!

      Once the emperor has no clothes on mass – poof all over-red rover!



      • agree and further when the small business owner thinks about maximising their profits they go and get a business coach, who says you start by saying how much profit you want each year (say $240,000 and then add that to the materials used in 12 months and then thats how much you need to bill, divide by how ever many weeks you want to work….
        so if said builder driving latest hilux wants to earn 80k not 240 then the cost of building can drop significantly,

        as an aside i reckon woolworths got into their new hardware stores at precisely the wrong time, a master stroke you might say

        • Hey Jack,

          Mate, agree with you … Woolies though is an interesting business.

          They are looking for growth and to be honest the competition Wesfarmers will create in response to the competition will be great for consumers – the only winners in price wars are consumers!

          Anyhoo… the other point of interest is the partnership do not underestimate the power of Lowes expertise with customer experinece, insight and marketing have a looksy here!

          If they bring their customer experience and quality retail experience here = game on!

          But yes, I also think it would have been much better timing 5-10 years ago. Ain’t hindsight just grand!


          • interesting thanks mainlander,
            i hadn’t seent he lowes link before.
            The consumer will benefit, if they can be bothered spending. The biggest issue i see is many not buying anything

    • Not automatically, but this one should.

      Similar to debt deflation, we (along with others) have over-capitalised resources, particularly human resources, into this sector, and much of them are either non-productive (RE agents, lenders) or have reduced productivity because of a highly regulated labour market (construction industry workers) and a captive customer base (tradies).

      Quite simply, there is nothing left to generate enough (good) money to throw at them (bad).

      As I’ve stated before, during the tulip bubble, where 3 times income was paid for a solitary bubble (say $180k), all the excess gain was not captured by one party.

      The seedling grower did not grow seedlings for $0.05 to the wholesaler who sold them for $0.30, just to see the retailer push them out the door for $180,000.

      They all took a cut, and after a while it entrenched itself.

      Now we have many more parties that requires either a rationalisation of the existing workforce, or an increase in producivity.

      It will not happen, and prisoner’s dilemma will see them finger point at each other before even understanding what is wrong.

      This is why I believe a sudden, economy destroying crash is preferred than a slow melt. Savers and FHB’s have suffered for long enough, without this wind down incurring death by a thousand cuts.

      • +1. IOW all along the ‘supply chain’ of housing, various entities have been have been taking their cut.

    • yes 50% of the time is my guess.
      but in aust we are “lucky” as some employment will be absorbed by mining sector, the non trade side of the property sector will suffer greatest, (agents, conveyencing, banking, as builders will head off to mining sector

  19. I am one person who is happy to see prices in Melbourne fall, and the further they fall the happier I am. We’ve had a property bubble for so long that most people think it’s the fundamentals that have been keeping property prices growing, when of course it has been all the stimulus schemes. For the past three or four years I have been telling people we are in a housing bubble, only to get strange looks and of course all the reasons why “property never falls” thrown back at me. Even now, I think the average person sees the real estate market as temporarily quiet, but one that will pick up again soon. I sold out a while ago, planning to get back in after prices crashed, but I realise now that these things always take longer than expected. Of course a crash will affect those who bought most recently, and many FHBs will be affected, but I really don’t see why we should prop up the bubble when it should have popped a long time ago.

  20. It’s a pity there’s no graph for Adelaide. I have been monitoring my local suburb in Adelaide and a count of the number of properties for sale on in August 2010 gave a figure of 110. This figure has been rising steadily and is now 205 (of which 40% are over $750k). Many properties are either old homes sold as potential knock-downs or new homes that have already been built by people hoping to make a fast buck on sub-divided plots. There is now a glut of these ‘spectacular and modern masterpieces’ with no back yard offering an ‘executive lifestyle’, and more currently being built have yet to hit the market. One in our street has been empty for the past 4 months since completion – the sellers live in the matching house next-door and originally we heard they were going to hold out for the full asking price so they could be mortgage free. They have now caved in and reduced the price 3 times, but still no-one turns up to the open inspections. I know another that took 12 months to sell. A third that despite heavy discounting didn’t sell and is now rented out. This market will take a long time to pick up. Prices are dropping but only the properties at the cheap end of the market are selling.

  21. The unusual think about the boom (or bubble) are the types of people who are bying into it are supposed to be some of the smartest business people. For example, I know a partner at one of the big accountancy firms who thinks propert in Melbourne is a one way bet and that it has NEVER gone down. I wanted to send him my copy of the Land Boomers. Another guy I know advises companies around the world on their corporate strategy and he basically thinks the same and that what happened overseas cannot happen here. I know others as well. Theses people are very smart and suppoed to be business savvy and probably get paid at least twice what I get paid. I just don’t get it.

    • maybe they aren’t as smart as you.
      Or in their own field they are smarter but
      just keep telling the truth and after a while you will be suprised. I have been telling people for 12 months to exit, and got told this week “oh your not still saying that” to which i replied had you listened your 3 units in melbourne might not be $50,000 each less then 12 months ago, they replied no they aren’t, so i replied lets speak to 3 agents and get an average price less fees and compare to 12 months ago, if it’s more then 12 months ago I will pay them the amount in the rise or if its fallen they would pay me the value of the fall. they didn’t take the bet, why cause the unit above one of theirs just sold for $75000 less then they bought theirs 2.5 years ago … yes i looked this up prior to my meeting with them, needless to say they are going to be listing 2 of their properties shortly …

      • You are a cruel man.

        A friend of mine has just bought a two bedroom unit in inner Melbourne for well over 600K. I he is very brave or stupid.

    • It’s possible to be Chairman of ANY Reserve Bank in the world, including the US one, and be this stupid about property prices. In fact, being clever AND HONEST about property prices is probably a guarantee that you WON’T get anywhere in government appointed jobs.
      There will also be no room for you in most banks and financial institutions, but the hedge fund industry will be most welcoming.

  22. Great analysis and insights from all concerned – as always on MB.

    Have been watching with interest as a Melburnian renter wondering how much further things will fall.

    While a sharp drop would be good from a personal perspective, given the likely flow on effect it would have to a large proportion of the population with equity/investment in property, I don’t think the Fed Government (and RBA?) would let it (for the same reasons Govt’s don’t want to talk about getting rid of negative gearing).

    Now whether this is done through immigration levels, interest rates, FHOB grants, temporary tax offeset or some other means I’m not sure, but there are a range of policy levers available to stop a massive drop off the cliff. The question is whether its observed quick enough.

    On the other hand Governments (Fed and State) are quite concerned about “housing affordability” and in Victoria there is likely to be a hell of a lot of land being opened up in the near future due to this perceived pressure.

    Hence, there is this quite an interesting policy tension between reducing prices to help with affordability and maintaining prices to help investors/baby boomers/retirees and all those mortgagees who will be stressed if prices fall too much.

    So my uninformed, newbie’s perspective is that things (at least in Melbourne) will continue to just slowly drift with zero real growth for some years. Once population growth and perhaps immigration in 5-7 years time, perhaps prices will kick back up again.

    The other aspect I found astounding is those people who in this market are willing to take on an investment property and negatively gear. Effectively paying to make a capital loss just seems ludicrous (or have I missed something?).
    Not to mention you have just locked up a huge amount of your capital on a single asset.

    In the meantime, I’ll just keep renting, keep the deposit growing and if I’m lucky keep a little bit of wages growth, allow me to buy something nicely valued in 4-5 years.