Home sales lowest since 1996

By Leith van Onselen

From Property Observor today comes this gem from RP Data, showing that the volume of home sales in calender year 2011 was the lowest in 15 years:

The number of property transactions in 2011 was the lowest number of calendar year sales since 1996. The annual volume of sales across the nation was 25% lower than it has been on average over each of the last 10 years, highlighting just how challenging market conditions have been for the industry, according to RP Data.

The 2008 calendar year was the most recent weakest year for the housing market, with capital city home values falling by 1% and 416,859 home sales over the year.

In comparison, capital city home values fell by 3.8% in 2011, however there were 373,394 home sales during the year, 10.4% fewer than in 2008…

Across the nation, the number of home sales has been trending lower since September 2009, according to RP Data.

Not so coincidentally, September 2009 was also the last month at which the Reserve Bank held its official cash rate at historically low levels following the economic turmoil in 2008 and was also the last month in which the boost to the first-home owner’s grant was available in full.

The slowdown in transaction activity throughout 2011 is in line with the 3.3% annual drop in housing finance commitment volumes for new loans (not including refinances)…

 

Across individual capital city markets the change in sales activity over 2011 has been quite varied. Like property values throughout 2011, sales volumes also fell across each capital city over the year, with declines ranging from 3% in Darwin to a decline of 17.5% in Hobart.

Across each capital city sales activity in 2011 was also below the 10-year average annual volume of sales.

Again there was quite a range, with sales activity in Sydney just 11.6% below the 10-year average and in Brisbane annual sales volumes were 36.9% below average.

Interestingly, across most capital cities, 2011 had the lowest volume of sales over the year of any year of the past decade, however, this wasn’t the case in Sydney and Perth. Sydney recorded fewer sales in 2004, 2005 and 2008 than it did last year and Perth had fewer sales in 2008 than it did last year.

Clearly 2011 was a very weak year for housing transactions.

The higher interest rate environment throughout much of the year and the general conservative nature of consumers were likely to be the biggest influences on such a low volume of sales.

RP Data’s forecast is for a modest improvement in transactions volumes in 2012, but certainly nothing to get excited about. They also expect no real house price growth but decent growth in rents:

We are anticipating transaction volumes will pick up over 2012 due to slightly more favourable conditions.

Interest rates have already been cut by 50 basis points, and we saw that the first of these consecutive 25 basis point cuts encouraged a greater level of sales activity in November 2011.

Many economists anticipate that the RBA will cut rates further in 2012 which is likely to improve market sentiment further.

Capital city rental rates rose by 5.8% over the 2011 calendar year while capital city home values fell by 3.8%. Although we aren’t anticipating any real growth in home values this year, we expect that rental rates will lift again in 2012 across most cities.

Ongoing increases in rental rates accompanied by a lower interest rate environment is likely to encourage some renters to purchase their own home.

Even though we expect that sales volumes will improve in 2012, it must be kept in mind that any improvement will be relative to the weakest year for sales activity since 1996.

On the subject of rental returns, it is interesting to note that despite the 3.8% slide in capital city home prices in 2011, and rental growth of 5.8%, gross rental yields – i.e. before property expenses are taken into account – remain well below mortgage rates, ranging from only 3.62% in Melbourne to 4.68% in Brisbane:

Overall, RP Data’s report suggests continued softness in the Australian housing market.

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Comments

      • More precisely, the head fell off in 2007, was mounted back in 2008 with a lot of sticky tape, started leaning to the right in 2010 and is now dangling on a piece of skin about to fall to the ground 🙂

      • Nicely put, but don’t underestimate how thick-skinned the politico-housing complex is.
        :-D>

    • That was 2011 – it is now 2012.

      What do you think happens after a bottom in any market?

      • What do you think happens after a bottom in any market?

        The price reverts to mean.

        However seeing as we haven’t reverted to mean, we still must be a long way from the bottom.

      • The article is about sales volumes, not prices.

        However falling prices whilst volumes increase is a possibility.

      • So Peter, are you saying the sales volumes have bottomed, prices are yet to come?
        When do you think the prices will bottom?

      • why not? In the previous decade, prices rose as volumes fell. Surely past performance predicts future results 😉

        Did someone say here somewhere that the average mortgage is now $400K?

      • Peter, national as well as Syd. I believe if it tanks nationally, Syd won’t survive alone. Thanks.

      • However falling prices whilst volumes increase is a possibility.
        We’re seeing that in my corner of Brisbane. Stock on the market in my postcode is even down, houses are moving again but only because vendors are willing to drop prices. And falling those prices certainly are; I wouldn’t have bought otherwise!

      • Hewell – I don’t think that you will see much change in the medians in Sydney, but you will find greatly reduced prices in distressed properties if you look hard for them.

      • Thanks Peter.
        Yea, you are probably right. Depends on suburbs as well. I will keep looking.

      • “What do you think happens after a bottom in any market?”

        Is that your call then, that 2011 marks the bottom of this housing cycle?

  1. S&P promises more of the same this year too, says China slowdown will improve house prices in Australia

    However, the article author/sub-editors at SMH describe it as a “plunge”.

    ‘THE predicted slowdown in China’s economic boom could cause Australian house prices to plunge by more than 5 per cent this year, according to one of the world’s most influential credit rating agencies.’

    Come on, 5% is a “plunge”?? So much pessimism in the MSM, when, in fact , falling house prices help a lot of young people.

  2. “””
    The higher interest rate environment throughout much of the year and the general conservative nature of consumers were likely to be the biggest influences on such a low volume of sales.
    “””

    I find that to be some lazy analysis from RP Data for two reasons.

    Firstly, that “higher ineterest rate environment” was, historically speaking, still under the long term average interest rate.

    Secondly, the “conservative consumer” meme has already been macrobated (even Gittins! recently). Savings rates have only returned to their long term average post-GFC. The savings rate lows of the 90s and early naughties was more a side effect of the credit boom, if anything.

    • I dont think its lazy, i think its deliberate. By laying the blame on what they proclaim to be unusual or transitory factors they are trying to set the stage for a recovery down the track.

      If they had to admit it was the result of consumers effectively reverting to the mean their message would be in trouble, as prices should then logically follow that reversion.

  3. Maybe I’m being too simplistic, but that’s another chart I would expect to see trending upwards over time roughly in line with population growth, not show a decline for 10 years.

    Perhaps the ‘hump’ reflects excessive investor activity?

  4. Leith, I have suspicions about rental statements of the type that pervade these kind of industry reports. Something in many of these types of statements reeks of making the arguments and analysis fit the outcome (similarly as baseless statements such as “property doubles in value every 7-10 years”) that they require for political considerations.

  5. anonysubscribe

    Wot? 2011 bad? how could it be? my friendly local real estate ‘agents’ came by promising the moon!
    I thought houses never went down!
    so there will be no real growth
    but rent growth will improve?
    yippee!
    but are they related?
    if the denominator goes down and the numertor stays the same wht was that they taught me in algebra?
    funny my real estate professors never explain such ugly truths.
    and they never told me to compare the gross yields with the actual net yields.
    or the relevance of opportunity cost in terms of risk free returns.
    [omission by unconventional economist as well]
    but then these arcane mysteries are best left to the professionals who sadly are rated with prostitutes in terms of credibly apparently.

    would that this migrant knew this when he came and was plastered with all the ‘marketing’ truths he learned the hard way buying and selling and enriching those kind men in their white shoes.

  6. As the RP Data weekly report keeps stating there’s less new listings coming onto the market than last year, but the stock levels keep rising. http://pages.e.rpdata.com/industry-wrap-090312

    The national total listings number of 311,389 looks likely to exceed last year’s peak listing total of 318,575 in the next few weeks. A LOT of vendors kept their properties on the market over January, and with the auction clearance rates (and likely demand) down so far this year presure to meet the market will be building.

    Some perspective on the national total listings figures 311,389 is 24.9% more listings than one year ago, and 54.4% more than two years ago. The fact that sales turnover is down is not a surprise

    • > A LOT of vendors kept their properties on
      > the market over January

      There were quite a few unsold properties in my area withdrawn from the market in late December only to come back as “new listings” with different agencies in February.

  7. thomickersMEMBER

    The property market is turning the tap off in order to let the the current stock on the market clear.

    Economic reality will turn the taps on full blast, if the current stock cannot be cleared.

    • I pity the poor hack that has to write this garbage, imagine if this was all you had to drag you out of bed each day.

    • russellsmith55

      Wow this article is really convincing! Unsubstantiated anecdotal ‘evidence’ from real estate agents about alleged first home buyer enthusiasm. Topped off with a prediction of increased mortgage demand – from the CEO of a website that compares mortgages no less!

      All entirely unbiased of course.

      I imagine the writer’s assignment started off as ‘write an article for Joe Everyman that gets him excited about entering the property market. Omit any facts as necessary that don’t support this outcome’. Must be soul-crushing for anyone calling themselves a journalist.

      • Unfortunately we here are something of a minority still – Many people my age (28) still read these “articles” and think oh thank god, we’re all saved, time to buy now before we’re priced out forever.

        There should be a law against this kind of “reporting”.

        The thing that’s starting to eat away at me more and more is what are we going to do about it? We as a community of answer-seeking young people (not just the ones watching MSM and MTV)…

        Who’s going to make housing a political issue? As opposed to “important” MSM distraction tactics like gay marriage and boat people?

        Sick and tired of hearing MSM whinging about retail, job losses, and concluding utter rubbish. As someone always posts “ITS HOUSE PRICES, STUPID!”. I sometimes scream that at my TV when watching the morning news…