Share on Facebook Share on Twitter Share on Reddit + - Weekly RP Data house price analysis By Leith van Onselen in Australian Propertyat 11:27 am on May 16, 2012 | 66 comments Login to access MacroBusiness Members special reports. If you are not a member, sign up here. Please fill in the following form to login Username: Password: or Please fill in the following form to subscribe * Username * Email * Password About Latest Posts Leith van OnselenLeith van Onselen is Chief Economist at the MB Fund and MB Super. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs. Latest posts by Leith van Onselen (see all) Dictator Dan opens prison gates - October 26, 2020 Alan Kohler: Australia must wean itself off mass immigration - October 26, 2020 CBA does the new RBA tools - October 26, 2020 Share on Facebook Share on Twitter Share on Reddit + - YOU MAY ALSO BE INTERESTED INAuction market builds steamCoreLogic's preliminary auction clearance rateGotti: Let home buyers raid their superannuationRobert Gottliebsen has urged the federalABC does the Sydney and Melbourne rental smashABC News has provided a useful update on theMelbourne listings rocket after real estate restrictions easeFrom Eliza Owen, Head of Research Australia at Comments Mr X May 16, 2012 at 11:34 am You’d only need to sell one house for around $2m to push the index up in Adelaide. Adelaide’s so resilient (or stoopid) depending on how you look at it… Karan May 16, 2012 at 11:41 am This is something I’d like to find out too – how much volume is behind these numbers? Avid Chartist May 16, 2012 at 11:42 am The last chart is the dimmest ray of sunshine I have ever seen. Would be out shone by one of those energy saving light bulbs. TheRedEconomistMEMBER May 16, 2012 at 11:44 am Sydney down 4.31 % for the last 12 months…. Those whom bought in the last 12 months on a LVR of 95%… would be starting to sweat. Melbourne no longer a paper cut… they are calling for the transfusions reusachtigeMEMBER May 16, 2012 at 12:08 pm It’s great to see Sydney finally being hit. This should help bring down the national figures faster. Felixfrost May 16, 2012 at 11:47 am Why do you continue to use the language of the spruikers Leith? “Another poor week” a “ray of sunshine”. It’s true that we associate downwards trends with negative language and vica versa, but if the overall sentiment on this website/the author is that high house prices are a bad thing (which is an assumption but I think a correct one), this can be reflected in the use of more neutral language, without resorting to any sort of reverse spruik. A more neutral approach which doesn’t assume good for high, and bad for low, should be encouraged when dealing with the highly emotive subject of house prices. So for eg. you could say “Prices continue to slide, downward trend continues”, or if it’s a upside, “bucking the trend” and etc. GB May 16, 2012 at 11:59 am see your point but disagree FF. when talking about markets you are talking about how those already in that market perceive the price moves. becuase they are the real participants in it, not the spectators on the sidlines. gtempo May 16, 2012 at 6:03 pm This comment shows how little is known about markets and market psychology specially in the RE market. Those spectators ARE market participants for as long as they are looking. Example: you go to an open and see 20 other parties looking at it. Or you go to an open and you’re the only one there. How does your confidence change if you are bidding? -gt DrBob127MEMBER May 16, 2012 at 9:59 pm good point reusachtigeMEMBER May 16, 2012 at 12:11 pm Totally agree. It peeves me to no end that house price falls are expressed as “bad” even on this blog and that house price rises are expressed as good. I believe it should be the opposite, but neutral language will do just fine and is thefair position. Unconventional EconomistMEMBER May 16, 2012 at 12:15 pm I have simply adopted common writing conventions. How often do you hear price falls in any asset class expressed as “good”? Answer: never. reusachtigeMEMBER May 16, 2012 at 12:20 pm And there’s the problem and why there is so much angst on this issue from the younger generations who see housing as just “a damn roof over their heads” which will not be attainable unless there’s a major shift downwards. There’s the real positive in house price falls!! Unconventional EconomistMEMBER May 16, 2012 at 12:29 pm I have done more to warn the masses about Australia’s housing bubble, lobby against negative gearing, argue for affordable housing, etc than just about anyone. So it’s a bit unfair to accuse me of adopting a “spruiker’s” tone. reusachtigeMEMBER May 16, 2012 at 1:56 pm Of course you have done a lot, and you are far from a spruiker. The comment the OP made was in regards to the language use -, it’s spruiker language. That is all. outsidetrader May 16, 2012 at 12:23 pm The price of an Australian dollar? The price/value of CDS? (Though it’s a stretch to call these assset classes)… cancerward May 16, 2012 at 12:42 pm Au contraire, it might be just an English language media convention. Here is William Keegan’s anecdote for you again from the Guardian: “I shall never forget the story told by the late Lord Alexander of Weedon who, as chairman of NatWest, visited the Bundesbank when Karl Otto-Pöhl was its president. Alexander was carrying a copy of an English newspaper that displayed a headline to the effect: ‘Good news – another rise in house prices.’ Herr Pöhl commented: ‘Over here, that would be bad news.’” I posted two comments on yesterday’s FHB article about Tim Costello / Joe Hockey’s Q&A comments on negative gearing and neither appeared, although several other comments on the same subject did. Lost in the ether somehow? Unconventional EconomistMEMBER May 16, 2012 at 12:45 pm “Lost in the ether somehow?” Let me check the Spam filter. Unconventional EconomistMEMBER May 16, 2012 at 12:49 pm I should check the Spam filter more often. Just restored a dozen comments from you, GB, gtempo, and others. Sorry about that! poid May 16, 2012 at 12:49 pm UE maybe its time to think of housing as a liability instead! (tongue firmly in cheek) Blake May 25, 2012 at 11:09 am Actually I would call it a liability, it is a shelter asset but a monetary liabilty, in that it generally costs money to continue the provision of shelter, atleast when renting or mortgaged. If you have bought outright, and own the property, there is still the opportunity cost of not having that cash in say term deposits earning interest. Does that make sense to anyone else? SteveB May 16, 2012 at 1:39 pm How often do you hear price falls in any asset class expressed as “good” House prices never fall, they just “soften”. Unconventional EconomistMEMBER May 16, 2012 at 1:42 pm Or “taper”… Miss P May 16, 2012 at 6:56 pm Or short lived affordability improvements DrBob127MEMBER May 16, 2012 at 10:01 pm negative growth Felixfrost May 16, 2012 at 2:38 pm No criticism was implied about your analysis or intentions Leith, I applaud your work. But it does strike me as ironic that the “Unconventional Economist” using convention as his defence. And yes, you are right, asset falls are never usually described as “good”, but isn’t this re-framing of the status quo what Macro business is all about? Also, I wasn’t suggesting a flip, mere neutrality. tonyddMEMBER May 16, 2012 at 3:48 pm Good for whom? I guess you could add this in the commentary and every angle / beef / whinge would be covered. What about Unemployment rate down and participation rate way way down? Not always straight forward! TheRedEconomistMEMBER May 16, 2012 at 12:17 pm Felix Frost, I understand your concern, but it would be great if the mainstream media also reported appropriately. We never hear “falling” or a “dropping” in prices. Terms such as “softening” or “subdued growth” are used. If I was writing terms like “bleeding” or “Haemorrhage” would be used. Velociraptor May 16, 2012 at 11:51 pm +1 “spiralling”, “plummeting”, “death throes”… Julius May 16, 2012 at 1:37 pm Anybody who mentions Leith Van Onselens name and the word “spruiker” in the same sentence has clearly spent the last several years living in a galaxy far, far away. Your call for “neutral” language reminds one of the ascendancy of political correctness and the manner in which it has effectively castrated a once vibrant, colourful, and highly descriptive language. Anyone with even a passing interest in the fate of the housing market understands what “Another poor week” means. And on this website the expression is quickly translated into its true contextual meaning. When “Another poor week” was read by the Macrobusiness constituency, you would have heard the crackling of grins across the internet. Charles Ponzi May 16, 2012 at 2:50 pm High house prices are a cancer. I believe patients and non cancer patients would use positive language to describe falling cancer rates. We should be using positive language to describe falling house prices. The sooner house prices crash, the sooner our sick economy can recover. GB May 16, 2012 at 12:03 pm looks like SYD playing catch up now as the bursting bubble moves from the regional to the big capital cities. SYD was always the last to fall but after melb has collapsed it was only a matter of time. not even the Claw’s “housing shortage” can save SYD now….. Unconventional EconomistMEMBER May 16, 2012 at 12:32 pm In fairness to Claw, he never suggested that Sydney’s shortgage would keep prices from falling. As I have shown many times before, inelastic (unresponsive) supply typically makes house prices more volatile and subject to wild boom/bust price cycles. The Claw May 16, 2012 at 11:15 pm My prediction was for a 70% price fall in real terms peak to trough. For the fall to be lasting it does need the shortage to be partially solved though. My prediction is not quite turning out as expected, but there is still some hope. Jarrod May 17, 2012 at 9:12 am 70% would be fantastic, but I agree it will need some significant increases in supply to counter the growing population. Serenco May 17, 2012 at 10:48 am even though I disagree with the shortage argument I must applaud you for recognising shades of grey: there can be a shortage and still we’ll experience a significant correction. russellsmith55 May 16, 2012 at 12:10 pm Somewhat related: A wonderful article at Business Spectator from Harry Triguboff on what Australia needs right now. Note, people with high blood pressure and on heart medication should think twice before perusing it. http://www.businessspectator.com.au/bs.nsf/Article/property-prices-Harry-Triguboff-pd20120516-UBRJG?OpenDocument&src=sph&src=rot ajostu May 16, 2012 at 12:27 pm Cut down the trees!! Cut down the trees!! DrBob127MEMBER May 16, 2012 at 12:31 pm Just about every comment under Harry’s article smacks it down as a spruiking info-mercial. mlsc1974 May 16, 2012 at 12:59 pm And people wonder why the Greens are on the rise. Corporate Australia is failing its current citizens. The major parties are constantly pandering to big business and then trying to buy off “working families” with handouts. Harry is just another example of a wealthy man running a business under an oligopoly. The proportion of the pie is hard to increase, so grow the pie instead to become wealthier. Same can be said for many large companies from banks to supermarkets, to privatised public infrastructure. DrBob127MEMBER May 16, 2012 at 2:10 pm +1 Mav May 16, 2012 at 2:23 pm I go straight to the comments section first. That’s a good preventive measure to avoid High BP. As usual, HRH got pwned in the comments. Goldilocks May 16, 2012 at 8:54 pm Russellsmith, thanks for that. The comments were great. I subscribe to BS and appreciate Karen Maley in particular but tend to not read this type of ..I don’t know what to call it actually. UE, thanks for another informative post. bskerr2 May 16, 2012 at 12:43 pm I have been watching China’s Shanghai Stock Exchange, and it’s been heading south since the whole Greece thing broke news. Waiting for Spain to turn into a Greece and expect China’s markets to go down even faster. So far down -.5% today and dropping. Around 11.30am Aus time they will close for lunch then open back up a few hours after that. But seems they will lose another %1 or so. But if the Chinese people get wind of what is really going on (hasn’t happened yet, been talking to a number of people online I know over there and the government is doing a good job hiding news, in fact people are talking about buying property again because they think its now a low price and may not go lower, poor them)they will really start to pull money of the markets like they did in GFC1. Then we will see their stock market drop fast, maybe even 5% a day in some cases like last time northerner sa May 16, 2012 at 1:52 pm Be carefull what you wish for, every other country that has had a house price correction seems to be in a depression with extreme debt associated economic problems. It seems that the same cycle is playing out here and is probably unstoppable now, the only difference is we should have the benefit of foresight, having seen what has happened in the rest of the world. I’d love to see a strategy or policy on how to manage the current situation rather than tread the same path as the rest of the world all the way to the bitter end reusachtigeMEMBER May 16, 2012 at 2:09 pm Raise interest rates, not lower them. northerner sa May 16, 2012 at 3:01 pm Bring the consequence on early and deal with it quickly and effectively rather than a long drawn out depression? yep I’d agree with that reusachtigeMEMBER May 16, 2012 at 3:23 pm Exactly. And to stop making debt so cheap. Serenco May 17, 2012 at 10:50 am never gonna happen, you don’t actually think that the people running economies are smart do you? RodZone May 18, 2012 at 4:45 pm Agreed Aristophrenia May 16, 2012 at 2:16 pm Its going to be much worse here – that is one thing for certain. Most of the country is employed in housing – northerner sa May 16, 2012 at 3:07 pm diversify the economy, support industries dealing with business conditions like high exchange rates until conditions improve rather than letting them wither on the vine? Mining taxes that are higher where there is no down stream processing lower taxes for investment in secondary processing like smelting? Hoe Jockey and Aony Tbbott May 16, 2012 at 6:58 pm Sorry, no can do. That’s why ‘Houses and Holes’ is just that. We’ll all have to live with this short sightedness. russellsmith55 May 16, 2012 at 2:18 pm Not sure what you can do really; its like closing the gate after the horse has already bolted. The only real solution would be to: 1. Invent a time machine and go back to before the personal debt levels got so high. 2. Convince people of the day that the market will be driven by a credit bubble instead of ‘fundamentals’, that Australia is not miraculously different, that a very bad GFC is coming and that confidence will turn very sour for years afterwards. 3. Make the government enact unpopular policies to lean against the bubble and channel investment back into productive areas of the economy. Of these steps, I think that number 1 would be the easiest to achieve… Mr X May 16, 2012 at 2:59 pm True Russell, but number 3 would be best in the long run. northerner sa May 16, 2012 at 3:20 pm Education on our current position and what we need to get out of it with the least pain? Some simple economics like the difference between a tax deduction and a rebate, fraction reserve banking? Engagement with the community? tonyddMEMBER May 16, 2012 at 3:57 pm Northerner Pain is character building, Our new building industry. There may be many upsides to the adjustment heading our way. Aussies might be a bit trimmer, walk more, meet the neighbours etc russellsmith55 May 16, 2012 at 5:20 pm If only our democracy revolved around ideas… Instead we’re driven by politicking, vote-buying, personal ambition, outdated prejudices, very loud ideologues, and a f### tonne of vested interest lobbying. Serenco May 17, 2012 at 10:51 am alternatively go back in time, tell yourself to leverage as much as possible into houses and gold and to make sure you sell it before mid 2010. Then who cares about the economy you’ll be sitting pretty lol finally May 16, 2012 at 4:16 pm Find it interesting that there is a lot of opposition to negative gearing. Was it the 80s when a former trial of no negative gearing deductions occurred in Australia Result: spiralling rents and no available properties. Reintroduction of negative gearing and I think there was the increased depreciation for new properties from 2.5% to 4% A lot of the renters who are spruiking how smart they are at the moment for not buying would be paying a lot more for rent if there was no NG. I also think that the comments that decry the property investor are a little misplaced. Who else would accept a return on a risky investment of around 2% after expenses without a little tax incentive. If you are buying real estate as a long term investment you accept the risks, from having your property trashed to swings in the market. At the same time on a number of occasions you will be providing cheap accommodation to some people who decide that it is more cost effective to rent than buy. I can’t see any governments providing the accommodation we need as cost effectively as the subsidy they provide through negative gearing. Public housing has one landlord who can’t or won’t look after each of their properties. NG has a million landlords, each keenly interested in how their property is looked after. We need to look at both sides of the equation before locking in a bias. mlsc1974 May 16, 2012 at 7:21 pm Negative gearing being abolished would not result in the difference between rent and tax losses claimed being picked up in full by higher rents. That is just plain wrong. This assumes that people are fixed into renting and have no other options. Assume rents jumped “overnight” due to the end of negative gearing (or anything other shock for that matter) what would people do in response. Well a range of options, from house sharing to use up the spare rooms and share the cost, some may decide to move suburb/city/country, some will move back in with their parents, others may seek a pay rise, others may buy their own place. You would expect people to change their behaviour, and most likely it would mean a lot of rentals would end up back on the market. What would that do to current property prices? They would drop, and that would mean some renters become buyers. If “investors” are so keen to help out in “public housing”, terminology which usually refers to the poor, why do they bother screening renters by income and status, why aren’t they choosing the most needy. Christiaan May 16, 2012 at 10:18 pm “NG has a million landlords, each keenly interested in how their property is looked after.” Dont you mean, “NG has a million landlords, each keenly interested in seeing how much they can fleece their tenants for” drsmithyMEMBER May 16, 2012 at 10:30 pm Result: spiralling rents and no available properties. This is false (as has been outlined several times on Macrobusiness). A lot of the renters who are spruiking how smart they are at the moment for not buying would be paying a lot more for rent if there was no NG. Untrue. Rents are dictated by a person’s real ability to pay, not their ability to borrow more than they can afford. I also think that the comments that decry the property investor are a little misplaced. Who else would accept a return on a risky investment of around 2% after expenses without a little tax incentive. Because the only reason rental returns are so poor is because housing is so ludicrously overpriced. Lower house prices == better returns for rental properties. Pretty much everywhere else in the world manages to have a functioning, affordable rental market without negative gearing. What on Earth makes people think it’s so important, or that no-one will invest in housing without it, is beyond me. DrBob127MEMBER May 16, 2012 at 10:31 pm “Supporters of negative gearing argue that its abolition would lead to a ”landlords’ strike”, driving up rents and exacerbating the existing shortage of affordable rental housing. They point to ”what happened” when the Hawke government abolished negative gearing (only for property investment) in 1986, claiming it led to a surge in rents, which prompted the reintroduction of negative gearing in 1988. This assertion has attained the status of urban myth. However, it is not true. If the abolition of negative gearing had led to a landlords’ strike, as proponents of negative gearing usually assert, then rents should have risen everywhere (since negative gearing had been available everywhere). In fact, rents (as measured in the consumer price index) actually only rose rapidly (at double-digit rates) in Sydney and Perth. And that was because in those two cities rental vacancy rates were unusually low (in Sydney’s case, barely above 1 per cent) before negative gearing was abolished. In other capitals (where vacancy rates were higher), growth in rentals was either unchanged or, in Melbourne, actually slowed.” http://www.theage.com.au/business/time-to-change-the-unfair-rules-for-negative-gearing-20110424-1dsu6.html#ixzz1v2FhWglp Julius May 17, 2012 at 9:32 pm Oh, dear….every so often along comes another one who believes in fairy tales. “finally”…..have a read of this link….it might help you understand the truth behind what DrBob127 has correctly labelled an urban myth: http://www.smh.com.au/articles/2003/08/24/1061663676588.html As for the “….million landlords, each keenly interested in how their property is looked after.” Hell…even I’m lost for words over that one. You’re pulling our chain….right? RodZone May 18, 2012 at 4:50 pm NG won’t change as too many pollies and senior public servants are in it up to their necks. The only change to it will be when prices fall and the over geared have to sell. ceteris paribus May 16, 2012 at 4:29 pm Well, UE, the trend continues unabated. By the way, did you see C Joye’s article in the Business Spectator yesterday arguing that the bubble since 1995 in housing prices can be almost totally attributed to demdand-side credit/monetary issues rather than to supply-side costs. I know you think otherwise. Any comment on C. J’s piece?