What housing shortage?

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Leith van Onselen
Latest posts by Leith van Onselen (see all)

Comments

  1. The shortage isn’t a shortage of physical houses – it is a shortage of adequate funds to live the lifestyle most people desire.

    So instead of buying a house on their own, they share house, live with parents, etc.

    The ‘pent up’ demand is not demand for shelter, but demand for lifestyle.

    • rob barrattMEMBER

      +1
      They’re running out of wood in Brisbane as it’s all going to make ‘For Sale’ signs.
      The problem is that they still want prices they aint never gonna get. They’ll come around, just give it time.

      • Very true. I see homes that have had the same price for over a year, still languishing on the market. Here’s the kicker: the listings often claim the vendor is “ready to meet the market, so make an offer now”.

        You’d think the vendor would try a few reductions for starters, eh?

        • ready to meet the market, so make an offer now”.

          Funny way to express things.

          I saw something like that posted, I made a bid at the proper price.

          The RE agent looked back at me and said “you have to be joking”.

          I said “well how many other people are making offers, if it’s been on the market so long?”

          He replied ‘none’.

          I said “Well then, I am the market, you said you’d meet me”.

          • I’ve had the identical experience. One time I made a lowball on a stale listing and the agent told me I was being “rude”. Go figure.

          • Your parting words should be, OK!, next month I’ll be back with a lower offer.

            And if the agent gives you anymore stick, let them know its the property your interested in, not their client’s debt.

  2. Great article but there is a difference between a housing shortage providing a floor price and whether or not there is a shortage.

    Saying we dont build enough houses – which we dont – is not the same as saying prices cannot fall.

    Prices should fall and we should build more.

    When rents start to respond substantially for substandard accommodation i will be more persuaded by the we have enough argument.

  3. vanityvehicle

    US housing starts during 2006:
    1,649,000
    UK housing starts during 2006:
    183,360
    Australian housing starts in 2011:
    148,108

    So:
    At its property bubble peak in 2006, the US built one new home for every 190 people;
    At its property bubble peak in 2006, the UK built one new home for every 340 people;
    During a property slump in 2011, Australia built one new home for every 155 people.

    Holiday homes are the only non-bubble factor I can see that easily explains the divergent rates. And even then, people will often liquidate assets like holiday homes when their personal finances take a hit.

    The other factors I can see–household formation rates, government policies promoting housing as an investment over other asset classes, expectations based on past performance–all seem to be pro-cyclical factors that would make any downturn worse in the long run.

    • and multiply that by avg persons per household of ~2.5 (which is conservative; i believe the record low is 2.5, and has risen since) you get enough housing starts for 370,000 people. Completions have averaged 145,000 per year since 2001 (accommodation for ~360,000 people).

      Population growth in the year to Sept 2011 was 319,000 people. Average population growth since 2001 has been 320,000 people.

      So is there a physical shortage of houses being built? Overall, no i dont believe there is.

      • Your error is that population growth only includes those who successfully obtained housing. Those driven out by the shortage are missing from your figures. Don’t worry, it is a very common mistake.

        • Explain that to me. Population growth is…. population growth, surely? Whether they sleep on a park bench or in a 2.5 person house or in a 25 worker hut, it makes no difference to the change in the number of people that live in our country?

        • I was waiting for The Claw to turn up and spruik some “shortage denier” nonsense.

          Surely this debate is over now? You don’t see these sort of declines — 5-10% over more than 12 months — in an under-supplied market? Do you? Come on Claw, this is just silly.

          • “Surely this debate is over now? You don’t see these sort of declines — 5-10% over more than 12 months — in an under-supplied market? Do you? “

            It’s not undersupply/oversupply that matters but the speed and cost at which new housing can be added. If supply is highly responsive (e.g. Texas), the fast/affordable addition of new housing supply will squash any speculative demand, keeping home prices relatively stable.

            By contrast, when supply is highly unresponsive, any additional demand will quickly translate into rising prices, thus encouraging speculators and panic buying from first home buyers. As a result, prices will rise further than in supply responsive markets and will crash harder if/when demand evaporates.

          • Exactly UE, which is what i have tried to explain to both The Claw here and another (TP: EDIT: don’t feed the t###ls) in another discussion.

            Where you have an unresponsive supply situation, it is the demand side of the equation that is driving prices (and credit availability/ability to service debt heavily driving demand). The flow of new housing stays relatively constant, as it has over the past decade.

            Examining the trend in persons per household gives a quantitative representation of that additional demand: its the reduction in persons per household over and above population growth that drives a perceived shortage. This happens when everyone wants to pile into housing, live on their own etc etc

            Since persons per household has been rising over the past few years, and debt saturation is occurring, the demand pressures have subsided. People can no longer afford to live on their own, want to stay home longer to save etc. Since its clear that we build more housing than we need just to satisfy population growth alone, a flattening of persons per household means that the “undersupply” can quickly become “oversupply”.

            Same dynamic as seen in other countries.

          • Hubert Cumberdale

            Indeed. I knew the title of this article would be like a red rag to the Claw bull.

          • If supply is highly responsive (e.g. Texas), the fast/affordable addition of new housing supply will squash any speculative demand

            But Leith, that’s largely because in Texas its easy to create more soul-crushing suburbia. In Florida, its not so easy to create new beachfront real estate. This will be true of some real estate markets regardless of regulation.

        • “Those driven out by the shortage are missing from your figures. ”

          Are you suggesting that people are fleeing the country because there is a shortage of housing?

          I expected you to rubbish my post, but i was at least hoping for a coherent argument instead of a baseless assertion.

          • Are you suggesting that people are fleeing the country because there is a shortage of housing?
            Of course. Smart people take into account wages and costs of living when deciding where to move to and/or settle down.
            I suppose it is also a baseless assertion that people will delay having children, commute further, and stay with parents longer due to expensive housing.
            Your denial is strong.

          • Most people consider other factors than the financial. You need to get out more. The economists rational consumer rarely exists (thankfully).

        • “population growth only includes those who successfully obtained housing”

          …What century are you from? Only landowners count? (Well, renters too I guess, but we all know they aren’t people in the real sense ;).

        • Brilliant. Thanks for the laugh, Claw. But lest I’ve misunderstood, what you are saying is that the only reason that it appears that we don’t have a shortage, is because there aren’t enough houses for the people that want to live here, but can’t because we have a shortage, right? Brilliantly circular.

          • A shortage-denier is not interested in the truth – only in winning the argument.
            Take the Ferrari, scarce and expensive. Yet the figures show there is one car per owner for Ferraris.
            Take the Corolla, abundant and cheap. Yet the figures show there is one car per owner for Corollas.
            Perhaps this is the wrong type of figure to show the scarcity.
            Do you wish ordinary houses to be as scarce as Ferraris or as abundant as Corollas?

          • Last I checked, no tent cities on the fringes of Aussie cities, but plenty of people who own multiple houses.

            This is merely a problem of distribution. There are enough houses to go round.

          • I belive there is a shortage of housing.
            A- shortage of affortable housing for people wanted to live in but cannnot affort it.

            and

            B- there is also a shortage of highly appreciable housing for investors who wanted to get rich quick.

            I think everyone should agree we don’t have one but these two ousing shortages.

      • I think you need to make an allowance for replacement of stock as well, as a certain number of those completions (I don’t know what the number is) will be replacements of existing dwellings, rather than additions to the total.

        The other thing we need to know is what is actually behind the recent increase in persons per dwelling. Is it a demographic change representing the end of a century long trend to ever smaller households, or is it a response to the higher prices forcing more people to co-habit than would be the case if housing was priced low enough for them to live on their own, or in smaller groups.

        I think a lot of people are confusing demand with need here. You can have a supply adequate to meet the housing needs of the population, but still be a shortage relative to demand. Now that demand may be well in excess of any reasonable need, due to say a sudden surge of people wanting a second ‘investment property’, but if they can pay, then this demand is as real as demand for any other reason, and as Leith is saying, if supply can’t keep up, it can result in a self perpetuating price spiral.

  4. Jumping jack flash

    Great article,

    I disagree with this though “I think people are very fearful about what’s happening in Europe … So people are putting off those big decisions like buying a house…”

    I think the average punter couldn’t give two rats about what’s happening in Europe, the real problem is they’re maxed out and can’t afford any more debt.

    Also, the continual rising cost of living and near stagnant wages going on four years would have far more impact on decisions than what’s happening in Europe.

    Europe is just a scapegoat, and it’s handy to cite it as the reason for everything going wrong, because we have no control over it.

    • Yep – the Euro fear factor is overstated. As you say the problem is that houses prices now fully reflect credit boom and have done so several years.

      That means at best no price action above income growth.

      That is slowly killing the dream of get rich quick in the mainstream.

      If price cannot be bid up due to the limits of credit being reached at current income levels stagnation is the best we can expect.

      Stagnation to a negative gearer is like garlic to a vampire.

      That alone can set the cycle into reverse.

      Government measures over the last few years have just delayed the inevitable.

      But dont underestimate their willingness to keep trying to delay the process.

      Jawboning the RBA
      Migration
      Choking supply
      FHB trinkets and mirrors

      • Jumping jack flash

        “That means at best no price action above income growth.”

        Definitely, and throwing in rising costs of living equal to or greater than the paltry rise in incomes, there isn’t a lot of room to take on extra debt to bid up prices with.

        House prices will continue their slow melt at best. Stagnation is optimistic in my opinion.

        The RBA is powerless, their only lever has broken off. Snapped, like so much electroplated zinc alloy.

        I don’t think migration will help us too much except continue to erode standards of living and wages. Besides, there’s only a limited number of oil shieks and wealthy Asians they can import to buy up all our houses for ever-greater amounts, and US houses are looking better and better all the time.

        Choking supply is moot when nobody can buy anyway.

        More FHB trinkets and mirrors may be their last bastion of hope, if they can afford it.

    • Other factors are insecure employment (people want savings as a buffer) and bank lending practises (try getting a loan on a casual job or contract).

      • Jumping jack flash

        I also think job security isn’t at the forefront of most people’s minds when they get the idea to go house shopping, call their friendly mortgage broker, sign on the dotted line and set forth, armed with a fistful of easy credit.

        Maybe the overly prudent would think twice, at most.

        The average housing investor is not nearly as sophisticated as most here would like to believe.

        How do you think we got into this mess? Surely not from prudent investors taking every minute variable into careful consideration, because if they had, then the majority of these massive loans fuelling enormous price increases and the consumption bubble would never have been taken out in the first place.

  5. Anecdotal: I spent Sunday afternoon with a troup of beautiful, blokeless, educated, 30yo women. Prime specimens.

    Naturally, I probed their attitudes to home ownership. For them, finding a presentable partner was ten times the issue of home buying (there is currently a serious man drought). They accept being excluded by price and are entirely uninterested in The Dream. Yes, they have done the arithmetic.

    One woman was being evicted to sell. She had four offers in the space of a breath: a couch, a bedroom x 2, a bedroom own bath, all available today. Their sinuous attitude to accommodation shows there is no lack of inexpensive options available.

    It will take a very big shift in the economics of shelter to transform these women into housing consumers. I say, the coming change will be to price; the price of land.

    Don’t Buy Now!

    • So these women are facing a man shortage AND a housing shortage? Is anything going right for them?

      • Yes. David was there “probing” their attitudes, those poor “sinuous” lovelies! 8¬)

        • probe (Verb)

          Physically explore or examine (something) with the hands or an instrument.

      • Ha Ha Ha! Inner Melbourne is alive with unattached desirable desperate 30YO women.

        Their counterparts, 30-40YO males with a job, reasonable education and no obvious physical or mental defects, are exploiting their good fortune mercilessly with a fresh partner every night.

        Didn’t you know Melbourne is the new San Francisco?

        • They’ve probably done the financial calculations and worked out that it’s cheaper to “rent” a couple of nights per week rather than to “buy” and carry the expense 7 days a week… don’t buy now 😉

        • reusachtigeMEMBER

          Awwww, man! Why did I get married? I picked the housing collapse but not the desperate hot cougar oversupply crisis.

        • russellsmith55

          Unlike property, Melbourne women that haven’t settled down by 30 are in danger of missing the boat. They suddenly find themselves on the wrong side of an oversupplied buyers market.

          We have roaming packs of cougars wandering our cities and no mid 20s guy is safe…

        • DC, i think i need to move to Melb. Perth is suffering from a female drought. Everywhere i go out there is a 3 to 1 ratio, and in the places they don’t let that happen you have to be at the door before 10pm just to get in.

          • russellsmith55

            More adjustments of the mining boom, as all the men go to the resource states?

          • Fly In Fly Out, JC. Rugged spendthrifts welcome. The 130,000 chaps absent in the mining camps are a key ingredient in the male/female asymmetry. (cue minebots)

            The risk – a real one – is you could be a daddy after a single night and spend 18 years dealing with the Child Support Agency.

            Be careful out there!

          • dumb_non_economist

            DC, that’s correct. Troops, when you go into combat make sure you’re wearing your body armour!

          • “nothing more scary than a walking ticking clock.”

            Or a walking ticking cock for that matter.

            “Fly In Fly Out, JC. Rugged spendthrifts welcome. …….The risk – a real one – is you could be a daddy after a single night and spend 18 years dealing with the Child Support Agency.Be careful out there!”

            Better to keep your fly in then.

        • Wow. Obviously no man drought at MB but perhaps not a particularly friendly place for women judging from that string of sexist comments from all and sundry.

          • McPaddyMEMBER

            Don’t like to sound like a killjoy, but I have to agree. Where’s the famed “edit” now….?

          • settle down princess, there’s nothing here that requires a white knight to offer protection from.

          • McPaddyMEMBER

            That’s not the point, RP. Personally, I don’t want to see people turned off this forum by locker room level boy banter. To quote our great leader I think a line was crossed a few posts in to this thread.

          • That’s not the point, RP. Personally, I don’t want to see people turned off this forum by locker room level boy banter.

            I happen to think it is a point.

            DC’s observation what appears to be women complaining about a ‘man shortage’ doesn’t seem too far fetched.

            A diary from one Ms Bridget Jones about a decade back seemed to say the same thing.

            All DC espoused was that say unlike the teens and 20’s of a man, the sexual market placed has changed to be in the favour of men. It is perfectly rational for men to exploit this considering the feminised view of the world we now live in.

            There is nothing malignant in such behaviour, it is perfectly healthy.

            In layman’s terms, the world does not need protecting from the male libido.

            If such person’s are turned off by such boy banter, then really there is no acceptable place or them in this world, they should be ostracised to the extreme.

            To quote our great leader I think a line was crossed a few posts in to this thread.

            Luckily democracy offers a plce to express a divergence of views.

          • McPaddyMEMBER

            Sorry, what I meant was, That’s not my point. When the conversation moves on from demographics to “careful or you’ll inadvertently impregnate a cougar” I think it’s fair to say that we’ve moved into the realms of the locker room, by which I mean a conversation that assumes a wholly male audience. Perhaps you disagree, TP. Perhaps I’m a prude. Perhaps it’s not really appropriate on a forum that holds itself out as a cut above the rest and generally more than lives up to that. Anyway, not my call, of course.

        • Lol a different side to DC. If your a male 30-40 yo in Melbourne, HOLD OUT. You’re bound to get a newer build, better presented, lower maintenance and with much less outlay. DON’T BUY NOW.

    • New women generation, although too “independent” and successful, expect the “right” man to buy them a home and when the life struggles come (babies, many bills and need for some restrictions) they are quickly willing to leave the “right” man, but taking the house and everything they possibly could. So why bothering about buying a property when they expect to “have it all at once” – the man and the house and the baby, when they decide it’s the right time, sorry, it is the last chance left.

      • but after 30, gravity is strong 😉

        Wives & girlfriends are temporary but ex-wives & ex-girlfriends last forever.

        GS Elevator
        #1: If she saw The Bodyguard in a movie theatre, then she’s definitely too old for me. #2: My threshold is The Sixth Sense.

    • Maybe MB could do an article or two on single women these days and how their “expectations” for a male partner are even more unreasonable than than most home sellers are…

      man drought? not in my estimation, they just want the moon and won’t settle for a more reasonable catch!

      • Feminism unleashing the Kraken of Hypergamy.

        Media plants the seeds of expectation.

        What could possibly go wrong?

    • I’m thinking of putting together a website that links up desperate, 30-something women with rural Chinese men.

      • Jumping jack flash

        yes, you could call it “farmer want a rife”

        You could market it through the launch of a sleazy reality show with the same name…

  6. The best way to determine if there is a housing shortage in your area is by annual rent increases as a percentage verses the real inflation rate.

    ie: If your annual rent is increasing by more than 5-6% pa, then that area is probably experiencing a housing shortage in the type of housing you rent. If your annual rent in increasing by less than 5-6% pa, then that area is probably experiencing a housing surplus in the type of housing you rent. That part is pretty simple really.

    The real unknown is what you think the real inflation rate is…

  7. Cognitive Dissonance

    Economics as a trade, is like most things in life, it is a competitive undertaking. I would also add it also demonstrates much vanity too, in that any economist serious about his job always ends up trying on the latest fashions. The papers and journals assist with write-ups and a picture of a person willing to take up the new seasons colours.

    The fellow that thought last season’s jeans will do or that old tweed jacket looks comfortable will likely be ignored by an expecting crowd, but he is comfortable with the way he looks, will likely wear the something next year, and who knows perhaps the kids may come out wearing tweed jackets next year.

    I take my hat off to all the ferial economists everywhere

    • Check out this quote for a laugh:

      “…the current completions rate is running well below the circa 190,000 homes per annum we require in order to support the population growth. But setting that aside, it’s actually a source of strength for the underlying market fundamentals. Because Australia suffers from quite acute housing shortages we shouldn’t expect to see any significant falls in prices…”
      Christopher Joye, Inside Business, 6 June 2010.

      Aussie capital city home prices have since fallen by over -7% since he made that comment, according to his own index.

      • It all depends on whether you consider a -7% fall in 2yrs significant. Would you consider a -7% fall of your stock portfolio in 2yrs significant?

        It’s all about perception really…

        Also you shouldn’t make light the situation todays renters face, going to open home inspections for rent only being faced with a dozen other applicants wanting the same property. It would be very disheartening.

        • I can assure you that -7% falls are significant to someone that purchased with a +90% LVR and could have rented the same home for roughly half of the holding costs.

          I’m also not making light of the rental situation in Australia, which is a disgrace. Australia certainly does have a shortage of affordable housing, which is why we need to free up the supply-side via planning reform, etc (as I have written about many times before). It’s just that I don’t buy the ‘housing shortage = prices can’t fall argument’. It never held up in the USA (California in particular) and it doesn’t hold-up here either.

          • So you do agree there is a housing shortage? Of affordable housing to rent? Okay then.

            The only reason a purchaser with a 90% LVR would be feeling any pain now with their housing purchased at the top of the cycle (or at any part of the cycle for that matter), would be if they cannot service their loan. If they are employed and can service their loan (as they could when they originally purchased), I can’t see a problem… Perhaps I’m missing something.

        • That’s the main point really – it shows that leverage can cut the other way too.

          Add in stamp duty (ca. 2%?) and a few other costs (LMI etc) and you are staring down the barrel of losing your entire deposit.

          Not a problem when you have a job repaying the mortgage, but if you lose the job or need to liquidate the house, there goes the 4-7 years of savings to get that (small) deposit in the first place, and the opportunity cost of doing so will hang around your neck for 20-40 years….

          As much as we all like to denigrate the average Aussie’s financial intelligence, I think most are starting to get it.

          Why buy and take on the risk when I can rent – albeit be treated like a 2nd class citizen, and fight amongst others – and put my deposit in cash…

          And be WELL out in front when prices finally become, well, rational.

          • No, I recently bought a house at a considerable discount (mortgagee reposession) – I’ve discussed this before.

            Its my 3rd house, (i.e I’m a 3rd time buyer), whereas I’m talking about FTB who are thinking of “upgrading” to from renting to buying first house in the current environment.

            Our mortgage is less than renting, which was the consideration when we made our offer.

            I calculate the value of our house to be around 15% more than what we paid (which was 20% below 2011 median asking price and around the pre-2007 median price), which is a premium I’m willing to live with since I was sick of being treated like rental scum (even though I could buy even the median house around here with cash only…)

            I think I’d only rent again in Australia if we adopt German/Swiss type rental legislation. I’m not sure I’ll buy again either, read between the lines on that what you will..

        • Yes, i would consider a 7% fall in 2 years as being significant significant, particulalrly when most of that fall took place in the last 1 year, at least in Melbourne.

          It’s not just the 7% – it’s the accumulated losses and steep entry and exit costs which get you. An investment property with a nominal loss of 7% could easily turn into a % loss in the high teens or more.

          And re the supply issue – i will believe that furphy on the same day i see tent cities springing up in our major parks and gardens. If there was truly a lack of housing stock it would have long ago been reflected in rent. It hasnt.

          • If there was truly a lack of housing stock it would have long ago been reflected in rent. It hasnt.
            Huh?
            In Sydney an ordinary house that used to rent for 1/3 an ordinary wage now rents for 1/2 an ordinary wage. A 50% increase in real terms.

          • You’re just not looking in the right parks and gardens. Or couches or cars, for that matter…

            Rents are a mess because landlords are trying to recoup capital losses by selling their transferring their right to occupy. As projected gains go down, rents go up – because just like there’s always some poor bugger who can’t afford it, there’s always a sucker who can, and figures they don’t have any other choice…

            There are plenty of houses around – it’s just that not everyone can afford them.

        • Speaking to Canberra, there are two kinds of places that have throngs of people at them for a rental opening (as of 16-ish months ago)…

          * Cheap for their class; IE: 3 bed, 1.5 bath at ~10% below everything else on market that aren’t obvious sh*t holes.

          * Cheap period; IE: Obvious sh*t holes at ~20% below everything else.

          My wife and I sold our unit in 2010 (thank you FedGov bailout for not selling in 2008!) and are first time renters. We went to a lot of places here in Canberra that were on market MONTHS after we saw them.

          Some of these places were nice, but overpriced by a good $30+ a week for their class/location/etc. (we looked in the $450-500/week range). Other places that were in the below 10%+ range we’d show and there were tons of people, but many would peel off BEFORE the open house if the sh*t hole-ish-ness was greater than the discount (we would, but also stayed to people watch a lot of the time).

          What the wife and I never understood is why the people with the +$30 too expensive per week places didn’t drop their asking rents. They sat for MONTHS without any tenants, which is a lot of lost $$$. They would have been better at the end of the year had they reduced. Pride+stupidity I guess…

          But, in Canberra (which is said to have a rental shortage) there is no such shortage! The shortage is in cheap (bullsh*t, not cheap… AFFORDABLE) housing, so we end up with group homes with 3-4 bedrooms and 5-7 people in them.

          In the end, we got an excellently featured place that was ~10% under market that wasn’t an obvious sh*t hole (that was until the rain came, the roof leaked and the possums moved in).

          • “What the wife and I never understood is why the people with the +$30 too expensive per week places didn’t drop their asking rents. They sat for MONTHS without any tenants, which is a lot of lost $$$. They would have been better at the end of the year had they reduced. Pride+stupidity I guess…”

            But if you’re negatively geared, you’re after loss – right? If you can carry that loss for awhile, you might end up better off by holding out for a higher rent… and in so doing, weed out a whole bunch of cheap and nasty undesirables, who might skip town without paying their last two weeks rent…

            The question is, how much longer will speculator landlords be prepared to carry such losses?

            Not every investor will have purchased since 2010. It will be take a while before every landlord’s resolve starts to waver in the face of their disappearing equity…

      • Now now Leith. What would you know? You’re only a back-office economist after all.

    • …. after a year ( or more like 4!) of waiting for a nasty crash, the fog clears, only for him to see that he has actually touched down safely in a cloud without realising it. He thunders the engines into life and heads back to the stratosphere where he feels most at home. Is that it….?

  8. I was always sceptical about the “underlying demand” concept. I mean you can take it to absurd lengths if you really want – I’m sure “underlying” demand for Ferrari’s is astronomical, for example…

  9. Prices go up, people consume less, which in this case means higher occupancy rates. This is about as obvious as it gets.

    I find it puzzling that people will compare prices to long-run averages, but things like occupancy rates are treated as if they’re written in stone.

    It would be interesting to see how much housing stock we’d need if occupancy rates reverted to their average over the past 30 years.

    • It would be interesting to see how much housing stock we’d need if occupancy rates reverted to their average over the past 30 years.
      Even more interesting would be all the grannies sleeping in bunk beds and sharing rooms with other pretend siblings.
      We are having less children and living longer.

  10. tsport100MEMBER

    Household formations are actively being inhibited by property prices and housing shortages (in NSW at least). FHBers, as the primary source of new household formations, currently make up only 12% of the market (in NSW) which is close to half the 20 year average.

    Lets get to the bottom of this, is Landcom actively holding back land releases to maintain current property prices in favour of developers?

    • In 1999 I was working within area that dealt with retrenchments in the State public sector. we dealt with a number from Landcom. The rationale for retrenchment was that Landcom was restricting development and no longer needed them and that it wasn’t in the governments interest anyway as high prices meant more stamp duty revenue and there was no cost outlays for actually developing the land. So maybe it wasnt for the benefit of developers, although I suspect they benefit as well. The dodgy development decisions of the past labor government are well known. It will be interesting to see what occurs with the current mob.

  11. Houston Rocket

    Underlying Demand gets rolled out almost every week in (Dr) Andrew Wilson’s column in Fairfax. I think he invented it.

  12. For me personally, there is a shortage of affordable housing close to work and good schools. I’m sick and tired of wasting of 2.5 hours of my precious time every day commuting to work. I seriously think about relocating to sunny Queensland and working remotely.

    • It is honestly the best response, please consider it.

      Shelter, in terms of a broad and sophisticated market, extends beyond a basic human need.

      It’s tenant in the market place is the utility of shelter for a productive workforce.

      Withdraw your labour from your current market, and let the market suffer.

      • There is much sense here. Anyone that can work remotely should consider it: buy a coffee machine and go off-grid.

        I see the germ of a new Homesteader movement in Detroit where land is cheaper than a second hand car. You would have to be prepared to live among some desperate characters, but the low cost base would turbocharge the personal balance sheet.

        Moe, Vic, 3825, anyone?

        • They’ve actually been destroying housing that went up during the bubble in Detroit and other places in Michigan like Flint.

        • I’m trying to go homesteading, but a few acres here in Oz is many times what it costs in the USA.

        • Moe not like San Fransisco David? Dang, won’t be any fun without those “prime specimens”

          “desperate characters” (in Moe?)….meaning BOGANS!!!!

          Run man!! Run for your LIFE!!!

          “buy a coffee machine and go off-grid.”

          Don’t forget the blow up doll.

        • After watching the movie Gran Tarino I wouldn’t even contemplate the idea of residing in Detroit!

    • Be wary of any job that can be done remotely, as it can be done in India for half the cost!

      • Why?

        If you live on the equivalent of a homestead in Australia, then you only need half the income.

        Food potentially for free. Consider the 2.5 hours per day saved on commuting, used on tending a garden and hunting.

        Craig Bellamy, the coach of the Melbourne Storm discussed about his early life growing up in the Riverina area in the early 70’s. His father past away when he wa young, he made mention…

        “We were a pretty poor family, the only way we ate meat, we had to shoot rabbits”.

        Thanks to Port Arthur, we don’t really even have that opportunity anymore. I think our guns laws here are much too strict.

    • If you can take your job & pay with you then you’ve got nothing to lose except getting used to being further from family & friends – not always easy.

      What Adz said bears thinking about as well. Things might seem cheaper in the sticks, but if you’re forced to work at local rates you might be in for a shock depending on what you do. You could end up in a poverty trap & end up going slowly backward.

      Far less stressful though 🙂

  13. Charles Ponzi

    There is no shortage of properties for sale. As a first home buyer I see lots of homes for sale, but I don’t see any homes that I would consider buying due to poor value. I also see lots of new homes recently completed that are sitting empty and not selling.

    What we have now is a shortage of buyers who are willing to pay at today’s prices.

      • “I also see lots of new homes recently completed that are sitting empty and not selling. ”

        ..and hence lots of properties that are not available to rent. I believe that when those who own investment properties finally realise they cannot sell their property then a flood of rentals will hit the market. Until then, however, there may be a nasty temporary shortage as many try to pretty up and offload their assets.

        • This is true. I was told this is the case by the agency that rents my home to me.

    • What we have now is a shortage of buyers who are willing to pay at today’s prices.

      or shortage of vendors willing to lower their asking prices to reasonable value ?
      It’s stalemate for now and not sure what will happen next.

      As GenX FHB candidates, me and my wife have given up idea to buy our own place and just try our best to save lots of funds for our retirement. I make joke regularly that we may get cheaper housing for the over 55s …just be patient 😉

    • Mr SquiggleMEMBER

      I’m with you there Charles Ponzi.

      Its not just the price though.

      I grew up in Melbourne and I want to live in Melbourne, not outer-development zone Z10 west.

      Removing supply-side restrictions won’t turn me into a first home buyer. They mights as well build new houses on the moon.

      The fundamental problem is that urban environments have limits on their rate of expansion. Adding 50,000 people per year in 2012 is a different proposition than adding 50,000 back in 1962.

      • That’s right. We need to create new cities. Either for you to go to, or for others to go to, thereby keeping local prices down for you (and I).

  14. thomickersMEMBER

    There is a big fat rental bulge developing in inner Melbourne. Stock for sale has only marginally increased.

    Rental market becoming 5% off in those suburbs.

  15. Low unemployment is rubbish, if you work for 60 minutes a week, the government classes that as employed, thereby reducing the nation’s unemployment figures.
    Unemployment is way higher, and the real situation of the economy is clearly negative, especially once you take all the manipulation away from the figures.

  16. Houston Rocket

    A quick check on a mortgage calculator and a glance at the tax tables tells me that there is either a LOT of people earning very HIGH INCOMES, or a lot of people servicing very HIGH MORTGAGE REPAYMENTS. I am pretty sure I know which one it is.

    I also don’t see anywhere in bank literature or the MSM the consequences spelt out of a 10% fall in prices on an 80% LVR. The 50% wipeout in equity mate is swept under the carpet mate.

  17. So someone in the mainstream has finally woken up to the ‘housing shortage’ being a crock advanced by the housing industry and the banks in order to keep the bubble inflated. If you guys read the Daily Reckoning (Oz edition) you’d know that editor Dan Denning blew that hollow theory out of the water years ago. The moral is NEVER BELIEVE THE MAINSTREAM MEDIA! Dig deeper if you really want to know what’s going on. And oh yes, at last count there were over 800, 000 EMPTY houses in Oz – some shortage!

    • Read some more coastybloke.
      That 800,000 empty myth was blown out of the water long ago.

      • “…population growth only includes those who successfully obtained housing.” Let me think, who thinks that….?

      • russellsmith55

        I would like to read about the 800,000 myth being blown out of the water. Please provide a reliable source where it’s written.

        • reusachtigeMEMBER

          I don’t think The Craw has ever provided a sauce, neither juicy nor dry. He will be the last housing oversupply denier left standing!

    • It’s unbelieveable that someone still believes that 800k myth.

      Look around you. Talk to friends tring to rent affordable accomodation. Look at the rate of annual rent increases. Stop just tring to be an MSM basher and wake up.

      I feel sorry for you.

      • russellsmith55

        Same as the Claw’s, this argument is anecdotal at best. What IS the rate of annual rent increases you’re quoting? What cities/suburbs does it apply to? Is it a general increase, or is it localised to a few areas?

        I’m not overly traditional, but normally when you refute a claim its customary to provide evidence.

        Emotive arguments like ‘I feel sorry for you’ also don’t count as fact sorry.

        Personally, I imagine ‘waking up’ would involve researching and evaluating many different facts and making up your own mind, as opposed to blindly accepting the unsubstantiated opinion of a blog comment.

        • Thats okay, no need to apologise.

          I’m speaking from the ground. At the coal face. When the RE agent gives you a verbal short list of half dozen applicants for my IP, and all I can do is narrow it down to between the Doctor and the Dentist, you know there is a problem with the supply of rental accomodation.

          • It is well understood that the 2006 Census data was not evidence that there is an oversupply of property, it merely indicated the number of properties that were empty during census night. I for one, remember staying at my then girlfriends (my future wife) place and filling out the Censes forms there… So even my house would have been included in that 800k figure when it clearly shouldn’t have been.

          • There’s a problem with the supply of well maintained and reasonably priced rental accomodation.

            When I went looking for a new place to live recently, most of the places fell into one of 2 categories-
            Well maintained (well, clean and with fixtures from the 1980s or more recent, with all significant structural features present) and a queue of 5 + applicants.
            Not well maintained (asking the same price) with fixtures from the 1940s, badly painted and in need of some industrial de-moulding. Strangely lacking in any applicants unless asking very low rent.

            We saw one house where the entire back room had mould up to the ceiling on all walls. same weekly rent as our current (no mould evident) place, for the same number of bedrooms.
            If you would not live in the property, why would you imagine someone would pay to live there and take care of it?
            This does seem to be a combination of landlords and agents, as the idiot who sold my Mum her IP boasted that he had screwed the tenants in a property he managed out of a new stove when the old one was no longer functional. As a former renter herself, this was not a winning strategy.

      • The behaviour by suppliers is called herding.

        It is difficult to adjust this behaviour unless you

        i) Put disincentives int he way of tax, as their actions allocate the use of resources in an inefficient manner.

        or

        ii) allow flexible supply, which in the short term is oversupply.

        There is no national strucutural undersupply, you can make the arguement it is in Sydney.

        We have dedicated enough resources to shelter, to provide the shelter required.

        What has occured is that a perfect storm of policies and marketing have enabled irrational behaviour to flourish.

        We need the invisible hand of market forces, i.e. oversupply, followed by wealth destruction of the landlord class to send a lesson to such improper behaviour. This hand did commence in 2008, until RuddPrime hit our shores.

        It is happening now.