Housing shortage arguments collapse

Login to access MacroBusiness Members special reports. If you are not a member, sign up here.

Please fill in the following form to login


or

Please fill in the following form to subscribe

Comments

  1. Well done in writing this up. Beat me to it! 🙂

    Might also be of use to discuss one of the other variables in calculating required hosuing, which is the Number of persons per dwelling. Guys like B(I)S and the Housing supply council make an assumption in their forward prediction for housing demand, that the number of occupers per dweeling will continue to fall.

    Obviously if that ratio falls that means we are more and more living seperatly from each other and so, require more dwellings to make that happen. However that ratio in the last two surveys has held steady at 2.6 persons per dwelling..

    • Decimal points matter here. The actual average persons per household has gone from 2.567 in 2006 to 2.559 in 2011. So it has fallen slightly.

      Definite impact on housing under/oversupply calcs, but not an increase.

      • Semantics.

        The “slight fall” over 5 years is close enough to be accurately described at “held steady”, so I think what BD says holds.

        But, I suggest you look at their (NHSC, for instance) extrapolation of the housing number. If I remember correctly, it was supposed to be down to 2.5 (with some extra decimal places, sure, but the point is much down on where it is now) by now, with it continuing to fall as it did from ’96 to ’06 for the rest of their projections into the future. I would say a significant impact, rather than just an impact, when you are talking about millions of housing stock.

        Point is, BD is right: the NHSC, BIS and others were wrong. Very wrong.

        • Wasn’t questioning the “steady” characterisation. My main point is that when everyone starts plugging numbers of persons per household into their equations to estimate some underlying demand, using 2.6 will give you a very different outcome to 2.55.

          But thanks for pointing out the NHSC. I suggest you read it fully. They don’t use a single estimate of persons per household to come up with future numbers of households. They get demographers from ANU to build it up at the cohort level.

          • Your response here implies they would not consider the multiple here? I would be very surprised if they did not at least consider it, especially given the fact that they actually have a table in the report (TA4.4) that refers to it.
            Regardless of whether they do or not, the reality is that it is an unavoidable function of households. Indeed they most certainly assume that:
            a) There will be a higher proportion of lone persons

            b) Group households will remain static right throughout to 2030 (table 2.3) at 4%.
            Indeed, this last point is somewhat amusing, especially given that their prime driver of the number of households projections is going to be migration intake. And they acknowledge on page 29 that migrating families group together at least initially.

            BTW their 2011 calculation for number of persons per dwelling is 2.5. Or 2.5052. A little bit off the mark dont you think? But hey, its only rounding..

    • Wondering if cultural aspects, where we’re seeing those coming to this country that are used to having more extended families under 1 roof. Perhaps more contentious that one than the simple affordability theory but quite feasible. With a stronger Asian based influx, I feel this may add to the persons per dwelling gradually.

      No doubt the HIA will be going in to palpable meltdown as we speak.

    • http://ckmurray.blogspot.com.au/2010/07/effect-of-dwelling-composition-in.html

      The average number of persons per household has declined from 3.1 in 1976 to 2.6 in 2007-08. In the same period, the proportion of dwellings with four or more bedrooms has risen from 17% to 29% and the average number of bedrooms per dwelling has increased from 2.8 to 3.1.

      In 2007-08, most households enjoyed relatively spacious accommodation. For example, 86% of lone-person households were living in dwellings with two or more bedrooms; 75% of two-person households had three or more bedrooms; and 35% of three-person households had four or more bedrooms. Over a fifth (21%) of three-bedroom dwellings, and 8% of four-bedroom dwellings, had only one person living in them

      • Hey Bobby, did you or anyone else see the TT segment last night about oldies whining because the gubmint wants to move them out of their 4-bed council homes into 2-bed apartments? Oh the humanity!

        Apparently the gubmint owns 400,000 houses in Straya!

        Just shows how many unused bedrooms there may be in this vast country.

          • The Brown Couch’s conservative estimate is that there are 5,000,000 spare bedrooms in Australia.
            Imagine how many spare seats there are in cars across Australia!

          • An interesting analogy.

            As petrol prices and other travel-related expenses go up, our capacity to manage costs by carpooling will indeed be determined by the number of vacant seats available…

          • It is understandable why here people need spare rooms. The tyranny of distance is the best explanation. In Europe if one lives in the same city with his relatives, doesn’t need spare rooms, they can take the public transport and go home at any time.

        • Just shows how many unused bedrooms there may be in this vast country.

          Yes Revert2Mean what is needed is the creation of a politburo so that government can force these bedrooms to be used (as govt sees fit).
          Perhaps a letter could be sent to each granny, telling her how many students and other grannies she must allow into her house.
          Should granny not comply then jackbooted thugs could drag her away.
          Revert2Mean and TheClaw could do this work. But which one would send the letter and which would do the jackbooting?

          • I am totally in favour of moving old welfare-bludging couples (because most of them are) out of their large, taxpayer-funded houses into smaller, more suitable accommodation to free up bedrooms for younger bludgers with numerous brats.

          • Re: Imagine how many spare seats there are in cars across Australia!

            …exactly, and as a consequence of that no one is talking about cars shortage in Australia

          • You’re quite the charmer on that other site. I agree they should be moved. No need to get overly emotional or judgemental. People lose their way continually in life. Try to empathise and then to help them.

        • Bobby Fischer

          Didn’t see it mate. But thanks for the link. Worthy of further investigation for sure. Cheers

    • Any forecast of over- or under-supply has to begin with a good understanding of how well-supplied the market is at the current time. As far as the housing industry and NHSC were concerned, a pre-existing shortage was assumed, but never proved.

      Amusingly, the decades of falling occupancy rates that preceded their forecasts were never interpreted as an indication of oversupply, but there’s an argument to be made that they were. If true, that would invalidate any shortage argument at the outset.

    • that ratio of people per dwelling is like leverage.

      amplifies the housing shortage as is it drops, but nagnifies the housing surplus as it rises. in these sort of economci condiotions it rises.

      • It is interesting to consider that very small changes in average household size, along with in-migration, very quickly fixed the famous “overbuilding” episode in Texas in the 1990’s. It helped that the “boom” was all in building, not in prices. Median multiples did hit 3.2 or something, and dropped to 2.7 or something “when the bubble burst”.

        But it is quite a lot different when the median multiples have gone to 8 and 9; even if they fall by 50%, which does a LOT of economic damage, in the prevailing conditions of high unemployment and economic stagnation, the prices are STILL too high for the problem to be solved by youngsters getting shacked up a bit younger and having kids a bit sooner. Refer California; follow “Dr Housing Bubble” blog for a while and you’ll see what I mean.

        No prizes for guessing what kind of “unwinding” Australia has to have……..

  2. Is the number of ‘households’, for all intents and purposes, equal to the number of residential ‘dwellings’?

    If so, is the census the only way of knowing exactly how many ‘dwellings’ there are in the country?

    I assumed that RP Data would know the total number reasonably accurately, given that they construct an index which represents the entire housing market. Or would they just plug in the census number?

    • I’m fairly certain a dwelling is a house or unit – a building. Households are the people that live in these dwellings (one family is one household, one person living alone is also one household) Households can thusly be seen as dwellings that are lived in.

      I think there are other ways of determining the number of dwellings, but the census is the only way to know how many are actually lived in – i.e. how many households we have.

      As I see it, the Council’s 2011 report determined there was a shortage of 186,000 dwellings (which was basically needed to house the homeless and those in caravan parks and bring the rental vacancy rate up to 3%).

      With an overcalculation of 900,000 households, and even if you took the rubbish argument of housing the homeless (as if their problem was a lack of house and not a lack of ability to finance a house), this indicates to me we are, what, 700,000 dwellings in oversupply?

      In truth, these 700,000 dwellings would probably also include things like holiday homes, which are not necessarily *oversupply* but are also not being lived in. Regardless, the long and short of it is that overcalculating households by 900,000 is *huge* and *devastating* to the ‘shortage’ argument.

      • Patrick Troy: “The Perils of Urban Consolidation” Published 1996. Australia has tragically failed to benefit much from Troy’s analysis of the many mistaken claims that have driven policy. For example, the oft-stated “decline in household size” is distorted by the following:

        – The period of analysis commences from a point where Australia had a serious housing shortage, following the Depression and WW2.

        – There were significant changes in the census definitions of “dwellings” and “private dwellings”.

        – The rural population decreased as a proportion of the total, and at the same time, there was a decline in the rural population related directly to farming and an increase in the rural population related to ex-urban living, holiday homes, recreation and retirement – which of course involve lower occupancy rates.

        – The development of retirement villages and homes for elderly people who once would have more predominantly been living with their relatives.

        – The disappearance of “boarding houses” and other “non-private” (by census definition) accommodation.

        Furthermore, the rise in the proportion of “one and two person households” is often said to require an increase in the quantity of smaller homes. But Troy points out that around 50% or more of the “one and two person households”, always have lived in smaller homes, in Sydney and Melbourne at least. The fact that the proportion has remained approximately steady, begs the question, what proportion would be “ideal”, and how can planners dictate the outcomes?

        Along with this, it is said that the size of Australian homes has increased “unnecessarily”. Apart from the implications for freedom of choice, Troy points out that there is a difference between “houses” and “dwellings” in census data; the focus has been on data for new houses, when the average Australian dwelling, including flats, town houses, etc can hardly be said to have been significantly increased in size due to the sheer size of the existing stock. Also, the “average” size for new houses is dragged upwards by a small proportion of extremely large luxury houses for the super rich. Median sizes for new houses are very much lower than the average.

        An even worse statistical error, is the fact that many dual occupancy “new houses” (eg with a self contained granny flat)
        are included in the statistics as a single large house.

        Furthermore, the emphasis on “new houses” ignores significant increases in the supply of small “dwellings” through the dividing of existing buildings, both houses and commercial buildings, into separate flats. The increase in quantities of these dwellings will have taken up most of the demand that the planners say should be met by “more small new houses”.

        Troy points out that this statistical false position has even been taken by politicians and other advocates arguing that “over-investment in housing” was harming Australia’s economy.

        Troy points out that lot sizes have been falling in Australia since 1950, and the average has been below a quarter acre for decades, although a quarter acre is the figure most often bandied about as representing the Australian Dream. Troy puts this down to Australian requirements for developers to reticulate services, which was an incentive for them to tighten the space between houses. This effect has applied since well before more recent and costly “growth containment” policies. Troy points out that Australian cities simply do not have “sprawl” of the kind that is referred to regarding the way many US cities developed over the same post-WW2 period; but this has not stopped Australian advocates from speaking as if they do and referencing studies that apply specifically to the US situation.

        Troy points out that because “public space” is a high proportion of total city size, crowding housing will have a disappointingly small impact on the overall footprint of the city.He points out that attempts to restrain the total urban footprint inevitably leave the lowest income groups disproportionally deprived of both size of their own property and local public space. Troy gives examples of this in recently-developed urban locations in Australian cities.

        Troy also points out something that Alain Bertaud pointed out years later: “……..The present policy has had the perverse result of increasing density of dwellings at the fringe…..”. And later in the book: “…….A high proportion of the new high density housing is now occurring on the fringes of the city. This is a direct outcome of government policy and produces the perverse doughnut effect of an annulus of high density housing ringing the lower density middle suburbs. The greater accessibility claimed for inner suburban consolidation does not occur….”

        Troy discusses that households “costs of moving”, including the severing of social links, is a far more significant factor that planners need to concede. People will not relocate their homes for as light a reason as planners hope. This includes elderly people remaining in their family homes for as long as possible, entertaining family and friends in the large space they now have to spare. And daily exercise in the relative safety of their own gardens, is also important to the elderly.

        Troy points out that the stand-alone house has flexibilities of modification and addition that make it suited to the occupants changing circumstances. He also says that the planners belief in the aesthetic superiority of their preferred types of development are not borne out in real life experience, including in the opinions of many people who occupy that type of development. Later in the book, Troy says of certain “lower income dwelling projects”:

        “Few…are designed to take advantage of natural heating and cooling opportunities and few are well designed for access by service and delivery vehicles. Few are landscaped, most have a plenitude of paved areas, and they rarely have any kind of pleasing aspect or outlook. Most have only pocket-handkerchief-sized open spaces for clothes drying and are surrounded by high fences or walls which create an overpowering sense of enclosure…..any attractiveness….comes from their newness. Those built (earlier) already exhibit a down at heel air……”

        Troy also discusses the planners monocentric thinking, and states that this is contrary to the reality of where the most of the people already work, shop, and play; and where they want to do so. The overwhelming majority finds suburban amenity more than adequate, and does not regret lack of proximity to the central city.

        Troy very appropriately condemns the “self-fulfilling prophecy” misinterpretation of statistics to allege that demand for separate homes is “falling” among the young, when the reality is that they are being priced out.

        On the claim that higher density “reduces housing costs”, Troy also says:

        “…..all the evidence suggests that increasing density, especially multi-unit construction, will actually lead to increased unit costs…….Multi-unit housing construction, especially if it is more than one storey high, usually has higher overheads due to the scale and complexity of the development……..and higher cost due to structural requirements. Such projects frequently have to be completed in their entirety before they can be used as accommodation; they are hard to develop and occupy in stages, which means that developers must raise finance on the open market to complete the project……A second factor relates to the need for greater investment in “hard standing”, site development and paving, and in sound insulation to ensure privacy……”

        There’s a lot more in that book; but the above is the most relevant to the discussion we are having here. Why is Troy not a celebrity?

        • DrBob127MEMBER

          “Median sizes for new houses are very much lower than the average.”

          Median IS an average, I think what you mean is:

          Median sizes for new houses are very much lower than the mean.

          • DrBob127MEMBER

            “In mathematics, an average is a measure of the “middle” or “typical” value of a data set. It is thus a measure of central tendency.”

            http://en.wikipedia.org/wiki/Average

            Have a look at the link and you will see that arithmetic mean, geometric mean, harmonic mean, mode and median are all types of averages.

            This is similar to the definition of positive versus negative feedback loops that has been clarified here in the last few weeks. Just because the term ‘the average’ is commonly used t0 almost exclusively refer to ‘the mean’ does not mean that it is correct.

        • ” He also says that the planners belief in the aesthetic superiority of their preferred types of development are not borne out in real life experience,”

          There is truth in that statement. In fact aesthetics seem to be independant of the housing type, you can make any type of development quite ugly…

  3. Houston Rocket

    The real shortage is in the MSM’s credentials. The repeated parroting without question, investigation or challenge, of the mythological housing shortage stats wheeled out by every brick pimping interest is negligent at best.

    There is no housing shortage in Australia. FACT.

    • +10.. I bet we won’t hear a squeak about the missing 1 mil household from our local MSM (with the sole exception of Chris Vedalago)

        • IMHO, BD does sit on the fence some times – He has a business to run, after all. Besides he is not a journalist.

          • The Patrician

            He has already squeaked here

            Black_Dragon says: June 22, 2012 at 11:58 am Well done in writing this up. Beat me to it!
            Might also be of use to discuss one of the other variables in calculating required hosuing, which is the Number of persons per dwelling. Guys like B(I)S and the Housing supply council make an assumption in their forward prediction for housing demand, that the number of occupers per dweeling will continue to fall.
            Obviously if that ratio falls that means we are more and more living seperatly from each other and so, require more dwellings to make that happen. However that ratio in the last two surveys has held steady at 2.6 persons per dwelling..

    • darklydrawlMEMBER

      “The repeated parroting without question, investigation or challenge”

      Also known as “Churnalism”. Commonly found in the MSM where the latest press release is just churned into a news story with little or no analysis.

      Story done, minimal costs, off to be pub early. What’s there not to like? 😉

      • Bobby Fischer

        +1

        Macrobusiness to trademark ‘Churnalism’ as part of their dictionary alongside ‘Bullhawk’ etc in 5, 4, 3….

        • Sorry it has been in the wider lexicon for a long time now.

          Specifically for press releases that are just given a headline and printed.

      • Love the term. Going to be more of it though, what with almost three thousand newspaper staff being cut across the country. Granted they’re not all journalists, but some of them will be. If you’re trying to do “more with less” then churnalism is the logical result.

    • Dumb question: what does MSM stand for? Context suggest something to do with real estate newspaper reporters, but no idea of the exact definition, and Google wasn’t much help. Some wild guesses whilst I made whilst wondering:
      * Main Street Mag
      * Media Stooge Mongrel
      * Mortgage Spruiking Messenger

    • “There is no housing shortage in Australia. FACT.”

      Agreed. And yet Bernard Keane manages to read the figures in a completely different way.

      According to him, the NHSC reported demonstrated that we have a shortage of nearly 200,000 units. Of course he fails to mention that the shortage was calculated by including the million households that don’t actually exist.

      http://www.crikey.com.au/2012/06/22/census-reveals-the-consequences-of-a-national-housing-myopia/

      “And it demolishes the claims of the housing denialists such as Steven Keen and the cherrypickers at The Economist that there’s no housing shortage in Australia. In the five years between 2006 and 2011, rents rose nationally on average just under 50%. That’s more than 30% above inflation. Monthly mortgage repayments rose on average 38.5%.”

      Someone might want to let Bernard in on a little secret. Rents can increase faster than CPI even without a shortage (unless he’s willing to claim that Ireland has a housing shortage).

      (From 2007) – http://www.daft.ie/report/geoff-tucker

      “The latest analysis of the rental market contained in this edition of the Daft Report shows rental values continuing to increase steadily right across the country, with the annual rate of growth reaching 10.5 per cent in February 2007 – the fastest growth rate since the index started tracking rents back at the beginning of 2002. Rental values have been increasing since the end of 2004, though it wasn’t until the middle of last year that the pace of growth really picked up and reached double figures. “

      • You are quite right. It is distortions in “supply” that result in a paradoxical combination of inflated prices AND empty properties. I have said this many times on this forum. This condition exists right now in China and the UK. It existed in Spain and Ireland. According to THIS paper, it exists in France:

        BENARD, Vincent (2012): “A State Made Paradox: Simultaneous Housing Shortages and Vacant Homes”

        The simple reason is that properties have been “flicked” and “flicked” and “flicked” until finally the bubble peaks, and you have 1) large numbers of potential legitimate home buyers who cannot afford the “market” prices; and 2) large numbers of “vendors” who are “greater suckers” whose hope was to find “greater suckers” than themselves. The next wave of greater suckers turns out not to have materialised, and the only people likely to buy, are the “legitimates” whose ability to pay, means around a 50% haircut will be necessary on the part of the “greater suckers”. But the “greater suckers” will hang on to their empty “investment” properties for a LONG time: hope springs eternal in the human breast. And the greater suckers financial backers will hang on for a long time too. Check out Dr Housing Bubble’s many comments on “shadow inventory” in California – all the mortgages in arrears and lenders too scared to foreclose because it will drive the market down even further and queer a whole lot MORE of their clients “investments”.

        Australia COULD have avoided the worst of this given that everything it needed by way of bad example was well and truly out in the open by mid 2008. A “First Home Buyers Grant” of $25,000 that sent prices up $80,000 in a few weeks, is just one of many stupid, stupid, stupid policy actions. The RBA assuring us “we can handle it” with monetary policy, is another fair dinkum Aussie “howler”. When the definitive history book on central banker hubris is written, there will be a chapter devoted specifically to the RBA and Australia’s house price bubble.

        It’s not as if NZ’s Don Brash did not say back in 1996 that a supply-distortion house price bubble rendered his then job as Governor of the RBNZ, impossible. Brash should be one of the contributing authors to the definitive book, if not seriously considered for a Nobel in economics, being so far ahead of everyone else in the world on this momentous point.

    • +1 Houston.

      Nailed it in 3 sentences.

      “The real shortage is in the MSM’s credentials. The repeated parroting without question, investigation or challenge, of the mythological housing shortage stats wheeled out by every brick pimping interest is negligent at best.
      There is no housing shortage in Australia. FACT.”

  4. Disappointing to see word games revolving around the word “shortage”.
    It was always nonsense to try to figure out exactly “how many” houses we are short. The shortage is structural and cannot be fixed simply by adding X houses.
    The structural shortage is caused by immigration exceeded supply at a fair price. Rich Chinese and/or poor Indians crammed-in are outbidding locals with normal jobs. Is this a problem? I think so.
    Ban immigration then add X, Y and Z number of houses. When price/rent falls to a reasonable level we can know how many dwelling we were short.

    • reusachtigeMEMBER

      Ahhhh – now the true reason for your steadfast on this has been revealed. It’s the bloody foreigners!

      • That ugly racism card as well… “Who is Claw 1940’s man?”

        come one analysis please not this poor stuff masquerading as an argument.

        PS White Australia policy is log dead and ideas like your are literally History.

        So incredibly sad. I feel sorry for you due to the ignorance you display which is just so incredibly poor. “Ban immigration” can’t believe you wrote that.

        You clearly have no understanding of Macroeconomics but even myself with bare 101 understanding knows we need the productive workers and the investment – 25% of Australians were born overseas – this country would not be what it is today without immigration full stop.

        TM.

        • Now I am accused of racism because of a simple example I provided.
          My example works just as well if you substitute any white race for the Indian and Chinese examples I used.
          It is not racist, it is simple mathematics and logic.

          • You’re accused of racism because you use loaded phrases like ‘Rich Chinese and/or poor Indians’. If you’d just said ‘immigrants’ you’d just be xenophobic.

          • The only thing loaded here is your comprehension.

            Using a term such as ‘Rich Chinese and/or poor Indians’ might infer that in Indian states such as Tamil Nadu, the minimum wage converts to $AUD0.50 per day.

            Inferring that immigration to Australia might be out of the reach of those except the rich.

            Xenophobic means a fear, or disdain to somethin foreign or alien.

            His views are clearly about economic impacts, not cultural.

            By attempting to slur him, all you do is weaken the stigma of racism and eventually be self-defeating.

          • Claw, quick PS for you and I won’t argue anymore just debate.

            We are all Human Beings and as such we are all part of the Human Race with a wonderful diversity known as Ethnicity.

            Do not use such outdated ideas from Gobineau a Racial Scientist you can learn more here: http://en.wikipedia.org/wiki/Scientific_racism with ideas have been long refuted as pure nonsense.

            Using “Race” to marginalise other Human Beings in my opinion a lowly act.

            Maybe you don’t realise just how wrong you are – however ignorance is no excuse.

            Have a read of that article on Wikipedia and in future as noted here we are all 1 Race the Human Race.

            TM.

            *shakes head in disgust*

        • It is a strawman argument, as well as facile and obnoxious, to say anyone objecting to high marginal rates of immigration is aspiring for the return of a whie Australia policy.

          Immigration comes at a short term infrastructure and opportunity cost. When that cost is being disprortinately borne by disadvantaged classses.

          It is really easy for those living in green, leafy, low density housing areas ‘what we need is increased tolerance!!!’ in faux-outrage, when they aren’t having to tolerate anything as immigrants are in lower cost suburbs 30km away.

          Would 2nd generation vietnamese in Cabramatta asking for a ‘slow down, I like things the way they used to be’, because public services are being stretched be subject to such slurs, or just white-guilt only fuel your outrage?

        • So incredibly sad. I feel sorry for you +100 Tm

          “due to the ignorance you display which is just so incredibly poor. “Ban immigration” can’t believe you wrote that.
          You clearly have no understanding of Macroeconomics but even myself with bare 101 understanding knows we need the productive workers and the investment – 25% of Australians were born overseas – this country would not be what it is today without immigration full stop.”

          My sympathy for him evaporated with that last vomitous comment of his. As you say, clueless.

          • Moderator please ban Velociraptor. He is using this forum to abuse me.
            He refers to me as being mentally ill, of Dutch ethicity or South African.
            He is running some sick kind of harassment campaign against me.
            In addition he is clearly as thick as two planks of wood wrapped in cotton wool.

            In order to discover the exact level of shortage, which fools like him demand to know, it would be necessary to conduct an experiment where further inflow of people stops and building commences until the shortage is over (eg lower price and rent).
            For this reason I said “Ban immigration then add X, Y and Z number of houses.”

            That is an obvious way to discover the precise level of shortage.

          • Claw, don’t worry, it’s just the Raptor’s acerbic eviscerating style. I cop it all the time – doesn’t bother me and often is quite humorous. 🙂

    • Bobby Fischer

      Claw

      Explain to us why there is NOT a shortage when as facts we have the following:

      – NHSC overstatting households in Aus by 1 million
      – Population increase 300,000 less than expected
      – Over 900K empty homes in Aust. Being generous and giving away half of those as unavailable e.g. deceased estate, unliveable etc

      That still leaves almost 500K homes sitting idle for purely spec purposes which will flood the market when good times go bad. Just like happened in the US and other places.

      How are we different here? Please explain.

      • Claw conflates fiscal incentives and income disparity that distorts rational behaviour with an allocation of resources.

      • That still leaves almost 500K homes sitting idle for purely spec purposes which will flood the market when good times go bad. Just like happened in the US and other places
        Evidence please, or did you just make that up?

        • Bobby Fischer

          Made it up.

          Would you be happy with 200K homes? Or 300K homes? That would only be 1/3 of all those unoccupied dwellings. I don’t think that is an unreasonable estimate of purely ‘specker’ homes out there when we have had the mother of all asset bubbles building for 2 decades.

          Oversupply is to be expected under circumstances of ‘ponzi financing’, because it is the best interests of builders, speckers, financiers etc to play the game, as everyone wins in a roaring market. Look at the RBA figures if you don’t believe me; the building of dwellings has outpaced the formation of households consistently for a long period (see their ‘average household size figures’).

          So, when this all goes south (like now) in the market, there will no longer be any benefit to holding specker properties en masse, because capital is being destroyed and the market is dead demand-wise. Therefore, it is no longer profitable to sit back and hold properties (without the hassle and cost of tenants) just to cream capital gains, because they don’t exist anymore.

          The oversupply has been hidden Claw, because no official reports (government or otherwise) have considered this ‘latent supply’ that is just waiting to swamp the market when good times go bad. Because we haven’t had bad time in property for so long…

          So, giving you the benefit of subtracting some 600 or 700K of those excess properties as ‘non-specker’ properties, that still leaves over 200 – 300K homes that are purely specker porn.

          What do you think those property equivalents of day traders (the specufestors) are going to do when this capital destruction continues unabated… flee is the answer. Then good times really do go bad…

          • I’m pleased to see that you can type a long reply.
            The problem is that I want you to provide evidence of homes sitting idle for purely spec purposes which will flood the market when good times go bad. Just like happened in the US
            Can you provide the data for the unoccupied dwellings ballooning during the boom and then flooding the market later?
            In Australia we have had 10% unoccupied since 1970 and I am still waiting to see the market flooded.

          • Bobby Fischer

            Here’s your evidence for the US and UK. Happy to assist your education further as required.

            http://www.businessinsider.com/the-renting-alternative-will-undermine-the-housing-market-for-years-2010-8(external link)

            “In August 2005, an article in the Wall Street Journal entitled “Speculators Push Rents Down” pointed out that the supply of rental homes in the Phoenix area almost doubled from a year earlier. Average rents for these houses dropped by nearly 10%. Similar situations were found in markets as diverse as Fairfield County in Connecticut, Kansas City, Las Vegas, San Diego and Palm Coast, Florida.

            Even more ominous was the fact that 1.34 million single-family home rentals stood vacant. This had risen from only 900,000 in 2003 according to Harvard University’s Joint Center for Housing Studies. Many of these homes became rentals because the investor was unable to flip the property. By the end of 2006, the number of vacant homes for sale had skyrocketed to 2.1 million according to the Census Bureau.

            … the glut of rental homes in bubble markets such as Phoenix had caused rents to plunge to half the cost of owning that same home by the beginning of 2008. The press began to notice that the soaring number of homes and condos for rent was providing an attractive alternative to buying.”

            http://www.telegraph.co.uk/finance/economics/houseprices/3473690/Rents-fall-as-properties-flood-the-market.html(external link)

            “The latest lettings survey from the Royal Institution of Chartered Surveyors said frustrated home owners were unable to sell their properties due to a lack of buyers created by the drying up of mortgage finance.

            It has resulted in an oversupply of rental properties and rental prices falling for the first time since April 2003.

          • Bobby Fischer

            Here’s the massive shadow housing inventory that has appeared in the US Claw.

            http://www.zerohedge.com/news/second-foreclosure-tsunami-coming-and-about-kill-any-hopes-housing-bottom

            “What this means also is that America’s record shadow housing inventory, which is far greater than any fabricated number the NAR reports on a monthly basis, is about to get unleashed on buyers, shifting the supply curve much further to the right, as up to 9 million new properties slowly but surely appear on the market. And while many will no longer be able to live mortgage free, forcing them to go out and rent (and no longer be able to afford incremental iGizmos), it also means that the prevalent price of homes is about to take another major tumble, making buffoons out of all those who, once again, called for a housing bottom in early 2012. Here’s the simply math: there will be no housing bottom until the 9 million excess homes clear. Period.”

            And here’s the proof they used to claim a housing shortage in the US as well. We’re not different Claw.

            http://articles.businessinsider.com/2011-01-10/markets/30051851_1_interest-rate-rise-property-listings-mortgage-rates

            Key quote:

            “Remember the housing “shortage” in Florida? People stood in lines overnight and entered lotteries for the right to buy condos. Others were going door to door making offers on homes that were not even for sale.

            From that aspect, it sure looked like there was a shortage. There wasn’t. It was nothing more than a speculative mirage much akin to the shortage of quality tulip bulbs in the year 1635 during Holland Tulipmania.

            So anxious were the speculators to obtain them that one person offered twelve acres of building ground for the Harlaem tulip. That of Amsterdam was bought for 4600 florins, a new carriage, two grey horses, and a complete suit of harness.

            Housing mania did not get as far out of hand as tulip mania. Nonetheless, many lives were ruined in Florida, Las Vegas, Phoenix, and dozens of places in California and elsewhere in the US.

            Until the bubble pops, speculative manias always make it appear as if there are shortages and infinite demand.”

    • Ah, dude, you really do my head in sometimes.

      “The shortage is structural and cannot be fixed simply by adding X houses.”

      Wait, what?

      “Ban immigration then add X, Y and Z number of houses. When price/rent falls to a reasonable level we can know how many dwelling we were short.”

      Since that will never happen, I suppose we will never know the true extent of the shortage? Brilliant.

      • Since that will never happen, I suppose we will never know the true extent of the shortage? Brilliant.
        Since I will never go completely bald you will never know how many hairs are on my head.

        What is your point?

        The suffering caused by the shortage is obvious. Why do you need an exact number?

    • Hmmm.. The Claw is a skills shortage denier 🙂

      Seriously, as one of the ethnics that the Claw has fingered (pun intended), I don’t think he is being xenophobic or racist. He is simply misinformed anyway on the numbers – majority of the immigrants coming in are from Europe/UK.

      Anyway, Don’t we all accept that immigration is a part of the population ponzi strategy? The Claw just put it in Boganomics language.

      • As an immigrant I agree with Mav, that the exponential population growth strategy that Australia has adopted is ponzi economics. As someone who is aware that Australia is not an infinitely large space we need to decide what population would be best for living standards and the environment and put in place policies that can stabilise the population around this number. Pumping people into the country is the laziest form of growth and although governments are addicted to it, that does not necessarily make it a good thing.

  5. Can’t wait until the planned six new suburbs for Melbourne are finished, that should help address the “housing shortage”.

  6. outsidetrader

    Has anyone seen today’s Crikey.

    Mr Keane has put out an article purporting that the census data proves the housing shortage is real and that there is not property bubble in Australia…

    Hard to believe he used the same data to reach such a different conclusion.

    • Yep, see above for my comment. Short response is – rents can increase faster than CPI even without an undersupply of housing. See Ireland for an example.

      • outsidetrader

        Yes – my thoughts exactly. Increasing rents do not necessarily imply a houseing shortage.

        And I hadn’t seen your comments above as I’d made my post a couple of hours earlier 😛

  7. this should bring bernard salt out of retirement……another regular spruiker…

  8. The housing equation just shifted. Will the spruikers recant. Nope. Will the MSM (beyond Vedelago and Zappone) ‘discover’ the new paradigm? Nope. Will the economists with dud models predicting price stability do a mea culpa? Nope.

    The Great Australian Land Bubble is deflating. Stay out of this market.

    Don’t Buy Now!

  9. Revert 2 Mean & Bobby Fisher etc.

    I saw that Today Tonight story and as much as I want to feel sorry for those elderly tenants the reality is the system is completely stuffed. I say this as somebody who has worked in welfare and housing recently; there isn’t really any new stock being added and the people who are already in the system NEVER move out despite the fact that they probably should (when they start work or need to downsize).

    The other problem is that every single state government is crying out for money and after decades of asset-stripping the only major thing left to sell is their various housing commissions/trusts. I wouldn’t want to be relying on a housing commission house right now because I think the writing is on the wall…

    • The rise of the non-government social housing landlord is well and truly under way… mostly at the expense of the State Housing Authorities.

    • Bobby Fischer

      Hi Sean

      That’s R2M’s baby. I have to read up on the public system, but I understand it is woefully underfunded with overly bureaucratic processes etc. I know little else about it though.

      Cheers

  10. In our AHURI report “Housing implications of economic, social and spatial change” we showed that household size had stopped falling 2001-6, ending an 80 year trend. What falls still remained were due entirely to aging of the population (old households have less people). Basically, people were staying home longer because of much higher house prices than could be in any way justified except by a mania mentality.

    The fact that house priced rose so fast during a time of low household formation was a very great worry to reputable housing economists.

    Owen MacDonald’s group have gambled that the long-term trend in reducing household size would continue in their estimates – which are clearly very far out even in the first five years..

    I will report on the new 2011 figures as soon as I have had time to assess them.

    Dr Joe Flood
    AHURI Melbourne

    • Great to see you on here, Prof. Flood.

      Keep the Patrick Troy tradition going……

      🙂

  11. The 2011 Census results are the final nail in the coffin for the Great Australian Property Boom.

    I suspect it’s merely conincidental but I’ve had three agents call me this morning (same guys who wouldn’t return my call 4-5 months ago) offering “good deals” on properties (the same ones I inspected 4-5 months ago that have been on the market now for at least 6 months).

    I told them I spent some of my “poperty money” on a new car and overseas holiday so I have about $50k less to spend and I’m not sure I want to buy right now – they still want me to come in and make an offer. You can hear the desperation in their voices. Almost feel sorry for them…. almost.

    • Put really low ball prices, like 1972 prices..

      “$13,200…It’s the new paradigm mate!!”

    • So, that (non-existant) shortage you were sheeting home to higher construction costs caused by Unions a few months back …? Are they still wielding a smoking gun ?

    • Funny – The RE agent who 6 months ago setup shop below our Apartment complex is now so desperate for business he is renting out storage lockers. I asked about one and he had an offer under my front door within 30 minutes. Assuming he made a 10% commishion, he would have pulled in a massive $30!

  12. The figures quoted in the article relate to ‘occupied’ private dwellings only. The headline number of dwellings is actually 9.117 million dwellings (http://www.censusdata.abs.gov.au/census_services/getproduct/census/2011/quickstat/0?opendocument&navpos=220) which is more than what the housing supply council have estimated. Whether a home is occupied or not shouldn’t make any difference to the over/under supply equation. A large portion of these homes would be for holidaying purposes I would suspect, some may be owned by speculative investors and some may be simply unoccupied on Census night.

  13. As someone who has seen the inside of the tent in the past, I’d like to shed some light on the NHSC projections. There are two parts to this story: technical and political.

    Firstly, the technical. I’ll start with the terminology. The NHSC makes ‘projections’, not ‘forecasts’. A ‘forecast’ is more like a stock target, in which we look for the expected value for a dependent variable. A projection is more like a ‘what if’, and makes a series of assumptions in a number of variables, then works out what the result would be if these assumptions held true. The difference in terminology is small, but significant.

    The issue with many of the variables is that it is hard to calculate them directly. So, the NHSC does things like assume that the rate of change of household formations will be the same as in the past, that population will increase as per ABS series A, B or C, and that supply will increase at somewhere between the lowest and highest rates seen in the past. In some parts of the method, as someone above has already pointed out, two large numbers (e.g. population and housing stock) are compared to produce a small number (e.g. shortage/surplus of housing stock). Finally, according to neoclassical theory, a shortage/surplus must result in a higher/lower price, which balances supply and demand to eliminate the shortage/surplus.

    In the real world, this means that a ‘shortage’ causes some households that otherwise would have formed not to form. I believe we can see this result in real world data, with the number of people per household stabilising for the first time in many decades, and young people putting off forming families until later in life.

    Secondly, the political. As much as some conspiracy theorists would like to think, the NHSC is not run by housing spruikers. The board is generally made up of academics, industry people and economists. I don’t believe there were any representatives from REIA. And, from what I saw, the board was concerned with the lack of affordable housing, especially for people on lower incomes. The board was also concerned with barriers to housing supply, at all levels: local, state, federal, AND industry.

    I understand that the word ‘shortage’ carries a lot of baggage with commentators in this space. Rest assured that when the NHSC talks about a ‘shortage’, they are saying it only as a wake up call. I never heard this term being used to talk up housing, but, yes, I have seen various real estate industry talking heads jump on the NHSC’s results and use them for their own purposes. You should ignore these people.

    So, in conclusion, the point of the NHSC and its report is to document the impediments to housing supply and the challenges facing Australians trying to find housing, not to spruik a ‘shortage’.

    • Also, on the subject of unoccupied dwellings, there is a lot of misinformation floating around on these.

      In aggregate, there were something like 800,000 unoccupied dwellings identified in the 2006 census, or around 10 per cent of all stock. But as readers of this blog will know, what is happening at the aggregate level can mask the real result.

      When we drill down on the locations of the unoccupied dwellings, we find that there are huge concentrations far away from capital cities. For example, suburbs in inner cities have unoccupancy rates less than 5 per cent, whereas some coastal ‘holday’ suburbs can have up to 20 per cent.

      When we look at the reason for being unoccupied, we find other interesting results. The ABS looked at the reason dwellings were unoccupied in their 1976, 1981 and 1986 censuses. I can’t remember the exact result, but I believe that a fair portion, probably more than half of these unoccupied dwellings were unoccupied for a good reason.

      So out of the 800,000 unoccupied dwellings, we find that maybe 200,000 are actually of any use to anyone. Still a large number, but not nearly as dramatic as the headline figure!

      • The Long Run; obviously you have some inside knowledge of the NHSC. Great.

        Then can you please justify their use of underlying demand to calculate a shortage, and explain why they chose to include such things as those “sleeping rough” in their calculation?

        Can you please explain how they picked a certain year to be “balanced” supply? Can you please explain at what level they think persons per household should be to be balanced?

        In all seriousness, I am interested in the answers.

      • Thanks long run !

        That was interesting and hopefully cooled the heels of some of those jumping at shadows.

        I agree that houses are overvalued but a lot of unoccupied houses does not equate to plenty of housing for rent contrary to what a few have argued above.

        Certainly, some of that stock may come flooding onto market when the penny finally drops but the idea that the burbs are full of empty houses owned by brain dead negative gearers happy to lose money is just too hopeful.

        We need to build more houses and as we do prices will fall – for several reasons.

        That is a good thing.

    • In the real world, this means that a ‘shortage’ causes some households that otherwise would have formed not to form. I believe we can see this result in real world data, with the number of people per household stabilising for the first time in many decades, and young people putting off forming families until later in life.
      Exactly. These young people are the victims of the shortage.
      Shortage-deniers use word games and statistical voodoo to deny this.

  14. I have looked at the data and here are the answers, which follow what we predicted a couple of years ago.

    a) the proportion of sole person households has fallen – breaking a forty year trend. The fall will be greater among young households. The proportion of group households has increased, also breaking a trend

    b) Home ownership has fallen by more than 1% (a huge amount). The fall will also be much greater among young people

    c) Persons per occupied dwelling has fallen very slightly – but this needs to be adjusted for the baby boomer advance which remains very marked

    d) The proportion of vacant dwellings has increased

    Reconfirming how Australian governments in 30 years have managed to turn one of the best performing and affordable housing markets in the world into one of the worst performing and unaffordable.

    Dr Joe Flood
    Melbourne

    • The Patrician

      +1 Although I think we can throw the FIRE brigade and their MSM cheerleaders into the dock as well.

      Guilty as charged

  15. I am a fan of Saul Eslake.
    Saul Eslake is deputy chairman of NHSC.
    If NHSC describes a housing shortage ..I believe it

    • -1
      “Honestly, I think we should just trust our president in every decision he makes and should just support that, you know, and be faithful in what happens.”
      Britney Spears, CNN interview 2003

  16. It’s been some time since I have worked with census data – but my recollection is that the first release data is based on counts on census nights and the second release is based on total population estimates that account for non-responses.

    Just checking that you are working with numbers for the population rather than dwelling and population counts for census night.

  17. Both my neighbours have holiday places that would have been unoccupied on census night.

    How does the census data treat houses that were unoccupied because of holidays or travel?

    My house would be unoccupied about 10% of the time due to holiday travel. When i was single it might have been empty 30% of the time when business travel was allowed for.

    • The Census Collector would have recorded it as an unoccupied private dwelling so it contributed to the local dwelling stock. 1 dwelling 0 residents. A non-responding dwelling, on the other hand, gets a little more complicated with imputation of residents etc.

  18. Significant flow on effects from the 300 000 population overestimate between 2006 and 2011. GDP followers, the revised annual GDP per capita in Australia is almost $1000 higher, roughly $65k up to $66k. National Accounts win.

  19. Sorry, I don’t get it – the census revealed less houses… Can someone explain why this means there is less of a shortage?

    • “Households”, not houses or dwellings.

      In other words, population was lower and/or people per household was higher than many (e.g. NHSC) predicted.

      In this case, both were.

    • Critical Influence

      Raveswei… you made a lot of great points in that post and you sure are begin vindicated now. I just cant believe how hopelessly, incredibly, incompetent the NHSC is in their ‘analysis’. It is mind-blowing.

      According to their approach, even if we had 10 million vacant homes in Australia we would still have a housing shortage as it is only future ‘underlying demand’ (itself calculated ridiculously even if the current market is ‘fully stocked’).

      The truth is (slowly) coming out.

  20. MsSolarFelineAU

    Forget the figures, and arguing over semantics.
    Let’s think about this real world that we live in.
    A large number of my friends in Syd/Melb/Briz are either moving in with their parents (I just moved back in with my pensioner Mum in Briz) or with other friends, there-by increasing the number of persons in households and decreasing the number of households.
    How many thousands of us are doing this? Why are we doing this?? Because accommodation is too expensive in Australia, and is taking up too much of a percentage of our income. Just _my_ perspective.

    • Which is exactly what these figures show happening. Could also be intersecting with a slowing of the trend towards smaller household size, causing it to effectively halt. I think that trend could continue, but only, as you point out, with lower house prices, and lower rents. Ordinary and low income earners have to be able to afford it for smaller households to keep forming, but at the moment, many of them are just plain priced out.

  21. Critical Influence

    Leith, thanks so much for being the only article in the Australian media that has covered this amazing revelation in the census data. NO wonder the MSM is dying (or are they just corrupt?).

    ‘Housing shortage’ can now be added to the other myths behind Australia’s “different” housing market: a) China will save us, b) resources will boom on forever c) decoupling from the West, d) no subprime lending, e) no non-recourse lending. The only pillar left is ‘strong banking system’

    • Do you believe “strong banking system”?

      International hedge funds have been “shorting” the Aussie banking sector for more than a year. Many of them might not be able to keep this up, and have to cut their losses and run. Making a killing shorting an obvious target is all a matter of the luck of the “timing”. Several hedge funds dropped out shorting the US mortgage market during 2007, thereby failing to strike it rich when the meltdown DID come.

  22. Hugh PavletichMEMBER

    To get a better “fix” on this, they need to compare stock and build rates / 1000 population, with a normal housing market such as Texas. Bubble markets (such as ours and Australia) are by definition “abnormal” because of the “in today / out tomorrow” unstable speculative activity they generate.

    The normal market of Texas has considerably more housing stock per 1000 population than the bubble market of California for example (check Federal Reserve figures). California build volumes / 1000 population had long been woeful and collapsed to 1 / 1000 (37,000 for 37 million population) back in 2009 after the bubble crashed.

    Interestingly, there is good strong “normal demand” in the Houston housing market, as the May Monthly Report from the Houston Association of Realtors http://www.har.com clearly illustrates. That market has the capacity to ramp up supply in response – quickly – ensuring a bubble is not triggered. The median family home price has hit a (don’t laugh) “staggering” $US168,000 (highest on record) with townhouse / condos up to $US141,500 (skewed by substantially increased transactions in the higher price brackets as illustrated within the report) –

    Houston Assn of Realtors May 2012 Monthly Report

    The United Kingdom is another “basket case” because of its planning strangulation too, with bubbles inflating and deflating with increasingly wilder swings every decade. Even with an appalling build rate of 1.6 / 1000 (100,000 units for about 62 mil population) Coutts…the Queens Bankers are expecting house prices there to fall 11% –

    House prices could fall by 11pc, predicts Coutts – Telegraph Blogs

    The Australian Census numbers are going to send a shockwave through the speculative property fraternity in Australia (and their financiers). Analysing and discussing behaviour in “abnormal” housing bubble markets, is much the same as trying to talk sense in a lunatic asylum.

    Hugh Pavletich
    http://www.cantabriansunite.co.nz
    http://www.PerformanceUrbanPlanning.org

  23. I’ve just worked my way through some interesting comments by Bobby Fischer, so to avoid a stalemate I will respond here.

    His first comment was that [our Census indicates there are] almost 500K homes sitting idle for purely spec purposes which will flood the market when good times go bad. Just like happened in the US and other places.

    I asked for proof. I firstly find it fanciful that so many houses would be kept idle for purely spec purposes, but more importantly I want to see proof of such dwellings flooding the market in the US and other places.
    I want to see a chart of the US Census unoccupied dwellings and then compare it with a chart of Australia. A table of values would suffice.

    In Australia in 1976 census 9.4% of dwellings were unoccupied. Now in 2011 it is 10.7%. What happened before the US crash? Did their census unoccupieds hit the 10% level and then crash 35 years later? or was it 45 years?

    Later Bobby reduced his number and said that still leaves over 200 – 300K homes that are purely specker porn.

    In 2005 … pointed out that the supply of rental homes in the Phoenix area almost doubled from a year earlier. Average rents for these houses dropped by nearly 10%. Similar situations were found in [other US] markets. Even more ominous was the fact that 1.34 million single-family home rentals stood vacant. This had risen from only 900,000 in 2003

    So in other words the US had a massive increase in the number of homes for rent, average rents fell 10%, and the number of vacant houses increased by 50% in two years leading up to the price peak in 2005

    I live in Sydney and none of these things have happened. Supply of rental homes is tight. Rents have not fallen 10%. Vacant house numbers have not risen 50% in two years. I see no similarity between the US situation and the situation in Sydney.

    The parts of the US mentioned apparently had a typical boom, overbuild and bust, whereas Sydney has a terrible shortage, a big boom and no overbuilding and no bust.

  24. There is no basis to the suggestion that the vacancy rate fell in the USA when things went bad.
    The gross vacancy rate in the US was 12.7% in 2005 BEFORE the crash and 14.3% in 2010 AFTER the crash.
    http://www.census.gov/hhes/www/housing/hvs/annual10/ann10t_5.xls
    The vacancy rate has actually increased in the US. The claim by Bobby Fischer is that vacancies represent “homes sitting idle for purely spec purposes” indicates that lower prices have actually increased that number.
    A more logical conclusion from the US figures is that the vacancies never were homes sitting idle for speculative purposes.
    If Australia follows the US with a house price crash, the evidence is that the number and percentage of vacant/unoccupied dwellings will actually increase.
    The Claw has been remarkably tolerant under persistent insults even extending to calling him racist. He deserves more respect. So does Saul Eslake – deputy chairman of NHSC.