R.P.Data’s September house prices results are out this morning and, voila, growth! Over the month, house prices rocketed 1.4%:
Here are the Hedonic Index prices:
And the median prices:
Finally, here’s the Sydney price chart, leading the charge:
And Melbourne, less convincing:
Perth, range bound:
Brisbane, bouncing along the bottom:
Am I excited by this? Not especially. Do I think it will continue? For a while. Is the long awaited “recovery” here at last? Of sorts, but not in the way that enthusiasts mean. The up-tick in mortgage credit is modest to say the least. Does it signal the end of the slow melt? No, that is a decade or so away, in my view, especially in real terms.
Nonetheless, an interesting development!
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
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In yesterday's press conference at Parliament
Are you guys on this?
“Wayne Swan has pledged $20 billion to help lenders by investing taxpayers funds in the home loans”
Sounds like a $20B “Bail-out”
The link:
http://www.theaustralian.com.au/national-affairs/treasury/canberra-loan-deal-exposed-to-default/story-fn59nsif-1226486161804
It’s the long-running AOFM program to buy RMBS. Nothing new here except they’re happy to keeping buying junk.
While I can’t bring myself to defend the Black Swan, I can’t help but point out that Joe Hockey had even a worser idea than a mere $20 billion in taxpayer bailout:
http://www.joehockey.com/media/transcripts/details.aspx?s=190
extending the governments’ AAA guarantee to AAA-rated RMBS paper is a good thing.
Yep, lets bail em all out at taxpayer expense.
I wonder if that has anything to do with the Hockey real estate agent up the road from me?
LOL.. no.
It has everything to do with Joe Hockey’s self-confessed Svengali (who will remain unnamed)
It was actually owed by Joe’s dad so I’m sure there is some self interest involved, but yes Joe’s “Svengali” is the source of that crazy idea.
They are both idiotic although you are right that Hockey’s could be more expensive.
Shiiiiiiiiiit. That sounds bad.
Stop this debt-fuelled madness
Stop cutting rates
rate cuts now totally off the table….
100 basis point of cuts over the next 12 months? tell ’em their dreamin!
I think that they will still cut. It’s not all about housing.
Of course they will cut. The mining investment booms is going to end in the next 6-12 months. After that, it will detract from growth every quarter. The dollar MUST be brought down to boost wider growth in tradeables.
Credit-driven growth is not an option. QED.
ill bet you both that they dont cut. nothing in it, just bragging rights for the rest of the afternoon. ive already placed my real bets.
🙂
I’ve already said they won’t cut today. We’re talking about the next 12 months…
I got some news, GB.
They did cut.
I was trying to be gentle.
Fair point!
I don’t agree with cutting to bring down the AUD. I mean how far do they have to cut for it to take away in spread advantage? The BOEs at .50, the Fed at 0.25, Swiss at zero, Japan etc.
It is too dangerous to join this game for a country like Australia,
any further signs of strength in house prices would have to take rate cuts off the table.
Sure they need to do something to ease the AUD lower, but if RE heads north again as a result they are just laying another minefield for the economy to cross
I just don’t buy it. This is a policy bounce with a bit of seasonal excitement. It may delay cuts a few months but I can’t see it taking off again. Caution is a structural shift. And if that’s not enough then the RBA will be happy to see it run far enough to restart new home sales but that’s the end of it.
It’s not an option as a growth model. The ratings agencies have said it. The RBA has said it. The IMF has said it. Even the banks have said they can’t fund it.
Sadly, as we dick around with this, more production heads offshore.
‘Sadly, as we dick around with this, more production heads offshore.’
That is the nub of it……..
The more likely it is that the over leveraged masses trying to sustain massive mortgages get handed a pink slip and have to sell under duress.
But trying to get punters to feel this is crazily difficult in Australia at the moment
0.25% cut in the base rate won’t effect the AUD given our “safe haven” status, but I think house prices will go up as there is no policy to divert the capital elsewhere in the sort of volumes that a rush to housing will generate. if the banks are willing to still lend for housing at an even better rate many punters won’t see the danger.
my2c
I think we’re at least 50-75bps away from any rocket under house prices – it’s when lending rates get under 5% that there’ll be a perception of “wait borrowing is really cheap”. The question is whether the banks will pass it on, though.
Good point Karen. I’m just looking at the last two months after the series of cuts, and expect a push up in the spring/summer if we get another cut today, and maybe even without a cut.
In my mind there’s a good chance that FHBs chasing the FHOG for existing dwellings may have (at least in part) driven the price growth (in Sydney) from the middle of the year when the announcement was made.
http://www.propertyobserver.com.au/tax/nsw-doubles-its-first-home-grant-for-new-homes/2012061255075
Changes are in effect as of October 1st (no more FHOG for existing dwellings), it will be interesting to see whether prices stall/fall following the change (I suspect they will, though may take a few months for chain reaction to slow as those who sold their homes to FHBs upgrade, etc).
That is likely given what happened last time. There’ll be an upgrader pulse next.
Yeah that is the first thing I thought of BB, here in QLD at least they only gave them about one month to go get the last of the “home vendor’s grants”.
Is there now no FHOG at all for existing dwellings in NSW? Or did they just cut the top up?
Just for lols, have a look at the RPdata daily index today… down across the board! sentiment has turned!! let’s start annualising percentages!!!
No FHOG at all for existing dwellings in NSW. period.
Good.
Will be interesting to see what happens now.
Ok. Here’s what happens now. Stock gets pulled from the market, and the press starts up with the ‘property shortage’ pieces. Those who have held off, panic, and pay over the top, so as not to miss out. This continues for the next 6 months. It’s just like any oversold/bought market snapping back. The real skill comes now for those looking to exit. Timing the sale , for those private and bank sellers, is crucial here, as the temptation to’hang on’ for just that bit more comes into play. Come March, the time to sell will probably have come and gone.
The fly in the ointment is bank wholesale funding.
With Euro crisis still festering despite OMT, Helicopter Ben’s QE euphoria lasting all of one week and our own mining boom busting, who would want to lend money to our banks?
Anyone who gets it at 0%’ish…it’s not about counterparty risk, it’s only about the arbitrage proportionality… that’s why HnH is right about a cut coming.
(NB: That was supposed to read ‘opportunity’, but proportionality might do!)
Even if they can borrow at 0%, the exchange rate risk after end of the boom and declining ToT, is now non-trivial.
This is an ever present risk in a carry trade, yet it does not appear to deter those willing to jump in.
Well, MF Global did go up in flames, betting on Euro periphery bonds.
The risks are minimal, until they are not.
Interesting.
I thought the forex more volatile than shares!!
Yeah but if a rate cut for quite logical AUD reduction purposes feeds straight into RE prices returning to ape then the marginal utility is going to be somewhat diminished
Nadeem Walyat at Market Oracle ‘OMT’ meant ‘One More Time’
Cheers
I was expecting short-term bounce more than 6 months ago. This looks like typical seasonal spring jump. Unfortunately RP Data is not providing seasonally adjusted numbers any more (I wonder why?). In spring 2011 we saw 1% jump in nominal terms.
This is actually bad news for property speculators. This fake recovery will turn off RBA for couple of months.
I also thought this is seasonal thing. How does the numbers compare from the same month last year?
Dead cat bounce.
Someone had to say it.
“Return to Normal”
http://en.wikipedia.org/wiki/File:Stages_of_a_bubble.png
Although I doubt the final drop will be as dramatic as suggested in the graphic.
Yes, despair is hardly the word to describe the current situation.
It will take time.
Stimulus programs after the GFC hit have thrown that out for AU. Some were saying that the bounce after the stimulus was the “Return to Normal” and falls since mid 2010 were the start of the final fall but I’d say you are right and the stimulus created a new “New Paradigm” and the falls since mid 2010 were the “Denial”.
I think that you’re right and that the ‘new paradigm’ is that govt. will do everything to support housing.
I have to admit I was going to post exactly the same thing, but with a question mark: “Return to Normal”? 😉
Mind you, it is amazing what govt intervention/manipulation can achieve!
Some would argue the 2009 bounce was the “return to normal”…
+1 I do not pay any attention anymore to data and media related to the property industry…… would be ironic if interest rate cuts were not forthcoming because according to the industry and “data”, property prices are rising……
+1000000. In Melbourne especially.
An anecdote from Footscray/Seddon: failed mortgagee auction Sep 12 for a prime piece of vacant land on Buckley St, subsequently three immediately adjacent properties now for sale/auction.
Hold the line folks. Where are the fundamentals that could possibly support anything more than a sideways trend in house prices?
Lower interest rates?
With all respect, that sort of thinking is very pre-GFC.
The already significant rate cuts have at best dampened an inevitable decline. Victoria is seeing a net loss of mortgages, hardly fertile ground at all for the peddling of our staggering oversupply, however dim its sheeple.
Fertile enough for Melbourne prices to jump 1.4% for the month and 3% for the quarter.
In the context of the biggest run up in prices since the Melbourne land boom, that says sideways to me.
“Lower interest rates?
Reply”
I wish they cut by 300bp, just for fun.
I am getting bored. Need some “stimulus” for my brain….
Damn! They missed it by miles.
Well, next time. Back to work.
Whats going on in Darwin with a 15% increase?
Inpex’s 34 billion dollar announcement in January is what happened. Darwin went nuts.
Prior to January house prices were dropping. Houses that were selling for $475k are now selling(yes selling) for over $600K. Real estate agents are saying its the new normal (phooey!)
Inpex has taken about 150 high end 2-3 bedroom apartments out of the rental market. This has caused an investor frenzy here. Rental vacancy’s are currently around 0.4%
Interestingly, the rate of mortgage stress is 17% in Darwin, the rest of the country is apparently 16%.
I’ve also seen quite a few properties that sold in the last 3 years back on the market. One sold for $600k three years ago was back on the market for $699K and on Friday the price was reduced to $685K. Between stamp duty and mortgage repayments etc, these people are going to make a loss.
Darwin will be in for a roller coaster ride, but this city has been under built for 15 years, so it will probably ride it out.
Interesting times ahead in Darwin, the new government has put the public service on notice and has suggested the possibility of not renewing contracts. The public service and affiliates employ more people than any other industry in Darwin, including oil and gas.
With off shore detention, detention centres in Darwin are likely to be wound up…
This just in.
Miguel Cabrera hit his 44th home run of the season, inching closer to the first triple crown since 1967.
Dead Cat bounce?
O.K. Provided we can keep selling assets to avoid the external accounts crunch we will continue to have liquidity. Now, we have lowered interest rates to discourage further ‘saving’
HnH published graphs (sorry can’t find the reference) that showed RE still favoured as a savings (investment) vehicle after cash. Lowering interest rates means the cash heads to housing.
In the current clear anti-business environment from both the Govt and Unions what the hell else is anyone going to invest in?
So as long as there is sufficient liquidity via foreign funds housing, with lowered interest rates, will attract the funds.
The current attack on Superannuation by Govt ensures this problem will be exacerbated.
Savings may be discouraged, but debt repayment is encouraged. This is a wonderful opportunity to reduce debt fast and borowers are taking advantage of this window – it won’t last forever.
Debt repayment is funding. On top of that, the government would not allow a credit squeeze at the moment, so they will do whatever it takes to fund our banks.
The loss of the FHOG in NSW will hurt in our largest market, so that will slow demand. I don’t see why there will be an overall money supply problem that doesn’t have a solution, but I’m also quite sure that house prices won’t rise at this rate over the next year or two – it’s just a bounce – they happen. In an enviroment of falling interest rates, I don’t see any reason for a fall either. Repayments are getting cheaper, and borrowers can lock in rates for 3 to 5 years if they want a constant commitment level.
I’m glad you didn’t repeat that Bernanke howler, that ‘debt repayment is savings’ Peter! I’d argue that it isn’t funding either though. It’s just….debt repayment.
Oh I’m quite happy to agree with Bernanke on that. Accumulation of equity is much the same as savings. You’re free to disagree, but you would be wrong.
So what is dis-acculturation of equity called then? You know, that stuff that 32% of American households have. It’s often called by its real name – Negative Equity….but perhaps there’s a term that applied to savings in there somewhere! Repayment of debt IS NOT SAVINGS! It is repayment of debt; the replacement of future work income, taking in the present.
(finger problem today – edit please ? ‘dis-accumulation’)
Peter
How on earth is accumulation of equity the same as savings ? It might be if it is not backing any debt, but it’s really not anything until it’s been realised. For most, that ‘equity’ is just used to back further debt. I think Bernanke is gilding the lily here. It’s this mentality that equity = savings that has helped land us in this whole mess.
Here’s my point, Peter. Repayment of a mortgage is no guarantee there is a ‘savings’ component in doing so. At best,it’s a hope based on recent history. Savings,are identifiable; quantifiable, not based upon future expectation.
Sorry guys, I don’t mean to be unkind, but using a few impressive sounding words that only apply in a down market is simply folly. Housing markets never stay down forever, and then equity that is entirely accidental also comes into play, as well as the equity accumulated though debt reduction.
Any study of simple Asset and Liability statements should teach you that.
So you reckon those Japanese fellas that have been ‘saving’ via their home loans for the last 20 odd years are better of today? I reckon at 0% they’d have been better off leaving the cash in the bank – which many of them did, and they are way ahead of those that’saved’ by buying a house! A debt is quantifiable ( have a look at your own mortgage statement – I bet it has a figure on it called ‘outstanding balance’?) What does the ‘ savings’ figure say against the equity in your house? Tell me where that figure is printed please.
Asset and Liability Statement? Yep. I know what that is. It’s what many investment and retail banks looked at to see where their ‘savings’ were. Guess what? The statements didn’t create any savings when they were needed them, did they! Nope. They were based on hope; expectation and figures, not savings at all then!
Peter
Which ‘impressive’ words in particular do you think are obfuscating this issue ?
Whether it is negative equity, ‘accidental’ equity or not is beside the point.
Until that equity is realised (sold), it is just an accounting entry. Banks clearly treat equity as a type of savings to back further debt, but then they have the luxury of not having to write down the value of that equity on a mark to market basis.
pithoneme – the impressive word that Janet made up.
Peter
I appreciate what you are saying – I think in essence you are really arguing something different. It might be viewed as a semantic argument, but to my mind, once ‘savings’ (i.e. cash that is not backing debt) are used to purchase property or shares (for example), then that money is no longer ‘savings’, but money ‘at risk’. For many, the equity in their home is accessed via an increase in debt. They haven’t saved anything until that equity has been realised, and it is not backing any debt. The problem in my mind is that many people abrogate any responsibility to save (in my mind, an allocation to cash or other fixed income, or otherwise not liable to capital losses), because they think they are ‘saving’ by purchasing and paying off a house. That may be true in the long-run, but it can’t be counted on – particularly if someone needs to access those ‘savings’ at an inopportune time. I know this isn’t telling you anything you don’t know, but surely you can see the risk in such a large scale, one-way asset allocation bet that now requires central banks (among others) around the world to keep peddling furiously to keep afloat. And the psychological/behavioural shift which consumers worldwide are resisting just keeps getting delayed while those same central bankers keep reassuring the punters they have been ‘saving’ via their home equity all along.
pithoneme – neither gains nor losses are realised until an asset is sold, including any losses or gains in equity, but that rather negates Janets point, so including you in the discussion was difficult – I apologise for not engaging, but I think that you will appreciate why.
Anyone who buys an asset using debt, but then pays off the debt must have equity in that asset, subject to market fluctuations.
When you introduce the possibility of someone drawing on their equity mid loan term, then you introduce possibilities that range from wasting that drawdown, to investing in Apple shares and doubling your money – how can you and I cover all of those possibilities in a short comment here.
Life is what you make of it.
“don’t see why there will be an overall money supply problem that doesn’t have a solution”
The only one that doesn’t have a solution is an external source of funds crisis. As I said as long as we are willing to sell our assets which we are indeed more than willing to do…no problem!
It’s all up for ‘property’
They can solve the external funding issue if they want to. It simply requires some changes by APRA. Even changes to the APRA rated “stickyness” of deposits would make a huge difference.
No Peter not a genuine funding issue where people don’t want our dollar.
This would have to be accompanied by now wanting our assets. Mind you if Labor gets elected again that could well happen.
Now for all knee jerkers I’m not saying Abbot would necessarily do better. I’m just talking about perception
Flawse – our banks have $300 Billion in OS debt which could be internally funded, we don’t need to borrow from O/S and then we would not be sending our interest overseas. As a “once off” that money would go overseas to repay the debt, but that has to be done anyway, putting it off and paying interest on it surely isn’t our best strategy.
No Peter…Debt repayment doesn’t pay when interest rates low…same as it doesn’t pay to save.
Negative RAT interest rates equal more debt one form or another other than in the VERY short term.
Flawse – debts cleared during low interest periods pay wonderful tax free dividends when rates rise again, as they inevitably do over a long term loan.
“Debt cleared during low interest periods” means the level of private debt should come down, no?
I can’t see how you are advocating lower levels of debt.
debt cleared at the “individual” level Mav, it would affect the overall debt level, but not necessarily put it into a negative growth setting.
Please read the comments.
LOL.. for a moment there, I thought you wanted lower overall mortgage issuance to buy existing houses.
debt cleared at the “individual” level Mav, it would affect the overall debt level, but not necessarily put it into a negative growth setting.
This is a prime specimen of cognitive dissonance.
Get rid of your random thought generator mav.
Pull the plug out from the wall before it’s too late.
Ok, I hope I distracted you long enough to stop you from writing one more mega mortgage.
yeah this has been my reasoning, I ve sold my gold (i expect a reverse to mean one day), i am not stupid enough to put 1c on the sharemarket. I have settle on 2 nice properties last month.very little borrowing, safe as an house (I still have a some TD).
Happy time.
Faber says Gold real Estate and equities….Agree I’d wait a while for equities top unless you have a specific strategy on something…just my opinion.
I’ll hold the Gold…it may go down for a while. I don’t care!
BTW that has to be ‘safe as an ‘ouse ‘:)
and in the meantime, the govt ‘Finds’ Extra $338bn Assets:
“revised household wealth up by AUD14,380 for every one of the country’s 22.6 million people”
“miraculous ‘find’ has dropped the ratio of debt to liquid assets from a worrisome 170.1% to a meager 129.1%”
woohoo – problem solved !
http://www.zerohedge.com/news/2012-10-01/australian-government-finds-extra-338bn-assets-no-unicorns-yet
Swan’s accounting knows no end of marvelous revelations and remedies.
http://tinyurl.com/9vc38gm
This is just BS statistics, low volumes, even lower number of loans being issued.
However lots of hugely discounted top end sales, think that they are allowing for that, me thinks not.
I bet that if there was a breakdown of the actual properties then you would see a much clearer picture.
However if the fools want to jump in now, just remember that a fool and his money are soon parted.
So if you are a fool, then buy now
This country is starting to piss me off.
They cant keep dropping rates forever. And house prices cant keep rising forever.
In the mean time a 14.4% property drop in Spain and I’m buying in while the AUD stays where it is.
14.4% drop last quarter alone 😉