New home sales plunge to new low

Well, it’s early days, but the RBA campaign to lift new home sales hasn’t begun overly well. From the HIA:

A third consecutive fall in new home sales in September highlights the persistent lack of confidence towards housing in 2012, said the Housing Industry Association, the voice of Australia’s residential building industry.

The HIA New Home Sales report, a survey of Australia’s largest volume builders, showed a decline of 3.7 per cent in September 2012, reflecting a fall of 3.5 per cent in the persistently weak detached housing segment and a 4.2 per cent decline in the multi-unit market.

In September 2012 the number of seasonally adjusted new detached house sales fell by 1.6 per cent in New South Wales, 6.7 per cent in Victoria, and 3.5 per cent in Queensland. Detached house sales increased by 2.8 per cent in South Australia and were up by 3.1 per cent in Western Australia.

2012-09 NHSS National Media Release (1)

David Llewellyn-Smith
Latest posts by David Llewellyn-Smith (see all)


  1. I can’t speak for the the rest of the country but in Qld the “First home owner construction grant” came into force on 12 September 2012 and may have pushed back contracts and distorted the data.

    From memory the NSW First Home Owner Grant (New Homes) came into force on 1 Oct 2012.

    I’d wait for the Oct data to get a better read.

  2. That will lend weight to the voices calling for a rate cut, and add to the housing shortage.
    Not good news at all.

      • I’ve been hearing about a housing shortage for at least three years and in that time new home sales have headed straight down. Why is that Peter?

        Either there isn’t a shortage or the market is broken.

          • “any fall in production creates shortages”

            Only if you make the assumption that there wasn’t an oversupply to begin with and that the new lower level of production doesn’t cater for the growth required (which it might if we have been overbuilding).

          • Surely if there was a shortage three years ago there would have been a supply response by now?

            Its not like the housing shortage story is something that’s just happened in the past year because of the lack of new home sales. The housing shortage story was well and truly alive before and during the financial crisis, and was often put forward as evidence for why our house prices are so high and cannot fall.

            Just asking!

          • It’s not that difficult to estimate the supply required based on natural increases and immigration, but it is difficult to know exactly when the supply will be required. Demand can be very elastic, but it still must be satisfied eventually.

            There are a lot of theories, and a lot of calculations by people who assume to prove things one way or another, but if we had the sort of oversupply that we have seen in the USA (some areas) Ireland and Spain, then we would have seen falls of those magnitudes – but we didn’t and it has been well over 4 years now and that is far to long to just treat as a time lag in effect.

          • @Mav,

            This is off the topic, but just for the sake of my curiosity, I wish to know how much (or how little) common ground there is between us. I do not have time to list my positions on all the economic issues, but the Henry tax review is a good starting point. I support the recommendations in the Henry tax review. Do you?

          • “…but if we had the sort of oversupply that we have seen in the USA (some areas) Ireland and Spain, then we would have seen falls of those magnitudes…”

            This assumes that all other conditions are consistent with those economies, which they are not.

          • We have already proved there is an oversupply Peter, in excess of 60,000. We have been overbuilding since the GFC.

            HIA stated there were 138,000 COMMENCEMENTS (they have started building, the developer has obtained finance)during June 2011-June 2012 and if you add up the sales from the above graph for the same time period you a lot of unsold stock. The 138,000 figure is smaller than the real figure as HIA basis its commencement numbers off its members and their option to disclose exchanges.

          • @dumpling, re Henry tax review, I do support it in full.

            @PF, I am not arguing oversupply. But clearly there is no undersupply when supply keeps falling!!

            Besides, you may want to look again at the magnitude of the falls in Ireland and Spain.

          • “It’s not that difficult to estimate the supply required based on natural increases and immigration…”

            I don’t mind repeating myself.

            As with any other economic model, you start with assumptions and proceed from there. Choose the right assumptions, and you get the answer you want.

            However, certain facts can’t be avoided. For example, the number of deaths is already increasing due to the first baby boomers reaching old age. Consequently, we’ll have around 50,000 more deaths per year, every year, by around 2020. That will keep increasing until around 2050. (This corresponds with the peak number of births in around 1972.) By that stage, there will be almost twice as many deaths per year than there are now.

            If you want to factor this in to calculations for housing supply, bear in mind that every other death is a person living alone, but their home will be occupied by around 2.4 people when they’re gone.

          • Oh labrynth your calculations are as dodgy as they come.

            Listen to the market.

            Is there an oversupply of holiday homes – yes – are the prices falling – yes.
            Why are they falling – because it costs money to hold onto property that isn’t being used, so for a holiday home that is in a secondary location that doesn’t have constant demand, owners need to sell them – you can’t just hold an asset that no longer justifies being held due to asset appreciation.

            Is there a shortage of homes close to the CBD and labour markets – no. How can we tell – because prices are not falling – those homes are either being used as a PPOR or there is constant demand for them as a rental and thus the holding cost is not high enough to demand a sale.

            You can massage a bunch of figures anyway that you like, but don’t ignore what the market is telling you – after 4 years it shouldn’t be a mystery anymore.

          • Guys. Just look at rents. They rose by 40% between the 2006 and 2011 Census. Put simply, Australia has not built as many homes as it should have given the rise in prices, population, incomes, etc.

            This in no way means that prices cannot fall – inelasatic supply increases sensitivity to swings in demand – but arguments about shortages/oversupply are a waste of time in my view. Australia should be building more homes.

          • @UE

            When there was a bubble in the US, the dot com bubble produced the US private version of NBN, the housing bubble produced tons of houses. Back in the 19th century when there was train bubble, they built 250,000km long railways.

            Why did the Australian housing bubble fail to leave a “product” in its wake?

          • why are they not building more homes?

            Shortage of people willing to sign up for a debt of seven or eight times their annual income at a time when unemployment is rising.

          • Yes, as someone else noted, the construction/building sector does not like free market capitalism and insists on being bailed out every time.

          • So who is resisting the free market capitalism in Australia?

            I mean this is ludicrous. US bubbles left pretty useful “products” in their wakes.

            After all this housing craze, Australia has nothing to show for?

          • @UE

            Are you sure rents are good proxy for under/over supply? Rents were rising quickly in Florida, Arizona and other “bubble” states that now have huge oversupply of homes. For example: Rents in Naples, FL are high for USA standards ($1100/m). They increased almost 8% in 2010/11 while Naples is metro with one of the largest oversupplies in USA (37.5% vacant homes, 10% of all homes for sale at the moment, 11% rental vacancy rate, 4% of all homes under foreclosure).

            BTW. According to ABS rents increased 32% between March 2006 and March 2011. Census provides only average rent paid by renters not the increase in rents (renter composition might changed it seems that renters in 2011 rented bigger and more expensive properties). In fact, percentage of high earning renters increased between censuses.

            It is clear from the data that we were building more homes than needed for living. We built them for speculation. Now speculators ( so called property investors) are gone so nobody needs these homes any more.

          • Very true….

            If we’re talking about something like cars that is.

            There are houses 60 years old for sale too. Still in supply.

      • UE. 40% increase from the census 2006-2011 is only 7% compounded annually. While that is still above inflation and wage growth, it doesn’t indicate to me a dire issue in the rental market where rates have been on the low side. I’d say that given the so called vacancy rates that 7% a year is not the end of the world relatively.

    • Peter may not be right about there being a shortage now, but the trajectories of population growth and new home creation appear to be more and more opposed.

      • One cannot use basic population growth headline figures and correlate with housing demand as significant numbers are only temporary residents. Obviously there are sub markets within these temps e.g. international students who will rent and possibly buy property, most likely to be apartments (where Melbourne has a flood hitting the market).

    • There is a bigger shortage, prices are the lowest in years but still nobody wants to buy new home?

      Something must be wrong with your theory.

  3. Oversupply of houses

    Australia is 1/14th USA’s population so why would you NOT expect Australia to have 1/14th USA’s new home sales i.e. ~5,000 p/m = 60,000 p.a.

    Economists say we are all rational agents, so 60,000 new houses will have 240,000 – 300,00 new occupants.

    Why would the RBA and the HIA not believe their own economic theory!

  4. So much for hte governments hope that the housing industry makes up the shortfall in revenue due to the mining industry falling over!

  5. The Vic data is interesting.
    By all accounts there is a growing stockpile of new homes and land.
    No shortage of supply.
    Sales continue to fall.
    Prices do not.
    There is no prospect of government incentives to buy.
    Is there a growing incentive to sell?
    Something’s got to give.

    • Yes somethings got to give, the perplexing part is that it hasn’t.

      At the risk of sounding like Dr Spock “it is not logical”

      On a positive note the new NT government has placed a 1/4 page advertisement in yesterday’s paper saying that the problem here is a shortage of land releases and its high cost. They said that FHOG only drove the price of existing property and did nothing to increase supply.

      So the new government knows what the rest of us have been aware of for years. Yippee! (sarc #off)

      What are they going to do about it? Well, they have commissioned a paper….

      • The Spock you are referring to is Mr. Spock (“live long and prosper”).

        Dr. Spock was the noted child psychologist.

      • The ad is also a swipe at the previous Labour Government who had an appalling, sorry abysmal, useless, incompetent record when it came to managing land release in the NT particularly Darwin. The new government recognises the social impact of insanely high house prices and rents for living in, and let’s face it, Darwin. Now the juggling act is delivering on the expectations of “affordable” housing without being seen to support a housing correction. In my opinion, once Inpex is finished, the riches won’t flow was expected and the correction will occur naturally.

    • Easy! In this age of expectation, no one wants to live in a featureless, inaccessible and poorly serviced new estate. I’m not sure about prices not falling in these areas, but it might be offset by continued strength in established areas. If you are going to hock yourself to the tune of $500K to get into a new housing estate, why not take that extra $100 or $200K if it’s on offer? That seems to be the mindset.

    • I have become convinced that only mass Unemployment will stop the masses paying the status quo prices for property; that is, so many people have only “known” property prices to go up, such that their are actually adults alive that have never thoughtfully experienced any real correction in prices – for them in particular (the FHBers!) they think high and high prices are just normal (they really do think that!)

      Deadset, we will continue to pay those prices until we have utterly ponzified (read: sacrificed)the entire economy at the alter of housing.

      Sorry for the harsh tones, but it honestly gives me a heavy heart (and, hey, I work in Mining – have you seen what is happening to engineering services?! Truly brutal (ie. sad) UE occurring in that space.


      • UBS is cutting 10k jobs globally, not sure how many will be fired here in AU.
        Another EU based investment bank is cutting 30% in AU in 9 mths.
        plus all the outsourcing to India, Malay, Singapore.

        It’s only a matter of time.

      • dumb_non_economist

        That is my view point, when UE hits hard only then will we see a fall in RE. Everything else is pretty much in place, high household indebtedness, job insecurity, the declining boost from mining, declining business investment in general. Then and only then will the dominoes finally fall.

      • Hey Burp (whoops! excuse me). Unemployment may be one of those statistics that never will (be reported to) increase much.

        Look into how the ABS guesstimates unemployment, you’ll be convinced that it is actually high already.

    • “The Vic data is interesting.
      By all accounts there is a growing stockpile of new homes and land.
      No shortage of supply.”

      Respectfully, I wonder what Leith’s take on this is? He is consistently arguing that inelastic supply due to government regulation is one of the biggest problems.

      I agree that it may create some problems but I don’t see it as being the major one. The major factor in all of this has been the age of easy credit.

      Here in Gladstone, new housing estates have sprung up like mushrooms everywhere you look. I see nothing in my neck of the woods that suggests anything remotely like an artificially constrained supply of land exists – yet the price does not fall as residential land supply booms. Credit continues to feed speculation which keeps the beast growing.

        • Yep – houses are purchased mainly with credit and as such, I can only pay what I can borrow.

          I don’t disagree that supply is a factor, I just don’t think it’s the main one in this case.

          • I can only pay what I can borrow.

            Perhaps more important at the moment, I will only pay what I am willing to borrow.

          • As I was told by the head of FX in about 1982, it’s all about fear and greed.

            If I have the income and am in the demographic, I will borrow and buy if I think that prices will go up, I won’t if I think prices are falling or I worry about losing my job.

            Single twenty somethings move home to save money and travel, or after their first 6 months of the new home buyers grant is over so the rent can help pay off the loan.

            Demand for rentals and purchases does have elasticity when older parents have spare rooms before downsizing!

      • +1 The supply of credit creating a positive feedback loop into price does appear a bigger driver than land supply in the boom period. Land release is clearly part of the picture but really the easy and necessary step is just to curtail speculative investment in established property and incentivise building and construction.

        Coastal housing is a good example of this. Pure price speculation has basically rooted up our coastal areas and really once the get rich dreams of the speculators evaporate the true demand for this stuff is actually reasonably modest.

        The very nature of housing as a social need and it’s slow response to drivers makes it easy pickings for the speculators.

  6. Seems fairly obvious to me that a mood of caution has overtaken the country. People are much more risk averse (see eg surveys on where people think is a good place to invest – most saying cash now). With potential buyers in that mood, they are not going to take on the huge debt exposure that current asking prices imply. They will keep saving their cash and building up a bigger deposit until the loan amount looks like something they are prepared to commit to. About time!

    • I agree Alex that people are not buying as many new houses due to a “mood of caution”….

      The real question is..Why don’t prices move down to find the level at which demand is stimulated?

      • I don’t know, but I guess that the owners of the land are reluctant to sell and realise a loss. They fear that if they do, there will be a cascade effect which will lead to much bigger losses. For a start, it might force their lenders to reassess the value of their land holdings, following which they might have to stump up some cash to keep the lenders happy.

    • To clarify PETER_W,

      You say the “real” demand for new houses is 5000p/m and we are currently (and have been for the last 3 years) approving approx 12000p/m?

      So on those figures (and if all dwellings approved are completed) we should have an oversupply of approx 7000 homes p/m?
      i.e. an oversupply of 252k dwellings over the last 3 yrs?

      • The HIA clearly does not like a free market

        The HIA build @ 12,000 p/m BUT the market buys @ 5,000 p/m

        This is not a private capitalist welfare nanny state

        HIA either lower the price & SELL 12,000 p/m OR cut construction volume from 12,000 to 5,000

        Stop bleating for welfare, its worse than China’s klepto politico housing FAI

        If the taxpayer is going to run a fiscal deficit then the most ‘community useless project’ is more vacant dwellings

        • I agree with most of your points PETER (particularly re corporate welfare) but where are these ghost cities you speak of?

  7. Using housing supply-demand analysis as a predictor for house prices in isolation is not very helpful. We have already seen innumerable international examples from Leith and others that markets which had housing shortages still experienced large falls in house prices during the inevitable property bust. So, it is therefore clear from real life that supply & demand cannot be by itself, in isolation, be the primary predictive factor for house prices.

    Prof Keen provides us with some more
    Reality Economics 101 (I do hope those treasury boffins do actually read MB as someone earlier suggested…)

    “The supply-demand argument is easy to sell. The reasoning goes that there are too few houses being built, and the housing market is just like any ordinary commodity market, so the price rises.

    This pricing model is superficially appealing at the level of everyday consumer items – corkflakes, for instance (though even here it’s a flawed logic, as I explain in these two [1] [2] rather technical papers). But the model breaks down completely in asset markets. If the price of corkflakes rises due to supply constraints, consumers switch to complementary goods. They don’t rush to the supermarket to buy more cornflakes at the higher price.

    But in asset markets, consumer behaviour is turned on its head. Instead of being more reluctant to buy an asset that is rising in price, buyers reason that they’d better get in quick and buy while the asset is still within their reach. So higher prices actually stimulate demand, and this behavior often reaches a fever pitch a short time before an asset bubble deflates.

    In other words, prices have a perverse impact upon asset markets, and it is simplistic to interpret how asset prices behave simply on the basis of “supply and demand” analysis.

    Have a look at the chart below. The average number of people living in each dwelling in Australia in the year 2007 was around 2.6 (the black line)—and it was higher in earlier years. To keep the ratio of people to dwellings constant, we would need to build a new dwelling for every 2.6 new people. In fact, on average between 1986 and 2009, we’ve been building a new dwelling for every 1.8 new Australian residents. Only in the last couple of years—after the GFC hit—has population grown more rapidly than we’ve added accommodation.

    This is where neo-classical economists’ ‘supply-demand’ arguments fail the common-sense test. If we’ve consistently built more new dwellings than required by the number of new people in Australia, and if “supply and demand” explained everything, then real prices should have been falling for all but the last couple of years (in the past two years a new dwelling has been built for approximately every 3 new people – see chart).

    We need to bury the ‘housing shortage’ myth, but to do so requires a shift in thinking. Economists follow a model of the economy that is as realistic as the view that the Earth is the centre of the universe, and the Sun, Moon and planets revolve around it. It took the GFC to expose just how unrealistic this model is—a model that ignores credit and pretends that everything happens in equilibrium. We instead live in a credit-driven world which is always in disequilibrium. Until economists and policy makers recognize this, we are likely to have policies that address symptoms but not causes, and ultimately make the problem worse rather than better.

    In simple terms – “It’s the rate of change in mortgage debt stupid” and conventional supply-demand analysis applied to the housing market is naive in the extreme.

    Further, there is no apparent undersupply – except in affordable housing options. Artifically constrained rental markets due to properties that are withheld for purely speculative capital gain plays is not a ‘true shortage’. See the speculative vacancy reports for Melbourne if you are not convinced.

    Housing shortages, even if they exist (doubtful) will simply not put a floor under property prices and anybody arguing to the contrary is ignoring large piles of evidence from abroad.

    • rob barrattMEMBER

      Property prices won’t decrease sharply until unemployment starts to surge because no-one will realise potential negative equity untl their privates are firmy in the vice.
      THEN you’ll really see something.
      The trouble is, potential first home owners are as likely to effected by an unemployment surge as anyone else. This emplies that, though prices will go down, affordability (which is a function of the availability of credit) may not broadly change.

    • The key is the responsiveness of supply. In markets where supply adjusts QUICKLY to changes in demand, the positive feedback loop between credit/house prices is mitigated, which dampens price rises and the boom/bust cycle. One only has to look at the US, where markets with responsive supply never experienced the big boom/bust cycle, despite ridiculously easy credit, high population growth, etc.

      It’s the perception of shortgages and ever rising prices, brought about by easy credit and the lack of a supply response, that creates the ‘panic buying’ and speculative buying that leads to big booms, and then big busts when things go tits up.

      • But what would happen if there wasn’t the spruiking and easy credit? How would you get a bubble then?

      • Leith, I see your point re the importance of responsive supply …but…isn’t there more to it than that?
        Doesn’t your argument need a freely moving price to right the ship?
        I argue we do not have a freely moving price.
        At present..
        1.Demand (for new houses)continues to fall.
        2.Supply continues to flow as it has for the last three years (building a bigger and bigger stockpile).
        3.Price doesn’t move
        If responsivness of supply is the key, wouldn’t the price move down to meet demand?
        It would be interesting to layer new home price persqm over the above chart.

        • rob barrattMEMBER

          It would be interesting to see (in the case of new housing) the degree to which the smaller building companies (ie smaller contingency capital) currently sitting on completed developments are constrained by the need to avoid a loss.

          It might be a case of negative buyer sentiment (why step in when there is an expectaton of prices falling more) resulting in the market remaining irrational until the developers can no longer remain solvent. In effect, a standoff.

      • Hi Leith

        I agree your work identifies this factor keenly in the United States and elsewhere.

        However, bored with looking at the US, I thought I’d look elsewhere, and the pattern holds for Europe e.g. the case of the French housing bubble. That is, high property prices are typically defined by:

        1. lack or responsive supply; AND
        2. the easy availability of credit

        Both factors seem to be key to facilitation of asset booms.

        France is extremely over-valued by any metrics:

        “After zooming 120% from 2000 to 2008 and briefly dipping 5.6% in 2009, French property prices have continued their inexorable march higher since late 2009. French property prices are strongly overvalued, currently valued at 135% of their historic price-to-income ratio and 150% of their historic price-to-rent ratio. Though property prices are strongly rising throughout France, the French housing bubble is strongly driven by the Paris region, where prices have jumped 18% in 2010 and approximately 10% in 2011, up more than 40% since 2005. Some posh districts in Paris have risen at a 27% rate in 2011. France’s housing bubble was goosed by a 2009 law that was meant to stimulate the housing market by creating a significant tax incentive for buyers. Mortgage rates that plunged from 6.5% in late 2008 to 3.5% in 2011 were another major catalyst for soaring property prices, causing fixed-rate mortgage lending to increase by 73% by early 2011.

        The French property market now has the dubious distinction of being the most overvalued in Europe and the third most overvalued market in the world, behind only Hong Kong and Australia, which have property bubbles of their own.”

        Note the credit factor in encouraging the bubble. Further, consider the ‘responsiveness of supply’ issue:

        “A cursory glance at the data provided online by the FNAIM (French Real-Estate Federation) for the first quarter of 2011 reveals significant variations in average purchase prices across France: Paris comes in at €7,500–8,000 per square metre, sought-after towns in Provence and on the Riviera at around €4,000/m², most large provincial cities at €2,500–3,000, and the rest of France at less than €2,000/m². These geographical differences highlight a strong attractiveness differential and, above all, show the importance that must be accorded to making housing available at regulated prices to low-income households in areas with expensive property markets. And yet it is not in the most expensive cities that the greatest numbers of new homes have been built in recent years: 2.6 new homes per 1,000 inhabitants per year were constructed between 1998 and 2009 in the Île-de-France (Paris) region, 4.3 in Provence–Alpes–Côte d’Azur, compared to 4.8 in Franche-Comté, 5.7 in Poitou-Charentes and 6.9 in Brittany!”

        So, those regions which are most expensive had the poorest relative rates of new builds and were effectively unresponsive to demand for highly sought after areas, resulting in very high prices.

        The broad answer to the development of housing bubbles is obviously multi-factorial, with the worst bubbles and busts occurring in the following environment (note Australia checks every box):

        – easy availability of credit (primary in my estimation given very strong correlations in Prof Keen’s work going back decades between rate of credit growth and property prices);
        – unresponsive supply (as shown in your US analysis);
        – deluded mass of individuals who believe you can’t lose on bricks and mortar;
        – distorted taxation systems and tax concessions favouring over-investment in real estate by investors and owner-occupiers – particularly negative gearing;
        – grants of all descriptions and stamp duty exemptions;
        – limited release of new land for development by government;
        – land-banking by the rent-seeking thieves;
        – up-front costs for new development infrastructure being passed straight to the punters instead of being financed via municipal bonds or similar methods;
        – deluded baby boomers encouraging their aging off-spring to exit the mould-riddent basement at age 35 to actually find an abode of their own;
        – urban growth boundaries;
        – a baby boomer led government and government institutions over-represented with investment properties on their asset declaration forms;
        – a complicit central bank which does nothing to prevent the free flow of cheap credit into a housing ponzi;
        – high State fees/taxes/charges associated with all facets of construction, sub-division, approvals, environmental regulations etc;
        – the lack of a comprehensive land tax. Consequently there is egregious theft from the populous of unearned rent (capital gains) resulting from increases in land generated by taxpayer-funded infrastructure and a large incentive to speculate;
        – stamp duties driving up the cost of housing transactions and preventing an ‘effective’ market whereby people can move to more suitable housing arrangements to meet their needs without being stung with a very large bill;
        – government/RBA/Treasury ‘research’ being nothing more than neo-classical drivel or populist political spin dressed up as economic analysis (see recent ‘another housing boom is coming to save us’ speech by the hopeful economic figureheads as an example);
        – political paralysis in affecting positive change in housing policy due to inability to piss off a large voting block tethered to the government teat for the foreseeable future;
        – general economic illiteracy in the community meaning large financial decisions are undertaken without due regards to the risks accompanying this decision; and
        – loose banking regulations and ineffective overseers resulting in cowboy lending practices.

        This list is by no means exhaustive, but I think it is clear that Australia is at risk on many fronts and has developed its bubble on the back of many ridiculous policies enacted by our feeble legislators.

        • We should all buy in run down areas in the near city ring of US cities which have had responsive supply and campaign like crazy for introduction of smart growth, urban consolidation and urban renewal! The rent vs buy equation and low rates mean we would be cash flow positive or pretty close!

  8. @ Peter Fraser

    “You can massage a bunch of figures anyway that you like, but don’t ignore what the market is telling you – after 4 years it shouldn’t be a mystery anymore.”

    More like stick your head in the sand, your logic is flawed as you base it on the past and since things have been good in the past they always will be good. Sounds like the logic spruikers were using in 2006 pr-GFC.

    How is it massaged… 138,000 commenced 70,000 sold. 60,000+ unsold stock. The 138,000 can be bigger as it is based on members of HIA disclosing their exchanges.

  9. In the past (1970’s) we had an occupancy ratio of 3.5

    That was a normal and rational occupancy ratio back then, and it will be a normal and rational occupancy ratio again sometime in the future.

    Australia’s dwelling stock is 9 million and increases 140,000 p.a.

    Australia will reach 10 million dwellings by 2020 and it would house 35 million occupants, whereas Australia’s present 22.5 million population may be 26 million!

    The HIA needs to suck it up

  10. I spoke to a friend who is a builder and asked him how things are at the moment. “Very quiet”, he said “but things should pick up in about 18 months”

    I asked him what was going to cause things to pick up and he said.

    “Oh it just will, these things move in cycles”.

    It made me realise that most participants in the game have NFI.

    • Interesting to note a friend building (very slowly) has had three separate approaches from other builders asking if they could assist to get the project moving faster. I didn’t think I’d ever see the day.

      Will it improve? Cycles? This boom went for at least the last 12 years and from recollection the previous downturn was probably 10 years in duration. Decade on/decade off?

      I think there are other factors at play. I don’t believe the economy is tanking and people are still hunting houses, with a major preference for established areas, due to the decade long failure to supply services and infrastructure to fringe estates.

      There’s no shortage of property per se, it just isn’t where the demand is. A good, prolonged recession will smooth that demand profile out perfectly. But will we get one whilst the helicopters are airborne??

  11. Lower interest rates are likely to drive increased house prices over time unless rate cuts are not passed on as banks replace wholesale foreign funds with Australian term deposits.

    France, Switzerland, Austria, Sweden, Norway and Finland all have higher prices now than at any time near the GFC. Source:

    Australia, Belgium, Canada, China, France Germany, Hong Kong, Singapore, South Africa, Sweden, Switzerland have higher house prices now than at Q1 2008. Source:

    The falls in Australian interest rates are quite dramatic, even if not approaching ZIRP.
    Source: pp18-22 of latest RBA Chart Pack

    The idea of housing grants only for new construction is a way of stimulating employment but not allowing interest rates to quickly increase prices of existing homes by diverting most demand to new construction.