RP Data: House prices fell in October

By Leith van Onselen

RP Data yesterday released its daily home values indices for 31 October, which revealed that dwelling values in Australia’s five major capitals fell by -0.91% over the month of October, partly reversing September’s 1.52% gain. All capitals, except Perth, experienced value losses, with Adelaide and Melbourne fairing the worst:

Capital city home values are now down -0.17% since the beginning of the year, with all major capitals, except Sydney, experiencing losses:

Australian capital city home values have now declined by -5.4% since values peaked in October 2010, with all capitals experiencing losses. Losses have been particularly high in Brisbane and Melbourne, whereas Sydney has held-up relatively well and improved the national average:

The ABS on Tuesday is scheduled to release the official house price indices for the September quarter, which completes the run of house price data.

Twitter: Leith van Onselen. Leith is the Chief Economist of Macro Investor, Australia’s independent investment newsletter covering trades, stocks, property and yield. Click for a free 21 day trial.

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Comments

  1. What you chaps need to do is to target your FHBer scheme at the builders even more so than you are doing. (NB: NZ doesn’t have any scheme like yours, at all!). Give the FHB grant to the builder, directly, rather than the FHBer. That passes the ‘discount’ down the line, flat, and not up to the buyer, who otherwise would leverage up the grant into a higher price. Just a thought, with a thousand holes, I’m sure!

    • Any idea is a good idea at this stage ;). Makes sense to me.

      That and disincentives for existing property speculators would go miles…

      • They’re so benevolent, during the height of the vendor’s boost they’d cross out the ‘From $XXX’ price on their pointer boards and add the exact value of the boost to their price. Blatant, no effort to hide the fleecing.

    • The FHB grant is nonsense. Actually anything that the government does to ‘help’ ultimately misguides and skews the market. Why even get involved? Too much meddling with FHB, Negative gearing (what a joke that one is)etc. If you increase FHB you only increase the prices of the houses. It just helps the elite at the top. My suggestion is stop helping and get out of the way. It’s like this across the world..governments need to set regulations for the sociopaths who run the banks and let the market work it out. Setting up grants and tax schemes which benefit those at the top of the pyramid works mostly for…those at the top of the pyramid.

      • “Setting up grants and tax schemes which benefit those at the top of the pyramid works mostly for…those at the top of the pyramid.”

        🙂

  2. reusachtigeMEMBER

    Where’s the boom in housing gone? Any slight uptick of data = cries of boom. But huh? Massive rate cuts already and it’s business as usual, ie, melllllttttttt …

      • Thanks for sharing that. I have a feeling there are a number of recent migrant families who are weighing up whether to stay or go, many of them taking Aussies with them if they go. On the other hand there are large numbers of willing immigrants queuing up to come here. Many of them may end up being shocked by the living costs.
        I think it would be really hard to leave this great country and its friendly people although we have given it some thought.
        To me the key for a successful country is education. If you load up the youngsters with student debt (looking at the US here) how do you expect them to help the housing recovery by bidding up houses again, or reviving retail by spending when it all comes back to the debt that prevents or at least hinders the recovery.
        I hope Australian politicians make sure that education remains in a reasonable price frame or else there may be more trouble ahead. I also hope they make sure they can regulate and take legal action if any of the education providers are not compliant with common laws. If the government is too reliant on private providers they may find it “difficult” to intervene in some of the issues they should, IMHO.

      • There is another solution to high land prices: leave the country. This guy will be able to return when sanity prevails, after we endure 5-6 years of pain.

        I don’t disagree with the high level issue (absurd living costs in Australia), but this raised my eyebrow:

        “We have cut our lifestyle to the bare minimum. We share a single car between the two of us. We rarely go out to eat. All of our money goes to rent, childcare, and groceries.”

        After tax, a combined income of $450k is going to be at least $270k. They spend ~$58k on rent. That leaves ca. $210k they are spending entirely on a supposedly “bare minimum” lifestyle.

        Something there isn’t quite right.

        • They have 15 children? Their single car is a Rolls Royce? They only buy French cheese? They won’t eat any meat other than King Island rib eye fillet? They spend $500 a week on designer clothes (each)?

          Mind boggling.

      • Ive got an idea – why don’t we give every Aussie a 1/4 acre from birth. The land belongs to God, not us, so lets play fair boys and girls.

    • No CJ will be fine – a change of just 0.17% over 3 quarters is about as flat as we have ever seen it.
      Glen Stevens will be drinking a celebratory glass of orange juice as we speak.

        • precisely – prices falling in real terms – but nominal prices protected to avoid a financial catastrophe.
          It’s so good that it’s scary.

        • But what happens when incomes stop rising? You know, with employment market tightening and all. Who’s want to be an investment banker today, for instance!

          • “Who’s want to be an investment banker today, for instance!
            Reply”

            I do not exactly want to be an investment banker, but I may buy an investment bank with large North American exposure (MQG) when it comes down a bit. Time to buy is when nobody is interested in it, you know.

        • Surely there is going to be considerable caution about rebooting the boom with interest further interest rate falls.

          They do seem to have a nice ‘melt’ going.

          • I doubt any of us who read MB assess the Australasian property market in isolation, aj. 18.5 million unemployed in Europe etc. What happens to the property market here may be totally outside of the control of the local authorities.

          • J. I agree absolutely, however a
            Australia still has the capacity to head back into boom in the short term (very short memories you see).

            I think G should hold fire.

          • They do seem to have a nice ‘melt’ going.

            With all these fondues about, we must be back in the 1970s.

        • Ah – well in that case I have misinterpreted “slow melt”
          I assumed it meant slowly falling nominal prices, but apparently that’s not necessarily so.
          Changes to FHOG may have had a slight influence. I think that it did in Qld and I know that SA have just changed theirs as well. NSW and Vic made recent changes.

          • Did we just see the bounce to allow the trapped to escape, Peter? You’re closer to it than me, but when you see it, if this wasn’t it….you’ll know it!

          • Janet the market is quite diverse. I have just sold a house in Brisbane on behalf of another family member. Four to five weeks for the exact amount that I expected, so the market is not hot, but it’s OK.

            By contrast property on the Gold Coast is so cheap that I’m considering ignoring my own advice and buying something. They have a significant oversupply.

            It’s a pity that we don’t have a HSR link with the Gold Coast as it would house a lot of people at great prices if they had faster access to Brisbane.

          • @ UncEcon
            Plenty of Google news references to slow melt re property prices from Canada in 2010. I don’t think you coined it but you may well have popularised it in Australia.

          • Have to agree on the GC Pete. Some amazing buys if you’re cashed up. As to the HSR, great idea but the least they could do is maintain the M1. If they don’t have the funds for that, you wonder where the billions would come from for such a venture.

  3. This is terrible news for our RE sycophantic economy and its propagandist mouthpieces in the MSM.

    Very low interest rates and house prices going nowhere (at best).

    Is this the real cliff edge – snuck up on us?

    I suspected rising clearance rates were due to vendor price capitulation.

    • Imagine house prices if the interest rate had remained at previous levels? It would not have been a 7% decline in house prices, but I think more like a 30% decline.

    • I suspected rising clearance rates were due to vendor price capitulation

      +1. I’ve seen a lot of that where I am looking, eg. a $1.45M, then $1.2M, property selling for 900k.

      • Property in my (old) neighbourhood went to auction mid-Oct. I predicted it would go for $1.6m, based on past sales in the area. Passed in and put on the market at $1.5m. After less than 3 weeks it’s now on offer for $1.45m, meaning they must have got no offers near the original price and possibly no serious offers at all. However they try to spin clearance rates as signalling a market recovery, when you look at the individual cases you quickly realise it’s baloney.

        • I’ll better it. Block of 4 apartments beachfront down the road (Melbourne), have been for sale (new) for over 12 months. Front two originally listed at $1.75m. The only one to sell did so recently at $1.06m, after a number of reductions. At peak they would have got the $1.5+. The irony is it will skew the suburb data, as there are many $500-600K offerings away from the coastal strip!

  4. I am interested in the excuses that RE industry “experts” will come up with and put it on record. But they seem awfully quiet. Early days yet.

    • “early days yet”

      Couldn’t agree more. Looking at the house price bubbles in lots of western and northern european countries since the GFC I suggest that we won’t know whether interest rate cuts have worked for about 12 months. People have to acclimatise to the new level of free cash, then they will ease of repayments/savings and move back to consumption/borrowing to invest.

      Shiller’s latest US share price data suggests that earnings levels compared to E10 scream sell while comparative yields of stocks versus 10 year bonds scream buy.

      In Australia a similar analysis may well hold for real estate within a year or two with inflation of building costs and incomes and continued low interest rates.

      Unemployment is the big factor and it will be ameliorated for the next few years by housing construction for first home buyers. Trouble for state budgets is it will do nothing for state stamp duty revenues.

      The risk comes in 4 or 5 years when there is clear oversupply and construction slows. But even this might not hurt as the impact might be felt only by older properties that are beyond their economic, functional or aesthetic life, much as CRE vacancies gradually accumulate in C class buildings as new buildings accumulate market share of rentals.

    • Domain.com.au is whistling a happy tune while sticking fingers in the ears and yelling “la la la la la”. Would seem impossible, but there you go…

      Comical Andy also pretty quiet on twitter (unless he’s blocked me like CJ did).

      • Haha, yeah! 🙂 :mrgreen:

        Notice how whenever Sydney sees a small price rise, the Fairfax journos wet themselves with excitement, but when all the other capitals drop, they are AWOL with commentary ❓

  5. Sorry to ask a silly question. A 0.17% fall…we are talking a degree of accuracy of one in 600 here. Isn’t this just noise in the absence of a consistent trend? Are RP data’s stats that good?

    Yep if we get it month after month…sure that gives us some significance.

    • 0.17% from the beginning of the year. MTM is much more substantial.

      But you are right – this index is way too volatile and lack of seasonal adjustment is also a drawback.

      Wait for the official ABS house price index.

      • Agreed on the volatility. Media really putting a lot of stock in an unproven index.

        ABS also not seasonally adjusted. Is it really that hard to get a monthly seasonally adjusted index. RP Data had it with their old monthly hedonic, but now they just focus on the daily index.

    • Flawse it’s important to understand that RPData can only catch about 4% of sales daily, and the data is updated later as sales are registered on title and the state office releases that information.

      Eventually all of the data is collected, but the methodology suggest that there must be a level of noise in the most up to date data, albeit small.

  6. Sydney still solid. I think employment security will be the main factor in vendors hanging on to their properties or discounting to sell. Not looking pretty at my work.

  7. Victoria is looking more like Spain every day, new loans at all time low, but houses still selling, smells like foreign investors. So when it does crash and the exchange rate with it, it will be like the Brits in Spain all over again.

    • I too find the Vic scene creepy. Young locked out adults are… locked out. So who is buying? The only candidates I can see are SMSF’s and Chinese migrants. Is this enough to maintain prices? Hmm thought not.

  8. Upper end house prices in the Southern Highlands (1M plus) getting crucified, loads of stuff on the market for ages, an now starting to sell for far less than they were bought for years ago.

    Plenty of people I know badly hurt, no one wants to talk about it, Bowral, Berrima, Robertson, according to my friendly EA, the peak was 2003/4, when Sydney muppets paid way too much showing off to each other with their weekenders.

    Definitely blood on the streets here, happy to provide examples for any doubters.

      • Sorry Dr, missed your question, been a bit busy.

        Check out Kennerton green (Bill Ireland,) or the Bell gallery, Berrima, both of which had money spent on them, or Aloxe Corton in Robertson, onthehouse.com.

        There are many more more personal examples I wouldn’t want to go into here, but 40% nominal discounts have not been rare, add into that money spent on refurbs, interest, and inflation.

        • I would add that this has also been more common than people would care to admit in Sydney, one only has to read the weekend property gossip re various celebs, eg Toni Collette, to see how many of them have taken a haircut in real terms.

  9. We are in the get more for the same or slightly lower price phase and the least price sensitive sellers (the recently dead or soon to be) are finding buyers.

  10. Failed Baby BoomerMEMBER

    Some thoughts from Garth Turner’s doomist Canadian real estate blog;
    “Last week, for example, I reminded you of the role that shriveled, omnivorous Boomers will be playing in this destructive process. As a group they have most of their net worth in houses, few pensions, fewer liquid assets and will be the first generation of retirees with widespread mortgage debt. Hippie dust to hippie ashes. Freedom’s just another word for nothing left to lose.”