Melbourne home sales hit 16-year lows

By Leith van Onselen

The Real Estate Institute of Victoria (REIV) has released preliminary data on the overall number of home sales in Metropolitan Melbourne in calendar year 2012. According to the REIV, 69,000 homes were sold in 2012, which was nearly -3,000 less than 2011 and the lowest volume of sales since 1996 when 67,904 homes were sold across metropolitan Melbourne (see below chart).

The sales figures from the REIV are likely to concern the Victorian State Government, which has been hit hard by falling stamp duty receipts but forecast a partial recovery in stamp duty collections in 2012-13 in its most recent budget (see below chart).

With Melbourne property prices continuing to deflate, down -1.6% in the December quarter according to RP Data-Rismark, and sales volumes failing to rebound, it would appear that the Government’s forecast recovery in stamp duty receipts in 2012-13 is looking shaky.

The fall in overall sales volumes in Melbourne has also not been matched by a commensurate reduction in dwelling approvals across the city, as shown by the next chart:

While over all sales volumes are tracking at levels not seen since 1996, the annual number of dwelling approvals remains highly elevated, albeit below the peak level recorded in 2010.

The news is similar when new detached house sales are compared against house approvals, with the former falling far more sharply than the latter:

When combined with Melbourne’s elevated stock-on-market, this partial data suggests that the Melbourne housing market remains in oversupply, which should keep a lid on prices and rents in 2013.



Leith van Onselen

Leith van Onselen is Chief Economist at the MB Fund and MB Super. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.


  1. Wow, that top graph has a pretty consistent downward trend from 2007-2012. I wonder how it would look corrected for population? (hint: not better)

  2. Can’t say it’s unexpected. When you borrow to consume because of a pervese govt incentive it advances consumption today that would have otherwise occured tm. With debt saturation at all time highs, you automatically have structurally weaker growth.

    Leith, what you should look at, if you haven’t already is the average first home entrants in Melb in any given year, for say the past decade, and look at the uptake in the year the grant was bolstered. May get some idea of just how much consumption was bought forward.

  3. Welcome back Leith.

    Given the Vic Govt has recently cut stamp duty futher, their receipts forecasts seem even more perverse.

    Do you know when the 2011/2012 Vic prop tax receipts data will be available?

    • G’day Patrick. The stamp duty data used to be published periodically on the DTF website, but I can’t seem to locate the page (might have been taken down). Either way, the May state budget will contain the updated figures.

  4. Good to see a prominent New Year article from you Leith. In Melbourne in the last week Today Tonight have been running stories on Melbourne’s ‘crazy’ house prices and where their ‘experts’ advise you to buy to maintain value. You can actually see the tidal shift happening with property speculators starting to realise that, yes, in fact house prices do have two directions.

    On a similar note, I’m presently working on locum in a DHS-funded program and we have been told recently to expect very savage cuts in the State budget coming in May (if not beforehand if there is a mini-budget). Those stamp-duty receipts (and their estimates) are starting to look a bit stale really and I’d be interested to see what the real figure was tracking at now days.

    Ted would be wishing that we could turn back the clock ten years to the heady days of the property price explosion… as other posters have observed it’s not bloody likely given the ocean of debt many are drowning in !

    • Never fear, PF has assured us that a miracle will be pulled out of the proverbial and we will be back to boom times within the next 2-3 years.

      PF also tells me he is releasing a book of quotes and predictions in time for this years Comedy festival.

      • Did anyone seriously expect anything different! Everywhere I look here in Melbourne there is a new development going on.

        Expect the overhang of stock to continue to increase for quite some time.

        • Block of 10 “super luxurious” 2 bed 2 bath units completed near my house over the Xmas/NY period (Orrong Road Armadale). I was astonished to see a sign go up the other day: “7 remaining” – when they were demolishing the Edwardian house it occupied last year they had signs up saying it was nearly sold out…

          Silly me, I thought that most builders/developers had to have 80 percent sold before they could go ahead now days? Could have been a wholly-privately funded development I suppose.

          • Funny you mention the % of sales required in order to finance a build.

            A friend of mine purchased a 2 bedroom apartment off the plan (under construction and due to be completed in Sept.) for over 400k and he told me the other day it was 75% sold….

            I went online to have a look and see that is listed as only 65% sold.

            I would imagine its developers /investors money to get the project over the line as I was under the same impression that no bank was going to stump up that sort of cash based on such low pre-sales numbers.

            As a side note, my mate purchased this place around about the time I started to refrain from giving advice about property. Still cannot believe he is paying that much for a dog-box and I imagine he will be blown away by just how tiny it is come moving in day.

            This is all after I told him that they purposely underscale the furniture on plan and make the rooms look that much larger than they actually are in the 3D visuals in the brochures.

            We live and learn, although this is one expensive lesson to learn.

      • PF seems to carpet-bomb any and all discussion about housing. It’s intelligent and well-reasoned discussion but nevertheless you get the impression that he has a signficant vested interest in ‘talking it up’.

        On a similar note I did hear a rumour that the mining industry also employs people to carpet-bomb the media with positive comments about their industry (maybe not so much now that commodities are sluggish?).

        • Government agencies and corporations recognize the threat posed to their control of explanations by internet writers and hire “trolls” to use the comment sections of sites to discredit truth-tellers. The combination of trolls and readers who only want to hear what they want to hear can bury the truths that try to emerge.

      • Sales volumes are not prices Christiaan. Would you like me to explain the difference to you?

        If you had ever read what I have written you would know that I’m bearish on Melbourne, but I also know that the longer prices stay static or fall slightly, the longer interest rates stay low, and as wages continue to rise, then buyers will come back.

        Sorry mate I can’t give you an exact date, but 2 to 3 years sounds like a reasonable estimate.

        • Based on govt intervention as I recall you stating. However participation rates, underemployment, ageing demographics and a shrinking PMI will have more headwinds than the govt can fight against.

          • Yes it is an assumption based upon over 100 years of peacetime annual adjustments to the minimum wage in the period after the Sunshine Harvester ruling, so any downside risk is both minimal and manageable.

          • Are we talking nominal or Real?

            I generally talk/think in terms of Real. Nominal rates will, of course, rise.

            Mid-term outlook for Real wages isn’t looking so good.

            Let’s not forget the driving forces behind our explosive wages growth over recent history… Is this growth sustainable? It is possible, however I would suggest probably not

          • Good point – I think of house prices in nominal terms, wages rises in those examples are nominal, although real wage growth has occurred.
            Ideally over time, both wages and house prices should track real wage increases.
            We have had a two speed wage base in Australia since the mining boom and that seems to have continued. The average worker hasn’t seen the big wages in the mining sector, but the high wages have spread into other mining support sectors such as software, engineering etc.
            At least we have had real wage increases in this country – in the USA they haven’t had that for 40 years.

    • I believe they are also running that program on today tonight for the Sydney market as well.

      Also I am seeing this being advertised on TV

      The ad itself doesn’t mention property but you can see from the link exactly what its about. Free seminars and all… do they need a license to promote this stuff? Financial advice?

      • The Corps Act 2001 has loopholes based on whether its ‘general’ or ‘specific’ advice, and you can also get away with it by attaching disclaimers and warnings that people should seek independent advice before making decisions.

        Of course, the people that jump on those things aren’t interested in that independent advice or a balanced view; they just want a ‘professional’ to confirm that their optimistic retire-by-30 plan is sound. The more un-labelled axes, motivational speeches and unverifiable anecdotes of success you can give them, the better.

  5. If rents slide which one would expect and interest rates are low and may go lower, I wonder what impact this will have on super funds and those who have brought investment for retirement

  6. michael francis


    Did the REIV ever reply explaining the anomaly as to why their auction result stats overshoot the same stats as provided by RP Data.

  7. Adjusted for population growth, volumes are likely = 1990., the bottom of the previous land price cycle. What is now different is … Is … Everything. Private debt burden is agonisingly high. FHB’s uninterested or excluded. I rates very very low, and recent cuts ignored. Boomer exit from worn family homes – a major demographic headwind – has been stymied by weak demand. The investment case for investment in residential RE for rents cannot be made.

    In 1990 i saw banks unloading properties in possession at a fast yet orderly rate. They have barely begun this process in this cycle.

    The Victorian Government is running a deficit because of its reliance on conveyancing Stamp Duty, a vile tax instrument that traps people in inappropriate dwellings. Give it up, Premier Baillieu! Remove the PPOR exemption and tax holdings, not transactions.

    If anyone can see action government can take please share. Treasury officials all round the country are watching this space. The only credible exit I see is a Modern Debt Jubilee.

    Everyone else, Don’t Buy Now!

    • I disagree that the CGT exemption should be removed from PPOR (assuming that is what you are suggesting here?), why should someone be taxed on a properties price growth simply for moving homes (especially when it’s a need due to upgrade, etc)?

        • “A CGT on PPOR is effectively the same as stamp duty with all the same economic inefficiencies.”

          This is an interesting way to look at it. Even though I do not agree to any exception on any tax, I see that stamp duty is inefficient.

          But then again, if the CGT exemption on PPOR remains and interest incomes on bank deposits are taxed at the full rate, is there any wonder that nobody wants to save meaningful sums?

      • CGT isn’t a state tax anyway, it wouldn’t help Victoria one iota.

        Get rid of both the FHOG and stamp duty both of which are simply market interference. Replace it with other taxes braodly spread across the community who all derive a benefit.

        It’s less volatile and it’s hardly rocket science.

        The debt Jubilee is simply madness disguised as economic theory. Imagine if we all ask to be rewarded for failure – truly madness.

        • “The debt Jubilee is simply madness disguised as economic theory. Imagine if we all ask to be rewarded for failure – truly madness”

          That will do for a good summary of the debt jubilee proposition!!

      • CGT tax should be on all residential held under 10 years. Exemptions for health, work and babies. This would stop short term flipping and speculation. Works for Germany.
        NO CGT on any property held over ten years.

        • 10 years seems rather a long time in this day and age – people are a lot more mobile now. I’ve moved through five cities and three countries in the last decade, and most people I know in my demographic (mid-30s white collar professionals) have lived in at least three different cities in that same timeframe, if not multiple locations within those cities as well.

          A CGT exemption for the PPOR makes more sense to me.

          • If you moved because of work, health or had a baby and needed a bigger house then an exemption would apply. If you just moved and made a profit, then CGT should apply.

          • If you moved because of work, health or had a baby and needed a bigger house then an exemption would apply. If you just moved and made a profit, then CGT should apply.

            If I want to cut down my commute from an hour to 20 minutes, does that count as “for work” ?

            How about if I move because I decide another part of town better, want a lifestyle change from an apartment to a house (or vice versa), or want my children to go to a particular school ?

          • drsmithy
            If you do not make a profit, then no problem is there?
            NO CGT for property held over 10 years is the bonus for investors.
            No stamps as well (land tax at 1% on all property, no exemptions), so you could move quite easily.

          • If you do not make a profit, then no problem is there?

            If house prices in the city I live go up in 15-20% in a few years, I’m going to make a “profit”, aren’t I ?

            Why should I be punished if all I want to do is move into a similar house down the street, or across town (or even across the country) ?

            NO CGT for property held over 10 years is the bonus for investors.

            I don’t care about investors, or speculators. I care about the normal person who only has a PPoR and wants to move house more than once every 10 years without having to pay CGT.

            No stamps as well (land tax at 1% on all property, no exemptions), so you could move quite easily.

            I don’t have a problem with swapping stamp duties for land tax. Bring it on, in fact.

          • If they rose 20% in three years and then you sold, then yes you should pay the full CGT.

            Why ?

            All I want to do is move out of my current crime-ridden suburb into somewhere better with a house of equivalent value (which has also risen by 20%). Why should I be hobbled by losing X% of my housing budget to CGT ?

          • CGT on a PPOR is madness – people have to take their equity with them to the new home and the state government is already robbing them blind with stamp duty. All the CGT idea will do is create more IP owners who just wouldn’t be able to afford to move.
            Not smart policy. On the other hand, we can all rent each others homes and claim NG – is that what we want?

          • NG will go as the boomers retire and no longer want it. It is gone withing 5 years.
            CGT on all property sold under ten years has worked in Germany to create anti speculation on residential property. Stamps go under a new CGT regime.

            The speculation and house flipping that has gone on in the past was a great negavitive for our society and our future generations.

          • CGT on all property sold under ten years has worked in Germany to create anti speculation on residential property.

            I remember from living in Switzerland they used a sliding scale of CGT based on how long the property had been held to also combat speculation (and it seemed to have worked quite well).

            Of note was the exemption from CGT if the proceeds of a property sale were used to finance another property within 6 (ish) months. I can’t remember if this applied to any property or just the PPoR.

            The speculation and house flipping that has gone on in the past was a great negavitive for our society and our future generations.

            I don’t disagree with that, I merely struggle a bit with the implication that some large fraction of people are speculating and flipping with their *PPoR*.

            Personally I’d be disinclined to have any CGT exemption for (investment) properties held >10 years as well.

          • drsmithy
            Yes, good points and well worth the discussion.
            Madness is a mortgage broker who does not feel that rising house prices are a good thing for an advanced society and yet, still remains a mortgage broker.

          • Paul – that isn’t what I said – please stop misquoting me, it’s becoming tiresome.

    • …and that, a Modern Debt Jubilee, will never ever happen. I think it should to at least some degree.

      Austerity for the many, seems to be the preference.

      I’m Not Buying!

    • While I appreciate the concept of the Debt Jubilee I think the public needs a mind reset on the concept of what debt means.

      If a Debt Jubilee is granted, its just more free money. Nothing is learned or achieved and people don’t change their poor financial behaviour.

      For the last ten years I’ve had to put up the smug bastards telling me how their property had gone up 20% in a year or how they had flipped this property and how foolish I was for not getting in on it etc etc.

      Schadenfreude anyone?

  8. MsSolarFelineAU

    Thankyou for your work Leith. I do love these figures. All those of us in Sydney have to do is be patient and wait for these figures to ripple through to Sydney. And, save pixels-on-a-screen (er, that’s $ in Bank Accounts).

    • Fingers crossed! Would love to see more data and similar articles in relation to the state of the Sydney market LVO

  9. PPOR exemptions should be modified, current rules encourage people to overcapitalise in the principal place of residence, also the current 6 year exemption for a PPOR that is being rented was put in place in 1985 as a result of federal politicans lobbying Paul Keating. The 6 years equate to two terms of parliment.
    Personally CGT should be wound back on a PPOR over time ie exempt after 15 years.
    Fully taxed less than 12 months. Actually the whole CgT does need reform like the whole tax system

    • Haha… this is awesome

      “There has never been a better time to invest in Real Estate or a Real Estate career, except for recorded history before December 2002”

  10. michael francis

    Thanks for that BB.

    Obviously successful auctions are reported quickly by Agents and unsuccessful auctions need to be hunted down.

  11. Would be interesting to see historical data relatively-adjusted for the number of existing houses at the time.

    ie. houses solds as a ratio of the number of houses existing at the time.

    Adjusted for population might also be another useful metric.


  12. Would anyone care to comment on when Sydney might experience the same repressed level of sales (which hopefully feeds through to lower prices)?

    • Simple. When the jobs start going.
      Melbourne’s had a shitload of jobs lost last year. Sure, many were able to resecure employment, but an event like being made redundant is sure to shock those people into being a bit wiser.

    • GunnamattaMEMBER

      Sydney has more legitimate land and housing supply issues though.

      And I dont think Sydney (with a bigger finance sector, more media, and more international regional HQs) will be roasted in quite the same way Melbourne (with more manufacturing and lower grade white collar gigs) is being by the high AUD in particular.

  13. this is great news – would be interested to see the population adjusted values – ie there must be 30% more stock now than in 1996??? if so its 30% worse than the previous worst.

    that said, prices are still crazy in Surrey Hills where I live, but a little less crazier than 2 years ago, and given the 2.5% gross yields, i reckon i have saved myself > 200k (120k rent v buy savings, 80k capital loss, 60k stamp duty) by not buying 2 years ago.

    Its still a mugs investment, even with low int rates.

    • Nice work, Squirrel. I long for the day when this is a polite topic of conversation, akin to the way people feel free to bang on about the killing they think they’ve made (whether they have in fact or not) in property. Have you ever noticed how becoming a “landlord” can release the psychopathic tendencies in people, a little bit like a security guard’s uniform?