First home buyer strike intensifies

By Leith van Onselen

Today’s housing finance data released by the ABS revealed a worsening slump in mortgage demand from first home buyers (FHBs). According to the ABS, the number of finance commitments to FHBs nationally slumped to just 6,557 in December 2012, which is the lowest recorded level since February 2011 (see next chart).

The percentage of total owner-occupied finance commitments going to FHBs has also slumped, falling to just 15% nationally in December 2012, which is the lowest recorded share since June 2004 (see next chart).

At the state level, the slump in FHB commitments has been driven by big falls in New South Wales and Queensland, where FHB grants on pre-existing dwellings were axed in October 2012. Victoria, where FHB grants on newly constructed dwelling were wound-back in July 2012, has also taken a big hit over the past six months (see next chart).

Focusing on New South Wales and Queensland only, you can see that the number of FHB finance commitments have literally crashed, with commitments in both states running -50%-plus below the levels recorded just prior to when the FHB grants were extinguished in October (see next charts).

In fact, the number of New South Wales FHB commitments in December was the lowest in 21 years, whereas in Queensland it was the lowest since January 2011, when the state was affected by severe flooding.

You can also see from the above charts the sensitivity to fiscal incentives, with mortgage demand temporarily surging in response to the 2008-09 FHB Boost in the wake of the GFC, the expiry of FHB stamp duty concessions at end-December 2011 in New South Wales, and the recent October 2012 expiry of the FHB grant on pre-existing dwellings in both states. On each occasion, FHB demand has fallen away sharply following the expiry of these schemes.

Finally, the percentage of owner-occupied finance commitments going to FHBs also tanked in both New South Wales and Queensland – falling to just 8% and 12% respectively in December 2012 (see next chart).

Expect political recriminations to fly over first home buyers being ‘locked-out’ of home ownership, as well as increased special pleading from the property industry demanding that taxpayer funds once again prop-up the market.

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  1. “Expect political recriminations to fly over first home buyers being ‘locked-out’ of home ownership, as well as increased special pleading from the property industry demanding that taxpayer funds once again prop-up the market”.
    Yes, that is exactly what I expect. And I expect no-one will address land banking and the outrageous cost of small parcels of fringe dirt.

      • I have checked a few times over the last 6 months and this algorithm does not seem to be picking up prices any longer for many areas.

        Is this the fact that real estate agents are blocking the info with a defensive firewall or algorithm, or has the house price algorithm failed due to low maintenance?

        Has anyone got an answer or another website to recommend as we are considering moving soon to another rental?

        Come to think of it I might write to the administrators of the site if no-one has an answer.

      • Tea merchant,

        There is no point in writing to them. I think the website has been ‘bought’ by some vested interest.

        I realised late 2011 that, the website was down for a few days, when it came back online all the properties had “advertised for: 5 days” on them. Which was a bit suspicious. I tracked them for another 3 months and VIOLA!… the counters used to “RESET” back to “5 days”!!!… So I assumed that some vested interested has “bought” the website from the owner, I would not be surprised if has bought them!

      • On stagant listings….

        off late, i am seeing that most of the stagant listings are heading over to NRAS, i.e. they are now being listed as ‘for NRAS eligible tenants only’! Interesting, isn’t it!
        a monstrous, 2br,2bath townhouse, advertised for 410 for over a year, is on NRAS for 250!

      • You can look at for sold prices. Interesting to see a Aus RE site hosted in China!

        Not the same thing, but for some of the sold properties, they have the historical “asking price” retained.

      • Just had a browse through
        It isn’t completely reliable.
        It lists 58A High Street, Burnside SA for 860K and 4 days on market with no price drop.
        Place has been on market since middle of 2012 and hasn’t changed agent.
        Initial asking price was 990K, then dropped to 930-960K until recently when it dropped to 860K.

        However, has recorded a recent change of agent for 12 Pam Street Beaumont SA by listing it twice (once at the old asking price and number of days on market – $895K & 76 days – and again with the new asking price and number of days on market – $859,950 & 0 days).

        It doesn’t record that 15 Duncan Road Beaumont SA has been on the market continuously since around spring of 2011 and this is the third agent to list it. Initial asking price was ~ 740K, now asking 580K (which is a reduction from the 590-599K current agent initially listed it for in spring 2012).

        I passed 95 Waterfall Gully Road Burnside the other day and could have sworn the asking price had INCREASED by $300,000 (was $1.35 million now asking $1.65 million). Place has been on the market for some time (according to suburbprice listed 12 Oct 2012 and price increased 4 Feb 2013).
        Same agent.
        Maybe the agent thinks some buyers wouldn’t deign to look at property below $1.5 million.
        However, the property failed to sell after protracted period on market (different agent) about 12-18 months ago (from memory back then asking price was ~ $1.4 million).

    • And the far flung locations of some of those pieces of fringe dirt. I was reading about Wallan and Drouin developments recently and the fact that these (former) country towns are touted as the ‘affordable’ option while the prices for blocks are still (in my opinion) quite expensive. Wallan locals have been doing their best to keep big developers out but I think they’ve pretty much lost their battle to avoid becoming a commuter town.

      Wallan is touted as a great alternative to some other commuter towns/estates because the Seymour line isn’t nearly as crowded as the Geelong/Ballarat/Kyenton trains during peak times.

    • Thankyou SO much for the links thomickers, Tea Merchant, mkuchin & Mav. I have my eye on a few builings in Sydney CBD…

      • Hear, hear, Claw.

        Catherine Cashmore looks like a promising writer.

        I didn’t know THIS:

        “…’s well known banks have strict lending criteria for first-home buyers trying to purchase small apartments in high-density accommodation. Each lender has its own restrictions relating to internal floor space, and most require a larger deposit to offset the risk. Clearly the banks recognise high-density accommodation is not always easy to offload in a default situation……”

        And she picks the situation well, that investors are mostly piling into the very properties that the FHB most needs, the less-unaffordable existing detached house:

        “…..the best established property in our inner suburban market that does appeal to the first-home buyer demographic is a hotbed of investor demand, with over 90% opting to place their dollars in this sector. Investors understand, if they purchase properties home buyers also desire, the value of their property is likely to attract interest throughout all stages of the “property cycle” and therefore speculation is rife. First-home buyers are caught out at every inner-city hurdle – they face restrictions for new, and somewhat unequal ‘deepest pockets wins’ competition for established…..”

      • You didn’t know it because she is not completely correct, in fact she is all over the place with pseudo facts. There are restrictions but not exactly what she is saying – she shoulda asked first.

      • @ PB – dead right we need to get investors and speculators out of existing residential housing:

        1. Belt them with higher land tax and other taxes if a minimum improve (say 50% of purch prise is not made) land taxes should be high anyway; 2. Quarantine neg gearing to the house profits; 3. Free up land supply and prohibit small block size.

    • reusachtigeMEMBER

      Good question. FHB’s are out on strike and disleveraging continues so what the bldy hell is propping all this up?

      • The best theory I’ve heard is: The largest vendor discounting is happening in ‘Class A’ end of the market. Those huge discounts are moving those high value properties and as a result the average house price stays high or even increases.

        Meanwhile B & C class property is stagnant with listings up 50% from pre-GFC and sales volume down 40%.

      • We allow FHB’s their dignity by describing them as ‘On Strike’. What we are witnessing is more accurately a lock out.

        Young adults wanting to save for a deposit find their free cash flow is eaten up by compulsory superannuation and tertiary loans. They are paid wage X but receive X – Super – Uni – Tax.

        Tax land, not wages.

        Don’t Buy Now!

      • If only the RBA saw it that way. That wonderful super money the employer pours in is actually “disposable” cash. Laughably.

      • Remember that most of the people who own land now bought it after paying high marginal rates of tax on relatively low incomes.

        In 2003/4 (and similar in earlier years):
        $62,501 and over $16,182 plus 47 cents for each $1 over $62,500

        This changed in 2006/7 to:
        $150,001 and over $47,850 plus 45c for each $1 over $150,000

        I have 2 major points:
        1. Taxing the land now would be grossly unfair to those who paid the very high marginal rates of tax on the relatively low incomes because they are getting hit by high taxes twice
        2. The cuts in tax by Howard and Costello have also contributed to higher net income which was then able to be used to support higher loan repayments and therefore higher house prices.

        I understand that at a second level these points work against one another as the price rise facilitated by the lower taxes benefited those who had bought property under the old regime of high marginal rates kicking in at much lower incomes.

    • with FHB lockout, it s now an investors playground in the low end.Home ownership rates are going to drop a fair bit.Have and have not.

      • Home ownership rates are going to drop a fair bit.

        The banks own the house anyway.. you bear all the risks and rent it from the banks at 5% pa. I don’t see the point of investing in an asset whose capital appreciation can’t even keep up with the interest repayment. You are basically depositing all the capital appreciation with the bank.

        Have and have not.

        Yep. Those who have a mega mortgage and those who do not 😉

    • Once your factor in the effect of removing a large number of FHBs fron the average and median prices how much “stimulus” is left in house prices? I don’t know just asking.

  2. Leith, agree with your last comment that we are moments away from First Home-Buyer cash grants being revved up again – those FHB figures are dreadful. FHB grants are really just a subsidy to people like Metricon, Devine, etc to act as a deposit for people who haven’t saved enough so they can ‘break in’ on the ground floor and keep the pyramid going.

    I think it’s been said on this forum many times before that anyone (and everyone) who can afford a mortgage already has one and there’s not much government can do to change this… In many cases (and as I’ve been reading recently) there are lots of Australians out there who have mortgages who clearly should never have been given a loan to begin with.

    • reusachtigeMEMBER

      There’s also a growing number of people who could afford a mortgage but choose not to. They don’t see the value in it right now as rent is relatively cheaper. How long they hold out and how much their numbers grow will play a big part in all this.

    • Indeed “there are lots of Australians out there who have mortgages who clearly should never have been given a loan to begin with.”
      Yes, a few of my son’s friends (around mid- late 20s) got in and r finding it tough,lucky they still have jobs!
      Another young couple I know with a combined income around $90k pa and 20k deposit went to d bank last week and were offered 660k loan, thankfully they said no thanks but have decided to go with 450k loan.
      This is in Sydney so with IMHO their work being a bit iffy I am advising them to continue living with his parents and wait it out a while longer..but new wives n mothers in law sometimes don’t see eye to eye.
      BTW I have advised my son not to buy and save as he lives at home …no problem with him saving but he went out and bought a new boat ….suppose he may as well enjoy himself with some of his savings as loose the same amount on an overpriced house.

      • GunnamattaMEMBER

        Geez, imagine 630K on a 90K income. My rough back of the envelope calcs would have them bringing in circa 5600 per month and handing back about 4600 in mortgage – for 25 years.

      • Depends a lot on whether they have prospects of good rises in real incomes eg young professionals with say 3 years experience whose incomes could double over 10 to 15 years in which case no problems.

        If they can only look forward to inflation rises in incomes and are more likely to experience cyclical unemployment in their career then heaven help them if the borrow so much.

        As for living at home, maybe the best bet is a legal second story on the parents home with illegal conversion to two residences. Or convert the double garage to a flat.

      • Not a new boat!

        What was that line about saving time and grief by standing in the shower and cutting up $100 notes?

      • The two best days in a man’s life – the day he buys his first boat and the day he sells it.

      • dumb_non_economist

        AH, did you know that the greater fool theory was formed after an economist bought a boat?

      • Actually – like standing on a cliff in a storm and throwing away hundred dollar bills 😉

        But boats that fit what people need are actually quite cheap. Boats that fit people’s egos are quite expensive. I remember watching a new retiree try and take his 40ft yacht out of the marina in only about 20 knots – disaster he and wife shouting at each other and the sound of cheap core filled plastic crunching and the realisation that a life spent making money doesn’t fill a missed life-time of experience.

  3. They are flogging a dead horse. There is every reason to believe that FHB will be back, and with elections on the way it could be tempting for gov to put it in place soon.

    What a crazy country Australia has turned out to be, wasted mining profits that pumped or transferred a bubble from mining to property.

  4. How do you break a strike of any sorts? One of two ways – Give them what they want ( most probable outcome; FHBer grants a-kimbo!) or starve them into submission ( reduce supply and keep prices up ) – another likely probability. It’s a lose-lose option to stay on strike in this case….

    • There is a 3rd option, social unrest, rents can’t go up as they track wages. Force people into a corner and you create Golden Dawn. 🙂

      • ♫♫ Whatever happened to the revolution… now today everyone’s a bit older
        We’re gettin’ richer but we’re gettin’ colder
        We’re lookin’ for somethin’ that just ain’t there
        And it don’t mean nothin’ to have long hair
        So when you’re ready to make a stand
        Open your mouth and raise your hand
        When you’re sick of your parties and sick of your sweets
        Get off your asses I’ll see you out in the streets ♫♫
        I doubt the will exists today.

      • +1 Janet “I doubt the will exists today?!” I believe many look at the rest of the world and still think we’re different(lucky) over here, others choose not to care and pretend it doesn’t effect them(they’ve already got a mortgage) and others use the excuse well there’s nothing I can do to bring about change anyway. Prices are holding up well but change is in the air….

      • GunnamattaMEMBER

        I agree in part Janet. For sure the post Howard generation havent exposed their latent Bader-Meinhoff streak yet.

        But the more that dont get into the housing market the more who become what socio-economists might call disconnected to their world in a political sense, and from there who knows what may happen. Add in a worsening employment outlook (for those in) and some ugly debt dynamics, and the electoral waning of the babyboomers at some point and they may fire up.

        My guess would be that their numbers may become pivotal in an electorate increasingly disenchanted with mainstream politics sometime before they start kidnapping industrialists.

      • GunnamattaMEMBER

        You arent wrong there old coq,

        I will edit the Bader-Meinhoff manual so as it refers to kidnapping banksters instead.

      • When considering how dire the situation has been in many EU countries for years and still no ‘revolution’ here in good old Oz I reckon it’s got buckleys.

      • GunnamattaMEMBER

        As someone who deals with Europe most days I can tell you the ones most likely are still ahead. Sure the Irish havent shown any inclination. But chat with anyone on the ground in Italy Spain (both still worsening) or Greece (maybe turning the corner) and it is something which occurs to more than a few…

        I dont think it likely that this would happen here, but I also dont think it likely that any government would be prepared to openly accept kissing goodbye to home ownership en masse, and think consequences of fruitcakes running populist campaigns and running static for Torynuffs or ALParatchiks (stage left Bob Katter) may be entertaining.

      • I would expect it far more in Spain/Italy/France. Not surprised by Ireland’s meek acceptance, years of conditioning.

        How did your presentation go – was it a surreptitious way to recruit future revolutionaries!

      • The most logical “revolution” would simply be to form a co-op, legally buy a farm, and build “informal” housing on it, and defy the authorities to come and tear it down and lock everyone up.

        This has been tried in the UK, and the authorities DID tear the housing down and lock everyone up. They are too far gone over there to actually get a real groundswell of change.

        Interestingly, Kiwis show signs of thinking beyond the narrow self interest of incumbent property owners, and thinking in terms of a fair go for the young, if recent polls are any guide.

      • Something like Nimbin Phil? We could have a Ximbin and a Yimbin depending on your generation.

        Interesting to ponder the features of each!

      • As an interesting aside, my name was once on the official Baader Meinfof (aka Red Army Faction) hit-list.

        This was back in the days after they killed the Karl-Heinz Beckurts (Siemens), its weird to think back to those crazy times. The good side of it was that I got a new Daimler bullet proof car and a driver, the bad side was the RFA were using bombs not bullets in their attacks.

        Ahh memories….

      • dumb_non_economist

        Gunna, it will be a cold day in hell before there’s a revolution here! The biggest Australian myth is that the average Aussie is a non-conformist, anti-authoritarian larrikin, instead the truth is he’s a scared conformists afraid to rock the boat unless he can see 1/2 dozen neighbours in it already.

  5. Expect political recriminations only from those on the losing end of the inevitable return to reality of house prices.

    The withdrawal of most FHB incentives is DESIGNED to allow the market to self-adjust. Additionally, leaving FHB in place on new dwellings only will gradually increase supply… putting further downward pressure in prices.

    This is an politically engineered gradual deflation of the housing bubble which is probably subtle enough not to politically alienate the boomers who will have to adjust to not having won the retirement lotto just because they bought a house 3 decades ago at the expense of following generations!

  6. There are a few groups, ones that can’t afford to buy, such as the 2 million Australians that are now in poverty (google that one and be surprised) and then there is another group, such as myself who have the money but just won’t buy as renting is far cheaper.

    Don’t be fooled by RPDATA or others who say in some places it’s cheaper to buy than rent, you will find they have miss-lead the market as their figures don’t show all the over heads and expenses in owning a house, such as tax, maintenance etc…

    If you also look at all the auction clearance rates you will find they are false, as they show an initial number of auctions then report on only what has sold, and the ones that fail or don’t show up are not counted, so you can’t trust those data feeds either.

      • Quite easily…

        The cheapest interest rate I could find was 5.48% in a quick search.

        I base my calculation on 100% mortgage interest only, as any deposit in a high interest account could be earning close to that rate.

        On the $700,000 Loan this equates to this..

        Mortgage (PW) $737.69
        Home Expenses $105.00

        Against a rent of $700 PW.

        Therefore you are better off renting, by some $142.69 per week or $7,419 per year.

        If we use his rate 6.5% its $280 per week or $14,560.

        He also states that property increase at 7% a year, which 4-5% above the rate of inflation, which is completely delusional. This would imply within a short space of time a mortgage would cost more than any combined income. We have had the biggest house price boom in history and Australian housing is among the most expensive in the world. Prices may only keep up with inflation over the next decade, that is if they don’t fall.

      • The numbers don’t have to add up. The lowest common denominator of the financially illiterate are his target market.

        He’s not a professor. Judging from his spruik he’s not an expert.

      • You ignore inflation of rents over time and inflation of house construction costs and land service costs over time.

        All these analyses are far too simple.

        There is also the forced saving element, the guy who bought the boat is a prime example of what happens when there is uncommitted income floating around.

  7. Guys,

    I’m a long time bear who has long resisted my wife’s home buying desires. But with values in our area down 10% (still obscene) and low rates I have finally relented and we are out looking. I am still a bear, but knowing my luck you can look to me as the last “bear turned bull” and I gurantee you that as soon as we purchase the market will capitulate. So hold on, only a few months to go.

    • LOL – I know what you mean. Even my bear laser beams are struggling against the better half’s desire for home ownership.

      • A number of our friends bought in 2007/8 in Sacramento CA just after the first big fall and in the dead cat bounce. They have since been rewarded with a further 30% fall in values, each loosing a cool $100k or more each of “value” from their homes.

        One friend did sorta avoid losses; they bought in San Francisco and a company relocation bailed them out by covering closing costs/etc. But my back of the envelope numbers suggest that despite selling in 2011/12 for their 2008 purchase price, they essentially paid 200% rent for those years. So another $100k+ in losses, depending on how you look at it.

        IMHO, Melbourne/VIC == Florida. Gold Coast == Vegas. Were are in approx. early 2007 in US house-price terms. That’s hoe the wife and i are looking at it as we rent our sh!thole in Canberra. but, YMMV.

    • I’m in the same boat squirell. I fought the good fight for two years but I’ve lost the war.

      Purchase of an extremely over priced house is imminent.

    • reusachtigeMEMBER

      I feel for you guys. You know it’s a bad idea but you’ve got no choice. How fktup is it that home ownership has been reduced to this? I’m holding strong against the prssure, for as long as I can.

    • I succumbed 12 months ago , my only advice is when you make an offer, take 15-20% off the asking price, as you may be the only offer they get.

      • I soooo much relate to what you guys are saying.

        Try Garth Turner’s “Greater Fool” blog in Canada – get the other half and the well meaning old folk to read that for a few days.

    • I would keep in mind that if you do end buying, keep that purchase price “fixed” in your head for 10 years when planning financial decisions for the future.

      e.g new car, kids education, holiday etc.

      I do not count any nominal growth in the “value” of my house, (slightly up probably, going on recent sales) but roughly figure the equity (original purchase price minus current loan balance) as our base case. But nothing else – nothing to be banked on.

      When we upgrade it will be done via savings/paying off mortgage, not a reliance on inflated growth in our current house (because by that nature we wont upgrade at all – the next house will have inflated alongside this one!)

      I would not be surprised if when I sell my house (probably in about 8-10 years) it will go for the same amount I bought it. That’s fine, because my mortgage repayments when I purchased where cheaper than renting – and this was before the RBA slashed by 175bps.

      Houses are depreciating assets, I’m lucky (patient – looked weekly for 3-4 years) that I bought in an area that has severely restricted land supply, although after learning from LVO about such matters, I’m not sure there is any real floor made under the price. Just volatility…

      YMMV, my two cents, not financial advice, etc etc…

    • I think there are a lot of people in this situation. It is unfortunate that “buying a house of your own” is such and ingrained social need. You can only push it for so long … Specially if you talk about possibility of houses going down to your wife for the past two years… As many in this site would think/agree. But it is not happening (at least at the speed one would like ) so your wife starts to push again.
      I have put myself the limit of being 40 years for the decision . Thankfully thats still a few years away

    • I too have succumbed to market pressure and bought two weeks ago in Perth. I’ve been a long time bear and had my deposit for 3 years. In that time, I’ve struggled to find good rental properties and had my rent go from $140 pw to $210 pw.

      Turned out it was only another $100 pw extra to buy the property next door.

    • Good luck with it all squirell and others. I hope you will find a good deal and a home that makes you feel happy.
      I am one of those wives you talk of here sometimes -one wanting to buy a home- but an unusually bearish sample of a woman. It’s a wonder I didn’t grow a beard with all the finance and macroeconomics I read a year or two ago. A mate at work said that once she hears I bought a property she will know that the market has bottomed. I replied that far from that, since I will probably buy much before then.
      However, now my husband has to put up with my newest thought of not buying here at all, but suggesting to put our currency appreciation gained over the past 5+ years to work and buy overseas. Looking at the modern seaside suburbs of Helsinki it is overvalued over there too but nowhere near to the point it is here and at least we would get a modern, large house on a large block. I feel the urge to play it safe financially as I fear the interest rates will pick up at some stage and goodness knows what other living costs may be like around the same time, so we might be heading back to the land of snow and taxes at some stage and consider the “free” education as a reward for those insane taxes.

      Many returning Aussie expats recently expressed frustration at their fellow Aussies. I personally find Australians amazingly considerate of others and just wonderful to be around. They are just brainwashed property bulls due to circumstances that are outside their control so most of them live a life of happy go lucky or don’t worry, be happy kind of life and maybe it will work out well for them.
      I am risk averse and can’t help that. I fear even such things as one of the kids losing one of us early (like I did in my early teens) and their financial future in various worst case scenarios and that pushes me up north…

      However, I am sure there are relatively reasonably priced homes by Aussie standards around these days and everyone needs to do what feels right for them.

      A wise friend living in France at the time once said to me: remember, the country you leave behind is not like a still lake. It is like a flowing river, moving along, and hence don’t expect things to be the same upon your return.
      So true.

      • Lol! Everything in your post confirms why we need you. Stay.

        Plan B? Meh, we (Australia) don’t have a plan B – mining or bust – a wing and a prayer.


      • I’m with you Goldilocks.

        This weekend I -for interest sake- ran our current rental property through a couple of home loan calculator. Even when using all our (not insignificant) savings as a deposit it would still come to a monthly repayment (interest and principal) that scared the beje… out of me. Compared to what we now pay in rent it made ab-so-lu-te-ly no sense what so ever, despite some very convincing (but misleading) arguments put on MB by some commenters lately.

        The thing is… if you want to raise a family here you need to buy a home. Renting is just no substitute thanks to very poor tenant rights. Add to that the the price of everything else here (not the least: overpriced education) and the urge to go back and buy in Europe becomes bigger and bigger the closer we get to starting a family.

        Shame, I know it will come good here sometime. I’m just afraid that will take way too long for us to hang around for.

        P.S. took me a while to link the nick to the homecountry. Funny. 😛

      • Yes, these are the kind of decisions to make after thinking through thouroughly and long term.
        We have 2 small children and with the Finnish education system locking in English as a 2nd language from yr 3 till yr 12, French/German/Russian/Mandarin etc as optional 3rd language from yr 4 to yr 12, then Swedish from yr 7 on, and of course Finnish all along, I realised we have to go early enough for them to not miss hopping onto that language train.
        I have learned they have schools and classes in Helsinki and the surrounding cities where kids can learn fully in English or 50:50 English:Finnish so our kids could get a soft landing (sic!) into the system. I believe Netherlands is even more international.

        Buying now, renting here and moving in a few years time might just be a smart move.

      • Good grief. We’re gonna lose you. Kind of makes a joke of our education system – and I had my child in early years Steiner/Waldorf and was always impressed how by about year 3/4 these kids could perform a Nordic play in monologue for 30 mins, speak OK German, and paint – ours do second rate parodies of woeful tv shows for the two minutes required.

        Helsinki here we come. All the best in the decision making.

      • Overpriced education?!

        Only if you have an ego that demands a private school!

        We have some of the best public education in the world. Particularly if you live in the right areas for intakes to schools without problems. Just rent in the intake area for 12 months and save circa $80,000 per child over years 7 to 12.

        Many catholic secondary schools are great value and at least they can push out the trouble makers to the state schools.

      • +100

        Funny, my wife’s solution to not buying down here for the next 4+ years is to move back to the States! And that is likely exactly what we are going to do. Couldn’t agree more (though NorCal would be our destination).

    • haha thats funny..

      In my opinion, they are “NOT SMART” they have become “SMART” because their hands are tied! …. if the credit was loose and job market very bright, then you should really check out “who” is smart! 🙂

      • Mining BoganMEMBER

        Time for a downer.

        Everyone remember the documentary ‘Scared Straight’? That is what has happened in my circles. My young associates have seen what falling house prices does to people and families. No money, no social life, stress, relationship break-ups, depression. Two suicides. All because kids chased a dream. A dream that isn’t real. The kids coming through now realise it is all a scam. They will never buy because for them, owning a home is related to the bad stuff in the world.

        I know this is just another anecdote in my little corner of the world but I hate to think how much of this unpleasantness is happening out there.

        Kids, Don’t Buy Now.

      • There is a LOT in what you say, Bogan. Even with things being spruiked like mad, many people surely must know someone in their extended circle of acquaintances who has lost their house and/or marriage on the rocks and/or bankrupt, what have you………

        I got involved in all this research years ago because I am acquainted with large numbers of young couples in major financial stress. It is just sickening that there is so much portrayal around that things are normal and sustainable and so on, when so many young people have been set up for a lifetime of debt slavery already. Unfortunately, these people will also suffer the most when the eventual “correction” occurs.

      • Mining BoganMEMBER

        Research needs to be done. We know the social cost of smoking, obesity, alcoholism, etc,…but nobody calculates how much these ridiculous house prices cost the community as a whole. When they do, watch this whole sordid industry get regulated faster than you can say spruiker scum.

        Funnily enough, the stories one hears from the countries that have already had their price correction almost always bang on about the social cost. Especially to the younger generations.

  8. Some FHBs are on involuntary strike because they can’t ‘afford’ the mega mortgage, while other FHBs are on voluntary strike even as they have a sizeable deposit, but still sit on the sidelines to watch investors sell houses to each other. capische?

  9. Without reading all other posts I can say that all the lower / mid stock around 4575 has recently sold and sold quickly. BB buying then?

    • Like these…

      Sale Amount: Sale Date:
      $430,000 18/12/2012
      $425,000 09/10/2004

      11 WAMARA ST, BUDDINA, QLD 4575
      Sale Amount: Sale Date:
      $420,000 16/12/2012
      $495,000 03/11/2010

      Sale Amount: Sale Date:
      $381,500 06/12/2012
      $414,000 26/02/2010

      and the list goes on…

      • Except in that suburb the falls have recently reversed. I know that because I specifically looked at the suburb at a fellow bloggers request.

      • Paul has posted hard evidence above, have you got any evidence to support your assertion? (Other that a finger in the air)

      • That particular area is part of the wider Sunshine Coasr area that has seen large falls, so the examples that Paul supplied are probably correct. However there is a large hospital being built and recently prices have started rising in response to what is seen as an increase in demand. initially rents rose, and then prices started rising. It’s a recent phenomenon that won’t really show on sales graphs just yet – but it’s there.

        Ask snagdog or flawse.

  10. innocent bystander

    and WA ignores the rest of Oz. And their land and houses are just as ovepriced. I keep waiting for the mining investment boom to come off and flatten Perth but talking to a varied(skills/companies) bunch in the mining game over the festive season they see a plateau not drop or dip – maybe they have their rose coloured glasses on but I was surprised by their unanimity

    • Not SpendingMEMBER

      Looking at what happened at Argyle Diamonds last week, the staff would be clueless as to what is really happening internally at the company.
      I live in Perth and people here are totally oblivious to whats happening east of the border. People here believe the mining boom will last a long time yet – hence still buying property like there’s no tomorrow.
      Totally overpriced and overvalued property and nobody’s budging.

      There’s also a lot of people over from the East (Qld, Vic) looking for work, which is also putting a tight squeeze on the rental market – hence investors are jumping in as well.

      But it won’t last. After mining Perth has nothing, not a thing to fall back on.

  11. NSW and Qld will certainly make changes to FHB entitlements this year unless reducing interest rates turns the trend around.

    • Ahh.. Wishful thinking for the return of government handout.

      The only problem with that is the NSW & QLD government budgets are already shot to hell even with all the spending cuts and are at risk of being downgraded by the rating agencies. Besides, developer lobbies are pretty strong in both states. I doubt REIQ & REINSW can beat them at rent-seeking.

      • GunnamattaMEMBER

        I tend to the Mav school

        They may want to flood back with FHB stuff, but their budgets are seriously tight and they would have some damaging explaining to do if they did.

        We arent there yet (although maybe QLD is – I havent been up there, and VIC is for sure not far off) but when (if) employment starts to tail off I think the question for almost all state governments would be where can they get the best bank for their buck with stimulus.

        I doubt anywhere looks particularly auspicious (given the AUD) but I would imagine many would be tossing up between nudging housing construction and infrastructure for the immediate jobs – beyond that I reckon it would need to be something left field, or real spade work in niches.

      • I have no inside information, so feel free to disregard my thoughts.

        However it is an election year. We have a mad Abbott, a desperate Gillard, and perhaps even a reborn K Rudd involved at the last moment.

        Seriously how could anyone rule out some deals from Canberra this year – I think they are a certainty. Helping out farmers or FTB’s is always a vote winner in the electorate where both groups have voter sympathy.

        Could be way off, or it could be on the money, literally.

      • PF, Dont get your hopes up:

        1. The Feds (Swanny) are already talking about reducing GST share of states that have jacked up mining royalties. As you already know, they are in a deep pickle over MRRT shortfall. It doesn’t help that both states are in Liberal hands and both are guilty of jacking up royalties.

        2. States have final say over how FHB money is spent – REIA has already tried lobby Swanny into stopping the FHOG changes, but came up blank.

      • A few points:

        1. What if it was an Abbott initiative?
        2. State Govts like money being spent in their states, it sells goods and employs people who then spend more etc etc etc. which eventually flows through as state revenue.
        3. Politicians don’t always tell us everything.

        I don’t have a crystal ball, but who knows, it will be another interesting year.

      • For me, the spanner in the works is gong to be the prolonged federal election campaign which could limit the effectiveness of any FHB stimulus. For example, should Gillard introduce a $50k stimulus and Abbott promise to double it (wouldn’t put it past him), then any FHB and vendors are likely to wait and see what transpires. If there is a hint that a big increase is coming, I’d imagine that those relying on sales commissions will have a survive a few frugal months.

    • The NSW and QLD govts have only just removed FHBGs, for existing dwellings, how stupid would they look reinstating them after only a few months, not to mention whether they can actually afford to reinstate them!?

      I think they will have to take a different tack if they are going to doing anything, even vested interests such as Harley Dale at the HIA has admitted FHGBs on existing property do nothing to help affordability and simply push up prices

      • Actually Qld did make changes only a few months after the previous change, and they didn’t care.

        I would expect the pressure to come from the Federal Government, so they can just implicate the Federal government, and when was the last time that a state government knocked back a bucket load of money when it was offered?

      • I am with PF on this one.

        Our governments -State and Fed – have plenty of form on this topic and if prices look soft and FHBs appear determined to sit on the sidelines, some action, however misconceived is a distinct possibility.

        The only thing that will rule it out is if it is unecessary – because RBA. rate cuts have got the debt mountain growing again.

      • “..because RBA. rate cuts have got the debt mountain growing again.”

        The debt mountain hasn’t stopped growing!

      • Correction.

        “The only thing that will rule it out is if it is unnecessary – because RBA rate cuts have got the debt mountain growing at a faster rate and asset prices drifting ever upwards”

  12. Doesn’t matter according to The Kouk.

    “Stephen Koukoulas ‏@TheKouk

    @JamesGlynnWSJ must be a lot of 2nd and more home buyers. I’ve never found that % relevant to much.”

  13. Was provided the following explanation when linked this elsewhere, may be of interest:

    “This is very misleading as first home buyers are buying lots, however they are buying off the plan property which they cannot get a loan for until close to completion. This means that from late 2013 there will be a massive spike in new housing commitments.

    Each agent in our office is selling $28-50 Million of off the plan Realestate in Sydney alone with 10 agents in our office alone.

    The data here is flawed and not explained adequately to be reliable.”

    • “Demand hasn’t died off. The report is showing housing commitment data and not signed contract data.

      FHBs are signing contracts with 10% deposits but they won’t need the loan until at least 12 months.

      Before, when they were buying existing properties the signed contracts happened after the housing commitments were recorded”

      • +1 BB

        Precisely why the current settings in Qld and NSW should be allowed to run for at least 12mths before they are reviewed.

        Precisely why Vic should be doing the same thing.

      • I’m sure this fact must be reflected somewhere, well before the end of this year if it is in fact occurring in a major way.

        Shouldn’t we expect to start seeing a large surge in building approval data or something such. It doesn’t look apparent in the building materials index, not yet anyway. I’m not sure that you could have a major wave of new builds that are not recorded anywhere until the dwellings are complete.

      • It the Govt spent half the money they currently spend juicing up the housing market on timely accurate and useful housing data, we might actually have a clue.

      • Agreed. Though surely we must be able see this large wave of new buyers activity manifest in some way before the end of the year. I would not have thought that large numbers of dwellings could go up with their existence going unrecorded until they are complete. There must be some method by which such a surge in activity can be tracked.

        I will confess my ignorance of the precise definition of “off the plan” in this instance – it it referring to detatched spec homes or only to apartment buildings yet to be built?

    • Interesting BB – so sales are being made, but because of the nature of the sale they won’t be recorded as a finance commitment until building completion.

      That may well be the case, and it also seems to suggest a quickening of the acceptance of apartment living for many.

      The traditional 3 or 4 bed home may no longer be the standard dwelling of choice.

      • Again, like the “strike”, is this “choice” or forced?

        Would riding bicycles instead of driving cars, if petrol taxes were put up 1000%, be “choice”?

      • Actually it could well be both choice and the economic advantage that a new blush of buyers find attractive.

  14. first home buyers being ‘locked-out’ of home ownership

    So, three options from our political geniuses:

    1) Allow he market to do it’s thing = No poltical points.

    2) Have a long debate (a la Henry review) about NGeering etc then do nothing = No political points.

    3) Re-ignite marketwith new (say) $40K FHOG (Result : Debt increases by 40K plus whatever percentage FHOs can leverage on top) loudly trumpeted as “to help unlock the market” = +500 political points.

    No contest…

      • I certainly would not rule it out. Funding issues are of little concern to this government, winning votes is.

    • If the concerns about a mining investment peak are weighing on treasury I would expect the FHB grant for newly constructed properties to be increased rather than the grant extended to existing properties. This helps employment but doesn’t create large rises in property prices.

      I agree it doesn’t make everyone feel as good as price rises, but many prefer full employment and a chance for their kids to buy a house over house price rises.

  15. Anyone got figures on the average Australian still-living-at-home age these days?
    Not uncommon to find salaried middle-level-managers still living at home.

  16. An outlier: A friend of mine -a BB- got into mortgage difficulty (paid out the wife after divorce by mortgage recommiment). Through ill health was suffering mortgage distress. Daughter stepped in and bought property through mortgage acquisation/remortgage.

    The botom line is the property did not go on the market.

    The daughter acquired the property in full title, as far as I know, with a large equity prop rtion transferred under both distress and extreme market lows.

    She was a first home buyer.

    I don’t know if this or other similar circumstances affect staticstics quoted or not, and /or prevevlance of similar activity?

    Over to Leith and the MB.

  17. And there are also deals about putting on a second story and later doing an illegal conversion to an almost separate residence, parents downsizine and helping kids with large deposits, parents going as guarantor and offering their homes as security, conversion of garages to flatettes to accommodate live at home adults.

    But overall I think these are not a significant part of the market, or at least not much more significant than 5 years ago.

  18. I have posted this on another thread but it is not as active. I’d like to hear people’s thoughts on this.In the ACT we have a land rent scheme on new blocks. It seems like a reasonable hedge on land prices dropping to me and something I am considering. In terms of enticing fhb it allows you to rent the land from the ACT government and pay your mortgage on the house only. (much cheaper) the cost is 4% of the market value annually + mortgage on home. I wonder if this is only something they can do here because everything is leasehold anyway.

      • kittyall – what tenure do you have? BTW there is nothing wrong with a perpetual lease, they work just fine.

        Talk to your bank and ask them about any possible finance restrictions that may prevent you from selling in the future. PS not the guys at the local branch – phone up the banks home loan centre.

        It’s certainly worth a look.

      • Only two banks loan against rented land, both of which are small locals. ALL the majors refused to sign up… I wonder why?

    • Before looking to move back to the US to buy a home there, we looked at the Land Rent scheme here in Canberra, did the course and everything. We recycled our certificates this last spring cleaning as we will not be using them.

      The short, short version: You build a depreciating asset on land you don’t own with borrowed money. You have to assume $0 in resale proceeds AT BEST.

      What happens if you need to sell? At resale, the new “owners” are only buying the house and the right to rent the land, and since construction costs of houses have stayed relatively flat over the boom, logic would state that the highest value for the home is at construction (as it’s only the land that appreciates).

      Only two banks are CURRENTLY loaning against homes on Rented Land (what happens if one or both pull out?). So your market of buyers is severely limited by the banks that allow loans on Rented Land (or cash). So since it’s likely your same bank will be loaning to the new “owner”, logic would state that they would have to be as good or a better risk then you (else why churn the loan?), likely further narrowing your market.

      So say you sell, for what price? If the new owner is paying 4%/year Land Rent, what does that leave for the fair market value of the home? Additionally, ANY issues with the home would come straight out of the sale price, because that is all they are buying. Cracked tile in the kitchen? That’s $1500 off my offer because the floor will need to be redone.

      From what we saw, the likely best avenue of sale of a Land Rented home would be to buy out the land from the government prior to sale, but then you’re at the mercy of the ULV (Unimproved Land Value) that the government has a vested interest in keeping elevated (land tax and land renters pay based on ULV). When was the last time you saw ULV fall more than a 1%, if that? We didn’t see ANY times where ULV fell, only since giving up on the idea have I read of minor ~1% falls here and there.

      The major issue is that the ACT Gov. get’s all the upside and zero of the down side. So you rent the land, which appreciates. The ACT Government has a vested interest in NOT allowing land values to slip, even if in the market they are.

      Plus have you seen the neighborhoods with the Land Rent Scheme? Small lots, postage stamp homes… this is not a place that will be highly sought after in 10 years time, Weston or no. And again, you take ALL of the risk of buying in a bad neighborhood as it’s the Government that has a monopoly on the land value!

      And take a look at to see what the housing market looks like in those new suburbs. They ain’t selling well AT ALL. And again, ANY depreciation comes straight out of your homes value FIRST.

      In the end I figured that we would have to assume a total loss on the home if we did Land Rent, which basically meant we were indeed RENTING while also carrying a ton of risk! Even if we paid for the home in cash (which we could) we still had to assume a total loss as if the government kept ULV above market values post crash, we were screwed as a $300,000 ULV lot that is actually worth $150,000 at a true sale again takes all of those dollars right off your home’s value.

      I am most freaked out about ULV due to watching the Californian market, as getting the tax man to adjust the IMPROVED value of the home (which is what CA taxes are based on and is MUCH easier to calculate due to tons of sale comps) has been a horrible fight for most home owners post crash! With the added obfuscation of ULV mixed in, the ACT Government could take MUCH longer to adjust any ULVs should the reckoning come.

      We wanted to stay in Canberra, our kids go to school in Weston, we want to buy, but Land Rent is not the way to go! But, YMMV.

      • Thanks campbeln.

        As you say…

        Why would you buy the depreciating asset and rent the appreciating asset? Sounds like a lose/lose.

        Now if it was the other way round….

      • Well, if you finance the build, you’re renting both! A Lose-Lose-Lose situation!

        I love the spruke from PF though! It gave me a smile =) “…nothing wrong with a perpetual lease…”, yea as a business with a revenue stream, sure… but for a consumer durable? Nup!