Vic property transactions slump to record low

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By Leith van Onselen

The recent housing recovery across Melbourne appears to be built on shaky foundations, with data released today by the Department of Sustainability & Environment (DSE) showing the number of housing transfers across Victoria in March falling to their lowest level in the series’ 11-year history (see next chart).

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Not only was it the lowest monthly reading on record, but transfers on a rolling annual basis also hit a fresh low, with just 167,200 transfers taking place in the year to March 2013, -14% below the 10-year average (see next chart).

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The Victorian Government, which is highly reliant on stamp duty revenues, will no doubt be lamenting these figures. It had previously forecast a recovery in stamp duty receipts in 2012-13, which now looks highly doubtful (see next chart).

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The DSE’s mortgage finance statistics are unique in that they provide data on both mortgage lodgements (i.e. new mortgages) and mortgage discharges (i.e. mortgages repaid in-full). Below is a chart showing both series on a 3MMA basis:

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And the next chart shows the same data on a rolling annual basis:

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And below is the number of net new mortgages created, calculated by subtracting mortgage discharges from mortgage lodgements:

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According to the DSE, the number of mortgages lodged in the month of March was -482 less than the number of discharges (i.e. 12,901 versus 13,383). On an annual basis, the number of mortgages discharged (187,189) also continued to exceed the number of mortgage lodgements (185,247), meaning that -1,942 mortgages were lost in the State of Victoria in the 12-months to March 2013, up from -1,887 mortgages lost in February. This compares to the average of 12,442 annual net mortgage creations since the series began in 2002.

Despite the recent pick-up in Melbourne house prices, the data has worsened once more and suggests that the Victorian (Melbourne) housing market remains on a fragile footing.

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Unconventional Economist

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. One more tidbit of data to encourage Michael O’Brien to move Victoria away from Stamp Duties and towards Land Tax on all properties.
    Hopefully, he can ignore all the complaints from the Liberal voters in the leafy suburbs that will be hit hardest.

    • UE, your net new mortgages graph tells the story so clearly.

      We hear anecdotally end Stamp Duty and the PPOR exemption from State Land Tax is the reform the Vic Treasury is urging on the new Treasurer. While this change won’t stop the land price correction, it will transform state revenues.

      AHURI’s economic modelling of the consequences of this change is here:

      Yes, fgh, the liberal-voting inner East would pay more, relief elsewhere.

      Raising the cost of buying and trapping people in their homes with Stamp Duty is a vile abuse of the taxing power. Give it up, Treasurer O’Brien.

      Don’t Buy Now!

      • David, thanks ever so much for the AHURI report link. What an excellent piece of empirical research (pity flats/apartments were omitted, but they had no land size data). Three cheers for Ken Henry — replacing land transfer stamp duty with a progressive rate of land tax on all land holdings is a stroke of genius. The AHURI report shows just how incredinly progressive it would be, and completely unavoidable. Can’t come quick enough. Total no brainer, so many benefits.

    • GunnamattaMEMBER

      Patrician mentioned this site on a weekend posting recently

      I am not sure how accurate the data is, and there is a 90 day notification period in play.

      But type any suburb you like to the west of Melbourne in, or Geelong and environs or anywhere east of Springvale road or South of Centre Road in Melbourne.

      If that data is accurate the property market is becoming constipated.

  2. Vic property will crash sooner or later and most likely bring down the other states. The problem with low stamp duties in revenue will drop off and that means cut back on budget.

    Get ready for Austerity from the VIC gov and watch the numbers of people who slowly get laid off as they trim the fat. That will all feed into a negative feedback loop of course making property worse in the long run.

    • DrBob127MEMBER

      …. a positive feedback loop (thus reinforcing the effect) but with negative consequences

    • Will it though? The data on the melbourne market has suggested inpending doom for quite some time now, but it just keeps trucking along…

      It’s been 5 years since GFC, it’s looking less and less likely that our property market will crash.

      • This may be a good sign, as bears usually struck when ppl becomes complacent. when the last person turn bull… here we come.

        • I must admit that my faith in a sharp correction has well and truly disappeared, it looks like a long, long, slow death instead.

          The glut of Melbourne property listings appears to have little impact on selling prices, and I have doubts that this trend in net mortgages created will translate into any serious price movement either.

          I would like to see what percentage price change Leith thinks the Melbourne market will have the next 12 months?

  3. So.. will they adopt a land tax or simply hide behind our AAA rating and borrow money?

    I sure hope this is something that leads to a drop in house prices but I think we still need a powerful outside crisis to offset the avalanche of government support that will rush in to save the housing recovery.

    Pretty crazy drop though…

    • haha if the property market crashes there won’t be a AAA because the government is backing the banks. Plus as far as I know the NZ gov won’t support the big four so if things slide over there it will impact here as well. Anyhow, I don’t think the AAA will be around for too much longer.

    • Honestly I don’t know at this point, I think that the slow melt will return to Melbourne property prices regardless of any external crisis.

      With RP Data now showing Melbourne prices once again declining, SQM’s stock on market pushing toward all time high’s and SQM’s asking price index indicating lower prices it appears that the brief peroid of good capital growth is already over.

      In the event of rapidly dropping housing prices Federal government intervention may very well prop up markets like Sydney or Perth but I’m not confident they could prop up a market as systemically flawed as Melbourne.

      The list of issues for Melbourne market is huge.

      – Massive glut of stock on market and has been for some time.
      – State government austerity coming soon and likely biting hard. Likely quite a large number of public sector jobs to go, also state infrastructure projects likely to be postponed or canceled.
      – A coming oversupply of apartments in inner city Melbourne pushing down rental prices and likely causing many landlords to sell their investment as the yield falls.
      – Victoria has arguably suffered the most as manufacturing in Australia struggles on life support.
      – The state economy has been in what is basically a recession for quite some time in spite of what fantasmical ABS UE numbers for Feb would lead us to believe.
      – As the above figures have shown net mortgage growth is already in the toliet, it would take a gargutuan effort from the federal government to get the numbers even back to the same ballpark as the GFC (pre doubling of the FHOG). There simply isnt enough FHB and owner occupier demand to prop up prices without way above average activity from specuvestors.

      • they may try the FHB grants, but that may only entice a few people this time around as more people are noticing things getting worse. It may also cause downgrades of ratings if the banks go stupid on mortgages to people that are leveraged to the max.

        • They’ll almost certainly try the FHB grants. They ain’t got nothin’ else. If people don’t willingly want to pile in to pay too much for a house, the government needs to make it more attractive for them to do so. More debt is the future. At the end of the day, the government will let the AAA rating go. As SA has shown, governments will sacrifice a credit rating before making politically unpopular decisions.

          • Vic already has FHB grants.

            Now widely accepted that FHBGs on pre-existing properties are a gift to vendors, brokers, REA’s and waste of scarce public money.

  4. FHB grant boosts must be coming soon. The bell is ringing, but will the dog respond and do as he’s been conditioned to do?

    • thomickersMEMBER

      FHB grant boosts won’t fix decline Stamp duty receipts.

      There already is a stamp duty discount for FHBs plus $7,000 so an “investor to FHB” transaction will do little to rebuild the state government’s receipts.

    • Yup, the dog will sit up and beg and he will be given a chocolate biscuit – even though we all know how bad chocolate is for dogs.