Gladstone property owners hit panic button

By Leith van Onselen

It’s panic time for Gladstone investment property owners, who are facing sharply falling house prices and rents as the three large LNG projects begin to wind-up construction. From The Gladstone Observer:

The high vacancy rate has given tenants the upper hand as owners and investors struggle to make enough to pay their mortgages and rates.

Renters are taking advantage of the opportunity – challenging real estate companies to drop their rent to equal what they’ve seen on signs out the front of vacant properties in their street.

…a rising number of homes are being taken by banks and in the past few weeks one real estate agent has been forced to evict tenants on two occasions because the house has been repossessed.

In a year, the average price of a rental house has dropped from a minimum of $320 to as low as $150.

A brand new home that would have been rented for at least $450 a week in November 2014, is now about $320.

CBS Property Group owner Jim Baron and Elders Rental Department Manager Nikki Nation agree – the “ridiculous” rental prices need to stop.

“Owners need to stop panicking and lowering the rent”…

“If agents stop putting out these ridiculous rents then the price will stabilise.

“Owners are panicking because their property is vacant … but the low rents are dragging the rest of the market down too…

CBS Group’s Mr Baron, which manages about 400 rental properties, said real estate agents were knocking prices down below what’s reasonable and doing their owners a disservice.

“Investors are obviously losing big time,” Mr Baron, who has seen multiple homes repossessed in the past few months, said…

“This is the time people should be buying in Gladstone but investors are looking at rental prices and saying ‘why would I buy there?’

It’s not rocket science why Gladstone’s property market is plummeting. The epic mining investment boom is unwinding fast as the three giant LNG projects under construction in Gladstone near completion (see next chart).

ScreenHunter_10193 Nov. 08 16.36

According to the State Government, construction jobs across the three large LNG projects are expected to number some 9,900. However, once the projects are completed, and the LNG plants move into the operational phase, then only around 420 employees are expected to be required. That’s a reduction in jobs of around 95%, not to mention the loss of jobs in functions peripheral to construction (e.g. engineers and mining services), as well as those indirectly affected (e.g. services staff in Gladstone), which could double the losses.

With demand for accomodation falling fast, rental vacancies in Gladstone have rocketed:

ScreenHunter_10194 Nov. 08 16.38

And with the rising rental vacancies has come falling asking rents, which have plummeted more than 10% over the past year and by half over the past three years, according to SQM Research:

ScreenHunter_10191 Nov. 08 16.32

Asking prices in Gladstone, too, are falling fast, down nearly 10% over the past year and by around 20% (houses) and 30% (units) over the past three years:

ScreenHunter_10192 Nov. 08 16.32

The bottom won’t arrive until the three LNG projects are completed and unemployment tops-out, which will probably occur some time in 2017.

[email protected]

Unconventional Economist
Latest posts by Unconventional Economist (see all)

Comments

  1. Ha ha ha! I love how the rentiers think they can hold up prices just by telling everyone not to drop rents. There are more houses than people to go in them. If you have a vacant property, your choice is less rent, or no rent. Rents and prices will decline for quite some time, methinks. History shows that housing in town with massive oversupply is essentially worthless, and rents cover the costs of maintenance, depreciation, and letting, with a modest margin.

    The lessons Australians are receiving about basic fundamental economics are very smile inducing.

    • so true, this starts to hit home, when you know someone from Sydney who has purchased one of those houses off the plan in the hope that this would form major plan of their retirement plan. So much empathy for them, cannot sell, cannot not rent but still have to maintain mortgage payments.

    • Now imagine Sydney and Melbourne are Gladstone as housing demand evaporates. Wouldn’t want to be a risk rater at a Bank.

    • I mean seriously it is Gladstone – it is a dive, the pits. Aside from the poor unfortunate souls who live their, it is a fly in fly out/drive past sort of place as you head to better areas of the Queensland coast. All opinions expressed are biased based on regional geographic upbringing and the fact that Gladstone really is a hole, even Gin Gin is better.

      • Yes John! How is it that this wasn’t the first point made in the comments!? You only have to go there to realise that you don’t want to go back.
        What was a sleepy little backwater town exploded as a consequence of the LNG projects, a whole lot of greedy investors jumped on the speculative bandwagon and are now learning that investments can lose just as easily (or more so potentially) as they can win.
        It’s on it’s way to once more becoming a sleepy backwater town, just with more people and more empty houses.

    • “The lessons Australians are receiving about basic fundamental economics are very smile inducing.”

      The wise learn from history or other people’s mistakes. The dumb only learn from their own.

      Warren Buffett famously said “Rule no 1 is not to lose money. Rule no2 is to remember Rule no1”

      The phrase can be interpreted in multiple ways depending on how one interprets the term “money”. If one interprets that (“money” = cash) then what he means is that one should invest in assets that generate positive cash flows. If one interprets that (“money” = total wealth) then what he means is that one should focus on avoiding losses. Of course, it is impossible to totally avoid losses in investing, but the focus should be on minimizing losses.

      Well, real estate ‘investors’ in a housing bubble failed on both fronts. Those who were heavily burnt may learn a lesson or two. The trouble is, they will no longer have money to participate in future investing activities so their lesson is virtually irrelevant. Meanwhile, their lessons will fall on deaf ears of those who still have money, so the cycle will go on and on…..

    • Exactly lord, all I could say was, ha, ha, ha as well. I’m sure he was trying to control the rises on the way up though

      • You know, I was thinking the same thing. But then I realised that as the bubble was inflating I constantly thought, If only these idiots wouldn’t pay those prices this couldn’t be happening. So I guess it’s a normal way to think, depending on which side of the fence you’re on.

    • The thing is, even if they don’t understand basic economic principles surely they can just look at the other towns nearby who have already gone through the same thing… Mackay for example, exactly the same.

    • Action-consequence, any other outcome would be tragic and a continued defiance of the laws of nature. This needs to spread quickly throughout this great country.

      • “continued defiance of the laws of nature”

        Groan…. and some wonder why Mises homily’s are associated with creating [really just rewriting] the canons…

        Skippy… H/T no such thing is “economic laws” and the use of nature is just a connotative tool to reinforce the previous… lmmao ex nihilo axioms comported to both epistemic closure and empiric fact…

      • Ease up Skip, the point is there are consequences to actions and booms don’t last forever (thankfully!)

      • Andy we don’t live in the 16th, 17th, 18th, centuries anymore, so why would we want to drag around their uninformed millstones around our necks…..

        Skippy…. personally I don’t want to revisit that kind of barbaric social template…. nor would wish it on anyone else for that matter…

      • Bankruptcy is not a criminal offence. Nothing barbaric or wrong with someone going to the wall economically for over-leveraging, just like the “gains” too many have made from exactly the same action over the booming last couple of decades.

      • Does not address the larger social ramifications, please read up on social psychology rather than moronic ad hoc ex nihilo antiquarian assemblages in one bound.

        Skippy…. its playing out in America right now…

      • Grandpa… eh? Come work with me and see if that is applicable.

        Slippy… is the information inaccurate or not… otherwise I don’t see your point, except ignorance is bliss..

      • Skip you’re only looking at one side of the coin.
        Those who cannot afford a home (by the maths and/or risk tolerance) have been suffering in increasingly exponential amounts for up to 2 decades due to destruction of savings purchasing power in relation to the housing deposit they are trying to save. Perhaps take a look at that for the social consequences.

        I’m honestly astonished you don’t want people to lose their property for their reckless actions… the house isn’t going anywhere and will be used by someone else who made better choices per our economic system.

      • Andy,

        Your correlation is not causation e.g. wages [labour] were attacked in the 70s [AET – Neoclassical ideological pogrom], this played out whilst the suburban miracle was still in its infancy due to classic price metrics holding, transit from primary residence to jobs made sense, and the two income trap could float the whole thing.

        The problems started when credit risk could be attenuated which meant big profits for issuers and traditional credit risk weighing could be ignored, which was further acerbated by bundling of credit and risk onto bag holders i.e. pensions, munis, et al. Realize 30ish years of profit today and off load the risk right back onto the the already indebted. Made even more complicated by 60% clouded title in America on vintage RE.

        Now you have a case where the Suburban template is mature and aforementioned metrics can no longer support the financial model, hence the new push for Urban inter City development. This all in the face of an increasing crapification of the labour market.

        Skippy… some just don’t seem to realize this whole template came out of an ideological think tank, yet are completely quivering in expectant glee at the victims demise… when challenged on all of this hand wave away history with the uttering of “rational actor” defense.

        PS. simple memes for simple minds I guess… so whats rational again – ???????

      • “…expectant glee at the victims demise…”
        You won’t find that from me in regards to owner-occupiers. The glee lies in house prices reflecting fair value, pure & simple. This will create “winners” and “losers” (like the last 2 decades have) and that is a valid outcome. Separating the person from the action/consequence is a healthy view.

      • can’t wait to buy “how to make friends and influence people, Skippy edition” for a christmas time read. It’s going to be a page turner.

      • Burns,

        Not here to make pals or buddys, just unpack the particulars, but nice try on the emotive engagement.

        Thought I referenced my past experiences, starting with the military, of which intel was a part, add a few decades of private sector. let alone a few thousand hours of conversing with economic ideologues.

        Skippy…. It gets redundant after a while imo, no new tricks, manipulative to boot.

      • Additionally if you want to have someone rub your belly in order to find self vindication… find your nearest RE or Financial agent.

      • People who have (often deceptively) leveraged themselves up to the eyeballs to buy multiple negatively geared ‘investment’ properties so they can dodge tax and feed their egos with class-based snobbery by treating their tenants like shit and sneering at renters are not “victims”.

        Neither are foreigners taking advantage of the corrupt lack of enforcement of our laws to convert cash – often of questionable origin – into hard assets.

        I doubt there are many here expressing glee at Joe Average Punter with just a PPoR mortage ending up underwater. With the possible exception of people who have been gifted ginormous capital gains and then pulled out the “equity, mate” to spend on frivolous consumption.

      • drsmithy you and others completely focus on the unwashed and not those that actually enabled the whole thing from the start.

        Which is compounded by belief that if the RE market crashes things will return to some arbitrary “norm”. Sadly the worlds entire financial system is tightly coupled, when the first few little bespoke firms blew up on Wall St, sending shock waves which took a few years to culminate in Lehman Bros and finally the GFC proper…. it took almost 27T to wash the stench off all the fraud which stopped over night rollovers dead in their tracks.

        I’ve got TB of data archived showing the ideological think tanks and advocacy fronts pushing the past RE agenda…. finger prints are from the libertarian mobs w/ affiliation to the Chicago school posse, that’s where your ire should be placed. Due you blame consumers for buying tainted – toxic products or the manufacture – ????

        Skippy…. ignorant consumers are not your – our problem….

      • “drsmithy you and others completely focus on the unwashed and not those that actually enabled the whole thing from the start.”

        No, it’s just you who parrots so much, yet understand so little, can’t distinguish who are the enablers.

        Bankers are the instigators, lenders are the enablers, they enabled with their consent.

        They’re entitled to say no, as many on the website have. It’s quite liberating.

        “Which is compounded by belief that if the RE market crashes things will return to some arbitrary “norm”. ”

        It won’t be ‘norm’, it’ll be rock bottom. it’s from the ashes of rock bottom one rebuilds.

        At rock bottom, there’ll be no support for the parasites…or ‘victims’ as you like to call them.

        “Sadly the worlds entire financial system is tightly coupled, when the first few little bespoke firms blew up on Wall St, sending shock waves which took a few years to culminate in Lehman Bros and finally the GFC proper…. it took almost 27T to wash the stench off all the fraud which stopped over night rollovers dead in their tracks.”

        What’s $27T but an accounting entry skip? Or can’t you reconcile someone else’s words with MMT to a separate topic?

        “I’ve got TB of data archived showing the ideological think tanks and advocacy fronts pushing the past RE agenda”

        And you’d be lucky to understand 2kb of it.

        “…. finger prints are from the libertarian mobs w/ affiliation to the Chicago school posse, that’s where your ire should be placed.”

        No one put a gun to someone’s head and instructed them to sign a contract of offer and acceptance, nor did they wear a lab coat and carry a clipboard.

        It’ was an act of speculating on capital gain, whilst abusing captive customers, with full agency.

        “Due you blame consumers for buying tainted – toxic products or the manufacture – ????”

        Wrong parable.

        I do blame people if they legislate away safeguard for toxicity, then complain about being poisoned.

        The environment wasn’t inherent, the environment changed due to many individual agents seeing $$$, coupled with a completely apathy to the real victims, namely the young and poor.

      • Penny your diatribe carry’s zero import… the entire thing is just a stream of conciseness meandering all over the joint w/ a few unsupported accusations about my acumen. Not one iota of historical perspective or factual representation, just one big unhinged attempt at slander by association.

        To top it off our past interaction has given me reason to hugely discount your perspectives origins, let alone your capacity for honesty….

        I go back before the days of she who died of cancer… remember Tata… to get to the bottom of the mathematical gibberish…

        “I do blame people if they legislate away safeguard for toxicity, then complain about being poisoned.”

        Bought people do as they are instructed, that’s how the ticket is punched. Not to mention decades of ratchet effect in stocking the pond, by those aforementioned in previous comment.

        Skippy… remember the wizards were hired to rationalize, then the keys handed over to the kids, they blew themselves sky high.

      • “Not one iota of historical perspective or factual representation,”

        We are living the historical record sparky. The wasn’t a bubble, and now there is.

        it also happens to replicate previous bubbles. We know what causes them, we know people elect to participate in them. I’d like to see what errant nonsense you blame for the tulip bubble.

        “To top it off our past interaction has given me reason to hugely discount your perspectives origins, let alone your capacity for honesty…. ”

        I would suggest that down to your competency is comprehension and conclusion, and I very much doubt I’m alone in that thought.

        “I go back before the days of she who died of cancer… remember Tata… to get to the bottom of the mathematical gibberish…

        “I do blame people if they legislate away safeguard for toxicity, then complain about being poisoned.”

        Bought people do as they are instructed, that’s how the ticket is punched.

        Banks bought borrowers now did they? Again, you seem to suffer this pathological delusion that people can’t say no, nor should there be any ill effects when their consent delivers adverse outcomes. You’re about as lucid as John Hewson challenging the prime minister.

        “Not to mention decades of ratchet effect in stocking the pond, by those aforementioned in previous comment.”

        Each stroke of the ratchet was enabled by the populace, who endeared themselves to a future of less impediment to their ‘investment genius’.

        “A little lower LVR, the less deposit my investment genius need to make a motza !$#@@!”

        If they said ‘no’, this doesn’t happen.

      • I’ve got TB of data archived showing the ideological think tanks and advocacy fronts pushing the past RE agenda…. finger prints are from the libertarian mobs w/ affiliation to the Chicago school posse, that’s where your ire should be placed.

        It is.

        But there are plenty of guilty parties closer to the front lines as well. You should not excuse them because of some “just following orders” variation.

        Someone swimming in millions upon millions of interest only loans greedily waiting for their unearned capital gain is not an “ignorant consumer”.

        I have a lot of sympathy for people who have been pressured into buying a house by media and family. I even have a bit of sympathy for people who might have an investment property based on some financial adviser’s recommendation.

        But after that those shades of grey start to become a lot more defined.


      • Due you blame consumers for buying tainted – toxic products or the manufacture – ????

        If it was done repeatedly over a long time frame rather than a one off, it would seem completely appropriate to blame wholesalers and retailers – and if a consumer poisoned someone else when they could have found out the product was toxic, they could be on the hook for negligence too.

        Originator’s negligence in no way cancels the responsibility of everyone else in the chain.

      • “I’d like to see what errant nonsense you blame for the tulip bubble.”

        You do realize that markets back in those days were bars or taverns and before the bidding started libations were on the house. Kinda funny when you fast forward to blow hand hookers… eh. Social psychology also informs wrt to such manias, not to forget Bernays machinations and the advent of supply side. John Laws shenanigans is also instructive here imo.

        “Bankers are the instigators, lenders are the enablers, they enabled with their consent.”

        Then why did this problem not occur sooner when banks held the deed and note on their books till maturity and risk weighting was done in house by qualified and experienced experts. Consent can be viewed from an information arb perspective along with social conditioning [their is a reason corporations spend billions on it imo].

        “It won’t be ‘norm’, it’ll be rock bottom. it’s from the ashes of rock bottom one rebuilds.”

        Ahhh the smell of “creative destruction” wellie history is not so kind in this regard see WWII and increased global neo-nationalism [the really bad kind]. Not to mention the mental scars which will echo for generations, all ready manifesting in america wrt a plutocratic police state.

        “What’s $27T but an accounting entry skip? Or can’t you reconcile someone else’s words with MMT to a separate topic?”

        For you to say that exposes your complete lack of understanding MMT, at its core MMT just notes that HPM can be created as needed with only resources as a finite limiter, inflation is just taxed. The Problem with the 27T is what it was used for, back filling endemic fraud which in turn bailed out the upper social strata, noting for those below that strata.

        “Banks bought borrowers now did they? Again, you seem to suffer this pathological delusion that people can’t say no, nor should there be any ill effects when their consent delivers adverse outcomes. You’re about as lucid as John Hewson challenging the prime minister.”

        This has been well documented by many academics in different disciplines, I’ve all ready referenced Bill Black due to his historical experience in a very similar event S&L. Your retort was based on your belief in free will and agency [quasi religious belief] which Bill himself refuted personally.

        “Each stroke of the ratchet was enabled by the populace, who endeared themselves to a future of less impediment to their ‘investment genius’.”

        The establishment of lobbyist groups like FEE et al which superseded the political process in order of having – its democracy of money – [pay to play – revolving door] leaving citizens with a spectator democracy. Hudson as an insider is informative in this regard. Therefore legal and political processes were bent to the aspirations of its benefactors. You will note the parabolic consolidation of media and industry monopolies over this time period.

        In summation penny… law creates markets so it matters on what foundations those laws are created, the business friendly [stocked pond-including SCOTUS – see citizens united] laid the foundations to enable such acts. Had it not, none of this would have happened, self inflicted wound as it were.

        Skippy…. To make it simple you could just read Yves book Econned, well researched, peer reviewed, w/ analytically granular, but that might challenge your simple uniformed biases

        drsmithy…. I basically agree with you and have no sympathy for predatory sorts, yet I watched this unfold from the start in Calif back in the early 80s. Flimflam men holding seminars on how to build a IP portfolio with connections to both developers and banks, myriad of friends and associates drawn to these tent revivals where for 1500K a pop one could learn the trade of leveraging ever increasing IP whilst insuring the whole thing so at death its zero sum. Yet after a few IPs one could quit work and live off skimming the equity and cash flows, the word Capitalism was uttered over and over and over.

        What some don’t seem to understand the whole thing was a self reinforcing loop, constantly pushing the RE price up. Banks and Developers made squillions compared to the small fish IP investors creating the churn for them, which from a social psychology perspective creates a imperative for others to do like so. Humans are at the end of the day herd animals. For example do you think people attending evangelistic conversion gatherings submit themselves out of no where because of some spiritual awakening or force or is it the over the top emotive atmosphere and the deep seated desire in all humans to conform to environmental conditions, most would agree with the term mob mentality.

        Which eventually ran out of steam due to wages being unable to put a floor under the whole thing and secondary equity loans were getting wobbly. Still big bundlers were stuffing non performing loans into trust right up to the end and off loading them, then taking an opposite market position on them.

        Stat… responsibility is a factor of knowlage or are you saying a lawn maintenance guy has the acumen to understand three reams of boiler plate law with excessive gotchas color coded with 20+ signature tabs when the American Dream ™ is staring him in his face and wife and kid[s. The banks are professionals and must know what they are doing or would never loan such an amount.

      • The banks are professionals and must know what they are doing or would never loan such an amount.

        Possibly the silliest thing I’ve ever read on this blog.

        You’re quite disingenuous, framing this in terms of sophisticated banks at one end of the spectrum and defenceless punters at the other, especially when I excluded consumers who didn’t have another layer under them in my example (except virtually all owners of IPs do have another layer – their tenant, not that they count). As DrS implied, there are layer upon layer of people, each with their own shade of grey. Some of the lowest layers of the pyramid might genuinely be pale, but you don’t have to get very high up to get to some pretty dark shades.
        Some wise fools on the topic -> https://www.youtube.com/watch?v=w8xqAQBIA0M

      • Stat nothing you – said – refutes the historical events…. All the commenters in this specific thread take issue with the same myopic point e.g. the concept of atomatisic individualism and the moralizing which is a by product of that quasi religious mental anchor. Hate too be the one to tell you, but not everyone is born equal, not only that but psychology makes a mockery of such antiquarian concepts. The case about the landscaper is an actual example, this is what control fraud amounts too.

        People do – are influenced by authoritarianism [banks in this case] why would a bank loan 500K+ if it thought the loan would end in bankruptcy. One day ABNs, non educated – experienced loan brokers driving door to door, etc.

        Yet out of all above you pick one little thing and act like I’m a moron…. shezzz…

        Skippy… sorry [not really] philosophy is not substitute for more rigorous methods of determining reality

      • More like this then huh?
        https://www.youtube.com/watch?v=KY2lQV3ADfc

        It’s all well and good for you to protest that these guys are all just harmless victims, yet there they are on whirlpool and somersoft swapping tips on how to get out of doing their legally obligated tenants’ maintenance and how to falsify their loan applications to get an extra $100k.

      • Stat the problems started long before the GFC and your point above only reinforces my mentioning the changes in risk evaluation and holding onto loans till maturity [skin in the game]. At the end of the day the issue the protesters in this thread base their disagreement on – is – an “assumption” wrt human “nature”, that’s it and nothing else.

        Skippy…. thought the bankruptcy thingy was cute, the leading preznit GOP candidate has made a fortune off it…. rim shot…

        PS… its curious that many that share the same view on this blog are also highly correlated to the AGW denier camp… ohhh… Galileo

      • Bit of a Larkin thing eh? Fucked up in their turn?

        Doesn’t mean they’re not fucking me and others with full knowledge a forethought.

        Just cos you’re a tool of the oppressors doesn’t mean you’re not culpable.

        What’s this about not all born equal – you falling for this mom and pop landlord bs direct from the IPA?

        God save all us sinners god save the Good Samaritan and god save the worthless queen.

        EDIT: it’s like a bloke tries to buy a sawn off shottie from the local Bandidos chapter so he can rob my shop and you want to feel sorry for him when they beat him up instead.

  2. Isn’t trying to tell property owners not to lower prices across the segment considered ‘price fixing’? A well functioning and efficient market should be able to have many actors working independently for price discovery

      • Dumpling as many of these markets are managed by rental services et al and not individuals you have an industry effect on “rational reasons” for not wanting to lower any price point. Too the point of waiting long periods of time to try and ride out the storm or dampen the curve whilst seeking to off load.

      • Understand dumpling tho would remind in troubled times industry has a bad habit of closing ranks… it does have a union of a sort… industry front…. snicker…

      • @skip,

        Contrariwise, as they say on Highway 81 – ‘Three can keep a secret [or a promise] if two are dead’.

      • Dead straight lines, 0.0% change -> SQM haven’t been collecting the data or there have been no new listings for SQM to get data from.

        Hence, those links are close to useless as a guide to what is happening now.

      • “SQM haven’t been collecting the data ” – Wow so not only are SQM not collecting the data, they are presenting false data
        “there have been no new listings ” – Vacancy data for all three locations for the same period clearly shows that statement is false
        Louis, Do you want to respond to those very serious claims?

      • Mate, there is no way on earth something as inherently noisy as asking rents extracted from website and newspaper listings can have an identical average month after month.

        For example in postcode 6714 they’ve got huge volatility in asking rents for 2 br units but 0.0% change of any sort for all units over a 12 month period – simply mathematically impossible. Aside from the other alternatives, the other possibilities are that there is a mistake somewhere or that the new listings are POA (I guess plausible in a falling market).

        I don’t see it as a particularly serious claim, btw, and I’m certainly making any suggestion of false data – in the absence of updated data, they rolled over previous data. Big whoop – although the data quality is obviously shot, and when one series is dubious it makes the other series (within the same postcode) seem dubious by association.

        Bottom line is that they aren’t representative of what is actually happening, though.

      • One of the largest RE data collection and publication companies in Aust says the median advertised rent for all houses in Karratha for the week ending 4 Nov 2015 is $850, Port Hedland $1233 and South Hedland $904
        You say that data is false.
        I would call that a serious claim.
        I am surprised Louis hasn’t responded.

      • You misrepresent my contention – I contend they have made zero report on asking rent since around August ’14 (i.e. for postcode 6714 except for 2br units), and their software filled in the line. To say otherwise suggests I have an opinion on why there is no update to the data series – I don’t.

        I am surprised Louis hasn’t responded.

        Draw your own conclusion I guess.

        One of the largest RE data collection and publication

        Data collection and publication – if that’s really all they do, then this situation is oughtn’t be surprising.

      • Your contention is
        “SQM haven’t been collecting the data ”

        SQM say they have been collecting the data

      • If they’re collecting the data, they’re not publishing it.

        They’re totally at odds wrt Karratha with the WA government btw, who have seen three further quarterly decreases in Karratha rents (” Karratha’s average advertised weekly rental price has dropped for the 15th consecutive quarter, ” ) as of last report that SQM are apparently unable to detect, and who report asking rents of $705 for all Karratha houses.

        To me, not collecting the data is about the least embarrassing alternative.
        http://www.pdc.wa.gov.au/download_file/force/152/284

      • “If they’re collecting the data, they’re not publishing it.”
        SQM say they have collected the data for every week up to the w/e 4 Nov 2015 and they have published it as described.

      • So your/their contention is that the WA government is lying?

        How do they explain the mathematical implausibility of a large subset of units showing volatility in pricing while the whole has zero change? Is there are another subset of data with perfectly aligned counter movements? Can we see it?

        SQM and government report were completely aligned in Q3 last year, both showing steep decllne and around $850 weekly rent in Karratha. According to government, falls continued at roughly same pace until at least June this year, according to SQM they stopped dead overnight sometime soon after October last year and then didn’t move – a truly fantastic event whereby either a conspiracy of all landlords was convened or exactly the right amount of extra demand showed up in one weekend to cause perfect balance.

        Or maybe SQM’s data collection isn’t sensitive enough to notice a 15% drop in asking rents over 9 months as reported by government?

        As I said, data collection or reporting stopped seems nicest alternative. If they’re publishing what they collect, they show no sign of looking at it first.

      • Ok, thanks for bringing this graphic error to our attention. It was simple a graphical issue. You will now find all the charts are fixed. But geez..next time..take off the tin foil hats and just asssume a standard error!

      • Thanks.

        Never assumed more than simple error and said so. It does suggest people at SQM don’t look at your own website – you can’t have looked at these three graphs any time since March – which seems a far greater sin than the actual error in one of the most newsworthy property markets in the country.

  3. Such good names those guys have. Baron, Nation…. They should start a Gladstone realestate agency together called “Barren Nation”. Then they could roll it out in other states.

  4. ErmingtonPlumbingMEMBER

    Wow, if this kind of stuff starts happening in Sydney and Melbourne we might have to think about doubling imigration numbers!

    “Give me your tired, your poor,
    Your huddled masses yearning to breathe free,
    The wretched refuse of your teeming shore.
    Send these, the homeless, tempest-tost to me,
    I lift my lamp beside the golden door!”

    Yes, so that we may sustain property prices

  5. Not sure how is Gladstone representative of the rest of the nation.
    These sort of things will happen (in specific environments) even if the rest of the economy is as safe as australian houses (pun intended).

    • It’s not necessarily representative of the rest of the nation but it does show that the bullshit that “rents will never drop” and “owners will never sell for less than they bought” isn’t alway true even here in magic Australia.

      • Hmmm…. rents are stabilising in Sydney, but the selection of properties for rent are literally disappearing. Prices have not dropped yet.

      • “…rents are stabilising in Sydney, but the selection of properties for rent are literally disappearing. Prices have not dropped yet.”

        Interesting you mention that – I have a couple of friends who are also looking around in Sydney (over fairly wide areas) and they say the same thing. More properties being prepared for sale? Or just simply a tight rental market (but wouldn’t that imply increasing rents)?

      • Don’t know, I had a few pet sceario’s, but none seem to be coming to fruition. Chinese still massively dominating buying, anecdotally, it seems that the locals are pulling out – and its just the Chiense supporting the whole thing.

        My accountant was telling me one of his clients spent $7m on a house on saturday, then spent $6m on another Sunday!!!!

        I guess they didn’t get the memo.

        Crash soon – very soon IMHO.

      • ErmingtonPlumbingMEMBER

        I have customers around Eastwood (chinese dominated RE market) telling me of well kept properties (by contractors) all over the area which are unoccupied.
        Even in china the holding of property without renting it out is very common. Its all about the preservation and protection of capital for may of them and for those with a long term reason to put their money here, a 20 or 30% drop over a few years now, is meaningless if they think the majority of their stored wealth here, is safer than having it in communist China.

      • I guess if stabilising means ‘increasing at a slower rate’ than that is exactly what is happening – 2.3% increase in rents yoy compared to 11.2% change over three years is a far slower increase.

        http://sqmresearch.com.au/weekly-rents.php?region=nsw%3A%3ASydney&type=c&t=1

        Coincidentally, 2.3% is exactly the reported Australia wage inflation for June 2015, implying landlords have only been able to put up rents to the extent that tenants have extra money – sounds like a market in balance.

  6. It isnt commodity prices elevating our currency and trashing other export sectors like Dutch Disease, it is the end of the construction phase crimping tradie incomes securing negatively geared rentals.

    The whole world is laughing at our bizairre national strategy and inverted priorities.

  7. A Greek Tragedy… saw on Foxtel business channel, Margret (somebody) spruiking property per usual. She didn’t strike me as being particularly cocky – I wonder if she has a couple of her own properties around this region.

    A couple of months ago I was suggesting (at least to Sydney property owners) that they should sell before Christmas, Which I think still think a reasonable assumption.

    But something weird is happening, a lot of the houses to rent are disappearing. Choice is completely disappearing… which is a real worry for us who want to rent.

    • Landlords often withdraw stock from the rental pool to tidy them up before sale. They’ll be back in a week or two as ‘new’ rentals or owner occupied.

      • And, of course, kick out existing tenants so their unfashionable furniture doesn’t spoil the presentation. High property turnover keeps a lot of perfectly liveable properties unoccupied.

        Bit longer than a week or two – more like month or two,even six months if new owners want to renovate before moving in/ installing tenants/ trying to flip.

    • TailorTrashMEMBER

      May be some thing to do with what I commented on last week . Seems to be an uptick of houses that are empty for sale ( devoid of furniture )
      “Investors ” getting out ? ……..

    • @RT – I think Janet has it. Properties (either empty or ex-rental) going up for sale. Investors are pulling out. Anectdotally – I live in the inner west – all the Auction signs have disappeared and For Sale is dominant.

  8. There are flow-on effects with APLNG/Origin etc head offices in Brisbane reducing head counts significantly.

  9. “CBS Property Group owner Jim Baron and Elders Rental Department Manager Nikki Nation agree – the “ridiculous” rental prices need to stop.

    “Owners need to stop panicking and lowering the rent”…

    “If agents stop putting out these ridiculous rents then the price will stabilise.

    “Owners are panicking because their property is vacant … but the low rents are dragging the rest of the market down too…”

    Oh no, the nature of capitalism strikes back! Can’t have that, can we?

  10. reusachtigeMEMBER

    The smart good looking realestate guy is right! Landlords need to stop panicking and get together to jack up rents. Landlords decide what their place is worth not blackmailing tenants! Sometimes I often hate renting scum!!!

    • You’re not sounding your usual debonair self reusa. Having trouble sleeping or is it just a passing allergic reaction at these spring auctions?

      • The southern hemisphere’s most handsome and charming man better be quick to recover his usual comportment in case the wind blows.

    • “Sometimes I often hate renting scum!!!” I don’t know why but this oxymoron like statement made me LOL…

  11. I could see Doc Wilson uttering similar words in a few years time, “vendors need to stop panicking and lowering their prices!”

  12. As RE inflation has come to replace wage income, since the Howard years [FIRE sector], and if sufficient stock goes south [capital city’s] you can bet your sweet derrière that broad consumer demand will go poof…

    Skippy…. which will be felt in the small business community the worst, which will then funnel its clientele into the biggest rentiers warm embrace…

    • You’ve essentially described the coming dynamic of the “diversified services economy” of Australia’s major metropolitan areas, in two sentences. lol

      • You forget the agenda to go cashless w/ the GST factor [GST was never about taxation, it was about ending the leakages due to the informal – underground economy w/ the bonus of making everyone an “economic rational agent” e.g. homo economicus].

      • Your being coy again, please provide historical data.

        Skippy…. to be overly simplistic I would go back to the establishment of the Chicago school of economics tho put its inception as a by product of the Lippmann mob.

      • Skippy If I have to repeat the pages of argument over and over to you each time I comment you really aren’t very smart.

      • Your groundless insinuations aside, the question tabled is…. about – your – response to my Howard starting point for the FIRE sector template.

        Skippy… you have a propensity for being obtuse… not my problem…

    • ErmingtonPlumbingMEMBER

      “finger prints are from the libertarian mobs w/ affiliation to the Chicago school posse, that’s where your ire should be placed.”

      Indeed brother, most people web surf to reinforce their own agenda rather than actually learn anything and are to often ignorant of the reality of the system they have been indoctrinated into.

      Intel eh?
      Did know a fella by the name of Lance Collins, Skip?

      • WOW 2004… hahaha…

        My experience was from gathering in the field, being subjected to its tender machinations in the field [fog of war] and the nice training camps…

  13. On the bright side, they’ve poisoned their harbour and destroyed any character the village once had in their rush to profit… Oh hang on, that’s not the bright side…

  14. The Gladstone observer facebook post on this subject makes for very interesting reading! The penny has dropped for some and some are going to “ride it out until prices stabalise”. You can’t make this stuff up

    • To quote Mr Baron, the real estate agent – “This is the time people should be buying in Gladstone”

  15. This is called: Going Back To Normal.
    Gladstone (also Sydney and Melbourne to follow in a larger scale) have been in an abnormal situation of house price bubble for years, fuelled by specufestors, RE agents, Banks, Media to the end of the long list of opportunists who make the same list of losers on the way down.
    You can say and do what you like but Logic will prevail, and what goes up MUST come down, FAST.

  16. boomengineeringMEMBER

    When I was at Rio Tinto Gladstone a lot of the local workers left to go to Curtis Island. I wonder how many of them are trying to get back to Rio

  17. Talk around the office is all about falling auction clearance rates…..
    One colleague with a property due to go to auction in Lilyfield is sweating bricks….. Has already bought in Balmain and servicing two mortgages.
    Another colleague was bought out by WestConnex and is now a believer – says he’ll sit on his hands until the prices correct – he won the jackpot!

  18. Just talking to someone from the big 4 and was relaying this article. The response was “oh no, it’s worse than that.” Said every time they put a loan application into their system in CQ it’s a case of “computer says no”. From personal experience they’ve seen leases come due and be negotiated from nearly 2k a week down to mid-low hundreds.

    Exact words, “the place is a disaster zone”.

  19. Notice how that mid/late 2014 sharp drop in Gladstone VR was followed by an early 2015 bump up in rents?
    I wonder what is to come?

  20. Just got this in an email from Barefoot Investor. Sit down grab some popcorn it’s on like donkey kong!

    This isn’t Gladstone it’s Karratha in WA, but same shyza different bucket…

    Subject: Last Year I was Laughing, Today I’m Crying.
    Hi Scott,

    I’m in hot water. A year ago I had two properties in Karratha that were going strong — I was receiving $1,300 a week in rent EACH. Fast forward to this year and they only pay $400 a week each. The mortgages are $600k each but if I had to sell now I’d be lucky to get $350k. I can’t handle the repayments — they’re killing me and I have no idea what to do.

    Shane
    Hi Shane,
    You bought the housing equivalent of a speculative mining stock — only with borrowed money.

    What got you in this mess was speculating on things you had no control over, so I’m not about to do the same: I have absolutely no idea what the value of your properties will be in the future.

    Instead, I have three pieces of advice for you:

    First, today’s buyer in Karratha doesn’t care what you paid. Don’t anchor your expectations on what you paid — you paid too much. Second, if the repayments are killing you, you need to act. Sucking your thumb and doing nothing is also a decision. Finally, ask yourself this: would you buy these houses again today? If not, you’ve got your answer.

    • Same newsletter, this is awesomeness….

      Subject: The Thief of Joy

      Hi Scott

      We bought a modest house in need of a little renovation in a blue chip suburb for $770k three years ago. It’s already worth close to $1 million but our mortgage is $650k. We both work full time and are in our mid-40s (combined income of $180k), with two primary-school-aged children. We don’t have a lot of debt but I feel we’re behind the eight ball compared to our friends. They seem to be on their third property and have small mortgages. Is it ever okay to have a massive mortgage? We know comparison is the thief of joy, but sometimes it’s very hard not be jealous of others.

      Pip

      Hi Pip,

      You’ve made (on paper) $230,000 in three years…and it’s not enough?

      You’re like the Oliver Twist of suburbia: ‘please sir may I get into more debt so I can make more money like my mates?’

      Here’s the truth: your friends got lucky. They’ve ridden a once in a lifetime housing boom, which has seen prices in Melbourne and Sydney increased by a staggering 66 per cent since 2008. Most people think these returns are normal. They’re not. They’ve been caused by interest rates dropping to all-time lows, and a belief that Australian property prices have some magical element to them that causes them not to go down.

      However, today Australia has the highest rate of household debt to income in the world (to put it in perspective, that’s about twice that of those spendthrift yanks). What happens when interest rates inevitably rise?

      I argue that it’s never prudent to have a massive mortgage (relative to your income), but it’s downright dangerous to do it now. Especially if you’re only motivation is playing catchup with the Jones’s.

  21. Maybe they should consider removing negative gearing in Gladstone. Didn’t Abbot, Hockey et al say it would lead to rising rent? Worth a try if you ask me.

  22. In a year, the average price of a rental house has dropped from a minimum of $320 to as low as $150.

    Unclear wording there. There seems to be some confusion between the average and the minimum.
    I checked a local website and found typical houses around $240 and a dodgy duplex with free water and gas for $190 per week.
    At a guess the minimum is $150 and the average $240.