Do you think that investors set house prices, much?

Via NAB comes the chart de jour for house prives:

That more than explains house price falls. It also explains past house price rises. Without investors as the rehypothecated, super-leveraged marginal price setter, the market is toast:

Further, my worry is that as Labor strips negative gearing and halves capital gains on established properties, the specufestor species may become extinct, without even considering the wider price headwinds.

After all, if we extend the chart of investor finance back a little, one could also speculate that the Costello capital gains tax reform in 1999 which turned established houses into a tax haven, will revert to trend:

I’m not even going to pretend that that is forensic but it’s a bit of bear porn to finish a day of poor Aussie data.

David Llewellyn-Smith
Latest posts by David Llewellyn-Smith (see all)


      • If I recall there was a sudden dead spot in the market, it didn’t last long but I think buyers evaporated for a bit. It was around the time the Chinese stock market was crashing. I think Chinese buyers disappeared briefly, then when the market had the plunge protection team deployed, everything went back to bonkers for a bit.

      • Wasn’t that when the “mining GFC” / deleverage / commodity price slump kicked in? We even had one negative GDP quarter from memory.

      • Our local douchebag agent was in a panic just after the election and said things had fallen off a cliff. Thought it was the big one but not so lucky. Not this time ….unlucky!

      • Yeah, a couple of rate cuts fixed that pretty quick. I remember MB arguing for the rate cuts, saying they would do nothing, then having to argue that prices weren’t rising again that the CoreLogic data was wrong.

        Now we all love the CoreLogic data, but rate cuts definitely won’t cause prices to rise again, Scout’s honour.

      • Yeah I remember stating the fact that interest rates dropping would fuel the bubble and macroprudential was not going to happen, and looks like the facts proved me right

    • Yep…and if you bought in Sydney at the peak around September 2015 you’re currently underwater.

  1. Be good if you could put plots on there for the interest rate cuts. Be even more interesting to see announcements from banks offering new IO loan product. Both of those things would correlate with the chart I reckon. Such a speculative frenzy.

  2. I got presented with evidence once years ago, that “the average price being paid by first home buyers” was “higher than the average price being paid by investors”. Therefore it was “first home buyers driving the prices up”.

    My response was to ask to see a graph over time, of the numbers of buyers in each category. It is obvious that the numbers of first home buyers has plummeted, even if the shrinking few of them who have successfully entered the market, have outbidded the investor class to do so. Any successful FHB will have had to outbid the investor class, and hence the higher investors are bidding, the fewer FHB’s will succeed.

  3. reusachtigeMEMBER

    I’m seeing many similar drops. Looks cyclical to me. Confirms that the new boom is on its way for sure.

  4. Further, my worry is that as Labor strips negative gearing and halves capital gains on established properties, the specufestor species may become extinct,

    Sounds like a good thing?

  5. Maybe not forensic, but that second chart is how I reckon it’s gonna go.

    Saw some Geocon spruikers flogging crumbly burny off the plan hi-rise dreck in the local mall today. Guaranteed 7% rental return for 5 years, or a $21K rebate for FHB. Can’t just drop the price of course, for well known reasons. They looked bored and weren’t getting any trade at all. Lol.

    • Australian Flambé Crumble – By Geocon.

      Has a certain “je ne sais quoi?” to it, n’est-ce pas? 😛

    • I love those guys. They cheer me up every time I see them. I’ve never seen anyone talking to them, ever.

    • And I keep thinking I should go and troll them, except the urge not to spend any extra time at Westfield for any reason has always proven overwhelming to date.

    • kiwikarynMEMBER

      Maybe they should guarantee 5 years supply of A2 Platinum infant formula and Swisse vitamins? Might get some interest then.

  6. So in the graph, investor loans are split by state. Is this the state the investment property is in? Or the state the investor lives in? What about say a Sydney investor purchasing in Perth?

  7. Sigh*****

    Until price is taken thingy…. now if some want to grumble about monolithic seller and buyer paradigms, as informed, by some concocted rationality that is multivariate adverse – that’s another question …

    • Yeah, I read that too. Thought it was pretty good. When you see stuff like that in the MSM, you know the Fit is about the hit the Shan.

  8. ErmingtonPlumbingMEMBER

    My favorite property market spruik, that always gets rolled out when price falls are being seen is the reassuring,
    “Its not a matter of TIMING the Market, but rather time IN the market”
    Heard that one uttered a lot lately.

    • How is ‘time in the market’ working out for anyone who bought in Sydney around the end of 2015? 3 1/2 years and even stevens before transaction costs and loan costs.
      Doesn’t seem like a real good thing if the downturn lasts much beyond a year.

      • People misunderstand the meaning of the adage. Time is a friend of a great business because its strong cash flows compound with time. If a great business is growing at a rapid rate then the timing of entry for an investor doesn’t matter in a long run.

        Obviously this is not the case for residential real estate investments.

    • kiwikarynMEMBER

      Its lucky then that the Japanese have the longest life span, its been decades and they’re still waiting for house prices and the share market to recover. I guess we can soon look forward to 100 year mortgages too while everyone waits.

  9. Not investors “per se” but buyers of any kind. When number of buyers is high prices go up, with number of buyers down price goes down. Number of sellers hardly matters.
    When buyers of any kind have open check book (easy credit) prices go wild, when no money (credit squeeze) prices collapse

    • Your partly right, especially in a market that requires a leveraged investor. But every buyer will be a seller at some point and usually when the tide turns. In this case you have a back log of sellers with thin buyers driving prices lower. Sellers do matter and they initiate the transaction. Lots of other forces at play including population growth, new builds (supply), foreign demand, etc that muddle the pure dynamics.

      • there are always enough sellers who have to sell – prices always collapse on low volumes despite low number of sellers prices fall because there are no buyers
        look at US or Ireland or Spain … number of homes for sale fell by 50% or more during the crash (much less sellers) yet prices collapsed

  10. NSW back to 2013 investor loan levels but not 2013 prices. Decent drop though in total investor loans amount when you think that there are more investors with larger individual loan sizes today than in 2013. Does anyone know if there is a lag?

    • Prices lag finance data. .

      As I understand it, loans are recorded once approved when a sale agreement is reached. Settlement follows some weeks after and then the price data can lag a while again before the stats are actually released (especially if it’s ABS price stats).

      So while in the real world the price is set about when the loan is set, the loan data is available well before the price data.

  11. Let’s see this graph (1 & 2) by Sydney / Melbourne & capital cities v rest of Australia. Dwelling capital price growth by dwelling value.
    Then by Investor v owner occupier.
    And then by owner country of origin and declared v the real occupancy & rent paid.

    Let’s see a sample ‘Housing audit’ or sample cross check of say 1,000 dwellings in the CBD or in the vast migrant zones that now spread across Sydney in an 800 sq km swathe from Mascot to the CBD then way out west to Penrith.
    There is no shortage of sample data. Staring you in the face if you ever dare go into the migrant zones.

    And what would that ‘chart’ show?

    That at least 580,000 very modest old established units & little old houses,,, mostly in Sydney & Melbourne,
    inner city old rundown small units & then middle & outer suburb small modest houses, the absolute bottom layer….
    Where the ‘Investor’ or purchaser will be a new PR or citizen grant migrant proxy..
    Who washed in the dirty money for purchase for the foreign syndicates, to evade FIRB,..

    And the ‘Occupants’ of that old modest ex Australian Housing?
    They will now be PR migrants (1.9 million in the last decade, the majority being third world unskilled & poor with over 61% or 1.1 million ‘renting’)
    Had then more than double that number again (2.561 million non resident migrant guestworkers 92% rent) so that will be another 2.3 million who also ‘rent’.

    A total of 3.3 million third world poor migrant ‘renters’ with 90% or 3 million in just Sydney & Melbourne.

    The ‘Housing Audit’ or 1,000 dwelling sample check will show an average occupancy of that now foreign owned housing as 2, 3 or even 4 times the Australian average (2.9 per dwelling ABS).

    It will be 2 or 3 migrant families, or 6, 8, 10 migrant guestworkers – paying cash in hand sub let bunk share.
    But only a nominal or minimal rent declared. And a Negative gearing kicker back to the proxy. Your taxes at work.

    It’s all about washing the dirty money into established housing, a safe haven – and CASH FLOW, not capital gain.

    A 10-15% untaxed cash yield v the usual 3-4% return.

    ➡️ This is all totally missed by Core Logic & others, as they use market advertised rents or declared returns – not the real market in migrant housing which is never advertised as the aggregate beds per little 2 bed unit and the real return, mostly cash is NEVER declared.

    Core Logic miss a quarter of the cash flow in the Sydney & Melbourne rental market.

    The underlying nutrient of all of this?

    Sydney 1.3 million TR migrant guestworkers renting.
    1 in 4 people. 25% of the population as non residents occupying only 7% of the housing. Plus another 500,000 PR renters.

    Melbourne 1.050 million TR migrant guestworkers renting. 1 n 5 people.
    20% of the people as non residents occupying only 6% of the housing. Plus another 400,000 PR renters.

    And another 250k TR migrant guestworkers elsewhere, Brisbane, Adelaide, Hobart etc and plus the PR in a similar correlation.

    Macrobusiness has published the stats on the PR many times. It’s 1.9 million in the last decade plus offspring here.

    March 2018: 2.431 million non resident migrant guestworkers.
    Fact check:

    5.7% year to year growth. (DHA quarterly reports so plus 130,000 new non resident migrant guestworkers in the last year).

    March 2019: now 2.561 million non resident migrant guestworkers.
    2.561 million migrant guestworkers.
    14 years worth of PR in addition.

    The vast majority of these non resident TR are permanent stay (NZ SCV with 38% or 260k of the 669k SCV as non NZ third world born – our fastest growing third world visa category) – or very long stay (670k foreign students & partners 4-9 years until they get the PR), or say 190k bridging / protection (up to 5 years), 155k so called skilled & partners / dependents (3-4 years until a PR), 150k backpacker, 1-2 year stay but only 15% outside a city & only for visa extension, 300k long stay repeat stay visitors, 130k special & other categories & so on..
    All needing housing.
    Mostly adult. Mostly Third world.
    Mostly poor. Many working & living illegally, week to week to week – repaying that foreign agent procurer debt & sending back the remittances.

    And so where do these 3.6 million (2.5 million non resident migrant guestsworkers & the 1.1 million poor unskilled lower socio- economic PR migrants) all ‘live’?
    And how / and who do they pay rent to?

    They are paying $170-180 a week average – for the migrant guestworkers ‘bunk share, bag of rice , toilet roll & wifi deal’.
    Widely advertised on the foreign social media, websites, posters & tear off ads in foreign languages all over the street.

    As example:
    🔹The 2 bed small unit in Regis Tower CBD, bought with the dirty money washed at say $750k.
    🔻 9 Thai & Malay hospitality workers / foreign students in bunks or the lounge at $180 a week each, $84k year, 11% yield. only $30k or 3% Yield declared (legal occupancy/minimal rent). 282 units with 1,700 in the tower block.

    🔹The 2 bed small old run down unit Burwood bought via the foreign dirty money washed in by the PR at say $550k.
    🔻2 or 3 Chinese families or 8 foreign students @$180 week = $75k year.
    14% yield, $50k cash, but only $25k or 4% declared. Plus NG as kicker for the PR proxy. The whole area a recreation of a Guangzhou slum.

    🔹The small 2 bed plus sunroom house north Parramatta recreation of Mumbai on grimy busy road as the trucks thunder past – bought by the Indian proxy with the dirty foreign syndicate money at $650k.
    🔻3 families or 10 Indian students / sponsored visa etc $170 week each = $90k year. 14% yield. But only $21k (3.5%) $400 week rent or declared.

    3.6 million PR or Non resident TR migrants who rent @ say $170 a week x 52 weeks in shared private accommodation = $32 billion.
    At 6 per dwelling = 600,000 dwelling.
    But only $14 billion (legal occupancy or nominal minimum rent) declared.

    14% of the Australia onshore population.
    Living in 6% of Australian residential housing (8.8 million private dwellings).
    It’s all on display. Easily checked.

    ▪️There’s your ‘housing bubble’.
    ▪️There’s your congestion & squalor.
    ▪️The overloaded public transport & gridlock.
    ▪️There’s the job & wages loss. 1.3 million Australians unemployed, 1.1 million Australians seeking work, wages fallen by 6.8% in real terms.
    ▪️There’s the Australian GDP per Capita thru the floor. Fixed trade income diluted by 10% more unskilled fake ID cash in hand unskilled non productive & non tax paying migrant guestworkers.
    ▪️There’s your mass Australian homelessness.
    116,000 Australian permanent homeless, 360,000 who don’t have affordable housing. Squeezed out or evicted by the new foreign owner proxy from their low cost Australian housing to make way for the migrant guestworkers sub let cash in hand goldmine,

    And there’s your debt bubble.

    The average Australian sucked into a migrant induced bubble – Australia one of the few OECD safe havens (no repatriation & or criminal proceeds treaty), virtually no checks on PR proxies in laundering foreign dirty money into modest Australia housing, plus a NG kicker and 3.6 million migrants needing housing.. so the housing priced up at 2 or 3 times what was a ‘Normal’ Australian occupancy value & cash yield.
    House prices fall?
    They buy more. It’s a dirty money laundering safe have a& cash flow back to the foreign syndicate model.
    Rents fall? Great. Drop the nominal rent declared and take evenmiex as untaxed cash & more on the negative gearing claim.

    Let’s see the Housing Audit or 1,000 dwelling ‘sample check’.
    Start with CBD city south, west & migrant zones.

    How many dwellings were acquired by foreign born citizen & PR?
    By location, housing grade and the real occupancy and identities of the migrant guestworkers in that ex Australian housing.

    And then the real rent paid v what is being declared.
    And how many billions have these PR proxy owners also ripped off in negative gearing claims.

    Let’s see that chart.

  12. Buckfast Abbey

    In Ireland after the crash, the govn were FORCED to make house sale prices transparent…this needs to happen in Australia now… Before the Major crash…not, as happened in Ireland , after the prices had dropped 50%..People need to know the sale prices, not the asking prices, with no lag.. On a side note, spoke to a real estate agent in Coolum Beach today and he said it’s the first weekend he had no listings on a weekend for 15 years…may mean nothing but I thought it was strange..

    • I don’t think that means nothing. That is huge.

      A lot of agents gonna go hungry this year.

  13. I think you should extend the last graph further back than it currently goes. The cgt changes in 99 appear far less significant than the change in the early 80’s.
    Before my time but i’m guessing the start of deregulation of banking?

    • Sure. But I think the point is, it’s the 1999 changes that Labor may unwind. So that’s the but realistically worth looking at.

  14. bigpadaricoMEMBER

    The chart doesn’t support the headline. Prices lead investor commitments. You keep showing this chart so maybe I am missing something.

      • bigpadaricoMEMBER

        So people are saying. But I’m looking at the chart. The turning points of finance happen after (best case coincident) with the turning points in prices. It looks to me like prices lead finance.

      • The size of the loan you can get determines the price you pay for your house. People find out the size of loan they can get, then they buy a house to match. Finance comes first in that respect. Finance availability is the key determinant if house prices. This is the most important point in the real world.

        In a long term backwards looking data series they are basically coincident because you get your loan and buy your house effectively at the same time.

        In the short term, finance data is reported sooner than house price data (which lags due to settlement time and reporting delays) so in that respect finance data tells you what house prices data is about to do. House price data can be back-revised once it has caught up, like the CoreLogic monthlies etc are.

  15. bigpadaricoMEMBER

    So people are saying. But I’m looking at the chart. The turning points of finance happen after (best case coincident) with the turning points in prices. It looks to me like prices lead finance.

  16. bigpadaricoMEMBER

    OK thanks – appreciate the explanation as this has been bugging me for a while. I think that makes sense, except in the chart in the article it looks like we have an extra month of price data vs finance data. I’ve never seen this chart done where the finance data is plotted but the price data is not. Which is what I’d expect based on the lag you mentioned.