Shrinkflation returns to Australia’s housing market

In 2017, MB coined the phrase “shrinkflation” to describe the unusual phenomenon where housing transaction volumes fall at the same time as dwelling values rise strongly.

It appears that the Australian housing market is experiencing another episode of housing shrinkflation, with prices escalating at the same time as listings and transaction volumes have shrunk.

The below charts from CoreLogic’s October chart pack tell the tale.

First, quarterly growth in dwelling values has surged, driven by Sydney and Melbourne:

But the number of homes listed for sale has plummeted across almost all markets:

And while auction clearances are running at 2017 ‘boom time’ levels, auction volumes have gone bust:

Finally, transaction volumes have crashed to levels way below the decade average; although they have shown some marginal improvement recently:

Basically, it is a very ‘thin’ market at the moment, and while dwelling values are rising strongly, the housing market is not exactly healthy.

We discussed these issues more deeply in our Q3 Subscriber’s report, which was released last week.

Leith van Onselen

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

Latest posts by Leith van Onselen (see all)

Comments

    • CraftsmanMEMBER

      Vanguard ETFs is also a good option, 50% shares, 40% bonds and 10% Gold. 1 year of living expenses cash of course.

      • boomengineeringMEMBER

        I years living expense of cash. YES. no more though as cashless could sneak its way in sooner or later.

    • Whatever you invest in, make sure it’s liquid. Jumping into property right now, unless you plan to live in it, is like running into a burning building for protection.

    • If cashless comes in..if I take my money out now and put it under t h e matress..would I be able to buy something big without being asked by ATO..why did u pay cash and where’d the money come from..if I leave it in bank..they control everything if the brown hits the fan.Id love to buy ETFs but I know nada about them..any funds for smaller amounts 5-10k till I get my understanding better?

  1. Some REAs gotta be feeling the pinch esp if they too drank the kool-aid. The recent “Proudly Sold Off-Market by___” sign in Turramurra a few weeks ago was an omen.

  2. Sales are strong at the moment in Sydneys inner west but this is only because there are half the usual number of houses (not apartments) up for sale. Currently at approximately 350 when usually this time of year the number would be close to 600. Its also a mixed bag of auction results. Some properties sell above reserve but many the sold prices are hidden and not openly reported which makes me wonder if prices have fully recovered … or not.

  3. A “great” story on ABC radio just now about a favourite location, Tarneit. ” I feel cheated”, “It’s becoming a slum” were some of the comments of vibrants who commute 2 hours each way for employment from bus and rail “ghost stops” that “service” this outlying area. https://www.abc.net.au/news/2019-10-09/tarneit-suburb-on-melbourne-fringe-feeling-growing-pains/11537562
    Wonder if they are still trying to flick contracts to buy on Gumtree?

    • Article distilled: we made a really dumb decision and we’re basically asking that someone bails us out / compensates us.

      I’ll start a whip round. Who’s in?

      • Charlie Daniels

        Sorry, I just gave $10 and a coffee to Frank , the homeless guy outside Wynyard Station trying to scrape up $35 so he can get a room for the night.
        These people can stop their fvcking whinging.

        • Haha, sucked in. Frank has a nice terrace in Lewisham, bought 35 years ago for $125,000.

          • Charlie Daniels

            I guess you’ll also try to tell me that Jasmine the dancer from Friday night isn’t really trying to pay for her Psychology degree at Macquarie Uni. She does live in Neutral Bay though, hmmm.

      • MountainGuinMEMBER

        They even complain how lack of public transport is impacting their property prices. Yes the lack impacts livability, but it doesn’t push prices down rather expectations of future price growth is lower. So even those most impacted by the model of population growth and more debt are still focused on prices rather than the massive hit to their quality of life.

      • One day they’ll look back and appreciate that they were at the vanguard of slum-living.

        Perhaps they’ll be awarded a medal, or something, in recognition.

      • LOL Harry, if you’ve ever driven out there (highly recommend it to get boots on the ground so to speak), then you’ll know it’s no picnic already. I wouldn’t want to live there. It’s similar to Donnybrook.

  4. TailorTrashMEMBER

    Round where I live 90% of the houses appear to be in the hands of the Chinese…..and they are not selling
    …..suspect this is the case in many suburbs of symelb

    • The Chinese near me all appear to drive Porsche Cayennes and high end Mercs. The ‘other’ Asians appear to be dirt poor by comparison.

      • Dominic that is a visual of who was successful in importing drugs as part of their migration. Simples.

    • I had wondered this too – a lot of Asian buying happened over the past few years, and perhaps they have no intention of selling.

  5. harry simpsonMEMBER

    Only low numbers of the top end of housing and premium home markets are still in demand with some prices slowly rising. The other 90% of the market houses continuing downwards. Don’t be a schmuck and get sucked into the new ‘housing recovery’ narrative by the spruikers!! Pile of desperate hype by the media, the RE machine and their sucker fish.

    • How’s the last 15 years of denial working out for you?

      Looking forward to the next few years of denial?

      • reusachtigeMEMBER

        I’ve come to the conclusion that many on here will never understand how things really work

        • The tard formerly known as bcnich

          I believe it’s caused by some form of mental retardation. See dominic above

    • You have 2 options.
      1. Buy now, be a winner thanks to QE and negative rates experiments…. admit that inflation is rampant (but only for housing).
      2. Hold off, watch your deposit get bailed in (hair cut) and then watch prices remain outside of wage growth for the next 10 years..

      I’m looking at option #1 (using low to no leverage)..

  6. This is what happens when you measure overall prices by the moves in the median of last weeks sales and demand slows making transaction volumes retreat. Only the better properties will sell.

    Take 5 properties on the market listed for 200, 300, 400, 500 and 600K.

    If demand is there and all of them sell for the list price the median is 400.

    BUT if they are not selling and the vendors accept a 10% reduced price, with only the better 3 selling then what does that look like?

    the sales are…. 360, 450 and 540…… a 10% reduction in prices but the median is now 450, not 400…. this looks like a 12.5% increase to the valuation assessment algorithm because they dont count the non sales.

    if they measured the median by counting the non sales as 0 the median would be 360 and reflect the actual 10% reduction, but they are too dependant on the appearance of increases.

    I used simple values to make a point but the same thing still applies to the current market.

  7. Presumably there’s little on offer because nobody wants to sell at a loss – defined as one cent below the peak of the market.

    • Yep. They don’t want to.

      And they don’t have to – because, thanks to the RBA, the interest on a $400k mortgage is $10k a year!!!.

      You could pay that in Centrelink benefits (literally!), if you needed to.

      Take in a boarder or do a cashie side-hustle and you’re golden, even if you’re unemployed.

      • The tard formerly known as bcnich

        Good point

        And yet u have clowns like north harping on about mortgage stress

      • Jumping jack flash

        That’s still 10K a year that must be extracted from the constantly dwindling pool of productive activities… So net impact on the economy from that 400K is still -10K per year.

        Better extract some equity and spend it quickly. Wait, what?

        • So what’s your point JJF? Nobody is arguing that the debt doesn’t come at a cost.

          It’s just that the cost is copped by the prudent. And the big gearers get the benefit.

          If you’re expecting firesales, you’ve got to be pretty patient and there is a high likelihood that you’ll end up disappointed – because dem interest rates – they’re low for a reason!

          • Jumping jack flash

            Not expecting firesales, only expecting infinite debt, for at least a while longer anyway.