Real estate companies hit property panic button

Yesterday, the CEO of property listings portal, REA Group, claimed the crash in property sales is “about as bad as it can get [and] it’s the worst market we’ve ever seen”.

Today, the boss of rival Domain Group has warned of an “extraordinary” shortage of properties for sale in Sydney and Melbourne:

Mr Pellegrino likened the current market to the 1990s, a time when an economic downturn hit the banks and Westpac posted a $1.6 billion loss. Australia was in a formal recession until the September quarter of 1991.

“It’s an extraordinary period,” Mr Pellegrino told The Sydney Morning Herald and The Age after Domain’s annual general meeting on Monday morning, adding real estate agents were also facing the same pressures of fewer listings…

Domain’s digital revenue was down 8 per cent for the year so far, compared to an 11 per cent decline in the fourth quarter in 2019. Total revenue was down 12 per cent over the period.

As I noted yesterday, property sales as a share of Australia’s dwelling stock has indeed fallen to the lowest level in at least 25 years:

And given both REA and Domain are turnover-based businesses, they are getting hammered.

This is a nice little analogy for state government stamp duties, which will likewise keep suffering despite any price rebound. And for federal government capital gains tax receipts.

Now that all of Australia’s institutions are working hand-in-hand to “manufacture” an upswing in the housing market, all fortunes should improve but for how long and how far remains an open question.

The bull trap scenario still lies in wait as monetary and fiscal stimulus is exhausted and the next external shock looms.

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.

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Comments

  1. TailorTrashMEMBER

    Well when all the good houses in good suburbs are already in the hands of Chinese who aren’t selling
    low sales are to be expected .

    On another front today saw one of those posters that scream out the headline news for one of Sydney’s silly “newspapers “

    “Developers demand that Berejiklian fix this construction
    mess “. Think the editor made a mistake …should have said taxpayers ……getitintaya straya!

  2. With only 10k of these government sponsored mortgages available in a country of 25 million people, is it enough to make a difference?

    Or will it just be a statistical blib that looks good in the LNP propaganda posters?

      • Apparently there’s only ten thousand of these.

        Yes they might open it up to middle income later as part of the “stimulus” but at this stage its still not a big number.

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