I'd heard that the Gold and Sunshine Coast property markets weren't faring that well but I had no idea quite how bad things were till I travelled up to Noosa for a short break. Sure, the same properties that were for sale 3mths, 6mths and 12mths ago are still for sale today, but that's often the case on the coasts, where the more expensive stuff in particular, takes a while to shift.
For example, I went to view a property on Noosa Sound (in Key Court) in 2007 that eventually sold in mid-May 2009 with a 20% haircut on the original asking price. The period that straddled May 2009, if you recall, was actually fairly strong for property.
Easter is traditionally a huge period for property sales in this part of the world, and after a disappointing Christmas for the spruikers, Easter 2011 was going to put the year and the market back on track -- or so some of the big knobs were saying in the press ahead of their "Gala Auction" events. I haven't yet looked at how all the agents got on yet but I thought I'd get the ball rolling with the Big 2:
Tom Offermann Real Estate was first up on Thursday, April 21st, at the Sheraton. They auctioned 17 properties that day (2 on-site) and sold a total of ZERO out of the 17. "It's our people that make the difference" -- so the marketing blurb goes, but I wouldn't wish to be overly critical at this juncture and it would only be fair to see if their competition fared any better.
Richardson & Wrench also held their "Gala" event at the Sheraton, two days later. The press insisted they had 11 properties on the block, although I counted only 10. R&W managed to secure ONE sale out of their 11 efforts and this was a Receiver's Sale i.e. a property that had been taken possession of and was going to be sold whatever. The property, 37 Mossman Court, sold for $3.5m which sounds quite a result, until you consider that this masterplan development would probably have been on the market for closer to $6m under ordinary circumstances.
I think it's fair then to conclude that, without the gift of a receiver's sale, the Big 2 agents in Noosa would have turned in a total of ZERO sales at one of the two most important marketing periods of the year. Added to this is the fact that there is an absolute mountain of other property for sale in the area. At some point, something's got to give.
The above two auction events/catastrophes (take your pick) were covered in the local press. In the Friday 29th edition of The Noosa Journal, the paper's Property Editor, Geoff Crocket, titled his report (buried on Pg 12 - why so coy?):
Easter a Treat for Auctions
"With stunning blue skies, full car parks and busy beaches, Noosa certainly turned on a treat for holiday-makers this Easter .... strong crowds at the two major in-room auction events .... On Thursday night ... 101 Noosa Parade, Noosa Sound provided the most excitement of the evening ... 11 bids bringing a buzz to the room and helping to bring the sale price to the $2 million mark." ($2m was clearly nowhere near reserve and this didn't sell)
"Easter Saturday's auction ... off to a solid start ... bidding for 37 Mossman ... reached $3.49m. Apartment 5, The Emerald, 42 Hastings Street, was another standout, sold under the hammer for $740,000."
Now, you would be forgiven for thinking, having read the key bits of the article, that these gala events were a raging success, with the author mentioning just 'one or two of the highlights' while the overall tone implies there were other successes. The actualite: 1 sale (under contract, post hammer) out of 28 lots. For those of you who've spotted the obvious mistake, let me clarify that Apt 5 at The Emerald is in fact available to view this Saturday and next, should you so desire. A curious state of affairs for a property that's apparently just "sold under the hammer", I'm sure you'll agree.
Thursday, April 28, 2011
Tuesday, April 19, 2011
Terry Ryder Strikes Again!
A local Western Burbs real estate agent, Zoe Diss, is desperate to break the home-buyer's strike on her patch. To do this, she's taken to sending articles by Terry Ryder, of the Australian, to her mailing list -- articles by a journalist who, one can only assume, is in the twighlight of his career. Mr Ryder, in one of his latest columns, has either been unable or unwilling to conduct any research of his own, preferring to fall back on some recent work by another (admittedly, part-time) journalist, Michael Matusik. You'd have thought that Mr Ryder, in choosing not to conduct his own research might have picked a reliable source to draw on, but he chose instead, to lean on Queensland's Chief Property Cheerleader, a man who has more than a vested interest in seeing the property boom continue for the forseeable future. It's hard to know whether Matusik is being disingenuous in his utterances or whether he's genuinely ignorant. Anyhow, Terry Ryder's latest article headlined:
Hysterical Bubble Talk Just A Load Of Hot Air
..goes through a list of reasons (all trotted out by Matusik, recently) why the Aussie property market won't crash. I've already knocked most of these reasons over in a past blog, but there are a few presented in Ryder's article that Australians can easily understand for themselves are downright rubbish -- it may just take me to highlight why this is the case.
One of Matusik's favourite comparisons is the US property market, because it has 'non-recourse' mortgages i.e. if you get fed up paying your mortgage over there then you can just hand back the keys and you have no further obligations to the lender. There's no doubt that this isn't great for banks and that this 'easy come, easy go' policy (only for those who don't have any equity in their home) can exacerbate a property glut. However, what Matusik fails to point out is that the Irish housing market, which has full-recourse mortgages (exactly the same as Australia does) has completely melted down and is in easily as bad shape, if not worse, than the US's market. So much for recourse over non-recourse, then. Does Matusik not know this? Or is this just too inconvenient a truth for him? Irrespective of the reasons for this oversight, it doesn't do his credibility a great deal of favours.
Back to Terry Ryder briefly: he claims ".... and, notably, Reserve Bank governor Glenn Stevens, agree we don’t have a price bubble...."
No shit, Sherlock! As if Glenn Stevens is going to admit to a property bubble on his watch. How many people in his position would admit to that while in office and then risk those comments setting in motion a house price crash. Clearly the journalistic threshold at Ryder's paper is lower than many imagine. If anyone out there is currently unemployed and fancies a crack at journalism, it seems you could do worse than apply to The Australian for a job.
Back to the inimitable Matusik whose anti-bubble arguments are so thin, that a one-year-old wielding a soft toy could poke holes in them:
He says: "...also odd to claim our homes are unaffordable when we have, still, one of the highest home ownership rates on the planet.."
What has high home ownership got to do with anything? He doesn't explain -- it's just left hanging out there as though the answer were obvious. His own paper, the Courier Mail, published an article earlier in the week, saying that a recent survey found that a staggering 40% of Queensland families were struggling to make ends meet given the recent hike in the price of just about everything non-discretionary. You add that claim to Matusik's own claim that "we have one of the highest home ownership rates on the planet" and it's hardly reason to crack open the Moet & Chandon -- in fact, it's the complete opposite -- it's time to be deeply concerned, particularly in the context of the future property prices.
And yet more rubbish from Matusik: "As long as our unemployment rate stays below 8 per cent (it’s currently around 5 per cent and steady), then falls in property values are unlikely."
Where he dug this up from is beyond me and he doesn't identify his source -- quite possibly, he dreamed it one night. Generally, I like to deal in facts though, so let me quote this in response: the US housing market peaked in July 2006 (source: the Case-Shiller Index), at which time US unemployment was around 5%. A full year later, the GFC kicked off, triggered by the falls in house prices. Right, there you have two 'Matusik myths' knocked straight over, the other being that you need some or other 'catalyst' to set in motion a price crash. Here the price falls were the catalyst for the GFC, rather than the other way round, as imagined by Queensland's premier property guru.
There's nothing like avoiding the facts when you're a journalist (not to mention doing some real research) and just plumping for a load of information (however dubious) which supports your particular viewpoint. Hats off, Terry Ryder, you're a credit (or perhaps that's debit?) to your profession.
Hysterical Bubble Talk Just A Load Of Hot Air
..goes through a list of reasons (all trotted out by Matusik, recently) why the Aussie property market won't crash. I've already knocked most of these reasons over in a past blog, but there are a few presented in Ryder's article that Australians can easily understand for themselves are downright rubbish -- it may just take me to highlight why this is the case.
One of Matusik's favourite comparisons is the US property market, because it has 'non-recourse' mortgages i.e. if you get fed up paying your mortgage over there then you can just hand back the keys and you have no further obligations to the lender. There's no doubt that this isn't great for banks and that this 'easy come, easy go' policy (only for those who don't have any equity in their home) can exacerbate a property glut. However, what Matusik fails to point out is that the Irish housing market, which has full-recourse mortgages (exactly the same as Australia does) has completely melted down and is in easily as bad shape, if not worse, than the US's market. So much for recourse over non-recourse, then. Does Matusik not know this? Or is this just too inconvenient a truth for him? Irrespective of the reasons for this oversight, it doesn't do his credibility a great deal of favours.
Back to Terry Ryder briefly: he claims ".... and, notably, Reserve Bank governor Glenn Stevens, agree we don’t have a price bubble...."
No shit, Sherlock! As if Glenn Stevens is going to admit to a property bubble on his watch. How many people in his position would admit to that while in office and then risk those comments setting in motion a house price crash. Clearly the journalistic threshold at Ryder's paper is lower than many imagine. If anyone out there is currently unemployed and fancies a crack at journalism, it seems you could do worse than apply to The Australian for a job.
Back to the inimitable Matusik whose anti-bubble arguments are so thin, that a one-year-old wielding a soft toy could poke holes in them:
He says: "...also odd to claim our homes are unaffordable when we have, still, one of the highest home ownership rates on the planet.."
What has high home ownership got to do with anything? He doesn't explain -- it's just left hanging out there as though the answer were obvious. His own paper, the Courier Mail, published an article earlier in the week, saying that a recent survey found that a staggering 40% of Queensland families were struggling to make ends meet given the recent hike in the price of just about everything non-discretionary. You add that claim to Matusik's own claim that "we have one of the highest home ownership rates on the planet" and it's hardly reason to crack open the Moet & Chandon -- in fact, it's the complete opposite -- it's time to be deeply concerned, particularly in the context of the future property prices.
And yet more rubbish from Matusik: "As long as our unemployment rate stays below 8 per cent (it’s currently around 5 per cent and steady), then falls in property values are unlikely."
Where he dug this up from is beyond me and he doesn't identify his source -- quite possibly, he dreamed it one night. Generally, I like to deal in facts though, so let me quote this in response: the US housing market peaked in July 2006 (source: the Case-Shiller Index), at which time US unemployment was around 5%. A full year later, the GFC kicked off, triggered by the falls in house prices. Right, there you have two 'Matusik myths' knocked straight over, the other being that you need some or other 'catalyst' to set in motion a price crash. Here the price falls were the catalyst for the GFC, rather than the other way round, as imagined by Queensland's premier property guru.
There's nothing like avoiding the facts when you're a journalist (not to mention doing some real research) and just plumping for a load of information (however dubious) which supports your particular viewpoint. Hats off, Terry Ryder, you're a credit (or perhaps that's debit?) to your profession.
Monday, April 18, 2011
High Costs Begin to Bite Hard
A diversion from housing today albeit there are some inevitable links.
It's funny, isn't it, how the perceived increase in the cost of living never appears to be reflected in the official government stats? High inflation has consequences for wage settlements and interest rates, of course, and the last thing the Aussie housing market needs now is another round of rate rises, while the tax-payer could do without being saddled with a higher public-sector wage bill. That said, if the RBA needed an excuse to raise rates again, I'm sure inflation could be made to 'rise' again.
My friends at the Courier Mail ran with a story yesterday suggesting that as many as 40% of Queenslanders are now struggling to make ends meet, given recent hikes in food, utility and fuel prices. While I've personally been aware of the sharp increase in the cost of living, even I was shocked at the 40% number, which, if accurate, is even more of a reason to worry about the medium-term future of the housing market in Queensland. The theory goes that home-owners will hang onto their homes for grim death and will sell the shirt off their backs before handing the keys over to the bank and I'm willing to go along with that, but default willbe unavoidable for an increasing number of us, while the tought of "trading up" will be furthest from our minds. It's this trading up (along with plentiful credit) that keeps the housing Ponzi going -- and prices going up. If moving or trading up stops and first home-buyers (FHBs) disappear, the pyramid effectively starts to collapse on itself.
But enough of housing because that isn't today's bugbear. No, today my bile is reserved for Australia's large and dominant retailers -- you know, the ones that had a public whinge about Australians shopping abroad online. The Australian Dollar, as everyone knows, has appreciated north of 30% against a basket of major currencies over the past 2yrs and this makes the Cost of Goods for Australian retailers a hell of a lot cheaper. However, instead of passing on these savings to their customers the greedy retailers have decided instead to pocket the higher margins while throwing the odd bone, in the form a few "Specials", our way.
Then, when the consumer, fed up to the back teeth from being gouged by the likes of Gerry Harvey and friends decides to shop abroad, GH and Co get shirty and try to force the government to tax these imports. I firmly believe most Australians get what's going on here, and that being the case, I only hope for the sakes of these retailing tycoons that they have adequate security, because the people they've been merrily robbing all these years have a right to be furious with them. A high Aussie Dollar should be helping to mitigate (through cheaper foreign imports) the inflation being felt in other areas, but it isn't -- thanks to a few money-grubbing retailing types. As the non-resources part of the economy continues to struggle, so too will Australia's big retailers and I can't say that I'll be shedding a tear as their earnings progressively slip into the abyss over the next year or two.
No doubt they're furiously lobbying the government as we speak, threatening headline grabbing redundancies if the government doesn't act -- lobbying that's sure to intensify the closer to the next election we get. Of course, this would require Tony Abbot's LNP to come out behind the retailers on a "save Aussie jobs" ticket, a noble cause, no doubt, but one that I believe would be a nail in Abbot's coffin, because Australians have simply had enough.
It's funny, isn't it, how the perceived increase in the cost of living never appears to be reflected in the official government stats? High inflation has consequences for wage settlements and interest rates, of course, and the last thing the Aussie housing market needs now is another round of rate rises, while the tax-payer could do without being saddled with a higher public-sector wage bill. That said, if the RBA needed an excuse to raise rates again, I'm sure inflation could be made to 'rise' again.
My friends at the Courier Mail ran with a story yesterday suggesting that as many as 40% of Queenslanders are now struggling to make ends meet, given recent hikes in food, utility and fuel prices. While I've personally been aware of the sharp increase in the cost of living, even I was shocked at the 40% number, which, if accurate, is even more of a reason to worry about the medium-term future of the housing market in Queensland. The theory goes that home-owners will hang onto their homes for grim death and will sell the shirt off their backs before handing the keys over to the bank and I'm willing to go along with that, but default willbe unavoidable for an increasing number of us, while the tought of "trading up" will be furthest from our minds. It's this trading up (along with plentiful credit) that keeps the housing Ponzi going -- and prices going up. If moving or trading up stops and first home-buyers (FHBs) disappear, the pyramid effectively starts to collapse on itself.
But enough of housing because that isn't today's bugbear. No, today my bile is reserved for Australia's large and dominant retailers -- you know, the ones that had a public whinge about Australians shopping abroad online. The Australian Dollar, as everyone knows, has appreciated north of 30% against a basket of major currencies over the past 2yrs and this makes the Cost of Goods for Australian retailers a hell of a lot cheaper. However, instead of passing on these savings to their customers the greedy retailers have decided instead to pocket the higher margins while throwing the odd bone, in the form a few "Specials", our way.
Then, when the consumer, fed up to the back teeth from being gouged by the likes of Gerry Harvey and friends decides to shop abroad, GH and Co get shirty and try to force the government to tax these imports. I firmly believe most Australians get what's going on here, and that being the case, I only hope for the sakes of these retailing tycoons that they have adequate security, because the people they've been merrily robbing all these years have a right to be furious with them. A high Aussie Dollar should be helping to mitigate (through cheaper foreign imports) the inflation being felt in other areas, but it isn't -- thanks to a few money-grubbing retailing types. As the non-resources part of the economy continues to struggle, so too will Australia's big retailers and I can't say that I'll be shedding a tear as their earnings progressively slip into the abyss over the next year or two.
No doubt they're furiously lobbying the government as we speak, threatening headline grabbing redundancies if the government doesn't act -- lobbying that's sure to intensify the closer to the next election we get. Of course, this would require Tony Abbot's LNP to come out behind the retailers on a "save Aussie jobs" ticket, a noble cause, no doubt, but one that I believe would be a nail in Abbot's coffin, because Australians have simply had enough.
Saturday, April 16, 2011
Burbs Auctions April 16th - Update
84 Long Street West: a new contemporary-look house on a block just under 600sqm.
I must admit, I didn't think this property had a cat-in-hell's chance of making the $1m mark, possibly because it's just a large ugly box with a nice paint job. Clearly, BCC's Planning department, is still open to incentives in exchange for permission to build modern eye-sores in character suburbs. It's the type of house that's just about acceptable in a rundown inner-city suburb. But I digress.
The Bidding opened, after much cajoling, at $850k and the auctioneer painstakingly dragged it toward the $950k mark before the vendor had to step in at $1m to get things going again. I thought proceedings would conclude on the vendor bid but someone (unsighted by me) took it to $1.05m, at which point another bidder went to $1.06m but the auctioneer appeared reluctant to go to $10k increments albeit he accepted the higher bid. At this point, the unsighted bidder decided to move the bid straight to $1.1m from $1.06m. Maybe it's just me, but that seems a little strange (why pay $1.1m when you could potentially pay 1.07m, etc). I've seen something similar happen at an auction run by this agency in the recent past. I had to leave at this point (much to my regret) but I don't think this sold, and certainly, the reluctance of the auctioneer to move to $10k increments at the $1.05m mark suggests to me that the vendor target price was well north of this. As I said previously, I thought the property would be lucky to reach the $1m mark and was staggered when it failed to be declared "on the market" at $1.05m
To 121 (?) Hassall Street now for the auction of a small post-war house on 1300sqm (much of it sloping away). Having been on the market for several months without success, the owners clearly grew impatient and an auction was announced. When it initially went on the market, the agent said he was looking for an offer in the $1.3m area. At the auction, two bidders took the bidding to $820k at which point it was declared on the market and went under the hammer at $835k. Now, that is an impressive revision of vendor expectations: $1.3m to $835k. That's a 36% discount to the original asking price! I'd love to know how that came about. Perhaps I'll knock on their door and ask.
**I have since rung the agent about Long Street West and a colleague of his informed me that the property went under contract post the auction at 'north of $1.2m'. The listing has yet to be removed from realestate.com.au or identified as Under Contract. While not that unusual in itself, it'll be worth watching to see whether this transaction completes.
I must admit, I didn't think this property had a cat-in-hell's chance of making the $1m mark, possibly because it's just a large ugly box with a nice paint job. Clearly, BCC's Planning department, is still open to incentives in exchange for permission to build modern eye-sores in character suburbs. It's the type of house that's just about acceptable in a rundown inner-city suburb. But I digress.
The Bidding opened, after much cajoling, at $850k and the auctioneer painstakingly dragged it toward the $950k mark before the vendor had to step in at $1m to get things going again. I thought proceedings would conclude on the vendor bid but someone (unsighted by me) took it to $1.05m, at which point another bidder went to $1.06m but the auctioneer appeared reluctant to go to $10k increments albeit he accepted the higher bid. At this point, the unsighted bidder decided to move the bid straight to $1.1m from $1.06m. Maybe it's just me, but that seems a little strange (why pay $1.1m when you could potentially pay 1.07m, etc). I've seen something similar happen at an auction run by this agency in the recent past. I had to leave at this point (much to my regret) but I don't think this sold, and certainly, the reluctance of the auctioneer to move to $10k increments at the $1.05m mark suggests to me that the vendor target price was well north of this. As I said previously, I thought the property would be lucky to reach the $1m mark and was staggered when it failed to be declared "on the market" at $1.05m
To 121 (?) Hassall Street now for the auction of a small post-war house on 1300sqm (much of it sloping away). Having been on the market for several months without success, the owners clearly grew impatient and an auction was announced. When it initially went on the market, the agent said he was looking for an offer in the $1.3m area. At the auction, two bidders took the bidding to $820k at which point it was declared on the market and went under the hammer at $835k. Now, that is an impressive revision of vendor expectations: $1.3m to $835k. That's a 36% discount to the original asking price! I'd love to know how that came about. Perhaps I'll knock on their door and ask.
**I have since rung the agent about Long Street West and a colleague of his informed me that the property went under contract post the auction at 'north of $1.2m'. The listing has yet to be removed from realestate.com.au or identified as Under Contract. While not that unusual in itself, it'll be worth watching to see whether this transaction completes.
Friday, April 15, 2011
Burbs Housing Market Update
In my Sub Million Dollar Houses blog I included an update of the local market using information gleaned from the Courier Mail's Property Section and the website, www.realestate.com.au. This was sales data for the week April 2nd to Apr 8th.
I've repeated the exercise this week -- Apr 9th to 15th:
The good news is that there appears (optically, at least) to have been more sales in this past week i.e. the sales data column is longer, so I'm willing to accept that the total number of sales was higher (not very scientific and it may not actually be true but let's look on the brightside). The more pertinent data came in as follows (this includes houses and units only):
Total published property sales for the Western Burbs, plus surrounding areas: 4 (prior week, 3)
Total published property sales for the Western Burbs only: 2 (prior week, zero)
Total property sales for the Western Burbs, plus surrounding areas over $500k: 2 (prior week, 3)
Total published property sales for All Brisbane over $500k: 30 (prior week, 33)
Total published property sales for All Brisbane over $1m: 1 (prior week,3)
As I discussed in a previous blog, some simple research lead me to conclude that there are at least 1,000 properties across the Brisbane metropolitan area for sale in the $1m+ category, and the actual number is likely to be north of 1,250. With one published sale over $1m this week, you can see that there is quite an overhang (to put it mildly). I'll be mightily impressed if that clears without any serious impairment to the overall level of prices. In truth, we haven't really seen a clear move lower in prices across the board -- this is still some way off. We're in a classic seller standoff, where there's preference to hold out for the right price or simply withdraw properties from the market altogether, but the pressure on prices is building all the time and eventually they'll crack, leading to many sellers taking to a more 'proactive stance'. Then it becomes a race to the bottom, while buyers stay on the sidelines to observe. Bear in mind that all those properties that have been withdrawn for now are effectively part of the overall supply number, because they'll be back just as soon as a) the market firms up or b) the markeet cracks.
I've repeated the exercise this week -- Apr 9th to 15th:
The good news is that there appears (optically, at least) to have been more sales in this past week i.e. the sales data column is longer, so I'm willing to accept that the total number of sales was higher (not very scientific and it may not actually be true but let's look on the brightside). The more pertinent data came in as follows (this includes houses and units only):
Total published property sales for the Western Burbs, plus surrounding areas: 4 (prior week, 3)
Total published property sales for the Western Burbs only: 2 (prior week, zero)
Total property sales for the Western Burbs, plus surrounding areas over $500k: 2 (prior week, 3)
Total published property sales for All Brisbane over $500k: 30 (prior week, 33)
Total published property sales for All Brisbane over $1m: 1 (prior week,3)
As I discussed in a previous blog, some simple research lead me to conclude that there are at least 1,000 properties across the Brisbane metropolitan area for sale in the $1m+ category, and the actual number is likely to be north of 1,250. With one published sale over $1m this week, you can see that there is quite an overhang (to put it mildly). I'll be mightily impressed if that clears without any serious impairment to the overall level of prices. In truth, we haven't really seen a clear move lower in prices across the board -- this is still some way off. We're in a classic seller standoff, where there's preference to hold out for the right price or simply withdraw properties from the market altogether, but the pressure on prices is building all the time and eventually they'll crack, leading to many sellers taking to a more 'proactive stance'. Then it becomes a race to the bottom, while buyers stay on the sidelines to observe. Bear in mind that all those properties that have been withdrawn for now are effectively part of the overall supply number, because they'll be back just as soon as a) the market firms up or b) the markeet cracks.
Thursday, April 14, 2011
Naughty Naughty!
If times are tough for estate agents in the Burbs, times are tougher in the Boom Bust Belt that is the Gold and Sunshine coasts. These areas are For Sale -- in a big way.
Someone I know just received a Noosa Property Alert for a property that has just been reduced by $1m (!!) for an urgent sale. The price? $3.8m. Ugly stuff, indeed ..... until I took a look at the property details and decided something smelt a bit fishy - which may not ordinarily have been unreasonable given the property's proximity to Noosa Sound, but here's where I have an issue:
My rudimentary maths tells me that, if a property is on the market for $3.8m having just been reduced by $1m, then it's previous sale price must have been $4.8m (don't hesitate to shout if I've gone wrong somewhere here). Now, don't ask me how or why, but I know that over the past couple of years the average asking price of a fancy new-build house on Noosa Parade has fallen into the $4m to $5m bracket but the aforementioned property is an old, un-renovated house which could not (in my estimation) have been valued anywhere near $4.8m. I checked the website On the House which has (largely) reliable data and it suggested that this property, 10 Noosa Parade, had been listed for sale at various prices over the past few months varying between $3m and $4m, which only supports my contention that this alleged $1m price reduction is dubious, to say the least.
The marketing agent is Tom Offerman Real Estate, which, by a happy coincidence, is also marketing 8 Noosa Parade. Here too the sales pitch claims a $1m price reduction: "Was $4million, Must Be Sold, Now $3million".
I did wonder whether the real estate industry had any rules pertaining to "markdowns" in prices i.e. the property concerned needs to have been marketed at the elevated price for a minimum period of time before the agent is then allowed to say the price has been reduced. And if there are no rules relating specifically to this practice, are the agents free to tell bare-faced lies?
Someone I know just received a Noosa Property Alert for a property that has just been reduced by $1m (!!) for an urgent sale. The price? $3.8m. Ugly stuff, indeed ..... until I took a look at the property details and decided something smelt a bit fishy - which may not ordinarily have been unreasonable given the property's proximity to Noosa Sound, but here's where I have an issue:
My rudimentary maths tells me that, if a property is on the market for $3.8m having just been reduced by $1m, then it's previous sale price must have been $4.8m (don't hesitate to shout if I've gone wrong somewhere here). Now, don't ask me how or why, but I know that over the past couple of years the average asking price of a fancy new-build house on Noosa Parade has fallen into the $4m to $5m bracket but the aforementioned property is an old, un-renovated house which could not (in my estimation) have been valued anywhere near $4.8m. I checked the website On the House which has (largely) reliable data and it suggested that this property, 10 Noosa Parade, had been listed for sale at various prices over the past few months varying between $3m and $4m, which only supports my contention that this alleged $1m price reduction is dubious, to say the least.
The marketing agent is Tom Offerman Real Estate, which, by a happy coincidence, is also marketing 8 Noosa Parade. Here too the sales pitch claims a $1m price reduction: "Was $4million, Must Be Sold, Now $3million".
I did wonder whether the real estate industry had any rules pertaining to "markdowns" in prices i.e. the property concerned needs to have been marketed at the elevated price for a minimum period of time before the agent is then allowed to say the price has been reduced. And if there are no rules relating specifically to this practice, are the agents free to tell bare-faced lies?
Financial Review: Major Banks are Lowering Lending Standards
A few weeks ago there was an article in the AFR outlining how lending standards were being lowered in order to encourage borrowing i.e. we're back to the heady days of 95 or 97% mortgages, capitalisation of the mortgage indemnity fee, and so on. Now, call me odd, but this article just set the alarm bells clanging for me.
And I think it would too for anyone who was in possession of at least one brain-cell: "Come on folks, it's time to leverage yourselves to the eyeballs just as the housing market crash is beginning to gather pace." Isn't this just downright immoral?
And I think it would too for anyone who was in possession of at least one brain-cell: "Come on folks, it's time to leverage yourselves to the eyeballs just as the housing market crash is beginning to gather pace." Isn't this just downright immoral?
Spruiker BS Alert!
Hardly a revelation but the Western Burbs' favourite spruiking duo have just issued their latest "Market Update" in which they shamelessly deny the market is weak -- in fact "it's quite the opposite" -- they then support this thesis by trotting out some spurious theory to illustrate why the market's never been hotter. Apparently, the fewer listings in Q1'11 versus Q1'10 mean that the supply/demand balance heavily favours sellers:
"..with such little competition in the market ... if you're thinking of selling, now might be the best time to do so."
Personally, I'm willing to take the other side of that. What is true, however, is this -- if you have to sell anytime in the next year or two you'd be better off doing it now and taking the first vaguely sensible offer. Putting it off in the hope of a recovery in the coming months is likely to seriously damage your wealth, particularly if you're already 'committed elsewhere'. If you don't need to sell at all, don't waste your time. Take holiday, consider a new hair-style , take up a hobby -- do anything but worry about the value of your property.
The Housing Finance figure from the ABS on April 6th was awful -- the lowest in 32 years. This follows three months of low commitments. First home buyer commitments have fallen off a cliff. This does not bode well, to put it mildly. What is going to stem the current weakness in property? The goverment stepping in with new incentives? Unlikely -- there's a danger that even drawing attention to the weakness would precipitate a sharper fall. Will the RBA reverse direction? I'm not sure -- depends on Glenn Stevens' willingness to eat humble pie. It would be an admission of failure on his part and he strikes me as some who's quite strongwilled. Once he's made a decision etc.....
A fullblown crisis might be a game-changer, though. We won't have that long to wait to find out.
"..with such little competition in the market ... if you're thinking of selling, now might be the best time to do so."
Personally, I'm willing to take the other side of that. What is true, however, is this -- if you have to sell anytime in the next year or two you'd be better off doing it now and taking the first vaguely sensible offer. Putting it off in the hope of a recovery in the coming months is likely to seriously damage your wealth, particularly if you're already 'committed elsewhere'. If you don't need to sell at all, don't waste your time. Take holiday, consider a new hair-style , take up a hobby -- do anything but worry about the value of your property.
The Housing Finance figure from the ABS on April 6th was awful -- the lowest in 32 years. This follows three months of low commitments. First home buyer commitments have fallen off a cliff. This does not bode well, to put it mildly. What is going to stem the current weakness in property? The goverment stepping in with new incentives? Unlikely -- there's a danger that even drawing attention to the weakness would precipitate a sharper fall. Will the RBA reverse direction? I'm not sure -- depends on Glenn Stevens' willingness to eat humble pie. It would be an admission of failure on his part and he strikes me as some who's quite strongwilled. Once he's made a decision etc.....
A fullblown crisis might be a game-changer, though. We won't have that long to wait to find out.
Monday, April 11, 2011
Real Estate Agent Lived Under Stone for Nine Months -- Official
Yes, folks, it's official. Your author has recently discovered hard evidence that a local estate agent has been living under a stone for at least the last nine months. I was just perusing the local house listings for our leafy 'burb when I happened across a new property for sale in Allardyce street in Graceville. The detail is a little more sketchy than I'd ordinarily expect, but the available photos suggest a modestly sized house on a confirmed 700sqm of land. The price? An eye-watering $895k! This is the kind of money that was fetched by a renovator on a (slightly) larger block in one of Chelmer's more prestigious high-side streets when the market was at its frothiest i.e. some nine months ago.
Now, I'm no snob, but I do know for a fact that Chelmer's "high-side" sells for a hefty premium over Graceville's "low side" and I wouldn't be surprised to discover that this premium has in fact grown since the recent floods. What on earth possessed the agent to suggest such a price-tag? Yes it's true, they could be masochists.... Personally, I wouldn't fancy doing endless viewings and open houses on a property that had absolutely zero chance of selling at such a nosebleed level. In fact, I'm not certain a 25% haircut would make a lot of difference to the chances. Then again, an agent did recently confide to me that the vendors themselves often called the shots on pricing, so one could view securing the mandate as a 'free option' -- that's if you don't mind the endless hours of fruitless marketing. Anyway, I think it would only be right that someone take this agent aside and point out to them that, while they were living under their stone, the housing market peaked and has been on a steady decline ever since, with recent evidence suggesting that the pace of decline may be picking up. At least, this way, the disappointment of failure won't be as great for the poor soul.
As an aside, the above property may not be the worst offender in the "Egregiously Over-priced" stakes. I did spy a small block of land for sale on the Oxley Road, that comes with planning permission for four 2-bed units, "reasonably priced" (the agent's words) at $1.5m. Mmmm....
Time once again for the cigarette packet and my trusty biro. I reckon you'd struggle to sell a 2-bed unit on the Oxley Rd for much more than $400k (and that's being somewhat generous -- in truth, $300k is more realistic).
But, let's don the rose-tinted spectacles for the sake of this exercise. I bet you've already done the rough mental calculation and concluded that $1.5m is easily 100% over-priced? Four units at $400k gives you a total of $1.6m, which would represent a return of around zero after costs and assuming you didn't spend a dollar building the units. Sounds like a bargain at $1.5m, then!
On closer inspection, it became apparent that the agent with the mandate is based in New Farm. Doing what I do best, I shall go out on a limb here and suggest that land prices in New Farm and Corinda may not be comparable, but I stand to be corrected given the agent's undoubted genius in securing a mandate so far away from his usual patch.
Now, I'm no snob, but I do know for a fact that Chelmer's "high-side" sells for a hefty premium over Graceville's "low side" and I wouldn't be surprised to discover that this premium has in fact grown since the recent floods. What on earth possessed the agent to suggest such a price-tag? Yes it's true, they could be masochists.... Personally, I wouldn't fancy doing endless viewings and open houses on a property that had absolutely zero chance of selling at such a nosebleed level. In fact, I'm not certain a 25% haircut would make a lot of difference to the chances. Then again, an agent did recently confide to me that the vendors themselves often called the shots on pricing, so one could view securing the mandate as a 'free option' -- that's if you don't mind the endless hours of fruitless marketing. Anyway, I think it would only be right that someone take this agent aside and point out to them that, while they were living under their stone, the housing market peaked and has been on a steady decline ever since, with recent evidence suggesting that the pace of decline may be picking up. At least, this way, the disappointment of failure won't be as great for the poor soul.
As an aside, the above property may not be the worst offender in the "Egregiously Over-priced" stakes. I did spy a small block of land for sale on the Oxley Road, that comes with planning permission for four 2-bed units, "reasonably priced" (the agent's words) at $1.5m. Mmmm....
Time once again for the cigarette packet and my trusty biro. I reckon you'd struggle to sell a 2-bed unit on the Oxley Rd for much more than $400k (and that's being somewhat generous -- in truth, $300k is more realistic).
But, let's don the rose-tinted spectacles for the sake of this exercise. I bet you've already done the rough mental calculation and concluded that $1.5m is easily 100% over-priced? Four units at $400k gives you a total of $1.6m, which would represent a return of around zero after costs and assuming you didn't spend a dollar building the units. Sounds like a bargain at $1.5m, then!
On closer inspection, it became apparent that the agent with the mandate is based in New Farm. Doing what I do best, I shall go out on a limb here and suggest that land prices in New Farm and Corinda may not be comparable, but I stand to be corrected given the agent's undoubted genius in securing a mandate so far away from his usual patch.
Sunday, April 10, 2011
Sub Million Dollar Houses
As a follow-up to my Million Dollar Houses blog I thought I'd extend my research a bit because I wouldn't want to be accused of focusing solely on the high-end stuff, which of course is potentially not reflective of the real world.
So, I grabbed the lastest copy of the Courier Mail's Property Section and logged on to www.realestate.com.au and set to work. According to the latest CM there were 33 sales (including houses and units) over the $500k mark in the past week (Apr 2nd to Apr 8th) across all Brisbane and according to the aforementioned website there are 631 properties for sale in the Western Burbs and surrounding areas alone in the $500k+ bracket. Referring to the Recent Sales Results page in the CM, the total sales in the Western Burbs in this segment amounted to: zero. When you include the surrounding areas (Fig Tree Pocket, Taringa, St Lucia, Indooroopilly, Tennyson, Yerongpilly etc) the total sales in this bracket amounted to: 3.
At that sales pace, it would take in excess of 4 years to clear the existing inventory alone. I'm going to stick my neck out at this point and suggest that many of these sellers may not be willing or have the capacity to wait that long and will need to engage with reality sooner rather than later and drop their prices - probably quite significantly. This will eventually re-price the entire market.
I know the above is "research" is not particularly scientific and I know that some sales don't make it to the Recent Results section of the CM's Property section (why not, I couldn't say -- you'd have thought that with housing sales now about as rare as a white truffle in K-Mart, that spruikers would be shouting every one from the rooftops), but by the same token, not every property that's for sale appears on realestate.com.au, so we'll call that one quits, I think. In short, there's enough in these stats to give an accurate picture of the market today.
P.S. In my Million Dollar House blog I challenged the assertion by some local agents that there are 148 properties for sale over the magic $1m mark in all of Brisbane and thought the number was closer to 1,000. This morning, consuming all of about 36 and a half seconds of my time, a search on realestate.com.au reveals there are in excess of 739 properties for sale over $1m. I must confess, I was somewhat surprised that this number was that low, so I delved a little deeper and discovered that my Brisbane City - Greater Region search actually only covers the CBD and inner Brisbane suburbs i .e only as far west as St Lucia (for example). I'm cannot find a way to do a single broader search on realestate.com.au that covers the outer suburbs as well but my estimate of 1,000 properties over the $1m mark now looks somewhat light. As I mentioned recently, there are 200 properties in the Western Burbs and surrounds over that mark alone. These numbers are worth keeping an eye on over the coming months because I fail to see any catalyst that would drive a spate of buying to start clearing this inventory. Even if there was a willingness to do so, it looks very much like the market's severe unaffordability is finally beginning to tell.
So, I grabbed the lastest copy of the Courier Mail's Property Section and logged on to www.realestate.com.au and set to work. According to the latest CM there were 33 sales (including houses and units) over the $500k mark in the past week (Apr 2nd to Apr 8th) across all Brisbane and according to the aforementioned website there are 631 properties for sale in the Western Burbs and surrounding areas alone in the $500k+ bracket. Referring to the Recent Sales Results page in the CM, the total sales in the Western Burbs in this segment amounted to: zero. When you include the surrounding areas (Fig Tree Pocket, Taringa, St Lucia, Indooroopilly, Tennyson, Yerongpilly etc) the total sales in this bracket amounted to: 3.
At that sales pace, it would take in excess of 4 years to clear the existing inventory alone. I'm going to stick my neck out at this point and suggest that many of these sellers may not be willing or have the capacity to wait that long and will need to engage with reality sooner rather than later and drop their prices - probably quite significantly. This will eventually re-price the entire market.
I know the above is "research" is not particularly scientific and I know that some sales don't make it to the Recent Results section of the CM's Property section (why not, I couldn't say -- you'd have thought that with housing sales now about as rare as a white truffle in K-Mart, that spruikers would be shouting every one from the rooftops), but by the same token, not every property that's for sale appears on realestate.com.au, so we'll call that one quits, I think. In short, there's enough in these stats to give an accurate picture of the market today.
P.S. In my Million Dollar House blog I challenged the assertion by some local agents that there are 148 properties for sale over the magic $1m mark in all of Brisbane and thought the number was closer to 1,000. This morning, consuming all of about 36 and a half seconds of my time, a search on realestate.com.au reveals there are in excess of 739 properties for sale over $1m. I must confess, I was somewhat surprised that this number was that low, so I delved a little deeper and discovered that my Brisbane City - Greater Region search actually only covers the CBD and inner Brisbane suburbs i .e only as far west as St Lucia (for example). I'm cannot find a way to do a single broader search on realestate.com.au that covers the outer suburbs as well but my estimate of 1,000 properties over the $1m mark now looks somewhat light. As I mentioned recently, there are 200 properties in the Western Burbs and surrounds over that mark alone. These numbers are worth keeping an eye on over the coming months because I fail to see any catalyst that would drive a spate of buying to start clearing this inventory. Even if there was a willingness to do so, it looks very much like the market's severe unaffordability is finally beginning to tell.
Are Real Estate Agents About to Change Tack?
Real estate agents .... three words that have the capacity to send a shiver down the spine. Down the spines of buyers, mainly, in recent times, but this may be about to change, and the reason is this:
The property market has been running hot for the best part of the past ten years and buyers have had to bear the brunt of nauseating spin and blatant lies -- all designed to puff panicked souls into hopping onto the ladder before "prices take off" for the stratosphere and it all becomes too unaffordable. Believe me, a significant chunk of the people who have bought in the past five years have been motivated by this very fear. There have been plenty of speculative purchases too, but when those go sour few tears will be shed. Sympathy should be reserved for the poor souls who have mortgaged themselves to the hilt and may be marginal cases if the market does collapse.
But here's the thing: with the market now definitively on the back-foot, RE agents simply don't have the leverage over buyers that they once did -- the lies and spin simply don't work anymore because any fool knows now that there really is no need whatsoever to rush in. Patience and not panic is the order of the day -- and for the forseeable future. Real estate agents then potentially face a bleak few years ahead unless they're able to keep the old sales turnover going. It's a case of adapt or die (not literally, of course, joining the dole queue might feel like you have done). So, if they can no longer execute sales by leaning on the buyers, what do they do? That's right, they start to lean on the sellers -- the panic will be going in the other direction this time i.e. "These are the worst conditions I've experienced in my 30yr career--you should really consider any vaguely decent offer; If you pass this up now, the next offer may be a lot lower; There's a bloodbath ahead for the property market". And so on. In doing this, of course, the agents will be assisting the market lower, which is ironic, if only for the fact that just about every sale in prior months and years will have been achieved after assurances that the market was likely to double again in the next 5 yrs or so -- you know the score by now: resources, China, well-heeled migrants etc.
There is a bullish alternative that can be spun, I grant you i.e. that the 'shrewd' or 'astute' buyer steps into the market when all the rest are standing on the sidelines, however, the truly shrewd buyer does not step in at the start of a correction in prices to catch the proverbial falling knife , which is where we appear to be right now. In any event, agents will find themselves having to be bullish with buyers and bearish with sellers, so one of the new skills learned by spruikers will be to ensure conversations with each party are not over-heard by the other.
The property market has been running hot for the best part of the past ten years and buyers have had to bear the brunt of nauseating spin and blatant lies -- all designed to puff panicked souls into hopping onto the ladder before "prices take off" for the stratosphere and it all becomes too unaffordable. Believe me, a significant chunk of the people who have bought in the past five years have been motivated by this very fear. There have been plenty of speculative purchases too, but when those go sour few tears will be shed. Sympathy should be reserved for the poor souls who have mortgaged themselves to the hilt and may be marginal cases if the market does collapse.
But here's the thing: with the market now definitively on the back-foot, RE agents simply don't have the leverage over buyers that they once did -- the lies and spin simply don't work anymore because any fool knows now that there really is no need whatsoever to rush in. Patience and not panic is the order of the day -- and for the forseeable future. Real estate agents then potentially face a bleak few years ahead unless they're able to keep the old sales turnover going. It's a case of adapt or die (not literally, of course, joining the dole queue might feel like you have done). So, if they can no longer execute sales by leaning on the buyers, what do they do? That's right, they start to lean on the sellers -- the panic will be going in the other direction this time i.e. "These are the worst conditions I've experienced in my 30yr career--you should really consider any vaguely decent offer; If you pass this up now, the next offer may be a lot lower; There's a bloodbath ahead for the property market". And so on. In doing this, of course, the agents will be assisting the market lower, which is ironic, if only for the fact that just about every sale in prior months and years will have been achieved after assurances that the market was likely to double again in the next 5 yrs or so -- you know the score by now: resources, China, well-heeled migrants etc.
There is a bullish alternative that can be spun, I grant you i.e. that the 'shrewd' or 'astute' buyer steps into the market when all the rest are standing on the sidelines, however, the truly shrewd buyer does not step in at the start of a correction in prices to catch the proverbial falling knife , which is where we appear to be right now. In any event, agents will find themselves having to be bullish with buyers and bearish with sellers, so one of the new skills learned by spruikers will be to ensure conversations with each party are not over-heard by the other.
Saturday, April 9, 2011
The 'Catalyst' Myth
According to any number of property pundits, experts and spruikers here in Australia, house prices will not crash because, in order to do so, would require some kind of 'catalyst'. The GFC came and went without incident, so if that doesn't prove how solid the market is here, then what does? The pundits have decided amongst them that only a spike in unemployment can threaten the rampant progress of the property market in "The Lucky Country" -- and look where that is: 5% and declining ...
As discussed in a previous blog, this is a complete myth. The U.S. housing market started declining when unemployment there was at 5% i.e. there was no real catalyst -- at least not from unemployment. Unemployment started to spike at least 18 months after the housing peak. While it's intuitive and possibly correct to suggest that a large increase in unemployment could cause a housing correction it's equally feasible that it works the other way round, and here is how:
I'll use Australia as an example because I believe that, if there is a sharp property market correction here, then this is exactly how things will play out. The Australian consumer is already stretched financially -- many have large mortgages to service, inflation in food and energy is rampant and pressuring already stretched domestic balance sheets, interest rates are high (relative to other developed world countries) and this has led to sales in discretionary retail and services falling off a cliff in recent months. Australians are, quite rationally, shopping abroad (on the internet) for non-food items because domestic goods are way too expensive. If there is a crash, or a severe correction, in property prices, something will have to give because already weak retail sales will all but evaporate as people batten down the hatches and horde their cash in case they need it sometime down the line to assist with non-discretionary spend and their mortgages. This HAS to lead to large-scale redundancies across the non-resources sector - and the mining sector simply cannot and will not mop up all this excess labour. Unemployment, therefore, will rise as a result of a weaker property market.
As an aside, I just hope the Chinese economy is still cranking when this all happens otherwise you'll see unemployment in double figures in the blink of an eye and a falling housing market will turn into a wholesale meltdown. You know the old adage: the higher you go, the further you have to fall.
As discussed in a previous blog, this is a complete myth. The U.S. housing market started declining when unemployment there was at 5% i.e. there was no real catalyst -- at least not from unemployment. Unemployment started to spike at least 18 months after the housing peak. While it's intuitive and possibly correct to suggest that a large increase in unemployment could cause a housing correction it's equally feasible that it works the other way round, and here is how:
I'll use Australia as an example because I believe that, if there is a sharp property market correction here, then this is exactly how things will play out. The Australian consumer is already stretched financially -- many have large mortgages to service, inflation in food and energy is rampant and pressuring already stretched domestic balance sheets, interest rates are high (relative to other developed world countries) and this has led to sales in discretionary retail and services falling off a cliff in recent months. Australians are, quite rationally, shopping abroad (on the internet) for non-food items because domestic goods are way too expensive. If there is a crash, or a severe correction, in property prices, something will have to give because already weak retail sales will all but evaporate as people batten down the hatches and horde their cash in case they need it sometime down the line to assist with non-discretionary spend and their mortgages. This HAS to lead to large-scale redundancies across the non-resources sector - and the mining sector simply cannot and will not mop up all this excess labour. Unemployment, therefore, will rise as a result of a weaker property market.
As an aside, I just hope the Chinese economy is still cranking when this all happens otherwise you'll see unemployment in double figures in the blink of an eye and a falling housing market will turn into a wholesale meltdown. You know the old adage: the higher you go, the further you have to fall.
Million Dollar Houses
In mid-March I received an e-mailed "Market Update" from a pair of the Burbs' finest spruikers. It is less of an actual update these days as this would require admitting to serious weakness in the market and even this pair realise you can only spin things so far.
So, instead of a useful and informative update the aforementioned duo furnished recipients with "an interesting fact":
'.... according to the Courier Mail, the first time a home sold for over $1,000,000 here in Brisbane was in the late 1980's. Today, $1,000,000 plus sales account for 6 per cent of sales made and that is double what it was in 2005.'
When I first read this I was puzzled as to why they would think their pool of potential buyers might find this particularly helpful ... and then the penny dropped: was it possible that our friends were attempting to embed the idea that, with the number of $m property sales doubling in Brisbane in the past 5 yrs, that this trend could well repeat itself in the next 5yrs? They go on to suggest that this isn't unreasonable either because $1m+ sales currently only make up 6% of all property sales.
6% is a small number, but it's a number without any context, so we are none the wiser as to what is reasonable under the circumstances. With the market as slow as it is right now, you'd have thought our spruikers would have had the time to look up the percentages for other metropolitan areas for the purposes of comparison -- and perhaps they did, but maybe the results didn't "suit" their thesis, who knows.
Of course, the lateral thinkers out there might consider the view that a doubling of $m+ property sales in just 5 short years may be an indicator that the property market has indeed risen too far, too fast, but perish that thought. No, prices are simply marching toward their long-run equilibrium value which is some way off yet, surely.
The final paragraph in the Market Update says the following:
'According to realestate.com.au, there are currently 148 properties listed for sale for more than $1 million around Brisbane, 305 in Sydney, 191 in Melbourne and 217 in Perth.'
Again, I'm scratching my head trying to decide why this is relevant in any way. In fact, it's not even that interesting. However, it does prove one thing and that is that our spruiker friends are not very adept at using the nternet:
Dated March 17th, they suggest there are 148 properties listed for sale across Brisbane on www.realestate.com.au above the $1m mark. A curious claim, I must say, because I've just done a search of properties in this bracket for the Western Burbs alone (including the immediate surrounding areas) and it suggests there are 199 properties for sale in this bracket. Goodness knows what the total number is for the whole of Brisbane but I'm willing to wager it's a lot closer to 1,000 than it is to 148.
For further reference, a similar search of the Burbs and surrounds two weeks ago revealed only 170-odd properties for sale in this bracket. I can't recall the precise number but that same search in August/September last year was only offering up 50 to 60 properties. Wow! Somebody had better start buying these $m homes soon otherwise the market will be drowning in them before long. I opened the Courier Mail property section this weekend and counted 3 sales over $1m in the 'Recent Sales Results' section (for the entire Brisbane Met). I know not all sales get reported in this section, so let's be generous and triple that number to 9. Nine sales in that bracket and something close to 1,000 properties on the market with the numbers rising fast.
But never fear, folks, there are thousands of migrants arriving in Brisbane every week with $m housing budgets and they're all dead keen to help keep the great Aussie dream from deflating -- not to mention the bank balances of the Burbs' favourite spruikers!
So, instead of a useful and informative update the aforementioned duo furnished recipients with "an interesting fact":
'.... according to the Courier Mail, the first time a home sold for over $1,000,000 here in Brisbane was in the late 1980's. Today, $1,000,000 plus sales account for 6 per cent of sales made and that is double what it was in 2005.'
When I first read this I was puzzled as to why they would think their pool of potential buyers might find this particularly helpful ... and then the penny dropped: was it possible that our friends were attempting to embed the idea that, with the number of $m property sales doubling in Brisbane in the past 5 yrs, that this trend could well repeat itself in the next 5yrs? They go on to suggest that this isn't unreasonable either because $1m+ sales currently only make up 6% of all property sales.
6% is a small number, but it's a number without any context, so we are none the wiser as to what is reasonable under the circumstances. With the market as slow as it is right now, you'd have thought our spruikers would have had the time to look up the percentages for other metropolitan areas for the purposes of comparison -- and perhaps they did, but maybe the results didn't "suit" their thesis, who knows.
Of course, the lateral thinkers out there might consider the view that a doubling of $m+ property sales in just 5 short years may be an indicator that the property market has indeed risen too far, too fast, but perish that thought. No, prices are simply marching toward their long-run equilibrium value which is some way off yet, surely.
The final paragraph in the Market Update says the following:
'According to realestate.com.au, there are currently 148 properties listed for sale for more than $1 million around Brisbane, 305 in Sydney, 191 in Melbourne and 217 in Perth.'
Again, I'm scratching my head trying to decide why this is relevant in any way. In fact, it's not even that interesting. However, it does prove one thing and that is that our spruiker friends are not very adept at using the nternet:
Dated March 17th, they suggest there are 148 properties listed for sale across Brisbane on www.realestate.com.au above the $1m mark. A curious claim, I must say, because I've just done a search of properties in this bracket for the Western Burbs alone (including the immediate surrounding areas) and it suggests there are 199 properties for sale in this bracket. Goodness knows what the total number is for the whole of Brisbane but I'm willing to wager it's a lot closer to 1,000 than it is to 148.
For further reference, a similar search of the Burbs and surrounds two weeks ago revealed only 170-odd properties for sale in this bracket. I can't recall the precise number but that same search in August/September last year was only offering up 50 to 60 properties. Wow! Somebody had better start buying these $m homes soon otherwise the market will be drowning in them before long. I opened the Courier Mail property section this weekend and counted 3 sales over $1m in the 'Recent Sales Results' section (for the entire Brisbane Met). I know not all sales get reported in this section, so let's be generous and triple that number to 9. Nine sales in that bracket and something close to 1,000 properties on the market with the numbers rising fast.
But never fear, folks, there are thousands of migrants arriving in Brisbane every week with $m housing budgets and they're all dead keen to help keep the great Aussie dream from deflating -- not to mention the bank balances of the Burbs' favourite spruikers!
Friday, April 8, 2011
Property Cheerleaders
Michael Matusik writes a regular column in the Saturday Courier Mail's Property pullout. He is a self-styled property "expert" and I've heard him interviewed on the radio on occasion and I have no doubt he does other media gigs too. In the latter half of 2010 the tone of his columns in the Saturday CM was decidedly bullish just at a time when the market was softening up and I had him tagged as just another "cheerleader". However, at the start of 2011, the tone of his articles changed and he tried to present a more balanced view of the market and its prospects, a development that naturally challenged my opinion of his credibility as an expert and led me to believe that perhaps he did have some genuine value to add.
In today's CM column (Apr 9th, 2011), the "tide ran out", so to speak, and all readers will be able to judge for themselves whether Mr Matusik is in fact "wearing any bathers" after all.
He outlines seven reasons "why I believe we will not see major falls in home values", and I believe all seven reasons are worthy of closer examination:
1. Population growth - roughly speaking he argues that growth in the number of migrants in the 20s to late 30s will keep prices under-pinned.
This statement is somewhat wishy-washy and Mr Matusik offers no other information to back up why this should make a material difference. The statement pre-supposes that most migrants a) want to buy a property rather than rent b) have the necessary deposit handy c) have the salary to afford the property they want and d) are completely oblivious to the fact that Australia's market is the most expensive and wouldn't therefore wish to wait for a better entry point (in short, most migrants are 'crassly stupid'), which I find highly unlikely. It is a "demand-side" argument which simply doesn't stack up. Students of property crashes know that demand can evaporate in a flash - all it requires is a change in sentiment. If people think prices are falling, or going to fall, they stand on the sidelines, plain and simple.
2. Tight Lending practices - here he talks about Australia's apparently unique "full recourse loans", while "many overseas markets which experience which a housing crash have non-recourse loans".
This claim I take real issue with and it's about as tardy a bit of journalism as you're likely to see. The U.S. mortgage market has non-recourse loans and has crashed, but actually has some significant advantages over the Australian market like fixed rate loans for the full duration of the mortgage which borrowers are able to refinance at will, virtually cost-free. The UK and Irish markets have full-recourse loans and their mortgage makets are about as similar to the Australian model as you could get. The Irish housing market, as all who have not been living under a stone for the past 24 months will know, has completely melted down -- we're talking a 40%+ fall across the board. This makes a mockery of Mr Matusik's claim. As an aside, diligent readers of the AFR will have seen an article a couple of weeks ago on how the major lenders are loosening lending standards again in order to attract borrowers. Yup, 97% mortgages are back and the mortgage indemnity fee can now be capitalized i.e. added to the borrowed amount and paid back over the life of the mortgage. So much for "tight" lending practices.
3. High Equity - according to mortgage broker AFG, current loan-to-value ratios are around 53% "reflecting our conservative position towards debt. Simply, most of us own about half of our homes."
It is statements like this that gave rise to the phrase: "Lies, damned lies, and statistics".
On the face of it this aggregate LTV number looks impressive but broken down, the picture looks a lot less rosy. This is an average and does NOT reflect the situation of each borrower. There are a horde of baby-boomers out there whose mortgages are approaching maturity which means their mortgages will have, say, a 5 to 10% LTV, balanced on the other side by more recent borrowers who are mortgaged to the eye-balls and have 90 and 95% LTV on their homes. It's this latter group that are the issue -- you only need a relatively small percentage of homeowners to become "stressed" to precipitate a fall in prices.
And here's an anecdotal reason that may help people understand how the LTV picture can be enhanced: a neighbour bought a house in the area for around $1m at the end of 2008. They did extensive work on the property, financed by their lender (to the tune of $350k), who valued the property at the end of the renovation at $2m. This makes the LTV on that property 67.5% which is impressive indeed, right up until you consider that this property in the current environment would struggle to fetch enough to break-even if sold, thereby making the real LTV around 100% (perhaps higher). Multiply this situation, which involved Mickey Mouse valuations tens of thousands of times, and perhaps the mortgage industry's LTV is not that great after all. And here's another question: in the current weak environment, are banks revising property values lower across their loan books to reflect reality? I think I know the answer to this one....
4. Undersupply - this speaks for itself
...and it is complete garbage. There are 340,000 houses and units for sale across Australia as of a few days ago and this number is increasing by the week. If this is undersupply then I'm Luke Skywalker. Mr Matusik does qualify this claim slightly by saying the undersupply may be at the lower end of the market i.e. "affordable housing", but how people who don't have the wherewithall to buy property can help support prices, I don't know. Someone please explain that one to me. And lets hope all those migrants that are arriving daily are able to help mop up this burgeoning supply, which is only likely to increase over the coming months.
5. Economy growth - "housing markets usually crash with large falls in employment".
Again, complete trash and the tardiest of journalism. The U.S. housing market peaked in early 2006 and started to decline shortly afterward. U.S. unemployment was around 5% at the time, roughly what Australian unemployment is right now. Australian interest rates are among the highest in the developed world and its people the most personally indebted -- at risk of sounding controversial, I'd say that's not a good combination.
6. Low unemployment - "as long as unemployment stays below 8%, then wholesale falls in property prices are unlikely"
Hey?! The riposte to the above ludicrous claim is the same as that for reason 5 but where, oh where did Mr Matusik come up with that 8% figure? Was this gleaned from some academic text book? Is he suggesting that, if Australian unemployment hits 7.9% the market will be A-okay but the moment it ticks up to 8% all bets are off? Only someone with an IQ in single figures would grant any credibility to this claim.
7. Few mortgage defaults - while the number of mortage defaults is currently rising, overall the number is still low.
The number is rising -- the trend is UP and there's no knowing when or where this trend will peak, so how could this possibly be a positive for the housing market?! Where is the logic in this? If we are only at the beginning of a housing market correction, then it's only logical that the default rate will still be low.
Make no mistake, the key to property prices rising or falling is people's expectations of what is likely to happen. Mr Matusik and his ilk (i.e. property "experts") have been riding the wave (and nurturing it) for the past decade but despite the best efforts of the "spruikers" to keep the bubble inflating, reality is finally dawning and sanity is hopefully returning to the housing market.
I don't know if there is a body in Australia that monitors standards in journalism, but if there is, they may wish to review some of Mr Matusik's recent work. I do wonder whether today's piece contravenes any guidelines pertaining to "investment advice" because I'd hate to think that any poor soul taking him at his word might go out and do something stupid like make an investment in property at the present time.
In today's CM column (Apr 9th, 2011), the "tide ran out", so to speak, and all readers will be able to judge for themselves whether Mr Matusik is in fact "wearing any bathers" after all.
He outlines seven reasons "why I believe we will not see major falls in home values", and I believe all seven reasons are worthy of closer examination:
1. Population growth - roughly speaking he argues that growth in the number of migrants in the 20s to late 30s will keep prices under-pinned.
This statement is somewhat wishy-washy and Mr Matusik offers no other information to back up why this should make a material difference. The statement pre-supposes that most migrants a) want to buy a property rather than rent b) have the necessary deposit handy c) have the salary to afford the property they want and d) are completely oblivious to the fact that Australia's market is the most expensive and wouldn't therefore wish to wait for a better entry point (in short, most migrants are 'crassly stupid'), which I find highly unlikely. It is a "demand-side" argument which simply doesn't stack up. Students of property crashes know that demand can evaporate in a flash - all it requires is a change in sentiment. If people think prices are falling, or going to fall, they stand on the sidelines, plain and simple.
2. Tight Lending practices - here he talks about Australia's apparently unique "full recourse loans", while "many overseas markets which experience which a housing crash have non-recourse loans".
This claim I take real issue with and it's about as tardy a bit of journalism as you're likely to see. The U.S. mortgage market has non-recourse loans and has crashed, but actually has some significant advantages over the Australian market like fixed rate loans for the full duration of the mortgage which borrowers are able to refinance at will, virtually cost-free. The UK and Irish markets have full-recourse loans and their mortgage makets are about as similar to the Australian model as you could get. The Irish housing market, as all who have not been living under a stone for the past 24 months will know, has completely melted down -- we're talking a 40%+ fall across the board. This makes a mockery of Mr Matusik's claim. As an aside, diligent readers of the AFR will have seen an article a couple of weeks ago on how the major lenders are loosening lending standards again in order to attract borrowers. Yup, 97% mortgages are back and the mortgage indemnity fee can now be capitalized i.e. added to the borrowed amount and paid back over the life of the mortgage. So much for "tight" lending practices.
3. High Equity - according to mortgage broker AFG, current loan-to-value ratios are around 53% "reflecting our conservative position towards debt. Simply, most of us own about half of our homes."
It is statements like this that gave rise to the phrase: "Lies, damned lies, and statistics".
On the face of it this aggregate LTV number looks impressive but broken down, the picture looks a lot less rosy. This is an average and does NOT reflect the situation of each borrower. There are a horde of baby-boomers out there whose mortgages are approaching maturity which means their mortgages will have, say, a 5 to 10% LTV, balanced on the other side by more recent borrowers who are mortgaged to the eye-balls and have 90 and 95% LTV on their homes. It's this latter group that are the issue -- you only need a relatively small percentage of homeowners to become "stressed" to precipitate a fall in prices.
And here's an anecdotal reason that may help people understand how the LTV picture can be enhanced: a neighbour bought a house in the area for around $1m at the end of 2008. They did extensive work on the property, financed by their lender (to the tune of $350k), who valued the property at the end of the renovation at $2m. This makes the LTV on that property 67.5% which is impressive indeed, right up until you consider that this property in the current environment would struggle to fetch enough to break-even if sold, thereby making the real LTV around 100% (perhaps higher). Multiply this situation, which involved Mickey Mouse valuations tens of thousands of times, and perhaps the mortgage industry's LTV is not that great after all. And here's another question: in the current weak environment, are banks revising property values lower across their loan books to reflect reality? I think I know the answer to this one....
4. Undersupply - this speaks for itself
...and it is complete garbage. There are 340,000 houses and units for sale across Australia as of a few days ago and this number is increasing by the week. If this is undersupply then I'm Luke Skywalker. Mr Matusik does qualify this claim slightly by saying the undersupply may be at the lower end of the market i.e. "affordable housing", but how people who don't have the wherewithall to buy property can help support prices, I don't know. Someone please explain that one to me. And lets hope all those migrants that are arriving daily are able to help mop up this burgeoning supply, which is only likely to increase over the coming months.
5. Economy growth - "housing markets usually crash with large falls in employment".
Again, complete trash and the tardiest of journalism. The U.S. housing market peaked in early 2006 and started to decline shortly afterward. U.S. unemployment was around 5% at the time, roughly what Australian unemployment is right now. Australian interest rates are among the highest in the developed world and its people the most personally indebted -- at risk of sounding controversial, I'd say that's not a good combination.
6. Low unemployment - "as long as unemployment stays below 8%, then wholesale falls in property prices are unlikely"
Hey?! The riposte to the above ludicrous claim is the same as that for reason 5 but where, oh where did Mr Matusik come up with that 8% figure? Was this gleaned from some academic text book? Is he suggesting that, if Australian unemployment hits 7.9% the market will be A-okay but the moment it ticks up to 8% all bets are off? Only someone with an IQ in single figures would grant any credibility to this claim.
7. Few mortgage defaults - while the number of mortage defaults is currently rising, overall the number is still low.
The number is rising -- the trend is UP and there's no knowing when or where this trend will peak, so how could this possibly be a positive for the housing market?! Where is the logic in this? If we are only at the beginning of a housing market correction, then it's only logical that the default rate will still be low.
Make no mistake, the key to property prices rising or falling is people's expectations of what is likely to happen. Mr Matusik and his ilk (i.e. property "experts") have been riding the wave (and nurturing it) for the past decade but despite the best efforts of the "spruikers" to keep the bubble inflating, reality is finally dawning and sanity is hopefully returning to the housing market.
I don't know if there is a body in Australia that monitors standards in journalism, but if there is, they may wish to review some of Mr Matusik's recent work. I do wonder whether today's piece contravenes any guidelines pertaining to "investment advice" because I'd hate to think that any poor soul taking him at his word might go out and do something stupid like make an investment in property at the present time.
Thursday, April 7, 2011
Irritants
A couple of things I need to get off my chest this afternoon:
Firstly, I simply can't get over the number of properties in our area that have been on the market for 3 months or more -- in fact several have been on the market for well in excess of 6 months. Has it not occured to the vendors that maybe, just maybe, their properties are well over-valued? In my view buyers are happy to engage sellers if they think a property is around, say, 10% over-valued but much more than that and buyers are dissuaded because they'd rather avoid dealing with anyone they deem to have their head in the clouds. How successful is an offer of, say, 20-25% below the asking price likely to be? The answer to most rational people is: "not very", and so they prefer not to waste their time and look to other opportunities.
It's true that some vendors, not so long ago, were able to adopt a strategy of: If I wait long enough, some idiot will eventually turn up and pay the price, but this is far less likely to work in the current environment where the market has turned sour and the newsflow has turned negative. With the "Buy property, get rich quick" trade finally burning out, even the property market cheerleaders out there will have to acknowledge reality at some point.
But my message is this: If your property isn't selling, it's probably because it's grossly over-priced and nothing more. Get your head out of the clouds and adjust your expectations otherwise the financial pain down the line may be greater than you can feasibly handle.
My second gripe centres on the information peddled by metropolitan Brisbane's Saturday morning must-read, the Courier Mail's Property section. (And before anyone mentions it, I accept that the "must-read" status may recently have been downgraded as Brissy's denizens choose not to find out how much their property may have depreciated in the past week).
But I digress. The issue I have is with the data in the Recent Sales section, specifically that which relates to Auction results. When a property fails to sell it is Passed In, often with the highest Bid posted in the Price column. Ordinarily this information would be very useful to the market i.e. if it were the highest real bid from a registered bidder on the day, but most often, this is the vendor's bid, which I would argue is useless information for the market and, in fact, highly misleading (and deliberate, at that). I can't believe this practice hasn't been outlawed at either Federal or State level. At the very least it should be flagged whose Bid this was. In any event, the last real bid is the information that buyers really care about. The vendor bid is as useful as a chocolate tea-pot because, at best, it may serve to inform the public around what level the vendor wishes to sell their property and all we buyers want to know is where the market is valuing it.
Sorry, did I say "a couple" of things? I meant three. Median house prices -- what a pile of good-for-nothing $%&*@£! I mean, has the penny not dropped yet, that this is largely, in the case of housing, a completely useless and meaningless measure? Especially as you start to look at local stats where granularity deteriorates markedly. A local agent sent around a booklet, complied by herself, that contained some stats that "buyers might find useful", one of which was a list of Median house sale prices for each month of 2010 in the local area. The lowest price was in the low $400k's, most in the $500k's and the highest was around $1.5m (in a month when there was essentially only that one sale!). Gee, thanks for all your help. How, on God's green earth, could that information ever be useful? All it does is highlight just how useless it is. But it's not the agent I'm irritated by -- she's simply one of many sheep drawn to Brisbane's housing market beacon. Yup, I'm talking about the Courier Mail's Property paper!
Firstly, I simply can't get over the number of properties in our area that have been on the market for 3 months or more -- in fact several have been on the market for well in excess of 6 months. Has it not occured to the vendors that maybe, just maybe, their properties are well over-valued? In my view buyers are happy to engage sellers if they think a property is around, say, 10% over-valued but much more than that and buyers are dissuaded because they'd rather avoid dealing with anyone they deem to have their head in the clouds. How successful is an offer of, say, 20-25% below the asking price likely to be? The answer to most rational people is: "not very", and so they prefer not to waste their time and look to other opportunities.
It's true that some vendors, not so long ago, were able to adopt a strategy of: If I wait long enough, some idiot will eventually turn up and pay the price, but this is far less likely to work in the current environment where the market has turned sour and the newsflow has turned negative. With the "Buy property, get rich quick" trade finally burning out, even the property market cheerleaders out there will have to acknowledge reality at some point.
But my message is this: If your property isn't selling, it's probably because it's grossly over-priced and nothing more. Get your head out of the clouds and adjust your expectations otherwise the financial pain down the line may be greater than you can feasibly handle.
My second gripe centres on the information peddled by metropolitan Brisbane's Saturday morning must-read, the Courier Mail's Property section. (And before anyone mentions it, I accept that the "must-read" status may recently have been downgraded as Brissy's denizens choose not to find out how much their property may have depreciated in the past week).
But I digress. The issue I have is with the data in the Recent Sales section, specifically that which relates to Auction results. When a property fails to sell it is Passed In, often with the highest Bid posted in the Price column. Ordinarily this information would be very useful to the market i.e. if it were the highest real bid from a registered bidder on the day, but most often, this is the vendor's bid, which I would argue is useless information for the market and, in fact, highly misleading (and deliberate, at that). I can't believe this practice hasn't been outlawed at either Federal or State level. At the very least it should be flagged whose Bid this was. In any event, the last real bid is the information that buyers really care about. The vendor bid is as useful as a chocolate tea-pot because, at best, it may serve to inform the public around what level the vendor wishes to sell their property and all we buyers want to know is where the market is valuing it.
Sorry, did I say "a couple" of things? I meant three. Median house prices -- what a pile of good-for-nothing $%&*@£! I mean, has the penny not dropped yet, that this is largely, in the case of housing, a completely useless and meaningless measure? Especially as you start to look at local stats where granularity deteriorates markedly. A local agent sent around a booklet, complied by herself, that contained some stats that "buyers might find useful", one of which was a list of Median house sale prices for each month of 2010 in the local area. The lowest price was in the low $400k's, most in the $500k's and the highest was around $1.5m (in a month when there was essentially only that one sale!). Gee, thanks for all your help. How, on God's green earth, could that information ever be useful? All it does is highlight just how useless it is. But it's not the agent I'm irritated by -- she's simply one of many sheep drawn to Brisbane's housing market beacon. Yup, I'm talking about the Courier Mail's Property paper!
Western Burbs Housing Update
Well, property continues to flood onto the market here in "the Burbs", although to be fair, this has been partially offset by several vendors withdrawing their properties until the market "improves". I just hope for their sakes that it does but I wouldn't hold my breath. This feels for all the world like the start of a genuine correction, and if it is, then said vendors could be waiting several years for a turnaround. And I can't see the RBA coming to the rescue of the market anytime soon -- at least not while the resources boom remains in full swing.
Meanwhile, real estate agents are either staying silent on the subject or talking things up with guff like: "there's never been a better time to buy" or "the market's as cheap as it's been for a while, what a great opportunity for buyers and investors". Yup, and if buyers are patient, it'll get even cheaper!
And let's not forget our friends the journalists, many of whom appear to have their rose-tinted spectacles surgically implanted:
Terry Ryder, writing in the Australian on April 2nd, headlined his article:
"Leave the herd and profit from a buyers' market"
.... the full article is available on the web, but in effect, Mr Ryder suggests that if you don't jump into the market now you're probably an idiot, and if you do, you're probably as savvy as Warren Buffet. I only hope Mr Ryder has taken his own advice and snapped up a few "cheap" investments of late.
The article was sent to my mother-in-law by a local Burbs estate agent, desperate to puff anyone she can into making a very bad decision. Personally, I'd have written back to the agent saying how offended I felt by the article.
A few more developer properties on the market in our area in the past week and the only thing for them to consider right now is how much of a financial hit they're likely to incur. Bear in mind that the land on which these properties stand was most likely bought at (or close to) the peak of the market, while the business plans will have factored in a rise in prices by the time of completion, not a fall. This just takes more developer funds out of the market and sellers of land or renovators can no longer rely on demand from this sector. Banks too have grown very wary of extending loans to developers, especially the smaller-to-medium sized operations.
On a related note: I haven't actually done any hard analysis on the subject but my guess is that the cost of building continues to go up (or is flat at best). The reason I say this is that the cost of labour is either flat but more likely rising (flood-related demand) while commodity prices have surged and show no sign of letting up. If property prices are falling while the cost of building is going up it has to mean that land prices are falling quite sharply -- anyway, something to consider. I'd like to add that rising building prices should provide support for house prices in general but if salaries aren't keeping pace with the rise in "real" inflation then house prices will continue to be pressured and private residential building will dry up fast.
Anyway, there are a couple of auctions to watch out for in our area on April 16th before we break for Easter. One vendor looks like they want an excessive amount for their property and my feeling is that this will fail to sell (by a large margin) while the other vendor looks to be pretty keen to pull the ripcord, so we'll see.
Until next time ..
Meanwhile, real estate agents are either staying silent on the subject or talking things up with guff like: "there's never been a better time to buy" or "the market's as cheap as it's been for a while, what a great opportunity for buyers and investors". Yup, and if buyers are patient, it'll get even cheaper!
And let's not forget our friends the journalists, many of whom appear to have their rose-tinted spectacles surgically implanted:
Terry Ryder, writing in the Australian on April 2nd, headlined his article:
"Leave the herd and profit from a buyers' market"
.... the full article is available on the web, but in effect, Mr Ryder suggests that if you don't jump into the market now you're probably an idiot, and if you do, you're probably as savvy as Warren Buffet. I only hope Mr Ryder has taken his own advice and snapped up a few "cheap" investments of late.
The article was sent to my mother-in-law by a local Burbs estate agent, desperate to puff anyone she can into making a very bad decision. Personally, I'd have written back to the agent saying how offended I felt by the article.
A few more developer properties on the market in our area in the past week and the only thing for them to consider right now is how much of a financial hit they're likely to incur. Bear in mind that the land on which these properties stand was most likely bought at (or close to) the peak of the market, while the business plans will have factored in a rise in prices by the time of completion, not a fall. This just takes more developer funds out of the market and sellers of land or renovators can no longer rely on demand from this sector. Banks too have grown very wary of extending loans to developers, especially the smaller-to-medium sized operations.
On a related note: I haven't actually done any hard analysis on the subject but my guess is that the cost of building continues to go up (or is flat at best). The reason I say this is that the cost of labour is either flat but more likely rising (flood-related demand) while commodity prices have surged and show no sign of letting up. If property prices are falling while the cost of building is going up it has to mean that land prices are falling quite sharply -- anyway, something to consider. I'd like to add that rising building prices should provide support for house prices in general but if salaries aren't keeping pace with the rise in "real" inflation then house prices will continue to be pressured and private residential building will dry up fast.
Anyway, there are a couple of auctions to watch out for in our area on April 16th before we break for Easter. One vendor looks like they want an excessive amount for their property and my feeling is that this will fail to sell (by a large margin) while the other vendor looks to be pretty keen to pull the ripcord, so we'll see.
Until next time ..
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