More On Property Prices
As if on cue, there are two articles today in the SMH as if to soothe the mounting anxiety about property prices. Here’s Ian Verrender trying to say that it’s not going to crash dramatically, it’s just going to go down slowly.
Among the biggest surprises was that Brisbane, one of the beneficiaries of the resources boom, led the housing market price declines with a 6.7 per cent drop in the year to the end of December.
Adelaide and Melbourne were next in line. But the biggest surprise was the pullback in Perth residential real estate, shedding a whisker under 5 per cent.
Unlikely as it may seem, Sydney was the best performer of all with a decline of just 2.7 per cent over the year. (OK, Canberra outdid Sydney with a 2.6 per cent drop but no one ever pretended it was a normal city.)
He then goes on to argue that these incremental slides down does not amount to a crash.The property market is deflating in an orderly fashion (a bit like the Greek default). But if I were in Brisbane, say and property went down 6.7 % 3 years in a row, that would be close to a 20% drop and I think that would be a massive correction downward that I would feel was a crash. Not to mention these figures are not adjusted for inflation. So… I guess it depends on what people mean by *crash*.
Leith Van Onselen (The name sure sounds like On-Selling to me) has this article here explaining why there’s going to be a slow melt in the coming years.
Given that the NSW stamp duty concession expired on 31 December 2011, there is a high likelihood that demand from NSW first-home buyers will recede over the first quarter of 2012, creating headwinds for Sydney home prices and, by extension, national prices as well.
Tuesday’s release of the Reserve Bank of Australia’s (RBA) credit aggregates data also signaled more headwinds for the Australian housing market. Despite the recent 0.5 per cent cut in mortgage interest rates, Australian housing credit growth slumped to fresh 34-year lows, suggesting that households are becoming increasingly averse to mortgage debt
That sort of dovetails with the Professor Steven Keene analysis about credit deceleration. Even with lowered interest rates, it’s hard to imagine there will be more people trying to get in than get out. Plus, when the Greeks finally face reality and admit they’re defaulting and when China finally admits it is in financial trouble, one wonders how all this high pricing is going to stay afloat.
That being said, momentum in a market is an amazing thing. It can be very slow to respond to changing circumstances in reality. It’s a little like the Coyote in the Roadrunner cartoons that keeps leaping off the ledge, then looks down to find he has a long way to fall. Somehow momentum keeps carrying the coyote into gravity-defying moments.
Today’s Funny Quote
Following on from yesterday’s kerfuffle with Gina Rinehart trying to do to our democracy what private equity firms do to perfectly fine companies, here’s this remark by an unidentified Fairfax executive:
”Anyone that wanted WA to secede, thought [of] using a nuclear bomb to develop better harbour facilities, does not believe in the science of climate change, thinks the mining resources tax was unfair, wants to import cheap Asian labour to help her make even more money and, most importantly, has no time for any views other than her own is not the ideal person to influence media in this country.”
That just about sums it all up, doesn’t it?