Some nice Supply Side numbers and charts

[DadOfSam]

So, unless you believe the 'hordes of empty houses' theory, where are all these people going to live?

Also, what are these asking prices? What has happened in the past is that they'll list their property for sale at a nice price (i.e. what you would have gotten 1 year - 6 months ago) but then when the realise nothing is happening they just take them off the market. Most of these people don't have to sell. They already have plenty of equity, own outright or have jobs.

I think the key factor will be the unemployment figure.

I think you'll sind the answer to that in the OP. The assumption that the number of households per person will keep rising underpins the underlying demand calculations. For example, if you instead assume that the number of households per person will remain flat, then Australia's building slightly more houses than population growth alone requires. And if you take it to the further extreme (i.e. what's happning in other parts of the western world) where the number of people per house rises then we're building too many even at the current lower levels. But understanding of the OP was that the number of households per person is projected to shrink at a slower rate - and that reduces the need for new houses to be built.

That's how underlying demand can show an undersupply - because it assumes the number of people per house must follow the long term trend. Sure, it's the most likely scenario over time, but it's hardly a given, especially in a (hypothetical?) economic enviroment where households are looking to cut costs.

Hope that helps.

 

[depreciator]

I'm not buying into this prediction discussion. You blokes are smarter than me. I'm just smart enough to know that I don't know what's going to happen. But I have to comment on this:

Now market supply tells a whole different story. Over to Louis Christopher from Advisor's Edge:

"This week, the online real estate listings portal Domain.com.au had over 33,000 property listings within the greater metropolitan Sydney region. This compares starkly with the number of listed properties back in November 2005 when the count was just 12,000 listings."

Four years is a long time in the history of the internet. There could be lots of reasons for more listings on Domain relative to the number there were four years ago. I recall there was a time when agents I spoke to didn't rate Domain.com at all, especially for properties beyond the inner west. They didn't bother listing properties in the west or outer west. Maybe that has changed? Do all properties with a hard copy listing in the SMH automatically get a Domain listing now? Have they positioned their prices cheaper than RE.com to get more market share? Beats me.
Scott

 

[Max Carnage]

So, unless you believe the 'hordes of empty houses' theory, where are all these people going to live?

May I switch this around? Where are they living now? Current estimates of the so-called fundamental shortage put the figure somewhere between 130,000 and 210,000. Where are the 330,000 to 550,000 people who are unhoused at the moment living (based on 2.6pph as per average)?

Either:
They are homeless, and this shortage is real
The projection of household formation rate is too high, and therefore the shortage does not exist.

Does this make sense to you? The number of homeless people has gone nowhere since the early 1990s. It's still at ~100,000. This suggests that we're managing to fit people into dwellings.

As for future growth, the low, low, low September figure was 11,593 dwelling building approvals (not seasonally adjusted). Even if this low figure continues, this is 139,000 dwellings in a year. And how much net population growth? Perhaps a record 310,000? Well in that case they'd squeeze in at a rate of 2.2 persons per dwelling, when the rest of us live at 2.6 persons per dwelling. Not really a squeeze at all, is it?

The fact that the average number of people per dwelling has declined, while the average number of bedrooms per dwelling has increased over this period suggests there is even room to comfortably fit more people into our current housing stock.

Four years is a long time in the history of the internet.

1) Check your maths. 2008-2005 = 3 years
2) Not really. The listing habits of agents, and browsing habits of buyers really haven't changed in 3 years.
3) Listings have risen pretty steadily all year. And positively rocketed up in the last 4 months. I strongly suggest this is nothing to do with technological advance and everything to do with the market supply/demand balance.

Why the convoluted search for a complicated answer that conforms to the "prices are gonna go up" mindset rather than accept that the most simple explanation is most probably the right one?

 

[depreciator]

2) Not really. The listing habits of agents, and browsing habits of buyers really haven't changed in 3 years.

I reckon the listing habits of agents have changed. But neither of us would be able to argue our position satisfactorily, so best not bother.

Why the convoluted search for a complicated answer that conforms to the "prices are gonna go up" mindset rather than accept that the most simple explanation is most probably the right one?

I don't have a 'prices are gonna go up' mindset. I think I stated pretty unambiguously my mindset:

I'm just smart enough to know that I don't know what's going to happen.

Scott

 

[DavidMc]

I agree it will happen to an extent, but I don't think it'll have a significant impact.

My Mum and her partner live in their fully owned property. It's a large 4 bedroom place. They're not well off yet they're not going to downsize or take on boarders unless one day they have to decide if it's Pal or Meaty Bites for dinner.

My Dad and his partner live in their fully owned property. Same deal.

 

[DavidMc]

That's a good point Scott. Where was domain.com.au 3 years ago? Can anyone remember? Personally I only used re.com.au at that time (and still do so now).

 

[Max Carnage]

That's a good point Scott. Where was domain.com.au 3 years ago? Can anyone remember? Personally I only used re.com.au at that time (and still do so now).

You'll be pleased to know that realestate.com.au has been displaying the same trend then.

 

[evand]

Domain is very Sydney centric. Probably more so a few years ago than now. It is cheaper than realesate.com.au and has recently increased prices. I have come across agents that list in Domain.com.au and not re.com.au to save money.

I dont think listings in the SMH automatically go in the Domain website and they have always allowed private listing as far as i know.

Could be a valid point Scott.

That's a good point Scott. Where was domain.com.au 3 years ago? Can anyone remember? Personally I only used re.com.au at that time (and still do so now).

 

[DavidMc]

May I switch this around? Where are they living now? Current estimates of the so-called fundamental shortage put the figure somewhere between 130,000 and 210,000. Where are the 330,000 to 550,000 people who are unhoused at the moment living (based on 2.6pph as per average)?

You can switch it around if you wish, although you've avoided my question and asked another.

The answer is people need to live somewhere. Where they can't buy, they'll rent. It's obvious to anyone who doesn't solely look at this forum all day that there are no huge stockpiles of empty houses where people want to live.

Sure, they're are empty rooms, although number of occupants per dwelling figure changes so slowly (being a cultural shift) that's it's not enough to create a crash IMO.

 

[DavidMc]

You'll be pleased to know that realestate.com.au has been displaying the same trend then.

That is interesting. I will be pleased because I'm getting ready to buy.

Any links? Inner, outer? Sydney/Melbourne? etc

 

[depreciator]

Quote:
Originally Posted by DavidMc
That's a good point Scott. Where was domain.com.au 3 years ago? Can anyone remember? Personally I only used re.com.au at that time (and still do so now).

You'll be pleased to know that realestate.com.au has been displaying the same trend then.

Might coincide with the downturn in listings in newspapers? Trading Post would have seem the same phenomenon. I know people who have sold properties recently and not bothered listing in a newspaper at all, they've gone straight to the internet. Three years ago the internet would have been an add-on for them. I'm not saying you're wrong, Max (or whoever you used to be). Like I said, I don't know. I just think that there may be additional explanations for the increase in internet listings.
Scott

 

[Shadow]

May I switch this around? Where are they living now? Current estimates of the so-called fundamental shortage put the figure somewhere between 130,000 and 210,000. Where are the 330,000 to 550,000 people who are unhoused at the moment living (based on 2.6pph as per average)?

Either:
They are homeless, and this shortage is real
The projection of household formation rate is too high, and therefore the shortage does not exist.

Does this make sense to you? The number of homeless people has gone nowhere since the early 1990s. It's still at ~100,000. This suggests that we're managing to fit people into dwellings.

Homeless people? Please try to think outside the box Foundation.

The number of persons per dwelling in Australia dropped from 2.97 in 1991 to 2.76 in 2001 and to 2.74 in 2006. So after falling considerably over a decade, this metric has basically flat-lined from 2001.

Australians are now bunching up in existing dwellings rather than continuing the trend of forming new households. Why? Because we don't have enough houses to allow people to continue spreading out at the rate they desire.

Construction is currently down and rents are rising strongly in all cities. The Australian population grew by 332,000 people or 1.6 per cent in 2007, and is expected to grow even faster in 2008 and 2009. This is the largest number added to the population ever.

People are being forced to live in mobile homes... even our caravan parks are overflowing! We can't just keep bunching up into the existing housing stock forever. The government is beginning to recognise this, hence their plan to build 100,000 new 'affordable' houses. But that is a drop in the ocean - we need many many more. They will leave that up to the private sector to build (i.e. us property investors and developers).

Unless we develop new stock, we cannot possibly hope to appropriately house the growing population.

So where are all the these people who contribute to the pent up underlying demand actually living right now? No they are not all homeless. I suggest they are...

- Bunched up in existing houses
- Sleeping on friend's sofas
- Living in caravan parks and campsites
- Staying with parents for longer then they desire
- Hotels, motels, backpacker hostels, guest houses
- Crisis shelter, homeless centres and public housing

Here are some more threads on this topic...

Population growth exacerbates housing crisis - Bernard Salt
http://www.somersoft.com/forums/showthread.php?t=44365

We're building towards a home construction boom
http://www.somersoft.com/forums/showthread.php?t=44440

Australia's Forthcoming Construction-Led Property Boom
http://www.somersoft.com/forums/showthread.php?t=44666

Why the convoluted search for a complicated answer that conforms to the "prices are gonna go up" mindset rather than accept that the most simple explanation is most probably the right one?

Why the convoluted search for a complicated answer that conforms to the "prices are gonna crash" mindset rather than accept that the most simple explanation is most probably the right one? Prices are not gonna crash.

Shadow.

 

[DavidMc]

Also

- Working illegally in Britian (you wouldn't believe the stats on those people... there are heaps on them. Much more than the number of NZ'ers working here).

- Travelling and working aboard in other countries.

Don't forget, at any one time we have a HUGE number of us overseas.

 

[DavidMc]

Hey Shadow where you do get the data for your pics from. Looks like a Residex style report?

 

[Shadow]

Hey Shadow where you do get the data for your pics from. Looks like a Residex style report?

Yep, I subscribe to the Residex quarterly NSW report. $75 per quarter - loads of detail. Pretty good value I think. I highly recommend it. Max Carnage / Foundation is a big fan of Residex too... he has this fetish about John Edwards' moustache...

 

[tcocaro]

crystal ball merchant and editor in chief of doom and gloom weekly.

(im joking Token Funder)

Token Funder,

Would you be willing to elaborate on your work/industry experience/background?

You seem quite knowledgeable on matters of credit....

 

[boz]

Homeless people? Please try to think outside the box Foundation.

The number of persons per dwelling in Australia dropped from 2.97 in 1991 to 2.76 in 2001 and to 2.74 in 2006. So after falling considerably over a decade, this metric has basically flat-lined from 2001.


Shadow.

Yep, Wonder if the underlying demand and house shortage crap is taken from RESIDEX crap data.
Here is a more reliable data from ABS:
It is a bit outdated but for sure since the census we haven't been building at over 2.4 people for building. I also recon we have around 8.5 mil dwelling in Australia with 21 mil population. By the way, a difference of 0.3 occupancy rate coming up from ABS data with Shadow data make around 1 m difference. This make me wonder how important is the 100-200K building shortage we are t alking about.

 

[lizzie]

okay - so the 0.27 people per household difference between was "is" (according to boz) and what is "required" (according to shadow) equates to a mere 22,950 extra houses australia wide apparently existing above what is required.

hmmm - wonder if that 22,950 includes ski chalets, fishing shacks, holiday homes and back country huts?

 

[Max Carnage]

Australians are now bunching up in existing dwellings rather than continuing the trend of forming new households. Why? Because we don't have enough houses to allow people to continue spreading out at the rate they desire.

Well it's funny that they are "bunching up" rather than buying the simply oodles of homes listed for sale. I'm sure people like Sparky23 would prefer they stopped "bunching up".

It's funny that they're "bunching up" rather than paying for new homes to be built. The builders are suffering a huge slump in sales, laying off workers... believe me, they'd like it if these folks stopped "bunching up".

So why are they "bunching up"? Oh wait, perhaps it's because they are unwilling and/or unable to buy at current prices! Which is precisely what I said. Huh, how about that! I already was "thinking outside the box".

That suddenly makes it look like the current situation is not a supply shortage, but simply demand doing what demand is expected to do when faced by higher prices - fall. And supply doing what supply is supposed to do when faced with a drop-off in demand at current prices - fall.

 

[boz]

okay - so the 0.27 people per household difference between was "is" (according to boz) and what is "required" (according to shadow) equates to a mere 22,950 extra houses australia wide apparently existing above what is required.

hmmm - wonder if that 22,950 includes ski chalets, fishing shacks, holiday homes and back country huts?

Where did you get 22.950? sure it is not 2,2295 mil person difference? I guess if we consider 8 mil household (or homes) X 0.27 = 2,16 mil extra persons you can squeeze in with the Shadow occupancy rate of 2.76