Victorian/Melbourne Property Market

[hobo-jo]

(Stockland) Managing Director Matthew Quinn reiterated that this is the worst new housing market he has seen in more than 20 years and that this will cause a substantial decline in earnings per share in FY13. Conditions in Victoria are particularly challenging following the end of state government stimulus on 30 June 2012; sales volumes have halved and aggressive discounting is required to clear stock.

http://www.macrobusiness.com.au/2012/10/new-home-market-still-the-worst-in-20-years/

Just 500 blocks a month were sold in Melbourne in the September quarter - a new low. That compares with about 1500 a month from 2009 to 2011, according to the latest figures by property research company Research Four.

http://www.theage.com.au/victoria/d...mand-slumps-20121015-27n1p.html#ixzz29VzszRbv

Stock on market continues to remain elevated (much higher than GFC levels):
http://www.sqmresearch.com.au/graph_stock_on_market.php?region=vic::Melbourne&type=c&t=1

Vacancy rates remain well above other capital cities:
http://www.macrobusiness.com.au/2012/10/rental-vacancies-flatline/

Mortgages being discharged faster than they are being taken out:
http://www.macrobusiness.com.au/2012/10/victorian-mortgage-demand-transfers-fall-sharply/

Those familiar with my expectations on property on a national level would know I am not expecting a crash, but I think Melbourne/Victoria (alone) could be set up to see one:

http://www.bullionbaron.com/2012/06/chart-guide-to-melbourne-property-crash.html

I think 30% off prices over 3-4 years is a definite possibility.

 

[Shadow]

Three links to Macrobusiness and one link to your own blog?

Why link to that discredited permabear site, Macrobusiness, when the Macrobusiness blog contains nothing but a copy/paste from the original source?

Better to link to the original source when Macrobusiness adds nothing new to the topic (which is the case with most of the Macrobusiness links you post on a daily basis... are you advertising for them? Perhaps they need a bit of extra Google Adsense revenue, given that hardly anyone has subscribed to their paid newsletter?)

Those familiar with my expectations on property on a national level would know I am not expecting a crash

I thought you said previously that you expected prices to fall 20% nationally?

Were you aware that Melbourne prices have jumped by more than 4% in the past few months, according to the RPData index?

 

[hobo-jo]

I thought you said previously that you expected prices to fall 20% nationally?

Were you aware that Melbourne prices have jumped by more than 4% in the past few months, according to the RPData index?

I think I have spelled out my expectations in more detail elsewhere but this quote will do (from January 2010):

I now believe we will see at least 15-20% of nominal prices over all capital cities over the next few years and probably another 5+ years stagnation/low growth. It could end up being worse.

I wouldn't really consider 4-5% price drops over 3-5 years a crash.

Yes I am aware of Melbourne's short term (dead cat) bounce (according to RP Data).

Where do you think Melbourne prices will be in 3-4 years Shadow?

 

[Shadow]

Yes I am aware of Melbourne's short term (dead cat) bounce (according to RP Data).

I guess the Adelaide bounce is probably more disconcerting for you. Adelaide prices are only 4% away from their all time peak now. So if you bought your old house back, paying 5% stamp duty, you're actually down 1% (plus other costs and hassle) as a result of your 'sell to rent' adventure?

Yeah yeah I know, in the particular suburb where you sold, prices are actually down a gazillion percent putting you miles ahead...

Where do you think Melbourne prices will be in 3-4 years Shadow?

I think they'll approach a price by an unspecified day within that timeframe.

 

[hobo-jo]

This thread is not about Adelaide or my personal situation, but you are welcome to start a new one if that particular market interests you. Otherwise maybe you can turn off troll mode and contribute something constructive to the thread.

If you think Melbourne prices are heading higher or will plateau rather than falling then make your case...

 

[Shadow]

Otherwise maybe you can turn off troll mode and contribute something constructive to the thread.

The thread is just a collection of links to Macrobusiness and your personal blog to support a bearish agenda.

 

[hobo-jo]

The thread is just a collection of links to Macrobusiness and your personal blog to support a bearish agenda.

I have posted links and information in the Perth thread which lean toward a case for prices to rise... do I have an agenda or am I just sharing an opinion and opening it up for discussion (on a forum designed for that exact purpose)? What possible agenda could I have if I am sharing both negative and positive information depending on the market?

 

[Shadow]

do I have an agenda or am I just sharing an opinion

Both I think (three links to the same blog that just requotes data from other primary sources?) but no worries... carry on.

 

[hobo-jo]

Both I think (three links to the same blog that just requotes data from other primary sources?) but no worries... carry on.

So what? You think I'm a paid shill for Macro Business? You're a nutter Shadow... carry on.

p.s. There are links to 4 different sites in the OP, they are not all to the same blog. I do use Macro Business links a lot, even when they are just quoting other sources because it's convenient (and because I think their analysis is not matched elsewhere in Australia business media). The search terms I use in Google to bring up the data I'm after often come up with the MB links. And for example with the Stocklands quote, the alternative is trying to copy/paste from an ASX release and the last time I tried to do that I wasn't able to. And the Victorian mortgage demand data might be available on some government website, but I doubt the data is charted or found quickly.

 

[Shadow]

You think I'm a paid shill for Macro Business? You're a nutter Shadow

Why the abuse?

I do use Macro Business links a lot, even when they are just quoting other sources because it's convenient (and because I think their analysis is not matched elsewhere in Australia business media).

You must be joking? Here are Leith van Onselen from MacroBusiness predictions for Australian property this year, versus what actually happened...

(h/t Strindberg from APF)

On 2 July 2012, Leith van Onselen (Unconventional Economist) predicted (in the $479 Macro Investor newsletter) the house price movements for Australia's capital cities for the 12 months from 1 July 2012.

He repeated the article the next day for free in the The Age.

http://www.theage.com.au/business/housing-outlook-the-bad-and-the-ugly-20120703-21e8z.html

We have the RP Data results for the first quarter of that period (ABS data soon) so we can take a peep at the progress of LVO's predictions for Australia's 5 major cities.

Here are the mid points of LVO's 12 month range predictions followed by the RP Data Q1 results.

Sydney... LVO says -1%, Actual Q1 result +2.8%

Melbourne... LVO says -6.5%, Actual Q1 result +3.0%

Brisbane... LVO says 0%, Actual Q1 result +0.8%

Perth... LVO says +3.5%, Actual Q1 result -0.2%

Adelaide... LVO says -3.5%, Actual Q1 result +1.2%

So, we see that so far Leith van Onselen actually has THE DIRECTION OF HOUSE PRICES WRONG IN ALL FIVE MAJOR CITIES.

For the 12 months from 1/7/2012 Onselen predicted prices to RISE in Perth. In Q1 they have FALLEN.

For the 12 months from 1/7/2012 Onselen predicted prices to FALL in Sydney, Melbourne and Adelaide. In Q1 they have RISEN.

Onselen predicted Brisbane would be flat, in Q1 it has risen.

So much for financial advice to be found in expensive internet newsletters. A blind monkey could have been expected to get the direction correct for a couple of these cities.

Macrobusiness are clueless about the housing market. They have been wrong wrong wrong for the whole time they've been publishing their property bear fodder.

David Llewelyn-Smith actually said last year that house prices would fall for the next decade!

 

[Angel]

I have Stockland shares, do I have to read all this arguing?

 

[dredfern]

I think 20-30% 'increase' over 3-4 years is a definite possibility!

 

[hobo-jo]

I have Stockland shares, do I have to read all this arguing?

I will try to refrain from responding to Shadow's trolling


Back on Melbourne, although RP Data claims a 4% increase in prices over the few months (which was really just recovery from a steep fall earlier in the year), their other stats show that the market is still in poor condition and likely to see further price falls:

Yields the worst in Australia
Time on market same as last year when prices were falling
Vendor discount (off asking price) higher than same time last year
Bundle that with the stats from the original post in this thread and there is only one direction Melbourne prices are going over the medium term (short term bounces always inevitable like any market).

 

[Aaron Sice]

Melb @ 2pm of the clock.

 

[DavidMc]

I'm keen to hear on others views on Melbourne 1-3 and 3-5 year views.

HTW put Melbourne Houses and Units at 'Bottom of market / Start of recovery'.

Do we think the next upswing will start with the inner burbs again? Inner has been pretty flat overall for the last 4-ish years.

 

[feihong]

I still have no answer for this one

Does anyone know, whether it is a norm for Melbourne/Victoria's acceptable rental yield (for investors) to be considerably lower than other states? In Sydney, Brisbane, Perth and Darwin, the rental yield in general has got to the point where the price just has to follow. I just cannot see how Melbourne is at the bottom of cycle with its dismal rental yield and high vacancy rate in many parts of the city (from anecdotal evidence)

 

[Jake Milne]

Melbourne's vacancy is hovering around 3% ...it's not that bad.

Rents have increased by almost 10% in the last 12 months.

*yield varies from 3-6% in Melbourne respective of property type, leverage and area.

 

[buzzlightyear]

Melbourne vacancy rate as calculated by SQM reserach is 2.8%.

F, you are going to be a bit more specific than simply saying all of Melbourne compared to a host of other cities. There is so much divergence between inner east, south-east, west, north in Melbourne alone.

And to be honest, I have seen net yields in flat/older style apartments in inner west in Sydney to be very similar to those in comparable suburbs in Melbourne. I cant make any comment about the other cities.

From my experience with my portfolio in 2012, I can talk about rents being stagnant in Frankston, climbing strongly in Northcote & Windsor, climbing steadily after slumping in 2011 in Point Cook, stagnant & maybe even weaker in outer North and a small rise in the inner North. As for yields, property type, location, condition, (non)NRAS, resi v comm all change the nature of the discussion. No doubting Melbourne market is soft, but if you are on the ground, as I have outlined in another thread, there is life returning to the market, however slowly.

Its been said before, but its impossible to say a city has one vacancy rate to have any real meaning, (even though I have quoted it above!) except for the technocrats and for those who like to see one number summarise what is generally a more nuanced issue of vacancy & rental rates across a city of 4million.

 

[matto_]

This is another of those arguments - that there appears to be no "middle ground".

 

[DavidMc]

Does anyone know, whether it is a norm for Melbourne/Victoria's acceptable rental yield (for investors) to be considerably lower than other states? In Sydney, Brisbane, Perth and Darwin, the rental yield in general has got to the point where the price just has to follow. I just cannot see how Melbourne is at the bottom of cycle with its dismal rental yield and high vacancy rate in many parts of the city (from anecdotal evidence)

I agree feihong.

Your comment reminds me of Steve Navra's theory called 'Rental Reality'. It would be very interesting to apply it to Melbourne, I think there is something in it. From memory it measures the current rent vs the last 5 years average rent and works off the premise that people will buy (and CG happens) once the buy/rent equation is favourable compared the the recent past.

My prime inner SE apartment costs $731pw to buy (100% LVR IO @ 5.59% for example) but it rents for $440pw.

With a 20% deposit it would drop to $584pw.

Sure, there is a premium to buy over rent (emotional aspect of owning, etc) but surely that gap is too great to buy?

Mind you this is a ~$680k 2 bedder in Toorak and yields are traditionally low.

My own properties in the outer SE (Casey + Frankston) and inner prime SE have both have been pretty flat in the last 12 months in terms of value and rents.