Property sales : Has the dead cat bounced in Australia's property mearket?

Property sales : Has the dead cat bounced in Australia's property market?

Property sales across the country have slumped to their lowest level in 10 years. despite rising sales in Melbourne, and some upturn in Sydney's housing market
Figures from RP Data show sales of houses and units dipped 20 per cent in 2010 on the back of a number of interest rate rises, and falling demand for other reasons too I suspect.
Darwin Brisbane and Hobart all recorded lower home sales activity, with Sydney leading the way.
The "dead cat bounce" analogy
Home sales fell last year to below those recorded at the height of the global financial crisis in 2008. That was when the rest of the World had a major correction in house prices and Australia missed that bath. Hence the dead cat bounce comparison.
Whilst we have seen several raises in mortgage interest rates, they are hardly a concern at average mortgage rates we have and full employment, so my guess is that house prices have got ahead of themselves and until they soften further we are unlikely to see an upswing in home buyers any time soon.
New Responsible lending laws
One thing that people are not talking about is that from January 1st, 2011, banks had to be more diligent in the lending due to new responsible lending laws taking affect.
The fact is that new land on the Sunshine coast is so over priced that lenders may be reluctant to fund the silly prices being asked for blocks of land, on the basis that the market may well soften further and they would be caught holding the baby.
This is besides the fact that the borrowers may have a hard time meeting the repayments. It may becoming easier for bank managers to say no to loans, as the big banks are loaded with mortgage borrowers who have equity in their homes and the ability to repay the loan. Why pick up new business that does not meet that criteria?
You may have noticed that the ads from the big home builders and the developers have suddenly stopped. They are not into throwing good money after bad, and the developers may have to start thinking about discounting their land if they want to offload the land that they have going unsold.
First Home Buyers an extinct species
Over priced land has killed off the first home buyers in the new home sector. Decades ago cheap land was the spur that meant that first home buyers usually bought house and land in the sticks. Well that does not happen anymore.
And the problem is that second home buyers wanting to move up want a decent lot size. That won't happen under $300,000 on the Sunshine Coast. So since when was residential land worth over $2 million dollars an acre? Since Stockland and Delfin monopolised the residential land development market it seems to me.
All was fine whilst the Labor Government propped up sales with trebling the first home owners grant to stimulate first home buyers into building a new home. Well that has stopped and as usual, the price of everything rose to the level that people could afford with the grants. Take them away and the party is over. Isn't this what has in fact happened?

If the Government wants to get people into new homes, and get home prices down, it needs to take control of land sales and development.
Without new players in the home loan markets, expect to see mortgage business drop and the return of refinancing and debt consolidation in the mortgage broker sector.

First time home buyers record boosts Australia's confidence

In Australian Rules Football a team down on it's confidence can be sparked into life by a daring feat followed by an unlikely goal. Well it looks like first home buyers have been given the confidence to act in the shape of the extended First Home Owners Grant, and they in turn have passed the ball to other players in the Australian economy.
In the face of a global recession, and flat real estate prices, the treat of job losses increasing later this year they have kicked a goal in the form a record in numbers of first time.
This act of courage can only lift the confidence of other Australians and give them heart to set aside their concerns and get on with it, whatever that "it" may be.
In fact on the back of this, and the financial support that has been handed to all Australians that need it most by the Rudd Government, Australians’ confidence in the future have risen its best level in nearly two years.
In turn Australians have set record retail spending figures over the last few weeks. With major infrastructure works that the Government has planned to yet come on stream and with major trading partner China recovering faster that expected, Australia just may miss this whole Global recession thing all together.
Those that control the levers of power in Australia seem to have a grip on what to do next. They include Kevin Rudd, Wayne Swan, the Reserve Bank of Australia, and the Treasury public servants. Good on 'em!
Lets hope there are other players in Australia's economy who can go out against the odds and kick some more goals.
Rick Adlam is Mr Mortgage

Will Australia avoid the World recession and swine flu come out stronger?

What happened to the Recession and Swine Flu?
Banks and other mortgage lenders, first home buyers and retailers and all rejoicing as Australia appears to have escaped the recession that has swept the World and the dreaded Swine Flu in a single bound!
Swine Flu reported numbers are falling and without a single fatality, and the Reserve Bank of Australia deciding to leave interest rates unchanged at 3 per cent, when the board met today at its June Meeting.
The Rudd government must be dancing in the corridors of Parliament house this afternoon. Expect them to make the Liberal opposition pay now for its criticism of the stimulus package handouts, and First Home Owners Grant boost, which saved the building industry from decline and job losses. The Retail industry must also be thankful as the stimulus reaped them a record April shopping spree. Things are looking good.
The decision to keep interest rates at its 45-year low is good news for the housing industry, home buyers and mortgage lenders because there is money to throw at any weakness the RBA board sees later in the year.
In a statement released this afternoon, Reserve Bank governor Glenn Stevens said there was evidence emerging the global economy is stabilising.
"The turnaround is clearest in China and some other emerging countries," he said.
"Recovery in the major countries is likely to take longer to begin and be slower when it does occur."
Mr Stevens said although the effect of low mortgage rates was yet to be seen, future rate cuts were possible if the economy continued to deteriorate.
"The prospect of inflation declining over the medium term suggests that scope remains for some further easing of monetary policy, if needed."
The Reserve Bank cut the official cash rate by 25 basis points in April ending 425 basis points worth of reductions since September.
The central bank has since indicated it is in no rush to lower rates further as it assesses the impact of its easier monetary policy stance and the Federal Government's stimulus packages.
The stimulus packages have worked their magic and have lifted the retail industry, with figures out yesterday showing consumers spending a record $19.4 billion shopping in April.

Property dives but first time home buyers think 'It's a good time to buy.'

Hopeful first-time home buyers think it is a good time to buy their first property despite prices falling 1.7pc in April. Around 57pc of people hoping to get on to the property ladder said they thought house prices would either stay the same or increase during the coming 12 months, while 69pc thought now was a good time to buy, even though the facts say otherwise.
One in five first-time buyers even said they thought it would be more difficult to buy their first home in a year's time, viewing the current market as a window of opportunity for people with a substantial deposit.
The group said the shortage of buyers able to get a mortgage and the increase in forced sellers meant that some first-time buyers had been able to purchase properties at 25pc less than their peak price.
The optimism comes as the Halifax said that house prices in Britain fell by a bigger-than-expected 1.7pc in April and by 17.7 pc in the three months to April compared with a year earlier.
Miles Shipside of Rightmove said: "It's a clear sign that the mood is swinging from negative to positive when first-time buyers are looking to re-enter the market. Canny investors have been snapping up some bargains, and now first-time buyers reckon prices are reaching a floor too."Some will be frustrated by the size of deposit that lenders are demanding to get the best mortgage deals, however.

The average first-time buyer questioned had £31,650 saved for a deposit, the
equivalent of around 20pc of the average house price in England and Wales.

The majority of lenders continue to require a 40pc deposit in order for borrowers to qualify for their best deals, and there is very little choice for people with only a 10pc down payment.However, competition in the mortgage market has been increasing in recent weeks for people looking to borrow 75pc or 80pc of their home's value.Mr Shipside urged lenders to take the plight of first-time buyers seriously and offer more loans to people with smaller deposits.

The British aspiration of property ownership remains high and
aspiring first-time buyers cannot be condemned to renting forever.

"We need to think about the long-term effects of the continuing mortgage famine and current lending policies." Around 62pc of first-time buyers are planning to buy a property with their partner, while 33pc are buying on their own and 5pc are buying with friends or family.
Six out of 10 people hoping to buy their first property are currently renting privately, with 30pc living with their parents and 6pc in council or local authority accommodation.
Four out of 10 potential first-time buyers said they would consider buying a property through a shared ownership scheme.

Will house prices rise in line with the First Home Owners Grant rises.

Those of us who have lived through two, now three first home buyers incentive schemes know two things that most people don't. The first is that putting money into first home buyers pockets is like spraying petrol into a car engine. When the fire is burning you will get a massive acceleration, more maybe than the energy you put in. When you do the same to a sluggish or dead engine, you will flood the engine and kill the spark.
The first home buyers have spoken in their silence. The engine is dead, and its flooded.
It needs to be stripped down and over-hauled. Its sick and doesn't do the job it was intended to do.
Adding supply side demand [by giving incentives and cash to potential first home buyers to an inefficient/ housing market] may drive the market on, but it will not address the core issues.
The core issues are that banks put their self interest before their customers and won't pass on rate rises, and must be dragged kicking and screaming to do so, and that the new home market is geared to second and third home markets, and in doing so has become inefficient in building new home stock.
The result is that the average age of a first home buyer is nearly forty in Australia, [over forty in the US], and the home builders of Australia and America focus on where the money is, the second, third and fourth home buyer.
These people want to get it right, mostly for a couple and a dog, and take their time to design and decide, two reasons why we are building bigger and bigger homes for less and less people.
I have worked in the new home building industry in the 1980's, the 1990's and the 2000's up to right now.
The last month I was AV Jennings in the mid 1988's I sold 7 homes [I averaged 4 homes a month.] The average was 3 sales a month in the 1980's
The average for the 1990's was 2 sales a month for the industry.
By 2000, the average was 1.5 home sales a month per new home sales.
By 2008 this was 1.25 home sales a month per month and falling fast. Many builders have display homes where they can't get home sales consultants to work or they have decided not to open because of their "graveyard status". Many builders have display homes they can't sell.
The sales training given these days is better than in the 1980's and the sales people are more professional, and the urgent need for accommodation for families is dire. So why aren't homes being built?
There are many reasons, but the big one is that first home buyers want a home three times the size they need and twice the size they can afford, and State and local Governments are addicted to money they take in the form of fees and Stamp duty from land developers, home builders and their suppliers, and home buyers generally and new home buyers in particular.
This makes the homes that first home buyers are looking at, at least $100,000 more than they would be, and paying off a mortgage that is $100,000 bigger than it should be may get the banks rubbing their hands, but is making first home buyers reluctant to get into debt that deep for a dream that can become a nightmare in an unclear future.
We need to stop allowing Local councils and state governments dependent on bleeding new development and building projects.
So back to the original question.
Will the house prices rise by the size of the grant increase?
I don't think so. Not this time. In the 1970's it did because The new home builders have become niche suppliers to second, third and fourth home buyers, not first home buyers. The incentives are still too small and don't compensate buyers for the GST, let alone the ripoffs mentioned.
Land supply to Developers needs to be controlled by the Government, as developers and builders have not been meeting the markets needs for years, and land developers use deceptive marketing tactics that manipulate the markets and make land prices artificially high, under the guise of market forces. They buy raw land then hold it. They should be taxed out of doing this. They deliberately hold land from sale to give the appearance of scarcity, when land is in fact abundant. They tell customers that they only have three lots available when they have 15 or 50 available. The run sham auctions. They put sold signs on lots that are not sold.
If Governments acquired and banked residential land and created a competitive development industry first home buyers could see a new home price halved.
The truth is a block of dirt to build a home on should not have to cost $300,000 in the middle of nowhere, but it does on the Gold Coast, and in many areas of Australia.
It time for a breakout of the trend that has gripped Australian residential building and it time for a new deal for the smarter first home buyers that want that new deal.
First home buyers no longer want to get across the line, because they are smart enough to know that they are then the proud owners of a 30 year mortgage. That the mortgage is bigger than it should be should be concern for everyone.
Rick Adlam is the founder of the Australian Mortgage Exchange and Mr Mortgage