housing scrabble

Highlighting the falls in home values, especially in Melbourne’s Inner East, is an example below which sold for $2,680,000 in September 2016. Add in the 5.5% stamp duty, the break even selling cost is $2,827,000. Fast forward two and a half years, the property is on the market for $2,100,000 with no takers. That’s a 34.6% haircut the current owner is taking, if he sold it at the asking price.

The magnitude of this fall is not typical, but Corelogic did report that Melbourne’s inner east fell 15.10% in the past 12 months. Corelogic also report that sales fell 22.1% in February from already lower sales. Across the whole of Melbourne, prices fell 9.10% and Sydney fell 10.4%.

Also, anecdotally, residential developers purchased 271 and 273 Dandenong Road, Prahran for $5,250,000. In January and February this year they abandoned development plans and sold the properties for $3,975,000, for a 32% haircut

The Australian Bureau of Statistics reported that on a seasonally adjusted basis unit approvals crashed by 51% from January 2018 to January 2019, and house approvals are down 6.6%.

Bloomberg recently highlighted that Australians are borrowing and spending less but are hiring and spending more. What will the RBA do? – probably what they have done for two and a half years – nothing. The RBA will have to see the whites of the eyes of a recession before they are moved to act. Gross Domestic Product numbers are out Wednesday which should show an immigration induced increase in GDP. Unfortunately, as a few media outlets are pointing out today, we are facing a recession on a GDP per head of population basis. There might be a much bigger crowd but, individually we can’t afford a meat pie.

10-year bond rates have fallen from about 2.75% in November 2018, to 2.05% in late February. The money appears to be on interest rates falling later this year.