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Aussie Face Palm
We’ve been on a bit of a housing kick lately, so I promise this will be the last of our posts on deflating bubbles for now. Perhaps we’ll move onto the auto industry next week as we’ve been hoping to share our investment thesis on a major supplier that has been “reborn” in the wake of the industry downturn.
Until then, we’ll share a couple of new pieces of information we’ve come across since our Aussie Pride post just a few days ago. To begin, we think it’s worth noting that the peak in existing house sales in the U.S., led the peak in price by about six months. It is intuitive that, Activity Leads Price in the real estate market. With that little nugget in mind, homeowners in Australia may wish to note the following press releases from HIA’s Economics Group:
Approvals Nose-Dive in January, 3 March 2011
“Building approvals fell substantially in January 11, as higher interest rates have negatively impacted the demand for housing.”
“Total residential building approvals fell by 15.9% in January 2011 to be down 24.8% on a year earlier.”
“The January 2011 fall in approvals is the worst monthly decline we have seen since September 2002.”
“Today’s poor approvals numbers emphasise the extent to which the non-mining sectors can be squeezed as the RBA hikes rates to control price pressures coming out of the mining sector.”
Pulse of New Housing Too Slow, 9 March 2011
“The number of loans for construction fell by 9.4% in January 2011 to reach the lowest level since December 2008. Loans for the purchase of new dwellings dropped by 13.5% in January 2011, which was also the weakest level since December 2008.”
“An unequivocally weak update on housing finance for January 2011 reinforces the appropriateness of a steady interest rate environment. It is important the Reserve Bank maintains a clear message of stable rates. Housing, like the majority of non-resource sectors, is performing below par in 2011.”
Investors are certainly entitled to their own opinions but that does not sound like a ringing endorsement for a fundamentally strong housing market to this simple mind. It would appear that 8% interest rates on new loans are starting to take a bite out of the “non-mining” Ozzie Economy.
The numbers don’t lie. But the anecdotal information we are coming across on a regular basis paints an even more colorful story. Once Australian writer notes:
Southport Central — where 165 units remain for sale — was the city’s best-selling project for the quarter with 28 sales. Apartments in the project’s second and third towers are selling from $340,000, down from the 2007 entry-level price tag of $437,000.
More than 720 new apartments remain for sale across the Coast, equating to just over two years of stock at the current rate of take-up.
The number of newly advertised properties for sale is 25.9% higher than it was at the same time last year. The total number of properties currently being advertised for sale is at the highest level of any week since the beginning of 2007. The elevated stock level is largely due to the difficulty vendors are having selling their properties as investors and first home buyers remain on the sidelines. The total number of properties advertised for sale increased by 1.7% last week and is 24.2% higher than at the same time last year.
Disclosure: At the time of publication, the author was short the Australian Dollar, Australian interest rates and various Australian financials via traditional and derivative investment vehicles, although positions may change at any time.
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'girls are not very pretty'....
you didn't go down under looking for an eye doctor then.
I was in Australia a few months ago and noticed they have a tv show themed just like we had in USA before our RE crash. The host travels around with prospective home buyers who might be lucky enough to be the winning bidder on mediocre homes that cost over $1M. I was on a little expedition to explore Australia as a potential place to move, as I have no intention of staying in USA much longer. Unfortunately the pristine beaches and friendly Aussies are not enough to get me to pick that as a final destination. Price of everything is sky high, and not only that, cops setup roadblocks everywhere, flag you over and stick breathalyzers in your face as they check your license. Our Patriot Act on steroids, Aussie bureaucracy is more paranoid than anything I've seen. That, and the girls are not very pretty.
Those TV shows are nothing new. They have been around in Oz since the late 90's. They are still going now, only because the property spruikers down here are in a last desperate bid to convince the sheeple (yes, we have them too) that property is still the investment of a lifetime (of debt servitude).
But the sheeple are slowly catching on, but those TV shows still persist. I'd give it another 9-12 months, and we won't be seeing those TV shows much any longer.
However, don't let that put you off coming down here. The place has multiple faces, in that what you see as a visitor/outsider, is but one of many facets, and there is a thriving multitude of sub-cultures down here, where most real Aussies tend to exist, and it is the antithesis of what is presented to visitors/outsiders via mainstream channels.
Yes, you are correct in all your observations, however, that trend towards less freedom for the individual is to be seen everywhere in the world, whether overtly or covertly, it is a clear trend towards less freedoms for individuals. Could it be...that that in itself, is indicative of the last dying grasp by central planners and their advocates everywhere, to retain a status quo which is slowly & silently dissolving in front of them?
As for the girls not being very pretty, well, this country can't satisfy everyone's tastes, but I know from your comment about this, that you didn't visit Men's Gallery whilst in Sydney...right?
For many years i have been waiting for the new type of real estate shows in Oz such as "Cold Auctions" and "The No Equity Block".
Magnum, get your eyes checked as well.
Excellent article, BTW.
Thanx.
The Aussie Housing Bubble will make the American one look small....
Median House price in Australia = US$560,000.
BOOYAAHH!!!!!!
But, But we buy an equity stake. Can't lose < sarc 0>
Hedges Ave - Ocean front 6 bed - sold 2007 for $13mill - resold 2 weeks ago $5.8m (and it was still overpriced)
Bonza
Good luck shorting AUD. The Bernank's goto strategy when in doubt is AUDUSD.
Would you mind expounding on this for those of who are a bit naive (vis a vis this dependency/action)? Thanks!
What with the amount of debt per capita aussies have (almost the highest in the world) and the way overvalued currency that has performed better than any other currency apart from singapore dollars, everyone is itching to short it making it the perfect short squeeze I'm sure Ben loves when he needs cash quick.
I've watched in amazement as AUD climbed to new highs in the lead up to and shortly after Australia was being pummeled by floods and that huge hurricane that took out large portions of Queensland. It's like the worse it gets, the better it does. It's the first to shoot up when risk is on and last to fall with risk-off -- as if in disbelief that it can actually go down. It's not part of DXY, small economy in the ass-end of the world noone cares about, and the idiot aussie policy makers think AUD strength reflects how great the so called booming economy is doing with the MSM lapping it all up. It's just a perfect tool as evident by the correlation of AUDUSD and US stocks.
"..activity leads price.."
Sure Thing
Joe Granville, creator of the OnBalance Volume indicator is famous for pronouncing that "Volume Precedes Price". So yeah, declining volume would point to declining prices.
Can you provide some names for home builders? This sector provided a lucritive short in the US housing collapse. Thanks for the update. Have been waiting 12 months for this scenario to pan out.
av jennings is one.
"Facepalm" meet "Smell the Glove." It speaks French and launches pre-emptive air strikes. I have no doubt "Khadaffy's days are numbered." And then what?