Wednesday, April 18, 2012

Great Australian Dream: Selling Your Own Home

They say that the great Australian dream is to buy your own home. An action which, according to the property spruikers, will put you onto the first step of wealth creation (regardless of when you buy, just get that foot in the door!) or if you ask most baby boomers will set you up with a secure foundation from which to start your family. 

Recent property market figures however suggest that the great Australian dream at the moment is the ability to sell your own home (without taking a large price hit). This is a dream which many were unable to realise as the volume of property sales fell to a 15 year low, collapsing in January to around half the number seen in January 2010 or 2011 (so more than just a seasonal drop):

The above screenshot was captured from the latest RP Data Market Update, courtesy of MacroBusiness. In the update provided by Tim Lawless (Head of Research at RP Data) he fails to adequately address the huge drop in volume in January and rather concentrates more on the minimal rise that we saw in prices over the month of March (.2% rise over March, flat over the quarter over the 8 capital cities). As pointed out by Leith at MacroBusiness the rise in March is not seasonally adjusted so the insignificant rise is really a flat result:
The RP Data-Rismark daily index is not seasonally adjusted. And according to the 2010 and 2011 March house price releases from RP Data-Rismark (see here and here), the seasonally adjusted result was between -0.2% and -0.3% lower than the unadjusted (non-seasonally adjusted) figure. This implies that Australian dwelling values typically rise during the month of March and that the 0.2% rise in March 2012 was actually ‘flat’ in seasonally adjusted terms. Link
Leith also points to the slides presented which show that housing finance (excluding refinancing) is tracking near 15 year lows:

And listings are still elevated, not far from the peak we saw last year:

Another interesting chart was this one, showing auction rates rebounded in March:

What Tim Lawless failed to mention when showing this chart was that the bounce in March auction results is seasonal and we saw this in both 2010 and 2011. This was also recently covered by Louis Christopher who got quite angry with the RBA for mentioning the rise in clearance rates without addressing the seasonal factor (this from last nights newsletter, signup here to receive it):

Some words from our Managing Director, Louis Christopher -
"Today the Reserve Bank of Australia (RBA) released it minutes from their most recent board meeting. You can find them here:
Readers, I present this to you for one main reason. 
As you will see, the RBA stated in its minutes the following:
".....They (Developers) noted the apparent sensitivity of developers to the outlook for dwelling prices. New dwelling construction had fallen in the December quarter and there was little sign of a pick-up in building or loan approvals, though house prices had shown some signs of stabilising recently. While Auction clearance rates in Sydney and Melbourne had picked up a bit of late, they remained below their average levels."
As a long term researcher and housing market data provider, I am deeply concerned by these comments expressed today by the RBA.
Let me tell you now, house prices have not "stabilised". In many parts of the country, they are still falling. And auction clearance rates are WEAKER than recorded this time last year. The rise that has happened of late (and it's not much of a rise at that) is strictly seasonal. The RBA should typically know this and yet are still suggesting that there is stabilisation in the market. Well, not for Melbourne and not for Sydney and not for Canberra and not for Hobart and there are still some question marks on Brisbane and there are still no signs of the Gold Coast or Sunshine Coast coming out of their property crash.
I think the only cities we could suggest that there has been a genuine bottoming now are Perth and Darwin.
I can only hope that the RBA is not relying on daily house price indexes that moronically suggest that Melbourne house prices rose 1.8% in January. Or relying on certain commentators who have suggested deceitfully that auction clearance rates are in genuine recovery when clearly they are not.
And I can only hope that the RBA did not rely on these "indicators" to the point of keeping rates on hold this month."
While there are some data points that reflect a stabilising property market, there are many more than indicate that this year will see much the same as we did last year with prices continuing their slow fall.

Toward the end of the video Tim mentions that arrears rates are low by international standards, but as recently pointed out by Chris Vedelago (in an article about Numberwang!) the rate is still high in comparison to 10 years ago and it's somewhat hypocritical that these commentators are happy to compare Australia to our overseas counterparts in some instances and not others:
Take the home loan delinquency data in the Reserve Bank’s latest Financial Stability Review, which shows 90+ day arrears have climbed near-steadily for the last eight years but declined 0.1 per cent the last six months.
So how was it presented?
‘‘While arrears rates on mortgages are still above average, they have eased a little recently, and remain low by international standards,’’ the RBA said.
In fact, the 0.1 per cent decline was characterised as a ‘‘drop off’’ by Rismark International economist Chris Joye, who noted that while arrears ‘‘have risen steadily...they remain no higher than they were in the mid-1990s’’.
It doesn’t seem to matter that the ‘‘drop off’’ came about at a time when interest rates have been cut below their historic norms. Nor that a delinquency rate of 0.6 per cent is still more than three times what it was in 2003.
Some might also think that having a deliquency rate today that’s comparable to a period in the mid-1990s when the standard viable mortgage rate hit 10.5 per cent isn’t a sign of strength.
But it’s the reference to ‘‘low by international standards’’ that provides the real laugh.
How is it that many of the same people who decry the use of throw-away comparisons between Australia and overseas property markets when battling the ‘‘destructionistas’’ in the housing bubble debate seem happy to use them when pushing their own ideological wheelbarrows?
The poor data of late hasn't stopped many commentators from calling a bottom in the housing market, for example...

Residex CEO John Edwards recently commented:
“Prices continued to weaken in almost every capital city over January. Our data suggests we are moving beyond the bottom of the cycle however the trend is not pronounced,” Mr Edwards said.
RP Data's Tim Lawless (Research Director) and Ben Skilbeck (Managing Director, Rismark) have said:
Australia's house prices fell in every quarter last year but they may have hit bottom, new figures show.
Housing data released by RP Data-Rismark today shows that the rate of decline in house prices across the nation slowed towards the end of last year.
"The December quarter was the year's smallest quarterly decline," RP Data research director Tim Lawless said.
"One of the things we're expecting to see following the interest rates cuts last November is more activity," Rismark managing director Ben Skilbeck said.
"We expect transaction volumes to pick up in February and March," he said. "We would expect the negative growth to abate."
Earlier in the year Christopher Joye said:
And now we have mounting evidence that the housing market is staging a slow recovery, as I’ve projected in these pages for some time. The key catalyst appears to have been the RBA’s decision to swing 180 degrees from expecting to hike interest rates to cutting them in November and again in December.
If the RBA cuts again in February, and further thereafter, as some analysts believe they will, expect to see the return of rapid house price appreciation. As I've said before, housing (and bank-intermediated credit growth) will be the chief beneficiary of any interest rate relief.
Granted we didn't see the rate cut in February, but Joye has continued to suggest we will see house prices rise on the back of interest rate cuts when they do come.

Few of the above commentators appear to be looking at the full picture and are rather cherry picking data and sprinkling some pixie dust over the top in the hopes that we see a recovery in the data they aren't talking about.

My opinion since late 2009 is that we will see a correction in nominal terms of 15-20% over 3-5 years and likely further deterioration in real prices as lower than inflation price growth follows for several more years. This scenario looks to be playing out and is set to continue unless we see a substantial increase in mortgage activity and sales volumes pickup to reduce the elevated stock on market levels. If the volume of sales in January was in any way an indication of the interest property will see this year then the correction *could* accelerate to the downside as vendors have to accept lower and lower prices to find an interested/financed buyer.

Could a couple of rate cuts be enough to spur above inflation growth? It's unlikely that they will by themselves and in my opinion the rate cuts would need to be coupled with government intervention again to see real growth. In 2008 it took a multi-pronged approach with government splashing cash around everywhere to boost prices (as I pointed out in this blog post last year) and even then the stimulus quickly wore off. Something that the government is unlikely to repeat given their recent belt tightening in light of trying to return from deficit spending to a surplus.

While property sellers dream of ridding themselves of their properties in this slow market without taking too big a price impact, I'm sipping cocktails in my home near the beach which I'm renting for around half what it would cost me to buy and have my capital tied up in assets which are appreciating at a faster rate than a term deposit.

/raises my glass to renters living the new Australian dream/

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Thursday, April 12, 2012

Perth Mint reminting early (1992) Kookaburra Coins

Much to the dismay of some Kookaburra coin collectors (see Silver Stackers for discussion on the news) the Perth Mint has started reminting the 1992 Kookaburra 1oz coin. While some different sized & design bullion coins are minted only in the year before and of issue, the 1oz coins from the Kookaburra series have always been considered open for reminting to bring their total up to the limit, although many weren't aware they would go back and do so with a 20 year old design.

The following is a table (data from Perth Mint) showing the number of Kookaburras they could potentially produce if they remint the entire back catalogue up to their maximum limits:

YearMax MintageActual (10/2011)Difference
Available to Mint2,763,094

So there is the potential for Perth Mint to remint another 2.76 MILLION Kookaburras should they have wholesale clients or customers interested in ordering from the back catalogue (they would have to do so in large enough quantities to warrant it).

This event is likely to put some pressure on the premiums that most of the older Kookaburras have previously enjoyed as there is now a risk of their rarity being reduced.

It's not the only time we've seen this happen, Perth Mint has reminted other various years at times (I assume after having large enough orders placed by wholesale clients), for example I am of the understanding that they were reminting 2007 Kookaburras in 2009 and 2004 Kookaburras in 2010. Note the date on the following box:

Further to the above evidence a user on Silver Stackers took note of the production numbers prior to the update in 2011 and it seems that all years that didn't have the limit had extras minted up to October 2011 from when they'd last updated the count form (possibly 12 months prior).

The Perth Mint also took the liberty of reminting Series 2 Lunar 1oz bullion coins when they didn't sell out in their release year, although they've made it perfectly clear that Series 1 Lunar coins are closed off regardless of the fact that many weren't minted to their limits.

If you are interested in buying some of the 1992 1oz Kookaburras, freshly minted, in round capsules, then you can purchase them at Bullion Baron's site sponsor Bullion Money.

Click this link or the image below to go to to the 1992 1oz Silver Kookaburra product page:

Perth Mint 1992 1oz Silver Kookaburra

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Wednesday, April 11, 2012

There's no Alex Barton of Australian Property Forum

As if any more evidence was needed that Australian Property Forum is just a front site/troll nest for a group of property bulltrolls who have plagued Australian property based websites for years... see these links for previous posts:

Revert2Mean at the new Bubblepedia Forums has uncovered indisputable proof that social media accounts have been put together with fabricated details. The Facebook account of "Kim Barton" the supposed wife of Australian Property Forum owner "Alex Barton" has been exposed as a fraud with the profile picture taken from a Bulgaria Ski Holiday website (

Since the fraud was exposed the Kim Barton Facebook page has been altered, but here is a screenshot showing the previously public aspects of the Kim Barton account next to the holiday website the picture was stolen from:

Click to image to enlarge
While I have no empirical proof, it's my solid belief that the "owner" of Australian Property Forum, Alex Barton, is simply a front name used by the trolls to make the site look more credible. The dodgy "blog" landing pages (ripping off other well known sites), slyly dropped links all over the web to this troll forum & the way the site owner allows users to slander and make defamatory posts about other sites and individuals should be enough for most to get the picture.

The Bubblepedia thread discussing this development and other evidence of the troll antics can be found here.

I don't agree with all the conclusions made in the thread by R2M and others (as I pointed out in the thread on Bubblepedia). For example I don't agree with the summation that Shadow and others are all the same individual (it is almost definitely a group of trolls, but they definitely do use sock puppets).

After finding another forum which they co-ordinate their trolling from (since moved) I've been sure it's a group of individuals (not all of who reside in the same state based on their IP addresses). Given the distance between them I would suggest the group know each other in real life, they are perhaps part of the same real estate agency, investment group or as has been suggested they are employees of a leading property data provider.

The motivations of this troll group are as clear as day when you consider the sites that they have tried most heavily to disrupt. Australian Property Forum is a front for astroturfing in support of Australian property and those behind it are likely to get more desperate as the correction in over priced Australian property continues.