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Housing shortage or property glut - who do you believe?; When bank lending is restricted the illusion of a supply shortage will disappear
Topic Started: 9 Jan 2012, 11:25 PM (1,248 Views)
Alright Jack
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Housing shortage or a glut — just who do you believe?

Adam Schwab

Shortage or glut? Feast or famine? The question of whether Australia is suffering a housing shortage continues to be hotly disputed, with the real estate and construction lobbies arguing a desperate shortage exists, while other independent bodies, such as Prosper Australia, disputing the notion of a shortage.

The housing glut argument is led by Earthsharing Australia, which last year produced a report suggesting that the vacancy rate in Melbourne (until recently, one of Australia’s hottest property markets) was about 5%. In fashionable suburbs, such as East Melbourne or the Docklands, vacancy rates exceeded 8%. Earthsharing’s report, which was based on water statistics provided by City West Water and Yarra Valley Water, suggested that more than 60,000 properties lay vacant in Melbourne — substantially more than the reported vacancy report suggested by the real estate lobby.

While not a perfect measure, there is a degree of commonsense to Earthsharing’s report. Rather than attempt to guess whether there is a housing shortage based on economic assumptions, the group simply checked whether to see water was being used in a property — it is not unreasonable to suggest that if no water is being used for a length of time, the property is unoccupied.

That view was contrasted by a report released by the National Housing Supply Council, which echoed the sentiments of construction groups and claimed Australia was in the midst of a housing shortage. In fact, according to the council, the shortage actually increased by 28,200 to 186,800 during 2011. Even worse, the alleged shortage is forecast to widen to 640,000 within 20 years.

The National Supply Council is a strange beast — formed by the federal government in 2008, the organisation is a strange mix of academia, property developers and the even respected Saul Eslake. Included in the council are Mark Hunter (CEO of Stockland Residential), Nigel Satterley (property developer and BRW Rich List member), Ruth Spielman (executive officer, National Growth Areas Alliance) and Simon Norris (Clarendon Homes Queensland).

The council’s rationale for deeming a housing shortage is worth considering further. That is because rather than look at actual demand for housing, the council uses “underlying” demand. This leads to strange results.

Last year, the population of Australia increased by 320,000 — this was through a combination of immigration and births (less deaths). This figure is sourced from the ABS, so we can assume it is about a correct a figure as we can locate. According to the council’s report, there were 131,000 dwellings added last year (this figure is lower than what other sources claim, but we’ll accept it).

The council’s own report noted that there are 8.7 million households in Australia — with a population of 22.4 million, that means there are 2.6 people per household. Using fairly simple arithmetic, that means with 2.6 people per dwelling, and 131,000 new dwellings, enough housing was built last year for 340,000 people.

But wait, the population only increased by 320,000 people — that means, despite the council’s claims, there is a surplus of housing being built (even with dwelling construction being less than forecast). This appears to contradict the council’s finding that the shortage increased in 2011.

The council claimed that “on the demand side, at any given point in time underlying demand may not feed through directly into effective (actual) demand” — basically, what that appears to mean is that while there isn’t really a shortage, it will make some assumptions that allow a shortage to appear.

Later, the council noted that “the level of underlying demand is driven mostly by migration and other demographic factors”. Essentially, it appears the council is claiming that demand may increase in coming years (even though immigration levels are falling, rather than increasing), and that is why a shortage exists. The fact that a surplus of housing was built last year is disregarded.

More mysteriously, the Supply Council also claimed that “there were about 8.7 million households in Australia in June 2010. The number of households is projected to be 12 million by 2030, representing a net increase of nearly 3.3 million households between 2010 and 2030″.

This alarming forecast again doesn’t appear matched by recent facts.

Based on household numbers, the council is predicting an Australian population of 31.2 million in 19 years. That’s an increase of 9 million from the current level. The problem? That would require Australia’s population to increase by 473,000 per year — 42% more than the population increased in 2011. In fact, that’s a higher population growth rate than Australia has ever recorded. The claim is more difficult to justify given that Australia’s population growth and migration is slowing after spiking in 2008 and 2009 (see table below).

Year Ending Net Overseas Migration
June 2008 277,400
June 2009 299,800
June 2010 198,300
June 2011 170,300

House prices haven’t increased because of increased demand from migrants outstripping dwelling construction — rather, prices have risen because bank lending has created false demand. Supply factors have played little, if any role in the recent house price growth. As soon as bank lending is restricted (and this is happening already), it is likely the illusion of a supply shortage will disappear. Just like what happened in Japan in the 1990s, or California and Ireland after the recent financial crises.

http://thedepression.org.au/?p=8976
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Rastus2
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lol. Interesting read.

Cue the bulls with their own stats.


Shadow - Defrauded his Bank ? 2015 I have 9 different loans and my bank had no idea which ones were personal and which were investment. They had half of them classed incorrectly. When this change came in they asked me to tell them if any personal loans were incorrectly classed as investment, which I did, and they switched them to personal for the lower rate. They also had a couple of investment loans incorrectly classed as personal. They didn't ask me about those. So they stay on the lower rate too. Worked out pretty well. :)
Shadow - 2008 Sydney Median House Price 1.25M by 2014-2015

Shadow : I think this boom has already begun in several cities. My prediction :
Peak of boom: 2014-2015. Sydney Median Price: $1,250,000 Bottom of bust: 2017-2018. Sydney Median Price: $1,100,000

Shadow's Original 2010 House Boom and Crash prediction http://s836.photobucket.com/user/rastus22/media/shady-orig-2010-chart.png.html?sort=3&o=0

Shadow's attempt to edit his 2010 chart in 2015 and replace it with one that does not show a crash in 2013 http://s836.photobucket.com/user/rastus22/media/Screen%20Shot%202015-06-06%20at%207.12.52%20pm_1.png.html
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Andrew
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Rastus2
10 Jan 2012, 12:04 AM

lol. Interesting read.

Cue the bulls with their own stats.


Cue links showing how there were claims of a housing shortage in many places that suffered significant price falls (including Brisbane, down 9.5% during a supposed shortage)


California housing shortage claims
http://www.ppic.org/content/pubs/rb/RB_304HJRB.pdf

Florida housing shortage claims
http://www.nytimes.com/2005/03/25/business/25boom.html?pagewanted=2

Irish housing shortage claims
http://www.breakingnews.ie/ireland/qleygbsnsn/
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themoops
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Ruby Member
The truth is probably somewhere inbetween. However the days of selling stuff a half hour+ from the city as if the lifestyle is some sort of fabulous inner city lifestyle are over and they will take a hit because of that as well as because of deflation. You see the artist pictures of those unit developments and the people walking on the street outside are all classy and good but the reality is the people are mostly trashy looking and ugly.
stinkbug omosessuale


Frank Castle is a liar and a criminal. He will often deliberately take people out of context and use straw man arguments.
Frank finally and unintentionally gives it up and admits he got where he is, primarily via dumb luck!
See here
Property will be 50-70% off by 2016.
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stinkbug
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The article suggest 2.6 people per dwelling, but I bet the average for units is less than that. The trouble with this debate is that it is hard to work out how much of the alleged oversupply is in fact underutilisation of existing dwellings.
---------------------------------------------------------------

While it's true that those who win never quit, and those who quit never win, those who never win and never quit are idiots.

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Admin
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Life on city's edge is no field of dreams

Chris Vedelago
April 22, 2012

ON THEIR daily walks around their Point Cook housing estate, Stephanie Sikman and her son, Stefan, 4, kept seeing the same vacant lots. Months passed, but very little in Esperance Estate seemed to change.

Where scores of new houses should have been rising, the land remained empty, leaving gaps like broken teeth in the streetscapes.

In some parts of the subdivision, vacant sites sit in clusters of a half dozen or more, with residents left to stare out over fields of dirt and weeds.

''We just assumed the people who bought all these blocks would build on them. We thought they would be like us,'' says Sikman, 34, who with her husband, Nick, started building their family home in the subdivision about a year ago.

Since moving into the neighbourhood in November, they've watched construction slow to a trickle. Instead of pouring slabs and building frames, owners are fencing off many of the vacant lots to stop a growing problem with illegal dumping.

''We're extremely happy with our house and we'll be here for 20 years. But this isn't the community we thought we'd be getting,'' Sikman says. ''There are still just so many empty blocks.''

Nearly two years after developer LinksLiving transferred the first lots in Esperance to their new owners, nearly one-third of the estate is empty and undeveloped.

Read more: http://www.theage.com.au/victoria/life-on-citys-edge-is-no-field-of-dreams-20120421-1xds8.html#ixzz1smDj70Dh
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