The real estate bubble in Australia has taken its next step forward as noted in Agents dump sellers over ‘dream 2010’ prices
REAL estate agents are dumping vendors who are stubbornly holding out for “dream 2010” prices instead of dropping their reserve in order to wrap up a sale.
With the number of properties in Melbourne at record highs and listings set to increase over the spring, agents throughout the city are telling growing numbers of vendors that they can keep the house and are walking away.
Barry Plant managing director James Hatzimoisis said there came a time in the sale process when agents had to make a commercial decision and drop vendors demanding substantially more than the market was willing to pay.
“There comes a time when you have to make a commercial decision and tell them, ‘I don’t think I am going to be able to sell your house at that price, so it’s best we go our separate ways’.”
JPP Buyer Advocates’ Catherine Cashmore said agents throughout the city were shedding hundreds of stale listings as they prepared for the traditional spring selling season.
While stock levels are high – RP data puts the volume of Melbourne stock at 52,611, about 34 per cent higher than this time last year – Ms Cashmore said between 10 and 20 per cent of those listings were discretionary vendors who would sell only if they could get their “dream 2010” price.
“An agent only gets paid when they sell a property so if they are investing a lot of time into something they know is not going to sell, then there is no point in wasting time on it,” she said.
“We have a market full of vendors who don’t need to sell and will only sell if they can get their price. They are perfectly happy to leave their property on the market in the hope that an uneducated buyer will come along and fall in love with it and pay what is on the price tag.”
Anyone surprised by this is not paying attention to me or far more importantly to Australian economist Steve Keen author of Debunking Economics.
Steve Keen has taught me a lot. I do not agree with everything he says (or vice-versa). However, a tip of the hat goes to Keen for his early, unheeded warnings regarding debt-deflation in the US and Australia.
Keen’s big mistake was being a year or so early in his home country, Australia. However, those demanding perfection will not find it from Steve Keen, from me, or from anyone else.
Debt-deflation has taken hold in the US, followed by Europe, followed by Australia. Canada will follow as well, and only a few of us have called it. Keen is one of them.
Housing Shills Still Cheerlead Others to Doom
In spite of the fact the Australia housing market has turned, bulls still stick to the absurd “housing shortage” myth. We heard the exact same nonsense in the US about Florida, Phoenix, Las Vegas, and for that matter everywhere.
There should be no debate on shortages because the idea is preposterous. Nonetheless, Bloomberg reports Home-Shortage Myth Pits Blogs Versus Banks in Call Australia Set for Crash
Australia, where home prices are falling at the fastest rate in more than two years, may have a glut of properties and be set for a U.S.-style crash.
The warning from tax-reform advocate David Collyer, commentator Kris Sayce and academic Steve Keen contrast with banks and developers that say a shortage of about 200,000 homes will underpin prices. The housing bears say builders and lenders are pushing flawed government data to keep prices afloat in the English-speaking world’s costliest place to buy a home.
More than two-thirds of the government’s shortage estimate arises by including people who can’t afford housing, such as the homeless or those living in trailer parks, Sayce said. Collyer at tax-reform lobby group Prosper Australia says there’s actually a surplus of more than 250,000 dwellings after 15 years of overbuilding, while Keen argues the shortage estimate is swollen by inflated demand from handouts to property buyers of as much as A$21,000 ($22,300).
Australia has the most unaffordable homes in the English- speaking world, Illinois-based consulting company Demographia said in January, with homes costing 6.1 times the average annual income.
The Housing Industry Association, a Canberra-based builders’ group, said on Sept. 1 the nation will have a shortage of about 500,900 homes by 2020 if it continues to build at the pace it has over the past 20 years. The greatest shortages will be in Brisbane, Queensland; Stirling, Western Australia; and the Gold Coast in Queensland, the group said.
Westpac Banking Corp. (WBC), Australia’s second-biggest lender, in an October report on the nation’s housing market estimated a shortage close to 200,000. Commonwealth Bank of Australia (CBA) and Australia & New Zealand Banking Group Ltd. (ANZ) — the largest and third-largest banks — have also published reports in the past year that attribute the run-up in prices over the past decade in part to an undersupply of housing.
Keen, who said his Debtwatch blog draws an average of 200,000 hits a day, sold his Sydney apartment in the inner-ring Surrey Hills suburb in 2008, missing out on further gains over 2009 and into 2010. He walked 224 kilometers (139 miles) from Canberra to the top of Mount Kosciuszko in April 2010 after losing a bet made in November 2008 that home prices would drop 40 percent to then Macquarie Group Ltd. economist Rory Robertson.
“Dr. Keen continues to bang his one-dimensional drum on the Australian housing market, still oblivious to the stark differences between the situation in Australia and what occurred in Japan and the U.S.,” Robertson, who no longer provides housing forecasts in his current role as an economic analyst at Westpac, wrote in an e-mailed response to questions.
“Most economists are not so silly as to literally ‘bet the house’ on an economic forecast,” said Robertson, who has owned his own home since 1999.
Who Bet the House?
For starters, Keen did not “bet the house”. He did the opposite. He has no position, neither betting on, nor against the housing market (ignoring the “walk the mountain bet”, a matter of pride as opposed to money).
On the other hand, Robertson, an economic analyst at Westpac would not recognize a bubble if it engulfed his head, popped, left sticky residue all over his hair, then became infested with ants.
I can make that claim because Australia’s housing bubble has popped and Robertson still cannot see it. Nor can he see the sticky residue in his hair. The only thing missing is the ants. Rest assured, ants (followed by cockroaches) will come.
Moreover, and more to the ironic point, it is Westpac who bet the house, or rather (and worse yet) bet the entire bank on the housing bubble in a big way. Without a doubt, this will come back to haunt Westpac.
Unfortunately, housing shills like Robertson seldom pay the price for their preposterous “cheerleading others to doom” efforts.
Mike “Mish” Shedlock
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