Brisbane's Courier Mail of Thursday 31 July reported that house values had dropped by 1.3% in the June quarter whilst the value of units had dropped by 3% over the same period.
As this fall has been largely brought on by higher interest rates and the lack of consumer confidence it is unlikely to provide any practical relief to ordinary Brisbanites who have seen housing prices rocket completely beyond their reach in recent years.
True to form the Courier Mail, an ardent promoter of the property 'industry', reported this threatened momentary pause in the upward movement of the cost of a basic human necessity as bad news:
Nationally, the market was at its weakest in four years.
He expects values will drop 10 per cent over the year, cutting almost $44,000 in value from the average priced home.
He said high borrowing rates, finance being harder to get and a big drop in consumer confidence were hitting hard.
And Mr McNamara warned that if banks continued to increase mortgage rates and the Reserve Bank lifted cash rates then price drops would be even more severe.
However, Mr MacNamara's pessimism was not shared by RPdata residential research director Tim Lawless, who predicted that Brisbane will have a 'softer landing'.
"Ten per cent sounds a bit pessimistic to me and ignores the strong population growth (my emphasis) and limited supply#main-fn2">2 in Brisbane," Mr Lawless said.
He predicted price declines will be forgotten by this time next year with prices increasing late in the year and early in 2009.
Notwithstanding this Mr MacNamara maintained that strong migration patterns were not enough to attract either first home buyers or investors.
In other parts of Australia, the effects of the credit shortages and lack of consumer confidence have, so far, manifested themselves differently. The Sydney Morning Herald of reported that house prices had slumped by 2% in the past year whilst the ABC on 24 July reported that Perth rental prices have risen 17 per cent, while rents for units have increased 25 per cent. The Canberra Times of 25 July reported that "median weekly asking rents for houses and units up by 5 and 10 per cent respectively in the past year."
Whether Michael MacNamara or Tim Lawless are correct in their predictions of the property market, this story further confirms what critics of immigration have been arguing for years. The principle motivation behind immigration is not as a charitable act towards other people or even to serve any vital economic need, rather, it is nothing more than a crude device to drive up the demand for housing to facilitate the transfer of wealth from the broader Australian community and from other countries into the pockets of land speculators and property developers and related industries such as financial institutions and manufacturers of building products#main-fn3">3.
#CourierMailCensorship" id="CourierMailCensorship">Postscript: Censorship by Courier Mail?
On Saturday 2 August, I posted a comment to the comments section attached to the abovementioned story in the Courier Mail and it has not, as of now, been published. As I did not keep a copy, I will reproduce it from memory as best as I can:
I agree with Lionel Theunissen of Brisbane (Comment 87 of 103)
Why does the Courier Mail always regard it as good when the price of house go up and bad when the price of houses go down?
As one for whom the cost of housing has gone completely out of my reach, I find it personally offensive when others rejoice in the price of housing going up.
Lionel Theunissen's comment referred to above follows:
Great news, but house prices in Brisbane could halve and they still wouldn't be cheap.
A 10 per cent drop is just the beginning. With the tightening of credit property will return to its intrinsic value, where potential rent can pay the interest on a 100 per cent mortgage. That means a property that might rent for 400 dollars a week is worth around 220,000 dollars, with prevailing interest rates at 9.5 per cent, not the 440,000 or so that might have been the market value up until recently.
For those saying "demand is still high, supply is low" in the hopes that somehow we will avoid the global trend, that is a naive, at best, interpretation of the laws of supply and demand: All demand can do is push buyers willingness to pay towards their capacity to pay, which is directly linked to their capacity to borrow. Willingness to pay has been maxed out for some time. With the tightening of credit and increases in interest rates the capacity to borrow has been greatly reduced and the market must come down to meet this.
The days of easy credit will not be returning any time soon, and the property market will not show any significant recovery until it does. The party is over folks!
My comment upon further reflection: Lionel Theunissen may not be taking into account the factor of high immigration referred to in the article above. Whether or not immigration will fulfil all the hopes of property speculators, if not dramatically reduced, will certainly serve to keep housing prices beyond the reach of most of us.
#main-fn1" id="main-fn1">1. #main-fn1-txt">↑ Whilst, we at candobetter.org do not have a high regard for the property sector, we believer that credit should be given to those who, in a manner out of character with most in the industry, demonstrate compassion and decency. This appears to be the case recently with Michael McNamara. In Don't abuse rates excuse, landlords told of 25 July 2008, Sydney Morning Herald Sunanda Creagh Urban Affairs Reporter reported:
AS MANY as half of all landlords have paid off their mortgages and should not be using interest rates as an excuse to push up rents, one of Sydney's top property analysts says.
Michael McNamara, the general manager of Australian Property Monitors, said the principle of supply and demand influenced rents more than interest rates did.
"Let's face it: investors have a profit motive in mind and they don't necessarily need a reason like interest rates to put up rents.
They do so because they can," he said. "The question becomes: are they simply trying to achieve market rents or are they profiteering from the current shortage of housing?"
#main-fn2" id="main-fn2">2. #main-fn2-txt">↑ This does raise the measures now being demanded by property developers as the 'solution' to housing unaffordability, that is, for more land to be released for subdivision. Whilst this measure could serve to partially negate the inflationary effet of furhter high immigration, it would be at a cost to the environment, food security and our quality of life that many consider unacceptable. For further discussion of this, see my article Brisbane's housing unaffordability crisis spun by ABC to promote property lobby interests of 23 June 2008.
#main-fn3" id="main-fn3">3. #main-fn3-txt">↑ This phenomenon was the subject of the 2002 Masters' thesis The Growth Lobby and its Absence : The Relationship between the Property Development and Housing Industries and Immigration Policy in Australia and Franceby population sociologist Sheila Newman It is available as a single 2.5MB PDF file here or as at Swinburne University.
See also: Brisbane's housing unaffordability crisis spun by ABC to promote property lobby interests of 23 June 2008.