Traders Sell Bank Stocks Due to Goldman Sachs Surprise

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“I was in bed last night with Alan Greenspan,” your editor told a colleague this morning.

“What?”

“Wait. It’s not what you think. I’ll explain in the DR today.” The explanation is below. But first, what will today bring for stocks?

On Wall Street the Dow fell by 1.7% and is back below 8,000 again. It looks like traders took advantage of yesterday’s earnings surprise from Goldman Sachs (NYSE:GS) to sell bank stocks. That sounds like the old, “buy the rumour, sell the news,” theory at work. And it tells you there’s not a lot of confidence that bank stocks have truly recovered and can lend the world economy into newfound glory.

By the way, a follow up to the Goldman earnings announcement. The Financial Times reports that Goldman’s performance was calendar aided. The FT says that Goldman’s “Fourth quarter ended in November 2008, but after converting to a bank holding company last year, Goldman adopted a calendar-year earnings period starting in 2009. As a result, the company did not have to include December in its first-quarter earnings, a month in which it sustained $1.3 billion in pretax losses.”

If you include the pretax losses from December, Goldman made $500 million in the first quarter, which is a lot less than $1.88 billion (but a profit nonetheless). Goldman’s Chief Financial Officer David Viniar also told analysts the Goldman’s first quarter profit was not boosted by profits from the $14 billion in U.S. taxpayer money it received, via the bailout of AIG. Viniar said that the profits from AIG “rounded to zero” once Goldman’s hedges to its AIG exposure were included.

What we wonder is why Goldman needed to be made whole at all if its exposure to AIG was hedged? And why did Goldman get paid US$14 billion for its securities when the market value was around $8 billion?

Questions and more questions. Goldman’s fixed income, commodities, and currency trading division (FICC) generated 70% of its net revenues for the quarter (US$6.56 of US$9.42 billion). While the former investment banking giant made just $823 million as an investment banker, it generated $7.1 billion in revenues trading and investing, although it’s not really clear from its financial filing just how that $6.5 billion was made by the boys at FICC.

Our point? This isn’t the sort of report that gives you confidence that credit market losses are behind us. More on that below, as we delve into yesterday’s numbers on commercial finance in Australia.

Speaking of Australia, the S&P ASX/200 is now 21% up from its low point on the year of 3,120. Yesterday’s close at 3,753 leaves it just below its high for the year of set in the first week of January. Will it matter if the index makes a new closing high today?

“No. I don’t think so,” said Swarm Trader Gabriel Andre on the phone today. “To be important, it needs to close above 3,820,” he added.

We’d love to unleash Gabriel and his technical analysis to produce short-sell recommendations. But the regulators are making it really hard to make money selling stocks short. So instead, we’ve begun looking at the top 50 ASX stocks on a daily basis, identifying long-term support and resistance levels for each of Australia’s top 50 largest companies. The goal is to alert readers to when they are overbought or oversold. We’ll keep you posted on the progress.

And the rest of the market? It’s meandering. Qantas announced its worst half-year result in 14 years yesterday. It’s also firing 1,750 people. But is this actually good news for the economy?

Unemployment is said to be a lagging indicator because it tells you where the economy has been, not where it’s going. That is, Qantas is firing people because the last half-year was bad, not because it expects the next half-year to be worse. At least, that is one way of looking at it.

But there is a deeper back story, too. In a routine recession, businesses reduce payrolls to match reduced demand in the economy. But this is not a routine recession. We would argue that businesses are reducing payrolls now because the entire economy has been built for an illusory demand propped up by credit.

With the credit depression, households and businesses are cutting back on spending and investment, respectively. What this means is much higher unemployment than anyone is currently figuring. And it means that because the entire structure of global labour markets has been based on a demand that’s clearly not sustainable without massive new levels of credit.

For Australia, that means fewer people hopping on Qantas jets to holiday in Thailand or Europe. It means fewer cars being built in Australia for consumers buying those cars on credit (the ABS reports a 24.6% fall in personal finance commitments for new cars in the last year). And by the way, for China, it means a lot fewer jobs in urban factories for rural workers who’ve come to make the stuff that Americans buy.

Do you think we’re just making this all up? Au contraire mon frère!

The ABS reported yesterday that total finance commitments to business fell by 14.7% in February to a 42-month low. Translation? Either the banks aren’t lending or businesses aren’t borrowing. Or both!

The numbers are actually worse when you stretch them out over time. Over the course of the last year, the seasonally adjusted commercial finance figures show a 43% decline from $44.3 billion in February of last year to $25 billion in February 2009. If your eyes aren’t bleeding yet, stick with us for just a few more pieces of data.

In a worrying trend for businesses, the big month-to-month decline in finance commitments came not in fixed loan finance but in revolving credit. The fixed loan finance figures show commitments declining from $29.6 billion in February ’08 to just $16.3 billion in February ’09. That’s a 45% decline, year-over-year.

That’s surely the sign of a credit depression. The only reassuring news is that the month-over-month fall in fixed loan commitments was just 7.3% (from $17.6 billion in January to $16.3 billion in February). But in the revolving credit sector (shorter-term, higher-interest borrowing) the month-to-month numbers are pretty alarming.

Revolving credit finance commitments to business fell about 6% year-over year, from $14.6 billion in February of 2008 to $8.7 billion in February 2009. But in the last month? They’ve fallen from $11.6 billion in January to $8.7 billion February. That’s a decline of 25%.

What does all this mean? Well its statistical confirmation of what you’re hearing on the street. Banks are getting tight and businesses are getting terrified. We have a modern economy that lives and breathes and bleeds on credit. The supply of that credit is shrinking. What do you think happens to the economy then?

The only positive way of looking at yesterday’s news is that it represents a “liquidation” of labour. This is not exactly good news for the liquidated employees of Qantas. But one the admonitions of the Austrian school of economics is that you can’t move to a recovery and new growth (new production possibilities frontiers) until the bad investments from the previous credit boom have been liquidated.

The trouble is, there is still a lot of liquidating to do. And we are not just talking about labour markets where, after all, Qantas expansion was the result of low fuel prices and globalisation for many years. No. We’re talking commercial and residential real estate.

That’s where Australia’s banks have the most exposure on their loan books. And that’s where you’ll see write downs and losses on commercial property portfolios. We suspect that’s why the banks are getting tight. They are preparing for much tougher times. Are you?

Well you wouldn’t be if you were just listening to the good folks at the Reserve Bank of Australia. Luci Ellis, the head of the RBA’s financial stability department, said that lending standards never delved too low into subprime territory in Australia to lead to a mortgage lending bubble.

In comments she delivered in Melbourne, she added that the inability of Australians to deduct the interest on their mortgage from taxes gave them a financial buffer against falling prices. She said that Aussies tended to pay off their mortgages more quickly because of this, whereas in America, the interest deduction presumably encourages people to maintain high balances on their mortgage.

And what defence of bubblicious Aussie house prices would be complete without trotting out that old canard, the housing supply gap! “Unlike in the United States,” Ms. Ellis said, “housing supply [in Australia] had not boomed in the same way for the past five years. There simply has not been an overhang of supply built up that would subsequently weigh on prices.”

We’ll get to the supply bogey in a moment. But we’re certain Ms. Ellis knows that the supply of homes is just one part of the pricing equation. The other part is, of course, demand. And the demand for housing is clearly influenced by the price of money (mortgage rates plus the first home buyer grants). Everywhere else in the world, plunging interest rates led to a huge mortgage lending boom that inflated house prices at historic multiples of household income.

Nowhere else in the world, in fact, has housing become as expensive as it is today in Australia, when measured against household income. Two things make this possible. First is the availability of mortgage financing to lever up and get on the property ladder. Second, and more importantly, is the deep seated belief-encouraged and repeated by those in government and banking and real estate-that property prices always go up.

The Great Australian Property Price Crash is coming people. You can’t have a depression in credit and expect inflated housing values to magically levitate. The latest figures on housing and commercial finance show a few things. They show that first-home buyers are propping up the market while investors flee (as was the case in the U.S. in 2006). And they show that bank-lending to the private sector (both fixed loans and revolving credit) is retrenching.

But what about the great supply deficit? Ms. Ellis cites a report by the National Housing Supply Council. This “State of Supply” report is prepared by a committee of insiders from the building, banking, and real estate industries. You’d naturally expect them to conclude that the supply gap is large and growing.

Yet this is not exactly what they’ve done. They’ve confessed that their estimates of housing demand are based on statistical models. To quote directly, “The Council estimates that a minimum of around 85,000 dwellings is the gap (unmet need) in the supply of housing in 2008. This is based on the incidence of homelessness and the low level of vacancy rates in the private rental market.”

And you thought we were joking about the homeless. We’ve always said if there was really a supply problem, you’d see more homeless people. The estimate the Council comes up with for the gap assumes, we assume, that the homeless are homeless because there aren’t enough houses. This is nonsense. Studies show that a fair portion of the homeless choose to be homeless, or would be homeless regardless of historically low mortgage rates.

But that point aside, low rental vacancy rates are also cited as evidence of a gap. This is nonsense too. Couldn’t this also be the fact that so many Australians live in capital cities? And so many of them want to live in the same place? It’s not that there aren’t places to live. It’s that everyone wants to live in the same place, which violates the laws of physics, of social propriety, and also drives up rents).

In other words, maybe the two factors the Council cites in fabricating a housing gap have other, better explanations that a fictional shortage of housing. But maybe that narrative doesn’t suit the needs of people who make money selling houses.

Ah! A caveat arrives on cue!

“The Council acknowledges the crudeness of this [housing supply gap] estimate and also points out that there were some 830,000 vacant dwellings in Australia at the time of the 2006 Census. The Council has assumed that most of these were probably second homes, homes in the process of sale or homes awaiting redevelopment and that there is likely to be limited capacity for absorbing growth in underlying demand within the present level of housing supply.”

Baffling. Or just deliberate chicanery?

There are 830,000 vacant dwellings. But that, according to the Council, is not enough to meet the housing supply gap of just 85,000 dwellings? Math was never our strong suit. But this smells fishy.

Could it be that property investors, let’s say boomers sitting on property as a retirement income, are not prepared to sell those investments at these prices? There’s no urgency, after all. Do they expect to sell these properties to pay for their retirement? Or are they just taking advantage of the tax benefits of negative gearing?

Who knows, dear reader? But we’d humbly suggest there is no housing supply gap at all. You could bring some of those 830,000 vacant dwellings on the market by changing the negative gearing laws. And the elimination of the first home buyers grant would prevent so much future demand from being “brought forward” merely to prop up values for existing homeowners who want to sell now to the sucker first home buyers.

But we reckon none of that is going to happen. While the stock market wades through earnings information and employers batten the hatches and throw men overboard, Australia’s property market is headed towards an epic fall. More on the fall tomorrow. Oh! And we almost forgot, more on our dream with Alan Greenspan too. We promise!

Dan Denning
for The Daily Reckoning Australia

Dan Denning
Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.
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36 Comments on "Traders Sell Bank Stocks Due to Goldman Sachs Surprise"

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brc
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Your arguments strike me as circular. On one hand, you’re saying there is an oversupply of houses across the land, 850,000 over 86,000 wanted. On the other hand, you’re saying that low vacancy rates are because everyone wants to live in one spot. You can’t have it both ways. If there is low vacancy rates in certain areas, ergo, there must be a shortage of suitable housing in those areas. Therefore, those areas must be somewhat safe from a fall in values, while other areas are at risk of a significant fall. Statistically, this may all wash out as a… Read more »
Lachlan
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Keep up the good work Dan. Common sense should tell us that economies generally are bloated. I welcome the hardships which lay ahead because the recent system has made spoiled brats out of too many. I pray I always live where individuals can work and create wealth for themselves and their families but when everything is given easily (credit expansion and high welfare)individuals become weak and immature as do family and community structures. When the end of it draws near they are too blind to see the whats really going on. Yes it will be so terrible when the contraction… Read more »
watcher7
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From: Steven Keen (http://www.debtdeflation.com/blogs/2009/04/06/steve-keens-debtwatch-no-33-april-2009-lies-damned-lies-and-housing-statistics/) Far from having an undersupply of housing, Australia may well have a substantial oversupply. It’s just that no-one is living in many of them. So what could these unoccupied residences be? Holiday homes? Some, of course, but surely not all of them. It is far more likely that many of these include “housing awaiting sale or development,” and “vacant dwellings”, as Hometrack put it. A very likely cause of this large stock of unoccupied homes is Australia’s system of negative gearing. Most “investors” build houses not for the rental income, but for capital gains, and rental… Read more »
Steve B
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Hi brc, One option would be to change tenancy laws in Australia. There are countries (e.g. Germany) where you can get “permanency and stability” as a renter. Another advantage is that rents are kept lower because many property investors aren’t so keen on having difficult to shift tenants, or ones that are difficult to constantly raise the rents on. Likewise, prices to buy are relatively reasonable. Home ownership rates are at drastically lower levels than in Australia, due to the lack of this artificial incentive for people to own a house. This is in the power of Oz governments to… Read more »
David V
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Dan guessed early on that Australian housing was a simple bubble and now he keeps sending out the same drivel without responding to his critics. Census data shows that the percentage of houses vacant rose from 3.5% in 1911 to 9.4% in 1976 and then flattened out and reached 9.9% in 2006. So if something could drive our vacant house rate back to 1976 levels it would free up just 39000 dwellings, and going back to 1961 levels would free-up 287000 dwellings. Perhaps Dan Denning is advocating cutting our holiday allowance back to 1961 levels. This might result in census… Read more »
Ned S
Guest
The concept of a Housing Shortage is a relative one. In less affluent economies you simply find more people living in each available dwelling. Namely, people’s standards of living are lower. In fact in those same less affluent economies after a property boom, you can find lots of vacant properties whose owners are very highly motivated to sell. While the people who really would like to be living in those vacant properties simply don’t have the money or can’t borrow the money or don’t want to borrow the money, to buy the property. So you find things like a married… Read more »
Ned S
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I guess the basic question is whether one thinks Australia’s real economy and our associated standards of living will decrease, remain stagnant or increase over whatever timeframe is of particular interest to a person. Or putting the question another way perhaps: More McMansions or Less (percentage wise)? But either way, house prices “should” drop in recessions. But Australians haven’t seen a recession for so long they either geninely don’t know that or just possibly could have forgotten. Can government avert that otherwise natural process with inflation – Yes, that is the wild card in the deck! (And deflation in Oz… Read more »
Ned S
Guest
David V – I can’t speak for Australian house prices generally, but Brisbane house prices which I do follow entered what could very sensibly be assumed to be the final blowout exponential increase peak phase of their bubble in Quarter 1 2008. Then started to drop. But the FHOG boost (in October 2008?) served to resucitate the bubble in the lower end of the market at least – I certainly saw one property where the owner required an “Urgent Sale” at maybe $300,000 taken off the market and relisted a week or two later (still requiring an “Urgent Sale”) but… Read more »
David V
Guest
Amazing thought processes at work here. Dan D thinks that there can be no shortage if he can find a single vacant house on Census night. Ned S thinks that there is no shortage because we could pack more people into houses. Ned S also thinks there can be no shortage in Australia because some people in Canada thought there was a shortage in Canada just before prices fell in Canada. Bizarre! The facts are that the Australian governments keep cramming in immigrants at a faster rate than housing and related stuff is built to support the higher population. This… Read more »
billf
Guest
There are a lot of single person house holds in Australia. I would say that this has been a symptom of a rising social mood for decades. What do people think is going to happen as the social mood gets more negative,unemployment increases, real estate values start falling and times get tougher. People are going to sell their properties and move in together to form multiple person households. That and the fact that the average cost of a house is 6 times the long term mean is good enough for me. Houses will correct back to the long term mean… Read more »
Ned S
Guest
Re my post above, “about 1988” should have been “about 1978” I’d also note that with the exception of the rental house I mention, I’d be pretty suprised if any of the other houses I mention have mortgages on them. And 4 of them are low set timber houses that could be raised and developed under – Not cheap, but still a heck of a lot cheaper way to get another 3 bedroom dwelling available than buying a vacant block of land and building on it. So why isn’t all this surplus capacity (both that which already exists and that… Read more »
Ned S
Guest
I’m tired obviously – I left out the word “not” in my intended statement “Do not rely on any so called housing shortage to keep prices up if the real economy turns nasty.” Yes, David V – The “rats in hole” argument can be raised by those who don’t think it is desirable for Australians to use their existing housing capacity more efficiently. The less efficient our usage the more we all have to pay on average I’d expect. So it becomes a matter of balance. And my point is that ultimately that balance is determined by the real economy… Read more »
David
Guest
Um where to start. Housing shortages based on population growth as mentioned by David V. Australia had 135,000 immigrants last year and the intake this year is 115,000 (ABS stats). We built 96,000 dwellings in 2008 (ABS Stats) if we have 2 occupants per dwelling (unlikely) then we have 192,000 housed. Total population growth including immigration was 237,000 in 2008. Given not all of those people needed new dwellings we have built more than enough houses to accomodate the population growth. Of the 135,000 immigrants 40,000 were children so we only need about 50,000 dwellings to accomodate them (based on… Read more »
David
Guest

Oh PS I live in Moorooka in Qld and we have large numbers of Sudanese immigrants and I can tell you there is more than one family per rented dwelling and this also true of mny of the Asian neighbourhoods with multiple families in some houses. In my last remaining investment property my mother, sister and brother and his family live in the one house to keep costs down. So jut because we have 135,000 immigrants does not mean we need 135,000 houses.

Wally
Guest
You can get as technical as you like I guess and spend many hours debating whos right and whos wrong, time will tell. But I just can’t help thinking about places like London, Barcelona, Hong Kong, San Diego, New York, Vancouver, etc. when people state their primary reason for a floor in the housing market here, i.e. we have a housing shortage. Every one of these cities continued to state all through their crashes (which are continuing) that there is little land and very tight supply. Well as we now knnow, prices are in total collapse because of limited demand… Read more »
Ned S
Guest
David – Thanks for the ABS stats. And anecdotal confirmation of my suspicion that people in Australia do/will certainly use housing more efficiently if they find themselves financially challenged. I’m not saying it is at all desirable for lots of people to be packed into housing. (Such as I’ve seen elsewhere.) But I am saying that it does happen in difficult economic environments. And that from what I can make out, person/dwelling rates where I live could certainly go up quite significantly without Australians living in anything that even remotely approaches what we consider as being the ghetto like conditions… Read more »
rick e
Guest
Please any FHOG can you tell me what the banks are offering you (to add) on top of your home loan? FHOG, when they buy do they put on there loan a new car, renovation like new carpet, paint, new furniture and white goods as this would add to the loan? I have heard that financial advice has told people to borrow (from home loan) more like $20 000 to put into the stock market, and then borrow on the stocks (margin lend) to buy more stock? So it seems that property (domestic homes) is linked in more ways to… Read more »
Dan
Guest
I agree with you all that the housing market on the whole is overpriced and is set for a fall (it’s already happening and selling now constitutes damage control), but property as such is still a worthwhile investment in certain respects, such as farming land in areas with good rain fall (rare as that has become), or housing in areas where employment is expected to remain intact. The point is that if the price vs. earnings is acceptable, then, like any other investment, it’s a worthwhile risk – not a great deal different from others. The thing that is good… Read more »
Ned S
Guest
rick e – Can’t specifically answer your question re FHOG but it is my general take on things that the banks have recently gotten considerably more conservative re lending on housing – So you probably should ask a bank direct. (But Google “LVR bank” for some general info possibly?) Re advice to borrow against one’s home equity and leverage to buy stocks (if that is actually what you mean), that sounds suspiciously like what a mob called Storm Financial were advising? If so, it works very nicely in rising stock markets apparently but results in people going bankrupt in bear… Read more »
David V
Guest
I have some other ABS stats for you and you can see where mine came from: http://www.abs.gov.au/ausstats/abs@.nsf/mediareleasesbyCatalogue/10CA1D232F97A75ECA25757C002653BC?Opendocument March 18, 2009 Embargoed: 11.30 am (AEDT) 14/2009 Australia experiences high population growth: ABS Australia is continuing to record high population growth, according to figures released today by the Australian Bureau of Statistics (ABS). A total population growth rate of 1.8% was recorded for the year ending September 2008, up from the 1.2% recorded five years ago. The last time Australia experienced higher growth rates was in the 50’s and 60’s (above 2%) as a result of post war migration and high birth… Read more »
Pete
Guest

Thanks for the article Dan. It’s slowly getting easier to be a bear.

Big1
Guest

Melissa Ketchell’s column / blog had some interesting stats – not sure where they came from – but they point to the US having practically the same ‘housing relative to population’: “Hometrack reckons the level of housing relative to population is at 2.51 similar to other anglo economies including New Zealand (2.51), Canada (2.54), Great Britain (2.35) and the USA (2.34). ”
That being the case, how come the US has an ‘oversupply’ and AUS has an ‘undersupply’??

Ned S
Guest
Dan – Your sentiments are very similar to mine. Except I probably still prefer cash to gold (AUD cash anyway – As sad as the Peso of the Pacific sometimes seems) – For a few reasons which I’ll list at the end in case you have no interest in reading them. It also sounds like you might be in a similar position of sitting on a bit of cash as well? If so, I can certainly say it’s a challenging but still fundamentally better problem than the alternative. For mine, as a long term owner of some IP with development… Read more »
Dan
Guest
Ned S – Australian cash is worth something currently, but the way (and the volume) of money creation around the world at the moment makes me wary trusting ANY currency. I think the happiest people on the planet at the moment are those who have a bit of cash (not heaps, just enough), no debts and a safe job. Getting rid of debt should be every mortgaged person’s principle task in life at the moment IMHO. Inflation and high interest rates are around the corner – at least in the items that people are forced to spend money on (like… Read more »
Ned S
Guest

David V – I for one will certainly try to have a good look/think through the stats you give – Appreciated – Thank you.

Ned S
Guest
Dan – There is no safe haven at this time that I can see. Because the governments of the developed Western economies lost control of their economies. And have not re-established that control – Leastways not in any fashion where they are at all sure just how their attempted fixes are eventually going to work themselves out I suspect. Plus some major global responses vary – The US (which is still the world’s global currency reserve holder – whether they or anyone else really like it or not) and Japan and the UK have gone for QE. While Europe which… Read more »
Ned S
Guest
Dan
Guest

Ned s – Yes, Pete’s comment summarizes things well. But I think your comment about potential war is the most important ‘what if’ question that needs to be considered. It’s the worst case scenario, in a sense. Thanks for your well thought through commentary, and also thanks to you Mr. Denning for your great articles.

watcher7
Guest
“Chinese banks the #1 global subprime problem” The China dream will eventually turn into a nightmare for China and Australia. * John Hewson, China’s long march, AFR, October 18, 2002, p.82: … journalist and Sino expert Joe Studwell … encapsulated in his book, The China Dream, which is subtitled The Elusive Quest for the Greatest Untapped market on Earth. As its cover proclaims, “For 700 years, ever since the time of Marco Polo, the world has seen China as an unrivalled opportunity for expanding trade. Century after century, businessmen have invested time and resources only to have the economy crash… Read more »
Ned S
Guest
Dan – My comment re “war” was in relation to any possibly minor and temporary conflict (especially involving an oil producer) potentially making gold ownership a handy tradeable short term thing despite my other personal reservations about it just now. Because such conflicts simply do happen periodically – But the broader world survives pretty much unshaken – Gold just happens to become a very useful and tradeable asset in such short term situations is my basic point. (Which I must acknowledge the truth of despite the fact I’m not a huge gold fan – But do still remain open to… Read more »
Ned S
Guest
ABS stats say HOUSING SURPLUS in Australia – See below: Well maybe; Make up your own mind – But here’s some numbers: David V – I can’t get my post through – Maybe it’s too long? So I’ll try she “short” version, minus the ABS links (although I do refrence them) – Sincere apologies: => Total population growth: 389,000 people in 2008 (ie 235,900 net immigrants plus net 153,400 excess of births over deaths) => 33,546 new dwellings projected for December Qtr 2008 (which would be about 134,000 in a year – providing building does proceed as predicted – a… Read more »
Ned S
Guest

Here’s the ABS links – I’ve had to bracket them to get them though?
[http://www.abs.gov.au/ausstats/abs@.nsf/mediareleasesbyCatalogue/10CA1D232F97A75ECA25757C002653BC?]
=> Total population growth: 389,000 people in a year (ie 235,900 net immigrants plus net 153,400 excess of births over deaths)
{http://www.abs.gov.au/ausstats/abs@.nsf/mf/8750.0]
=> 33,546 new dwellings (which would be about 134,000 in a year – providing building does proceed as predicted – a wildcard in the deck)
New dwelling sizes (2006-2007) of 212 square meters indicates average of 3 bedrooms per dwelling:
[http://www.abs.gov.au/AUSSTATS/abs@.nsf/featurearticlesbytitle/3E12D6C335EF3618CA25745C001489F1?]
Discussion of “HOUSING UTILISATION” re 2005-06
[http://www.abs.gov.au/AUSSTATS/abs@.nsf/7d12b0f6763c78caca257061001cc588/D1170F1D46AB8176CA2573D20010F79D?]
137,900 deaths recorded in Australia in 2007
[http://www.abs.gov.au/ausstats/abs@.nsf/mf/3302.0]

David V
Guest
You’ve posted a whole lot of baloney there Ned S. You set out to prove there is no shortage and you sought-out and twisted figures to try and prove your point. You make a big deal about how many extra bedrooms there are. Great! Can you have one delivered to me? You talk about local population growth as not needing extra houses because the old people who die will free-up houses and the babies born don’t need houses. Clever deception there. You have forgotten that babies born 20-30 years ago have aged and they are the ones needing the extra… Read more »
Ned S
Guest
David V – Well that was a blistering response! After digging through it to see what might have brought it on I guess I’ve got reason to strongly suspect that you are maybe in the 20 to 30 year old age bracket, live in Sydney and are experiencing difficulty buying (or perhaps even renting) accomodation there that is affordable and/or suitable given your personal circumstances. That is a rather different question to the one I attempted to get specific answer to – Namely whether the numbers of “new” people in Australia over the next 12 months might reasonably be expected… Read more »
Pat Donnelly
Guest
Lack of bank credit will slow house price rises even if immigration increases population. But as mortgages are paid off, through increased savings, credit will loosen and the demand for housing will re assert itself. Many migrants have the capital to buy a house without financing. They come from developed economies and have been economically active while the bubble expanded. They still have substantial equity even after recent 20% falls in price. Australian house prices internationally are fair to low given the higher areas and plot sizes. Sydney excepted! But wages in Oz are also low, comparatively. This will all… Read more »
Pete
Guest

Pat:
I agree that bubbles take time to pop (deflate) and the Gov. intervention is making things worse, by making things slower (which means slower recovery as we pay off the debt or fight the inflation).

You said:
“There have been effects of the bubbles here and these are being unwound, but 2Bn people want coal, iron and food.”

No they don’t.

“Look at the USA 200 years ago and see us at a similar stage.”

I wish I could share your optimism. We lack one very very important feature for that: Plenty of available fresh water. Ask any farmer.

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