(Bloomberg) 2012-08-31 — Melbourne Hasn’t Seen Worst of Housing Drop as Glut Builds
Melbourne, where home prices have fallen more than in any other major Australian city, may see further declines as a record number of new developments approved in the boom years hit the market.
Home values in the capital of Victoria state lost 6.6 percent in the year ended in June, the biggest drop among the eight state capitals, according to researcher RP Data.
Building work started on a record 47,293 homes in Melbourne in the 12 months ended June 2011, compared with estimated demand of 32,334, according to figures from researcher BIS Shrapnel.
“You’ve got developers who’re producing a massive surge of supply and they’re all facing losing money unless they sell soon, so there’s huge discounting pressure,” said Steve Keen, author of the book “Debunking Economics” and associate professor in economics at the University of Western Sydney. “And listings are rising because demand has fallen severely.”
[...] “New construction will keep a lid on any major recovery” in Melbourne, said Louis Christopher, managing director of Sydney-based property advisory firm SQM Research.
[...] Melbourne’s rental vacancy rate was 2.9 percent in July, up from 2.5 percent a year ago, according to SQM. The number of homes listed for sale climbed 4.8 percent from a year earlier to 48,322 as demand slowed, SQM said. Both levels were the highest among Australia’s eight state and territory capitals. Victoria’s moves to do away with tight land-release policies and zoning restrictions had won praise in a nation where such controls are blamed for a housing shortage that’s driving home prices beyond the reach of ordinary workers.Amazingly, people keep on talking about 'housing shortage' as the cause of the prices skyrocketing.
[...] The median price of a home in Melbourne was $493,688 as of July 31, according to RP Data, based on the exchange rate on that day. That compares with $340,600 in New York, according to real estate data provider Zillow Inc., and $564,593 as of June 30 in London, based on the most recent figures from the Land Registry.
[...] Homes under construction in the city are now 80 percent above the 20-year average, the analysts wrote. Relative to incomes, Melbourne had the fourth-most unaffordable homes among metropolitan areas with populations of more than 1.5 million people in the developed world, consultancy Demographia said in a report in January, behind Hong Kong, Vancouver and Sydney.
[...] Despite the concerns about a glut, “it’s too early to conclude that Victoria’s planning policy failed or created a massive oversupply problem,” Matthew Hassan, Sydney-based senior economist at Westpac Banking Corp. (WBC), said in a telephone interview. “We expect a few moves downward from the Reserve Bank next year, which will bolster a very patchy stabilization process.”Denial and incompetence illustrated
[...] “We’re in a period in the short-term where we have seen some signs of oversupply,” Brett Draffen, chief executive officer of Mirvac’s development division, said in a telephone interview from Sydney. “But underlying fundamentals will be strong for the medium term and beyond, and that’s when those projects come online.”Exactly the same thing we were hearing in the US in 2006 and 2007. Stupidity Illustrated.
Retailers want RBA action as sales dive
Retailers hope the biggest monthly drop in consumer spending in nearly two years will trigger alarm bells at the central bank when its board meets to discuss interest rates.
Retail trade fell by a seasonally adjusted 0.8 per cent in July to $21.4 billion, after being bolstered in the previous two months by government handouts and earlier interest rate cuts by the Reserve Bank of Australia (RBA).
Economists had expected an overall spending rise of 0.2 per cent in the data collected by the Australian Bureau of Statistics.
But department stores' sales slumped 10.2 per cent, the largest fall since April 2005.
The Age reports Food, fashion jobs in jeopardy as companies collapse
In another blow to Australia's already shaky retail sector, women's fashion chain Ojay and a ready-to-eat food manufacturer have reportedly been put into administration, threatening hundreds of jobs nationwide.
Food jobs also in jeopardy
It was reported early this afternoon that Australian Convenience Foods Group, which makes sandwiches for petrol stations and supermarkets, had collapsed.
Deloitte has been appointed managers of the company, with up to 400 jobs at risk. The company's history goes back to the 1970s. A receptionist at ACF’s office confirmed the company had collapsed.
Australian Convenience Foods fell into voluntary administration on August 28 and Deloitte is currently running a sale process to sell the business as a going concern to a new owner. Expressions of interest for buyers close tonight.