Financial Planning Introduction

44% jump in property listings points to price falls in 2011: Expert

Source: http://www.smartcompany.com.au/economy/20110110-44-jump-in-property-listings-points-to-price-falls-in-2011-expert.html

The property market could be set for early-year price falls due to a build up of unsold properties, with new figures by property research company SQM Research showing the number of listings swelled 44% over 2010.

Managing director Louis Christopher says while a short-term monthly slowdown in the capitals can be attributed to the Christmas period, (online listings dropped 1.9% in December), overall the huge number of listings means prices are now hanging by a thread and a market downturn is imminent.

"It's still very clear to us that they are now at levels that would suggest a downturn in the housing market, although the stock levels have fallen seasonally. The overall number is up now by 44% across the nation. "

"I wouldn't like to see another interest rate rise anytime soon – it will accelerate the downturn."

The claim contradicts predictions that prices will remain stable or grow by 5-6% growth range in 2011 due to an underlying shortage of properties.

The new figures suggest that the shortage has been overblown. Residential property listings were 328,270 during December, representing an increase of 44.9% over the year.

Louis says the figures dispel the myth of property undersupply in most cities, and says certain capitals such as Brisbane are recording a dangerously high level of properties on the market.

"Of course, it depends on where you are. We're most bearish on the south-east Queensland market, because they have a very bad result. The numbers are simply not good."

Christopher says it is Queensland that is the biggest worry, specifically in the Gold Coast and Sunshine Coast areas.

"In Surfer's Paradise, for instance, I know there are now over 2,000 properties on the market in one postcode – just one. That area is really struggling at the moment, and it is now the equivalent of Florida in the United States."

Florida, a popular retirement destination in the US, has recorded massive price falls due to the incredible amount of listings there.

"Florida has recorded massive house price declines, and while we think those price declines here may not be on the same magnitude, we are definitely concerned and we think we will see falls there."

Christopher also says he is concerned about Darwin, which recorded the largest increase out of all capital cities at 57.3%.

"Yes, we're concerned about Darwin as well. The housing boom that occurred there is over, that the top of the declines will take place there. It's quite clear there will be a downturn in Darwin now due to those listings."

According to the date, listings increased in Brisbane by 59.4% and Perth by 54.8%. Melbourne followed closely with a 42.7% rise, although Canberra recorded a rise of 46.5% as well.

Adelaide listings increased 39.6%, Hobart by 24.6% and Sydney by 22.6%.

SQM says the cities with the largest amounts of stock are now Melbourne with 24,884 houses and 8,981 units, while Brisbane now counts 23,076 houses and 5,313 units. Sydney comes in third with 17,081 houses and 10,546 units.

The region with the highest growth in stock levels was North Queensland, with an increase of 216.3%. The region with the highest month-on-month stock growth was Launceston, with 18.1%.

Western Creek recorded the largest year-on-year decline of 63.2%, while the Lower North Shore recorded the largest month-on-month decline of stock at 22.2%.

Most of the declines, Christopher says, will be limited to single digits. But he also points out larger capitals like Sydney could record falls of up to 4% over the full year.

The only city to escape dramatic falls, or any falls at all, will likely be Hobart, according to Christopher.

"However, this largely depends on what the Reserve Bank is going to do. It has a significant amount of influence on the housing market right now. I wouldn't like to see a rate rise, because that will simply accelerate the downturn."

Rashesh Bhavsar
Financial Planner,
Fortune Wealth Creation Group
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