Creative Commons License photo credit: lynac

The bullhawks are out in force, talking up last quarter’s smaller than expected price falls. Somehow here is evidence of the end of the downturn. Risk on! Throw caution to the winds!


It is easy to see why the bullhawks focus on that and claim it is simply noise, not a trend. They are mincing around about the short-term changes while the down-trend consolidates and strengthens.

Remember, land prices move very slowly in an eighteen year cycle.

With the release of the ABS HPI & CPI data, prices have fallen 7.3 per cent in real terms from 2010 Q2 – 2011 Q3, still at a faster rate than the US.

This assumes 2010 Q2 is the peak of the bubble. The government, through substantial rate cuts and another FHOG boost could reinflate the market and set another, higher peak.

The government, knowing full well that the 2008 Rudd FHOG boost inflated the market will likely try it again. There are clearly fewer greater fools, but it would kick the can down the road a bit further. There is nothing to stop the state governments announcing their own grants and stamp duty exemptions as well.

SQM Research shows nationally about 400,000 houses are on the market right now with more spring stock arriving each day. Meanwhile, housing finance and building approval figures are low and falling, and first homebuyers are as cautious as a giraffe on an ice-rink.

The construction industry – a big employer of semi-skilled labor – has ceased new starts until the backlog of unsold properties clears. An abrupt shift in unemployment is imminent.

Based on the falling land prices, the Kavanagh-Putland index forecasts a recession within this financial year.

This is a highly uncertain time to be making major investment decisions. Better to wait and build a larger deposit, rather than exchange renting a house for renting money from a bank.

Don’t Buy Now!