Is there already enough housing supply? Not on your nelly.

To read the original version of this comment in the original context at Macrobusiness.com.au click this link. (link maybe locked – but there is a free trial available)

There is always the risk that if ponzi-nomics generates a speculative construction rush that actually generates a temporary over supply (which will soon be soaked up by migration) that meaningful reform of a dysfunctional market for land and housing will not happen.

A couple of things to keep in mind.

Rental Vacancy rates remain at rock bottom in all but a few locations.

Anything less than 3% is tight – something between 3.5 – 4% is likely to result in rents reflecting a reasonable negotiating position for potential tenants.

When we start seeing vacancy rates with a high 3 or even a 4 at the front then we will start seeing rents that better reflect the reality of household incomes and not land lord wet dreams.

The cost of bringing new land to market is still burdened with the first users pays all approach to development costs.

This reflects the way that government has decided that loading up new home owners with debt (much of it sourced off shore) and then gouging as much as possible of that private debt is a legitimate approach to government finances.

Now is the time to fix the dysfunctional land and housing markets.

Low cost housing is the only real national asset when it comes to shelter.

…and this

Your anecdotes that there are some suburbs with lots of construction work are interesting.

Hopefully they are sign that vacancy rates will rise more generally around the country but a bit of ponzi-froth in some locations is hardly the sign of a healthy market.

Plus your own source does not support your contention that the country is awash with vacant properties.

From the same site – plenty of stats that demonstrate that the market remains far too tight in far too many places.

Melbourne North 2.8%

http://www.sqmresearch.com.au/graph_vacancy.php?sfx=&region=vic%3A%3AMelbourne+North&t=1

Western Sydney 2%

http://www.sqmresearch.com.au/graph_vacancy.php?sfx=&region=nsw%3A%3AWestern+Sydney&t=1

North West Melbourne 3.4% (Is that the area you are driving around in?)

http://www.sqmresearch.com.au/graph_vacancy.php?sfx=&region=vic%3A%3ANorth+West+Melbourne&t=1

South East Melbourne 2.5%

http://www.sqmresearch.com.au/graph_vacancy.php?sfx=&region=vic%3A%3ASouth+East+Melbourne&t=1

Even in the ghost apartment capital of Australia it is only 4.8%

http://www.sqmresearch.com.au/graph_vacancy.php?sfx=&region=vic%3A%3AMelbourne+City&t=1

…and this

Hobbes,

It sounds like Melbourne may be showing more signs of improvement than Sydney.

But are you seeing signs that rents and sale prices are actually falling in Melbourne.

Empty houses and apartments are not much help if they are not actually on the market for purchase or lease.

We could sell a bunch of ghost apartment blocks to foreigners that remain empty and, beyond the employment involved in construction, do nothing for the lease or re-sale market.

In any event, don’t get me wrong, I would like nothing more than to see the supply of housing more than adequate for the demand from specufestors and actual people who want somewhere to live.

I think it is still too early to celebrate victory especially when most of the fundamental drivers of the long standing imbalance remain in place.

This vampire on the economy needs a good stake.

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