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Summer chart series: The divergence between bank lending and house sales
December 24th, 2009Bernard Hickey picks out 10 charts from 2009 in a series of videos to play over the Summer break. In this video he looks at how a once close connection between the value of houses sold in any one month and bank lending in that same month has diverged through 2008 and 2009.
Banks are more reluctant to lend heavily on housing and credit growth has slowed to around 3% a year from over 15% at points in the housing boom from 2002 to 2007. Despite a pickup in activity and values in the housing market, bank lending has not returned to its previous track, which explains why the recovery in house prices through mid 2009 appeared to run out of steam at the end of 2009.
Tags: Bank lending, House prices, Property, Real Estate, Summer chart series
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December 24th, 2009 at 11:08 am
“…the point of maximum danger in any borrowing boom is when borrowing starts to slow, not when it stops…”
http://www.guardian.co.uk/business/2009/dec/21/global-economy-decade-boom-bust
December 24th, 2009 at 12:16 pm
It is also telling us about the lack of affordable new supply.
Hugh Pavletich
December 24th, 2009 at 4:17 pm
Bernard : Why do you look as if you’ve just sat on the pavlova ? …………. Oh…. , pass on that , I’ll just have some jelly , thanks !
December 25th, 2009 at 1:53 pm
I know, I know…it’s Christmas Day… but it’s all gone quiet, now….so more thoughts for Bernard.
http://www.bubblepedia.net.au/tiki-index.php
“It’s different here (Australia) to other places…….Once the speculative mania (for property) has waned, the significant oversupply will become apparent.”
December 25th, 2009 at 5:58 pm
Excellent link , thanks St. Nick . My mole in the Vampire Squid ( G.S. ) thinks there is a massive undersupply of housing in Oz . Your link is a good rebuttal to that . And it lays bare a few myths , the ” rent is dead money ” nonsense .
I’m always curious as to why us in NZ & Oz place so much emphasis on owning a house , rather than owning cashflow positive investments or a business . So daft for youngsters , fresh out of school / uni. , to shackle themselves with a mortgage on an abode . Such are the mysteries of life …………. Care for a gummy bear ?
December 25th, 2009 at 10:05 pm
@RT some ppl want a home….they want more than simply $…
Hugh Pav is beginning to sound like a stuck record….business must be slow for him….In the US they have surburbia stretching for miles….all of it needs too much energy to utilise in the future…so either we live more compactly so dont need the extra space or we need that space for food growing ie we spreadout…if you accept there is a paradym shift [about to] occuring of course ie peak oil/energy/minereals/society.
“The real story of the noughties is that of how borrowing was used to plaster over the deep structural problems of modern global capitalism. We have almost reached the end of that road, but not quite.”
I think he’s right on the first (as per my first para) but I Suspect he’s probably wrong on the second….you cant fight an expotential curve of yet more debt for ever, I think we are hear…I cant see how we can get it going again, strikes me its like trying to stand on a ballon, its un-stable, wants to escape out the side and will likely pop any second. Even if we could the war chest seems empty…and round two’s demands seems to be here….
“Policymakers are hoping a renewed appetite for debt by firms and households will enable governments to cut borrowing without causing a second leg to the recession.”
Policymakers? they are insane then….
Banks facing tough times?
http://www.guardian.co.uk/business/2009/dec/20/bank-of-england-calls-bankers-bluff
But some it seems get a great Xmas present, healthcare….USA passes healthcare bill (Senate anyway),
http://www.telegraph.co.uk/news/worldnews/northamerica/usa/6880904/President-Barack-Obama-hails-historic-healthcare-reform-bill-vote.html
regards
December 25th, 2009 at 11:09 pm
One to leave you with this evening,
“Behind all of this lies the central political fact of the limits to growth: the reduction of
First World nationsNew Zealand to a Third World lifestyle that will be the inevitable result of any transition to a postpetroleum world, whether that transition is deliberate or unplanned. Metaphors about elephants in living rooms don’t begin to touch the political explosiveness of this fact, or the degree to which people at every point on the political spectrum have tried to pretend that it just isn’t so.”8><—-
"Let’s walk through the logic. The most reasonable estimates suggest that, given a crash program and the best foreseeable technologies, renewable sources can probably provide the
United StatesNew Zealand with around15%25% of the energy it currently gets from fossil fuels (can NZ do 25%?). Since every good and service in the economy is the product of energy, it’s a very rough but functional approximation to say that in a green economy, everyAmericanKiwi will have to get by on the equivalent of1525% of his or her current income [ which is an average of $40k]. Take a moment to work through the consequences in your own life; if you made$50,000$40,000 in 2009, for example, imagine having to live on$7,500$10,000 in 2010. That’s quite a respectable income by Third World standards, but it won’t support the kind of lifestyle that the vast majority ofAmericansKiwi’s, across the political spectrum, believe is theirs by right.That’s the bomb ticking away at the heart of
America’sthe World’s political system.”Just think what that does to house prices….pensions…healthcare….
and ppl laugh at the Green’s…..
http://www.energybulletin.net/51089
regards
December 25th, 2009 at 11:35 pm
What this chart shows is that the increases in house prices this year are not due to credit expansion, but due to supply side factors. Hugh Pav is right on that score
@ Steven,
New Zealand already has 30% of its energy from renewable sources.
December 26th, 2009 at 8:40 am
The issue with supply is one of quality not quantity; (from an Auckland Nth Shore perspective) there is plenty of housing stock, but the quality is low, leaky homes, old, cold wooden boxes, horrible cross leased crap on a miniscule site with no sun, houses that have been butchered and changed without permits, sites where the neighbour can look straight into your living zone, just general overpriced rubbish. What then happens is people pay over the top prices for a bit of quality in a good school zone and with a slightly bigger site and this skews the numbers.
Hopefully John and Bill have steel balls and make the hard decisions and we will see a better 2010.
December 26th, 2009 at 12:45 pm
steven : Yes , some people want a home . But why does NZ have one of the world’s highest levels of home ownership ? Don’t you feel that fresh faced youngsters , full of ideas and vitallity , are better to focus on careers and businesses , rather than bricks and mortar ?
Houses aren’t going to suddenly disappear , or get much more unaffordable . Most will buy a home eventually . But why the rush ? When you’re 20-something , holding the B.A. or MBA , why buy into the route that baby-boomers and their parents trod ?
December 26th, 2009 at 12:50 pm
Interesting Chart alright… What it demonstrates to me is how correlated Credit Growth and Value of House Sales are, or have been until 2007…
So to me, the Divergence is tellling us a Story of De-Leveraging. – With the Gap being the overleveraged being forced to the less leveraged…
Not sure how Hugh Pav. sees this as a portraying housing supply issue?… Hugh? anyone?
December 26th, 2009 at 12:52 pm
Roger,
Because shelter is a basic human need and f you have an MBA the problem is there is an ever decreasing pool of undeveloped counties to exploit in order to make a fortune
Just look to the upcoming suffering in the crumbling US martial empire for a lead.
This is why I find both Stevens post above and Bernards pattern matching predictions so laughably ridiculous, NZ has always been on the sidelines and in being ‘behind’ in the capitalist dream of riches for all we may be ahead when this turns out to be a mirage
Neven
December 26th, 2009 at 2:11 pm
Nev : I think it is terribly sad that you imply the purpose of an MBA is to exploit undeveloped countries in order to make a fortune . Are you not damning the many , for the unscrupulousness of the few ?
December 26th, 2009 at 2:35 pm
@Roger
Individuals may not delibrately want to expolit the undeveloped regions however the exploitation of the developing countires for the benefit of Rich and Mighty Powers is well exposed, this has been done through various means including IMF,world Bank etc
I read a book, “Confessions of an economic hitman”, it is a good reading. This book correlated very closely with my personal experice and observations . Many with MBAs may not be even aware if they are being used in such an activity as no organisation would overtly announce or admit it.
December 26th, 2009 at 3:13 pm
Roger
Possibly yes, I’ve often seen MBAs doing charity work, collecting for poor, providing succor and suchlike, so yes I am uncharitable, it is Christmas after all.
But on the basis that wealth cannot be concentrated excessively without a balanced equation (the many must forgo a little to benefit the few) then I find the proposition that you can study the administration of business and somehow not exploit others a little disingenuous.
Was it just a bad choice of degrees on your part, No Doctors or Engineers mentioned?
Neven
December 26th, 2009 at 8:55 pm
We are missing my point , BA / MBA / Doctor / Engineer / Gummy Bear Scientist : Houses are a shackle on the career and business aspirations of fresh young things , the 20-somethings , flying the parental coop , and learning to dance to their own tune .
Shag . Gotta go and print some fish&chip paper . Catcha later , team .
December 27th, 2009 at 9:25 am
@RT: “Don’t you feel that fresh faced youngsters , full of ideas and vitallity , are better to focus on careers and businesses , rather than bricks and mortar ?”
Are these mutually exclusive? I dont see why.
Youngsters usually are focused on careers, I think if you look at the average age of first time mothers its getting higher and higher every year, suggesting careers are very important.
I dont see why ppl have to rent rather than buy myself, indeed wouldnt/couldnt a house act as collateral for a business? Also run a business from your own home? I know a few ppl that do, no landlord to get upset about that, you can convert a room(s) for business use…in fact my wife does this.
Also “suggesting careers are very important.” this is one reason I roll my eyes when Bernard gets on his grandchildren via Facebook high horse, its more likely a “get ahead” career type is going to go abroad, NZ will always be too small no matter what we do with tax reform, its the career stupid (sorry Bernard)….but what I do se is NZers go abroad, have a career/OE and come back to have children…so personally I think Brenard is wrong to worry. In my case my parents (who loved NZ anyway) followed me to NZ permanently so grandchildren are within an hour. The funny thing is my wife’s side of the family see less of our childen than my side at most once a year as they are on south island…so they just got an sdcard and a photoframe thingy for Xmas…
In terms of going abroad, well I want my children to be the best they can if that means they leave NZ so be it…its not that hard for us to follow…
regards
December 27th, 2009 at 9:32 am
@Mouse: Hugh is I think one of the no matter what it points out that my political view point is correct brigade. Also his work/liveyhood is based around town planning? if, so he isnt exactly un-biased. But, yes he should justify why he see it this way, becasue I cant see why he does…he might indeed be correct, but I want to see the logic behind his idea.
Not sure if this graph shows its de-leveraging, didnt NZ enter the recession early? about this time? So does this show us entering recession, or did this cause or contribute to our early recession?
In terms of de-leveraging thats only in the last year…at most 18 months, it was that fast!
regards
December 27th, 2009 at 9:36 am
Stuff on property this morning,
http://www.stuff.co.nz/business/3195164/Is-property-back-from-the-dead
Be interested to see what the Pros in here think of Stuff’s assessment(s)
regards
December 27th, 2009 at 9:41 am
@Mathew: That follows then that our GDP would be 30% of what it is today…ditto our income, this is twice the USA’s 15% mind. It is still not good though…
Should try and find a country with 30% of our GDP per capita and see how they live….
Also I read a piece that said a farmer tried to greatly reduce his dependancy on deisel, best he could do was cut 25%…now that’s the UK which is energy intensive on small -in-efficient farms so again NZ should be better off…but renewables for farming does not go well to my mind…so I’d guess that some areas of an economy might do better than others…however farming is essential to NZ….
regards
December 27th, 2009 at 9:59 am
steven : I saw that ” property back from the dead (” we printed it in the SST ) . They gave some helpful scenarios of cost / return of units . The issue seems to be that capital prices of these ” shoe-boxes in the sky ” have fallen so much . But I am reminded of a Bob Jones book where he states that the land is all important . Which is why he focuses on CBD investments . Condos have no land component , do they ?
December 27th, 2009 at 11:48 am
To there degree that quite a number of ‘condos’ are on leasehold land ( some that are about to have the lease amount doubled !), they have a limited land component. There are lots of ‘little’ details that need to assessed in a shoebox purchase that do not always meet the eye.
December 27th, 2009 at 4:35 pm
Yep, personally I think condos are an open check book to the building managers…
If its not freehold, dont touch it IMHO.
I think shoeboxes are a dog of a buy myself…quality always wins.
I dont see prices have really dropped that much? are sales down because owners are waiting for the market to improve? kind of wierd to me.
regards
December 27th, 2009 at 4:39 pm
Make my Day Says:
“The issue with supply is one of quality not quantity; (from an Auckland Nth Shore perspective) there is plenty of housing stock, but the quality is low, leaky homes, old, cold wooden boxes, horrible cross leased crap on a miniscule site with no sun, houses that have been butchered and changed without permits, sites where the neighbour can look straight into your living zone, just general overpriced rubbish. What then happens is people pay over the top prices for a bit of quality in a good school zone and with a slightly bigger site and this skews the numbers.”
That’s what I see too.
The government would look at that through a GDP lens: leaky homes would improve future GDP. Hugh Pavletich and others would see opportunity to make money (as they don’t live down in the swamps)…. and it’s all about them after all!
Lucky global warming is just a big hoax or it would demonstrate that Hugh and his mates have got it all wrong.
December 27th, 2009 at 4:42 pm
Oil price to start rising?
http://oil-price.net/en/articles/the-case-for-floating-oil-storage.php
December 27th, 2009 at 4:46 pm
@Jh: My point is just that…AGW isnt a hoax, and the point will be proved…..though Peak oil will prove it long before IMHO.
regards
December 27th, 2009 at 6:37 pm
bit of doom+gloom news in our brissie paper today
australia.s domestic debt–credit cards–mortgage,s + personal loan,s now stands at1.2 trillion–up 71 % in 5 years–this equate,s to 74 grand for every adult aussie.this figure is from the end of october so it,ll be worse now.reserve bank figure.s show personal debt now equate,s to 100.4 % of annual gross domestic product.
it,s never been over 100%.this seem,s to have been mainly fuelled by the first homeowner,s grant–this drops to 7 grand after 31/12/09.this may help to encourage the mexican.s[nsw+victoria] to pull their heads in.
December 27th, 2009 at 7:39 pm
steven : On an international front , I have stayed in a condo in Manila ( 7 weeks , my honeyswoon ! ) ; and an American friend owned a condo in Las Vegas . Both owners lost capital and their shirts . Whatever we might think of Sir (ha!) Bob , his lesson that you need to own the dirt is paramount .
On Glouchester St. CHCH , we have this monumentally ugly apartment building , being erected next to our former fish&chip wrapper plant . A Singapore consortium are bankrolling this monstrous 21 storey eye-sore . How the feck they got it past the Chch City council beats all of us , probably either sheer stupidity , or a bribe ! It has a 60 year life span . The apartments are fully managed , and guaranteed to return a net 6 % to investors . It is the epitome of capitalist greed , a stupid ” shoe-box in the sky ” , a boon to accountants , but of absolutely no redeeeming , no aesthetic benefit , to the good citizens of the city . I see it , and grab the gummy bears , for consolence !
December 28th, 2009 at 2:44 pm
Surely, there has to be an end to this; sometime soon ?!
“(Australia’s) spending binge, fuelled most recently by the federal government’s First Home Owner Grant, means personal debt now totals 100.4 per cent of Australia’s annual GDP…up 71 per cent from just five years ago …”
http://www.businessspectator.com.au/bs.nsf/Article/Aussies-12-trillion-in-debt-Z53CV?OpenDocument&src=tnb
December 28th, 2009 at 3:32 pm
Oz has in excess of $ 1 trillion in compulsory superannuation schemes , to counterbalance that personal debt . Which places them in a far less precarious situation than us , here in Godzone .
But gumnut interference in the marketplace , through the First Homeowners Grant , is crazy . The WA state gumnut even toyed with the idea of shared equity schemes , to assist people into homes . Hopefully those fools have either sobered up , or been booted out , by now .
December 28th, 2009 at 3:50 pm
Agreed, re Oz Super, RT, but that is a ‘frozen’ asset. OZ Super is an ongoing weekly expense ( soon increasing from 9% pa to 12% pa, I believe) for households, against a future income stream, that can’t be used for present day debt servicing. Current household debt has to be serviced with current household income, not future assets or capital gain. Let’s hope Oz doesn’t have a dowturn in employment or a wages rise pause or ‘future assets’ may have to turn into present day money..
December 29th, 2009 at 2:22 am
12 degree cool Summer chart:
Because humankind is now so much better educated, well read, cultured, cultivated and civilised – we should not allow “The climate” to change. It should be categorically disapproved by the public. So called “Weather- Bombs”, cyclones, droughts, rising sea- levels, wondering ice-bergs etc. must be declared as acts of terror against civilisation. Such events, the cognition and narration by the public must be internationally pursued and eliminated. Governments need to work together and make sure the public and companies do not change, safe, care and implement sustainable policies. For officials dealing with this matter we also recommend existing “Working Papers”.
Please ask under: secret@CH.IS.RU-US.co.nz
Walter
December 29th, 2009 at 2:50 pm
RT: how did they get it through the council? Naturally a bribe. There is no other way with those useless… I will stop here.
Who at the chch city council even has the ability to inspect such construction? Let alone pass it in the foreseeable future?
It can take 6 months for consent (and tens of thousands) if an addition requires pre-fab steel etc (hello engineers report)! And what if your addition casts a shadow over a neighbors fence during winter months… forget it – oh now we must consult the RMA! The failure to conduct quality residential inspections of standing structures (and accepting responsibility for faults not found) prior to sale is proof of lacking inspection expertise.
Why the building got the go ahead – like most stupid ideas – it will be due to one or two high ranking council members who wanted to play with the big boys. Just like all government departments, its about maintaining what little power structures each manager has – and attempting to leave some form of legacy in wake of a career of failure and waste. Now they can look up from their Fendalton McMansion and point out their wonderful achievement to visiting St Andrews College mates – all the while New Brighton/Aranui/Linwood etc continue the slide below the poverty line.
Merry xmas