As if out of thin air, a magical 46 per cent more property was offered for sale in February than a year earlier. Like the heavens opening after a long drought, desperate first home owners must have been thanking their lucky stars.
Let's repeat that. Forty six percent more property appeared on the market, according to SQM Marketing. This is a staggering fact. We have been led to believe time after time that there is nowhere to live. Suddenly, almost 50 per cent more properties have hit the market in a few weeks. Where did this mystery supply come from?
The speculative hotspots of Darwin, Perth and Melbourne showed the largest increases in auctionable property.
Point Cook in Melbourne's western growth corridor sold 780 properties for the whole of 2010. At present, more than double that amount (1596 properties) have been on the market for over two months in that suburb. Craigieburn, another growth area, has 624 properties that have been on the market for two months or longer but only 550 properties sold in 2010.
In Melbourne, the Valuer-General conservatively estimates that the well-educated markets of South Yarra fell 28.8 per cent and Hawthorn 24.6 per cent in the September 2010 quarter. Less savvy first home owners, unaware of the changing market conditions, willingly paid prices 47 per cent higher than just 3 months earlier at Williams Landing, west of Laverton.
The divergence between wages and land prices is crucial to the affordability question and the reality of what to pay. Compared to GDP, wages fell 1.4 per cent while land prices rose 20.8 per cent in just the last year according to Dr Gavin Putland of the Land Values Research Group.
Those in the know knew that the market was turning and rising prices could not be afforded forever.
With conditions changing quickly, Prosper Australia launched a Home Buyers Strike warning now is not the time to buy a house. With young people in racked up to their eyeballs with HECS, car and credit card debt, they don't need to enter the Great Australian Dream just as it turns into a nightmare. For middle aged workers who have spent even longer locked out of the housing market, the importance of buying at the right time is compounded.
The Buyers Strike took off like wildfire on housing bubble blogs and in the GetUp community, where it quickly became the people's number one campaign idea. It's not hard to see why.
In April 2000, the average First Home Buyer's loan was $134,000. By January 2011, this had all but doubled to $266,700. We can thank the halving of capital gains tax, the first home owners grant (the seller's subsidy) and negative gearing for this abrupt price distortion.
The monopoly nature of land is forcing both husband and wife to work 25 years to pay off a mortgage on a low quality 'starter' home.
Recently Dr Bob Birrell announced that only 30 per cent of urban fringe lots were in the affordability range.