Silver Surfer

'Shocking' sales slide may halt rates

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Surprise, Surprise, here come the emergency settings again ...

Hefty retail sales slide and weak building figures may halt rate rise

By staff writers and wires From:news.com.au March 31, 2010 12:41PM 27 comments

Shoppers have lost their lust to hit the malls, forcing the RBA to rethink a rate hike next week, economists say / File

Shopping, building down in Feb

May give RBA pause on rates

RBA boss: 'There is a God'

AN UNEXPECTEDLY large fall in retail sales and lower-than-expected building approvals could see the Reserve Bank hold interest rates steady next week, economists say.

Retail trade fell 1.4 per cent in February to $19.8 billion, from a downwardly revised $20.1 billion a month before, data from the Australian Bureau of Statistics released today shows.

It was far below the market forecast for a 0.3 per cent rise in sales in the month.

Meanwhile, building approvals fell 3.3 per cent to 13,929 units in February, seasonally adjusted, from an upwardly revised 14,405 units in January, the ABS said.

In the year to January, building approvals were up 34.2 per cent.

The median market forecast was for building approvals to have risen 2.1 per cent in the month.

Shocking drop in sales - economist

Rising interest rates appear to have taken the sting out of consumers' lust for shopping.

"It was a pretty shocking number," JPMorgan economist Helen Kevans said of the retail sales figures.

"Part of it is pay back for the strong January result and it's the result of a big fall in discretionary spending.

"Looking at these numbers I think there's reason for concern ... the RBA will get to its meeting next week and weigh the weakness in the housing market against the weakness in the consumer."

Housing approvals down

CommSec economist Savanth Sebastian said the building approvals figures came as "no surprise" given the exit of first home owners from the market and rising interest rates.

"It's a clear sign that the economic recovery isn't set in stone,'' Mr Sebastian said.

"The Reserve Bank will need to take that in context.

http://www.news.com....0-1225847951411

Edited by RumpledElf

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Hey - perhaps I'll get another $4000 ummester family shopping bonus to add to the deposit:)

Remember last years worked out to be around about what you'd end up having to pay back in tax, per person earning less than $85K, if you had a couple of kids. Totally zero sum.

The actuallity of all this is, of course, that high house prices are having an effect on what people have to spend. Hopefully Stevens will shake it of and keep pushing rates up in his quest to stop specualtive house price rises and the end result will be the retail industry saying no to high house prices.

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What a load of sh*t - typical Newscorp cash for comment. RP data is spruiking massive rises in the median in Feb.

People aren't spending because they are feeding the bubble. 25 or 50?

Ms Keven can go back to washing the Coffee Cups and doing the lunch run now she's had her 2mins of fame.

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Housing approvals my arse. Nothing to do with a weak economy. Fact is that simply the property developers can't get outside finance; nothing to do with a drop in demand. Haven't these nong commentators been to an auction recently? Glenn can see the wood for the trees can't he?.....[those tumbleweeds and cricket noises just then were a bit unfortunate].

The ASX target rate tracker took a 5% hit anyway, back to 65%. The poor tracker has been out of fashion though, since its bad last February. It was Plonk's best friend at one time.

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Housing approvals my arse. Nothing to do with a weak economy. Fact is that simply the property developers can't get outside finance; nothing to do with a drop in demand. Haven't these nong commentators been to an auction recently? Glenn can see the wood for the trees can't he?.....[those tumbleweeds and cricket noises just then were a bit unfortunate].

+1

The thousands (and I mean thousands) of empty units between Adelaide and Port Douglas are due to the ridiculous prices and general turnover loss is resulting in punters staying away especially since the few investors that did in the last 24M (condo/units) are facing big losses.

Financing a condo development or a sub-division at the prices they are being sold for (and the glut that exists) is utter madness from a finance perspective.

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...Fact is that simply the property developers can't get outside finance; nothing to do with a drop in demand....

In this current run of people talking about things I feel they are missing the basic logic.

If a person makes money by loaning it to developers their entire risk is that the developer goes bust.

If there was a genuine shortage how could they go bust? It would have to be a mad max situation wouldn't it? Like a game changer where no sensible plan can cater for it.

So if they are not loaning the money they are assuming the guys will go bust.

Maybe the people loaning money to developers are out of touch and just don't realise that demand for guaranteed riches is guaranteed to stay high.

If I was loaning money to people I think I would want to have some basic knowledge of what they are doing with the money.

ergo the money lenders are incompetent because there is a provable demand for more houses and it is a safe bet.

or the other thing where the guys that have made money for years lending their money are actually in touch and moving on to new pastures.

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Partially unrelated but one of the contractors authorised by the Land Development Agency for the new Canberra suburb, Bonner, went bust recently.

I don't know the reasons, of course, but I think a lot of the local developers are suffering from self-inflicted greed-related wounds. Bought up a lot of land, trickled it onto the market to keep prices high, and now find themselves unable to unload the house/land packages at a profit.

Personally i don't know how a builder could go bust in Canberra these days--seems like something you'd really have to work at. But where there's a will there's a way, I suppose.

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I think Tor makes a good point. If there really is such a huge underlying shortage, and prices are truly going to keep rising as tipped by so many RE experts, you'd think the banks couldn't lend to developers fast enough.

urchin, I think it might be the same thing with what you're describing, how can they go bust with such a big shortage, and so much demand, sounds like a license to print money.

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I think Tor makes a good point. If there really is such a huge underlying shortage, and prices are truly going to keep rising as tipped by so many RE experts, you'd think the banks couldn't lend to developers fast enough.

urchin, I think it might be the same thing with what you're describing, how can they go bust with such a big shortage, and so much demand, sounds like a license to print money.

That is unless costs keep rising along with prices.

I think there is a lot of artificial bubble related costs in new dwelling construction, so this will all resolve itself along with teh bubble. I reckon ummester was onto it on another thread saying keep saving your 20% deposit for your dream house minus 30%. Except I think you might need 30 to 40% of your dream house at 30%. It will eb hard work getting finance in a falling market!

Anyway I saw this today and it dawned on me why we are stuffed in Australia. See below link to a government table tabling the regional developer contributions in Sydney, it is from 2004 but I post it more to shed light on the ineptitude of our decision makers than for the information within. Nonetheles it shows each level of development with the amount say for medium apartment = 25k The next bit is what made me spin out!!! they then MINUS TAX DEDUCTION = $7500.00 so the NETT COST CONTRIBUTION IS ONLY $17,500.00!!! What a crock! Cost is cost if it is industry wide it will be passed on in prices!

Suffice to say if this is the quality of people we have working in the government in the development field it is little wonder that our housing market is cactused.

Cant wait to tell the boss next time I make a cock up, hey it only cost me $50k after tax champ, not 75k!

These taxes are raising the price to the end user, but they have also raised the costs, it costs the developer nothing really as it is all a level playign field but the full amount is passed onto the home buyer if they can afford it which increasingly seems not to be the case with new construction tailing off again.

Anyway look at page 16 of this for the source:

http://www.metrostrategy.nsw.gov.au/LinkClick.aspx?fileticket=FyohelQtZe4%3D&tabid=68

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I think Tor makes a good point. If there really is such a huge underlying shortage, and prices are truly going to keep rising as tipped by so many RE experts, you'd think the banks couldn't lend to developers fast enough.

urchin, I think it might be the same thing with what you're describing, how can they go bust with such a big shortage, and so much demand, sounds like a license to print money.

now if i went to the bank with a nice shiny presentation that showed how i could make a fortune out of buying the large block down the road and putting up 30 units the bank would show me the door - even if it looked perfect on paper.

if i was a developer that had built tons of these types of places and turned up at the bank with the same plan you'd think the bank would jump at the opportunity to lend to the expereinced developer. you could understand the hesitation if i took the plan to the bank in the midst of the 'crisis'. perhaps the banks are not sure we are out of the water? perhaps there is a lot of stock on developers books - but not on market?

why aren't banks lending to good projects?

kev should step in and provide finance for all developers!

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kev should step in and provide finance for all developers!

Kev knows thers a bubble and the undersupply is a myth - but he also knows that the majority of voters want the bubble to remain and fears, because of the us, that the housing market is the most important facet of the economy.

I had no idea something like this bubble could be drawn out as long as it has but, ultimately, I don't have the deposit I want yet anyway so it is proably in my favour.

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so, shockingly high prices in perth according to another article, but shockingly low volumes of sales everywhere?

and they need more stimulus and lower interest rates to boost sales volumes, so prices can go shockingly higher?

something seems to be wrong here...

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so, shockingly high prices in perth according to another article, but shockingly low volumes of sales everywhere?

and they need more stimulus and lower interest rates to boost sales volumes, so prices can go shockingly higher?

something seems to be wrong here...

I agree, the picture is confused at best, which probably means things arent goint well for Real Estate prices ...

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Kev knows thers a bubble and the undersupply is a myth - but he also knows that the majority of voters want the bubble to remain and fears, because of the us, that the housing market is the most important facet of the economy.

I had no idea something like this bubble could be drawn out as long as it has but, ultimately, I don't have the deposit I want yet anyway so it is proably in my favour.

agreed kev knows there's a bubble. but he's almost guaranteed another term, so he can't afford for it burst in the next three years or he's out. if he pumps it up then there is a very very real risk it will pop and he won't have a chance of a third term. i would think his aim is to keep it nominally steady, so it slowly deflates in real terms. i believe that was his intention in the boost, he just underestimated the effect of free money, the knock on effect, and overestimated the effect of credit contraction in Australia.

in this case he can decrease demand, which the rba is doing for him. or increase supply, or a combination. with the 'crisis' behind him he's doing a bit of experimenting to see what works.

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The ASX target rate tracker took a 5% hit anyway, back to 65%. The poor tracker has been out of fashion though, since its bad last February. It was Plonk's best friend at one time.

Still is my best friend: inlove.gifheart.gif Ahhh, but i was young then Maria. Just a young Plonk. Now i also check all the ABS and RBA data data that is coming out prior to the meeting, the TD/MI inflation gauge, house price inflation, the AUD, the BBSW, and all that jazz. At the end of the day, noone really knows what will happen, but the futures put money on it, so i like to see what they think. I keep an eye on what McCrann and Annette Beacher and Rory say too. Still, everyone is guessing. I have a feeling that even Stevens probably goes in to the monthly meetings with an open mind, and a compelling argument at the meeting could probably sway things. If I felt like I had a 100% knowledge of what would outcome would occur prior to the meeting, I would just put all my money on black or red, but I have no such faith as a data reader.

My next aim is to find out what the "balance of priorities" is for each data set ie does housing approvals falling + retail spending down, have more weight than say, house prices rising and inflation (measured by the TD/MI monthly report) rising. The only way I can do that is see what the commentariat say, and the futures figures.

Interest rates and me, we're close. hug.gif

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Still is my best friend: inlove.gifheart.gif Ahhh, but i was young then Maria. Just a young Plonk. Now i also check all the ABS and RBA data data that is coming out prior to the meeting, the TD/MI inflation gauge, house price inflation, the AUD, the BBSW, and all that jazz. At the end of the day, noone really knows what will happen, but the futures put money on it, so i like to see what they think. I keep an eye on what McCrann and Annette Beacher and Rory say too. Still, everyone is guessing. I have a feeling that even Stevens probably goes in to the monthly meetings with an open mind, and a compelling argument at the meeting could probably sway things. If I felt like I had a 100% knowledge of what would outcome would occur prior to the meeting, I would just put all my money on black or red, but I have no such faith as a data reader.

My next aim is to find out what the "balance of priorities" is for each data set ie does housing approvals falling + retail spending down, have more weight than say, house prices rising and inflation (measured by the TD/MI monthly report) rising. The only way I can do that is see what the commentariat say, and the futures figures.

Interest rates and me, we're close. hug.gif

latest TD is out

The rise on the TD Securities - Melbourne Institute monthly inflation gauge followed an increase of 0.8 per cent in January and 0.1 per cent in February.

The annual inflation rate by this measure was 2.5 per cent, up from 1.9 per cent over the year to February.

The trimmed mean inflation gauge, which parallels one of the measures of underlying inflation used by the Reserve Bank, also rose by 2.5 per cent over the year to March.

Both were in the middle of the Reserve Bank's two to three per cent medium term inflation target.

Despite that, TD Securities senior strategist Annette Beacher warned that inflation was "again building up a head of steam" after a pause in February.

http://www.theaustralian.com.au/business/news/inflation-gauge-rises-05-pct-in-march-td-securities/story-e6frg90f-1225848424528

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So, in Zappone world, does the TD index trump retail sales? Or do we need a straight flush of building approvals, or are you guys going to blow your deposits on the river card? Anyhow, each of these crumbs of information will make a sensational headline. That's the main thing. Isn't it.

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So, in Zappone world, does the TD index trump retail sales? Or do we need a straight flush of building approvals, or are you guys going to blow your deposits on the river card? Anyhow, each of these crumbs of information will make a sensational headline. That's the main thing. Isn't it.

stevens has revealed he holds two (very) wild cards. the 'i've got god on my side' card and the 'emergency low rates' card. he may use one or both this hand, or might save them for the next deal. i think he can make a trick

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Some more negative news on the feb current account deficit.

Exports fell -1% M/M imports grew 2% M/M. Leaving us with a nice deficit of A$1924M.

Party on!

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Some more negative news on the feb current account deficit.

Exports fell -1% M/M imports grew 2% M/M. Leaving us with a nice deficit of A$1924M.

Party on!

Weren't we supposed to be into positive territory by now, even in the worst case scenarios that were aired at the time of the need for the stimulus spend.

Can't be helpful to be still adding to the deficit by this much in a month.

Lets see, across a 12 month period that would be about $12bn!:sadwalk:

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