Forced Sales Index - Residential/Commercial

[hobo-jo]

Quite an interesting index even though it's only a couple of months old:

http://www.landmarkwhite.com.au/
http://www.landmarkwhite.com.au/secure/downloadfile.asp?fileid=1039035

- Analysis of major investment advertisements has seen 31.3% of total assets on the market being mortgage in possession/receiver stock (27.7% in October, 36.3% in November)
-53% of these forced sales are located in QLD, 26% in NSW & 8% in VIC

Industrial %'s (forced sales as % of total industrial ads) are almost as high as residential. Commercial property safer? Don't count on it.

Retail and office not fairing well either.

 

[tom32]

I cannot believe it to be honest.

I know there are more than it appears as they usually don't advertise them as forced sales / mortgagee in possesion but I am looking fairly regularly and find only the occasional forced sale. Maybe one in 15 - 20 or so?

30% odd would mean you rock up to 3 houses and there is a much better than even chance one of them is a forced sale?

Are we reading this stat right?

 

[lizzie]

Talking to a broker on the Gold Coast today who advised that there were over 2,000 mortgagee in possession residential properties up for sale in the area.

He did say the exact figure but I can't remember it.

Rather stunning - and that's just the Gold Coast.

 

[Aaron_C]

lizzie - that sounds like typical Gold Coast lol

As for other areas - usually banks will give bad clients a 'nudge' to sell their house before exercising their right to foreclosure, as they know that people go to mortgagee auctions looking for an absolute bargain. Maybe hobo-jo's list inclues these type of pseudo-mortgagee sales?

 

[hobo-jo]

30% odd would mean you rock up to 3 houses and there is a much better than even chance one of them is a forced sale?

Are we reading this stat right?

I think the key words here are "major investment advertisements", this would suggest to me that it's strictly based on investment marketed property (e.g. by developers). It's not an implication that all property (such as is advertised and sold by private individuals) has a rate this high.

Probably should have highlighted this in the OP, still not a very healthy sounding market. If the big guys can't turn a buck at their scale then what hope do the little guys have??

 

[Aaron Sice]

lets face it - QLD aint doing great, same with Vic.

i think WA and NT have had their flush-out and NSW is such a wildly varied market that it's very likely this is only just above normal.

interesting find though, hobo!

 

[Aaron_C]

Probably should have highlighted this in the OP, still not a very healthy sounding market. If the big guys can't turn a buck at their scale then what hope do the little guys have??

This is just a product of banks pulling the plug on commercial funding. You think about it - if you have a $100m shopping centre on a 70% LVR from 2005 - and in 2009 the bank tells you that they are reducing the LVR to 50%. What are you going to do? If all the banks employ the same policy (As they did), who is going to refinance your 70% LVR? You either have to come up with the extra 20% or sell up.

As for the small end of town - this sort of problem doesn't happen so it is relatively unaffected.

 

[tom32]

I think the key words here are "major investment advertisements", this would suggest to me that it's strictly based on investment marketed property (e.g. by developers). It's not an implication that all property (such as is advertised and sold by private individuals) has a rate this high.

Probably should have highlighted this in the OP, still not a very healthy sounding market. If the big guys can't turn a buck at their scale then what hope do the little guys have??

Ahh.

Actually I see this in time creating opportunity for the cashed up little guy. Lots on the edge of Sydney / central coast are getting to levels which a regular punter can take on.

The banks not touching pty ltd company structures / developers and the kind of prices on some, sold now at lifestyle block levels with developers and developer finance exhausted means you can get a bank val based on this valuation and buy it as a PPOR block if under 2ha and go from there. The only complication is that most sites zoned for investigation will not let you build even a PPOR so you end up on a wing and a prayer after putting down your 10% unconditional deposit that you will get finance, so best to find one with an old dwelling on board. I think you need about 40% minimum in capital for the straight lot so if necessary have a partner / relative go in with you. When you find one that stacks up it is not hard to get people who want in, councils release pretty good future plans but of course their is risk this can change... You would be surprised at the small margin between blocks capable or near capable in some parts of Sydney and the Central coast and a regular finished housing block nearby...

I reckon Sydney in particular with development regulations under state libs now finally turning a corner and improving means developable land might actually go in the opposite direction to house prices in that city, i.e. up.

 

[Bon]

So many cheap units for sale on the Gold Coast... I mentioned to my old man he should look at buying one in the next few years for a holiday retirement apartment.

 

[Belu]

does anyone keep a list of these?

 

[tom32]

does anyone keep a list of these?

national mortgagee database attempts to but does not even get close from what I can tell.

I subscribed for 3 months and nothing in my area and yet I knew of a couple myself just from word on the street so to speak.

Still worth it to get the hang of finding them and working out what agents get these listings. As a heads up it is usually the national ones like Ray White and the like.

You have to be prepared if you go in pre auction though to go unconditional. If it is land you pretty well have to go unconditional anyway before during or after teh auction sign a form 66 if you are in NSW etc.

Of course you can make whatever offer you like but I recommend you just make an offer in line with the banks proposed sale contract / conditions if you actually want to purchase the joint. Bit like getting a loan, don't attempt to cross out clauses.

 

[hobo-jo]

I'm betting the Victorian percentage of this index grows over the next 3-6 months, looking ugly for developers in Melbourne:

http://www.macrobusiness.com.au/2011/12/the-melbourne-building-bubble-bursts/

 

[Aaron_C]

I'm betting the Victorian percentage of this index grows over the next 3-6 months, looking ugly for developers in Melbourne:

http://www.macrobusiness.com.au/2011/12/the-melbourne-building-bubble-bursts/

Good it means that I can screw my builders for my project. I keep getting called by these domestic lift shops who want me to order from them. Business ain't so good.

 

[turk]

I'm betting the Victorian percentage of this index grows over the next 3-6 months, looking ugly for developers in Melbourne:

http://www.macrobusiness.com.au/2011/12/the-melbourne-building-bubble-bursts/

Hi hobo-jo

I know i'm easily confused by some of your posts but the link you have provided shows a reduction in building approvals in Vic.

I can't see how this ties in with,

"31.3% of total assets on the market being mortgage in possession/receiver stock "

One conclusion reached on this link was,

" I suppose there’s some upside to this, that oversupply won’t be as bad"

if anything this would relieve downward pressure on prices.

Cheers

Pete

 

[hobo-jo]

In my opinion the slow down in Melbourne construction is likely tied to a glut that developers are already struggling to move e.g. they've overbuilt, can't sell what they already have which is now resulting in lower levels of construction.

IMO we will see an increasing number of bankrupt developers coming out of the popping Melbourne price and construction bubble.

 

[Aaron_C]

In my opinion the slow down in Melbourne construction is likely tied to a glut that developers are already struggling to move e.g. they've overbuilt, can't sell what they already have which is now resulting in lower levels of construction.

IMO we will see an increasing number of bankrupt developers coming out of the popping Melbourne price and construction bubble.

Lack of building approvals can stem from a lack of pre-sales from a slow market (Esp in off the plan). But it can also arise from reduced planning permits being issued, developers are not building as much because they are tied up elsewhere etc. There's no one simple cause and effect.

As for developers going bust in Melbourne - I think that is likely but not to the extent that you might think. Developers do not build unless they have adequate presales to cover peak debt from the bank (otherwise banks won't lend them to build in the first place). So even if stock remains unsold, the developer won't be brought under because they should be more than covered by OTP sales.

 

[tom32]

Not all developers sell off the plan. That said the ones that don't are not likely to go broke.

 

[turk]

In my opinion the slow down in Melbourne construction is likely tied to a glut that developers are already struggling to move e.g. they've overbuilt, can't sell what they already have which is now resulting in lower levels of construction.

IMO we will see an increasing number of bankrupt developers coming out of the popping Melbourne price and construction bubble.

I think that the "popping of the Melbourne price and the popping of the construction bubble" would have opposite affects.

I can see a decrease in prices hurting developers.

However I would see a decrease in developement lowering supply thus assisting in the sale of existing developements.

This I believe would lead to a decrease in mortgage in possession/receiver stock entering the market.

 

[hobo-jo]

If the market was tight enough that the lower level of construction had an immediate effect on the supply/demand fundamentals then I would agree (prices would rise, existing developers might be ok), however IMO Melbourne has been overbuilt enough that the lower level of construction won't matter for at least a few years... have you seen Melbourne's stock on market recently?

I guess I'll try to keep an eye on this index and see if Victoria's mortgagee sales (in this sector) do increase as I've suggested.

 

[tom32]

It will depend how the government react to it IMO.

IF unemployment rises in the domestic building game the government will either attack the demand side with grants or they will attack the supply side perhaps with grants only for new or reduced take from developers.

I reckon watch that space for the longer term effects on house prices.

As Aaron C said depends on what is released too as it is possible more gets built at lower prices with certain policy settings around housing. Sydney definitely has the most room to move in this area. Make the central coast exempt from the state gov levies, i.e. view it as regional and there could be a building boom there tommorrow. Libs have stopped increasing the state gov levies there it will be interesting to see if they start paring them back in addition to the move around stamp duty we may well get some building happening in Syd even if prices do drop back a bit.