On Friday, PerthNow reported that due to a flood of properties, sellers are being forced to reduce their asking prices by 6 percent. “HOUSE prices in Perth are on a downward trend with sellers reducing asking prices by 6 per cent as the local market floods with properties for sale, according to the Real Estate Institute of Western Australia.” The REIWA reports the median price in Perth has dropped 4 per cent in the past three months, with the number of properties listed at two year highs.
Today, the Sydney Morning Herald reports “As the Sydney market continues to soften, vendors now have to trim 6.3 per cent off their asking prices so they can sell their homes. The figure was 5.7 per cent in April.” It reported medium house prices have fallen 2.07 percent in the September quarter.
On Sunday, the Melbourne Herald Sun reported “THE bubble at the top end of Melbourne’s property market has burst.” According to the paper, prices have crashed by more than 10 percent in 14 of Melbourne’s exclusive suburbs with Hawthorn leading the way, plunging 26.9 per cent in the three months to September.
» Prices down as Perth property market floods – Perth Now (News Limited), 15th October 2010.
» Inner west doing best, but sales slip – The Sydney Morning Herald, 18th October 2010.
» Luxury home prices drop – The Sunday Sun Herald, 17th October 2010.
It will start at the top and then work its way through the ‘rings of wealth’.
Foreclosures are coming – and the FHBG will be seen as one of the stupidest strategies in the history of Australia.
I know of three FHB’s. Two are a month behind, and the third has two people renting the spare bedroom’s just to make ends meet. But even that didn’t work because the gas got disconnected on the weekend.
Many FHB’s locked in low interest rates for 2-3 years – so many are yet to feel the impact of the higher rates. Factor in higher utility prices, and its a recipe for disaster.
Prices will continue to fall as investors run for the hills, Neg gearing is now pointless as prices will keep falling, (unless rates were to fall quickly like when the GFC hit which is most unlikely this time) the prices of houses will be off by 10% by Xmass. The bubble reached its peak about May and then stalled, most people are only now starting to feel the mood changing to fear of prices falling, this new mood will increase the rate of falls and so on and so on…….
oooohhh 6.3 % …. big deal.
The worrying thing is that this will affect us all from the banks all the way down to the person on the factory floor.
The strong dollar / increasing credit costs / potential bubble burst in china will make the current situation worse too.
It had to happen one day, but I fear it has arrived at the wrong point in time.
Looks like the weakest mortgage borrowers will be shaken out of the market. The due increase in interest rate by the RBA will slide housing prices down the hill some more, weed out a few more knife edge mortgage holders. BUT! In this new World of Government Stimulus/Bailout Packages, anything can happen.
Still, it just doesn’t taste/smell/sound/feel/look good out there.
I live in Sydney and there is an abundant number of properties 4 sale. I think in this economy interest rates are the key, and if they increase in November, which is forecast then you see more investors come out of the woodwork trying to sell their properties as well as home owners who will be defalting on their mortgages.
If interest rates keep rising then you will see the domino affect and things will slowly start tumbling. Demand will slow, consumer sentiment will decrease and away we go
@ AverageBloke – what is a big deal?
Whether the RBA increases, or holds the interest rate, there is a VERY strong indication that the Big Four will independently increase their rates, forced by increased cost of overseas borrowing, and the need to roll over / refinance existing 90 day loans.
However the problems don’t seem to have been noticed by too many Sydneysiders – walked past a property for sale in Cambridge St, just up from the Station -right on the street, no front yard, heavy traffic zone, pretty run down looking place, however on checking the Agent’s website, they are expecting to get $950,000 for THAT! The only plus point for the pllace was the 10 minute walk to the Station!
While this remains the case, Sydneysiders at least are still being expected to, and it seems quite happy to, dig deep in the pockets for very mediocre accommodation!
If we get a 10-20% drop in Sydney then we would have an effective correction. Might be a good time for our gutless politicians (on both sides) to make adjustments to the Negative Gearing Tax Rort which no doubt has distorted the Australian Property Market.
AverageBloke 6% on a $500,000 = $30,000 and the falls are set to get worse. FHB that have jumped in over the last year are going to get smashed and you say big deal. You are a tool!
@2bob I know second home buyers, and one third home buyer that are on the verge of such a smashing. The third home buyer sold his second house for 673K, after paying his remaining mortgage off he’s left with arounf 450K, borrows over 740K to buy his 1.2Mil house, which is in a similar condition to the property Parrotile described, and now is extremely nervous. (They all own just the one house they’re living in).
Similar position to a FHB’s position. Crickey! I know Australians are house fanatics, but sometimes, some people are just straight out… I don’t know… Not thinking perhaps, especially when a banks says “here, let me chuck some money (debt) your way”, and that seems to flatter them.
Home owners with reasonable jobs will cope with a couple interest rate rises, but the problem is in this day and age people have to work twice as hard (both man and women) to achieve the same outcome and instead of paying off their mortgage at 45 like the baby boomer generation it’s more like 65. What a Rort!
Sydney siders are the most gullible, and yes I have seen people paying big $$$ (>$700K) for a mediocre 3 bedroom house in Sydney’s inner west which needs a lot of work. Australians obsession with housing is beyond me.
You will see leading up to Christmas and after the new year how many investors come out of the workwork trying to sell their properties as with prices at their peak and now slowly coming down, negative gearing is pointless. I don’t think prices will fall sharply in places like Sydney and I can’t see investors being foolish enough investing in property that will decrease in value or stagnate for an extended period of time. S
So, the theory is supply should slowly increase and prices decrease. Put interest rates higher and this process will occur more rapidly.
2bob, all insults are just self-criticism.
30k sounds like alot but to put in perspective most homes have gone up 50k a yr for the past 8 yrs or so.
30k! … big deal.
I’m actually over in Auckland today for work, and the front page of the “New Zealand Herald” was this morning “Our Unaffordable Housing”.
The average mortgage in Auckland is $527 per week, and the average wage in Auckland is $817 per week.
Interestingly they were saying that over here Asian and Indian buyers were refusing to move into entry level suburbs (as the immigration criteria means that the more wealthy ones are able to move) so prices were actually falling to the far south and west (with only the east and north having gains).
I know Australia has a very similar criteria – I believe that to come to Australia from China or India you have to prove that you have $250,000 AUD in either cash or equity that you can sell on arrival. Naturally if immigrants are coming from ‘upper class’ lifestyles back home (as opposed to the Mumbai slums), they will turn their nose down at living in certain areas of Australian capital cities (i.e. Melton/Sunbury/Craigieburn in Melbourne) & and the far west and south west of Sydney. This will help to explain for Melbourne especially why the Chinese are only interested in the Eastern suburbs and bayside, and the Indians are only focused on the Eastern Suburbs and Point Cook..
You have to wonder if we had a fair and equitable immigration policy that didn’t selectively take wealthy people (with so called ‘skills’) where house prices would be anyway.
@Domenic Add to that anywhere between 3-7 credit cards, yes 7, on top of a mortgage! 65 may become an ambition, guess the kids of tomorrow will be playing hot potato with their parents ‘inheritance’, instead of trying to grab more of the share.
Funny world it has become.
Does anyone know how one can go about owning a bank?
AverageBloke, You dont seem to get it! with a drop of 6% people that have just got into the property market in the last year will have seen no real cap gain and are paying higher interest rates now than when they first took out a loan to buy the home, this will get worse as house prices continue to drop and they go further under water. Not all people owned a home when this property bubble started to get out of control and its going to send them to the wall. If you dont think 30000 is a big deal then when prices are off by 15% and its now a loss of 75000 and the debt to the bank is still owed is this the point that it becomes a big deal? or maybe its a big deal when its a 20% drop in value ie $100000 + the debt to the bank?
Maybe you should stop and think about calling yourself AverageBloke because you dont seem to take the Average FHB position into account.
Todays articles (22/10) in the money & the business sections of the AGE and Heraldsun make interesting reading.
The wussy Australians continue to cry to the government over the banks threats to raise interest rates and hence reduce these morons from being able to forfil their lust for over-priced realestate. And as you’d all be aware the idiodic Liberals have suggested regulation of interest rates and other moronic ideas as well as direct control of the banks to force down interest rates. Whereas the IMF has a view that is opposite and sits in line with the views of the banks….
“THE International Monetary Fund (IMF) has warned Australia and its neighbours of the need to raise interest rates and cut government spending because of the economic strength of the region.”
Read more: http://www.news.com.au/money/interest-rates/prepare-for-rate-pain-australia-imf/story-e6frfmn0-1225941922632#ixzz1336GOJ5B
Pure political point scoring with the ignorant masses will only make this realestate mess worse and lead to our own mini-GFC but do you think you can convince the credit spending idiots out there? nah, they just wana buy buy buy and have fun, let someone else worry about the hangover and bail us out when it all crashes.
@Romsey,
Too much debt + Falling salaries + Reliance on credit cards + Rising energy costs + Interest rate increases + Most people being one month without a salary away from disaster = X
Interesting article, though I’m thinking the idiots you’ve pointed out in your last paragraph will feel the hangover alright, they’ll also pull in some (not all) prudent ones in with them too. That’s the bummer.
Keep in mind in this new World of Government Bailout/Stimulus packages anything can happen. ‘X’ above may just equal something 50x more hiddeous happening.
I am an Average FHB in that I will never be able to afford a home. I have a job and a good deposit but I can’t afford the debt required to purchase a humpy in a bad neighbourhood where I would get stabbed if I stepped out of the front gate that’s even if it has a gate.
I’m a FHB and I can’t afford a home – haven’t been able to for the last 7-8 yrs or so. There are many more like me that I run into. That’s the point 2bob. FHB’s have been irrelevant for years. So the silly buggers whomhave purchased in last ponzi stimulus must be doing better than me.
AverageBloke,
If you dont have a massive debt like the FHB that have jumped into the market in the last year then it is infact you that is better off and will be much better off as prices keep falling for the next few years!!!