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  1. THE PROPERTY CHOPPING BLOCK Sydney first, others follow. In June last year, a Sydney agent told a family that their home was worth $1.95 million. Nine months later, after reducing the price to $1.15 million, the home remains unsold. Last week the owners refused an offer of $870,000. Welcome to today’s Sydney property market where prices are tumbling and where many homeowners don’t know who to believe or what to do. Can they trust an agent to give an accurate quote on their home? Seldom. What about the advice from the Real Estate Institute? Last month, the president of the NSW Institute, Rowen Kelly, assured worried homeowners that there was “no evidence†that property prices were in decline. Kelly said housing prices in the last 12 months “remained steady or grew slightlyâ€. Can you trust Kelly to give the right information? Seldom. So, how do you figure out what’s really going on in today’s market? To know what’s happening with prices you have to compare the same properties. Look at the properties that sold in 2002 and 2003 and are now being resold. Are those prices higher or lower? That’s the question to answer. Here’s an example. Almost two years ago, in August 2003, a unit in Bondi sold at auction for $655,000. This month, the same unit was auctioned again. The highest offer was $540,000. In simple maths that’s a capital loss of $115,000. By the time expenses are included the loss will be around $150,000. You may remember this unit. It was auctioned in front of 3.3 million people on Sunday August 17, 2003; yes, the grand finale of Channel Nine’s hit series, The Block. In any suburb you can find accurate price information by checking the resales of the same properties. Just because the real estate institutes may not be able to find evidence of price declines, it doesn’t mean there is no evidence. Now that the property slump is well and truly upon us, there is evidence (or there soon will be) in almost every street where there has been a sale in the boom and then a recent sale of the same property. Property prices are being chopped in Sydney and, to a growing extent, all over Australia. A two-bedroom unit in Edgecliff Road Woollahra sold in 2002 for $1,270,000. Two weeks ago, the same unit was resold for $1,070,000. That’s a clean chop of $200,000. With expenses, there’s no change from a loss of a quarter of a million dollars. A four-bedroom home in Cecil Street Ashfield sold in 2002 for $850,000. Two weeks ago, the same home was resold for $740,000. That’s a price chop of $110,000. With expenses, the loss is closer to $150,000. There are examples all over Sydney. Sure, they are not pretty, especially when homeowners are selling for less than they paid. But price falls are the truth of today’s market, no matter what the industry spokespeople say. Property prices are not “steady†or “softâ€, they are falling – and faster than the public is being told. The recent property boom and the inevitable bust which is now happening has been one of the easiest to predict. It’s common sense. What’s happening in Sydney will happen all over Australia. Where prices rise they also fall. As The Economist (and many other trustworthy sources) has been saying, “The bigger the boom, the bigger the bust.â€
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