Australia Faces Its Demons

[Sancho Panza]

3 hours ago, darkmarket said:

Home sellers drop listed prices by up to 30 per cent in pockets of Sydney

SYDNEY home sellers have had to accept GFC-level price declines due to a weakening market that has given buyers more bargaining power, but some suburbs have been more affected than others.

http://www.news.com.au/finance/real-estate/sydney-nsw/home-sellers-drop-listed-prices-by-up-to-30-per-cent-in-pockets-of-sydney/news-story/dae2aaaad1596760ffaa06d5f0975337

 

' There are currently about 25 per cent more homes for sale compared to a year ago and only 80 per cent as many people actively looking for property, industry figures reveal.

The average house seller in the inner city suburb of Darlinghurst had to cut 30.6 per cent off their advertised price to sell.

Bellevue Hill sellers dropped their prices by an average of 16 per cent before selling, while in Vaucluse the adjustment was 13 per cent.

Down south, sellers in nearby suburbs Sutherland and Alfords Point slashed an average of more than 15 per cent off their listed prices prior to selling.

Other suburbs where sellers discounted their prices by more than 10 per cent included Narrabeen, Cammeray, Tempe, Coogee, Mascot, Belfield and Matraville.

Cobden and Hayson agent Samantha Elvy, who is selling the rundown home on Balmain’s Harris St, said fewer prospective buyers were going through open homes in general terms.

Exceptional properties on the other hand were still attracting keen interest, she said. “Fixer uppers like (the Harris St home) are rare so they get a lot of inquiries.”

LARGEST 3-MONTH MEDIAN PRICE FALLS BY LGA

NORTH: Mosman units -1.9%

EAST: Woollahra houses -2.1%

WEST: Camden units -1.7%

SOUTH: Botany Bay units -3.6%

INNER WEST: Ashfield houses -6%'

2 hours ago, pepto said:

The big question is still do you buy now or wait? All of the stories we see on here are explaining how the fundamental economics of the country are going to lead to rate rises and the bubble popping but I have been reading that for nearly a decade and still the correction has not come. It now seems that the government cannot let the bubble pop because it is all that is left and the results would be catastrophic...once again the banks are too big to fail!

 

Intersting snipets from the link above.Market timing is always hard.

[Eddie_George]

14 hours ago, pepto said:

I should add that this is another big factor in wanting to buy even though property is way over priced. I am fed up of having to ask the estate agent if I can put posters up in my kid's bedroom and then worrying about how much of my deposit they are going to take when we move out if there is a small mark. 

A few years ago we lived in a lovely old sandstone house in Adelaide in an area notorious for walls cracking over the years due to the clay soil that expands/ contracts over the seasons. We had cracks in the plaster all the way down the 5m living room wall which we had requested to be repaired but to no avail. When we moved out they tried to charge us for a mark that was left from one of those adhesive picture hooks!

Gosh, it does sound worse than over here.

I think in the long term, if you can adapt to the Australian culture and climate (and it seems like you have), it'll be a nicer place to live than the UK.

[pepto]

19 hours ago, Eddie_George said:

Gosh, it does sound worse than over here.

I think in the long term, if you can adapt to the Australian culture and climate (and it seems like you have), it'll be a nicer place to live than the UK.

The fact that family are so far away is the only major negative about being here. Other than that, the housing problem and the high cost of living (and these are the same in London where we were in the UK before moving here anyway) pretty much everything is great.

[Sugarlips]

Noticeable breakout higher this last week £ vs AUD:

http://xe.com/currencycharts/?from=GBP&to=AUD&view=1W

I recall the pound most recently bottomed just as the US election was announced at 1.60

Worth monitoring in case it gets back above 2 to 1 which would be the first opportunity in a decade to get out of the UK if you're willing to live in one of the cheaper Oz cities like Adelaide..

[Mancunian284]

3 hours ago, pepto said:

The fact that family are so far away is the only major negative about being here. Other than that, the housing problem and the high cost of living (and these are the same in London where we were in the UK before moving here anyway) pretty much everything is great.

What’s the cost of food like now?  I remember paying £4 for a bunch of bananas before I left in 2011.  Food in supermarkets was very expensive but eating out in restaurants was reasonable.  This was in Sydney.  

I remember clothing being much more expensive as were any big ticket items that are mostly imported - cars and electronic goods mostly.

Our two reasons for leaving were the cost of buying/renting a house and distance from family.  We were gradually being pushed further and further out of Sydney, and as much as people whinge about the transport infrastructure here, at least in the U.K. you can live outside a city and commute in which is almost impossible in Sydney at least.

Edited March 19, 2018 by Mancunian284

[Mancunian284]

On 17/03/2018 at 11:46 PM, pepto said:

 

The biggest pain is that the lease mandates inspections of the property every 3 months. This would not be a problem if they were just taking a look to check we hadn't knocked a hole in the wall but the letters we get go into the level of detail that that all skirting boards and light switches must be dust free. We keep out place generally pretty clean and tidy (the missus is Japanese and so no shoes in the house etc) but it gets a bit ridiculous when you have to do a 'deep clean' every time the estate agent wants to come round.

 

I remember this and it’s really invasive.  We got a post inspection letter from the EA reminding us to remove rubbish as it attracts vermin (we had left the Sunday papers on the dining table as we hadn’t finished reading them), clean finger marks off two light switches and clean soap scum off the right hand bottom corner of the shower screen.  All really minor things that aren’t a threat to the property in my opinion.  

Edited March 19, 2018 by Mancunian284

[pepto]

20 hours ago, Mancunian284 said:

I remember this and it’s really invasive.  We got a post inspection letter from the EA reminding us to remove rubbish as it attracts vermin (we had left the Sunday papers on the dining table as we hadn’t finished reading them), clean finger marks off two light switches and clean soap scum off the right hand bottom corner of the shower screen.  All really minor things that aren’t a threat to the property in my opinion.  

Exactly, anything that is not permanently damaging the property does not even need to be noted and things that are should not be an issue as long as they are general wear and tear or can be covered by the deposit.

We recently had a plumber come to fix a leak and leave a massive hole in the kitchen ceiling which doesn't seem to be a priority to the estate agent but I am sure come inspection time they will complain that we haven't cleaned the cooker sufficiently or something...

[pepto]

21 hours ago, Mancunian284 said:

What’s the cost of food like now?  I remember paying £4 for a bunch of bananas before I left in 2011.  Food in supermarkets was very expensive but eating out in restaurants was reasonable.  This was in Sydney.  

I remember clothing being much more expensive as were any big ticket items that are mostly imported - cars and electronic goods mostly.

Our two reasons for leaving were the cost of buying/renting a house and distance from family.  We were gradually being pushed further and further out of Sydney, and as much as people whinge about the transport infrastructure here, at least in the U.K. you can live outside a city and commute in which is almost impossible in Sydney at least.

Generally we find groceries to be a bit on the expensive side compared to London, but very expensive compared to the small town where my parents live. I bough a single banana for my son to eat while we did our shopping on the weekend and it cost 45 cents, which is about 25p nowadays so not too expensive.

Clothes and especially shoes are very expensive, but I generally find electronics such as phones, TV's etc to be cheaper.

One shocker to me is the cost of dental...I recently was told that I need to have a root canal and crown on one of my back teeth and the cost is $3400!!! Even with my health insurance that I spend $350 a month on I will be $2500 out of pocket...

I am lucky that I don't live is Sydney...even though I am complaining about house prices here it is much much more affordable than Sydney. The median house price in Brisbane is not far off 50% that of Sydney, I really don't know how people can make ends meet down there. A guy at work has family there (a husband who is a lawyer and wife who is a senior accountant) and he told me that mortgage payments on the 3 bedroom house they are living in would cost more than 50% of their take home pay...

 

 

 

[Mancunian284]

4 hours ago, pepto said:

Generally we find groceries to be a bit on the expensive side compared to London, but very expensive compared to the small town where my parents live. I bough a single banana for my son to eat while we did our shopping on the weekend and it cost 45 cents, which is about 25p nowadays so not too expensive.

Clothes and especially shoes are very expensive, but I generally find electronics such as phones, TV's etc to be cheaper.

One shocker to me is the cost of dental...I recently was told that I need to have a root canal and crown on one of my back teeth and the cost is $3400!!! Even with my health insurance that I spend $350 a month on I will be $2500 out of pocket...

I am lucky that I don't live is Sydney...even though I am complaining about house prices here it is much much more affordable than Sydney. The median house price in Brisbane is not far off 50% that of Sydney, I really don't know how people can make ends meet down there. A guy at work has family there (a husband who is a lawyer and wife who is a senior accountant) and he told me that mortgage payments on the 3 bedroom house they are living in would cost more than 50% of their take home pay...

 

 

 

We left in 2012 and it was expensive then, worse now I believe.  A lot of my friends have moved to Brisbane or Adelaide for cheaper housing costs.  I think I remember there being a couple of cyclones before we left which were responsible for pushing up the cost of bananas!

Have you looked into getting the root canal done at one of the University Dental schools for free?  One of my friends did this in Sydney, it’s actually a qualified dentist that does the root canal but you do have to have a group of students watching the procedure.

[Sancho Panza]

http://www.afr.com/real-estate/residential/sydney-melbourne-housing-boom-is-over-auction-clearance-rates-show-20180318-h0xmhl

'The Sydney and Melbourne housing boom is over as investors retreat further and sellers' price expectations continue to wind down.

Preliminary auction clearance rates, a proxy for how the housing markets fare week on week, were in the 60 per cent range for the two biggest housing markets last week, Corelogic data shows.

For the full week, Sydney's auctions cleared at a preliminary 67.8 per cent and Melbourne's clearance rate was 68.9 per cent.

While the volume of auctions was similar to last year, clearance rates for Sydney and Melbourne were higher then at 76.8 per cent and 77 per cent respectively.

"Buyers certainly feel like the tides have changed ... but we won't call them buyers' markets unless clearance rates are less than 50 per cent."

New apartment sales have also slowed into what developers call a "normal market". While foreign buyers have mostly departed the market there was still plenty of appetite for well-located apartments from first-home buyers and owner-occupiers '

[steve99]

 

On 22/03/2018 at 2:09 AM, Sancho Panza said:

http://www.afr.com/real-estate/residential/sydney-melbourne-housing-boom-is-over-auction-clearance-rates-show-20180318-h0xmhl

'The Sydney and Melbourne housing boom is over as investors retreat further and sellers' price expectations continue to wind down.

Preliminary auction clearance rates, a proxy for how the housing markets fare week on week, were in the 60 per cent range for the two biggest housing markets last week, Corelogic data shows.

For the full week, Sydney's auctions cleared at a preliminary 67.8 per cent and Melbourne's clearance rate was 68.9 per cent.

While the volume of auctions was similar to last year, clearance rates for Sydney and Melbourne were higher then at 76.8 per cent and 77 per cent respectively.

"Buyers certainly feel like the tides have changed ... but we won't call them buyers' markets unless clearance rates are less than 50 per cent."

New apartment sales have also slowed into what developers call a "normal market". While foreign buyers have mostly departed the market there was still plenty of appetite for well-located apartments from first-home buyers and owner-occupiers '

However these 'clearance rates' are Bsh*t.  Many agents only report their successes,  bad news (in their view that is) is often not reported.

Edited March 27, 2018 by steve99

[darkmarket]

5 hours ago, steve99 said:

While foreign buyers have mostly departed the market there was still plenty of appetite for well-located apartments from first-home buyers and owner-occupiers

You'd expect the same foreigners who have departed the market as buyers to be considering re-entering as sellers to liquidate some assets before they lose more of their investments.

5 hours ago, steve99 said:

"Buyers certainly feel like the tides have changed ... but we won't call them buyers' markets unless clearance rates are less than 50 per cent."

With no new money coming into the market from outside or from increases in lending, it looks pretty certain the 50% will be breached soon. Australia's politicians must be squirming right now.

[Sancho Panza]

https://www.themaven.net/mishtalk/economics/australia-s-housing-bubble-finally-popped-Y-aoEGfeyEq-OiqqdkGDtQ/

'Australia's Housing Bubble Finally Popped?

 

'Australia's mining towns are getting crushed. Not even Sydney is immune.

Perth Investors Fear the Worst

West Australia property investors are suffer as the mining slump lingers. Nearly One-Third Losing Money on Resale.

A report from property research firm CoreLogic shows one-third of investors in Perth property lost money on resale in the December quarter.

The figure of 33.6 per cent was equal with Darwin as the highest proportion of loss-making resales nationally.

In regional WA, the situation was even worse — 47.5 per cent of resales by investors made a loss in the quarter.

 

80% of Gladstone Homes Sell at Loss

Five years ago, investors from all over Australia scrambled to snap up a property in Gladstone. Today, you have to pay to get out. More than 80 Percent of Gladstone Homes Sell at a Loss.

SITTING at the southern tip of the Great Barrier Reef, and famed for being one of the nation’s industrial powerhouses, is the central Queensland city of Gladstone.

Four decades ago, Gladstone was a tiny port town best known for its fishing industry and boasting easy access to the southern reaches of the reef.

A decision to build a liquefied natural gas plant was made — encouraging thousands of construction workers to fly into the already prosperous town in an attempt to score a piece of the plant pie. By 2012, the LNG plant was built, the construction workers were getting laid off and the city started to experience a severe downturn. Six years later and things are no better.

In the last December quarter, more than 80 per cent of Gladstone homes sold at a loss, according to new data released by CoreLogic. That rate is the highest in Queensland and second highest in Australia, based on the average home price more than halving in the past five years.

Most of the places in the top 20 are linked to the mining resources sector in Queensland and Western Australia. Pegs Creek in Western Australia is the only suburb to beat West Gladstone, with 92.3 per cent of its properties selling at a loss.

In 2012, when the city was still on a construction high, Ms. Kerry Connor [Gladstone Real Estate] said working as a real estate agent was exciting. “People came from all over the world to try and buy a Gladstone property. We’d advertise on realestate.com.au and in a few days, the property would be sold. “It was the most amazing time to be a real estate agent and it was mad — everything was happening very, very fast.

In January 2013, houses in the centre of Gladstone were selling for an average of $595,000 but by January 2017, the average was down to $330,000. Gladstone is also one of the top 10 postcodes in Australia for people behind on their mortgage payments, according to S&P Global Data.

Ms Connor confirmed this figure, admitting most of Gladstone real estate’s sales are repossessed homes — most of which were bought by investors in the 2011-2012 boom. “A very high percentage of sales in Gladstone are repossessions. It’s quite scary actually,” she said.

Cracks in Sydney

The Sydney Morning Herald reports Sydney house prices fall for the first year since 2012

 

Cracks are showing in the Sydney property market, with prices now falling for the first time over a 12-month period since the boom began.

 

The median property value now stands at $880,743, after the first 12-month decline since 2012.

 

Over the three months to February, Sydney prices dropped 2.4 per cent. This was the weakest result in the country.

Melbourne also showed continued signs of a slowing housing market, with prices up a solid 6.9 per cent over the year but down 0.4 per cent for the last three months. Its median dwelling price is now $723,334.

CoreLogic head of research Tim Lawless said the overall softening in the market was becoming “more evident” with interest rate increases on the horizon.

“With high levels of household debt and dwelling values now starting to fall as well as tighter credit policies and a prospect of higher mortgage rates down the track, it is reasonable to expect that borrowers will be taking a more cautious approach to taking on debt,” he said.

This is a miniscule down payment on what is ahead.

Any further gains in places like Sydney will just add to the pile of future losses.

Want to know what it's like selling in the midst of a slump? Look at Gladstone.

[Sancho Panza]

http://en.brinkwire.com/241941/australian-home-ownership-rate-falls-to-the-worst-level-since-1954-as-immigration-surges/

Australian home ownership has fallen to the lowest level in more than 60 years, with high immigration blamed for pushing Sydney and Melbourne houses beyond the reach of the young.

 

The proportion of Australian adults who either own their home outright or have a mortgage has fallen to 65 per cent, marking the worst home ownership rate since 1954 – the year the Queen first visited Australia.'

[Sugarlips]

SP you raise a very valid point here, immigration rates in Oz are huge ie getting on for 2% of the nations population every year and its been like this for easily a decade or more. All the migrants want to live in the big cities of which there are only a few. Infrastructure improvement lags the growth by a large amount so everyone is crushloaded into the existing trains/roads/housing.

There are towerblocks going up all over the place in Syd/Mel but they are sold to overseas investors off the plan and often left empty (Chinese culture apparently) so no one benefits..

 

The prime minister has laguished in the polls losing every one of the last 30, why there hasnt been another snap election i dont know other than the public are sick of politicians..

 

[Timbuk3]

http://www.abc.net.au/news/2018-04-11/westpac-mortgage-home-loan-lending-standards/9640812?section=business 

Looks like the banks are tightening up on loans. Seems a bit late. 

[spyguy]

On 4/5/2018 at 9:48 AM, Sugarlips said:

SP you raise a very valid point here, immigration rates in Oz are huge ie getting on for 2% of the nations population every year and its been like this for easily a decade or more. All the migrants want to live in the big cities of which there are only a few. Infrastructure improvement lags the growth by a large amount so everyone is crushloaded into the existing trains/roads/housing.

There are towerblocks going up all over the place in Syd/Mel but they are sold to overseas investors off the plan and often left empty (Chinese culture apparently) so no one benefits..

 

The prime minister has laguished in the polls losing every one of the last 30, why there hasnt been another snap election i dont know other than the public are sick of politicians..

 

Countries should welcome Chinese money being poured into housing.

Just tax them 10% of the purchase price every year.

[Sugarlips]

Latest update on the Aus mortgage debt mountain:

http://www.abc.net.au/news/2018-04-12/mortgage-delinquencies-stable-but-set-to-rise-house-prices/9644566

For the last 5 years Syd/Mel prices have rocketed higher, whereas Brissy and Perth have largely flatlined (for 10 years+ actually)

Interestingly all the suburbs with high mortgage delinquency rates are in the latter 2 cities with next to none in the former. The takeaway for me is Syd/Mel borrowers are using their equity to service the debt whereas QLD/WA havent had the price rises so there is no equity to tap 

Syd/Mel owners could well be swimming naked when the tide goes out, less so elsewhere..?

[Sancho Panza]

https://www.themaven.net/mishtalk/economics/australians-face-huge-spike-in-repayments-as-interest-only-home-loans-expire-tQTwDAmXvU-sZj2F3qAZCQ/

'Australians Face Huge Spike in Repayments as Interest-Only Home Loans Expire

The Reserve Bank of Australia (RBA), Australia's central bank, warns of a $7000 Spike in Loan Repayments as interest-only term periods expire.

Every year for the next three years, up to an estimated 200,000 home loans will be moved from low repayments to higher repayments as their interest-only loans expire. The median increase in payments is around $7000 a year, according to the RBA.

What happens if people can’t afford the big hike in loan repayments? They may have to sell up, which could see a wave of houses being sold into a falling market. The RBA has been paying careful attention to this because the scale of the issue is potentially enough to send shockwaves through the whole economy.

In 2017, the government cracked down hard on interest-only loans. Those loans generally have an interest-only period lasting five years. When it expires, some borrowers would simply roll it over for another five years. Now, however, many will not all be able to, and will instead have to start paying back the loan itself.

That extra repayment is a big increase. Even though the interest rate falls slightly when you start paying off the principal, the extra payment required is substantial.'

[Sugarlips]

In-depth but worth it for the Oz property watchers, basically 15.8% of NSW (ie Sydney) have an LTI of over 6 times. That’s now, at the end of the biggest equity growth period in generations. Things have the potential to get massively ugly..

 

http://digitalfinanceanalytics.com/blog/a-deeper-dive-into-current-loan-to-income-ratios/

[Steppenpig]

Quote

Home prices post first annual fall in six years

1 June 2018 — 10:57am

Home prices across Australia's major cities weakened for an eighth straight month in May as tighter lending standards at banks cooled demand in Sydney and Melbourne - although regional markets continued to tick higher.

 

https://www.smh.com.au/business/the-economy/home-prices-post-first-annual-fall-in-six-years-20180601-p4zity.html

[Kurt Barlow]

9 hours ago, Steppenpig said:

 

https://www.smh.com.au/business/the-economy/home-prices-post-first-annual-fall-in-six-years-20180601-p4zity.html

Can't be true - my wife tells me you can't lose on Aussie Bricks and Mortar.

I asked - how much did she pay for her Unit in Adelaide in 2011

Mrs B - $210K

Me - Whats it worth now 

Mrs B - $170K

Me - err thats a significant loss

Mrs B - arr - but I have claimed over $18K in tax relief

Me - yes but you would have had to have spent approx $45K to generate that relief.

Me - so with rent money you might have just about broken even over 7 years?

[pepto]

More bearish articles floating around...but the drops seen so far are still in the single digits. Hardly a crash, more like a small blip.

https://www.smh.com.au/money/investing/why-this-house-price-slump-is-different-from-the-last-one-20180613-p4zl7u.html

"ANZ Bank economist Daniel Gradwell says the last couple of dips in prices - such as around 2011 - were triggered by rising or already "elevated" interest rates. That's not the case this time. The cost of debt is still extremely low - many home loan rates are less than 4 per cent.

Instead, the main reason for the slump in prices appears to be the availability of credit. Mortgage brokers say banks are simply not willing to lend as much as they were a few years ago. Banks are more closely scrutinising how much money borrowers need to live on, and taking longer to approve loans."

"UBS analyst Jonathan Mott has estimated that if banks assumed more realistic living expenses, the maximum amount they would lend customers would be about 30 to  40 per cent less than today. He says that would cause housing credit growth to come to a near standstill - which would be a dramatic change from today's 6 per cent growth rate.

Both analysts don't view these sharp contractions as the most likely scenario, because regulators would probably try to avoid such a financial shock.

We do know, however, that the royal commission into misconduct has put banks on high alert over their compliance with responsible lending laws. So it's fair to assume the banks will want take extra precautions for a while yet, which is likely to keep the housing market subdued."

 

There has been a lot of fallout from the royal commission into the banks but it all seems to get swept under  carpet, it is as if no one really cares to give it any mind at all and every big scandal that is revealed in the papers is all forgotten about within a week.

https://www.theguardian.com/australia-news/2018/apr/20/banking-royal-commission-all-you-need-to-know-so-far

[spyguy]

10 hours ago, pepto said:

More bearish articles floating around...but the drops seen so far are still in the single digits. Hardly a crash, more like a small blip.

https://www.smh.com.au/money/investing/why-this-house-price-slump-is-different-from-the-last-one-20180613-p4zl7u.html

"ANZ Bank economist Daniel Gradwell says the last couple of dips in prices - such as around 2011 - were triggered by rising or already "elevated" interest rates. That's not the case this time. The cost of debt is still extremely low - many home loan rates are less than 4 per cent.

Instead, the main reason for the slump in prices appears to be the availability of credit. Mortgage brokers say banks are simply not willing to lend as much as they were a few years ago. Banks are more closely scrutinising how much money borrowers need to live on, and taking longer to approve loans."

"UBS analyst Jonathan Mott has estimated that if banks assumed more realistic living expenses, the maximum amount they would lend customers would be about 30 to  40 per cent less than today. He says that would cause housing credit growth to come to a near standstill - which would be a dramatic change from today's 6 per cent growth rate.

Both analysts don't view these sharp contractions as the most likely scenario, because regulators would probably try to avoid such a financial shock.

We do know, however, that the royal commission into misconduct has put banks on high alert over their compliance with responsible lending laws. So it's fair to assume the banks will want take extra precautions for a while yet, which is likely to keep the housing market subdued."

 

There has been a lot of fallout from the royal commission into the banks but it all seems to get swept under  carpet, it is as if no one really cares to give it any mind at all and every big scandal that is revealed in the papers is all forgotten about within a week.

https://www.theguardian.com/australia-news/2018/apr/20/banking-royal-commission-all-you-need-to-know-so-far

A small blip will sink Oz.

There's some much leverage that a 10% fall will blow it all up.

Think that idiot Brown's credit boom/spending run - 2002-2008ish.

For Oz, the period is 1991-2018.

Try and find the Roger Whittaker visit to Nairu.

 

 

[zugzwang]

55 minutes ago, spyguy said:

A small blip will sink Oz.

There's some much leverage that a 10% fall will blow it all up.

Think that idiot Brown's credit boom/spending run - 2002-2008ish.

For Oz, the period is 1991-2018.

Try and find the Roger Whittaker visit to Nairu.

 

 

Aussie FTBs are currently forking out 40-45% of their joint income on mortgage repayments, 4-8x what their boomer parents did.

https://renegadeinc.com/australian-housing-affordability-worst-130-years/