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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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I seem to be under the impression that Australia are somewhat "ahead" of us in the cycle and the property stagnation came before ours and now the crash has started ahead of ours.

Would this be right ? How far ahead are they and how quickly can we expect this to spread to the UK .....

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I seem to be under the impression that Australia are somewhat "ahead" of us in the cycle and the property stagnation came before ours and now the crash has started ahead of ours.

Would this be right ?  How far ahead are they and how quickly can we expect this to spread to the UK .....

I would say they are about 1 year ahead. I read an article in The Economist around March 2004 with the title "Crashing?" and it pointed to the sudden drop off of mortgage approvals in Oz and how Sydney house prices had not risen much over the last year. I believe interest rates in Oz were at 4.75% last March as well.

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There has been a huge increase in new listings which has only really started in the last few weeks.

For the last year the number of new properties listed vs those sold was only slightly higher. In the few weeks before the last interest rate hike this increased more rapidly but in the 4 weeks since sales have virtually dried up leaving an enourmous gap between new listings and those sold.

It is safe to say that the crash is now in full swing in Australia.

Anyone still holding property for short term gains deserves to lose now as they have had plenty of time to get out.

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It is safe to say that the crash is now in full swing in Australia.

Aussie Lad, how pronounced is the "greed effect" in Australia, i.e. stagnation that has been caused by sellers refusing to drop prices ? Are there any significant falls in FTB property ?

Anyway it is good to see things happening and all this after a mere .25 increase in IR ....

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I am currenctly renting 20KM north of Perth. My rent is the same as a 25 year repayment mortgage of $250k (assuming 100% mortgage)

The house has 5 beds, overlooks the Indian Ocean, has pool and garden maintenance thrown in. And get this it is "worth" $900k and belongs to an investor living in singapore. He bought new in 1993, for around $350k.

I have a 2 year lease and he can't raise my rent.

Denial phase in Perth currently, but that will change. 350 sqm blocks selling for $400k (165 sterling), same again for a house to be built on it which leaves no garden.

Sitting this one out and looking to buy circa 3 years from now.... in the meand time 5.25% on my capital!

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I seem to be under the impression that Australia are somewhat "ahead" of us in the cycle and the property stagnation came before ours and now the crash has started ahead of ours.

Would this be right ?  How far ahead are they and how quickly can we expect this to spread to the UK .....

Australia varies enormously from region to region both in terms of market fundamentals and present state of the market.

Sydney seems to have peaked sometime around mid-2003 whilst northern parts of Queensland are still booming. Tasmania peaked late September / early October 2003. Most areas seemed to have a VOLUME of sales peak in the second half of 2003 with prices continuing to slowly rise for a while thereafter. The volume of sales peak is easier to use to compare timing since the stats are easy to get.

Notable speculative hotspots include the Gold Coast (an ultra-developed holiday area near Brisbane), parts of the New South Wales coastline within reasonable distance of Sydney and the whole state of Tasmania.

So, what's going on around Oz? The following is compiled from my own understanding of the situation based on local observation, this and other forums, media and real estate agent comments etc.

Everywhere (except those remaining boom areas) - Auctions generally failing, low volume of sales, top of the market is dead, bottom not much better. Lack of first time buyers. Median averages and the fact that most sales are in the mid price range distorting statistics.

Sydney - top end of the market seems to be in full on crash mode. Unviable location for most first time buyers - simply too expensive both housing and general living costs. General drift of population away from the city - it's now officially Australia's slowest growing major city. About 10 months ahead of UK.

Melbourne - serious oversupply of inner city appartments with prices crashing around 30% so far. Rest of market down but not so bad. More appartments still being built. Not certain but around 5 - 10 months ahead of UK.

Brisbane - Long term rapid population growth seems to be holding the market up a bit but the boom is over. It is very common for Aussies to relocate to Brisbane from the Southern states due partly to the climate. This ensures constant demand for new homes. No known evidence of a crash so far but the boom has slowed to a crawl at best.

Gold Coast - Prices through the roof but mostly speculative activity. Heavily dependant on national and international economy since significant number of holiday homes. Tallest residential appartment block in Southern hemisphere is under construction with very high pressure selling tactics apparent on a recent visit.

Adelaide - Market is slow like everywhere else. Fundamentally, there is no shortage of land, travelling times from any suburb are reasonable and the city just isn't growing that fast. It's following the rest of the country. Mostly in the denial phase.

Perth - Very isolated from the rest of the country in practically all respects. State economic growth is very strong and there seems to still be some limited HPI happening in some parts but varies. Mostly in the denial phase.

Hobart - No such thing as a land shortage, it's just not possible anywhere in Tasmania due to lack of population. Prices up 100% past few years largely due to speculative investment. Many "investments" bought solely for capital gain with no intention of ever having a tennant. There's no letterbox of even electricity connected to some of these properties! Not much selling, top end of the market is dead according to real estate agents (!!!). Prices starting to slowly fall but sellers generally not moving (in denial). Seems to be 7 months ahead of UK.

On some of the points raised on this forum there seems to be no difference between Oz and UK. Overall it would be fair to say that Oz is about 6 months ahead but perhaps about 10 months at the upper end of the major city market (Sydney, London) and not as much time gap in the typical mid-price housing.

Oz seems to be about 15 months ahead of the US from what I can work out although of course it does vary from region to region in the US just as it does in Oz.

Hope that helps.

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It doesn't seem to me that Aus is 12 mths ahead of UK. I was of the view they are running about the same, though as someone said above, there are big differences state to state. Sydney leads the way though, and it seems the denial phase is at the tail end at present. Another .25% rate increase in early April (likely) will really set the cat amongst the pidgeons I reckon !

Also, Aus has gone up a lot more than UK, the greed factor has been greater, and on average, borrowers are way more overcommitted ! As yea sow ...

JamesP

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  • 439 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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