A report from The New Daily in Australia. "The traditional December auction slump seems worse than ever this year, with preliminary results showing a combined capital city clearance rate of just 43.1 per cent – the 10th consecutive week where less than half of homes taken to auction have sold. Sydney’s weekend clearance rate sat at 41.4 per cent, Domain reported, with unreported results likely to see it fall into the 30s."

"SQM’s Louis Christopher recently noted the data showed there had only been three prior times since the 1980s when Sydney auction clearance rates had sunk into the 30s. 'That was in October/November 2008 during the GFC, May 2004 after the NSW vendor stamp duty was introduced, and July 1989 when the cash rate hit 17 per cent,' Property Observer reported."

"As clearance rates have fallen through spring, sale prices have also dropped back as the remaining buyers become Scrooge-like bargain hunters. The weekend turnover in Sydney totalled just $129 million in sales, well down on the near $600 million this time last year, Domain reported."

"Melbourne had $258 million in recorded weekend sales, compared to $826 million the same weekend last year. There were definitely far fewer buyers around than in spring, with many no bid auctions, agents say."

"Of the 17 advised Glen Waverley auction results the priciest offering failed to sell, with the townhouse-approved 697 High Street Road holding passed in on a $1.5 million vendor bid. Melbourne’s cheapest sale was $305,000 for a one-bedroom apartment at Box Hill. The sale of 406/1 Watts Street, Box Hill was well below the $320,000 to $352,000 price guidance."

"The recent $370-a-week rental also sold well below its 2011 $390,000 sale price, CoreLogic advised."

From Perth Now in Australia. "More than 14,500 WA mortgage holders are trapped in a home worth less than the loan they took out to pay for it. And according to Digital Finance Analytics, about 726,000 households in Australia own less than 15 per cent of their property — 21 per cent of all borrowers — putting them at risk if house prices drop."

"Homeowners in WA were most likely to be in the red, with 14,500 owing more than the value of their home. About 130,500 households in WA — 32 per cent — hold less than 15 per cent equity in their properties, placing them at risk of mortgage stress."

"Negative equity is considered among the worst problems for households as they become trapped in unaffordable homes and are unable to pay the difference between the value of their home and the loan they took out to buy it. There are fears more could be plunged into negative equity if house prices continue to fall."

"Perth house prices have fallen more than 15 per cent since 2013, with the city considered the most affordable of any Australian capital. Perth’s median property price of $450,000 is about five times the average salary, compared with a multiple of 10 in Sydney, where typical prices are almost $1 million."

The Otago Daily Times in New Zealand. "John Maynard Keynes called it 'animal spirits.' It refers to the collective emotions that can drive markets. Endemic optimism or pessimism are the key culprits."

"The Sydney housing market is experiencing the latter at present after years of riding the former. Median house prices have slumped by over 6% in the past year. The pace of decline appears to be accelerating. Auction clearance rates have fallen dramatically and there is a huge backlog of unsold properties. Vendors appear to be willing to take a hit in order to sell."

"It is worth exploring the anatomy of this slump because it highlights a little appreciated aspect of the economic landscape that is applicable to New Zealand. Banks can get it horribly wrong in their lending practices and this has enormous implications for a society. Far more than any other industry in a modern economy."

"The dirty little secret of modern economics is that private banks create most of the money in the economy. Most modern money is simply debits and credits in bank computer systems. During a housing boom, banks are collectively willing to lend more because the value of collateral is going up. People want to borrow more to climb on the rising housing ladder."

"So the debits and credits in the banking system magically multiply. House prices rise, people are eager to borrow more, banks are eager to lend more, so house prices continue to rise. A self-fulfilling cycle emerges. But then the music stops."

"At this stage, the cycle shifts into reverse. This is now playing out in Sydney and other housing hot spots in Australia."

"As house prices start falling and houses become harder to sell, the banks take fright. They become less willing to lend. They are fearful of bad debts and the falling value of their collateral. Because there is less bank lending there are fewer buyers in the market. Because there are fewer buyers the prices of houses continue to fall. Vendors who are urgent to sell are forced to take a hit. As house prices continue to fall, banks are more reluctant to lend. A vicious downward spiral has emerged."

"The key dynamic of the banking system that makes it unique from other industries is the ability to create credit. The deregulation of the finance sector in the past 40 years has unleashed this genie. A housing boom allows the banks to create more credit, which further fuels the boom, allowing more credit creation. Unfortunately, this process can prove very nasty in reverse. This is now playing out in Sydney and other parts of Australia. Let’s hope it’s not contagious."