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Signs Sellers, Developers And Buyers Are Grappling With The Real Value Of Housing

Two reports from the Australian Financial Review. “It is every homebuyer’s dream to be mortgage-free and Sydney developer Allam Property Group is making that possible for some – for twelve months. It will pay a whole year of mortgage for new homebuyers at 80 per cent of purchase price at its Sydney housing estates such as Box Hill, Chisholm, Marsden Park and Schofields.”

“‘In today’s market we think this is important, smaller offers or offers of free up-grades or furniture simply do not have the cut-through in today’s incentive driven market,’ founder Barney Allam said.”

“While incentives are not unusual, in recent times there has been a much bigger push on rebates on stamp duty, utility packages, rental guarantees, and free cars and television sets, particularly in the two biggest and most vulnerable markets Sydney and Melbourne, to lure more buyers in a firmly slower market.”

“The market lethargy has also found its way into the rental market. SQM Research reported housing vacancy rates in Sydney, which is suffering a faster price fall than Melbourne, have risen 40 per cent in the past year. What this amounts to is uncertainty around the true valuation of residential property, AMP Capital chief economist Shane Oliver says.”

“The cuts in rents and rising incentives are signs sellers, developers and buyers are all grappling with the real value of housing. ‘These are signs of a weak and falling market, people just don’t know what the true value is, like catching a falling knife,’ he said. ‘The increase in housing supply is causing a cut in rents … rents are usually used as measure of the value of housing but rents are falling.'”

“The drop out of Chinese buyers from the property market has left a significant hole in one Sydney suburb, causing house prices to plunge by 20 per cent in 2018. Houses in the suburb of Penshurst, 17 kilometres south of Sydney’s CBD, experienced the biggest fall in median price across the city, dropping by 19.7 per cent from $1.32 million to $1.06 million over the 12 months to December – double the 9.9 per cent city-wide fall in prices – according to Domain Group data.”

“‘Penshurst used to benefit from the overflow of Chinese buyers in Hurstville, which is the capital of St George and a major China Town,’ Ray White selling agent Steve Pentland said. ‘We were so heavily reliant on the Chinese market but the demographic of Penshurst has shifted – there are no more Chinese and there’s no money being spent.'”

“The median house price in Lane Cove also dropped significantly over the year by 18.2 per cent to $1.8 million followed by Glebe where values slipped by 17.7 per cent to $1.58 million. The biggest drop in unit prices over the year was in Balmain, in Sydney’s inner west, where the median price fell 16.9 per cent from about $1,275,000 to $1,060,000.”

“Unit prices also fell in other parts of Sydney’s inner west, particularly in areas where there has been an influx of new apartments, including Newtown (-15.3 per cent), Leichhardt (-14 per cent), Summer Hill (-14 per cent) and Erskineville (-12.5 per cent).”

This Post Has 20 Comments
  1. ‘We were so heavily reliant on the Chinese market but the demographic of Penshurst has shifted – there are no more Chinese and there’s no money being spent’

    I said years ago, eventually this Chinese money is going away, and then you’re fooked.

    ‘It will pay a whole year of mortgage for new homebuyers at 80 per cent of purchase price at its Sydney housing estates such as Box Hill’

    Box Hill is down over 40%.

    1. Hurstville, which is the capital of St George and a major China Town

      My brain read that in as “Hurtsville”.

    1. You seem to be on the wrong blog. The people here generally don’t buy into those false flag operations and false narratives that the NYT and other media liars promote.

    1. “Everybody’s been behaving like speculators. Housing prices have been just like day trading stocks. What’s happening right now is a lot more suggestive of a bubble bursting much more than it does just a correction or a down cycle.”

      Great opening statement!

    1. “…home owners have a secret weapon: they don’t have to sell.”

      Sure Chris, all they have to do is wait a moment and the house will start making them rich again, just like always. Besides, falling prices cause a shortage!

      Life events destroy the supposed secret weapon: Death, layoff, divorce, to name a few. God forbid people would stop throwing good money after bad on a house they couldn’t afford in the first place.

    1. But zillow assures us we are doing great in CA!!

      A recently revised forecast suggests that the California real estate market could outperform the nation through 2019 and into 2020 — at least in terms of annual home-price appreciation.

      Positive Home-Price Forecast for California

      This new housing market prediction came from the research team at Zillow. In February 2019, the group wrote: “California home values have gone up 4.0% over the past year and Zillow predicts they will rise 7.3% within the next year.” Their 12-month outlook for the country as a whole was 6.6%.

      Two things are noteworthy about this particular forecast:

      The housing analysts at Zillow expect home prices in California to rise more in 2019 than they did in 2018.
      They also expect house values in the state to outpace the nation as a whole, between now and early 2020.

      1. FannieMae forecast 4.2% HPI
        FreddieMac forecast 4.1% HPI
        Mott Bankers Assoc. 4.5% HPI

        All January data points

  2. Glenn Kelman, CEO of Redfin, was on with NPR’s planet money team a few days ago. He talked about the Super Bowl as a key housing indicator. Glenn was sounding the alarm about sales dropping off a cliff in Seattle and other hot coastal markets towards the end of Q3 and Q4 in 2018. He also said some things about the Fed’s monetary policy as basically protecting the wealth of boomers as the expense of Gen X and Gen Z.

    The interview he gave yesterday sounded much like Orwellian double-speak. He sugar coated all the negative and spun it as a positive. It was really astounding to hear. He attempted to explain away the year-over-year sales decline this quarter in housing sales in a way that was reminiscent of realtor nonsense. It was kind of sad to hear because I was starting to respect him as a straight shooter, but given that he talked so much in the interview about his need to avoid negative stock market reactions to earning calls, it appears to me that he has gotten the message from shareholders that he needs to tow the real estate line and avoid spooking the herd. The interview was pretty much real estate cheerleading. It’s worth a listen:

    https://www.npr.org/sections/money/2019/02/19/696084985/the-super-bowl-key-housing-indicator

    Some snippets:

    “KELMAN: If you look at all the numbers that compare January 2019 to January 2018, January 2019 is worse.

    “KELMAN: A little more than a dip. There were a lot of people who thought they’d sell their house for $500,000, and then they marked it down to $480,000, and then they marked it down to $460,000, and then they pulled it off the market.

    And then this little piece of cognitive dissonance which doesn’t jive with the data:

    “KELMAN: And so we’ve seen some signs of life, even in coastal markets where I’d been pretty skeptical. But those markets are coming back, too. So I don’t think it’s on like Donkey Kong, but it’s better.”

    So basically the housing market is “better” because 1) rates are no longer back at 5% but rather 4 1/2% 2) No more bidding wars with sellers and 3) inventory is up.

    I don’t know, it sounds like the market is better for seller because they can expect falling prices, but the features he has highlighted certainly has the hallmark of a popping bubble. The Fed seems to have realized this and is now fighting the inevitable by halting interest rate hikes.

    1. I meant to say:

      No more bidding wars with other buyers

      And

      It sounds like the market is better for buyers

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