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The Current Conditions Have Come As A Shock To Many Who Are Hoping To Make Money Off Their Investments

A report from Reuters on Australia. “As property prices rocketed toward the heady peak of Sydney’s real-estate boom in 2017, the bulldozers came to Epping. But prices are now in freefall, and the suburb is being refashioned once more, this time into the epicentre of a bust. As buyers disappear and miss settlement payments, some projects are sinking under their debts.”

“‘Once the sales rates and pricing dropped, it just couldn’t service all of its commitments,’ said Philip Campbell-Wilson, who is liquidating one such new development, Gondon’s Elysee Epping. Now 61 of Gondon’s 130 apartments are for sale all bundled together to recoup creditors’ funds, pushing prices in the area lower still.”

“Prices in the Epping area have already fallen more than a fifth from their peak in August 2017, according to Corelogic, the steepest falls in Sydney.”

“Australia’s house price falls are not entirely unwelcome and have been partly engineered by authorities to improve affordability. Epping prices, for example, doubled in the eight years leading to the 2017 peak.”

“Realtor Oliver Yap said an apartment nearby that fetched A$562,000 a year ago had taken months to attract a A$415,000 offer. Rents have also sagged. ‘We don’t think this year will be good, there’s no reason for it to be good,’ Yap said. ‘There is a huge oversupply of apartments.'”

From News.com.au. “House prices in Sydney and Melbourne could fall by up to 25 per cent this year alone and ‘there’s a chance they could fall by half’ in the coming “property bloodbath,’ an economist has warned.”

“LF Economics founder Lindsay David, who has been warning of the looming property crash for the past five years, said in a report today the recent house price falls were just the beginning. Mr David said the downturn signalled the end of the ‘Ponzi finance model.’ ‘People have to understand that there are simply too many investors already tied up in the housing market and they can’t go and buy more real estate unless the value of their home rises,’ he said.”

“‘That’s how everyone was able to accumulate so many properties in such a short time. They bought a $500,000 investment property, 12 months later it’s worth $600,000, with that $100,000 equity you’re able to go and buy another $500,000 property. You can’t do that anymore, it’s in reverse.'”

The Daily Telegraph. “Continued oversupply of apartments has pushed Sydney’s rental vacancy rates up for the fifth consecutive month to nearly 4 per cent. Figures showed Sydney had a 3.7 per cent vacancy rate over the January period — the highest level recorded in recent years. This figure is well up from the 2.3 per cent vacancy rate a year ago.”

“The surge in listings was largely driven by an increase in housing stock across Sydney’s middle ring suburbs, which include areas like Auburn, Bankstown and Parramatta. Inner ring areas such as the eastern suburbs, lower north shore and inner west recorded a 3.2 per cent vacancy rate, well up from 1.8 per cent 12 months ago.”

“REINSW president Leanne Pilkington said landlords in Sydney’s western suburbs were feeling the brunt of the increases. ‘All the developments that Sydney has seen in recent years are all finishing at the same time, especially in the west and north west of Sydney, and this is leading to a lot of vacant stock,’ she said.”

“The increase in vacancy rates is leaving many landlords with no choice but to drop their asking price — including Hollywood star Rebel Wilson. She has had to drop her asking rental price twice on her recently settled Gladesville investment apartment, and is still yet to find a tenant.”

“Ms Pilkington said landlords needed to be realistic on price as the market has come back. ‘They need to understand that tenants aren’t prepared to pay any more than what they have to,’ she said. She said the current conditions have come as a shock to many landlords who are hoping to make money off their investments.”

“‘As a landlord you expect to see rent go up, not the other way, which is a big shock for some,’ she said.”

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This Post Has 28 Comments

  1. ‘Once the sales rates and pricing dropped, it just couldn’t service all of its commitments,’ said Philip Campbell-Wilson, who is liquidating one such new development, Gondon’s Elysee Epping. Now 61 of Gondon’s 130 apartments are for sale all bundled together to recoup creditors’ funds, pushing prices in the area lower still’

    Etc…

      1. For example:

        ‘A capital gains tax would lead to lower house prices as property investors flee the market to avoid getting stung with the new tax, according to New Zealand’s biggest Real Estate lobby group. But other property experts are not so sure, with one saying anyone who thinks a capital gains tax (CGT) would be the grand elixir to get property prices down was “sadly mistaken”.

        ‘National is also sceptical that the tax would see much movement in the housing market’

        https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12206369

      2. things must be kept in perspective, with the price drops occurring alongside positive conditions such as low unemployment, low interest rates and strong population growth

        The thing about Economists is that they can’t see what might lie ahead.

  3. ‘We don’t think this year will be good, there’s no reason for it to be good,’ Yap said. ‘There is a huge oversupply of apartments.’”

    Au contraire, Yap. Watching speculators and FBs get their heads handed to them, and insanely inflated housing prices getting slashed, makes for a very good year.

    1. Mr David said the downturn signalled the end of the ‘Ponzi finance model

      Lead the way Australia. The whole ponzified globe is to follow.

  5. “‘That’s how everyone was able to accumulate so many properties in such a short time. They bought a $500,000 investment property, 12 months later it’s worth $600,000, with that $100,000 equity you’re able to go and buy another $500,000 property. You can’t do that anymore, it’s in reverse.’”

    Deleveraging is a bitch for highly leveraged speculators. If they get lucky, they will be designated too big to fail and get bailed out, as the putative alternative to the global financial economy going up in smoke. But the chances of this seem slim, given that the Fed is nowhere near unwinding its last bailout.

    1. 12 months later it’s worth $600,000, with that $100,000 equity you’re able to go and buy another $500,000 $600,000 property….

      problem is that 500k property is really 600k now. Continue this and that 500K will be 1.2 M real quick. Of course, the true intrinsic value is what it will rent for. I’ve seen in SV house (3/2, 1400sqft) listed for 1.2 M but next house asking rent is like 3K per month. Last year they were stupid Chinese buyers bidding for it site unseen but today they ran out of greater fools.

      Go on Zillow and search for
      2539 Amaryl Ct
      San Jose, CA 95132

  7. i know that this is not a ponzi scheme in the classic definition. But is there something between true investment and ponzi.

    “‘That’s how everyone was able to accumulate so many properties in such a short time. They bought a $500,000 investment property, 12 months later it’s worth $600,000, with that $100,000 equity you’re able to go and buy another $500,000 property. You can’t do that anymore, it’s in reverse.’”

    1. “They bought a $500,000 investment property, 12 months later it’s worth $600,000.”

      That’s because the price of the comps was driven up by a pool of strangers, who may or not be of sound mind (it makes no difference), who were somehow able to get access to money that they otherwise would not have.

      It’s the availability of money accessed by this pool of strangers that ultimately determines whether your equity wealth will increase or decrease, and the degree of this increase or decrease of your personal equity wealth depends on how much money is made available to this pool of strangers and the sanity of this pool of strangers.

      It should be noted that the most crazy of the crazies that make up the pool of buyers is the one that submits the highest bid for the house and thus is the one that commits to buying and thus sets the values of the comps and thus determines the amount of equity wealth increase or decrease for numerous strangers who just happen to live nearby, by using money that belongs to another group of strangers.

      1. In other words, artificial money. Had this conversation yesterday about a friend whom said his net worth is in the millions because of his home value. The artificial value is the “appreciation” of what strangers value his home until it’s not. I view ones wealth by the amount of liquid assets they have not the speculative value.

  8. silver n PM
    seems any company in metals has to plunge themselves into heavy dept
    almost bought paas ,but fougedaboudit

  10. REITS booming
    a year ago my county,2nd wealthiest in the country, was considering reporposing buildings w homeless etc

    more office space coming

  11. Continued oversupply of apartments has pushed Sydney’s rental vacancy rates up for the fifth consecutive month to nearly 4 per cent. Figures showed Sydney had a 3.7 per cent vacancy rate over the January period

    wtf ? I thought average was 6%
    office here has been over 15% for 10 years

    1. so they have been illegally eating road kill all this whole time. Good news at a soon to be, financially bad time for them!

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