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Now They Aren’t Investing Here, That Market Has Disappeared

A report from Bloomberg on Australia. “Australia’s worst property slump in a generation has created some obvious losers. Investors who bought at the top of the market are underwater; homeowners looking to sell are having to slash prices and developers are struggling to offload apartments as projects started during the height of the boom near completion. But there are also some winners.”

“The median dwelling value in Sydney dropped to A$789,339 ($560,430) in February, according to CoreLogic data, from as much as A$895,117 at the top of the boom. With interest rates still near record lows, and lending curbs knocking investors out of the market, first-home buyers are back in business.”

“More first-time buyers getting on the property ladder is thinning the field of applicants for rental properties, just as a wave of new supply hits the market. Landlords are dropping rents and in some instances offering incentives such as a free pizza and case of beer to applicants willing to sign on the spot.”

The Australian Financial Review. “Two trendy neighbouring suburbs close to Melbourne’s CBD were the biggest victims of the property market downturn in 2018, with house prices in both suburbs falling almost 20 per cent over the year.”

“In the hip suburb of St Kilda East, about 6 kilometres south-east of the CBD, house prices dropped 18 per cent in the 12 months ended December 31, Domain Group data shows. House prices two suburbs away in South Yarra fell 17.7 per cent. Citywide property values in Melbourne fell 7 per cent in 2018, with other inner city suburbs like Abbotsford (-17.1 per cent), Flemington (-16.8 per cent) and North Melbourne (-16.8 per cent) posting steep house price drops.”

“‘That sub-$1 million housing market had been an investor-driven market over the years, but [investors] have all but disappeared for all sorts of reasons,’ said Jeremy Rosens, a director at Gary Peer Real Estate.”

“In the upmarket suburbs of Toorak and Prahan, where there has been a lot of new development, apartment prices also fell by 11.7 per cent and 9.1 per cent respectively. ‘There are a lot of new apartments in those suburbs, and anywhere where they have been new developments have been hit badly,’ Emma Bloom, director at buyers’ agency Morrell and Koren said.”

“‘Blackburn definitely is one of those areas where Chinese buyers had bought apartments and they just aren’t buying like they used to,’ Ms Bloom added.”

“Mr Rosens said Prahan had become a very hip inner-city suburb where a lot of the apartments had previously been sold to investors. ‘It has been one of the destination suburbs for middle-income earners from China and Malaysia who may have seen there as a great place to invest in Melbourne and now they aren’t investing here, that market has disappeared,’ Mr Rosens added.”

The Herald Sun. “The Melbourne market downturn is showing ‘no real sign’ of stopping after 15 straight months of price falls. Plummeting prices had been at their worst across Melbourne’s most expensive regions, said CoreLogic’s Cameron Kusher.”

“For houses, CoreLogic figures show the biggest annual declines were in affluent Kooyong (down 43.5 per cent to a $1.755 million median sale price in the year to November 30), Parkville (42.3 per cent to $1.475 million), St Kilda (34.2 per cent to $922,500) and Toorak (31.6 per cent to $3.35 million).”

From Nine Finance. “The impact of the softer housing market continues to be felt in Australia’s busiest markets, with auction clearances and rental prices alike falling. Vendor discounts have been particularly steep in Sydney and Melbourne since the start of 2017.”

“‘The widening gap between seller and buyer price expectations reflects the fact there are fewer active buyers in the market and as a result vendors that are serious about selling may need to make some sizeable price adjustments in order to sell,’ CoreLogic research analyst Cameron Kusher said.”

“And in bad news for people looking to offload property, the trend is set to continue. ‘With housing market conditions continuing to deteriorate, buyers thin on the ground and a high volume of stock listed for sale, it is reasonable to expect that over the coming months vendor discounting may increase further,’ Mr Kusher said.”

From ABC News. “A commercial builder has been suspended by the Victorian Building Authority (VBA) over a string of substandard housing developments in Melbourne’s suburbs. Emad Farag has been suspended as a domestic and commercial builder for three years.”

“Residents at one apartment block built by Mr Farag said they had been forced to pay tens of thousands of dollars to fix defects which include leaking pipes and cracks in walls. Owners want government assistance and fear that their property sale values have plummeted. ‘It’s been an absolute nightmare, I wish we had never bought the place,’ said apartment owner Ryan Staples .”

This Post Has 38 Comments
  1. ‘It’s been an absolute nightmare, I wish we had never bought the place’

    It was cheaper than renting Ryan.

  2. ‘Blackburn definitely is one of those areas where Chinese buyers had bought apartments and they just aren’t buying like they used to…Prahan had become a very hip inner-city suburb where a lot of the apartments had previously been sold to investors. ‘It has been one of the destination suburbs for middle-income earners from China and Malaysia who may have seen there as a great place to invest in Melbourne and now they aren’t investing here, that market has disappeared’

    I said years ago, this Chinese thing would come to be seen as a curse. Hello curse!

    1. It is not so long ago that a member of the Diplomatic Body in London, who had spent some years of his service in China, told me that there was a Chinese curse which took the form of saying, ‘May you live in interesting times.’ There is no doubt that the curse has fallen on us.

      — Sir Austen Chamberlain

  3. ‘Investors who bought at the top of the market are underwater…‘With housing market conditions continuing to deteriorate, buyers thin on the ground and a high volume of stock listed for sale, it is reasonable to expect that over the coming months vendor discounting may increase further’

    You ain’t seen nothing yet Cameron. Wait until the foreclosures start pouring in.

    ‘According to Nick Viner, principal and buyer’s agent at Buyers Domain, the suburb of Haberfield has seen its median house price fall to $1,855,000, a price that is under its median house price from 2015, which was $1,912,576. The analysis that drew Mr Viner to this conclusion was on the collection of 10 neighbouring suburbs, which showed Haberfield declining by 18 per cent between 2017 to 2018.’

    “According to the numbers, Haberfield is back to its 2015 price – far and away the worst result among the suburbs considered,” he said.’

    https://www.smartpropertyinvestment.com.au/buying/19247-buying-opportunity-in-infrastructure-impacted-nsw-suburbs-at-below-value-running-out

    1. “Wait until the foreclosures start pouring in.”

      That’s one factor, which is likely to be exacerbated by two others:

      1) Interest rates seem unlikely to remain near historic lows forever.

      2) Unless this time is different, the unemployment rate will remain near its current level, near historic lows, for only a little while longer before rising steeply.

      These three future developments (rising unemployment, interest rates, and foreclosures) are likely to play out in tandem, as the financial engineering which drove them to historic extremes come unglued.

      I sense another perfect storm ahead!

  4. “But there are also some winners.”

    Last time the Fed bailed out elderly homeowners who gambled on real estate and lost, at the expense of renters and young adults who want to someday be homeowners. In fairness, shouldn’t they adopt a policy stance going forward similar to Australia’s, favoring renters and young prospective buyers over aging homeowners who gambled on ever-rising home prices and lost?

  5. Tesla’s price cut ignites anger among Chinese buyers
    Global Times-4 hours ago
    “I received Tesla’s Model X on February 25, and I only drove this car for five days before Tesla announced a price reduction of 174,300 yuan ($25,989.87).

      1. You can’t give away a used Tesla.

        Let me know when you see a cheap P100D. X or S, I’ll take either one :-). But no way I’m paying 6 figures for a used one. Hopefully this price reduction is the first step in dropping the used prices. In the meantime my plan is for fun to take European delivery of the upcoming ~$60k Audi RS Q3 in a couple of years. Practical and will outrun a P100D at the dragstrip with just software and E85.

        1. I see 3 used P 100Ds on the EV CPO website for under $100k ($84k, $94k, and $96k). The higher priced vehicles of any make are the ones that depreciate the steepest in 4 years, so I’ll bet in one year you will be able to get an even better deal.

          My father has a P100D. He loves going fast, but when I asked him what he loved about his Tesla it wasn’t the speed. It was autopilot. He never files anymore between CA, NV, UT, ID, and WY. He says he loves driving because it’s a totally different experience. He can’t stand to drive any non-autopilot car. He loved the acceleration and lubricious mode for the first couple of months, but the novelty of that insane speed grew old. What he likes instead is the mental break of just how much easier it is to drive when autopilot is engaged, especially in stop and go traffic on the highway.

          1. He loved the acceleration and lubricious mode for the first couple of months, but the novelty of that insane speed grew old.

            He sounds normal. I tend to run with a little…uhhh…different crowd. I’ve spent a lot of days at the track and a lot of nights watching for cops :-). I’m a little old for that sort of thing now but it also makes my excuses more believable. “I’m just here looking for my son”. “Move along sir”.

            What he likes instead is the mental break of just how much easier it is to drive when autopilot is engaged, especially in stop and go traffic on the highway.

            I’m sure that’s very useful in some situations. I can’t wait until I can just crawl in the back and sleep and wake up at the destination.

    1. Tesla’s price cut ignites anger among Chinese buyers

      Regarding December price slashing:

      “Tesla also recently cut prices for some of its Model 3 cars in China by up to 7.6 percent, according to the Chinese version of its website. Tesla has adjusted prices in China two other times in the past two months. The company said it was “absorbing a significant part of the tariff to help make cars more affordable for customers in China,” when it slashed prices of the Model X and Model S cars by 12 to 26 percent.”

      https://www.cnbc.com/2018/12/24/tesla-cut-prices-in-china-and-will-pay-for-missed-tax-credit.html

    2. “‘I received Tesla’s Model X on February 25, and I only drove this car for five days before Tesla announced a price reduction of 174,300 yuan ($25,989.87). I’m probably the most unlucky new buyer … That’s unfair,’ a Weibo user named Luweijuzi complained in a post on his account.

      “The new buyer claimed that his actual loss because of the price cut was about 200,000 yuan, including tariffs, bank loan interest, insurance and sales taxes.”

      “… bank loan interest …”

      😁

      Tesla’s price cut ignites anger among Chinese buyers – Global Times
      http://www.globaltimes.cn/content/1140712.shtml

        1. Nothing spells easy living like having ignorant pukes sending huge chunks of their hard-earned money to you each and every month in the form of interest on money that has been borrowed. Whether or not this money that has been borrowed has vaporized or not makes not one bit of difference.

          1. Prices come and go, which means values come and go, which means wealth comes and goes.

            But as for debt? Debt gets to stick around.

          2. If any of you pukes are interested in participating in
            my own personal “Share the Wealth” program then drop by my bank and ask me about my Dotted Line Special, and enjoy a (as in one) free cup of coffee.

            (Terms regarding coffee refills are negotiable.)

          3. There’s a special party up ahead just for you Mr. Banker, and for your buddies. It’s called Cascading Defaults!

          4. Cascading Defaults is destined to morph into Never-Ending Bailouts, just as before.

            These Never-Ending Bailouts will be disguised and promoted as programs to Save The Homeowners, just as before.

    3. Stamp your little feet! (But not too close to your Tesla – the vibration might cause it to self-combust).

      1. Tesla all but filed bankruptcy this week. Anything and everything are being done to generate and to preserve cash.

      1. Neither are the Koch brothers and some of the auto unions in Detroit. The hard decision now is that they just announced that Y is coming in a week and a half. So I am tempted to switch, but I’ve never been an SUV or crossover guy. Decisions, decisions.

  6. “down 43.5 per cent… down 42.3 per cent… down 34.2… down 31.6 per cent”

    These are some huge annual decline numbers for Melbourne.

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