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Some People Are Probably Questioning The Prices As They’re Dropping, ‘Why Would You Want To Buy Now?

A report from the Daily Telegraph in Australia. “Sydney home auctions have turned into a bonanza of giveaways as real estate agents offer free coffee, arts and crafts bags for kids and even champagne in the hope of attracting bigger crowds to their sales. Auctioneer Damien Cooley said champagne giveaways were another strategy that was becoming popular at auctions in the current climate of conservative bidding.”

“‘(Agents) usually offer the champagne to whoever opens the bidding,’ Mr Cooley said. ‘It was something we used to see a lot at auctions a few years ago, before the boom, but we’re seeing it come up a lot more again … it’s a weaker market.'”

The Newcastle Herald. “The curse of Newcastle’s Empire Hotel site has struck again after the land’s latest owner shelved plans for the Onyx high-rise apartments due to slow sales. Warwick Miller, whose firm is building the Verve apartments around the corner in King Street, said he had refunded clients’ deposits with interest and agreed to pay ‘reasonable’ legal fees.”

“Newcastle unit prices have dropped eight per cent since their peak amid tighter bank lending and a downturn in the national housing market, according to CoreLogic. ‘I figure there’s no point in us hovering around for a year and keeping people going in the hope that we’ll eventually sell enough to start it,’ he said.”

“‘It’s very hard for me to imagine, and this is me talking, anybody starting a new project in B-grade residential in the town,’ he said. ‘Some people are probably questioning the prices as they’re dropping, ‘Why would you want to buy now?’ Overall, if you could say one thing about the market, the market’s down because of people’s inability to borrow. It’s changed everything.'”

“Mr Miller said he believed the next proposal for the site would be for student accommodation. ‘Nobody at the moment would try and build apartments there. Wrong timing, too much else on the market, and my numbers show there was a carryover of about 800 units from last year into this year. If you’re only going to sell 200 units off the plan in 2019, you’ll carry another 600 from what’s already on the market.'”

The Weekly Times. “There are four vacant blocks of land for sale in an exclusive pocket of Sydney at the moment that are either on the water or with knockout views of the water. Empty blocks of land are not common in the Emerald City, especially so close to the harbour or the ocean but these four sites are all large with amazing views and at least one has had a serious price cut.”

“Arguably the rarest of the four blocks is a 1813sqm parcel in Seaforth on Sydney’s northern beaches. Last year the land had a price guide of $5 million to $5.5 million. Now that guide has dropped to $4.5 million and the block is booked for an auction on Saturday March 16.”

From News.com.au. “Data from auction house Cooley Auctions showed a nearly 40 per cent annual drop in auctions over February, with the average price for sales dropping from $1.3 million to $1.07 million. SQM Research director Louis Christopher explained that total private treaty listing numbers recently rose to nearly 36,000, but many of the homeowners trying to sell were those who had first listed back in spring.”

“‘They’re relisting,’ Mr Christopher said. ‘It was a tough spring selling season and there were a lot of (homeowners) who didn’t sell.'”

The Star Weekly. “Wyndham’s property market is ‘not all doom and gloom’ according to local real estate agents. YPA Werribee director Bassam Tofaili said the real estate market in Melbourne, including Wyndham, was ‘adjusting’ after the recent boom. ‘I wouldn’t say it’s doom and gloom, but it’s not an easy market, that’s for sure.'”

“CoreLogic last week released a report which showed that properties in Melbourne had experienced a 9.1 per cent price drop (to a median value of $629,457) between February this year and February last year. Properties in Melbourne’s west had experienced an annual drop of 5.7 per cent, to a median value of $549,075. The data did not break down the information into individual municipalities.”

“Mr Tofaili said vendors needed to be realistic about their price. ‘Sellers need to look at the last three months’ of sales, not the past 12 months,’ he said.”

The Sydney Morning Herald. “Reserve Bank research has found its cuts in official interest rates drove up house prices, and cautions that long-term falls could in the worst case escalate into an American-sized drop in Australia’s property market.”

“As recently as last week, Reserve Bank governor Philip Lowe downplayed the role of the RBA in the spike since 2011 in house prices, which in Sydney and Melbourne climbed by up to 75 per cent, peaking in 2017. Since then they have fallen, with Sydney’s house prices dropping at their fastest rate since the 1982 recession, while they are also trending down in every capital city bar Hobart and Canberra.”

“But Reserve Bank economists Trent Saunders and Peter Tulip said their research pointed to the role of interest rate cuts as the driving factor behind the pre-2017 property boom. They found that a one percentage point cut in interest rates lifted house prices by 8 per cent in the two years after the move.”

“‘The model suggests that much of the strength in housing prices and construction over the past few years can be explained by the fall in interest rates,’ they found.”

This Post Has 29 Comments
  1. The reader who sent me the last link had this to say:

    ‘Blind Freddie would see/know that. Haha’

    ‘blind-freddy
    Proper noun

    (Australia, informal) An imaginary incapacitated person held up as an archetype of incapacity: what blind Freddy can see (understand) must be very obvious. [From 1940s.]

    https://www.yourdictionary.com/blind-freddy

  2. ‘Overall, if you could say one thing about the market, the market’s down because of people’s inability to borrow. It’s changed everything’

    Note to the supply and demanders. Did they build their way to cheaper shacks? Nope. Financing dried up. Some of it was government action, some was lenders fear. Either way, there was no shortage. And all it took was loans to dry up and voila! Lower prices. See, I had it right all these years and you were barking up the wrong tree.

    And what shows up as soon as the lending dries up? “Jeebus, we’ve got too much housing!” Speculation exposed.

    1. Jeebus, we’ve got too much housing

      Too many Golden Geese when the eggs don’t get laid. Not enough when they do. Yes, you’ve been clear for a long time.

  3. “Auctioneer Damien Cooley said champagne giveaways were another strategy that was becoming popular at auctions in the current climate of conservative bidding.”

    How long from now will they start giving away free houses?

    1. Bahahahaha … the most expensive champagne you will ever drink in your life just may be the FREE champagne offered at these auctions.

  4. In the early stages of downturns there are all kinds of quibbles over a few per centages of price and sales drops.

    When intermediate stages get there, the mind set changes as the peak gets so far in the rear view mirror that it is no longer in site or referenced and the new paradigm begins.

    Remember pulling prior MLS records for property projects I was involved with around 2008 to 2009. The current pricing as of that time was around 180 to 200k. The prior MLS records referenced for these properties from 2005-2006 were for prices around $450k with realtors comments “wont last long” or “best deal in xyz development” etc. These, of course, were expired or cancelled listings after 6 or more months on market.

    We may be heading that way again and appears that Australia is laying the early blueprint for what is coming here shortly. No one can fathom, then suddenly it is on us. When it is, then all those previous pricing benchmarks become completely irrevalent and archaic. Seen it all before. Lots of pain.

  5. “Reserve Bank research has found its cuts in official interest rates drove up house prices, and cautions that long-term falls could in the worst case escalate into an American-sized drop in Australia’s property market.”

    They needed to conduct a research study to show that lower interest rates increase housing prices? It seems like this is embodied in the asset valuation formula on page 1 of any undergraduate finance textbook.

    1. “‘The model suggests that much of the strength in housing prices and construction over the past few years can be explained by the fall in interest rates,’ they found.”

      Read: debt donkeys leveraged up to the gills on cheap credit went on a speculative binge that drove housing prices to unsustainable highs, setting the stage for yet another central banker-caused global financial crisis.

  6. A closely watched pot never boils.

    DoubleLine Capital founder Gundlach sees a correction coming; others stand ready to buy that dip
    By Barbara Kollmeyer
    Published: Mar 13, 2019 7:30 a.m. ET
    Critical information for the U.S. trading day
    Getty Images
    One top market strategist sees a sharp correction, while others are ready to buy a dip.

    Caught in a trap.

    That describes the S&P 500 right now, says Peter Schultz, chief strategist at the Winning Secret newsletter, who believes the 2,800 resistance level that the market has pushed against roughly four times since October needs a real catalyst to break. “And the one everyone’s been looking for — a trade deal with China — might be a while in coming.”

    Schultz finds few reasons to buy right now, especially in a stock market that is “overextended from the December lows and is due for a real pullback — one we’re likely to see before new highs.”

    Try summer for that big move down in equities, says our call of the day from DoubleLine Capital founder Jeffrey Gundlach, who told investors in a webcast on Tuesday that the “stock market was and still is in a bear market.”

    “I think they’ll go negative on a year-to-date basis, probably sometime during the second quarter, early third quarter. I think the Fed will react to that,” he said, according to this recap, doubling down on comments he’d made in January about “more zigzag behavior” for stocks.

    “We’ve already had a pretty strong zig. I’m expecting before long a zag,” he said, calling the one-year Treasury bond the best “risk-free asset” going right now, as he bets on a recession.

  7. Now that the Fed has demonstrated how balance sheet expansion can be used to save financiers from their foolish gambles at no cost to any taxpayer, why not use it to satisfy every desire the FSA can imagine?

    1. Economics
      The Fed Has Given MMT Proponents Ample Ammunition
      The idea that the government can print money to spark the economy is not that much different than quantitative easing – with one big exception.
      By Jim Bianco
      March 11, 2019, 10:00 AM PDT

    1. Why does this article keep talking about “home ownership”, when they’re obviously actually talking about having a mortgage? If you have a mortgage, you’re not a homeowner.

  8. Not in downtown Sacramento, walked by a tiny 2 bedroom in midtown asking over 700k! Prices have not dropped at all in Sacramento prime locations due to bay area wealthy.

    1. RE only goes up and with all the shortages, high demand, and Foriegn investors making RE more scarce, buy now or be priced out FOREVER!!!

        1. Guess that whole “government restriction” thingy along with hitting the peak in pricing ran them off. The mysterious decline in RE sales and pricing corresponds very remarkably with the timeline of all this but for some reason little is mentioned through MSM. I have a feeling in the future when we look back it will all be very transparent and blame will be thrown at the foreign investors along with our own QE

    2. You can ask whatever you want for your dilapidated two bedroom fixer-upper, but unless a buyer steps forward who is willing to pay your wishing price, it won’t ever sell.

    3. “Asking”

      You know….a wise man once said he could ask $50k for his 10 year old Chevy pickup, but where is the buyer at that price?

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