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Winter Isn’t Coming, Winter Is Here

A report from the Herald Sun in Australia. “Melbourne’s mansions are bearing the brunt of the property market correction. Sales among the city’s most elite addresses — the top end of Toorak — have come to an ‘absolute stop,’ according to industry insiders. And new CoreLogic figures show the top 25 per cent of the city’s houses — those above $1.011 million — have lost a median $170,000 (14.4 per cent) in the past year. By comparison, a middle-range house in the city — valued at about $730,000 — has lost about $95,000 (11.5 per cent).”

“Top-end buyer’s advocate David Morrell said the city’s elite home market — houses above $5 million — was seeing fewer sales and listings now than during the global financial crisis. ‘Winter isn’t coming, winter is here,’ Mr Morrell said. ‘There wouldn’t even be a handful of sales a week. It’s just come to an absolute stop.'”

From Nestegg. “A lack of confidence and the banks clamping down have been thought of as reasons why acquiring finance is so difficult for property investors lately, but according to the Housing Industry Association’s (HIA) chief economist, Tim Reardon, foreign investors leaving Australia’s property market also has played a considerable role.”

“Mr Reardon said data from HIA Economics and the RBA have pointed to lending to investors to drop down to its lowest level ever. The explanation for this, the chief economist said, was not just because of declining confidence in the market or banks restricting access to finance, but because of foreign investors leaving the market.”

“Over the last two years, Mr Reardon said data from the Foreign Investment Review Board saw foreign investment decline from $30 billion to $12 billion, with the vast majority of that sourced from China.”

“‘What we know is state government certainly acted to restrict foreign investors in the market,’ he said. ‘Punitive rates of stamp duty have certainly had an impact, differential exchange rates may have had an impact, falling house prices in Sydney and Melbourne may have had an impact. But if we look at the rest of the world, Toronto has seen the same thing, London has seen the same thing, in fact, they’ve seen bigger reductions in foreign investor activity in residential homes than we’ve seen.'”

From the Australian Financial Review. “Property prices in Darwin are now back to the same level they were in 2007, with anyone who bought a home in the Northern Territory capital in the last 12 years potentially out of the money. An exclusive analysis by CoreLogic for The Australian Financial Review shows a meteoric rise in dwelling values between 2002 and 2011 before prices began to fall. The market then peaked again in May 2014 and prices have been sliding since.”

“While the recent downturn in Sydney and Melbourne has affected a larger number of home owners due to the sheer population across the two biggest capital cities, the steep and prolonged fall in Darwin’s property market to coincide with the mining downturn has left the buyers of as many as 32,155 properties underwater, potentially leaving every single household in the city affected.”

“It’s the unit market that has suffered the most in Darwin with values down 41 per cent since their peak. House values have dropped 20.5 per cent. If a buyer purchased an apartment for $500,000, close to the median value in 2014, it would now be worth as little as $295,000.”

“‘Darwin was heavily popular with investors in its growth phase, particularly in the apartment sector, and if you look at the data – how many units were built in the lead-up to 2013 – there was a spectacular level of supply,’ said Tim Lawless, CoreLogic’s head of research.”

The Courier Mail. “The housing market in the Queensland capital is set to hit a new level of luxury with the addition of an $8.8 million mansion complete with luxury car and free wine. The four-storey home at, 15 Towers St, Ascot, is being built by Zephyr Industries and has five bedrooms, seven bathrooms and a seven-car garage — perfect for the buyer’s new bright green Lamborghini Huracan LP 580.”

“Zephyr Industries director Brayden Larkin said the design of the property was a culmination of ideas. ‘I had a few beers and got creative,’ Mr Larkin said.”

From ABC.net. “We all know landlords and real estate agents aren’t afraid to jack up prices to ‘keep up with the market.’ But when the market reverses, and rental prices drop because of over-supply or economic factors, why shouldn’t you be able to ask for a reduction? We started looking around and noticed that similar places to ours in Sydney’s inner city were being advertised by up to $100 less than they were a year before.”

“When I floated the idea of asking for a cut, we were all pretty nervous. Some of my friends called me crazy and told me not to do it, worried we would be kicked out. In the end we decided to ask for $65 a week off. That’s a cut of just over $20 each for three housemates, and well under the 12 per cent drop in rental prices in our area.”

“At first they asked us to meet them halfway, which we refused. Then they asked if we would sign a longer 18 month lease, but we said we weren’t comfortable doing that either. In the end, it was good news for us. We got the full $65 a week reduction we asked for. And now all of those friends who called me crazy are now emailing their agents and doing deals.”

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This Post Has 22 Comments

  1. ‘anyone who bought a home in the Northern Territory capital in the last 12 years potentially out of the money. An exclusive analysis by CoreLogic for The Australian Financial Review shows a meteoric rise in dwelling values between 2002 and 2011 before prices began to fall’

    The Good, the Bad and the Ugly – The Danish National Symphony Orchestra

    https://www.youtube.com/watch?v=enuOArEfqGo

    1. “The Good, the Bad and the Ugly – The Danish National Symphony Orchestra”

      The chick that comes in at 3:31 has one powerful set of pipes.

    1. How much of that increase is people buying stuff they don’t really need? And how much of it is people using the cards to buy groceries, pay rent, Etc, desperately trying to hang on?

  4. Any Aussies out there? You are ahead of the curve here. What rumblings are coming from the central bank and government regarding crisis management? Maybe we can get a preview of what might be in store for the rest of us.

  6. excerpt:
    House Prices Don’t Care Where The Money Comes From

    The takeaway from this part of the story is that it doesn’t matter where the increase in the money chasing homes comes from. Whether the increase is caused by 18th-century Dutch investors shifting money into real estate, or crazy 21st-century American mortgage companies lending to anyone with a pulse, or modern Chinese investors looking for safe foreign investments outside the reach of their government; it doesn’t matter so much why there’s more money chasing houses, it only matters that more money is chasing homes.
    […]
    Which brings us to the next major similarity between modern real estate bubbles and the bubbles in Amsterdam 200-400 years ago — speculation and upward price momentum.

    The study found significant price momentum effects, that is, that higher prices, in and of themselves, can cause additional higher prices.

    1. ‘House Prices Don’t Care Where The Money Comes From’

      There’s gonna be some sad pandas here when they read that.

      1. Dont worry Lyft, Uber, Airbnb, IPOs etc. will shoot prices up to the moon again…thousands of new millionaires dont mind burning cash as they are rich like hell and will save the housing market. Mark my words if you dont buy in 2019 you’ll regret this decision for the rest of your life. END OF STORY

        1. Lyft and Airbnb need to team up and create AirLyft for all the people who need a car to sleep in because they can’t afford rent and car payments.

          1. UberBnB, you can sleep in my car and i’ll give you a ride to the drive through at McDs in the morning and you can buy yourself an egg McMuffin. An idea whose time has come. Surely a multi billion dollar IPO in the making.

          2. There was a guy a couple of years ago that put the back of his Tesla on Airbnb for someone to sleep in. It was kind of a publicity stunt, but I see plenty of people putting their RVs on Airbnb and their airstream as sleeping solution, so why not?

            The EV startup Canoe seems to be thinking along the lines of Airbnb meets Lyft.

          3. With drivers fuming over low pay, Mayor Garcetti takes heat for …
            Los Angeles Times-1 hour ago

            Low pay?

  7. Some thoughts based on that article…

    On the “more money chasing homes” front:

    Housing bubble 1 – Wall Street minted “hot money” via MBS, CDO, CDO squared, etc + GSEs

    Housing bubble 2 – GSEs + foreign money. The foreign money is slowing (drying up?). The GSE’s had loosened standards, letting non-bank lenders fill the role vacated by Wall Street but that leniency appears to be ending (FHA tightening mortgage underwriting standards as credit scores decline).

    On the momentum to the upside front:

    Reduction in money chasing housing leads to leveling off and dropping prices.
    Speculators are drawn in by rising prices, so fewer will be drawn in
    Speculators sitting on prior purchases will want to lock in gains.

    So if the 2 main causes of housing bubbles are flagging, what’s left? Lawrence Yun spinning a tale and the mainstream media under reporting what’s happening.

  9. If a buyer purchased an apartment for $500,000, close to the median value in 2014, it would now be worth as little as $295,000.”

    Gosh, it seems like throwing away money on rent would’ve been the wiser choice.

  10. “While the recent downturn in Sydney and Melbourne has affected a larger number of home owners due to the sheer population across the two biggest capital cities, the steep and prolonged fall in Darwin’s property market to coincide with the mining downturn has left the buyers of as many as 32,155 properties underwater, potentially leaving every single household in the city affected.”

    All you genius FBs who bought into a bubble will certainly have a lot to talk about as you’re standing in line at the soup kitchen.

  11. I spent three days in Darwin, Australia last year. I was there right at the beginning of July, which of course is early winter. It was still sweltering.

    My hotel was right downtown in the CBD (Central business district). It was actually a little scary to walk around down there, if there wasn’t much other foot trafficat the time. Or possibly even if there WERE other people around.

    There are homeless or otherwise unoccupied aboriginals all over the place. At night, some get drunk and carry on in the streets. The restaurant next to my hotel, had its windows smashed one night. Judging by what I saw and discussions with locals, such vandalism is not uncommon.

    Basically, I found it was not a great place to visit, and I certainly wouldn’t want to live there.

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