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Prices Have Been Steadily Dropping, With A Surplus Of Properties Now On The Market

A report from Domain News on Australia. “A regulation-led slowdown saw the city’s median house price drop $76,616 in the year to September, the latest Domain House Price Report shows. Almost half of the drop was in the past quarter. ‘Sydney buyers and sellers are now operating in a housing market with prices at late-2016 levels,’ said Domain senior research analyst Nicola Powell.”

“Sydney’s median house price is now at $1,101,532, down 8.1 per cent since the market peak in mid-2017. By comparison, prices have surged 89.1 per cent over the previous six years. While the downturn had seen vendors’ profits take a hit, Yellow Brick Road executive chairman Mark Bouris said it was the market restructure Sydney needed to have.”

“‘What was needed was not so much a price correction, but to take the euphoric nature of the market down … we had to slow it down. There was too much hype in it,’ he said.”

“Falling prices are bad news for some but are of course good news for others, including Gabriella and Jacob Princi-Kinchella. They recently bought a five-bedroom house in Denistone for $1.61 million, weeks after it passed in at auction.’

“The couple bought the property for $115,000 below the advertised sale price. ‘When we went and inspected it there were only ever two or three other parties there,’ Mrs Princi-Kinchella said. ‘After four weeks I think [the owner] realised they weren’t going to get what they wanted.'”

The Canadian Press. “Sales of luxury homes in two of Canada’s most expensive cities fell this year, as the high-end real estate market continued to feel the impact of foreign buyers taxes. Realty brokerage Re/Max says sales of single-detached homes priced from $1 million to $2 million fell 35 per cent from a year ago in both Toronto and Vancouver.”

“According to the annual report, sales of single-detached homes in the $2-million to $3-million range were down 50 per cent in Toronto and 22 per cent in Vancouver. Meanwhile, homes that were sold for more than $3 million dropped 44 per cent in Toronto and 45 per cent in Vancouver.”

“‘All the new rules that the government implemented, along with the foreign buyers tax and the new lending regulations, it all just put a crunch on the most expensive part of the market,’ said Christopher Alexander, regional director of Re/Max Integra’s Ontario-Atlantic business.”

The Press and Journal in Scotland. “Since the 1970s the fortunes of the Aberdeen’s property market have closely followed that of the oil and gas industry due to the scale of employment the energy sector brings in buoyant times. But over the past four years, house prices in the city have been steadily dropping, with a surplus of properties now on the market.”

“Robert Fraser, a senior property partner at Aberdein Considine, believes the current market is the best property buyers have experienced in close to 20 years. ‘Since the oil price crash of 2014, when the Brent Crude benchmark dropped to under $30, the average transaction value in the Granite City has fallen considerably,’ Robert said.”

“‘The average house price this year between January and September was under £180,000, down 15% on the peak four years ago, and this is likely to drop further before year-end,’ he said. ‘At the peak in 2004 there were around 3,000 properties on the market at any given time. Today that number sits at over 6,000, creating a buyers’ market where properties are changing hands for below home report value in many cases.'”

From This Is Money in the UK. “Chancellor Philip Hammond will unveil the Government’s fiscal plans on Monday next week. Last year, he scrapped stamp duty for first-time buyers but there was little solace for those further up the housing ladder, many of whom feel trapped in their homes because of the increasingly extortionate cost of moving.”

“With just five days to go, reader Chris Healy put down her predicament in writing for Mr Hammond to consider. It is in full below.”

“Dear Chancellor, I need your help — as I suspect do thousands of others. And if you help us, then we may end up helping you. So it’s a win-win. My problem, you see, is I’d like to downsize: first my home and then, later, my job.”

“I am no shirker, but I’m coming up to 67 and have been working full-time for almost 50 years, so part-time hours are starting to have a greater appeal. I’ve tried twice now to sell my house and have failed — and lost a fair bit of money in the process.”

“The first time, 18 months ago, the cash buyer, had agreed to pay £1million (this is the expensive South-East we’re talking about) plus £43,750 in stamp duty. We’d almost reached exchange of contracts when he stopped responding. I paid my solicitor’s bill, chalked it down to experience and moved on. Not literally, of course.”

“The second time, just two weeks ago, on the day before I was signing my sale contract, this time selling for £945,000, the buyers reduced their offer price by £50,000. Nice. I offered a £10,000 reduction but they remained firm and the whole deal went pear-shaped.”

“The result is that I now have more legal fees to pay and — if I don’t find another buyer pretty quickly — I will lose the deposit on my intended home on a new development. I can’t say punitive stamp duty charges alone are to blame for these sales falling though — but they mean there are far fewer buyers interested to begin with.”

“At £945,000 — the perfectly realistic agreed price on my five-bedroom house plus annexe — stamp duty land tax adds £38,250 to the buyers’ costs. That’s an enormous amount for any normal family to find, and it means more people are deciding to stay put.”

“Buyers will often stretch themselves financially to achieve a bigger family home, but the huge stamp duty charge makes it a stretch too far. It’s the upsizers who need some help. Without it, the market will remain clogged, with our inability to sell and move, and eventually stagnate. In my road of 20 houses, four of us would-be downsizers have tried to sell in past 18 months — without success.”

“Nor do I think I was being unrealistic in my sale price. This time around, I’d asked for £975,000 and accepted my buyers’ offer of £945,000. They were a big family, and the deal would have allowed them to stop ‘wasting’ more than £2,500 a month on rent while I could have paid off my still-large mortgage and moved to a slightly cheaper area.”

“I was so optimistic this time that half my possessions were already packed in boxes. I was buying new, from Berkeley Homes, and we were under pressure to complete by October 31.”

“Anyway, it’s a buyers’ market, it seems, and I may have to content myself with unpacking the boxes and staying here for a while longer.”

This Post Has 46 Comments
  1. “Prices Have Been Steadily Dropping, With A Surplus Of Properties Now On The Market”

    This will never happen on the US West Coast. It’s different in Oz.

    1. On a more serious note, can anyone provide a plausible prediction for how long from now we will see similar headlines with reference to the US West Coast?

      1. I’m betting on spring. Homebuilders will start slashing hard followed by a race to the exits by used homeowners.

        YoY numbers will get progressively uglier through July 2019.

  2. ‘At £945,000 — the perfectly realistic agreed price on my five-bedroom house plus annexe — stamp duty land tax adds £38,250 to the buyers’ costs. That’s an enormous amount for any normal family to find, and it means more people are deciding to stay put’

    Why don’t you pay it Chris?

    1. Not in Japan, apparently…

      Japan’s Nikkei 225 index is down more than 3% early as global stocks sink
      Last Updated: Oct 25, 2018 at 9:29 a.m. JST
      Delayed quote
      21,360.40 -730.78 -3.31%

  3. “Sydney’s median house price is now at $1,101,532, down 8.1 per cent since the market peak in mid-2017. By comparison, prices have surged 89.1 per cent over the previous six years. While the downturn had seen vendors’ profits take a hit, Yellow Brick Road executive chairman Mark Bouris said it was the market restructure Sydney needed to have.”

    Still a long way to go BOYZ

    1. A 90% price increase is roughly wiped out by a 45% decrease. 8% is just a start. It might not have to fall the complete 45% to get back to baseline. Some of the inflation might buffer the fall. Still, many people fail to realize that price declines are a lot more vicious in terms of lost value than price appreciation is.

  4. “Sydney’s median house price is now at $1,101,532, down 8.1 per cent since the market peak in mid-2017. By comparison, prices have surged 89.1 per cent over the previous six years.

    Escalator up, broken elevator down. You’ve got a lot further to fall before you augur in, FBs of Sydney.

  5. “the city’s median house price drop $76,616 in the year to September, the latest Domain House Price Report shows. Almost half of the drop was in the past quarter.”

    So conservatively $10k per month drop on the median home. We need a better term than negative-wealth-effect…

    1. Yesterday the press said $1,000 a week. Now it looks more like $2,500 a week.

      Ill have a blue Christmas without you
      Ill be so blue just thinking about you

      1. You have everything to live for, Ben. Don’t let your despondency get the best of you. We’re here for you, brother.

  6. “At £945,000 — the perfectly realistic agreed price on my five-bedroom house plus annexe — stamp duty land tax adds £38,250 to the buyers’ costs. That’s an enormous amount for any normal family to find, and it means more people are deciding to stay put.”

    Anyone paying a million for a house is not a normal family. She said that upsizers need help – hell no they don’t. It’s the middle class and the poor that need help, not the upper middle and middle that always get it.

    1. It’s hard to see why an investor would buy US housing, now that price appreciation is done and inventory is piling up. That leaves end user buyers, and they are priced out until prices fall alot.

  7. Who’d’ve thunk that repricing the dollar by raising interest rates off the lowest levels in recorded history would result in the price of virtually all dollar denominated assets falling at exactly the same time?

  8. October: This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.

    — Pudd’nhead Wilson (Mark Twain)

  9. Wow, the stock market gains of 2018 have been wiped out. Housing is entering full-blown downturn, especially on the high end, soon to be everywhere. But how about those Tesla earnings today? Good to see an American company on a roll that actually makes things and innovates. Can’t wait for my model 3. Will likely be ordering in January.

    1. Shlonged…

      Asian stocks are getting slammed after Wall Street rout
      By Daniel Shane, CNN Business
      Updated 11:16 PM ET, Wed October 24, 2018
      – The case for rotating out of major tech stocks
      – China reports slowest growth since 2009

      Hong Kong (CNN Business)The stock market rout has rolled into Asia.

      In early trading Thursday, benchmark indexes were down about 3% in Tokyo and 2% in Hong Kong. The latest plunge in the region’s battered stocks was prompted by sharp falls Wednesday on Wall Street that wiped out top US indexes’ entire gains for 2018. The Nasdaq slumped more than 4%.

    2. how about those Tesla earnings today?

      Hopefully you own enough shares to pay for a car out of gains.

      It is a study in psychology for sure. Circus barker Musk announces that he has “earned” so much. Share price goes up. Accounting games are not visible. Production supposedly went up an extraordinary amount. That sort of thing usually requires an extraordinary cash burn, which can easily be excluded from reported earnings calculation simply because it was extraordinary.

      If Tesla really made money their pile of money should go up, right? We’ll see if it does or if it goes down another billion. Their stock doesn’t pay a dividend and they say they have no intention of ever paying a dividend. Yet many believe it is worth a lot.

      It’s interesting to watch in this theater of bubbles.

      1. Blue,

        I don’t own any shares. I prefer to buy the vehicle. As Matt Levine said yesterday,

        1. “[Tesla] makes good cars that people like and are willing to pay a lot of money for
        2. It has lost money every year that it’s been public.
        3. It also has a $50 billion dollar cap.

        Number 2 may no longer be true. They went from $700 million cash burn in Q2 to $300 million net profit in Q3. That is a $1 billion swing. I don’t know if that justifies market cap, so I’m not playing around with the stock. But our apartment complex is right by the dealership in downtown Salt Lake and the number of cars flying off the lot is incredible. Something tectonic is happening. Even noted short sellers have changed their tune noting that Tesla is “destroying the competition.” This is true. Look at the German high end cars BMW, Mercedes, and Audi. All car sales are down significantly.

        Tesla is only tangentially related to housing. Housing prices are constrained by NIMBYism and high land prices near thriving urban city centers. I’ve long said that the only way to break the high price cycle is to allow the feasibility of living a great distance away from pricey real estate where good jobs are. This is only going to be enabled by full self-driving.

        1. Be careful on both the stock and with the car. Accounting gimmickry sounds very likely, especially considering such a wild swing from cash burn to sudden “profitability” added to so many of their accounting people fleeing the company just before what should be good times. Likely they’re fleeing jail time from accounting fraud.
          Will be interesting to see the actual audited 10K results sometime after their attempt to get the stock above $360 to hopefully avoid that Billion $ cash payout to bond holders next Feb.

          Me thinks I smell fraud and corruption in the air (could be Alviso though, LOL), and I work down the street on Osgood.

          1. I don’t need to be skeptical. My father drives a P100D and my coworker has a Model S. Our apartment complex just installed an electric charging station for Teslas in it. The tipping point toward mass adoption of EVs was this last quarter.

          2. The tipping point toward mass adoption of EVs was this last quarter.

            Hmmm. I think that you might be right if the bubble didn’t pop. But assuming it is in the process of popping right now I wonder if electric cars do better or worse during hard times? At Tesla prices I suspect they will do worse, even if total cost of ownership isn’t as bad as you would think.

          3. The tipping point toward mass adoption of EVs was this last quarter.

            That’s not self evident.

            Tesla is a Zombie company, unable to progress without subsidy and debt. If they can’t roll over that debt it will be a tipping point.

  10. Markets
    Asian Stocks Lose $5 Trillion This Year With No End in Sight
    By Moxy Ying and Livia Yap
    October 24, 2018, 4:02 PM PDT
    Updated on October 24, 2018, 11:51 PM PDT
    – MSCI Asia Pacific Index takes its annual plunge to 16 percent
    – Slump comes after 3 percent S&P 500 drop on earnings worries

    After a slump in U.S. stocks, Asia’s main equity gauge has finally succumbed, entering a bear market overnight. The region’s equities have already lost more than $4.9 trillion in value this year, and Thursday isn’t looking pretty.

    The MSCI Asia Pacific Index fell as much as 2.4 percent on Thursday, taking its slide from a January peak to 22 percent. Japan’s Topix index plunged 3.1 percent to its lowest level since September 2017, while the Nikkei 225 Stock Average lost 3.7 percent.

  11. “Trouble in Arkansas”

    (snip)

    “During every credit cycle, there is one national lender that all other lenders try to emulate. This is because a combination of rapid asset growth and elevated net interest margins leads to rapid earnings growth and share price appreciation. Unfortunately, in order to do that, you have to make a lot of risky loans and pretend they’re totally safe. Remember Countrywide Financial? They were the ones who’d lend to you no matter what; no income, no job, no assets—you’re approved!!! Anyathing to show growth. Everyone in the financial industry emulated them because they were growing so fast. Besides, when you have a fixed cost structure, you cannot exactly stand still and let others steal your market share. That brings me to what may be this cycle’s Countrywide Financial, Bank OZK (OZK – USA), formerly known as Bank of the Ozarks.”

    http://adventuresincapitalism.com/2018/10/23/trouble-in-arkansas/

    1. More Denver.

      Suspect in terrifying Wash Park home invasion arrested by Denver police:

      “Police have arrested a 32-year-old man who is suspected of tying up a couple in Denver’s Washington Park neighborhood, threatening them and robbing them at gunpoint Tuesday morning.

      Denver police announced Wednesday afternoon they had arrested Marcus Dechee, 32, in regards to the robbery, which happened in the 1000 block of S. Gilpin Street. They said he was arrested Tuesday afternoon after a separate carjacking that happened in the 1000 block of S. Federal Boulevard.

      The victims told Denver7 Tuesday they woke up to find a man, believed to be Dechee, standing in their kitchen with a gun. He was wearing a mask and told the couple, “Yeah, you guys have lots of money in this neighborhood,” victim Janet Schmidt said.

      https://www.thedenverchannel.com/news/crime/suspect-in-terrifying-wash-park-home-invasion-arrested-by-denver-police

      1. She says she can sell now for A LOT of money. Well do it Suzy homemaker. You literally had the gun pointed to your head, what more will it take to convince you to dump your shack. Everyday you wait the money will go down further and further. Sell sell sell, it’s a great time!

        1. “She says she can sell now for A LOT of money.”

          Sounds appealing until she realizes(which she never will) she has far more into it than she gets out of it.

          DonkeyMath is near universal.

  12. I have been observing homes locally here going into pending sale status and pop back up for sale as if nothing happened and no inclination as to the sellers drop in price. The listings basically show as if the home never had a price reduction or a smart potential FB withdraw from the sale. Someone was eluding to this on a previous post but I could not find it.

    This is one that was 1.3m 50 days ago and went into pending status a few weeks back and now it shows at just under a million (still a rip).

    https://www.trulia.com/p/ca/santa-cruz/4310-gladys-ave-santa-cruz-ca-95062–2084358435

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