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Buyers Will Be Able To Pick The Eyes Out Of The Market

Two reports from Domain News on Australia. “Sydney is in the middle of the steepest downturn in house prices in decades and top experts say there’s a way to go yet. In the year to September, more than $75,000 slid from the median house price which is now down 8.1 per cent since the peak mid-last year, with unit prices also falling 4.4 per cent. The longest downturn before the current one ran from early 2004 to late 2006, when the median house price fell 7 per cent.”

“‘The clearance rate says to us that the values sellers are putting their properties up for is being rejected by buyers,’ said Matt Hayson, director of Cobden & Hayson, adding that vendors were caught out by sharper than anticipated price falls, and buyers were holding back because of reduced borrowing power.”

“The inner west took the biggest hit to prices in the year to September, with a median drop of almost $180,000. The city’s biggest drop was in Rose Bay, where the median dropped 20.4 per cent to $3.25 million. This was followed by Russell Lea, Lane Cove North and Glebe.”

“‘The peak of conversions [to principal-and-interest loans] will be in 2019-20 … so that will be a true test of the market,’ said Ilya Serov, associate managing director at Moody‘s Investors Service.”

“A run of ultra-prestige house sales this week should be good news for trophy home owners, but agents fear it’s the first sign of a cold headwind blowing in their rarefied market. Sydney’s harbourside home values have remained largely immune to price falls this year thanks to a shortfall in the number of suitably luxurious homes to meet demand.”

“And while agents say there are still plenty of buyers at trophy home levels, it is vendors who are no longer willing to wait it out for the right price. ‘I’m telling people to get out before Christmas because we don’t know what the market will be like when it returns in February and March,’ said Bill Malouf, of LJ Hooker Double Bay.”

“On Vaucluse’s Wentworth Road, the grand Federation mansion of the late Helen and Andrew Andrews has sold for between $19.5 million and its $20 million guide through Sotheby’s Michael Pallier.”

“Listed almost two years ago, it received an offer through Mr Malouf of $20.4 million last year but the deal fell through when the buyer from China was unable to access their funds.”

The Herald Sun. “Melbourne could see fewer homes going to auction and sales even more skewed towards buyers after it failed its biggest market test in six years. Less than half of Melbourne’s auctions, 49 per cent, ended in a sale yesterday, according to preliminary CoreLogic figures. It’s the second week clearances have dipped below 50 per cent during the busiest time of the year for home sales.”

“Advantage Property Consulting director Frank Valentic said consecutive weeks of clearance rates below 50 per cent had left buyers well and truly in control. ‘What this means is that we are definitely in a buyers market — and there will be a hell of a lot more opportunity for buyers,’ Mr Valentic said. ‘They will be able to pick the eyes out of the market.'”

The Sydney Morning Herald. “A real estate agent specialising in luxury properties with high-profile owners has been charged with 15 fraud offences after she allegedly misused $3.69 million which was placed into her agency’s trust account by various clients over the course of two years.”

“Nicolette van Wijngaarden, 44, is the director of Unique Estates, a boutique real estate agency now under liquidation which specialised in selling multi-million dollar properties in NSW, Victoria and Queensland.”

“She is accused of fraudulently dealing with home deposits paid to her company, including $105,000 from the sale of Ms Dinnigan’s Surf and Stables retreat at Milton on the NSW south coast in late 2017.”

“Ms van Wijngarden is also accused of ‘falsely representing’ that $1,165,876 from rental properties would remain in the Unique Estates trust account until the money was paid to the property owners. The charges span from May 2016 to February 2018.”

“Unique Estates was placed into liquidation in May, owing an estimated $4 million to 26 employees and other unsecured creditors including BMW Australia Finance, the Australian Tax Office and the Office of State Revenue. According to a liquidators report published by ASIC, the Office of Fair Trading have identified “‘a number of deficiencies in the trust accounts’ of Unique Estates.”

“Liquidators from PwC also identified a ‘bookkeeping error’ where the value of certain assets was ‘significantly overstated.'”

This Post Has 36 Comments
  1. ‘the median house price which is now down 8.1 per cent since the peak mid-last year, with unit prices also falling 4.4 per cent. The longest downturn before the current one ran from early 2004 to late 2006, when the median house price fell 7 per cent’

    This 2004 thing is roughly how I remember it. The UK went first, then Australia. Most economists don’t have any idea how it went down. They just repeat “US subprime, 2008” blah, blah. Anyhoo, prices have already fallen more than that episode and in just one year.

  2. ‘I’m telling people to get out before Christmas because we don’t know what the market will be like when it returns in February and March…’

    People in Australia (or at least in the major urban areas of south Australia) don’t buy homes in the summer?

  3. I just saw a story about equity locusts driving up housing prices in previous M/LCOL areas pop up on slashdot.

    What is slightly interesting is the comments – despite the more educated crowd that site attracts, it’s clear most of the comments don’t have a clue as to the ‘big picture’ of what’s going on and are just parroting some of the simplistic explanations or solutions that get thrown around.

    We may argue and disagre here, but I’d say with confidence that the average HBB reader sees the big picture a whole lot better than most people.

    1. LMAO! When I went over there, very first comment was: “We need to BUILD MORE HOUSING!” Because, shortage, ya know.

  4. Did you buy AmaFlix stocks on the assumption that tech stocks always go up?

    Opinion: This money-flow chart shows that Amazon and Netflix are in dangerous territory
    By Nigam Arora
    Published: Oct 27, 2018 6:08 p.m. ET
    Investors were too complacent when Amazon topped $2,000 and Netflix surpassed $400
    Getty Images
    Amazon CEO Jeff Bezos, left, and Netflix CEO Reed Hastings

    Money flows are showing that Amazon and Netflix are killing the popular FAANG trade.

    What if you had a stock that gave you the foresight of what most are now seeing in hindsight? Yes, such a tool exists in segmented money flows.

  5. I know it’s not a major theme of the comments today, but it’s funny to me how the Chinese are demonized for driving up prices in US, Aus, CA, etc.
    Meanwhile, back in the good ‘ol US of A, a major component of the house porn industrial complex (HPIC) are shows cenetered around obnoxious pasty Ameicans “snapping up” beach front bungalos alomg the various coast of less monied countries. How must the citizens of Costa Rica, Belize, et. al. feel about the fact that their beautiful beaches are occupied by “others” who can infinitely outbid them?
    Seems to me that the Chinese are living the American dream (as piped around the world via HPIC entertainments).

    1. I went diving in Belize several years back. Before I went, I read all these reviews in which Americans wrote how much they were loved there, and how nice the native people were. When we arrived, all the service people were smiling, loving and very helpful. They tended to congregate in the area near the back our rental when work let out. All I could hear back there was how much they actually hated us. I don’t blame them. It sucks to lose your most valuable property to foreigners whom you must serve and pretend to love in order to eat. I’ve had similar experiences in Africa. Americans in San Francisco, NYC and Miami got to see this in reverse.

      I guess I don’t see the hypocrisy you see in all this. Instead, I see it all being consistent. The elite tend to exploit, and those that are left out get upset. Too many people confuse the politics of the rich in any Country with the average person in such Country. The more you travel you realize everyone is pretty much the same. The rich have always had exploited.

    2. I’m sure my views are biased due to the Chinese family who bought the house next door for $50,000 above the comps, displacing the young American family that used to rent the place.

      1. Explains my bias too. It’s hard for me not to carry resentment when all I hear and have personally experienced while selling my shack last year, is local RE being overbid by the Chinese “investors”. I keep hearing that since this summer they have backed out and coincidentally see properties locally sitting Unsold with constant price drops since… experiencing something first hand definitely influences my attitude.

      2. Professor, I’ve read this guy’s posts on Seeking Alpha. He is a bit of a contrarian and he doesn’t see the bubble in terms of excessive credit. I’ve had to re-read some of his posts several times and I do think his view of things on some points are spot on.

        Essentially he views the so-called bubble as a restriction of supply in “Closed Access” (e.g. thriving urban metro areas with jobs) leading to substitute cities where housing was purchased as an “inferior substitute” due to the inability to add supply. Intuitively this makes a lot of sense to me and it jives with the equity locust and “drive ’till you quality” anecdotes that we see when people get pushed out. Funny money in one market can spill over and create a whole lot of displacement.

        1. None of that is inconsistent with Chinese equity locusts as a driver of higher prices in plum locales.

          1. Yes, I agree. The cause of the bubble is multifactorial. Surely you have lower regulations, lower interest rates, foreign capital, and you also have NIMBY-ism and zoning restriction. To some extent, land in prime economic areas is a positional good. But if it was easier to build (and if regs requited built units to be occupied), then I think you’d have tackled the closed access problem.

        2. drive ’till you quality

          How things change. A long time ago I worked near NYC. Back then it was more of “Drive until you can stand the neighborhood.”

    3. This is true as it all does trickle down. Foreign investors (primarily China and Russia) drove up US RE, US residents see US RE as over valued and start investing in other Countries RE thus driving up pricing / demand. The thing that makes the US more prone to this is the low restrictions. We actually offer Visas for foreign investors whom bring x amount of dollars whereas other countries either have added taxes or only allow RE to be leased to foreign investors. And then we have the relocating Californians that spread out to other parts of the US and drive up prices and the people in these states that have ill thoughts towards them. Kinda of a snowball effect that starts at the top level and it’s easy to assume that one specific group or nationality is to blame for the inflation / bubble we are experiencing when maybe it could have been our governments doing all along. We can all see where this is headed and whether we join in at the top and become an FB or wait for a rational RE market is our choice.

      1. The wall we need to build is from foreign investment bidding up the price of land and housing. Once every American has a decent place to live and isn’t rent burdened then maybe we change course.

        1. You would think the Republicans would catch on to this issue and add it to their platform, but housing issues seem to be missing in action from the national political debate.

          1. Might have something to do with a developer, that relies heavily on foreign investment partners, being in charge.

          2. Might have something to do with a developer

            That doesn’t explain why it was so before the current administration. Not even close.

          3. Romney suggested at one point the idea of letting the housing market “bottom out”, or something to that effect, and was politically hammered for the suggestion. Aside from proposals for “save our homes” bailouts, housing seems to be somewhat of a political third rail in the US.

          4. Kamala Harris and Senator Warren have both floated proposals for affordable housing. I had a long 20-mile run the other day and I cooked up something in my head that I thought would be decent. I think you have to give renters some tax relief if they spent more than 30% of their income on rent. At the same time, you have to provide a counterbalancing credit to any renter who comes under the 30% threshold so that you don’t inadvertently subsidize luxury apartments. The tax code needs to be shifted away from the mortgage interest deduction by at least giving renters some similar relief, or scrap the mortgage interest rate deduction altogether.

          5. you have to give renters some tax relief

            Wait. You want ME to give money to my neighbors because they are spending too much? I’d rather not.

          6. Why not just scrap the frigging mortgage interest deduction, which is one of the key reasons why housing is overpriced in perpetuity?

  6. does anyone want to buy the 1 amazon share I own?

    my shack fell in value this month. is it time to mail in the keys?

    1. Unless it’s different this time, once housing prices start to fall, it will be at least another 20% down in most locales where prices got frothy.

  7. ‘I’m telling people to get out before Christmas because we don’t know what the market will be like when it returns in February and March,’

    That is some great advice for house flippers everywhere whose plan was to pick up a few Yellen Bucks in front of the steam roller. Get out now, or get steamrolled.

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