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At The Heat Of The Market, People Were Paying Big Money For Anything

A report from ABC News in Australia. “Australian housing prices have continued to slide, with the market facing its sharpest annual decline in six-and-a-half years. This signals ‘the weakest macro-housing conditions since February 2012 … a 0.5 per cent fall in dwelling values nationally in [the month of] October,’ said Tim Lawless, CoreLogic’s head of research.

“‘We expect values will continue to drift lower in the remainder of the year, and at least the first half of 2019,’ Lawless said. ‘A big part of this downturn is to do with credit availability and rationing. We simply don’t see credit becoming more available or starting to free up any time soon,’ he said.”

“Capital Economics’ Ben Udy agrees with that position — and believes the upcoming price declines will be steep. ‘The continued fall in house prices in October is consistent with our view that prices will ultimately drop by at least 12 per cent.'”

“Mr Udy said this would make ‘the current downturn the longest and deepest in Australia’s modern history.’ ‘What’s more, this is all before the full effect of the tighter credit conditions linked to the [banking] royal commission has been felt.'”

From Domain News. “Stamp duty rebates, frequent flyer points and strata levy payments are just a few of the bonuses developers are putting on the table, in a bid to attract more buyers in a cooling market. With a record number of apartments being delivered at a time when tighter lending restrictions and the banking royal commission are taking their toll, developers are doing what they can to stand out.”

“‘The practice [of offering incentives] has increased to get rid of stock,’ said Leigh Warner, national director and head of residential research at global property firm JLL. ‘It’s a continuation, but also an acceleration,’ said Mr Warner of the fall in unit sales.”

“Sydney’s unit sales fell more than 20 per cent last financial year, and the number of units being marketed over the three months to the end of September was also down more than 20 per cent on the previous quarter, the report shows.”

“‘A few years ago at the peak of the market, which was fuelled by Asian buyers and investors there was an unlimited appetite for larger scale developments,’ said Dennis Vertzayias, head of residential NSW project marketing. ‘But as the regulations have tightened, now restricting these sectors from entering the market, we have seen some larger scale development sale volumes noticeably impacted.'”

“While the supply pipeline is expected to fall away quite sharply in 2019, Mr Warner said unit completions were still set to peak in 2018.”

“An extra 3134 apartments entered the market over the latest quarter, bringing the total number of units completed this year to 7502 — more than half of which has been in the inner south. The region will also see the bulk of projects to come, with more than a third of the extra 25,700 units to be delivered by 2020 also in the inner south.”

“Mr Warner said rather than risk reducing the value of their projects by offering price discounts on properties, developers were increasingly trying to lure local buyers by offering up a variety of incentives.”

“The positive for buyers was that developers were facing more pressure to deliver quality stock, according to Mr Warner. ‘At the heat of the market … people were paying big money for anything, now there is less buyers around, less competition, buyers can be more discerning.'”

The Daily Telegraph. “No-one envisaged the Sydney property boom would continue with gusto into 2018. But the accelerated price reversal has caught many sellers by surprise after an extended period typified with double digit annual price growth.”

“Negative equity does now loom for some, should recent buyers seek to sell. This concern, along with not knowing just how much further prices will fall, is creating uncertainty. And property markets don’t like uncertainty.”

“We are only starting to see at an anecdotal suburb level the shocks of uncertainty in the property market as homes are not worth as much as previously envisaged. And if it escalates we will see it being a drag on the wider economy too as fears see demand for goods and services fall, at least temporarily.”

“Olivier Blanchard, former chief economist of the International Monetary Fund, wrote in 2009 after the collapse of the US financial markets that there was ‘(nearly) nothing to fear but the fear itself.'”

“That was obvious at weekend auctions. There’s still enduring purchasing interest in quality Sydney offerings, though with extreme caution. Some 18 contracts were issued to potential buyers during the marketing of a North Balgowlah brick home in a great bushland location with renovation upside.”

“But not one bid came at its onsite auction given the stage we are at in the cycle. Buyers and sellers are gaining valuable insights that real estate goes up, down or even goes nowhere.”

This Post Has 17 Comments
  1. I’ve been busy following the US crater, but I had to make time to cover what’s going on in Australia. This mania is one of the biggest and their spirit is being broken. Even a month or three ago the REIC was telling the public, “it’s almost at the bottom Mates!” Where are they now? Trying to unload those cash bleeding airboxes I bet.

  2. ‘At the heat of the market … people were paying big money for anything’

    Sounds ridiculous doesn’t it? A short time ago, the California media would ohhh and ahh as some fool paid a couple million for a burned up shack in the bay area. That’s right, it was just as ridiculous.

    How ’bout that bay aryan crater now! Shoulda listened.

  3. “‘We expect values will continue to drift lower in the remainder of the year, and at least the first half of 2019,’ Lawless said. ‘A big part of this downturn is to do with credit availability and rationing.

    Well, Lawless, I expect values will crater as panicked FBs realize the party’s over and stampede to the exits, only to discover the once-limitless pool of Greater Fools and Knife Catchers has vanished.

    1. Didn’t the same “16% plunge” figure recently surface in news about California real estate? The near-simultaneous timing of plunging markets across the developed world economies suggests a global financial driver of the crash. I guess it’s safe to say that all real estate isn’t local anymore.


  4. ‘The continued fall in house prices in October is consistent with our view that prices will ultimately drop by at least 12 per cent.’”

    Pikers!

  5. Among the things tumbling these days, oil is sinking towards $60. Looks like the cost of everything needed to build a house is falling, except the cost of debt.

    1. Are you trying to set bait for AlbuquerqueDan to come back and assure us that $100 oil is soon to be here to stay?

  6. With wage inflation starting to take hold, Treasury yields are surging, and mortgage lending rates are soon to follow in lockstep.

    Treasury yields add to climb after October jobs report
    By Sunny Oh
    Published: Nov 2, 2018 8:36 a.m. ET

    Treasury yields extended their rise after the U.S. economy created more jobs than expected in October. The 10-year Treasury note yield (TMUBMUSD10Y, +1.34%) was up by 3.2 basis points to 3.176%. The 2-year note yield (TMUBMUSD02Y, +1.28%) rose 3.2 basis points to 2.887%, while the 30-year bond yield (TMUBMUSD30Y, +0.57%)picked up 1.9 basis points to 3.406%, near its highest levels in four years. Bond prices move in the opposite direction of yields. Nonfarm payrolls for October rose 250,000, well above the expectation of 208,000 from economists polled by MarketWatch. Average hourly earnings rose 0.2%, raising the yearly pace to a 9-year high of 3.1%.

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