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Australia Is In The Grip Of Fears Of A Property Price Crunch

A report from the Herald Sun in Australia. “Melbourne’s long-suffering homebuyers are cashing in as three-quarters of homes sell for less than their initial listing price. The figures revealed in CoreLogic’s latest Property Pulse reflect an average 6 per cent discount, equating to more than $45,000 on a $745,000 median priced house in the city. It’s been 12 years since so many homesellers were willing to cut back their expectations.”

“In April last year barely a third of sellers would reduce their price to get a sale. Buyers advocate Cate Bakos said many sellers were now negotiating with buyers — and Christmas would serve as an ’emotional deadline’ to convince more to do so. ‘Even good properties are discounting, though obviously not all of them,’ Ms Bakos said. ‘We are in the thick of a buyer’s market.'”

“With close to a thousand homes expected to go under the hammer each weekend for the rest of the year, Ms Bakos advised that a below-reserve bid at auction would give buyers a chance to drive a hard bargain immediately after auction without worrying about competition.”

The Augusta Review. “Activity levels in Australia’s construction industry continue to improve on the back of strength in engineering work. However, activity levels in all other sectors are deteriorating, especially in apartment construction.”

“‘Apartment building activity contracted for a sixth consecutive month in August, and at a sharper rate,’ the Ai Group said. ‘Apartment builders indicated that activity was being driven lower in response to project completions, reduced inquiries and falling investor demand.'”

“Diwa Hopkins, Economist at Australia’s Housing Industry Association (HIA), agrees the outlook for residential building is unlikely to improve anytime soon. She said pressures with ‘access to finance are unlikely to ease in the near term — only yesterday did other major lenders hike their mortgage rates, with more independent moves likely to follow,’ she said.”

“‘Add to these factors a situation of falling house prices in the key Sydney and Melbourne markets, and the list of deterrents to investor activity is quite varied. We expect credit conditions to continue to weigh on new home building activity into 2019.'”

The Australian Financial Review. “Real estate agency H&T Realty is suing developer Metro Property Development over $4 million in off-the-plan apartment sales commissions. H&T, which sells apartments in Sydney, Melbourne and Brisbane, alleges Metro withheld commissions after blaming the agent for a 20 per cent to 25 per cent default rate at seven of its Brisbane projects.”

“H&T had the bulk of the sales at the seven towers. Troubled Chinese-based group Ausin was also used, it is understood. The case highlights the rising casualties of the housing downturn triggered by tightening bank lending, the fallout from the banking royal commission and an oversupply of apartments aimed at local and foreign investors, particularly in the Brisbane and Melbourne CBDs.”

“It is understood the contracts between Metro and H&T are “industry standard,’ which means some commission is paid upfront when deposits are taken, with the rest to be paid on settlement.”

“H&T claimed this approach was unfair as many of the defaults were not ‘business as usual’ fallovers that tend to occur in any off-the-plan sales, but caused by a blanket refusal by banks to issue loans, forcing both foreign and local buyers to walk away.”

“Loans were also rejected because of falling apartment valuations of up to 25 per cent, H&T said. A recent valuation of a two-bedroom 60-square-metres unit at the Brisbane Casino Towers came to $460,000, a 20 per cent decline in value on its sale price of $576,000.”

“‘You can’t say it’s the agent’s fault for not assessing the buyer’s ability to settle. We don’t control bank policies or the decline in valuation, so it is unfair that we are not paid until all settlements have been made,’ H&T Brisbane’s Alvin Tan said. ‘We do our best to check the buyer’s financial situation but we can only do what we can based on the conditions at the time of sale.'”

“The Financial Review previously reported Metro had asked many agents across Sydney, Melbourne and Brisbane to sell ‘residual units’ at these projects offering larger discounts and commissions.”

“Veterans of the Smashed Avocado War of 2017 will probably have some sympathy for the undercurrent of bewilderment emanating from the Reserve Bank of Australia about the panic around house price falls.”

“It was only in May 2017 that demographer Bernard Salt set off a national debate by claiming that Millennials could afford to buy homes if only they would cut back on spending on indulgences such as smashed avocado breakfasts.”

“Fast forward 18 months, and Australia is in the grip of fears of a property price crunch, caused at least in part by the banks tightening the supply of mortgage credit in response to changes forced by the prudential regulator, and concerns about responsible lending sparked by the royal commission.”

“‘We’ve seamlessly moved from a housing affordability crisis to now it’s just too affordable,’ RBA deputy governor Guy Debelle noted dryly on the sidelines of a FINSIA event in Melbourne on Thursday.”

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This Post Has 29 Comments

  1. ‘It was only in May 2017 that demographer Bernard Salt set off a national debate by claiming that Millennials could afford to buy homes if only they would cut back on spending on indulgences such as smashed avocado breakfasts’

    Bernie looks like a real ass-hat now!

    1. could afford to buy homes

      As if “Housing” was a religion of self denial. I don’t do it, but I’ll have steak, eggs and single malt for breakfast if I want to. I’m not joining your cult.

  3. H&T, which sells apartments in Sydney, Melbourne and Brisbane, alleges Metro withheld commissions after blaming the agent for a 20 per cent to 25 per cent default rate at seven of its Brisbane projects.”

    “Always be closing” doesn’t leave much room for ethics or worrying about whether buyers can actually afford the apartments for which they signed on the dotted line.

    1. The recriminations begin. “You brought us a deadbeat buyer. Your airboxes lost 20% of value before it was finished.”

  5. ‘We’ve seamlessly moved from a housing affordability crisis to now it’s just too affordable,’

    Can’t have it both ways. If there was an affordability crisis before and houses are now affordable, then that is clearly an improvement, especially if the losses are landing on foreign flippers who had no business speculating in residential real estate and driving prices to levels where local residents were priced out.

    1. Can’t have it both ways.

      It’s not that. There were too few stupids, so we’re dropping our ridiculous price.

      Long way to go.

    1. Opinion: Bitcoin still fooling buyers into believing those 200%-plus gains are coming back
      By Gary Smith
      Published: Nov 17, 2018 10:29 p.m. ET
      Speculative investments that do not generate cash are prone to bubbles and crashes

      Investors at times are gripped by what, in retrospect, seems to have been mass hysteria. The price of something climbs higher and higher, with nothing to justify the rising price except investors’ hope that it will go higher still. Then, this speculative bubble pops, buyers vanish, and the price collapses. With hindsight, it is hard to see how people could have been so foolish. Yet, at the time of the bubble, it seemed foolish to sit on the sidelines while others became rich.

      Which brings us to bitcoin (BTCUSD, +1.24%). Bitcoin does not generate cash or pay dividends, but bitcoin prices can rise as long as greater fools think that they can sell at higher prices than they paid.

      https://www.marketwatch.com/story/bitcoin-still-fooling-buyers-into-believing-those-200-plus-gains-are-coming-back-2018-11-16

      1. didn’t mr mcaffee make a statement he would eat his own d!ck if bitcoin didn’t reach 1m by end of year. He is one crazy sob, wonder if he is planning to follow through on that…

        1. Is that $1 million per coin?

          It’s not going to happen. Hopefully he wasn’t serious about his ludicrous and disgusting offer.

    2. Bitcoin Is Crashing — What’s Wrong With the Cryptocurrency Market?
      Here’s why most major cryptocurrencies are down big over the past couple of days.
      Matthew Frankel, CFP
      (TMFMathGuy)
      Nov 15, 2018 at 4:08PM

      Cryptocurrency prices have been relatively calm for the past few months, but that all changed on Wednesday. Leading cryptocurrency bitcoin suddenly plunged below $6,000 to its lowest level of 2018, and most other digital assets followed suit.

      Here’s why the volatility has suddenly returned to the cryptocurrency markets, where the largest cryptocurrencies stand, and whether the upward momentum that we saw in 2017 could return anytime soon.
      Golden token with bitcoin symbol.
      Image source: Getty Images.
      Today’s cryptocurrency prices

      After relatively low volatility for the past few months, bitcoin and most other cryptocurrencies took a sudden dive on Wednesday. In fact, all of the top 50 cryptocurrencies by market cap (except for those pegged to the U.S. dollar) are in the red for the past week. Here’s a look at the 10 largest.

      https://www.fool.com/investing/2018/11/15/bitcoin-is-crashing-whats-wrong-with-the-cryptocur.aspx

    3. Crypto Investors Are Trying to Save Their Funds Amid Bitcoin Crash
      Alexander Kuptsikevich
      FX EmpireNovember 15, 2018, 4:31 AM PST
      During the last 24 hours, Bitcoin’s price has lost almost 13%, trading at around %5,500. According to technical analysis, the next important stop could be the area of the previous price consolidation: distant marks near $3,500.

      The safe harbor of cryptocurrency has eventually sunk under the volatility wave, which triggered a massive collapse of all crypto coins. During the peak of this decline, market capitalization has shrunk by $30 billion. During the last 24 hours, Bitcoin’s price has lost almost 13%, trading at around %5,500.

      On the morning of November 15, 2018, the second largest global Bitcoin wallet, which belongs to the Binance exchanged, moved out 109,234 BTC ($600 million at the current exchange rate). Considering this huge sell-off in the past day, the news in regards to such a big move of almost all Bitcoins from a “cold” wallet may reinforce negative dynamics in the market. It is worth remembering the sharp reaction of the market, subsequent to the sale of BTC and BCH by the Mt.Gox bankruptcy trustee Kobayashi.

      https://finance.yahoo.com/news/crypto-investors-trying-save-funds-123132775.html

    4. Nov 15, 2018,10:55 am
      Crash: Bitcoin And The Stock Market On The Brink
      Clem Chambers, Contributor
      Intelligent Investing Contributor Group

      I’ve been writing about how bitcoin has been in an increasingly tight range and how when it breaks out it should run in that direction a long way. It’s trader thinking. This coiled spring compression has got downright silly in recent weeks with the usually volatile bitcoin trading in an ultra-tight range. This tight trading range seemed very contrived to me and suggested something was “up.”

      Yesterday out of the blue bitcoin dropped 10%.

      According to my thinking this should be the start of a very significant fall. That is my “speculation.” An asset like bitcoin is an extreme speculative asset so if you are going to play this market you must be and are a “speculator.”

      $2,500 has been my target since the crash started at $20,000. I bailed at $18,000 and have been waiting since then to reenter in size. If it hits that price I will load up. It could bounce tomorrow, it could hit $1,000 but $2,500 is my target waypoint, my unreliable crystal balls are indicating. Price goals can only be guesses but as a trader you pivot around them as the market develops.

      What is this move about? What is going on?

      The obvious culprit causing this dump is bitcoin Cash, the ‘wannabe’ bitcoin usurper, which forked from bitcoin last year. It is forking again and there are competing forks and all sorts of conniptions are expected. It sounds plausible this is causing the move but the fact the bond market spiked at the same time suggests something else is going on to me.

      The stock market is crashing and the Nasdaq is crashing more and can crash the most.

      https://www.forbes.com/sites/investor/2018/11/15/crash-bitcoin-and-the-stock-market-on-the-brink/#5156bfe337b8

    5. Cryptocurrencies
      ‘I Didn’t Sleep Well Last Night:’ Analysts Predict Bitcoin Has Further to Fall
      By Vildana Hajric and Olga Kharif
      November 16, 2018, 10:34 AM PST
      – Analysts suggest Bitcoin could gravitate toward $1,500 level
      – The digital token’s lost more than 60% of its value this year

      Bitcoin’s no longer boring.

      After months of tranquility that became the envy of equity investors, the biggest cryptocurrency roared back into the public consciousness this week with the biggest sell-off since August, another fork and a cameo in a major semiconductor earnings report. Some digital asset industry pundits have already begun referring to it as the crypto winter.

      Bloomberg Intelligence says the drama’s just starting. Analysts predict the price could fall to $1,500, which would indicate another drop of more than 70 percent from current levels. The digital token tumbled 12 percent on Wednesday alone to its lowest level in over a year, and has lost more than 60 percent of its value so far this year. Many of Bitcoin’s closest peers, including XRP, the cryptocurrency also known as Ripple, fell in tandem.

      https://www.bloomberg.com/news/articles/2018-11-16/crypto-winter-comes-early-as-bitcoin-slide-spurs-viability-fears

  8. ‘Where GoPro goes from here’

    ‘Management expects to the company be profitable in Q4, and for the second half of 2018. But it’s still struggling to convince its customers to replace their action cameras in a similar way to how consumers upgrade to new smartphones every few years. That’s problematic, because as of now, GoPro’s completely dependent on sales of new cameras to generate its sales and earnings. It simply hasn’t been successful in generating significant revenue from anything else (consider its failed Karma drone and its virtual reality rig).’

    It’s gonna be another twitter…

    1. Investors in malls steeling for losses
      NWAOnline-5 hours ago
      This is happening because malls are losing anchor stores and, as a result, would have to significantly cut rents for existing occupants, Reardon said, noting that …

  9. “Melbourne’s long-suffering homebuyers are cashing in as three-quarters of homes sell for less than their initial listing price.

    Greedheads not getting their crazy wish prices doesn’t count as suffering in my book. If anyone’s suffered, it’s the prudent and responsible who have been priced out of the market due to the speculative mania unleashed by ultra-easy lending and FOMO hype.

    1. long-suffering homebuyers

      They are talking about current buyers, having suffered long waiting for a deal. This supposedly is cashing in as they grab a falling knife now.

      1. Odd, I’ve been renting for a few years now, and can’t say that I’ve experienced any suffering or emotional distress from declining to buy into a housing bubble or being impervious to FOMO and REIC hype. I rent a nice house at a fair price and am patiently bidding my time.

        1. No wonder you can’t identify with the “longsuffering”. You haven’t “cashed in” as the debt donkeys phrase it.

  10. The oligarchs who have been the prime beneficiaries of ten years of central bank “stimulus” are now faced with twin threats from the “far right” – nationalists and populists – and the far left bent on “reattributing the wealth” and forcing ultra-high income earners to “pay their share.” Looks like their decade of unfettered looting of the proles and buying up the latters’ distressed assets with QE funny money may end up costing them more than they’d bargained for.

    https://www.bloombergquint.com/politics/ultra-rich-on-edge-as-brexit-chaos-boosts-odds-of-corbyn-s-rise#gs.C6MKfwM

  11. “Looks like their decade of unfettered looting of the proles and buying up the latters’ distressed assets with QE funny money may end up costing them more than they’d bargained for.”

    A pessimistic perspective is that it looks like it is about to happen again.

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