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The Reality Is, Once The Market Turns There’s Less Demand

A report from the Herald Sun in Australia. “Home values have peaked and begun to fall in every Melbourne SA3 region, with the declines tipped to continue into the new year. New CoreLogic figures show the drops range from just 0.6 per cent in the Sunbury region through to a substantial 14.5 per cent in Stonnington East, with the city’s well-heeled suburbs generally falling the furthest.”

“‘ This shows the declines in the market, although their still biggest at the top end, have become more broad,’ said CoreLogic research analyst Cameron Kusher. ‘I wouldn’t say any of the regions have bottomed out — most will continue to see falls next year.'”

“As well as in Stonnington East, double-figure drops from peak were recorded in Boroondara (13 per cent), Whitehorse West (12.7 per cent), Bayside (11.8 per cent), and Manningham West (10.8 per cent).”

“Mr Kusher said the significant falls at the top of the Melbourne market were ‘being driven by the fact there’s not as much demand for that kind of housing.’ ‘People aspire to live in those affluent areas, but the reality is, once the market turns there’s less demand for those areas because credit is hard to come by,’ he said.”

“Real Estate Institute of Victoria senior vice president Leah Calnan said a price correction was inevitable following Melbourne’s recent boom. ‘ When we look back to 2016-17, some suburbs were seeing growth of 20 per cent per quarter. That was never going to be sustainable,’ she said.”

The Sydney Morning Herald. ” Listed real estate agencies McGrath and The Agency have felt the cooling winds of the flat residential market, with staff departures and a delay in new acquisitions as experts warn the housing market correction has further to go.”

“The staff changes and delays come as the year ahead looms as a tough one for the residential market. According to Sarah Harding, partner, head of residential, Australia at Knight Frank, the Sydney and Melbourne residential markets were well into market correction mode following three years of significant capital growth. “

“‘The prestige end of the market has continued to sell at a slower rate although some high prices are still being achieved on a rate per square metre,’ said Daniel Cashen, from Knight Frank in Victoria. ‘ In the next 12 months, we expect there to be fewer projects launched than we’ve seen in recent years and developers will need to reset their expectations while the market corrects itself.'”

The Daily Telegraph. ” Renters will be among the biggest winners from the sluggish real estate market next year, with landlords set to struggle, according to the head of one of Sydney’s largest real estate groups. Starr Partners chief executive Douglas Driscoll said tenants could expect a good year, with housing supply up — particularly for units.”

“‘Apartment development has been high over the last three to five years and half these properties were snapped up by investors,’ he said. ‘ Renters have more choice … landlords need to be ultra-realistic with the prices they set.'”

“SQM managing director Louis Christopher said Sydney was becoming a renters’ market. ‘The rise in vacancy rates across cities is expected in November as the year winds up … but we are also seeing an emerging oversupply of rental accommodation,’ Mr Christopher said. ‘Bargaining power (is) moving to tenants as some landlords struggle to fill their rental properties.'”

“Another issue for all buyers would be finance. Banks may become more prudent and low-ball buyers on valuations, limiting their borrowing capacity, Mr Driscoll said. ‘We are already seeing many off-the-plan apartments that were bought 12-18 months ago now worth five to 10 per cent less than the original purchase price.

This Post Has 33 Comments
  1. ‘the city’s well-heeled suburbs generally falling the furthest’

    Yet again. This has happened in pretty much every metro I’ve followed. And to magnify the phenomenon, prices will fall most in the most expensive neighborhoods, in the most expensive cities. IMO, this is because these people were speculating. They didn’t need to live in these fancy shacks. It was what they figured would appreciate the most.

    1. If prices are increasing at about the same rate across all price levels, then HODLing the biggest, most expensive homes is the most profitable option.

      Of course this option also loses money the fastest in a housing downturn.

  2. Although it is a bit off topic from this article, I pose the question: has anyone observed that recently in past few days a surge in articles in Web publications with glowing optomistic real estate projections? It is almost like a desperation move to flood pay for play publications with happy talk. Probably comes from REIC efforts..

    Some of these are just rediculous efforts at grasping for straws with twisted interpretations of recent data. Yun is looking like a bear by comparison.

    Just an observation of some strange stuff I have been seeing recently. “Circling wagons” maybe?

    Your thoughts?

    1. I have definitely seen more sellers turning off the estimate on redfin (which was bs anyway — it literally rises with the listing price… or at least it used to)

    2. They figure if they flood the MSM with there rosey optimism then they may be able to survive through winter.

  3. Renters will be among the biggest winners from the sluggish real estate market next year, with landlords set to struggle…

    Suffer, bitchez….

    1. Renters will be among the biggest winners from the sluggish real estate market next year, with landlords set to struggle…

      Jeez, I may need to learn to needlepoint so I can frame that.

  4. Dec 20, 2018,10:34 am
    Pro Perspectives: Bitcoin Was All About Chinese Money Flight
    Bryan Rich, Contributor

    As we often see with markets, people tend to confuse forced capital flows with genius.

    We’ve seen it in the tech giants. The “disrupters” in Silicon Valley were only able to disrupt long-entrenched industries because of the hundred billion dollars that flowed from Washington to Silicon Valley as part of the American Recovery and Reinvestment Act. When the government is pouring that kind of money into “new technologies”, private equity (i.e. pension fund money) will follow it. Plenty of funding, regulatory advantage, and no pressure to (in some cases, ever) produce a profit turns out to be a recipe for destroying industries. The entrepreneurs are credited for their genius, but they have those capital flows from Washington, at the depths of the economic crisis, to thank for it.

    Bitcoin is another case of confusing capital flows with genius.

  5. “Real Estate Institute of Victoria senior vice president Leah Calnan said a price correction was inevitable following Melbourne’s recent boom. ‘ When we look back to 2016-17, some suburbs were seeing growth of 20 per cent per quarter. That was never going to be sustainable,’ she said.”

    Now she tells us

  6. Speaking of turning markets, does it sort of seem like the Wall Street bull has gone into hibernation?

    Although my ursine relatives and I normally settle into a long winter’s nap this time of year, I had no idea that bovine species also hibernate!

    1. This market swoon has taken a big bite out of Apple…like 33%! And I have to assume that most Wall Street folks don’t even realize that the bull is hibernating, or perhaps dead. I guess when this dawns on them, stocks will have to dip even more.

      All the biggest stocks that are now in a bear market, in one chart
      By Jessica Marmor Shaw and Terrence Horan
      Published: Dec 20, 2018 10:01 p.m. ET

      There are some BIG names in bear territory right now.

      And the list of bear-market stocks keeps growing every day, as the Dow Jones Industrial (DJIA, -1.99%), the S&P 500 (SPX, -1.58%) and the Nasdaq Composite (COMP, -1.63%) continue to decline sharply this week in the wake of the Federal Reserve’s latest interest-rate hike.

    2. Markets
      David Tepper: Fed is done supporting stock prices, so cash is ‘not so bad’ as an investment now
      Published Thu, Dec 20 2018 • 7:16 AM EST Updated Thu, Dec 20 2018 • 8:51 AM EST
      John Melloy
      Key Points
      – David Tepper emails to CNBC saying, “Powell basically told you the Fed put is dead.”
      – “Cash is not so bad,” the investor adds.
      – Tepper manages $14 billion at Appaloosa Management and has moved the market in the past with his calls.

      1. “Cash is not so bad,” the investor adds“

        No it’s not and many of the greedheads investors that used their cash to invest in RE will be chasing the market down suffering loses daily

    3. BUSINESS | Personal Finance
      Liam Dann: The bull market is dead, the stockmarket party is over
      17 Dec, 2018 11:39am
      5 minutes to read
      Market Watch 2018 predictions – did we get it right?
      Liam Dann
      NZ Herald Business Editor

      The bull market is dead.

      As fresh falls this morning take the NZX-50’s returns for 2018 below four per cent, it’s time to recognise the decade-long equity boom we’ve enjoyed is over.

      For the foreseeable future we can no longer expect to see double-digit returns on our KiwiSaver funds.

    4. “I had no idea that bovine species also hibernate!”

      Where exactly is the “defiant girl” these days Mr. Professor?
      (breast feeding in a $eedy NYC alley? Near wall $treet?)

    1. You do have to admire the Mad Money host’s steadfast optimism!

      “I feel powerless, just like 2007, when I ranted that the Fed needed to start easing aggressively in order to stave off a financial catastrophe. ”

      1. ” …to $tave off a financial cata$trophe. ”

        How many “grilled ham & chee$e sandwiche$” has booyah $wallowed in 11 year$?

    1. The Wall Street Journal
      China’s Mountain of U.S. Government Bonds Shrinks for Fifth Straight Month
      China’s holdings of U.S. Treasurys fell to $1.138 trillion in October
      By Mike Bird
      Dec. 17, 2018 11:39 p.m. ET

      Chinese holdings of U.S. Treasurys are at their lowest levels in nearly a year and a half.

      What’s Happening

      Data released on Monday showed China’s holdings of U.S. government bonds dipped again in October, to $1.138 trillion. That is the fifth straight month of declines and the lowest total since May 2017.

      To Read the Full Story

  7. This juncture reminds me of when I bought the dip in Japanese stocks during the early 1990s bubble implosion. Imagine my surprise ten years hence when the share prices hadn’t recovered at all. The end of a raging bull market can dovetail into a prolonged drought in positive stock market returns.

    Asian markets continue to fall on recession and trade-war fears
    By Marketwatch and Associated Press
    Published: Dec 20, 2018 10:49 p.m. ET
    Nikkei on track to end year down 13%; Shanghai on pace for 25% decline
    An aerial view of central Shanghai, China, on Tuesday.

    Asian stocks fell further Friday after Wall Street slid on recession fears, putting markets in Shanghai, Tokyo and Sydney on track to end 2018 down more than 10%.

  8. “My advisor told me that the rate hike was already priced in!”

    Stocks Fall to Lowest Level of the Year Following Fed Rate Hike
    The FOMC raises rates as expected yet investors keep selling
    By Caleb Silver
    Updated Dec 20, 2018

    U.S. markets sank to lows for the year following the FOMC’s decision to raise overnight lending rates by one quarter percent to a target range of 2.25-2.5%. The rate hike was expected, but investors may have been hoping for signs that the FOMC would take future rate hikes off the table for 2019. They did not get them. Fed Chair Jerome Powell indicated that there may be at least two rate hikes planned for 2019 to bring the overnight lending rate to 2.9%, to what the Federal Reserve calls ‘neutral’ policy.

  9. Asset Management
    Vanguard founder Bogle says buy bonds to battle ‘Brexit debacle’
    Fund management veteran worries investors are not paying enough attention to the risks in global markets
    By Chris Newlands
    December 12, 2018 Updated: December 18, 2018 5:33 p.m. GMT

    Jack Bogle says investors need to re-examine their portfolios to make sure they have enough exposure to bonds to protect against what the investment legend calls an “unstable” US government” and a “Brexit debacle”.

    Bogle’s comments come as UK Prime Minister Theresa May faces a vote of confidence in her leadership and after MSCI, the world’s biggest provider of investment indices, said British stocks could fall as much as 25% if the country’s politicians reject the UK government’s proposed deal to leave the EU and there is a disorderly exit from the trading bloc.

    1. …what the investment legend calls an “unstable” US government”

      Sad to say, this is an accurate description of our current “leadership.”

      1. And at the bottom end of government feminist mid-level managers are busy driving away experienced staff and stuffing the workforce with obese single moms and their mulatto kids both of whom can’t seem to function without accommodation and inclusion programs, which ultimately means that someone else has to perform their work.

        “This is how the world ends, not with a bang but a whimper.” —T.S. Eliot

  10. Can you hear the wailing and cursing of the HODLers as the stock market craters?

    Williams says Fed is ‘listening’ to a plunging stock market as part of data-dependent rate policy
    By Rachel Koning Beals
    Published: Dec 21, 2018 10:31 a.m. ET

    The Federal Reserve is “listening” to a plunging stock market but still views the economy as strong enough to stick to an increasingly data-dependent, yet higher, course for interest rates, New York Fed President John Williams said on CNBC Friday. The Fed raised rates by a quarter point this week, the fourth hike of the year, sending stocks (SPX, -0.05%) sharply lower.

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