The real estate market in Australia is very similar to ours. They have had the relaxed lending standards, low interest rates, "toxic" loans, flippers, "specuvestors", the "real estate only goes up; everyone wants to live here; we're special; it will be a soft landing; we are at a permanently high plateau" wishful thinking that we have been dealing with here. Despite all of that housing prices in parts of Australia are collapsing by more than 40% in some cases.Some choice quotes:
A three bedroom house in St Clair sold for just $260,000 at the weekend, down about 42 per cent from its last sale at $450,000 in 2003...Update: as mentioned by Shiller in the longer audio file of this post, Australia is supposed to be a case study for what is going to happen to us!
...a townhouse that sold for $257,000 in 2003 was resold by mortgagees for $156,500, reflecting a roughly 40 per cent fall.
...a four-bedroom house that sold for $330,000 in 2003 resold at $255,000 in another mortgagee sale. Four of the seven registered buyers put in bids before the... house sold at an approximate 22 per cent discount to the property-boom price.
Auction clearance rates are hovering around 48 per cent since the recent interest rate rise, but plummeting property prices have meant many vendors are confronting negative equity, where they owe more on the property than it is worth.
The Herald checked 16 properties in south-western and western suburbs listed at the weekend and found 60 per cent had prices or had attracted offers at a discount to their last sale price.
Given it has been 16 years since the last recession, long-time estate agents fear the fate of a generation of owners who had not experienced having a loan when times were tough. St Marys agent, Michael Beatty said: ‘There was a wave of people punting on the expectation of constant price rises until well into 2004, even after the three interest rate rises of late 2003. There has been significant price deflation and many now have negative equity in their homes.’
6 comments:
A three bedroom house in St Clair sold for just $260,000 at the weekend, down about 42 per cent from its last sale at $450,000 in 2003...
Btw, I hear that St. Clair isn't somewhere out in the bush, but a newer suburb of Sydney. Does anyone recall the past Sydney Olympics, and all the talk of real estate prices there? Back then, I never imagined prices would correct in Sydney.
I know that there are people from Australia who visit this blog. Maybe this would be a good time for some of them to identify themselves as such and tell us what is going on down under.
One thing to remember about the Australian market is that very few, perhaps no, people have fixed 30 year notes. All notes adjust...as I recall, even five year fixed are rare.
It may be the case (and here I am not sure) that the noteholder can force a sale if the property drops below the value of the note.
I like this comment!!!
"There are some people around Liverpool who think that prices have further to fall, but I couldn't imagine this type of house will fetch less in six months' time," said its selling agent, Ray Dimarco.
Another great quote
"There are some sad stories. But we have to show the sellers the comparable sales and say honestly this is where the market is realistically at."
Hey RE junkie!!!!
If you block the anons, the traffic goes very slow.
You lose some great insight.
Deal.
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