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sancho panza

The dud Kangaroo bounce thread

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In the spirit of the @leonardratso thread on Zombies

Looks like the wheels have come off in Oz.After three decades of growth,some are realisng it's overpriced and hot,with bugger all water.

 

Business Insider Australia 6/6/18

'Home prices are still falling in Sydney and Melbourne, dragging annual growth nationally into negative territory for the first time in years.

Auction clearance rates are at multi-year lows, and housing credit growth, particularly to investors, is slowing fast, reflecting restrictions on interest-only lending from Australia’s banking regulator, APRA.

Tighter lending standards for borrowers, this time based on income and debt levels, are also beginning to filter through the banking system.

Official interest rates are unlikely to fall much further, if at all, and with short-term market interest rates elevated compared to normal levels, there’s even some speculation that out-of-cycle mortgage rate increases could arrive at some point in the future.

For the once high-flying Australian housing market, the backdrop now looks a whole lot different to a year ago.

Given the headwinds for prices, there’s no shortage of analysts out there forecasting that the Sydney and Melbourne-led slowdown will persists for some time yet. Some believe it could be years, rather than months or quarters, before prices begin to lift again.

It’s enough for ANZ Bank, previously one of the most optimistic forecasters in Australia, to change its tune, predicting the slide in house prices will be larger than it previously thought, with the subsequent price upswing arriving later.

“Our expectation that prices would have begun stabilising by now was based on auction results, which had settled through the end of 2017 and opened 2018 at reasonable levels,” says Daniel Gradwell, Senior Economist at ANZ.

 

“However, this was not sustained, and nationwide auction clearance rates have fallen from an average of 66% in February to just 58% in May.

“This is the weakest monthly result since the start of 2013, and suggests that prices are likely to come under further pressure over the near term.”

The relationship between auction clearance rates and national price movements in average weighted terms can be seen in the chart below.

auction-clearance-rates-v-australia-homeANZ

Rather than being driven by higher interest rates — something that has usually driven prior downturns in the past in Australia — Gradwell says this event has been as a result of tighter lending standards introduced by lenders.

“The primary driver behind this slowdown in prices is the availability of credit, rather than the cost of credit,” he says.

“Banks have responded to regulatory requirements by implementing a combination of lower loan-to-income ratios, lowering estimates of rental income from investment properties and raising expense estimates.”

Gradwell says even tighter lending restrictions could be introduced, something the RBA flagged in its June monetary policy statement.

It’s worthwhile remembering that the RBA sits on Australia’s Council of Financial Regulators, along with APRA, ASIC and Treasury. Therefore, its acknowledgement that “there may be some further tightening of lending standards” hints there could be further restrictions to come.

In Gradwell’s opinion, tighter lending restrictions will place further downside pressure on house prices. The only real question, he says, is just how much that pressure will be?'

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19 hours ago, sancho panza said:

“The primary driver behind this slowdown in prices is the availability of credit, rather than the cost of credit,” he says.

Not much after a lost decade to be that annoying one who chirps up with an I told you so about how it isn't supply and demand as much as morally hazardous credit that drives housing market prices.

It is shaping up to be epic in Australia though, the IMF plans must be all ready to go.

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@TheCountOfNowherefrom the ToS:hattip

 

thar she blows

https://www.9news.com.au/national/2018/06/19/16/07/sydney-property-prices-housing-bubble-forecast

' House prices across Greater Sydney have already fallen by 3.4 percent in the past 12 months – more than any other capital city apart from Darwin (where property values are down 7.7 percent).

In Sydney’s CBD and inner south, house prices have fallen dramatically by 13.6 percent since their peak in June last year, while Ryde and the inner west have seen falls of just over 10 percent since August and March 2017 respectively.

On the city’s North Shore, property values have fallen by 8.7 percent, while the Northern Beaches didn’t fare much better, recording a 7.5 percent drop since June last year.

But it’s not only Sydney that’s seeing a levelling out of the market, with house prices forecast to fall by up to a combined six percent across Australia by the end of 2019.

Macquarie Securities economist Justin Fabo said while market corrections are always worrisome he believes the regulators would be largely delighted with the orderly cooling of housing markets so far.

"To us the real risk is on the demand side," he said.

He said if households were to lose faith in housing markets given still-elevated prices, the demand for credit could fall more than he expects.

"The main thing to fear for Australian housing is fear itself," Mr Fabo said.'

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http://www.abc.net.au/news/2018-06-22/investor-lending-strangled-falling-16pc-over-the-year/9898244

Investor lending falls almost $100 billion in 12 months as property market softens

By business reporter Stephen Letts

Updated Fri at 5:18am

The steady strangulation of investors in the property market has intensified with the outstanding value of interest-only loans falling by almost $100 billion over the past year.

Key points:

  • Interest only loans fell by 16pc, or $93b, in the 12 months to the end of March
  • Household face a 35pc increase in repayments as IO loans switch to principal & interest
  • High risk loans above 80pc of the value of property continue to fall in line with APRA hopes

 

The Australian Prudential Regulation Authority's (APRA) quarterly property statistics show while the overall mortgage market continued to soften, down 4.3 per cent over the year, this was largely due to a investor loans plummeting 16 per cent.

Interest-only (IO) loans have now collapsed almost 60 per cent since APRA slammed the brakes on them in March 2017.

Owner-occupiers have remained resolute, with loans up 3.1 per cent over the year, although this is still a step down from the 3.9 per cent growth in the previous quarter.

"The outstanding stock of IO loans has now slumped $93 billion year-on-year [-16 per cent] with interest only-loans making up 31 per cent of all mortgages, down from 39 per cent a year ago," UBS analysts wrote in a note to clients.

UBS economist George Tharenou said while the switch from IO to principal and interest (P&I) loans was a modest 0.1 per cent, or $1.6 billion, of nominal income across the economy, it hit individual borrowers harder.

"For individual households the [around] 35 per cent increase in repayments is significant," Mr Tharenou said.

"With $120 billion of IO loans expected to mature every year for the next three years, this is likely to remain a modest negative for consumption, but the larger risk is from 'stressed selling' as some households struggle to meet the higher repayments."

 

'End of the beginning' of housing correction

Mr Tharenou said it was significant the APRA figures relate to the first three months of the year, before the bank royal commission hearings started.

"Since the royal commission the housing market has slowed faster than we anticipated," he said.

"It is difficult to determine whether this slowdown was exacerbated by a further tightening in underwriting standards as a result of the royal commission, or whether a slowdown in demand was already in train as house prices peaked.

"It appears clear that the first quarter of 2018 was the end of the beginning of the housing market correction."

 

However, the figures will no doubt please APRA, which has been working assiduously to de-risk balance sheets.

Mortgages at the riskier end of the spectrum with loan-to-value ration above 80 per finally fell below 20 per cent of all new loans, down from closer to 30 per cent when APRA started turning the screws.

The other key trend in the figures was the ongoing loss of market share controlled by the big banks as they move to tighten their lending standards.

Major banks share of owner-occupier loans fell to just 71 per cent of new loans, the lowest level in 10 years.

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Australia's central bankers just won't raise rates, but their big 4 are going ahead without them:

Quote

Until the global financial crisis, retail banks tended to raise or lower their lending rates in line with the Reserve Bank's interest rate cycle.

But the RBA has kept the official cash rate on hold at record lows for the past 20 months as the nation's economy fails to improve quickly — and a commonly-held expectation is that it will not lift rates for the next one to two years, or even longer.

While that is occurring, the banking industry has faced increasing stress on its net interest margins...

The banks blame this on their surging short-term borrowing costs, in particular the sharply rising 90-day bank bill swap rate (BBSW).

https://ycharts.com/indicators/3month_libor_based_on_british_pound / https://fred.stlouisfed.org/series/USD3MTD156N

Also a good review of the situation in Bloomberg here: https://www.bloomberg.com/graphics/2018-australia-consumer-debt/

 

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https://wolfstreet.com/2018/07/02/deflating-house-price-bubbles-sydney-melbourne-australia/

'“Recent home buyers could be facing negative equity”: CoreLogic.

In Sydney, Australia’s largest property market and Petri dish for one of the world’s biggest housing bubbles, home prices fell 4.6% in June compared to a year ago, with house prices down 6.2%, and prices of condos (“units” as they’re called) down 0.7%, according to CoreLogic. The most expensive sector got hit the hardest: in the top quartile of home sales, prices fell 7.3%. In the nine months since the peak in September, the overall Daily Home Value Index has fallen 5.0%:

Australia-home-prices-Sydney-2018-07-01.

But it had been one heck of a boom in Sydney, where home prices had jumped over 80% from the end of 2009 through the peak in September last year. Even during the big-bad Global Financial Crisis, they’d only dipped 4.6%.

So the market is changing, and the denying has stopped. Australian banks are getting put through the wringer by the Royal Commission with ongoing revelations of an ever longer list of misdeeds, particularly in the mortgage sector.

The Australian Prudential Regulation Authority (ARPA), which is supposed to regulate the financial services industry, put in place some macroprodential measures to tamp down on the housing bubble, and they’re finally having an impact. Banks are suddenly focusing on borrowers’ debt-to-income ratios and other specifics, rather than just the assurance that home prices will always rise. They’re under investigation, and they’re tightening credit. And investors – a huge force in the market – have suddenly lost their appetite for property speculation, and banks have lost their appetite for funding them.

Melbourne lags a few months behind Sydney. Home prices in Melbourne peaked in December 2017 and have since declined 2.1%, but are still up 1.0% compared to a year ago. In the upper quartile of sales, property prices already dropped 2.5% from a year ago. The overall index is now back where it had last been in August 2017.

Australia-home-prices-Melbourne-2018-07-

For the other three capital cities, the situation is mixed. In Brisbane, home prices ticked up 1.2% from a year ago and in Adelaide 1.1%. But in Perth, home prices have been declining since late 2014, when Western Australia got hit by the mining bust. In June, the CoreLogic index fell 2.1% from a year earlier, with houses down 1.7% and condos down 3.7%.

For the five capital cities in aggregate, the index was down 1.7% in June from a year ago. May (when the index was down 1.1%) had been the first month with an annual decline since October 2012, according to CoreLogic. The index has now declined month-to-month for nine months in a row and is down 2.5% from the peak in October last year:

Australia-home-prices-5-capital-cities-2

But these are just the initial signs that the market is turning. Home prices remain 32% higher than five years ago, according to Corelogic research director Tim Lawless. Seen from a different perspective: there’s still a lot of air underneath these prices.

And suddenly there’s the prospect that “recent home buyers could be facing negative equity,” he said:

“Tighter finance conditions and less investment activity have been the primary drivers of weaker housing market conditions, and we don’t see either of these factors relaxing over the second half of 2018, despite APRA’s 10% investment speed limit being lifted this month.”

A large part of the home sales are via auctions that take place, mediatized and televised, in front of the home. This is supposed to whip current and future home buyers into frenzy. Every Monday, the auction results are reported with great fanfare. The key number everyone watches as sort of a real-time measure of the housing market is the “clearance rate.” It’s an indication of the percentage of homes that sold over the weekend either at auction or before the auction, compared to the homes that had been scheduled for auction.

During the boom times until late last year, clearance rates had been high. From 2013 through 2016 in Sydney, they’d mostly been in the 70% to 80% range. Last year, they began to drift lower and late last year fell below 60%, something that happened only a couple of times since 2012. And clearance rates have plunged further. This weekend:

  • Sydney: 56%, down from 68% a year ago
  • Melbourne: 60%, down from 71% a year ago
  • Brisbane: 38%, down from 52% a year ago
  • Adelaide: 55%, down from 61% a year ago
  • Perth: 25%, down from 40% a year ago

CoreLogic summarizes in its auction report:

The 2018 auction market so far has demonstrated the weakening property market, with the success rate of auctions continuing to fall through the first half of the year; returning the lowest weekly clearance rates seen since 2012 as property values decline in turn.

In Canada, the housing bubbles in Toronto and Vancouver have been on a similar track. Locking back on the wild party times, the public mortgage insurer’s massive survey of recent homebuyers reveals all. Read…  Foreign Buyers Made Me Do It: Canada Reflects Back on its Housing Bubble '

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1 hour ago, sancho panza said:

https://wolfstreet.com/2018/07/02/deflating-house-price-bubbles-sydney-melbourne-australia/

'“Recent home buyers could be facing negative equity”: CoreLogic.

Notice in the comments someone doubting the accuracy of the CoreLogic data, not for the first time. The Australian market has very poor levels of transparency and a lot of psychological manipulation, it's really not attractive at all.

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https://wolfstreet.com/2018/07/11/sydney-house-price-bubble-mortgage-market-royal-commission/

It “Hit the Mortgage Market Over the Head with a Baseball Bat”

by Wolf Richter • Jul 11, 2018 • 49 Comments

8 boots-on-the-ground findings about Sydney’s deflating housing bubble.

Australia’s housing market is getting rattled. The mortgage industry is in turmoil. Banks are battered by incessant revelations of misconduct.  Home prices in the Sydney and Melbourne metros, after surging to an astounding degree, are deflating. And the once splendid and vast game of real-estate speculation just isn’t fun anymore.

Lindsay David, of LF Economics in Sydney — who has long played a role in exposing misconduct in Australia’s banking system including, in early 2016, by calling for a Royal Commission investigation into the mortgage sector — put some findings of his boots-on-the-ground analysis into a note to clients. Here are some of them:

1. Drop-off in Speculative Demand:

“We spent countless hours” in recent months “observing buyer turnouts to scheduled property inspections of houses for sale,” he writes. “While there may still be a small sum of properties on market that continue to see very large turnouts, there was a clear visual drop-off of engaged interest from buyers and indeed ‘property snoops’ across the majority of properties for sale that we had observed.”

“On many occasions, we observed either no interested parties, or less than 4 parties inspecting a property across a very decent chunk of offerings on the market,” he writes. “This lower rate of turnouts was something we simply had not observed over the years at such a dramatic scale.”

2. Sharper drop in selling prices than shown in official data:

According to CoreLogic (the official data), home prices in Sydney fell 4.6% in June compared to a year ago, with house prices down 6.2%, and prices of condos down 0.7%. In the most expensive quartile, prices fell 7.3%.

But Lindsay David writes: “It is our view based on all the resources made available that house prices in the Sydney area have broadly fallen somewhere between 11% and 15% over the comparison period.”

3. Sudden eagerness by property agents to negotiate

“We also observed a systemic increase in property agents’ willingness to negotiate and follow up on the majority of very low-ball offers made for properties they are selling. This negotiation approach for buyers was simply not possible twelve months ago,” David writes.

4. Less access to “Jumbo Loans” because rules suddenly matter to banks (a little):

David writes in the note:

As we have always argued, Australian banks had for years been flooding the housing market with “jumbo loans” that were well in breach of the National Consumer Credit Protection Act 2009 (NCCPA). When benchmarking the ability now to ascertain a loan outside the scope of the NCCPA, it appears the majority have lenders are now simply skirting in and around the laws of the NCCPA versus the outright disregard of this law, which for many years was industry standard.

This shift in lending practices brings lenders closer to the rules of the law and thus resulted in a significant reduction in the overall borrowing capacity of your standard Sydney property buyer. Sydney property buyers were leveraging at the highest ratios in the country (indeed globally) on the back of the easiest of lending environments. This now more broadly appears to be in the past versus the present.

5. The Royal Commission did it:

In 2017, the Australian government finally and reluctantly established The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, as it’s called, to investigate and report on misconduct in the financial services industry, particularly in the mortgage sector. It found a treasure trove of misconduct and “continues to expose cases of bank malpractice,” David writes:

The publicly released evidence provided consensus that our research into illegal conduct and regulatory capture in the mortgage market was spot on. We anticipate captured regulators will struggle to release the noose of the banks borrowing power without repercussions.

Under scrutiny, banks are now curtailing some of these practices and some of their riskiest lending, such as interest-only mortgages to investors who cannot afford them, and this has caused lending conditions to tighten particularly for speculative buyers.

The changes “appear to have hit the mortgage market over the head with a baseball bat,” David writes. “In our opinion, this is the primary reason the Sydney property bubble got pricked.”

6. Underwater interest-only mortgages:

Property price declines hit interest-only mortgages the hardest because there may be little or no equity cushion. Once a home is worth less than the mortgage, and is thus “underwater,” it cannot be sold because the proceeds won’t suffice to pay off the mortgage. Investors, often with negative cash-flows in the property, are stuck contemplating doom and gloom.

7. “Non-transparency” increases sharply

“The Sydney housing market is synonymous for non-transparency,” David writes. “We have continued to observe an ever-increasing lack of transparency when it comes to house prices (asking price and sale price)”:

  • More properties that are for sale are advertised without an asking price.
  • The number of transactions where the price is not disclosed has surged. This also appears to be the case in Sydney’s weekly auction results, thus preventing the median sale price at auction from falling faster than what it likely has in reality.
  • On many occasions, properties are being put on market only to be taken off market two or three months later. However, many of these properties are still for sale, but no longer advertised or have a ‘for sale’ sign posted on the front lawn.

“It could be argued that the property culture in Australia is to make sure everyone knows how high houses are selling for – unless the market is falling,” he writes.

8. Local Media, hooked on real-estate & bank ads, downplay Bad News

“The local mainstream media (MSM) have made great efforts to play down the systemic nature of the early findings of the Royal Commission along with the fall in house prices in Sydney,” David writes:

‘House Prices will fall, but not crash’ is the chorus despite Sydney house prices falling through the floor on the back of rising funding costs and weakening credit conditions. No doubt, revenues from real-estate and bank advertising remain a critical revenue component for Australian MSM news sites, relative to their international peers.

Humorously, the MSM has also begun to turn their attention on smaller housing markets that are showing signs of strength and increased credit expansion, such as Hobart, Tasmania, which has a population of just 220,000.

And the bottom line?

There are repercussions. Lindsay David, from his perch at LF Economics, concludes the note:

We stand with the view the Sydney housing bubble appears to have been pricked, and we are confident that house prices will continue to fall at a moderate to fast pace over the coming months. This should eventually have knock-on effects to the banking system and its stability and ability to maintain profits.

Furthermore, we can expect the residential construction sector to feel the pressure as more developers come to the realization that there is now no real profit to be made in a falling market. In a feedback-loop economy so reliant on rising land prices, the risk of eventual job losses filtering through the Sydney economy appears to be on the increase which could easily spill into the broader Australian economy.

But even the official reports are no longer brimming with optimism. “Recent home buyers could be facing negative equity,” warns CoreLogic.

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I own a house in Melbourne since 2014/15 and fully expected prices to be flat or declining by now.  As recounted elsewhere, we bought so as to avoid having all our deposit money sitting in banks/green numbers on a screen somewhere as I was more worried about losing everything in a bail in during the next crash than possibly losing an imaginary percentage on a home. 

 

Melbourne will be our home for 20-30 years when we get back to Australia.  I do hope property prices stagnate or decline to make a fairer market, but I know how Aussie pols work and how easy it is going to be for them to reinflate this bubble.

  1. increase immigration from overseas.  Major driver (I am one such example)
  2. Loosen foreign real estate controls - they kinda did this for decades by not enforcing the laws.  A bit tighter now, but could easily be loosened
  3. Drop mortgage rates.  They are still around 5%.  Remember how low the UK went?
  4. Bring in a homebuyers incentive.  Done in a few places already

 

If you look at the number of Aussie pols with more than one property, it is huge.  They have direct skin in the game.....

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There will be a general election early to mid 2019, the Coalition that are in power are very out of favour, Labor are likely to take it from them this time (it was a hung Parliament last time i think). 

One of Labor's big promises is to scrap negative gearing which is where investment property mortgage interest can be written off against tax. The tax deductible aspect has been a big driver of the bubble on the way up.

It feels like the current government want to let the market drop and then run a huge scare campaign in the run up to the election warning that the opposition will smash house prices if they pull the rug on negative gearing at this pivitol time (and only the incumbent govt can save you all etc).

Whilst its true that mortgage interest rates are higher, its quite easy to get a variable rate loan for circa 3.6% currently if you are borrowing conservatively (the RBA cash rate is 1.5%)

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On 13/07/2018 at 01:45, sancho panza said:

‘House Prices will fall, but not crash’

When does a fall become a crash? Presumably when it does some damage.

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26 minutes ago, Option5 said:

When does a fall become a crash? Presumably when it does some damage.

Panic first and you might get out with the shirt still on your back.

The MSM are trying to convince us that the falls in Sydney are an orderly 5%, a healthy correctly after years of strong growth etc. If this dump is anything to go by, i beg to differ:

Originally listed in March at AU $1.6m:

https://www.news.com.au/finance/real-estate/sydney-nsw/an-interesting-neutral-bay-home-seeks-new-owner-after-43-years/news-story/12a558efc3239dbba419cdea854ac26a

Just 5 months on asking AU $1.19m with a lick of paint and not sold. Thats a 25% drop which would've been unheard of this time last year esp in Neutral Bay which is proper inner Sydney & very walkable -albeit this one is in a crappy bit.

https://www.domain.com.au/300-falcon-street-neutral-bay-nsw-2089-2014116551

No one wants to catch the falling knife,  yet anyway

 

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4 minutes ago, Sugarlips said:

Panic first and you might get out with the shirt still on your back.

The MSM are trying to convince us that the falls in Sydney are an orderly 5%, a healthy correctly after years of strong growth etc. If this dump is anything to go by, i beg to differ:

Originally listed in March at AU $1.6m:

https://www.news.com.au/finance/real-estate/sydney-nsw/an-interesting-neutral-bay-home-seeks-new-owner-after-43-years/news-story/12a558efc3239dbba419cdea854ac26a

Just 5 months on asking AU $1.19m with a lick of paint and not sold. Thats a 25% drop which would've been unheard of this time last year esp in Neutral Bay which is proper inner Sydney & very walkable -albeit this one is in a crappy bit.

https://www.domain.com.au/300-falcon-street-neutral-bay-nsw-2089-2014116551

No one wants to catch the falling knife,  yet anyway

 

People always want to think it only affects others and that their circumstances are different, "A falling tide lowers all boats" is the reality. The 'damage' of a crash is the people in negative equity or bankrupt due to falling house prices. We'll know it's a crash when repossessions and bankruptcies start to rise.

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32 minutes ago, Sugarlips said:

Panic first and you might get out with the shirt still on your back.

The MSM are trying to convince us that the falls in Sydney are an orderly 5%, a healthy correctly after years of strong growth etc. If this dump is anything to go by, i beg to differ:

Originally listed in March at AU $1.6m:

https://www.news.com.au/finance/real-estate/sydney-nsw/an-interesting-neutral-bay-home-seeks-new-owner-after-43-years/news-story/12a558efc3239dbba419cdea854ac26a

Just 5 months on asking AU $1.19m with a lick of paint and not sold. Thats a 25% drop which would've been unheard of this time last year esp in Neutral Bay which is proper inner Sydney & very walkable -albeit this one is in a crappy bit.

https://www.domain.com.au/300-falcon-street-neutral-bay-nsw-2089-2014116551

No one wants to catch the falling knife,  yet anyway

 

Good luck trying to get to sleep in that place! Over a million dollars for guaranteed mental illness.

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Posted (edited)

The Aussie MSM certainly seem to have run out of positive spin at the mo..the language has quickly become "plunge" and "freefall" - and that's in Perth where prices are already beaten up after the mining boom ended 5 years ago..

https://www.perthnow.com.au/business/housing-market/perth-house-plunge-leads-national-downturn-ng-b88914158z?utm_campaign=share-icons&utm_source=clipboard&utm_medium=clipboard&tid=1533124941912

Meanwhile on the east coast today..

https://www.smh.com.au/business/the-economy/the-worst-is-yet-to-come-house-prices-fall-by-fastest-rate-in-six-years-20180801-p4zuuc.html

Edited by Sugarlips

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9 hours ago, Sugarlips said:

The Aussie MSM certainly seem to have run out of positive spin at the mo..the language has quickly become "plunge" and "freefall" - and that's in Perth where prices are already beaten up after the mining boom ended 5 years ago..

https://www.perthnow.com.au/business/housing-market/perth-house-plunge-leads-national-downturn-ng-b88914158z?utm_campaign=share-icons&utm_source=clipboard&utm_medium=clipboard&tid=1533124941912

Meanwhile on the east coast today..

https://www.smh.com.au/business/the-economy/the-worst-is-yet-to-come-house-prices-fall-by-fastest-rate-in-six-years-20180801-p4zuuc.html

Wow!!!

'HOUSE prices across the country are now in freefall, led by Perth, with new figures showing a deepening in the national property downturn.

CoreLogic’s house price index, released today, showed house values in Perth fell another 0.8 per cent through June.

They are now down by 1.1 per cent over the past three months and by 1.8 per cent over the past year.

There had been some signs the market had bottomed but buyers got cold feet through July.'

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WOlf is on this too ce soir.

https://wolfstreet.com/2018/08/01/house-price-bubble-sydney-melbourne-australia/

'It is rare that a housing market makes such a beautifully defined U-turn, after a long hard surge.

In Sydney, Australia’s largest housing market and one of the world’s biggest housing bubbles, prices of homes of all types fell 5.4% in July compared to a year ago, and 5.5% from the peak in September. Prices of single-family houses dropped 7.0%, and prices of condos (“units”) fell 1.6%, according to CoreLogic’s Daily Home Value Index:

Australia-home-prices-Sydney-2018-08-01.

The most expensive quarter of the market got hit the hardest, with prices down 8.0% in July compared to a year ago. Across the so-called “most affordable quarter of the market” – “least unaffordable” would be more appropriate – prices fell by 1.8%.

And supply in Sydney is starting to come out of the woodwork: Total number of homes listed for sale in July, at 26,103, was 22% higher than a year earlier, and according to CoreLogic, the most since July 2012.

In the chart below, the number of homes listed for sale in 2018 is denoted with the black line. It’s below only the blue line (2012), but creeping up on it. Note the seasonality, with listings getting pulled during the Christmas holiday period (chart via CoreLogic):

Australia-Sydney-listings-2018-08-01.png

And so goes the rental market, where “conditions eased further in July,” CoreLogic noted in its report: In Sydney rents fell 0.4% year-over-year. While that might not sound like much of an annual decline, it is “the largest decline on record” in CoreLogic’s data going back over a decade.

Melbourne lags a few months behind Sydney but is now catching up. Home prices in Melbourne fell 0.5% in July year-over-year, according to CoreLogic, and are down 3.0% from their peak at the end of November 2017: House prices fell 1.4% from a year ago while condos are still up 2.3%. The index is now back where it had been at the end of June, 2017:

Australia-home-prices-Melbourne-2018-08-

The most expensive quarter of Melbourne’s market, as in Sydney, got hit the hardest, with prices down 4.1% from a year ago. In the “most affordable” quarter of the market, prices are still up 7.5%.

And supply is increasing: In July, there were 30,029 homes listed for sale, up 11% from a year ago, and the highest since 2014.

Corelogic tracks the largest five of Australia’s eight capital cities in a separate index. Sydney and Melbourne, due to their enormous size, weigh the most. In the remaining three of the five capital cities in the index, prices were mixed in July:

  • In Brisbane, home prices rose 1.2% year-over-year.
  • In Adelaide, home prices ticked up 0.7%.
  • In Perth, home prices fell 2.3%, with houses down 1.8% and condos down 4.6%. Prices started skidding in late 2014, when Western Australia got hit by the mining bust.

In aggregate, the five capital cities index fell 2.4% in July year-over-year. Note that May was the first month with a year-over-year decline since October 2012. The index has now declined month-to-month for 10 months in a row and is down 3.1% from the peak in October last year:

Australia-home-prices-5-capital-cities-2

Across the country, home prices dropped 1.6% year-over-year, the largest annual fall since August 2012, according to CoreLogic, and are down 1.9% since the peak in September.

This is “a relatively mild downturn to date considering values remain 31% higher than they were five years ago,” said CoreLogic head of research Tim Lawless in a report titled, “Housing Downturn Gathers Momentum In July.” With the implication that there’s a lot more room to fall?

[T]he weakness in dwelling values is being driven by the long running declines in Perth and Darwin along with an acceleration in the rate of decline across Sydney and Melbourne and slowing growth rates across most of the remaining regions.

 

Even the Hobart market, where the annual pace of capital gains has held in double digit growth territory since January 2017, is starting to slow down. Dwelling values were steady over the month and the annual rate of growth slowed to 11.5%; still strong but the slowest annual growth rate since February 2017.

To tamp down on the excesses in the housing market and to keep banks from exposing themselves to even more risks, Australia’s banking regulator (APRA) and the Council of Financial Regulators started in 2014 to introduce “macroprudential policies” (summary) that were at first completely ineffectual but now are pulling the rug out from under housing speculators and investors – domestic and foreign alike.

These policies include a 30% limit per bank on interest-only mortgages and higher interest rates on mortgages for investors.

Investors and speculators are now also getting rattled by declining property prices, on top of historically low rental yields (though they’re now creeping up as prices decline).

In terms of owner-occupied homes, banks have been pushed – after publicized scandals, shenanigans, and recent findings by the Royal Commission investigation – to look at debt-to-income ratios, a new emphasis that has effectively taken many potential buyers off the market, particularly in the most expensive cities, Sydney and Melbourne.

These dynamics are being accompanied by a surge in new construction coming on the market, according to CoreLogic:

Unit construction remains well above average across most states, and is at record highs across Victoria [Melbourne] and South Australia [Adelaide] and only marginally below the record high in New South Wales [Sydney].

Coupled with high supply, key segments of demand, including domestic investors and foreign buyers, have thinned out which could see downwards pressure on prices in those areas where new ‘investment grade’ projects are numerous.

Real estate moves slowly and price changes drag out over many years. It is rare that a market makes such a beautifully defined U-turn, after a long hard surge, as the markets in Sydney and Melbourne.'

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http://www.abc.net.au/news/2018-08-01/corelogic-housing-price-downturn-accelerates/10060036

'Melbourne has overtaken Sydney as the nation's worst-performing housing market, and suffered its first annual price drop in almost six years.

Property prices in Australia's second-largest city fell last month (-0.9pc) and over the past quarter (-1.8pc) — versus Sydney's slightly smaller drop in July (-0.6pc) and over the past three months (-1.1pc).

However, on a yearly basis, the result is different. Darwin remains the weakest annual performer, down 6.2 per cent.

This compares with Sydney (-5.4pc), Perth (-2.3pc) and Melbourne (-0.5pc) over the past year.'

 

https://www.bloomberg.com/news/articles/2018-08-01/australia-housing-downturn-deepens-prices-fall-most-in-7-years

'Australia’s property slump deepened in July, with housing prices falling the most in almost seven years.

National dwelling values dropped 0.6 percent last month -- the biggest fall since September 2011 -- as declines in Sydney and Melbourne accelerated, according to CoreLogic Inc. data released Wednesday. Prices have now fallen for 10 straight months due to a combination of lending curbs, stretched affordability and reduced investor demand
As well as little prospect for capital growth in the medium term and higher mortgage costs, investors also face falling rents, which declined 0.2 percent nationally last month, according to CoreLogic.
 

In the Red

The rate of annual decline in Australian property values is accelerating

“We can’t see any factors that may halt or reverse the housing markets’ trajectory of subtle declines over the second half of 2018,” CoreLogic’s head of research Tim Lawless said. “The availability of housing credit has been a significant factor contributing to this slowdown.”

Nationwide, housing values have fallen 1.9 percent since peaking in September, though remain 31 percent higher than they were five years ago.'

 

 

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Posted (edited)

Sydney down 5.6%.

 

It's going to be interesting to see whether the momentum builds.

https://www.businessinsider.com.au/housing-australian-property-corelogic-house-prices-2018-8

 

Australian house prices ticked lower last week, falling by 0.1% across Australia’s five largest capitals.

Weekly data from CoreLogic showed the declines were led by Melbourne and Brisbane, which fell by 0.2% and 0.1% respectively.

Elsewhere, the Sydney market held flat on a weekly basis for the first time since early June. Adelaide and Perth were also flat.

cl-1.jpgSource: CoreLogic

The latest results mark the fourth straight week — and fifth week out of the last six — that Melbourne led declines in major markets.

Price changes in annual terms for the Melbourne market have fallen from a gain of 0.2% to a loss of 1.4% over that six-week period.

Annual price falls for the Sydney market were unchanged last week at 5.6%.

Last week, a quarterly report by consulting firm RiskWise Property Research assessed the risk outlook for houses and units for all eight states and territories.

Tasmania’s housing market was the only market deemed to be low-risk, while NSW was considered to be medium-risk for houses and units.

 

Victoria was deemed low-medium risk for housing and medium risk for units.

Across the major markets, last week’s price action coincided with a decline in the number of successful auctions compared to the week prior.

Preliminary data from CoreLogic showed 868 properties went to auction in Melbourne over the weekend, returning a clearance rate of 55.7% (down from 61.3%).

Sydney’s preliminary clearance rate was 56.5% on 572 auctions, down from 59.1% last week.

cl-2.jpgSource: CoreLogic

Once again, unit auctions had a higher success rate than houses, after a brief reversal the week prior when houses outperformed units.

For the second straight week, the number of new property listings — properties listed within the last six months — increased across all five major capitals.

Including Hobart, Darwin and Canberra, the number of new property listing compared to the same time last year was down 3.7%.

cl-3.jpg
Edited by sancho panza

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Personal loss tracker - I bought my house in Victoria in 2014..... I wonder at what point I will have a paper loss?

(don't really care re paper price as we are going to be living in it when we return to OZ.....)

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On 22/08/2018 at 21:26, wherebee said:

Personal loss tracker - I bought my house in Victoria in 2014..... I wonder at what point I will have a paper loss?

(don't really care re paper price as we are going to be living in it when we return to OZ.....)

Dont worry the new PM is Very close with the AUS property lobby, he'll have your back with double, nah triple home owners grants and other creative htb scheme like let the young access their pensions to bid up the east coast bubble just that bit more..

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