Worsening Housing Market in Australia

[Ryan]

From the Sydney Morning Herald:

Housing crash puts sellers in debt crisis

Jonathan Chancellor, Property Editor
August 21, 2006

A THREE-BEDROOM brick-veneer 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 in a further sign of the depressed state of the Sydney property market.

Only one person bid on the house in the city's west. The mortgagee sale was forced after the owners could not meet the interest payments on the $405,000 they borrowed to buy the house at the peak of the market.

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.

At the St Clair auction the buyer was an investor who will spend about $40,000 on essential repairs before leasing it at about $270 a week, said its L.J. Hooker St Marys selling agent, Michael Beatty.

Increasing petrol prices appear to be compounding the impact of repeated interest rate rises on properties in Sydney's outlying suburbs by driving prices down.

Lethbridge Park, near Penrith, recorded the second highest fall, when a townhouse that sold for $257,000 in 2003 was resold by mortgagees for $156,500, reflecting a roughly 40 per cent fall.

At Heckenberg, 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 Adaminaby Street house sold at an approximate 22 per cent discount to the property-boom price.

"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.

At Parramatta, mortagees accepted $541,500 for an unrenovated house that fetched $736,000 in 2003 when it was sold as a deceased estate. The bank lent $580,000 on its 2003 sale.

Even the inner-suburban areas are showing signs of depressed prices. In Lilyfield a four-bedroom house on 607 square metres last sold at $1,355,000 unrenovated in boom-time 2003.

It attracted a $1,179,000 top bid after its recent renovation by its owner-builder. Two registered bidders competed at the on-site auction but the property was passed in well short of the owner's expectations. The freestanding house now has a $1.35 million asking 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.

Mr 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.

"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."

 

[Pierre]

FINANCIAL FLOWS
* 1990-2000 : increase in shares price
* 2000-2003 : shares price drop
* 2003-2006 : shares price stabilizes
(http://finance.yahoo.com/q/bc?s=%5EDJI&t=my)

* 2000-2005 : investment shift from shares to real estate : surge in real estate prices
(http://investmenttools.com/median_and_average_sales_prices_of_houses_sold_in_the_us.htm)

* 2006 : new shift ? real estate price starts to drop in some areas while gold price experiences strong increase
(http://www.kitco.com/charts/livegold.html)

INTEREST RATES

* 2000-2002, interest rates were very low and it pushed people to borrow money, particularly in order to buy housing because prices were getting higher and higher.

* 2002-2006, interest rates rise non stop (http://minneapolisfed.org/research/data/us/disc.cfm)

SITUATION IN 2006

1/ the cost of loans repayment keeps increasing (non fixed interest rate loan)
2/ while the value of the patrimony (on which the loans are guaranteed) is decreasing (beginning of real estate deflation in some areas).
3/ and savings rate drops (http://www.ecb.int/press/key/date/2005/html/sp051104.en.html, chart 5)

These are three major threats as far as personal bankrupcy is concerned.

 

[mabar]

Hi, maybe its not the place but, Im in Mexico and at least 3 people have been asking me if I want to work in Australia?...ME??...I found it curious, but reading this post I ...dont know...If there are red lights why they are asking for working people to get there?...somehow it pop in my mind the immigration problems and the cheap class working people.

He told me that he received an email regarding asking people with certain characteristics to applay to work in Australia...I have not seen the email, but I found this website:

The Australian Government seeks skilled workers & professionals to fill shortages created by the growing Australian economy. 97,500 work rights visas will be made available between July 2006-June 2007, allowing skilled workers to work and live in Australia. Over 150,000 jobs are advertised each week, and the current unemployment rate at its lowest level in 10 years. Australian Government statistics confirm 89% of Skilled Visa holders gain employment within 6 months.

http://www.migrationexpert.com/register.asp?type=1

..."created by the growing Australian economy"...that happends to has financial problems?...so many countries with "growing economies" that is not reflected in the normal people ...everyday mexican economy is "growing" too...to where? ...they dont espicify ...

 

[Ruth]

Hi, maybe its not the place but, Im in Mexico and at least 3 people have been asking me if I want to work in Australia?...ME??...I found it curious, but reading this post I ...dont know...If there are red lights why they are asking for working people to get there?...somehow it pop in my mind the immigration problems and the cheap class working people.

He told me that he received an email regarding asking people with certain characteristics to applay to work in Australia...I have not seen the email, but I found this website:

The problem with Australia is its a BIG place with a small population. The government has trouble getting skilled labour - especially into areas that need it, like rural areas.

Many people who have skills come here, but due to difficulty with language as well as other differences in training, end up doing unskilled labour. The government often makes it very hard, insisting that people take more training in order to register and work as a skilled person.

I know of some skilled Chinese who come here and end up opening a two dollar shop, selling cheap bits and bobs instead of working in their skilled area.