Buyers In Sydney ‘Bowing Out’ Of Housing Market
The News Limited reports on the so-called soft landing in Sydney, Australia. “Sydneysiders are voting with their wallets, bowing out of the NSW property market at an unprecedented rate as new home approvals fall to their lowest level in almost 20 years. With fears of a softening state economy and rising unemployment, demand for new homes is hitting all-time lows.”
“For the 12th month in a row, building approvals have declined across the state, with fewer homes being built per year than in the mid-’80s. The State Government claimed it was indicative of a slowdown in the housing sector across the country, although construction makes up almost a quarter of the state’s economy.”
“The Australian Bureau of Statistics figures revealed approvals were the lowest for 19 years. Only 2039 homes were approved in January. Dwelling unit approvals fell by 10.9per cent. In 1995, 4167 homes were being approved a month, around 50,000 homes a year. It has now crashed to around 33,000.”
“A NSW Property Council spokesman said: ‘I think the figures reinforce what we all know..the economy is soft and the housing market is also soft..and until the situation turns around we are less likely to see a pick-up in demand for housing.’”
“Treasurer Michael Costa yesterday said the property market slowdown was more significant in NSW because the housing boom had been much stronger in the state.”
the interesting question is: is there a sudden drop in demand (maybe buyers don’t see as much easy money in the housing market as they used to?) or is there is huge oversupply in the market thanks to speculation in recent years?
Maybe someone from Oz can tell us if the sales numbers for new homes are dropping as much as the new construction numbers?
Europe vs other parts of the world.
People are trying to compare our fate to that of Great Britian and other European markets.
There is one major difference in these markets.
People in Europe have owned land for thousands of years. Its long established, estates have been passed down through generations and large land sales are rare causing market stability.
In Austrailia, North America and even South and Central America land has only been occupied for a few hundred years with the largest holders still being those governments who can sell large tracts of land cheaply in the name of economic developement.
Bottom Line
More transactions equal less stability. Less transactions equal more stability.
I don’t think the difference is that big. In many EU countries a normal home buyer can hardly buy on the open market; you just purchase from a developer who usually purchases from the local government. In Netherlands and several other EU countries the biggest land speculator is the government itself.
wierd theory on stability-
OZ has a kick ass export to Asia economy - we have HIC & MIC
both are dying
Have to agree with that. The booming (bubbly?) resource sector has saved Oz’s ass in the aftermath of their house bubble. That and years of reforms by the fiscally conservative government.
Further, their primary stock market index is well into record territory: http://finance.yahoo.com/q/bc?s=%5EAORD&t=5y Also mostly due to resources.
UK is significant
mostly arms- no big moive down 5% ? in 20 months after peak 6/4
where’s the beef
Top level numbers like that don’t tell the full story. For example, there are neighbourhoods in Sydney that are down 30%, whereas the nation as a whole might only be off 5%. Same would apply to the UK. Brutal crashes in the most bubbly areas are hidden in national statistics.
agree with the comment by SMB about national statistics.
The same happened in the Netherlands around 2001. The most bubbly markets like expensive homes in Amsterdam went down about 30%, while in the rural areas the RE boom was just beginning. National averages have been steadily climbing giving the impression of a ’soft landing’ while reality is that there is no landing yet, the bubble is just spreading (also to other countries) and this keeps prices elevated a little longer.
Name me a single suburb down 30% in the last year?
Do you even live in Australia?
The decline was about 5% in NSW last year.
In Western Australia, where the real resource boom is, housing is just starting to see a peak. Median price is around 300k for the whole state - considering we have a climate similar to California, without the pollution and overcrowding, and a booming economy, I think thats pretty reasonable.
Just saw houses for sale in Byford, WA, for $300k.
I really really hope I am right about this peak - there can’t be too many fools left willing to shell out that kind of money for the pleasure of living in the ghetto.
If the world housing market crashes, demand crashes
and the Ozzie raw material export market gets hit hard. The drop isn’t over for Ozzie housing
Just a theory of mine…
From my experience in Europe, its a whole nother world. People I met there were not the same as here. They are less driven by material things and value effeciency more.
Here people are driven by this whole “one-up-manship” we have to buy the biggest SUV, the biggest home… ect. with money we don’t have to impress people we don’t like. This is why over the past couple years the Hummer and the Mcmansion have been so sucessful.
Couldn’t agree more.
From my experience in Europe, its a whole nother world. People I met there were not the same as here. They are less driven by material things and value effeciency more.
Here people are driven by this whole “one-up-manship” we have to buy the biggest SUV, the biggest home… ect. with money we don’t have to impress people we don’t like. This is why over the past couple years the Hummer and the Mcmansion have been so sucessful.
Hmmm … I’m not so sure, about the UK at least! (I moved from UK to USA in 2004.) There’s a big aspect of ostentatious consumption in the UK too. There are plenty of Range Rovers and other SUVs in Southern England which will never get their wheels muddy on a dirt track. There are more in the US, because gasoline is far too cheap. There is much less space in the UK to build on.
Now we just reached a point where true end users can’t afford the homes or condos and investors lost interest due to flat prices and the fear of a bubble.
I guess now its just a high stakes game of poker… Lots of homes for sale right now, will buyers fold and pay high prices or will they call the sellers bluff and hold out for more incentives and price declines?
it’s not like poker, because when gambling you can loose your money. In the housing market, you just loose other people’s money when you buy a home that is over your budget.
Buyers have no reason to fold - they can play anytime they want even if they don’t have the money. At least, that is still the situation in most of Europe and I don’t see any signs of change in this. Of course, people who have the money or who want to purchase expensive homes where a decent downpayment is required are mostly on the sidelines by now; the rest is still enjoying the free party in the casino.
I agree, time is on the buyers’ side now.
i’d love to see prices come down dramatically in sydney. i love it there and could see myself buying a vacation home there when i’m older.
Me too. Or even living there permanetly.
What is the best online resource for Sydney real estate? From my extensive research (all fifteen minutes of it) it seemed like the government was not terribly receptive to non-residents purchasing property. Of course with prices falling that may have changed.
non-residents purchasing property:
are we talking about speculation, just when the top seems to be in?
I agree than in many of these overseas markets (including some US areas), EU buyers will be ’snapping up the bargains’ in the next year because the floodgates with easy money are still wide open there, and everybody in the EU knows by now that you can only win big time in the RE market …
No.
Australia only allows foreigners to buy NEW construction, which they can fairly easily. The rationale is that you are adding to the existing housing stock. I don’t think that’s about to change any time soon.
If you want to check out houses, here is a link to a large Sydney RE agency: http://www.mcgrath.com.au/
Prices are in AUD$ and are mostly negotiable right now.
Thanks.
http://www.realestate.com.au
If you were smart about it, you would forget Sydney and move to Perth - similar climate, beautiful city on river and some of the best beaches in the world, great wine region down south, housing at half the price, no infrastructure, overcrowding or pollution problems etc etc etc - check out Mandurah and the canal estates. Secret Harbour is nice as well.
Sydney’s RE peaked about two years ago and compare with OC in terms of real prices it only about 10 % lower, with the help of strong AU$ in recent years, the actually RE appreciation rates about the same as of OC. Since their GDP is 80% of US’s, the actually affordability is even lower, not to mention there is no incentive for mortgage interest tax deductions.
In short, I think NSW is a very good reference point for us to observe the future of OC RE market, since it about 12 - 18 months ahead of OC.
Crash Believer - we don’t buy our own properties using US dollars. We don’t seem to spend to show off like US consumers do either - I’m 25, a working professional, and none of my friends own plasma tvs (one did buy a 10 year old toyota 4runner though). The strong aussie dollar is good if you want to buy a microwave, but I haven’t ever needed to do that so it doesn’t really affect me.
BTW, as a resource driven economy, imagine what would happen if the AU dollar had not appreciated?
You also forget that while there may be no interest deduction on your first home, stamp duty is waived in some states, and the government hands out the first home owners grant ($7k). Also, you can deduct the full cost of ownership, including loan interest, on any investment property.
A few friends who have bought property are either renting or living at home, and renting out their investment property so they can deduct the interest. It’s a pretty common practice.
Lastly, we never had those crazy loans Americans are so fond of, nor did we have the very low interest rates.
I wouldn’t live in a $hithole like California even if it was half the price of Australia - its dirty, polluted, the beaches are overrated, the schools are crap and health care isn’t free. Just flying into the airport through the layer of brown smog forever ruled that state out of consideration for me.
Love your last paragraph, it’s a perfect description of Sydney as far as I’m concerned.
ha
thats why I live in Perth.
Aussie update……….6th March.
http://www.smh.com.au/news/business/housing-market-about-to-take-off-again–in-your-dreams/2006/03/05/1141493544760.html?page=fullpage#contentSwap1