The Housing Bubble

A report from News Corp Australia. “It’s not the news property investors want to hear. Just as price growth begins to slow, rents are also on a slow down and going backwards in some capital cities. ‘There is still a lot of new properties under construction at the moment, particularly units, and units tend to be much more likely to be rented than houses, so that stock still has to come on line and that is going to limit the opportunities for investors to lift rental rates, because those renters are going to have a lot more choice,’ said CoreLogic RP Data senior research analyst Cameron Kusher. Mr Kusher said the figures showed there had been a pretty sharp slowdown in rental growth across most markets. ‘It is pretty much a record low,’ he said.”

The Australian. “House prices in Perth’s most exclusive suburbs have plunged. House prices in the riverside suburb of Mosman Park in Perth’s west fell 30 per cent to $1.01 million in the 12 months to September 30, the latest median quarterly Real Estate Institute of Western Australia figures show. House prices have also fallen heavily in neighbouring Cottesloe which is down 14.4 per cent to $1.8 million while central Perth prices dropped 15 per cent to $841,000 during the period. It comes as the number of dwellings on the market reaches levels not seen since the global financial crisis.”

“Property forecaster SQM Research says the total number of residential properties for sale in Perth has jumped five per cent to 25,000 in October. ‘That’s a sign the market is in a downturn,’ SQM managing director Louis Christopher said.”

The Herald Sun. “The median price for one-bedroom units in Melbourne has fallen in the past year, as property experts predict an apartment glut could make it difficult to sell smaller apartments in the city. Buyers gifted with more choice by the boom in apartment developments across the city will bypass shoebox-sized units lacking a car park, outdoor area and other sought-after features, experts say. Buyers advocate Frank Valentic said said an apartment would be tough to sell if it didn’t ‘tick all the boxes’ — being bigger than 50 square metres, in a desirable location and having an outdoor area and car park.”

“Young professional Ali Knight said she was ‘a little bit nervous’ about selling her one-bedroom apartment in Middle Park at auction next Saturday, but hoped its big kitchen, car park and bright appearance would appeal to buyers. The 29-year-old bought the home for $289,000 in mid-2012 and has fully renovated it.”

From Mortgage Business. “The head of a national real estate group fears that a serious default issue is on the horizon for the thousands of Australians buying off-the-plan properties. Century 21 Australia chairman Charles Tarbey explained that off-the-plan properties may not come up to their contract value upon completion as valuers become more conservative in an environment of increasing risk. ‘Valuers were the ones who were absolutely destroyed during the GFC, whereby people purchased property, the price of property fell through the floor and people sued the valuers because of the advice they had given on valuations,’ Mr Tarbey said. ‘At this point in time I would think that valuers are going to start revisiting the pain they felt all those years ago and they are going to become more conservative in the way that they value properties.’”

“In its latest Financial Stability Review, the Reserve Bank of Australia warned that settlement risk on apartments purchased off-the-plan may have increased as a direct result of the stricter criteria that banks are now applying to investor housing loans. ‘The risk of a downturn in apartment markets is greatest in the inner-city regions of Melbourne and Brisbane, which look susceptible to potential oversupply,’ the RBA said.”

From Domain News. “It was a gloomy spring day for many property sellers across Sydney, with many properties passing in – often with no bids from prospective buyers. A two-bedroom, two-bathroom apartment with views of the city and the Harbour Bridge, passed in on a vendor bid of $1.45 million. Auctioneer Scott Gibbons, who markets himself as ‘Mr Sold,’ had called for one of the two registered bidders to ‘lay their cards on the table’ for the ‘phenomenal opportunity’ but no one raised their bidder’s card. Unfazed, he assured the small gathering: ‘You will see this one sold very quickly.’”

“In inner-city Redfern, auctioneer Damien Cooley​ was just as unsuccessful at the auction of a two-bedroom apartment. ‘All you need to own this is make a good offer … a fair offer,’ he said. But even a vendor bid of $785,000 failed to encourage anyone to show interest – which is hardly surprising since, as Belle Property Surry Hills agent Leon Parker admitted later, no one had actually registered to bid. Why did they proceed with the auction? ‘Well, we paid for it,’ he said. ‘And we really wanted the vendor to see that he has to lower his expectations.’”

“The reserve had been $850,000. An apartment higher up had sold for $800,000 earlier in the year but things have changed since then. ‘It’s a little bit scary, with the market doing what it’s doing,’ Parker said.”

“Buyers made conservative offers and stuck with modest bid increases at many auctions in Melbourne on Saturday as a sense of caution affected the residential market. With stock levels at record highs in the run-up to Christmas, buyers are sensing the market pendulum is shifting their way and many are determined not to overpay. As a result, opportunities are opening up for first home buyers in cheaper areas, as well as for some upgraders who are getting a leg up, particularly in the eastern suburbs markets, because of reduced buying activity by Chinese and other overseas buyers.”

“Biggin & Scott’s Trudy Biggin described Saturday’s auction market as sluggish, with one or two bidders participating at most of her company’s 32 auctions. She said the company had five auctions in Glen Waverley, where there were definite signs that Chinese national buyers were pulling back. ‘There are a number of restrictions on getting your money out of China at the moment and that is having an impact on the market,’ Ms Biggin said. ‘There has been a decrease in the number of international buyers in recent weeks.’”

The Gladstone Observer. “Ben Smith, who has built a number of properties in Gladstone since 2008, says ‘doom and gloom’ is all that is emanating from our town, and further south investors aren’t even giving us a look-in. That’s a problem for a town where there are about 2000 homes for sale with owners who are desperate to sell. Rent has officially dropped below pre-boom levels by more than $70 and Mr Smith said the sliding rent was fuelling the negativity.”

“Average rent is down to $260 a week compared with $330 in 2009. It seems like revenge for renters who may have felt gouged by property owners who jacked prices as high as $700 in 2012, but according to Mr Smith there are real -term consequences to depressed rents. Alicia Williams from Gladstone Location’s Property Agents said if owners stopped panicking and accept the short-term pain, they’ll be fine. ‘If everyone is talking the market down we’re never going to get anywhere,’ Ms Williams said. ‘The problem with low rents is that it becomes a snowball effect and the onus needs to be on landlords and real estate agents to give the market the stability it deserves.’”