The Coming Australian Housing Crisis: A Couple Of Updates
It was nine months ago that I started writing about the reality of housing prices in Australia here. Since then I've posted about our experience dealing with mortgage brokers and attending open homes for sale.
A couple of things came to my attention just yesterday that encouraged me to quickly post this update on the situation that may be of interest, especially to Canadian readers as we seem to share similar dynamics in this part of our economy.
Observation 1
It was perhaps 6 or 7 months ago that my wife and I were casually looking at acreage properties for sale in Brisbane, Queensland (the state to the north of New South Wales). I blogged a little about our assessment of that experience and discussed it verbally in my interview on @scaredycatguide's Music & Money Show on MSP Waves Radio.
We didn't end up making an offer on anything as our assessment at the time was that it was not a market we wanted to enter. The phone calls and interest died off and we moved on with our lives.
Just yesterday, my wife received a call from one of the real estate agents who had shown us one home over half a year ago. I recall her despite us only meeting her once.
She asked my wife whether we had found a property. My wife responded that we hadn't. The agent apparently sounded elated at hearing this and proceeded to talk about how she'd be pleased to show us around some more and generally attempt to rekindle our long dead "interest".
Hearing of the encounter struck me with a sense of desperation. I'm not a stranger to property purchases and sales. I've owned a few in my time in different parts of the country and yet being contacted by an agent 6 or 7 months on in an attempt to solicit business was a new experience.
To me, I'd have thought that the agent would have first worked though all of the phone numbers she had collected most recently first if she was short of sales; progressing further and further into the past until she found some interest. Obviously she was calling contacts who she'd not hand anything to do with over over half a year in order to get to us.
Her enthusiasm seemed dashed when my wife told her that we simply weren't interested in this market. Anecdotally, possibly a story she'd been hearing a lot on the phone of late.
It's subjective, but interesting nonetheless.
Observation 2
This is a quicky from Benjamin Law on twitter. I came upon this tweet courtesy of @bulleth who forwarded it to me yesterday. It speaks for itself.
https://twitter.com/mrbenjaminlaw/status/963616619502100480
Actually it has been nearly a year since we were looking at properties.. About a few weeks off a year. So the agent went back quite some time to contact us again
Ah yes correct you are. My sense of time was off. Going back in the contact list a year smells even more desperate!
Sounds familiar. I do some casual investments in real estate and I have bought properties, built on them and sold them at a later date. I usually find these properties on my own. But just this week I have has 4 people show up at my door asking if I was interested in buying their property. This is new for me. Of course, I am not interested in this market...
Wow four cold canvas approaches in the one week. That speaks to the market on the ground right there! Ironically enough the very act of asking communicates desperation and makes it less likely that you'd want to look into it. That's an amazing observation!
Thanks!
I am currently renting a property and it is up for sale. It is struggling to sell at the price it is listed for and it's listing price is the same price that the owner bought it for back 6-7 years ago.
Wow @apsistrading, that there is pain. When you factor in the holdings costs over that time: rates, insurance, maintenance and mortgage interest that places the owners already underwater and they haven't even started to negotiate yet!
@nolnocluap There was an open home for it over the weekend with zero interest. Nobody walked through for the entire hour we had the open home. It is on a street where there are blocks of 2 bed 2 bath apartments going up left right and centre.
I've seen those streets before and even used to live on one. Supply side saturation. Why buy now when newer offerings will be completed just around the corner? This will tend to push prices lower in my opinion.
Not to mention the bond market being in a bubble and at the end of a 30-something year cycle. Home loan interest rates approximately 4% below the average standard variable home loan rate for the last 50 years in Australia. Rising interest rates in the overseas wholesale funding markets that the Aussie banks source capital from.
Things are going to get interesting...
I'm...really not sure what to make of that house and that price O_O Aside from being tempted to ask if it's Photoshopped XD
We're looking at houses atm, we'll see how we go.
That was my first reaction "is that legit?"
Good luck with your searches!
I looked into a property there(long story) and due to laws preventing non citizens/visa holders from investing I believe the market will stagnate and slightly deflate. I think the government is seeking to restrict investments to people who are living or citizens of Australia which I believe will make property there a decent way to maintain a person’s wealth but not increase it.
Hey @travelersmemoire thanks for the reply and my apologies for getting back to you so late. Yes those laws are controversial here, in the sense that there are many who believe they're deliberately not enforced as a way of averting price falls through drop in demand that you write of. Of course, innocent law abiding people such as yourself are denied the opportunity. It's all very off to me. Thanks again!
No worries. It’s odd to hear the laws are being ignored. I’d be too concerned with my property being seized to invest illegally.
Considering that report that over a quarter of loan filings were suspected to be fraudulent combined with investigation into the origin of money coming into the market plus the coming downturn I'd say it's easy to guess why those on the sell-side would be panicking as to where their new clients will be coming from. Also your first link simply goes to that image for some reason.
Hi @charitybot. Thanks for the info about the link, I've fixed that up. Thanks too for your interesting thoughts and my apologies for getting back to you so late. I completely agree and that there is the political motivation for keeping prices inflated.... at any cost!
Yeah it seems that all countries went down the road of low rates and taxes to attract investors and buyers, hopefully not too many good people get debt-trapped.
interesting, here in America there is a shortage of inventory, a strong sellers market.
Hi @funbobby51. That's interesting. I'd always thought that the US market was actually a number of sub-markets with different drivers and cycles. Is the inventory shortage a national phenomenon there at the moment?
Like always the lowest inventory is in the most desirable areas, right now it is fairly widespread. Very little on the market and it sells fast.
How interesting. I presume this would indicate a willingness to take on significant debt.
I want to move but I haven't really found any place I want to buy more, I think a lot of people are in the same boat.
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