Property Market in Disorder


MELBOURNE:- The worst fears of real estate agents and property vendors has arrived: the orderly sale of property has broken down. A twenty year uptrend made Australian real estate ‘most severely unaffordable’ and a Ponzi scheme propelled by consumer debt. Prosper says prices are now in free-fall.

“Anyone buying at current prices is a damn fool,” Prosper Australia campaign manager David Collyer said today. “The sheer weight of property available will drive prices down as must-sell vendors discount and discount again.

Auction clearance rates across the nation have fallen below 50 per cent.

“Auctions are left dangling at unrealistic vendor bids. How can a seller offer to buy their own property and expect others to compete with them? This is madness.

Stale stock – properties offered but unsold for over sixty days – is piling up.

“The SQM Research data is crystal clear. Our survey of postcodes 3000-3207 show unsold stock blowing out from 19,700 to 26,000 properties in the last two months alone.

“We particularly warn against buying in Point Cook 3030, where stale stock has risen from 1634 to 2319 houses in that time. Only 564 Point Cook houses sold in all last year. The area is in profound oversupply.

Finance is available only to squeaky clean credit risks.

“ABS finance approvals (April 2011) show a record low 15.8 per cent of finance going to first home buyers. Both banks and buyers abruptly discovered the virtues of caution and prudence.

“Why should FHBs – the essential foundation the whole market is built upon – be expected to catch a falling knife? Lower prices are immediately ahead.

“Why should FHBs commit to an entire lifetime of heavy debt to buy crummy and unsuitable ‘starter homes’? They are expected to sign away a lifetime’s earnings – their entire future – to buy that first step on the property ladder.

Prosper has been one of the few voices contesting the constant, self-serving spruiking by the property industry. “We do not claim to lead the sudden end of sacrifice. The Home Buyers Strike sought to inform buyers of what is actually happening in the marketplace.

“Vendors and the property industry ruthlessly exploit FHBs’ inexperience. Their agenda is to sell out ahead of the correction. But market power is now in the hands of FHBs and prices will continue to lower – provided they exercise restraint and resist buying at these ridiculous income multiples.

“The path to freedom and prosperity is clear: continue renting or living with relatives, save a larger deposit, and follow the price correction from the sidelines with interest.

Don’t Buy Now!” Collyer concluded.

7 Comments

  1. renee21-06-2011

    Looks like Aus RE prices are going to follow the trends shown in US, UK, Ireland, Spain etc after their bubbles burst.
    But what is the point of having a asset bubble burst if nothing is learned.
    I will believe we are out of the woods when I see govt act responsibly and address the causes of the present price hike frenzy, eg. revisit the Henry Taxreview, stamp on the worst of speculation.

  2. Nexus78922-06-2011

    Stupid comments about the notion of freedom. If I rent I am not free and if I get a mortgage I am.

    Hardly, a mortgage is 25 years hard slog and debt servitude and I would end up paying the principle plus all the thieving interest. Then it is only when the last payment is made you may own the property. Any failure to pay at any time means the banks can come and turf you out.

    The con has come to an end. Australia is no different to Ireland, UK, US, etc, and pricing will continue to free-fall as we have a very asset bubble – the longer it was talked up the bigger the coming fall. The estimates of a 30% drop is looking a little underdone as two thirds of the price increase have been debt driven. Hopefully this will change peoples perspective as to how they were conned into speculating on property.

  3. Glenn Peters22-06-2011

    Nexus789, you need to think this through. After 25 years of paying rent, will you REALLY have saved the difference between your rent payments and a mortgage? Very, very few people ever do. No, you’ll be left to pay rent to a landlord (whose mortgage you will have paid off) until the day you die. You can be kicked out of your rental property for non-payment, so no difference there. Unless you’re prepared to accept no interest on your investments, ‘thieving’ interest on a loan is an absurd statement. Go ask a pensioner who has to pay commercial rents out of their pension leaving them $35-$50 a week to live on, what a great idea renting forever is. Sorry you missed the boat on property, now all you have is sour grapes.

  4. James of Adelaide22-06-2011

    @Glenn 1:05 pm : actually YOU are incorrect. The amount any mortgage holder pays in the space of 25-30 years to pay off their house (ie interest and principal) is more than 3 times than what a tenant pays in rent. Median rent does not come anywhere near to paying half the median mortgage, so as for your “paying off the landlords mortgage” that is complete bunkum. That is why every investor (until now) has never paid heed to rental returns as the main decisive factor when considering an IP as it has always been based on the potential for capital gains. Love how you people change your investment strategy theories to suit the market. No capital gains “oh its all about the rental returns”. Low rental yields “oh its all about the capital gains. Dream on mortgage holders… you are simply slaves to the bank and are too embarrassed that you were scammed into the housing market. In the mena time I will continue to “SAVE” my money and EARN 6.5% interest rather than paying 7.5%

  5. graham25-06-2011

    @Glenn, So with house prices now overvalued by upwards of 40% as opposed long term trends or any sensible rental yield, you are saying to anyone wishing to enter the market “Sorry you missed the boat on property, now all you have is sour grapes”. Perhaps framed that over the entrance of every primary school, high school and university. Stick it up them, eh?

    Solution: get rid of goverment inspired distortions – FHB Bribe, negative gearing for 2nd hand property, Interest Only Loans for existing homes, ignoring bank behaviour (lax lending standards),etc.
    Time for govt policy makers to grow a brain.

  6. Paul Meleng26-06-2011

    There is something to learn from Glenn’s comment. He challenges and says you will not have saved the difference between rent and mortgage. But you could if you were wise enough. You could save it by extra “salary sacrifice” contributions to superannuation. Thus getting 85% of your gross saved and invested instead of having 70% or less of your gross in your pocket after tax to spend on lifestyle or home mortgage and principle. You can still invest that money safely inside your super fund into geared blue chip commercial property seeing as property is supposed to be so good, or into an index of Australia’s top 200 companies where all the money is made to pay the wages and incomes to pay the rents and mortages in the first place (can you imagine property consistently going up if our top companies were not paying salaries and making money for shareholders? how?). There is no limit to how much you can accumulate in your super fund, so you could rent and save enough in your super to buy the place you want to retire in and settle in one place one day and also enough for your tax free superannuation retirement money. You can “follow the money” in your career without the cost and anchor of buying and selling houses. You can vary your accomodation to suit your varying needs at different times, from renting a room, house sitting, sharing, living in a rambly big old knock about place where kids can have fun, move in with aged parent(s) and help them in later years, go bush, work overseas, live in a caravan or a job with accomodation provided and all the while be living lightly with minimum baggage and stashing as much as you can away.
    My immigrant friend from El Salvador carries all his posessions, including cooking utensils in one standard set of airline luggage, always looks immaculate and relaxed and is welcome everywhere because he is relaxed and intelligent and always does more than his share of cooking and cleaning, as well as being a wizard with plants and transforming gardens. I call him “the phantom”. It is possible to live much more elegantly and simply than we do. If you rent and spend the difference on lifestyle you will live to regret it, as Glenn says, BUT if you stash it away intelligently you will do very well indeed.

  7. Cameron Murray29-06-2011

    Glenn,

    I’m not sure why saving the different in expense between renting and buying is necessary to be better/freer etc.

    Isn’t the fact that you have all that extra money to spend for 20+ years reward enough? It doesn’t matter if you save or spend and then rent your whole life.

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https://prosper.org.au/2011/06/21/property-market-in-disorder/