According to an article by Ian Verrender in today’s edition of “The Age” newspaper, property prices in Australia will not crash:
Despite a veritable army of doomsayers – as evidenced by the number of websites and chat rooms – salivating at the prospect of a crash in property prices, it has stubbornly failed to materialise. There is no doubt residential real estate prices are on the slide. And if the economy stalls and unemployment rises, they will continue to edge lower. But don’t count on a crash.
According to the latest numbers by RP Data-Rismark, capital city residential prices are down just 3.2 per cent on a national basis compared with this time last year.
The main difference is in the way our banks lend. Our mortgages are fully recourse whereas in the US, they are non-recourse. Default on a home loan here, and the bank will chase you for the outstanding cash and bankrupt you if need be. Not in America. If you owe double the value of your home, you can simply walk out, leave in the keys in the door and let the bank take the pain. The result is that Australians are less likely to default than Americans, even under extreme duress. That means fewer houses on the market during a recession, which means less pressure on prices. When the housing bubble burst in the US, an already soft market suddenly was flooded, causing home prices to slump by more than 50 per cent.
The chances of an Australian property crash? Rare as hen’s teeth.
Here’s the article in full – Case for a crash is a house of straw
Now there are a LOT of Australians out there who think differently. They say that Australian real estate prices have started sliding, and they’ll continue to fall for a long time to come.
But perhaps the reality is different. Perhaps circumstances here provide stronger support for the housing market.
What I’m hearing from real estate agents is that sellers just aren’t prepared to give their property away at bargain prices. After all, unless a seller is being forced to sell their property (maybe they can’t meet their mortgage repayments), they can choose to hold on to it if buyers aren’t willing to pay the price the seller wants.
What do you think?