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?
“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.”
Hmmmm. The question is, if an investor is not receiving anywhere near the amount they need in rent to cover the interest on their loan, AND property prices are (at best) sliding by 2-5% per year, then what incentive is there to hold out? Who would hang on to an asset that is losing them $20 – $50,000 pa?
Then again, I’ve never owned property, so apparently I don’t understand the “special place” property, even loss-making property, holds in Australian investors’ hearts.
Prices are down 3.2% + 3.6% for inflation so in real terms you have lost 6.8% year on year. To think the major crash (in my opinion) has yet to come yet its scary to think of what may occur to the Australia property market. I dont own property but will in the near future. Ill come in when the arse of the market falls out (Which it will) and buy up some bargins.
I dont see how people can think the market will remain strong and appreciate in value??? Every market indicator that drives a market is telling me that the property market has tipped on the cliff and ready to fall.
The fall wont be as bad as the US, but all we have to do is look at history during the 1930’s depression to gauge some idea of a minimum the market could fall (Which was 30%) i think this time around it will double that when compared to the all time highs in 2007.
I dont think many people are expecting the level of financial confusion and heartache when the fiat money system comes to and abrupt end.
Gold and Silver is the place to be at the present time, trading into property and other cash flow assets when the market goes bang.
Am glad to here a positive side on our banking sectors policy and the credibility we have as obligated payers that wouldn’t dodge a debut with the banking sector which will give australian citizens an opportunity to be awarded a housing loan for a piece of real estate in the market. Great share!
The increasing demand of property in Sydney provides significant opportunities for the home owners and for the strata management companies. Whether you are an investor or owner or looking for moderately priced housing or high-end residences, Sydney is the right place to fulfill all your needs.