As I have been commenting on recently the “edges” of the real estate market are showing sure signs of capitulation. I was going to begin my week with a bit of an inspection of first home buyer areas because I had heard some anecdotal evidence that housing stress is becoming very apparent. However I need not have concerned myself with extensive research.
This morning I received an e-mail from a reader, Carl. (Note: I have edited it a little because some personal details were given)
Hi DE.
I really like your new superblog but I have to admit I don’t understand half of it.
I used to read your old blog and you actually helped me convince my wife not to buy until we had done some more research. Thank god we did because if my cousin’s experience is anything to go by then you just saved us from big trouble.
I live in Brisbane, I think you do as well right ? I went to my cousin’s house over the weekend in North Lakes. If you don’t know that area is one of those Delfin areas that attracts lots of young families and is really big with first home buyers. My cousin just had a new baby so has been looking to upgrade. I don’t know about his finances but he is really starting to panic.
His house has been on the market for 3 months and the only offer he has had was $40,000 under his asking price. He told me that the market has died since Christmas and there is heaps for sale out there with more being added daily. He said that he has heard that lots of stuff is selling way below asking price. When I got home from his place I checked out SQM you can see that is correct. I haven’t shown him that graph because I think he will have a fit.
As long as the market doesn’t fall too far I think he will be OK because he built his house a few years ago. But I reckon recent first home buyers in that suburb are screwed. Thought you would be interested to hear my story.
After I received that e-mail from Carl I checked the recent sales list for North Lakes. The news certainly looks bad for Carl’s cousin. As far as I can tell everything was OK up until Christmas, however the latest registered sales ( for January) are another story. For example, the house at the top of the sales list is this place. It was listed at $419,000 but actually sold for $365,000 on the 24th of January which was $27,500 less than it was purchased for in January 2009. That certainly sounds like first home buyer territory to me. After adding legals, stamp duty, interest and real estate fees that is a big loss. This place is another example, sold for $505,000 which was $32,000 less than in August 2006; probably not first home buyers but still a problem for the market.
Now these maybe special cases and not truely representative of the overall market in that area, but I certainly didn’t have to try to hard to find them and that is a bad sign. I just wonder whether there are similar stories starting to pop up all over the country in first home buyer suburbs.
But it doesn’t look like it is just houses that are a worry for Aussies. Today I note that they are also struggling to even meet their tax obligations.
The number of Australians failing to lodge a tax return has blown out to about 4 million and small businesses have racked up a crippling $9.4 billion in Tax Office debts.
In a grim picture revealing many families are doing it tough, about 700,000 taxpayers entered into special repayment plans with the Tax Office in 2009-10 – an increase of 32 per in four years.
And while big business posts record profits, the Tax Office expects 260,000 small business owners – many of them struggling corner-store operators – to default on these repayment deals.
This represents an increase of 100,000 in just two years, reinforcing concerns of a “two-speed economy”.
Looks like the trouble is spreading.