Messages from the front-line

Anyone that follows the Australian housing market will know that the South-East Queensland (SEQ) and Perth housing markets are in trouble. After registering above average house price growth in the years leading up to the global financial crisis, both regions are now underperforming, registering significant falls over the past 12 months.

According to RP Data, Brisbane and Perth registered price falls of 6.3% and 4.7% respectively in the 12 months to June:

And according to Residex, country Queensland’s housing markets are also struggling, registering house price declines of 4.1% and unit price falls of 9.8% in the 12 months to July, caused in part by the slowdown of tourism.

The malaise that is Queensland and Western Australian real estate is also reflected in both region’s mortgage arrears, which are showing a clear break-out for loans originated in 2008 (chart from the RBA):

With these statistics in mind, I want you to consider the following emails received last week from two MacroBusiness readers, who were kind enough to share their experiences of the Perth and SEQ property markets.

Both messages, which are presented below with permission, offer a unique insight into what is really going on in these markets and supports the weak data presented above.

The first message is from real estate agent, Bernie Kroczek, who has been servicing Perth’s northern suburbs for 25 years. Bernie first sent me a short message of support early last week, which I responded to by asking for his views on the Perth housing market. Below is Bernie’s response.

Hi Leith

Congratulations on your fantastic blog.

Having been in the real estate business for 25 years (this month) I can say I have not seen such a dead market. I have also been speaking with some pretty experienced salespeople and they all agree. Offices are closing down and salespeople are leaving the industry in droves. After all everyone has to eat.

Real estate agents’ income is dependent on turnover, regardless of whether prices are going up or down. According to Landgate, where all property transactions are registered, turnover has fallen by 40% over the past 5 years. You could say then that income in the industry as a whole has fallen by 40%.

As for prices, they have been deflating since 2007, apart from when the Government artificially stimulated the market at the end of 2008 by doubling the First Home Buyers Grant. Anyone with half a brain could see what was going to happen when it ran out. Everyone, that is except the Government and, sad to say gullible first home buyers who were lured in to the market by historically low interest rates and some free money.

Steve Keen was absolutely right when he described the First Home Buyers Boost as the First Home Vendors Boost. The free money went straight into vendors’ pockets, plus some as first home buyers jumped over each other to get into the market.

Now you hardly ever see a first home buyer. As for investors, I haven’t seen one of those for a while.

I notice the banks are starting to loosen up their lending criteria again. That’s a worry.

However, as I always say, “there is a buyer for every property, in any market, at the right price”. My view is that it will take some time for the market to recover as there is no confidence in the economy or the present federal government.

Confidence is everything.

As for the rest of the “booming” WA economy, I was speaking to my hairdresser and mechanic this week and both of them said they have never seen it so quiet. I am hearing the same story from every small business person I speak with.

Having been through Keating’s recession I can say this feels worse, although I am not seeing any distressed or forced sales of property, which we saw quite a bit of in 1990-91.

Then again unemployment (official) is still very low, at this stage.

As I said in my earlier post, economists should get out and about a bit more, and the government is simply in denial.

Personally I am in favour of a resources rent tax, if properly and intelligently applied, something beyond the scope of this government, it seems. As for all the other issues such as flood tax, carbon tax and rising cost of living, it is little wonder consumer sentiment is down, and that is something which won’t shift overnight.

Sorry about the long winded response to your earlier email but I think my reply accurately sums up the WA economy and in particularly the real estate market.

Thanks for your message and best wishes.


I think we can all agree that Bernie’s synopsis of the Perth housing market is worrying and suggests further weakness. I wish Bernie and his wife Gai the best, and hope that their real estate agency survives the lean period ahead.

The next message comes from “Kylie” (name changed), who provides an intriguing insight into the current state of the Sunshine Coast housing market.

Hi Leith,

I just wanted to thank you for all the information and hard work with the website. It has really given me a balanced perspective of what’s actually happening and allowed me to make better informed decision for my financial future.

I thought I would share some of my history with you about my own experiences with housing and about what is happening around my area, the Sunshine Coast.

I purchased my first property at Everton Hills, Brisbane in 2005 for $289k and rented it out until December 2008 for $300 to $330 per week while I lived and worked in Central Qld in subsidised rental housing.

In late 2008, we relocated back to SEQ and my now husband and I put the property on the market so that we could relocate to the Sunshine Coast. After much heartache, we eventually sold our house for $389k after reducing the property from the listed price of $429k. Overall, we were happy and found a place to purchase at Little Mountain for $427k and increased our mortgage to $350K.

Initially, after coming across some of your work I felt that it was a touch left field for me and the housing fundamentals would see the property market through. However, I did feel that we may need to sell our property and move to a better location as Little Mountain was very over built and not stopping. However, my husband did make the key point of “but we can afford the mortgage”. We sold for $415k after 2 weeks on the market for less than what I wanted but we thought we had better not let it go by. At this stage, my husband and I are on a combined income of $150k gross – both teachers.

This didn’t sit well with my husband, and it was all but impossible to get him into the rental market. It was my preference to be cautious, but he was adamant that only losers rent and I had already made him move from where he was happy, so we purchased at Warana for $465k close to the beach in November 2010. Although the purchase was against my wishes, I felt that the location place us in a stronger position in the long term.

Fast forward to March 2011. I was broken with stress and worry and I had to break the news to my husband and parents that I felt we should exit the property game ASAP. We had a $420k mortgage by this stage and cannot afford to have kids or just live a decent life and we are witnessing prices coming down fast around us. I felt that this was not the path to financial freedom as nothing great was going to change wages wise and we would be paying over $3k per month for the next in 30 years!

The straw that broke the Camel’s back was when I rang my previous Little Mountain agent to enquire about dogs and renting. I let him know that I was thinking about selling and renting, and he proceeded to tell me that he was doing the same thing and his house was going to auction in four weeks! Naturally, I put our house on the market the next day.

To cut a long story short, we sold for $430k after two months and walked away with nothing. All that equity that we had built-up from the original property had gone through selling at a loss, stamp duty, agent fees, mortgage insurance, etc..

We are now currently renting for $420 a week in a house that could have fetched $600k at the peak of the boom in 2008. We can afford to have kids and actually live.

I feel now that the challenge lies in what we do with spare money we have from not paying the massive mortgage. But I can live with that problem as opposed to having the big mortgage noose around my neck for the next 30 years.

In the course of selling our home, I have also come across the following recent sales stories:

  • Parari St, Warana: purchased for $430k in 2008. Owner sunk $80k in renovations then put it on the market in March 2011. The auction failed, with a best follow-up offer of $385k. It has since been pulled off the market and is advertised for rent.
  • Peacock St, Bokarina: purchased for $470k in early 2008. Owner sunk more than $120K in renovations before listing in June 2010 at $600k. Sold in February 2011 for $430k and is currently rented for $450 per week.
  • Brightwater (Master Planned Community): 1 year old house purchased for $485k. On the market for 7 months before selling for $390k.
  • Coonang St, Warana: bought March 2007 for $739k. On the market for ages. It was initially priced in the $700’s and then high $600’s. Now it is under contract this week at $580k.
  • My Minkara St, Warana house: sold in August 2011 for $430k. Now rented for only $400 per week.

I also spoke to my agent who sold our Little Mountain house and he reported that it getting really ugly out there. The sharks are circling apparently…

I trust that you find this information useful. Thanks again for your balanced perspective.


Thanks for your message, Kylie. Nothing beats stories from the coal face to find out what is really going on. I am glad to hear that you and your husband got out okay – albeit with less money than you had hoped. It must be a great relief for you both. I am also thrilled that you find my analysis useful.

[email protected]

Unconventional Economist


  1. Good to see there are still honest agents out there prepared to call it as they see it (Bernie).

    Re Kylie’s situation, glad to hear that she got out and is happy, however can’t help but be a little skeptical of someone who claims they can’t afford kids when they are clearing around $1250pw after paying the mortgage ($150k – 33% tax – $750pw mortgage)…

    Thanks for sharing Leith.

    • BB, I think the point is that she won’t be working when they have kids, so their income will halved – $1000 per week. And with a mortgage of $750 (+>$100 in rates/insurance/maintenance) that leaves them around $100 per week. But renting, they still have $600, which is about what you need (in my estimate in QLD) to pay for family life.

    • That’s their combined income. Having kids usually involves the mother taking a year off work.

      When my wife was in a mothers’ group, we were very saddened to see mothers having to go back to work after 4 weeks because they had to pay the mortgage.

    • People have forgotten that a family needs to survive off one income once a child arrives or else hand that child over to comeone else every business day. It’s part of the problem of why we are in this mess – it became a 2 income necessity.

    • Fair call guys regarding the drop to a single income (shouldn’t have missed the blindingly obvious). I believe the Paid Maternity Leave scheme is quite generous, although that only lasts for around 18 weeks.

      It’s pretty unfortunate that many these days are faced with the choice of either home ownership or kids.

    • My wife and I pay 40K a year in child care with 13K returned in rebate (paid quarterly). We’d likely be better off with one of us as a stay at home parent (lower tax bracket & additional government support). But we’d be less productive and we also like the stimulus our 2 boys get going “to school”. The point being it aint cheap having kids! I hope that Dutch disease does not also impact further the local child manufacturing industry…

    • Dumb_Non_Economist

      I’d have to say that when I read the part about a 100K return (less buy/sell costs) after just 3 and a bit yrs I was thinking what is this women whinging about, until I got to the rest. Glad they made it out okay!

  2. Thanks for these, Leith.

    i really like hearing what else is REALLY going on out there, onthe front line, as your say (where ‘economics’ really lives and dies, isn’t it?)

    I would like to see plenty more of these real stories, whether they be positive or negative, as these are a higher quality, qualitative barometer of what is really going on, compared to the the arbitrary quantitative, point-value metrics that re thrown around – ie. the qualtitative puts the quantitative in context.

    Frequent accounts of these types, such as is already done at the “Anecdotal Real Estate” thread at the TalkFinance forum, would be great.


  3. Hi Leith,

    Quick anecdote from the Gold Coast: The rental property I’m in at the moment was advertised for $420/ wk when we moved in 18 months ago. Managed to negotiate a ‘temporary’ reduction to $400 for the first 6 month lease. They then offered a 12 month lease still at $400, which is now about to run out. Got a letter a couple of days ago offering another 12 months at $400. So no growth in rental return for 2.5 yrs by the end of the next lease.


    • Phil,

      interesting I have been in my property for nearly 10 years and have only had 5 rises in that time.

      It matches CPI in effect as my Landlord is awesome and is asking for a reasonable return on investment in effect.

      So the $300PW we pay is no drama at all and certainly fair.

      That said if we bought it would jump to 3x that amount in mortgage!

      By the way 10 years renting… was not in a position to buy in the first 5 (did not think I was going to stay in Melbourne) last 5 years, got married, new Masters degree, wife got her Masters, new jobs, massive wedding + honeymoon (went to 8 different countries over 3 months), OS holidays every year and still saving! and now a house sounds good but not at crazy prices!

      I know there Bulls out there will go “fool should have bought” but you have to be ready and willing… maybe we should have but to be honest not concerned we will buy when we’re ready.

      Right now renting makes a lot of sense!

      Cheers, TM.

      • Dumb_Non_Economist


        You just have a very smart landlord. He obviously recognises you as a good tenant and in the long run you’re better to forgo some rent for a good long term tenant any day!

        • Non-Economist,

          Yes mate, the (Landlords) are awesome, any issues gets it sorted and even bought us a wedding present.

          I think both parties have been lucky to find one another.


          Also, I have never seen rent money as dead money, housing is just another service… I said that to my RE manager once he fraked out when I said there service delivery was pathetic for an annual spend in 5 figures I expect much-much better!

          Don’t think he had heard that argument before and was taken aback! lol.

          Also, I have a theory about how RE makes money out of Rental income.

          I think it is the lag between collection and passing over to Landlord and holding this ‘cash’ in over-night money markets (do they still exist) and taking serious interest (scale) for nics!

          Am I right guys?

          Does not worry me but the BS RE give you… oh we make nothing out of rentals!?

          Well as a Marketer I say BS – no one works for free – or to be in third place as your just wasing your time!

          Interested in the Economics of the rental market – I think this will be of interest in the years to come.


          • Greetings Mainlander
            Real estate agents make money out of rentals by charging the owner management fees and fees for other services such as inspections and actually finding the tenant. It is a relatively small amount per property and really requires around 100 properties under management to be viable.
            As for investing in the short term meoney market that is definitely a NO NO!
            Any rental money has to be deposited into a trust account which is audited every year and a report submitted to the real estate board. They are very strict on it.
            Hope this clarifies.

      • Dumb_Non_Economist


        Just read the rest of your reply. You’re smarter than you think. You consolidated your marriage and that will have a far bigger emotional and financial pay back than ANY property purchase, no matter how ridiculously low the price could ever have. Take that from me, based on experience and no degree needed!

        • Thank you Non_Economist – you made my wife very happy and brought a smile to both our faces. 🙂

    • We moved into our current unit in 2009 and were paying $290 p/w. The landlords just sent a very nice letter asking if we would like renew our lease for another six months at $290 p/w. And this is in one of Brisbane’s bayside suburbs, squished bewteen the City and Moreton Bay, running out of land etc etc. If that’s the potential for rental growth in my area I’d hate to be a landlord at the Gold or Sunny Coasts.

    • I have been renting in a 3 beddie unit with two mates. We moved in August 2009 paying $490 a week.

      We are about to sign another 12 months lease at $515 a week.

      That is a 5% increase over 2 years…down in real terms.

    • Two years renting in Malvern (Melbourne) for me. House worth maybe $2m and we pay $700 per week after negotiating down from an advertised $800 per week. No rent rises in sight for us yet.

    • My advice is to shop around as there are heaps of 3 bedroom residences for low $300’s. (257 for rent under $350/week!) At a minimum, offer the current landlord $350 if you don’t want to move. When they factor in the advertising costs, letting fee, potential rental loss etc. they would be crazy to let you go!

    • My family rent a 4 br, 2 bath, + games room for $300 wk, 5 blocks away from the beach in Quinns Rocks.

      The rent has been $300 / wk for 4 years.

      The guy who owns it bought it for nix in the mid 90’s, of slavic origin, I suspect he may not even live in the country anymore. I don’t think he is tempted to aggreive a tenant who has never missed a payment.

      However the real estate agent has been keen over time to have us sign more fixed term leases on the same rate, instead of the rolling terms we are on now.

      I believe they get a fee for a contract, not quite in the fiduciary interests on the owners behalf I feel.

  4. Wow, I am amazed and please to see the honesty of both Bernie and ‘Kylie’.

    These stories are exactly why my wife and I are renters.

    Only 14% of our income goes on rental and we live 6km’s from the the centre of Melbourne.

    Everytime we look at property we do the Scott Pape 2010 Rule (20% deposit and 10% interest) and the Housing PE rule as a rough guide. Even with over 20% deposit and good jobs we’re not ready to buy – just yet!

    This is more due to our worries of the long-term interest debt we would bring on. Interestingly the exact worries which Kylie expressed are excatly why we still rent.

    We live really really well and owe NO ONE any money at all.

    So, for banks there ‘modus operandi’ is to “keep you in debt” otherwise they don’t make money.

    I a heartened that the psychological ‘shift’ is now well underway I look forward to seeing Australia’s housing soft landing over the next few years and prices correcting back to the long run average.

    Then we will buy on our terms and by the probably a 40-50% deposit.

    No skin off our noses to wait either!

    Thank you to Bernie and Kylie… also loved Bernies point about Economists – get out from the desks and see the real world in action – totally agree. (not having a go at you Leith at all or the MB crew)

    PS. “Caveat Emptor” no other bastard will look out for you but you! 😉


  5. Bernie rather disingenuously forgets to include himself along with vendors, as someone who benefitted from the first home buyers boost.
    2% of $7000 leveraged 20:1 must have been a good earner for him

    Hope he didnt waste it on BMWs and double breasted suits.


    • Thanks Schadenfreude
      The volume of sales did actually increase for a few months, nothing wrong with that is there in a free market economy? But if you calculate the extra fee we earned at 2% of $7,000 only comes to $140.
      Then you take off GST and tax @ 30% leaves only $88. That wouldn’t even run my Mazda 6 for a week never mind a Beema.
      I’m not into heavy gearing @ 20:1 and I don’t advise any of my clients to either.
      Nice thought, anyway.
      Real Estate agents are just normal people you know, just like any other profession. Feel free to check out my website for an alternate view on how to do real estate.

  6. Well I really for Kylie and her husband, but doesn’t this just highlight a huge issue in broader society – the lack of financial education. Financial products are of course deliberately bewildering, but how much did kyle lose just in transaction costs? How many years of savings do those transaction costs represent? How easily could this have been avoided?
    I am no expert and not a finance professional, but I have been able to help a few people evaluate a property purchase decision with nothing more than a pen and the back of an envelope. It’s not hard but we are just not taught the correct way to think about money and debt – I would argue at any level of education.
    The property bubble made this family’s experience much worse but there was a more fundamental issue there with optimal financial decision making that they can’t entirely take the blame for. Let’s be honest, in any transaction you have a vested interest in keeping the other party ignorant. Unfortunately this is wreaking havoc on a national scale.

  7. Caught up with a property manager friend last week who is expecting Canberra property prices (at least for units anyway) to fall by 20% in the next few years. She’s finding clients are having to drop rents below expectations, and has what she describes as good properties on her books that have not been able to find a renter for months.

  8. We have benefitted from the FHVB twice as it was in place first in Bris when we sold our residence.

    Bought in 02 for $165k, sold privately for 375k in 07. We then travelled in a van for 2 years. We bought in Merimbula for $292k, nice house, terrible neighbours. We spent a bit on reno’s, sold privately for 350k in 09. Made 30k nett and got a motorhome.

    Now we’ve been on the road for over year again. Looks like we’ll be buying in a few months in a depressed market.

    The house we last sold is back on the market for over $400k – which is typical of the NSW Far Sth Coast, in that there are RE windows full of dreamers hoping to get the very highest prices and real sellers $100k less, going by advertised prices. Only seen one RE agent close down and that was in Moruya, a Raine and Horne.

    We go to a few auctions and often have a bid, sometimes being the highest bidder, but have seen very few sales, sometimes the auction just doesn’t even get any bidders. I usually have a bit of a go at the auctioneer about vendor bids when they try to get me to either bid against them or when they try to get me to bid against myself.

    Have fun out there in RE land!

    • So are you saying that buying low and selling high was to do with your strategic prowess, and not the overall market at the time?

      Because if so then buying in a depressed market right now would logically seem like a brilliant choice.

      Otherwise it was just luck. Are you feeling lucky?

      • Pete, this is all dumb luck. All my investments have been like that although I foresaw the 2008 crash coming and timed out of shares and into gold and TDs in 2007. I also know that markets can turn on a dime and take me out. For example a rise in interest rates in the USA would turn world markets 180 degrees in a nanosecond. I actually believe this is needed to complete the business cycle and get the world going again.

        • Thanks Rod, I appreciate your reply.

          In light of your response I would like to apologise for any silliness in my previous comment.

  9. Greed and fear drive markets where they be housing or shares. The fear of missing out, the fear of losing capital, the fear that you will be thought a loser for renting etc. I have been renting since 2005 my rent has gone up $10. My wife wants to buy again, even though we would have a loan that technically we would be in our 70’s when it was paid out. I paid our first house off within 8 years,blessed by rising wages and falling interest rates and reasonable utility expenses. I cant see the same thing happening again. My wife just tells me that not everyone thinks like me. So glad i found this website.

  10. On the rental front- wehave just undergone a painful process of finding a new rental place ( the current one has maintenance issues). Apart from the abundance of “recently reno’ed” places up for rent, it has been interesting to note the people interested. Previously, most of our competition has been overseas students/domestic students on the whole or just out of uni house sharers. This time round couples and young families were dominant- the ones who are usually smug about their “owned” house. So where are these people moving from?
    The second factor has been the high number of houses that appear to have been owner occupied. There is also a definite split in the market- those houses where adequate maintenance has been undertaken (aka the professional property investors) have queues to inspect and multiple apps. Those where the strategy appears to have been “buy and hold and be stingy on the maintenance, praying for capital gains” are languishing.

  11. innocent bystander

    I put a cash offer in on a Perth property back in March this year. Agent just rang me today to see if I am still interested. 5 months later.

    • Thats actually quite fast by WA standards!!
      To give my tuppence worth, I have just moved over to WA from the UK, and cannot believe the extortionate prices for EVERYTHING, houses, alcohol, utilities, broadband, foxtel (i call it Sky) etc etc etc. Even taking exchange rates into account I reckon everything in Oz is around twice the price that it is in the UK. People like myself are probably the reason that the Oz market is taking a hit, as I would struggle to sell my home in the UK (unless I took a hit on it) and this coupled with a poor exchange rate means that it would be madness for me to sell up and transfer my money across to buy here!!! (at this time). The days of UK immigrants coming over and buying homes pretty much outright are gone forever, and this must have an impact on house sales in some form.

    • Thats music to my ears,I put in an offer on a place 2 weeks ago 100k below the asking price… got laughed at, but hey, no skin off my nose.
      I’m liking the odds that the same will happen though…only one house has sold in the region in 2.5 yrs and there’s starting to be a few new ones coming on in time for ” the Spring”.

  12. All I can say is that it is a shame Kylie sold the Everton Hills property after $100k of capital gain! She crystallised a CGT event and had to pay all of the transaction costs associated with buying and selling property.

    Property is a long term place for your money – whether for a home or an investment. Trading chews up $$ due to costs.

    If she had retained Everton Hills she would still have the $100 equity on her balance sheet and be pegging down the mortgage with saving AND getting a tax deduction on the interest and other costs.

    Very unfortunate…