Aussie house price crash accelerates into 2019

By Leith van Onselen

CoreLogic’s dwelling price results were released for December, with revealed another 1.34% decrease in values recorded over the month at the 5-city level:

It was the 15th consecutive monthly decline in home values, with values down a cumulative 7.2% over that period at the 5-city level:

Quarterly values also dived another 2.9%, with the trend worsening:

Over the December quarter, values were down heavily across Sydney, Melbourne and Perth:

In the 2018 calendar year, home values crashed by 6.4% at the 5-city level, driven by Sydney (-8.9%) and Melbourne (-7.0%):

The next chart, which tracks trend annual price growth, shows a collapsing trend driven by Sydney, Melbourne and Perth:

Similarly, the below chart tracks price growth on a quarterly basis, with the same three markets collapsing:

Sydney has already followed Perth into double-digit peak-to-trough falls, with Melbourne following:

And the pace of decline is both steep and accelerating in Sydney and Melbourne:

The crash is on like Donkey Kong!

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Comments

  1. The ducks seem to keep lining up for this time to actually be the one. I’ve been watching this too long to get excited, but i’m considering a popcorn machine.

    • Lots more downside to be reflected in CoreLogic’s stats too – tighter lending criteria and Opal Tower debacle will take a couple of months to influence stats, plus IO reset and CCR on the horizon too.

    • This time it’s real for sure. Question is how deep? Will the government intervene?

      My money is they hit the panic button at 25% drops averaged across the board and let folk buy themselves out of trouble via super – probably via some complicated self-loan scheme to keep the super bugs happy.

  2. Following on from Gavin’s comment NYE. When investors place houses on market expecting x dollars, but no upgraded or even on maintenance done for years. Outcome, big discount or no sale.

    Current and future buyers should get property that have had a lot of improvement renovation as this money will not be fully recoverable.

    Happy new year.

    Copenhagen vibrancy report. 1dead 4 injured by knife 100 metres from our apartment, returning to Oz on Sunday 😎

    • “future buyers should get property that have had a lot of improvement renovation”
      Yes, and mainly NO!
      Get one done by an aficionado of The Block etc – ie; they’ve done the work themselves- ( “How hard can doing this stuff be?! I’ve seen how it’s done”) and you’re potentially asking for heartache down the track.
      A building inspector pre-purchase can’t see what’s in the walls – who did the ‘new’ plumbing and electrics etc. They can only see what’s on view, and what the certificates of work-done disclose.
      Nope. I’m afraid buying a do-up, done-up, is asking for trouble….

      • We recently bought a totally run down ‘cheap’ shitter with excellent bones for just those reasons. It’s amazing just how many don’t want to go through the reno thing though…… & we’re starting to understand why.

      • Stone the Crows

        Geez you are a brave person doing that down here Nudge. Getting quality competent tradies down this part of the world is a job in itself mate, unless you are doing the majority of the work yourselves. We have just been approved to run our own home based business and we found that getting reliable and reputable trades people to perform required alterations is a huge task. Many just completely ignore your inquiries and if you are lucky enough to get a proper quote watch out for the opportunists who wants to make a killing. But then again you do have the local knowledge ?

        Ready for that beer anytime………….

      • Yes and No. I don’t believe in paying a premium for other people’s vanity project. Nor do I expect to pay a premium for a “blank canvas”/”renovators delight”. If the job is done by a clueless DIY type you should be able to spot it a mile away. In which case run. I’ve rented a few and been thankful I didn’t own them. You get an eye for such things after a while.

        My dad has done the owner-builder thing after finding the builder’s quality of work was not up to scratch. Entirely rebuilt our house from a bare frame. I can appreciate the countless hours that goes into doing things *the right way* versus doing things at a commercially acceptable price versus weekend warriors.

        The rebuild/renovate experience has left me thinking I’d be happy to make alterations but no way would I ever want to tackle a total strip out after being the T/A (and voice of reason) on the family home.

        p.s. I posted this a few weeks back.
        https://www.domain.com.au/274-mckillop-street-east-geelong-vic-3219-2014761009

      • @STC. You’re settled in then….. The grapevine helps sift the chaff, & fortunately I can smell BS pretty quickly too. Any here & the town will know, & the tradies know that. My turn to be too busy for a while (I need to be present….. the majority of a full internal reno in <7weeks & moving in too!) but we'll get there…. I'll yell out when I see a window.

        Welcome & Enjoy! ……well when it settles down again……

    • Buffet, when people are greedy be fearful, when people are fearful be greedy. I looked at 2 houses in Melbourne this week. Going to potentially put in an offer (if first declines we might chase the other).

      1 property sold for $770k in Jan 2017, now asking $950-1.05m.. I’ll probably offer below the Jan 2017 price.

      The other property has had $500-$600k worth of work done to it. Land was about $130k in 2014. Maybe offer around $800k (since it was a builder’s own home) and fit / finish and quality are top notch. My mum built a similar house in the country and it cost her $700k when all was said and done (she already owned the land too!).

      So while I fully expect a crash and values to go down (even below replacement value) I can’t see it staying that way forever. Unless we get a good old depression… And a repeat of our 1880 crash.. but who knows?

      Repayments on mortgage at 7.5% with money I’m looking to borrow will still be lower than what I pay in rent for a dumpster of a house in Sh1tney.

      Just have to see what the commute is like this week before commiting to the idea. It’s not a cookie cutter estate suburb area, rather a semi rural property with an artist hub and lots of greenery and large acreages. You won’t find me going near that new suburb crap.

      • Please Gav, give it another 12 months. I don’t want to see you catch a falling knife. yes, I know, like me, you’ve waited a long time. But, patience grasshopper.

      • It would be a very manageable loan. It also depends on how the stock market goes early Feb. If it tanks before then I might be better off waiting… But I would be buying eyes open to a 50% correction. Though you couldn’t build either house for post crash prices.

      • reusachtigeMEMBER

        LOLOLOL! No one who is anyone is fearful. Tell him his dream’n! Great buying opportunities though so go for it!

      • Buying now in Sydney or Melbourne is like buying in SF or Miami in mid 2007 – a decent discount, still possible to get mortgage and clearly wrong time to buy.
        Buffett may be rich but none is right about markets all the time.

      • What chance it explodes higher? Near none. Wait for 2 weekends of 60% auction clearance rates. Don’t catch a falling knife.

      • If you really want a house to move in to I’d be offering very lowball offers and eventually someone will be desperate enough to take, then buy and don’t regret it. There is a high chance that prices will keep falling further but you will get a steep discount anyway. There is also the chance some more kindling is thrown at this and no GFC in 19 and you will be renting in limbo for another year + waiting for prices to settle again.

      • kiwikarynMEMBER

        “semi-rural property … with large acreages” – now. In time, when the Council have rezoned the land residential and those large acreages are subdivided, you will be in the middle of a cookie cutter estate.

      • From your description, it sounds like the kind of place baby boomers might be looking at for their retirement. On that basis, it might hold its value better than in the suburbs.

      • “1 property sold for $770k in Jan 2017, now asking $950-1.05m.. I’ll probably offer below the Jan 2017 price.”

        Jan 2017 was the top of the market. Yes you would want to offer below that – a long way below – and ignore the feeble attempt to pretend the boom just continued in the interim. They are just trying it on.

      • SupernovaMEMBER

        $700,000 to build house in country! Site costs must have cost her around $30,000-$50,000 alone, they can be a killer in rural to semi-rural areas. Anyway must be a very nice house for that amount!

      • You being clued up & expecting property to fall further I’m very surprised you’d buy now. I’d love to buy now but I can’t see me even considering it until next summer, though I expect probably the one after that is more likely. Yes you can easily afford payments. But you should estimate $ falls for your chosen property over time frame AND how long you think it’ll take to get back to price you paid, in good times this is about the some as it took to drop, though I think it’ll be a lot longer this time due to structural change in mortgage market &/or China/world economy slowing, you could be stuck in negative equity for a very long time all her while praying interest on list equity. Now convert your losers into your favourite car, could you still justify your car hobby, still feel like buying? I can understand if you do but it’s going to cost you, I think

      • Replying to Reusa. I think you were spewing the same crap opinion re it’s a great time to buy about a year ago! You knock Steve Keen but are falling into the same trap but from the opposite direction!

    • Good time to buy apartments in the Lacrosse Building and Opal Building, high quality construction examples showing off the skills of developers.

  3. A little bit of Anecdata for everyone here…Overheard people talking about friends who had been considering divorce in May 2018, but decided to give counselling a go to try to patch things up, but to no avail. So now the family home is up for sale and the family have been told that they should expect $1.1 million for the sale. If they have gone ahead with the divorce in May, they reckon that they would’ve gotten $1.6 – $1.7 million for the house. They are now beside themselves because both have already started separate lives, but will have to do so with about $250k each less in their pockets. Pennant Hills region of Sydney.

    • The thought of losing 250k each should make the love of eachother really shine through. Divorce proceedings should be fun! (I shouldn’t have schadenfreude over this, but when house prices come into the mix I can’t help myself! Yes, I am a bad person! :D)

      • 1 house I’m looking at is a couple going through divorce. The other is the missus wanting to move closer to city after husband busted his arse building their dream home.. that in itself should be grounds for divorce. I would not be happy with my missus after that!

    • Ouch, in hindsight financial counselling would have been a better option than marriage counselling?

    • So, in the minds of this couple, house prices in pennant hills have fallen 30-odd percent in 8 months?

    • There was a brief time in the mid-1980’s when divorcing couples got a huge financial advantage. A divorcing or separating couple could buy a second house and pay only 10% interest, but a couple staying together and buying a second house as an investment would have to pay 14%. I had several friends whose parents accidentally became wealthy through this mechanism.

  4. Slow-poke boomers should cash out of the country already and move to Asia, whilst their house, shares and Aussie dollars are still worth something.

    • Spot on, already here and love it, left Aus in 1999 no nanny states up here, no violence, low tax, great medical, awesome travel and the best thing I love about Asia is its like being Peter Pan, you never grow old here…and when you do your helpers look after you (live in maid). Love Aus and will always be in my blood but loose the brainwash that its the best country in the world and become free..

      • Yes, where are you. I am visiting Thailand under sufferance at the moment. Nice locals but the expats leave a lot to be desired.
        What is clear is that the human desire to exploit another’s disadvantage is very much alive.

      • You gotta be joking right? Hong Kong is about the only place in the world that tops us for absurd property to income ratios. I get claustrophobic in that place after a couple of days.

      • ‘no nanny states up here’ in hk, under the control of communist China. Lol you’re a comedian mate!

  5. I LOVE the smell of burning equity in the morning, so early in the new year.

    Nothing else like it.

  6. Look at Melbourne catching up to Sydney in the falls race.

    All it needs is John Tapp calling the 5 city loss race.

  7. I have been surprised at the lack of kitchen sink from the government as of yet. They are still babbling on about soft landings and controlled falls. Are the feds really so paralysed/deluded that they won’t try to save it?

      • 20% could be too late. Unless they go in REAL hard.

        Like Reusa-hasn’t-had-an-emission-for-over-24-hrs hard.

      • That sort of condition is clearly visible on Reusa even when the LandLord is fully clothed. They also call it pitching a tent.

    • MountainGuinMEMBER

      The govt is currently going with the line of being strong economic managers and the economy is performing well in terms of unemployment and gdp. Switching tack to a emergency stimulus is a 180 degree change from their msg and the election is not far off. I think they have locked themselves in.

    • That’s the beauty of fake numbers like “only 8% down nationally”. It means there is complacency on the way down too. Plus they are too concerned about themselves and how to fight ON off than to pay attention to numbers and rubbish. I’ll tell you what, if Malcolm was still here and they had some head space to think of anything else than saving their own skin, they probably would have cobbled something together by now. Plus, they were probably also expecting rba to ride in with a rate cut and caught out by that not happening.

    • C.M.BurnsMEMBER

      The kitchen sink has been thrown. All that’s left is some crappy old cutlery up the back of the drawer and that jaffle maker that no one can remember if it’s theirs or was here when they moved in.

      • I am on the hunt for a solid 1970’s/1980’s vintage jaffle machine. Heavy is good. Gotta have a good lock to keep the edges pinch-welded shut. Nobody needs thermonuclear heinz spaghetti sauce disfiguring them for life.

    • This was considered inconsequential by the “experts” and even MB. But it’s actually massive. Remember all those interest-only strugglers that were going to “reset” and cause some armageddon or something? Here’s their lifesaver. It’ll now be significantly easier for them to refinance at IO again for another 5 years.
      https://www.apra.gov.au/media-centre/media-releases/apra-remove-interest-only-benchmark-residential-mortgage-lending

      Also..
      May 2018:
      Rushed through legislation came into effect (restricted ADI framework) which provides an easier framework for more lenders to operate under the guise of enhanced competition for consumers… “By making it easier for aspiring ADIs to enter the market, APRA hopes to see consumers benefit from enhanced competition and potentially innovative new business models”.

      Lo and behold, three days later, APRA announces the granting the first restricted ADI to Volt Bank, the first completely new start up to be licensed as retail bank entrant in the Australian market since the Australian Bank in February 1981.

      Then..
      October 2018:
      Authorised ABN Amro Bank N.V. as a foreign authorised deposit-taking institution (ADI)

      December 2018:
      Authorised Xinja Bank Limited as a restricted ADI.

      Authorised China Everbright Bank Co., Ltd as a foreign ADI.

      In the previous decade, only one entity not already associated with an existing bank managed to get new banking license in Australia (Tyro Payments).

      More lenders to come in 2019. Sh1ts gunna be thrown at it, don’t worry about that.

      • C.M.BurnsMEMBER

        this is how the regulators “save” the big 4 and the australian share market. by allowing new entrants into the Oz mortgage market who can then “compete” for all the sub-prime, complete junk loans that the banks are currently holding and desperate to get off their books

      • It is not “significantly easier for them to refinance at IO again for another 5 years”. This myth is bollocks simply because of the income tests, expenditure tests, base interest rates for serviceability tests and the rest of the disclosures now required following the RC (which has done nothing other then force lenders and their agents to operate within the existing framework).

        Coupled with falling valuations, the mix is toxic to stressed households.

        Soon to come, rising interest rates. Stay tuned.

      • Geordie – they don’t need to “refinance” to stay on IO. If they can’t afford the P&I on their liar loan, what do you think the Bank is going to do?

        That’s right – let them keep paying just the interest.

      • They’ll have to go down as distressed borrowers then, Peachy, flagging them as even higher risk. A hardship variation is only a short term fix, and after all, if you can’t pay regardless you’re damaging bank profitability. Not a sustainable situation, particularly as more and more people fall into this hole.

      • Borrowers who (i) can’t revert to P&I and (ii) are unable to get a new IO loan from another institution will be taken to the cleaners by their existing bank. The existing lender can jack up the IO rate until it hurts. What are they going to do, sell?

      • kiwikarynMEMBER

        Mate says its about injecting liquidity into the system, since the banks have started rationing credit. Once you are an ADI, you fall under APRA and fractional banking, so the more ADI’s the more ‘instos’ that can take deposits, and then leverage that 20-1

    • This government is hamstrung. For much of last year they have claimed that prices would have collapsed under Labor and have tried to take credit that the current reductions are under their control – the so called “soft landing”. I can’t see them doing anything that would amount to an admission that they have overshot or that there is a “problem” especially considering the Martin North/John Adams piece about them trying to feign ignorance and escape blame (https://www.youtube.com/watch?v=MK6oLSOvvtk).

      By avoiding an early election and delaying it to May 2019, the falls from peak will reach double figures which I think would be enough for Labor to point the finger and attribute the property declines as completely the responsibility of the Coalition.
      I suspect that many boomers or soon to be retirees sitting on 7 figure properties, and more likely to vote Liberal may reconsider their position after enjoying a minimum 100k loss in paper wealth under the supposed “better economic managers.” At the moment, there seem to be quite a few around who still believe that the government will do something to intervene or that the banks will do things like allow people to refinance from IO to P&I on their original loan length, i.e. someone who has had 10 years of IO on a 30 year loan period going to 30 year P&I instead of 20 years.

      In response to Les, I believe the removals of the IO cap are only cosmetic, as lenders were at 16-17% IO loans despite the 30% cap. This would suggest that anyone who qualifies for an IO would have had no difficulty getting one prior to the changes and that the reduction of lax serviceability criteria is a more important factor – I can’t see the latter being loosened given the Royal Commission.

      The other bit about new banks is an interesting one. I note that Volt and Xinja are neobanks, so completely digital. However, both are very new and unlikely to get off the ground until sometime this year and if the experience with UK neobanks like Monzo is anything to go by, it will take time for consumers to switch and choose these new banks as their primary option for depositing their salaries. As such, I suspect their impact as a new source of funding are likely to be limited.

    • Labor’s political advantage I think has stopped them doing what’s required to stabilize the housing market – and has limited their actions to things only financial types understand (e.g IO mortgage caps, what’s APRA. etc). Labor are in opposition – they have both the interest and motivation to be political and damn the consequences right now as they will be blamed on the current government (e.g royal commission, threats of policy changes Labor make right now can be attributed to Liberal’s term, etc). Any recklessness by Labor to gain a political advantage will be paid for by the current government; the joys of being in opposition. But because of their weak political position Liberal’s are beholden to the RC’s recommendations (which was a Labor idea lets be honest) – if they had more political capital we may see a different result.

      Rudd got away with doubling first home grants, allowing chinese into our market, super to fund property, guaranteeing the banks debts (which pretty much saved Mac Bank), etc because Labor had a lot more political capital to do so at the time.

    • How would that sit with the narrative that they are fantastic managers of the economy. Record jobs growth, low unemployment … things pumping under the LNP. Why the hell would be call ‘fire’ when everything is going well!


    • Are the feds really so paralysed/deluded that they won’t try to save it?

      Yes, especially considering they probably need votes from independents in places other than Sydney/ Melb to essentially save Sydney/ Melb house valuations. How the hell are they going to convince them without explaining that’s to stop a recession that they may already be too late to avoid?

      • My mum asked me to commit to buying in 2019. She is sick of me renting. More accurately though, she is sick of putting up with a few of her friends always bragging about their sons’ property portfolios, when her own son is renter. Need Brisbane to join the party to prove to my mother that her permabear son knows what he is doing after all

    • Party is on … just need to work out how to get your invite.

      We just purchased a house at same price as 2008. Party on, Wayne.

    • Sydney, Melbourne and Brisbane are all going back to 2015 prices. Brisbane did not rise so much since 2015, so the drop looks smaller in dollar terms, but it’s the same in chronological terms. (You can substitute 2014, 2013 if you prefer, but you get my point).

  8. Friends are moving to Brisbane from Sh!tney for family reasons. They are amazed at how cheaply they can buy or rent a decent house.
    We’re talking $1 million instead of $2 type comparison. (Still too expensive in my book).
    Anyway all the agents they talk to in Brisbane are reporting an epic flood of people from Sydney moving up to Brisbane at the moment. It doesn’t sound like typical agent BS to me. It sounds real.

    • Yep. Please stay in syd. No 1.3 mil is not cheap for here.
      Agents still cocky as hell in the western burbs in Brisbane. Sure mr agent they won’t accept anything lower than x.

    • kiwikarynMEMBER

      It makes sense if you think Sydney prices are going to fall further, while Brisbane prices are not. Sell up your $2m house, buy an equivalent home for $1m and invest the rest. Even if Brisbane prices fall as well, you are still going to lose less on a $1m house than a $2m one.

    • I think Brisbane is expensive. Sydney being way more expensive doesn’t mean Brisbane isn’t expensive.
      But agree, agents have it easier selling to people from Sydney. They just walk into a Bris property and ask the Sydneysider how much such a property would cost in Sydney. If they say 2.5m, the agent just says take a mill off and this one is yours.

    • Hill Billy 55MEMBER

      We are told that there are plenty moving north, but there aren’t that many interstate cars on the road. Would seem an illusion at this point in time. Mind you, happy if report is true as SIL and MIL are both selling their houses. They are not seeing much interest at the moment. Will update if this changes.

    • There’s a lot of talk that Newcastle and north coast prices are holding up for exactly this reason. Boomer sells $2M Sydney sh1tbox and buys better for half the price on the coast.
      But how long before reality sets in? how long before they realize that NSW has a heck of a long coast line so there’s not any real good reason for over-paying to live in Newie or Redhead or Catho or Hawks-nest or or or?
      I suspect some of these sea changers will get bitten bad when they figure out that their kids still live in Sydney (jobs, kids, life etc) and they live 2 or maybe even 4 hours drive north.
      From what I’ve seen in the past they’ll learn that these sea-change markets are highly illiquid especially in a down market.

      • anecdote: I live on the south coast near nowra. Prices shot up in the last 2 years and still seemed to keep their level for a few months as Syd was starting to drop. However lots of stale properties that haven’t sold in what should be peak season and asking prices seem too high to me (and everyone else clearly). Wollongong looks very overpriced given it’s supposedly a first home owner magnet.

      • Yes, mates parents did a sea change, but decided it was t oo far from Sydney, so moved down the coast, still too far, so did a tree change, but didn’t like that now they only “nice” house they can afford was in Tassy, well at least it was close to noni. They completely faarked themselves & have lost hundreds of thousands in costs & bad choices of newly built houses up the coast, well at least now Sydney is falling it doesn’t look quite so bad.

    • Talking to someone the other day who knew Sydney was going down, but he’d hear brissy was booming. Price stagnation below inflation doesn’t really seem like a boom to me..

      For those selling in Sydney and buying in brissy.. I don’t see that jumping around within an asset class during a crash is a quick path to wealth.

      • Tell them don’t believe it, Brisbane is flat-lining at best and starting to look like rolling over. Lived here all my life, may look cheap from mania syd prices but still too dear. Don’t count on gains here.

    • Whilst I’m sure there is plenty leaving Sydney and Melbourne for Brisbane. I’d say it’s not enough to replace the investor buying that has been going on for the last 5 or so years in all cities.

      Personally I’m done with Sydney, the place has been ruined in the last few years and cost of housing and rents are just insane for the crap quality you get.

      I suspect Tasmania was all driven by those priced out of Sydney / Melbourne. Hence the lag for it to start falling with the other cities and I’m sure it will follow soon.

      Area in Melbourne I’m looking at has surged in last 2 years also, probably folks desperate to escape the rat race. My mum has a house in Kinglake which is not really within easy commuting distance to Melbourne, but has been surging in value for the past few years. A house not far from her sold for over $1M recently which I can’t believe. Given that it doesn’t have the same view of the city my mum’s property has.

      I think the prices are driven by folks cashing out of the city and buying up semi-rural for retirement. Peace and quiet away from all the riff Raff.

      • I’ve been wrong on Tasmania many times Gavin – I live in suburb with seaside views (river & beaches – I saw Wild Oates sail up the Derwent from my recliner chair!) and the house across the road sold for $861k just before Christmas. Me and the missus cannot believe it sold for that much, considering it sold in the 90’s for about $170k. The reality is, the ‘pent up demand’ you talk of, is/has driven Tassie’s market and it is the interstaters that are doing the heavy lifting and because of Tasmania’s real estate being less volatile (always the last to move and play catch up) then I expect only about 10% falls and this is in line with recent boom/busts.

  9. kiwikarynMEMBER

    New listings are down, but old listings are up. The normal strategy for people who cant sell a house for what they want is to put it on the rental market instead. However a flood of new rentals hitting the market will push rents down (so watch out for those figures). Lower rents will flow through the market making previously positively geared investors negatively geared, and negatively geared investors even more so – and then Labor arrives and cans negative gearing tax breaks. This will cause a big cash crunch for a lot of investors. Result – forced sales. Then, the real housing crash will begin.

      • it won’t matter. Losing income to lose capital.. pfft let them.

        I’d rather they neg gear it all the way back down than be forced to sell at some profit.

      • kiwikarynMEMBER

        Wont that distort the market though? If I were an investor I’d switch to IO in a heartbeat if old properties were still able to be negatively geared. You’d be stupid to be paying P&I on old investments, you should save the cashflow and direct it to new property investments. Lucky APRA removed that pesky IO restriction 🙂

      • May become difficult for those who fund their retirement from collecting rent on their paid off investments. I wonder when some of the will decide it is cheaper to sell and try to invest the money elsewhere.

  10. Sydney will be -15 to -16% by March.

    At least -20% by mid year.

    Its probably too late to stop those falls. Maybe the government can stop it reaching -30%? I have my doubts. They are beyond distracted, everything is internal now. Any effort from now on will be merely yo save the furniture. They may even change PMs again…..

    • ErmingtonPlumbingMEMBER

      Ive never thought it was going to be less than 30% from peak.
      The end of this year will have everyone else thinking the same,…if it hasn’t already gotten there by then.

    • kiwikarynMEMBER

      The authorities have no interest in saving house prices and owners/investors. They are only interested in saving the banks and other financial institutions. That’s how every housing bust in the world plays out – no relief for Main St, but Wall St gets the bailout.

    • We get another few months of falls like this and the boomers will be getting super nervous as they see their cushy retirements slipping away. Remember boomers have to cash out at some point. How many more months will it take?

      • kiwikarynMEMBER

        Double whammy with all their retirement accounts balls deep in bank shares. This is a world wide problem – I read that 75% of invested funds are held by the retired, and about to retire baby boomers. They dont have a decade to recover from a sharemarket (or housing) bust. They have to act to protect their capital, otherwise they will be eating slop fed to them by a non-english speaking immigrant in a poorly maintained government run rest home.

      • @karen
        Bingo. This is the risk that they will all head to the exit at the same time if prices keep falling. The question is how much prices need to fall to trigger the avalanche?

      • kiwikarynMEMBER

        Exacerbated by the fact that almost 50% of funds are now held in passive investing vehicles, who will not be price sensitive sellers. Once redemptions start to flow in to index and ETF funds, the feedback loop will be complete.

      • Diogenes the CynicMEMBER

        Yeah I have heard some of this gnashing of teeth from my Mum’s boomer friends who are balls deep in the stock markets and have seen their portfolios fall 10-20% in 6 months. When you ask them what percentage of funds are in stocks they either don’t know or say they’re in a balanced fund..ie 70-75% stocks!!! Some are are SMSFs and have been loaded up with banks so they are really hitting the skids.

      • This! I suspect many retires are thinking things will soon bounce back, I don’t see enough drivers. That should be a second leg down.

      • Yeah, I reckon there is pent up demand in this category – boomers who were planning to sell their Syd/Melb house in 2014 for downsize or sea/tree change, but kept holding on one more year, one more year, while prices were still going up.

    • I don’t disagree Sydney RE is certainly looking like it’ll exceed 1982 declines, but is that reason for celebration?
      With Soooo much of the Sydney economy revolving around the Financialization of everything, can any resident really escape the wrath of said financial gauds when out’n’out sacrilege adversely impacts the value of our/their temples?
      Wasn’t it JC himself who held the Pharisees to account against their sacrilegious practice of loose oath-taking, was it the Gold in the temple OR the Temple itself that was consecrated?
      No one can look at these numbers and not conclude that temple of modernday Sydney worship (or is that worth-ship) is under attack by non-believers. The non-believers are openly sacking our Temples….. that bodes not well for our highly paid Temple guards (aka FIRE sector employees).
      For those not old enough to remember 1982, I’d suggest you crack open a book and familiarize yourself with the events that both preceded and followed the 20 odd percent decline in Sydney RE, to use LVO’s words it’s on like Donkey Kong

      • Fisho remember it well. My old man lost his job and never got another. Family with four children and significant debt. We were destitute. No car, not enough food, unable to pay school fees etc. And you know I think things will get worse this time

      • @fisho spot on, which is why I’m looking at it this way. I could remain invested in US stocks and watch the value of said stocks plummet and see my savings potentially nailed in or buy a property with a very small loan required and watch the value of said property fall in half but have a place to live and the security of that.

        Preserving capital over the next few years is going to be tough no matter how clever you think you are. I know I’m not smarter than most when it comes to picking the next safe harbour and therefore I view buying as transferring wealth from 1 bubble to the next.

      • Yeah but done the math here, when you’re renting and cash saved up, and no debt, and in your prime working age, in STEM, you can wait out even a 5 year joblessness and still have more well than half your wealth left. At least the house prices will be reset to something you can aspire to at the end of it. So I’m not going to shy away from a tough time. Alternative is to pay for someone else’s retirement and be a debt slave to the banks for the rest of my life working it off. Why.

      • @divya
        Yeah everyone can do the sums but few can properly calculate the consequences.
        Take for instance 5 years Joblessness, cashflow wise I might survive, BUT would I still be employable at the end of that 5 year employment hiatus?
        Even STEM jobs typically derive a large part of their value from continued economic growth, for instance Oil exploration is about as far removed from Finance and Sydney RE as one could imagine yet in reality it’s one of the industries that derive 100% of their value from continuous economic growth. So lots of smart people study Well rig and drill ship / exploration ship deployments as leading indicators of global economic health.
        IF the STEM work that you do is even peripherally related to Oil industry support than you could quickly find yourself in a world of hurt, with industry specific knowledge that no longer has a market-place.
        Look at what happened to say the Aberdeen oil development industry during the mid 1980’s oil crash, lots of advanced Scottish STEM technology companies went bankrupt and the local development industry never recovered.

      • From what I’ve seen in a downturn it’s completely random as to if your neck ends up on the block. Eg many of the best companies now are hugely indebted, will they survive? Will management at your company cut the best or the worst people, your department or another etc. So yes, I’m expecting a lot of pain, either directly or indirectly. The best way to preserve wealth, should be to be debt free & in liquid assets and/or boring assets & a bit of precious metals, least that’s my basic plan.

      • True good point Gavin. I’ve thought many times over the past few years about selling my place only to re-buy after the crash but I’m too scared to sit on the money, I don’t trust the banks, gold or anything. At least now I have something of value that I’m using. Push for a good price and buy, eventually you’ll get a desperado that must sell.

    • -30% is Sydney is nothing. It’s a 1.4m dump now being a $1m dump.. still ridiculous. A typical Sydney property at that price should be no more than $7-800k.. or USD 500k. There’s still a way to go yet.

      • ErmingtonPlumbingMEMBER

        Fair call,… Some places will fall farther than others.

        I remember buying my place in Ermo 16-17 years ago but wanting to buy closer to the Northern Beaches as I surfed there several tmes a week and was spending considerable time in my car per week to do so.
        Like for like properties in the “hinterland” (away from the beach) in Avalon/Newport/Colloroy Plateau or further back inland around Belrose/Frenches Forrest were going for about 50% more than Ermington properties.

        Fast forward to the peak of the boom and we got to an almost parity with these areas (same for same at the bottom end)
        Clearly the boom wasn’t driven by Boomers and Gen Xers wanting to live near the beach.
        Foreigners don’t give a fk about the beach and along with investors prefer places with functioning public transport systems, close to areas of Employment.

        Ive notice that prices are dropping farther in Ermo than the Northern Beaches now and lament that I didn’t make the move I was considering when I could have.

    • Hard to believe ALP won’t make a big effort to “ride to the rescue” when they get in mid year. There will be much pleading. just can’t picture them saying, This was all an illusion and now the hangover, folks.

      • TailorTrashMEMBER

        No one wants to admit it’s an illusion. Strayans are the richest people in the world cos their sh1tty houses make them so …and Scomo says so too .
        …..a pile of bricks and concrete tiles just sits there creating money ……wonderful country ……
        …….once this gets real momentum ….and its looking like that …..it’s like an avalanche and nothing will save it ….I know Straya’s different …….but the levels of stupid belief exceed even those exhibited in Ireland ……….and contrary to the old English propagated myth they are actually a clever country.
        .

      • Yes @TT it’s the unshakeable beliefs that really annoy me! Drives me bat shyte insane.. actually.

        Even my own mum thinks I’m far too bearish and even when I explain the global financial context she just thinks it won’t get that bad here.

        I will try to get her to watch The Big Short while I’m still in Melbourne.

      • It will be too late by then. I actually think its already too late to stop falls beyond -20%.

        This has creeped up on the political class. Mostly because it has been concentrated in Sydney in Melbourne in the higher end of the market, the states have masked it with their FHB sweetners, and the RC has made the banks look atrocious.

        This is a crash and we shouldn’t be under any illusions as to where it leads.

      • tactically stupid if they do. fingerpointing at the lnp using ever more florid and detailed language is the simplest politically.
        but alparatchiks hold ip’s too so I expect a cockup

      • kiwikarynMEMBER

        At least there are people who are beginning to accept prices are falling. Here in NZ everyone is still adament that prices will never drop, even though Auckland has the highest price to income ratio in the world. Keys use of the term “rock star economy” has birthed a whole generation of people who think NZ is special and “different”. And as much as sentiment supports prices, we are indeed not crashing. So annoying!

      • St JacquesMEMBER

        I’m absolutely amazed by that kiwi. “Rockstar economy” For sure,. that’s it, that’s the secret. lol

      • St JacquesMEMBER

        kiwi, I realised my last post is ambigious, what I mean is how people can believe such merde, and I suppose in a small, tight country like NZ, those beliefs can hold things up until they can’t. It’d be interesting to look back at what happened in Ireland in this regard. Did they have a similar defiance of reality before reality finally ran over them in full force?

        edit: oth Maybe Ireland is not so comparable because they don’t have their own currency, so when the GFC credit crunch hit the cash simply ran out. Maybe McPaddy can fill us in on this.

  11. How long before we start seeing these falls feeding into employment and the rest of the economy? Even without price falls just the low volumes should be having an effect with less money entering the system.

    • I suspect retail figures over xmas will be down. Lots of anecdotes from various sources saying the shops in Melbourne were quiet compared to previous years.

      • I went to Chapel Street about a week before Xmas- friend has a one month pop up shop. I hadn’t been for about 12 months.
        Virtually no traffic,virtually no other people at traffic lights or on the footpath, and most of the shops were either closed,or having closing down sales( mostly the former).
        Looked like a modern ghost town. Never seen so few people in such an urban setting.
        My boys tell me it’s busy at 1.00, but that’s not retail as such.

  12. I am confused as Mr IQ (Nathan Birch) is outlining now is a good time to buy… maybe he has no idea or just chasing those material buyers agents fees…. caveat emptor & good luck to those who follow him…

    • Probably chasing the 10k buyers agent fees and talking up his own book. I note that Martin North’s DFA youtube channel now has more subscribers than Mr IQ.

      • To be fair to Nathan, DFA’s new subscribers may just be fans of a beige shirt (and b!tchin drum loops).

  13. I reapplied for a loan preapproval. Did the same last year, but this time, post RC, they asked us so much more about our expenditure, including… how much my wife spends on her nails each month!!

    • I know! I was even asked how many left handed mice I expected to purchase each year. They thought my estimate of each one lasting a full 3 months was too conservative given the current state of the property market.

  14. I built a house in Ireland in 2005 and it was valued (at a stretch ) at 250k euro….by 2007 it had risen in value to 450k…(I cut the grass!) by 2008 when I decided to sell I put it on the market at 420k as market was beginning to turn…over the following months I kept dropping the price down as far as 300k..still nothing….In 2019 I still own that house….and it’s valued now at 215k….Aussies do not realise..there is no stop button on a downturn….when people crap themselves…the wallets stay shut…the banks shut credit down….govns are found out to be just the private school debating teams that do not give a Sh1t about the working man they so vehemently try to convince people they want to help..( take a bow Scummo and Bill )…..Why would house price falls stop at 20%…they won’t