Australia’s property values are already falling

Robert Klaric, the founder and CEO of The Property Expert International, was interviewed by Sky News whereby he claimed that “virtually, across the board, we’re seeing around a 10% correction to our market already in the last six-week period”.

Klaric also forecast that we are “likely to see a 10 or 20 per cent reduction in terms of property values”:

“The negotiations have become, certainly, a big difference between the asking price and what they are purchasing the property for”…

“From a buyer’s perspective, they’re thinking well why should I buy now when, potentially, I’ll be able to get the same product a lot cheaper in the next three, six to 12 months”…

“Everyong said to me that the banks are being cautious. So you need to have strong financials, strong employment history to get the funding”. If there’s any grey area, the banks don’t have an apetite for lending at all…

“We are going to see a lot more distressed sales over the next six months”…

“At the moment the market is sinking”

It’s a view shared by SQM Research managing director, Louis Christopher, who noted that “we are very much aware of the real estate industry advising their vendors that the prices achieved in February and January are no longer achievable now:

“I’m hearing anecdotal reports of the banks cutting new lending”…

“It will be very interesting to see when we get to August. Will the banks roll over that moratorium [on mortgage repayments] or will they start calling in loans”…

“These are very difficult days for property investors. We are getting zero net migration. So we are looking at a surplus of stock”.

“On top of that, because short-term arrivals are zilch, it means a whole bunch of Airbnb properties have zero tenants in them right now, so those property owners are looking to move those Airbnb into the long-term leasing market creating an additional oversupply”.

Nothing readers of MB don’t already know.

Leith van Onselen

Comments

    • Mark StueveMEMBER

      Credit contraction risks rising, areas of life that are highly leveraged.
      Marco cycle – disinflation for now.
      Labour – reduce wages broadly but hidden through wage growth and stagnation in asset prices over the next 2 to 3 years. Incomes higher in real terms in IT and health, but people get over leveraged no matter of household income- usually them in this cycle.
      Place yourself in towards cashflow for a quick burst then a slow grind up.

      • Jumping jack flash

        “…people get over leveraged no matter of household income…”

        THIS.

        After acquiring the essential amounts of debt – ie: as much as can be possibly taken on and then a bit extra, everyone lives on HEM rations. This is regardless of “base” income.

        Its how you make a robust and properly functioning economy these days.

        Its also how you thrust control of the economy into the hands of the banks, and then they can make the economy dance with a flip of the interest rate lever… until you get debt hyper-saturation, like we have now.

        Not even QE can work in this environment, as we will soon see.

      • GlendaFMEMBER

        Numbers are numbers, and if they’re the wrong numbers, you could be born again Kerry Packer and they still wouldn’t lend to you…at the moment….

    • As a seller right now, settlement risk is real.

      We have another offer on the table for ours which looks a better prospect risk wise (their sale is a big cash payout)…current O&A buyer seems to have some trouble going unconditional on finance…

      Look for shorter settlements to derisk

      • Hoping yours gets through Swampy. Gav’s mum rang the bell at the top selling perfectly pre-Royal Commission, maybe yours will be the top in your region this time!

      • I’m at the end of 4 days of moving due to our rental selling. The offer went in maybe a week before sh1t got real with KungFlu. I was thinking, wow my landlord is a lucky bastard! It took ages for the buyers to get finance approval though…I really thought they’d screwed the pooch.

  1. I spoke to a property developed who had an interesting take on how things would play out – he is heavy in cash and I asked when he will look to purchase. He thinks banks will wait about 3-4 months post the JobKeeper and mortgage holidays ending before they start forcing sales. So Jan/Feb 2021 is when he expects the big drops to start, and for it it to take a few months with the bottom not occurring until 2022. That is when he is planning to start re-purchasing.
    That was a lot of a longer timeline than I had thought of myself, but I can’t really fault his thought process.

    • Yep, I have an RE developer friend who is saying similar – consciously, specifcally, going to look for distress and go in with low-ball offers, mainly from Mum and Dad investors who don’t know what they’re doing and haven’t timed the market properly…yep, that is his specific tactic.

      • Jumping jack flash

        My wife is too impatient. I would wait until the end of next year but she wants at the end of this year..

        Which is a shame because I have some IP (not the land kind) I have sold which will be fully paid at the end of next year.

    • Fark longer than I wanted, if we take a 6M lease / rent post sale I was hoping Oct so we could buy before Christmas
      Hopefully though we can flush something out before then and the vendor isn’t looking to 2018 for price guide

    • Bring it under the FHB stamp duty limit and I’d be interested. I don’t think it’s worth anywhere near 900k given the plot the house sits on plus distance from any commutable location.

        • The 899k one is next to a water park? That should make it generally speaking even less valuable than the one that sold in Jan 2020 (see below).

          It might or might not bother me as a buyer. Easy to spend some time there to find out in normal times. Probably dead quiet these days.

          • Just across the river. You’d need to check it out but yes, probably a bit quiet now

    • This place just up the road, with double the land size – and all of it flat and usable, unlike the previous one – sold in Jan 2020 at near the peak of the rebound for $1.8m: https://www.realestate.com.au/sold/property-acreage semi-rural-nsw-lower portland-129355854

      The obvious questions would be flood plain-related, but it certainly puts the $900k asking price of the first property in perspective.

  2. BoomToBustMEMBER

    Interesting email from VCAT:

    Critical information
    If you lodged an application with VCAT from Wednesday, 13 May 2020 onward or regarding termination/possession

    Dear RT users,

    CAV reference number information
    Under the Residential Tenancies (Covid-19 Emergency Measures) Regulations 2020 (reg 12), which took effect on 13 May 2020;
    • VCAT cannot consider your application at the hearing unless you have contacted Consumer Affairs Victoria (CAV) and are provided with a referral to VCAT
    • that means if you have not obtained a referral from CAV by the time of the hearing, the hearing will not be able to proceed.
    • at the VCAT hearing, if VCAT does not have evidence that CAV has referred your dispute to VCAT, the hearing will be adjourned until you obtain a CAV referral.
    Please visit the CAV website and complete an online application form for the Residential Tenancies Dispute Resolution Scheme.

    CAV will either:
    • invite you to attempt to resolve your dispute through the newly established Residential Tenancies Dispute Resolution Scheme (you will not be able to continue your VCAT application); or
    • refer your dispute to VCAT.
    If your dispute is referred to VCAT:
    • reply to this email giving the CAV referral number which CAV will give you; or
    • call us on 1300 01 8228 and give us the CAV referral number.
    If you contact CAV and are advised your dispute can only be dealt with through the Residential Tenancies Dispute Resolution Scheme, contact VCAT immediately and withdraw your VCAT application and ask for a refund of your application fee.

    When contacting us provide your VCAT reference number, “R2020/?????”.

    Termination/possessions of a tenancy under new RT laws
    For applications for termination and possession the new Residential Tenancies (Covid-19 Emergency Measures) Regulations 2020 now set earliest termination dates that can be specified in VCAT orders.

    These minimum periods run from the date of the VCAT order:
    • The day the VCAT order is made if the ground for the termination order is (a) damage (b) danger (e) notice to leave managed premises (l) premises unfit.
    • 14 days if the ground for the termination order is (c) serious threats (d) failure to comply with VCAT order (f) illegal use (g) trafficking, cultivating or supplying drugs (DOH) (h) indictable offence (DOH) (m) false statement as to eligibility (n) assigning or subletting without consent.
    • 28 days if the ground for the termination order is (i) failure to comply with an obligation (including non-payment of rent) (r) failure to comply with pet exclusion order
    • 30 days if the ground for the termination order is (s) refusal of alternative accommodation from DOH transitional housing.
    • 60 days if the ground for the termination order is (j) sale (k) DOH renovating or demolishing (o) landlord or family moving in (p) public purposes.
    • 90 days termination if the ground for the termination order is (q) tenant ceases to meet eligibility criteria for public housing.
    These time limits are set out in the Regulations, not in the Residential Tenancies Act.

    If your application is urgent, contact VCAT requesting that your application be heard with priority.

    You are receiving this message as you are the registered email for your company RT Hub account, please provide this information to those in your company that use the RT Hub account.

    Regards,
    VCAT Residential Tenancies Division

  3. “..We are getting zero net migration. So we are looking at a surplus of stock”.” – but politicians and MSM were saying high immigration is not pushing prices up. How come low immigration is pushing prices down?
    I said this many times.. without jobs, immigration can create more problems than solve. I’d like to see how opening the gates will work if there are no jobs.. moving forward.
    Mark my words – we will become main destination for all international drug lords, war lords, corrupt politicians.. who want to launder their money away from their own countries. Banks already proved this is happening but my view is it will get lot worse.

    • Most pivots round IPs for rental by investors catering to temporary churn over e.g. students, professionals etc., while negatively geared investors are catered to by govt. legislation in tax system. New permanent residents are less significant in number, many may still rent, if they wish to stay on in country for citizenship.

      Elephant in the room is the opaque market round apartment developments which seem to fly under market data radar (or totally bypass it), and lesser extent suburban housing developments.

      Of course there is still sentiment that drives much of the market..

  4. Side DishMEMBER

    Took part in an online auction for a 1137 acre rural block on Friday.
    First bid after 3 minutes of prompting $700k
    2nd bid of $900k came after 2nd call
    Passed in at $900k with a reserve at $1.4m
    Bank wants 40% deposit on ag lending

      • Side DishMEMBER

        Inverell NSW in the New England area
        Quality properties are still selling but it’s to corporate farmers or to the farmers next door who are expanding
        Most farms sold around here recently could not pay for themselves as a standalone enterprise
        Otherwise property’s that are rundown or have poor or no infrastructure are staying on the market

  5. People are discounting apra/asic/banks sh!t fkery.

    Once mortgage holidays end they will offer P&I owners 1 year IO terms. They will try to avoid foreclosures at all costs.

    This is what the 6 month holidays are for… preparing all manner of measures to delay the day of reckoning

  6. As a keen observer I’d have to say that prices have taken a bit of a tumble and are much closer to their pre-2019 election values than what they were a few months ago.

    Having said that, given that clearance rates have started climbing to ‘neutral’ levels’ there might not be the continued price drops that some are expecting.

    • Hard to draw a conclusion either way until number of auctions is a bit closer to normal.

      Remember, not only is the number of auctions tiny in comparison to usual (Melbourne is still down around 80% compared to weekend before the world stopped), they’re the properties belonging to vendors most confident of making a sale at auction (who are often individually a bit silly, but collectively have enough of an idea to bias the result).

      Also, end of JobHider will be an interesting test.

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