A Housing Bust Forms in Bubble Markets Sydney & Melbourne



Posted by Ed 6 mths ago
“Bloodbath” and similar technical terms crop up in the media.

Sales of houses and condos in Greater Sydney, Australia’s largest housing market, plunged 16.7% in October compared to October last year, even as advertised listings surged nearly 20%, to the highest level for this time of the year since 2009, according to CoreLogic. And prices fell in October:

Prices of single-family houses dropped 8.4% year-over-year
Prices of condos – “units” in Australian – fell 4.9%;
Prices of all types of dwellings combined fell 7.4%;
Prices at the most expensive quarter of the market dropped 8.6%;
Prices at the least expensive quarter of the market fell 4.6%;




Ed 6 mths ago
Sydney's Housing Crash Could End Up Being The Longest On Record

After a parabolic rise in Sydney home prices over the past cycle, mostly aided by a fear of missing out, property prices plateaued then rapidly moved lower midway through 2017, catching many by surprise.

Sydney home prices have dropped 7.4% over the past year, according to CoreLogic’s latest Home Value Index, the sharpest annual percentage decline since February 1990.

Cameron Kusher, a Research Analyst at CoreLogic, posted a series of charts on Twitter showing Australia’s largest and most expensive housing market has declined 8.2% from its cyclical peak 15 months ago, making this the fastest reversal in over three decades.

To October 2018, Sydney dwelling values are -8.2% lower than their peak. Since 1980, the only larger decline recorded in Sydney was a -9.6% fall in values which started just before the last recession. This decline is now longer and deeper than most with little sign of abating. pic.twitter.com/hAhhmnA2VC

— Cameron Kusher (@cmkusher) November 4, 2018
As shown in the next chart by Kusher on Twitter, in the past, it has taken several years for Sydney home prices to revert to prior cyclical peaks whenever values have plummeted.

Following the ugly downturn in the early 1990s, it took five years for home prices to return to their prior nominal peaks.

The other question is how long will values take to return to peak levels, Historically it has been pretty quick but has tended to happen on the back of falling interest rates or Government stimulus. Neither is out of the question but both look unlikely at this stage. pic.twitter.com/COdMYBsibQ

— Cameron Kusher (@cmkusher) November 4, 2018
Many of the country's top economists forecasted home prices to increase in 2018; one forecaster even expected prices to jump 9%. However, this was not the case, as house prices have experienced their most significant and longest peak to trough decline in modern history - spurred by housing affordability constraints, tightening of lending standards, and the Australian Prudential Regulation Authority's restrictions on new investor loans.

The Australian Financial Review surveyed five top economists that now expect the national house value index would continue to deteriorate into 2019, with Sydney, the epicenter of the downturn.

Stephen Koukoulas, of Market Economics, was the most downbeat of the bunch, with expectations prices would fall in Sydney between 7.5% and 10% in 2019 after a drop of 7.5% in 2018.

Nationally, he predicted house prices would fall by between 5% and 7.5%

"From the 3rd quarter in 2019, I am forecasting some stability in prices as supply and demand forces underpin new activity," Koukoulas told The Australian Financial Review."From the 3rd quarter in 2019, I am forecasting some stability in prices as supply and demand forces underpin new activity," Koukoulas told The Australian Financial Review.

Once a floor is found in prices, he then expects first-home buyers would enter the market and take advantage of increased levels of affordability.

More https://www.zerohedge.com/news/2018-11-06/sydneys-housing-crash-could-end-being-longest-record

Ed 6 mths ago

Ed 5 mths ago
“A potent combination of nervous buyers, cautious lenders and retreating investors has turned Australia’s once booming housing market to dust. With the downturn now in its second year, the question for home-owners, house-hunters and property investors is how much further there is to go. Prices in Sydney, the epicenter of the preceding boom, are falling at an annualized pace of about 8 percent.”


Ed 5 mths ago
A new analysis by UBS concludes that housing prices in Australia could fall as much as 30% in a deep recession scenario. UBS analyst Jonathan Mott assembled five different scenarios to predict the direction that Australia’s housing market could go. The worst case includes the first recession in 27 years, a 30% collapse in house prices and widespread litigation against the banks for mortgage mis-selling. The bear case would also include the central bank cutting rates to zero before embarking on its own version of quantitative easing, the suspension of dividends and equity raisings from the big banks.

Mott thinks that current conditions are already reflecting the very real possibility of a housing correction and also warns that risk of a credit crunch "is real and rising."

Mott stated: "The rapidly deteriorating housing market is a signal of even tougher times ahead. The housing credit squeeze experienced over the last six months is expanding. The outlook for the banks has not been as challenged since at least 2008."


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