Property Market Crash?

[Cherished]

dh and I have been talking about the world economy and wondering if the property market will crash in Australia. We know that in America things are really bad and thousands of people have had to sell their home at a fraction of what their home loan is so now are without a house and still owe the bank a stack of money we have friends over there who are also in that boat Anyway I was wondering if any BB'ers had thought about this issue and what you had concluded? We built our house about 3 years ago and we love it! But we also know that this is only house #1 and would eventually like to be on acreage and be able to put a big pool in soooo we are thinking of selling now and renting and then if the market does fall we can buy some land cheaper and build our 'dream' home. There are lots of pros and cons either way I guess but the idea of having so much more money to spend every fortnight is also VERY attractive! We are comfortable and don't really 'want' for anything much but to know that I can just spend more money instead of thinking that I don't really need it would be very liberating!

[Arimeh]

It's definitely headed that way. Things here are taking 2 years to sell and it's ridiculously cheap here in tassie compared to the other states. Our home has been on the market for nearly year a we've dropped the price by $25,000 from what we paid for it 18 months ago.

My SIL has her house on the market in Pomona (qld) and it's a beautiful house - no buyers.

My mum has a great block of land for sale in peachester (just under an acre) for the same amount of time as ours has been and relatively cheap at $269,000 - and yet again - no bites.

Its definitely pretty crap in the market at the moment and I don't see it picking up any time soon.

[Cherished]

Hey hon, how are you going? what a bummer about your house taking so long to sell. I remember that you are from the sunny coast. Our house is in Cooroy in a great location, since we've lived here there have been a few neighbouring houses sell, some for much less than what we would want to sell for but then again our house is on the high side of the street and has more internal features in it. Hmmm I wonder if we should put it on the market and just see if there are any buyers. I wonder what real estate fees would be involved. I was just looking on a real estate website and the property market has dropped stacks from when I look a few months ago Now I'm wondering if we should just hold onto the house? we can service the loan no worries so maybe we should just ride out the storm... oh what to do, what to ??

[Taurean]

Yeah, I think it's pretty clear the market in on a downhill spiral. Some suburbs are still performing well but as a whole, most areas are starting to hurt. We are in Perth and it's had a 7.5% slump in the past year. That's huge.

We are counting our blessings we sold our last house (which we built - walking distance to Fremantle - and had been in for only a year) at the tail end of the boom as our friends in the same area are struggling to sell their home. Just 2 years ago, they would have had people putting in ridiculous offers over the asking price BEFORE the home opens. Yes, it was that nuts over here. They've actually just taken their house off the market as it's been 5 months with only one offer and they need a break for a bit.

As you say, there would be pros and cons to selling now. You could definitely snap up a bargain in the near future BUT you also run the risk of selling your current house at a loss. It's such a gamble at the moment.

One of my close friends lives in Melbourne but her and her future hubby are going to move to the Gold Coast in a year or so. They've just bought a 4x2 with a pool close to the beach (5 minute walk) and only 10km north of Surfers. They paid $540K - $100K under the initial asking price. Admittedly it was a deceased estate but seriously, that seems crazy!

Perth definitely needed a shakeup in my opinion. It was so over inflated over here and while I'm grateful that it worked in our favour on several occassions, it has made it difficult for a lot of people and now the big slump is only making things worse. It will be nice to see the houses more afordable over here but it's sad that so many families, in particular, will be (or have already been) hit hard.

[Cherished]

Thanks Taurean, we don't need to sell so we wouldn't let our house go at a loss. We would be happy enough to make a much smaller amount though or even break even as our 'win' would come from having so much extra money in our bank account, being debt free and being ready to buy when our dream bit of land shows itself. I think I've decided to put it on the market and see what happens. Not sure what the real estate fees would be but will find out tomorrow. Another bonus for us is that we could rent much closer to dh's work, at the moment it's a 30 min drive. Seeing I am not going back to work there is no need to be where we are now. Gosh so much to think about!

[Taurean]

Sounds like a good plan and it can't hurt to see if there are any 'takers' out there

We moved to our current house (which we are actually knocking down early next year to build again - woohoo!) so we are much closer to DH's work too. We only a 15 minute drive in traffic (each way) instead of 40 minutes. We are in an even better suburb now too and plan on staying here - hopefully forever!

We can't remember exactly how much our agent fees were but we think it was around 2.5% and the only thing we paid for prior to the sale of our house was advertising fees of around $2K. We had a full coloured 'For Sale' sign out the front of our house which displayed beautiful photos (taken by a professional photographer) and details of the house. The agent also had gorgeous full colour brochures for clients and our house was on realestate dot com with loads of great photos. We were really impressed with what was included in our advertising costs and have no doubt it helped to sell our house faster (we sold in 6 weeks) and for our asking price

[Sopdet]

I'm watching the prices in my area drop quite substantially over the last 6 months, from a terrace going for about $1.5mil to down to the $1mil mark. One in my street was on the market for a couple of months, I honestly thought a 4 bedroom, 2 bathroom, 2 car park terrace less than 5kms from the CBD would be snapped up quicker. The amount of time it was on the market is pretty unheard of according to the long time locals that I chat to.

I'm watching the market, would like to buy in the next 6-12 months but that is dependant on a few things.

[black_rose]

It dropped really quickly last year, we first talked about selling in July and by the time it was on the market in September we had to drop 60k off the asking price. It turned out ok as we bought in the same area so got this house for a lot less, we sold quickly but this house was on the market for 6 months and with three agents. The owner had over capitalized on the renovations so she barely made any money, she wanted a lot more but no one was prepared to pay it.

[Olive]

what happened in the USA will not happen here, the issue over there was to do wtih banks lending 100% loans etc...over there you can simply work away from a mortgage if you wish, our economy is great in comparision and the fact that interest rates are steady is a good sign. i think the key is buy in the right area

[Traveller]

I second what Olive said. In the UK it was similar in that a lot of people had borrowed 110% of their property value which meant when property prices dropped a little, it had a huge knock on effect on the economy. America and UK were also in recession which they are still struggling with. Australia managed to avoid the recession and whilst prices may drop a little in the short term I do not believe they will have an almighty crash.

[RhiChiChi]

I was going to same the same as Olive - the property and mortgage market is completely different in the US.

I think it entirely depends on where you bought/live. Inner affluent suburbs in Melbourne (such as Toorak etc...) have seen a massive drop in prices to sell, whereas out this way houses are barely on the market and sell ASAP. A house around the corner from us had been previously bought approx. 2years ago and was on the market for months, it sold last month within 2 weeks of being on the market.... A general thought is that ppty prices will overall hold and there will be no crash (that is in Victoria anyway)

[Just Me]

I also second what Olive said. What America did was CRAZY! They went for the whole 'every american deserves a home' stance and I think lots of people were mortgaged 3 or 4 times over what their house was worth. Lehmen Brothers, Franny Mae and Freddy Mak (the institutions that collapsed and kicked off the financial crisis) were pretty much set up by the gov't to give Americans any amount of credit they wanted regardless of whether they could pay it back or not. It was a stupid stupid economic move. Of course those institutions collapsed because people couldn't afford to pay the money back and once they feel over, so many other banks panicked and did the same thing. They all wanted their money back and people couldn't afford it which meant there was a massive surplus of houses which is why houses were selling for as low as $7000. There were just so many that people couldn't afford and the market was flooded. I don't see things becoming that dire here because we have lending laws that protect us.

Also in America, people can walk away from their houses without having to pay the money back or taking any responsibility for their mortgage. This is a huge difference as well.

Interest rates in America were also very low (less than 1%) and the UK was the same. When the GFC hit, they had nowhere to go with interest rates which is why they suffered so badly with it and why their property and lending markets did as well. Australia, thankfully, had interest rates around 4% (from memory) but we had room for our interest rates to go down which is what kept our heads above water. We are still above water now.

Some economists have been predicting a second GFC though based on what happened - because America has continued to borrow and borrow and borrow. George Bush, as president, borrowed more money than all the presidents before him combined and Barak Obama has borrowed more than George Bush and all the other presidents combined. It is some phenomenal amount everyday with no way of paying it back. It is kind of scary. But our interest rates seem okay and the Reserve Bank is trying to keep inflation under control (even if the ALP is trying to drive up inflation to pay back Australia's astronomical debt) but we should be okay if another GFC hits.

I think the property market will suffer a little, but I don't think it will crash. I would say that it is not a good time to be selling and to hang onto your property if you can afford it. Ride it out and things will even out with wages/cost of living/economy in a few years.

Anyway, there is a little video (about 40 mins) that explains it all. I will see if I can track it down and put up a link. It is really really interesting.