From boom to bleak, Australia’s hot property market is backtracking

New homes and land for sale are pictured in Sydney’s south August 14, 2014. Wealthier Chinese are taking their money out of China to invest in Australia’s property market as a crackdown on corruption in Australia’s biggest economy Asia is gaining momentum, say real estate consultants and lawyers. REUTERS/Jason Reed

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SYDNEY, Aug 1 (Reuters) – In April, Australian repairman Reis Saki put his parents’ home on the market in suburban Melbourne, hoping for a quick sale so they could get closer to services family and health.

But six weeks and two interest rate hikes later, he withdrew the listing after receiving no offers, despite a 10% reduction in the asking price from what had been an average amount for properties. similar in the region.

“It was nothing, nothing at all,” Saki, 45, told Reuters by phone. “I was really losing my temper.”

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His experience reflects a rapid reversal in Australia’s A$2 trillion ($1.40 trillion) property market which, after weathering the pandemic, entered what many economists call a downturn due to aggressive rate hikes. of a central bank determined to crush runaway inflation.

Pandemic-related savings and stimulus payments have helped push house prices nationwide by a quarter in 2021 alone. But now just over half of properties put at auction are selling in most major cities, compared to three-quarters last March.

Property prices in Sydney, the world’s second most expensive property market after Hong Kong by some measures, have fallen 4.7% since April, according to CoreLogic, the fastest decline in four decades.

“The boom was made possible by the shift from very high interest rates 30 years ago to recently very low interest rates, and that is now reversing,” the chief economist said. of AMP Shane Oliver, who expects house prices to fall 15% to 20% from the peak in early 2022 to 2024.

With the Australian government warning that inflation has yet to peak, most economists expect further rate hikes in the coming months – the next is due on Tuesday. Read more


Sellers face multiple headwinds, from competition to deteriorating buyer sentiment. Since homeowners generally prefer to sell in the spring, an increase in listings next month could add to the pressure, economists say.

Meanwhile, after postponing loan repayments for pandemic-affected homeowners, lenders have resumed “mortgage reinstatement” activities, such as filing repossession applications with those in default, according to court data.

In the first six months of 2022, property filings in Australia’s three most populous states totaled 997, up 56% from the previous year. It was still well below pre-pandemic levels, but signals mortgage stress, borrower advocates said.

“Letters of formal notice are being issued, particularly by second and third tier lenders,” said Claude Von Arx, financial adviser at the Consumer Action Law Centre.

SQM Research said property listings containing phrases such as “mortgage in possession” or “bank forced sale” hit a record high of 5,500 in April, the month before rates began to rise, versus about 15,000 before the pandemic. By mid-July, the number had increased by 10%.

“We are in a new environment where we have rising interest rates and we no longer have these banking moratoria, so we expect these numbers to increase significantly and at least return to where we were before COVID. ,” said SQM Chief Executive Louis Christopher.

People facing forced sales or eviction now make up a quarter of the caseload at Mortgage Stress Victoria, a service for people struggling with payments, up from 5% at the start of 2022, the manager said Legal Matthew Martin.

The big four banks – Commonwealth Bank of Australia (CBA.AX), National Australia Bank Ltd (NAB.AX), Westpac Banking Corp (WBC.AX) and Australia and New Zealand Banking Group Ltd (ANZ.AX) – said they had has not seen an increase in mortgage uptake, a sign that change is being driven by non-bank and subprime lenders – who lend to riskier customers for higher fees – who hold a quarter of the market.

Australian Banking Association CEO Anna Bligh said foreclosures remained at an all-time low due to a decade of initiatives to support struggling customers, and that “longer-term data trends should always be considered alongside shorter snapshots”.

($1 = 1.4325 Australian dollars)

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Reporting by Byron Kaye; Editing by Kim Coghill

Our standards: The Thomson Reuters Trust Principles.

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