The Herald Sun has recently reported that the Australian property market is heading towards a "bloodbath". Leading US real estate analyst, Jordan Wirsz, thinks prices are likely to fall up to 60%, with our capital cities being hit the hardest.
And that's just the residential sector. Mr Wirsz believes land investments could decrease in value by as much as 80 or even 90%, while commercial property could lose out by as much as 50%.
Is the Australian housing industry a bubble about to burst? Via.
It's a pretty 'doom and gloom' outlook, and Mr Wirsz places the blame with "artificially low interest rates, high loan-to-value lending practices, overinflated property prices, unrealistic vendor expectations and Australia's large number of second mortgages".
He doesn't believe the property market will start to recover until 2016.
But is this just a US outsider trying to throw his weight around? Local experts disagree with his claims.
Paul Bloxham, Chief Economist with HSBC, says that a property value crash simply isn't on the cards. He believes that we'll be buffered from the current global instability thanks to more rate cuts, strong overseas demand for Australian assets, a low dwelling price to income ratio and an undersupply of housing.
Meanwhile Sydney real estate agent Charlie Bailey of Ray White is of the opinion that there's no 'housing market bubble' to burst.
What do you think? Is the Australian housing market in for a gloomy future? Or is this just the naysaying of people who don't understand our market?
Anything for a headline! Every year, so called experts predict one thing or another and I suggest that we start some form of record of these outlandish statements by so called experts and bring them to account when their predictions are not realised. The issue of affordability is one thing. Levels of employment, immigration and housing demand, the cost of money, the perception of future interest rate trends and so forth all contribute to market cycles. It would be also good to see what percentage of homes are fully owned - I suspect this is a lot higher than most realise.over a year ago by stephen gough
This Wirsz, like all of the doomsayers, 40% imminent housing crash predictors are again shown to be wrong. Even today, reports such as http://smh.domain.com.au/real-estate-news/prices-slowly-emerging-from-the-doldrums-20120125-1qgbb.html contradict his unsubstantiated nonsense. And for the record, there is no housing bubble. There is a cycle, yes. It goes up, it goes down, it goes back up, etc. Sometimes it simply says unchanged. But the trend in Australia over 50-60 years is gradually upwards. Prices are at normal levels and there is plenty of ‘affordable’ property – the people complaining about affordability really want to buy a house on the harbour with views of the Opera House. Well no, those days are gone. But modest affordable property is still available as it always was.over a year ago by Pete9999
In case Wirsz and others still don’t understand, the US housing market blew up due to value-less packages of worthless high risk mortgages being onsold and used as collateral by banks which subsequently folded. By contrast, lending policies in Australia are extremely conservative and by contrast (to the US) the high proportion of Australian home owners that have near 100% equity in their homes means that predictions of a US-like disaster scenario are simply economic nonsense. Can only assume that Wirsz is seeking a way to talk down the markets in the hope of being able to afford to buy Australian property?
Hang on, did I just read that right? Local people who want to sell you a or your house and provide finance say no, everythings fine, everything's ok :)over a year ago by Charlie
We just sold a spec home we built for $370,000 - problem is it cost us $402000 to build. We could not rent it and the interest was $2000 a month, undersupply of houses is real estate agents and project builders talking through their arse. Property market is currently doomed. If you are a first home owner hang on a bit longer and you will get some real bargains. Invest at your peril!!over a year ago by Andy Aitchison
Andy - Sunshine Coast Queensland
For house prices to drop by up to 60%, builders, contractors, tradesmen and developers would need to be prepared to effectively take a 60% pay or profit cut. i can't really see that happening at any time, let alone in the immediate future. Please also remember that a proportion of U.S workers only earn around $10.00 per hour and lost the homes due to mortgages that they could never afford to service in the first place.All of my workers and most of my colleagues are ahead in their mortgage payments. Just keep going to work every day, pump the jobs out and collect the money, it's the Australian way, unique to usover a year ago by Steve Walters
The Australian housing market is overvalued. Australia does not have a land shortage like most of us would like to believe. It does not have a housing shortage like most of the real estate agents would like us to think. What Australia does have is an oversupply of land, a lack of affordable housing and a rental market that is demanding rents that most people are not prepared to pay or can afford. Its a matter of when the bubble is going to burst and it will burst. Its happening in China , they have 1000's upon 1000's of new high rise buildings that are empty with occupancy rates of under 20%.over a year ago by shin
The reason why there is shortage of housing and rental is due to the fact that prices are not affordable for the average Australian. The building and real estate industry are the only ones that are benefiting from the boom and are continually trying to talk up the Australian property market. The downturn in Europe will hit Australia as well as the high Australian dollar which will eat away at Australian manufacturing and service industries. This is what the US and UK had gone through and now its Australia that is heading the same way. Jobs will leave Australia this year as companies begin to realize that the cost of employing people is cheaper abroad. This has already started with Toyota and Suncorp moving operations overseas. Made in Australia is going to become an extinct brand. The government needs to reduce interest rates in order to reduce the increasing dollar and also to make sure that the housing market remains strong or else it will only repeat the same mistakes that the UK and US have made. Sub prime mortgages in Australia are also becoming a problem with lenders lending over 80% LTV. Mining is something that will also get hit as the Chinese beginning to look at continents like Africa, Mongolia, Brazil etc for cheaper raw materials, this is inevitable as some companies in China are working on margins as low as 2% due to the ever increasing costs of raw materials. Congo now imports over 80% of its raw materials to China and other new developing mining countries will follow.
The Australian government needs to cover its angles before it is too late. Don't think that we as a country are immune and when we are hit we will get caught out with our pants down. We need to act and act now. Get the Australian dollar down before it begins to hurt the country further.
My advice to people is to reduce your exposure to property and if you can't help yourself , then invest in the US property market which I think has reached its bottom. I remember when the US property bubble burst and being in the UK when people continued to say that it was not going to happen in the UK as they had a land shortage and that interest rates were low. The funny thing is a year later the UK property market plummeted. What happened to the land shortage that people spoke about and the low interest rates. Well that was a myth and it all comes down to affordability. My advice to people with property is don't over leverage yourself with property, if you have to stay in the place you are and don't up size for at least 2 years. The reason why property seems buoyant over the last few month is because the building booster grant was supposed to come to an end and people rushed to get contract signed before this was going to happen (even though the government has extended this) and also the fact that in NSW stamp duty was going to be added to property sales and people rushed into buy property and hence a spike in property prices. People, just cover your angle and don't over expose yourself to the market no matter what the real estate agents put out in the media.
Have a read of the following articles:over a year ago by Shin
look at the facts and not what market sentiment is saying.
http://www.moneyweek.com/investments/property/rest-of-the-world/profit-from-australia-house-price-crash-20400over a year ago by shin