From boom to dark, Australia’s booming housing market is collapsing

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

“It was really nothing, really nothing,” Saki, 45, told Reuters over the phone. “I was really losing my temper.”

His experience reflects a rapid turnaround in Australia’s $ 2 trillion ($ 1.40 trillion) Australian housing market which, following the surge during the pandemic, has entered what many economists see as a slowdown due to rate hikes. . .

Savings and stimulus payments related to the pandemic helped push home prices nationwide by a quarter in 2021 alone. But today, just over half of auction properties are sold in most major cities, compared to three quarters of March.

According to CoreLogic, property prices in Sydney, the second most expensive real estate market in the world after Hong Kong, have fallen 4.7% since April, according to CoreLogic, the fastest decline in four decades.

“The boom was made possible by moving from very high interest rates 30 years ago to very low interest rates recently, and this is now reversing,” said Shane Oliver, chief economist at AMP, who predicts that prices of homes drop 15-20% from their peak in early 2022-2024.

With the Australian government warning that inflation has yet to peak, most economists are expecting further rate hikes in the coming months – the next is scheduled for Tuesday.

SALES STRESS

Sellers face multiple headwinds, from competition to harsh buyers. As owners generally prefer to sell in the spring, an influx of listings next month could add pressure, economists say.

Meanwhile, after postponing loan payments to pandemic homeowners, creditors have resumed “mortgage enforcement” activities, such as defaulters’ claim for recovery, according to court data.

In the first six months of 2022, expropriation applications in Australia’s three most populous states reached 997, an increase of 56% over the previous year. This figure remains well below pre-pandemic levels, but signals mortgage stress, borrowers say.

“Letters of formal notice are issued, especially by second and third tier creditors,” said Claude Von Arx, financial advisor to the Consumer Action Law Center.

Real estate ads with phrases like “mortgage possession” or “bank forced sale” hit a record high of 5,500 in April, the month before the rate hike began, according to SQM Research, from about 15,000 before the pandemic. by mid-July, that number had increased by 10%.

“We are in a new context where interest rates are rising and there is no longer a banking moratorium. We therefore expect these numbers to rise significantly and return to at least pre-COVID levels,” said Louis Christopher, CEO of SQM.

People facing a forced sale or eviction now make up a quarter of the workload of Mortgage Stress Victoria, a service for people with payment difficulties, up from 5% in early 2022, said legal director Matthew Martin. .

The big four banks – Commonwealth Bank of Australia, National Australia Bank Ltd, Westpac Banking Corp and Australia and New Zealand Banking Group Ltd – said they have not seen an increase in mortgage execution, a sign that change is being driven by non- Risky banks and lenders – who lend to riskier customers for higher fees – that hold a quarter of the market.

Australian Banking Association Chief Executive Anna Bligh said recoveries remained at record lows due to a decade of initiatives to support distressed clients and that “long-term data trends should always be considered. along with any shorter snapshots “.

($ 1 = 1.4325 Australian dollars)

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