Going, going gone for Australia’s house price boom
SYDNEY: It’s a winter weekend in Sydney’s bustling northern suburb of Chatswood and a three-bedroom family house sporting an endless garden is up for auction. It’s priced to sell at A$1.88 million (US$1.4 million) but no buyers bite and the sale is abandoned.
On the same day, in the heart of the harbour-hugging city a two-bedroom apartment with panoramic views fails to sell as no bidders turn up.
Auctions are a bellwether of demand in property-obsessed Australia, where attending sales is almost a national pastime.
It is therefore telling that only just over half were successful the weekend last month a Reuters reporter visited some of Sydney’s auctions, compared to more than two-thirds for all of last year.
And while that week was the worst since 2012, it wasn’t a one off. Auction clearance rates have averaged in the mid-to-low 50 per cent range for each of the past nine weeks.
The recent weakness in the Australian housing market, which has been one of the drivers of an economy that has now grown for 27 years without a downturn, has some economists warning of heightened risks of a recession and even a financial crisis.
In anticipation, some hedge funds are shorting the nation’s financial assets and some significant investors are heavily underweight Australia compared to regional benchmarks.
The slack has been partly engineered by the authorities. Curbs on lending to foreigners, foreign buyer taxes and a clampdown on capital flows by Beijing have hurt bubbling demand from Chinese investors, who have been important contributors to the housing boom of recent years.
There are signs of a similar fall in Chinese investment in Vancouver, Canada – which has also been a red hot market in recent years and where the authorities have also intervened by raising taxes on foreign buyers. But a decline in Vancouver’s sales is yet to translate into price declines.
In Australia, a governmentmandated inquiry into the nation’s banks has turned up so many misdeeds that the industry has restrained some lending.
Annual growth in housing credit has braked to four-year lows while building approvals have come off a peak and nationwide home prices have started to fall for the first time in six years.
Home values in Sydney, the country’s largest city, are down 4.4 per cent compared to June last year, the sharpest fall since 2008 and far away from the 19 per cent growth enjoyed early in 2017, according to property consultant CoreLogic. — Reuters