Australia’s home market boom may be starting
SYDNEY: After a long pause, the auctioneer commissioned to sell a northern Sydney beachside apartment for in excess of A$ 800,000 ( US$ 614,391) puts his gavel away, unable to entice a single bid.
Across town, in the city’s trendy inner western suburbs, the owner of a warehouse converted into a three- level home drops his reserve price for the property’s sale.
There are just two potential buyers at the auction, and they have declined to enter the kind of bidding war that has caused home prices in Australia’s two biggest cities, Sydney and Melbourne, to double since 2009.
The auction stand- offs may indicate that the Sydney market, which has been def ined by researcher Demographia as the second most unaffordable in the world after Hong Kong, has finally hit a peak.
As the buyers have drifted off, the sellers have also started to back away and the number of home listings is down 25 per cent from a year ago, according to CoreLogic RP Data.
This is all yet to show up in a decline in prices in Australia. In the nation’s eight biggest cities, home prices surged a further 0.7 pct in January even as the volume of transactions was lower.
But some real estate experts and hedge fund investors say that it may be only a matter of time before prices also start to crumble.
A sharp correction would heap stress on those who have paid a high price to enter the big east coast property markets, while damaging the country’s financial institutions as home loans account for up to 60 per cent of the major banks’ total loan books.
The property sector is also a major employer and generator of demand, a particularly important pillar of the economy during a subdued period for the mining sector.
One big concern is the drop off in the number of Chinese buyers, following a crackdown by Beijing on capital outflows and Australia’s tightened restrictions on lending to foreigners.
I nd iv idua l s taking the maximum US$ 50,000 a year out of China now have to commit to not spending it on real estate and risk being investigated by the Chinese authorities if they break that pledge.
And the impact isn’t only being felt in Australia. In Canada’s Vancouver, which has been a big target market for Chinese buyers for some years, the number of transactions dropped 40 per cent last month, compared to the same month a year earlier.
A sudden increase in the number of sales agents splitting off from the big realtors to set up their own firms, and the arrival of new online players, is being seen by some in the industry as a contrarian signal of an overheated market.
“It’s that classic top- of- themarket mindset,” said property valuer Gavin Hegney, from Gavin Hegney Property. “’ I’m making money hand over fist, I could do this myself.’”
Hong Kong-based hedge fund manager Apt Capital Management has shorted Australian banks because of their exposure to a property market it believes is out of step with Australia’s economic strength. It is forecasting a severe correction. — Reuters