Connect with us

Real Estate News

Australian house prices: Real estate market boom unsustainable, banks fear, and could spark problems soon

Published

on

House prices across Australia continue to climb insane levels despite lockdowns, and unlikely voices warn it is getting out of hand.

At the start of the coronavirus pandemic, when the world was on the verge of unprecedented uncertainty, economists issued a dire forecast for the Australian real estate market.

It would suffer tremendous losses like we have never seen in modern history, with estimates ranging from a 10 percent drop to a devastating 30 percent drop.

Despite massive job losses, widespread lockdowns, the shutdown of the economy and a resulting recession, as well as the interruption in trade, these forecasts have never been fulfilled.

In fact, average property values ​​across Australia rose 15.8 percent in the first eight months of 2021 and rose 18.4 percent last year.

Prices are higher than they were before anyone knew what Covid-19 was and have grown at the fastest annual pace since 1989.

“In dollars, the annual increase in national housing values ​​is roughly $ 103,400 or $ 1,990 per week,” said Tim Lawless, research director at CoreLogic.

Aside from those trying to get on the real estate ladder and fight, most of the other market players would be celebrating the historic upturn in the market … right?

This week, an unlikely voice joined the growing chorus of concern over the ongoing boom that continued during the lockdown in two of the largest markets, Sydney and Melbourne.

Commonwealth Bank chief executive Matt Comyn said he was “increasingly concerned” about rapid price growth in virtually every city, as well as in key regional areas.

Although the bank is the country’s largest bank and the largest home purchase lender, which means it raises cash, Mr Comyn said at a parliamentary hearing that the bank wanted to take steps to “take some of the heat out of the housing market” .

Prices are still rising, but are slowing down

The national property market again rates the street 1.5 percent in August, with Sydney’s largest market up 1.8 percent, the CoreLogic Index reported.

This growth rate for the capital of New South Wales is limited to one person at a time, despite a prolonged lockdown in the city with real estate inspections and auctions that are conducted online only.

Even in Melbourne, even in the midst of another lockdown, prices still rose 1.2 percent – a modest increase, but still impressive in the context of the Covid landscape.

“As expected, during the significant phase of the lockdown in Sydney, Melbourne, we saw a sharp drop in consumer and business confidence,” Comyn said Thursday.

“I don’t see any major slowdown in (mortgage) applications or funding. You can see that the market is still very active. “

The strongest increases in August were recorded in Hobart with an increase of 2.3 percent, Canberra with an increase of 2.2 percent and Brisbane with an increase of 2.0 percent.

“Australian real estate values ​​continued to surge across the board despite the disruption from the lockdown,” Lawless said.

However, the August results provide further evidence that price growth is slowing after peaking in March, he said.

“At the time, national home values ​​were up 2.8 percent in a month, led by Sydney, where home values ​​were up 3.7 percent.”

That slowdown in recent months has likely more to do with affordability than Covid-19’s restrictions or significant uncertainty.

“House prices have risen almost 11 times faster than wage growth over the past year, which has created a greater barrier to entry for those who don’t already own a home,” Lawless said.

“Bans have a clear impact on consumer sentiment, but to date the restrictions have resulted in falling offers and, to a lesser extent, fewer home sales, which has less impacted the dynamics of price growth.

“It is likely that the ongoing shortage of real estate for sale is central to the upward pressure on property values.”

Despite lockdowns and restrictions for the real estate industry, the auction dissolution rates – i.e. the proportion of offers that go under the hammer – remain high.

According to CoreLogic, 1,835 houses were auctioned in every capital last weekend, a sharp increase over the previous week and almost twice as many as 12 months ago.

The national auction clearance rate was 74 percent, while Sydney led the individual market fee with a score of 82 percent.

Volumes are low, however, especially in Melbourne, where 56 percent of the roughly 560 properties that went under the hammer have been sold successfully, suggesting that many sellers are stuck right now.

A sign of anger ahead of us

The head of a big four bank, who talks down house price growth and even calls for action to slow it down, is obviously important.

And it is an indication of what the real estate industry – a crucial pillar of the economy – could face if it continues unabated.

In a speech at a parliamentary hearing on Thursday, Mr Comyn was asked about the growth in residential property prices when he said: “We feel it is important to take some humble steps sooner rather than later to take some of the heat out of the housing market.

“I think it would be wise to act sooner rather than later.”

What just happened – a nearly 20 percent explosion in national property prices – doesn’t give him any reason to pause.

“I’m not worried about the time that has just passed. But we are increasingly concerned about rising real estate debt and rising real estate prices. “

ANZ boss Shayne Elliott also appeared at the parliamentary hearing, who also voiced his concern about Aussies who may bite off more than they can chew.

“The number of people taking on more debt for their income has increased,” Elliott said.

“We’re taking more time to be careful, to ask more questions, to really judge whether people have the ability to take on the debt they’d like (and) we’ve lost a bit of market share as a result.”

The Reserve Bank has also expressed growing unease by saying that rising house prices and subsequent household indebtedness see “risks to financial stability … building.”

In a speech this week, RBA Assistant Governor Michelle Bullock, who oversees the country’s fiscal stability, said homeowners’ debt was huge thanks to house prices.

This means that a bigger event like a decline in employment may be felt worse by it.

“For example, in a recession where a large number of indebted households are suffering from income losses, such as job losses or reduced working hours, they might choose to cut back on their consumption,” said Ms. Bullock.

“It can only be a precaution. However, when households are constrained by running out of much income after completing their debt servicing and lifestyle basics, they are more likely to cut back on their consumption.

“This will amplify the initial impact of the economic shock.”

She said the RBA is constantly reviewing whether action is needed to address the risk.

“Even if banks have strong balance sheets and lending standards are adhered to, there is a risk that households will become increasingly indebted in this environment,” said Bullock.

“High levels of debt could pose risks to the economy in the event of a household income shock or a sharp drop in house prices. It is these macro-financial risks that require close monitoring. “

CBA is taking proactive steps

Another bombshell Mr Comyn dropped on Thursday was that his bank had raised its operational floor to cool the market.

That is, the rate at which a bank tests a person’s ability to keep repaying their mortgage when interest rates rise has been cited for Commonwealth Bank clients.

Currently, the official rate in Australia is at an all-time low of 0.10 percent, making the cost of borrowing extremely low.

These low lending rates are adding to the real estate rush, as well as a faster than expected recovery in consumer confidence, FOMO (fear of missing out) and backlog.

While there are no immediate signs that rates will rise, they will eventually.

“I think we all have our part in ensuring that Australia’s households are in a strong position to continue to repay, but also to support broader consumption in the economy in the second half of this decade when and when rates go up they might go up faster, ”said Comyn.

Right now, few people are losing due to skyrocketing prices in virtually every part of the country – with the exception of a significant group.

Younger Australians are facing conditions that “make it difficult to enter the housing market,” Elliott said.

Full pricing out will lead to long-term economic inequalities in the future, he warned.

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Real Estate News

Real estate commission structures do need changing

Published

on

Earlier this month the editors of the Boston Herald called on the National Association of Realtors to amend a number of rules that they believe are anti-competitive and are designed to keep real estate commissions artificially high.

In response to the editorial, NAR President Charlie Oppler pointed out that commission rates have steadily declined in recent years. The consequence of this decline, according to Oppler, is that the commissions are fully negotiable, which suggests that agent compensation is not anti-competitive. However, a closer look at the commission data actually supports the opposite conclusion; namely, that there is substantial evidence that the current commission structure is against antitrust law.

When analyzing real estate commissions, it is important to recognize that the total real estate commission consists of two components: the broker’s commission and the buyer’s commission.

Because listing agents negotiate their commissions directly with sellers, there are no anti-competitive concerns with this component of total commission. However, this is not the case with the brokerage commission because the brokerage commissions do not negotiate their commissions directly with their buyers like they would in any other industry. Instead, the NAR rules stipulate that when listing the home, the seller must offer a preset, non-negotiable commission to the buyer’s agent who mediates the buyer.

This means that the buyer’s brokerage commission is not dictated by free market forces when the price of a service equals the value of the service. Instead, it is determined by how high the buyer’s commission is in the respective market. This notion of a common price exists because most sellers either from experience or from their brokerage agents know that offering a lower brokerage commission to the buyer would encourage brokers to illegally distract their customers from their offers and towards properties with higher commissions .

The declining commission data referenced by Oppler emphatically supports this characterization of real estate commissions. According to industry news site RealTrends, the average national commission rate has fallen from 5.40% in 2012 to 4.90% to 4.94% in 2020. (For simplicity we assume it is 4.90%.)

However, as explained above, we have to split the total commission into the broker’s commission and the buyer’s commission. According to a Redfin study, the average brokerage commission fell only slightly from 2.8% in 2012 to 2.7% in 2020. It can be deduced from this that the average brokerage commission fell from 2.6% to 2.2% during this period – four times the decrease in the buyer’s average brokerage commission.

It should come as no surprise that the average brokerage commission has dropped significantly over this period. First, the number of active brokers increased by 46% from nearly one million to nearly 1.5 million between 2012 and 2020. It is to be expected that this increasing competition will put pressure on commissions. Second, the average home sale price rose 23% (adjusted for inflation) over this eight year period, more than offsetting the decline in average listing commission. Finally, the increasing adoption of technological tools such as electronic signature software has helped streamline the process.

Therefore, the sharp drop in the average brokerage commission is an indication that free market forces are at play on the listing side. If this were the case on the buy side, we would expect a similar decline in the buyer’s average brokerage commission as the trends described above affect both sides of the deal. On the buy side, the decline is even more dramatic as buyers increasingly find their new homes on real estate websites like Zillow and realtor.com.

The fact that the buyer’s average brokerage fee has changed little since 2012 therefore supports the argument that the buyer’s brokerage fee is dictated by an arbitrary rate rather than free market forces.

Will Fried is a data scientist at REX.

Continue Reading

Real Estate News

Fall Real Estate: Tri-Valley market shifting as 2021 comes to an end | News

Published

on

Tired homebuyers looking for a break can look forward to something in Pleasanton in 2022.

Buyer behavior changed in the second half of 2021 and is likely to continue into next year, said Tina Hand, 2021 president of the Bay East Association of Realtors.

“In general, homebuyers find less competition when they bid on real estate,” said Hand. “Many buyers are still a bit tired; they have been on the market for a long time and have been much outbid.”

She explained that historically high sales prices have taken their toll and there are simply fewer buyers in the market. Hand said buyers “are still waiting for prices to fall further despite we’ve seen price adjustments.”

The number of pending sales in Pleasanton peaked at 87 in April and then stabilized in May, June and July. Pending sales fell to 57 in August and then to 54 in September. This trend suggests a decline in buyer enthusiasm, which is also reflected in sales prices.

From August through September, the average retail price for a single family home in Pleasanton fell from $ 1.79 million to $ 1.56 million. This change was just one of the few times in 2021 that sales prices dropped month on month.

Hand said buyers are pulling out and sellers are not used to that. When asked how the sellers are reacting, Hand said: “I think they are a bit surprised that in August and early September they are not getting the prices we saw the market is shifting.”

“Sellers had received 15 or 20 multiple bids that were $ 200,000 to $ 400,000 above the asking price, and that doesn’t happen,” she said.

According to Hand, changes in the total cost of living are dampening buyer enthusiasm.

“People are starting to see fuel prices go up, food prices go up. I think that’s another factor in why people might be backing off a bit,” she added. “We have inflation going on and I think that scares people. First-time buyers in particular are a little nervous and will wait and see what happens.

The monthly price changes from August to September are surprising, but do not yet indicate a major shift in home sales prices. The average sale price for a home in Pleasanton in 2020 was just over $ 1.25 million. From January to August 2021, the average retail price was more than $ 1.6 million.

Hand said: “There is talk of a ‘housing bubble’ but the factors are just not there; this is not 2008. What happened then will not happen in 2021.”

Looking ahead, Hand said buyers should be positive with potentially more options. “More inventory in the market will help home buyers moving up or down or first-time home buyers – whatever the case.”

When asked when the 2022 real estate season will start, Hand predicted, “I bet it will start in late December or mid-January. that will make a difference in both residential and commercial real estate. “

Editor’s Note: David Stark is the public affairs and communications director for the Bay East Association of Realtors, based in Pleasanton.

Continue Reading

Real Estate News

Shaq Sells Florida Mansion For 60% Less Than He Originally Sought

Published

on

After three years, five agents, and several price cuts, the NBA legend is Shaquille O’Neal has finally made a sale of its longstanding Florida property.

A deal for the huge estate known as Shaq-apulco was sealed for $ 11 million. That was 33% less than the last April list price of $ 16.5 million.

In 2018, Shaqs Spread hit the market in Windermere, FL for a whopping $ 28 million. Months later, the price was lowered to $ 22 million.

The waterfront retreat returned to the market in 2020 with a new marketing strategy and a new price of $ 19.5 million before being dropped again earlier this year.

Ultimately, the property was sold for 60 percent of the original, soaring asking price.

O’Neal realtor Benjamin Hillman of Premier Sotheby’s International Realty explained what made buyers decide and said through a representative, “It was the amenities and expansive lakeside setting that did it.”

He did not want to comment on the selling price.

The huge mansion, which the athlete bought for $ 3.95 million in 1993, has been modified down to the smallest detail. That turned out to be a certain hurdle for buyers.

New listing agent, new strategy

Hillman, the fifth agent to oversee the listing, spoke to us back in April about his revamped sales strategy. His goal: a lot less Shaq.

“I watched this house for over three years and they all walked down the same street, from Shaq, Shaq, Shaq,” Hillman told us about the strategy of previous agents. “But I want to take him out of the picture. I asked that any Shaq items that could be moved be moved. “

1/12

Gallery image

2/12

Gallery image

3/12

Gallery image

4/12

Gallery image

5/12

Gallery image

6/12

Gallery image

7/12

Gallery image

8/12

Gallery image

9/12

Gallery image

10/12

Gallery image

11/12

Gallery image

12/12

This was a challenge given the “S” branding throughout the 31,000-square-foot interior, sports field, and oversized, custom-made furniture tailored to fit the 7-foot-1-inch star.

However, Hillman really managed to clear out a lot of Shaq’s belongings. In addition, the interior walls were painted white and many rooms were newly staged.

As the photos illustrate, references to Shaq remain: the diesel truck mural, the cinema decorated with Superman, and a similarly branded motor show. The “S” is even engraved in a glass shower door. The indoor basketball court still has Shaq’s name on the hardwood.

Trophy home

Unsurprisingly, Shaqs Spread has everything a superstar could need. The spacious interior offers breathtaking perks anchored by a 1,170 square foot two story great room with a marble fireplace and glass walls.

For entertainment, the manor house offers a cigar room, an aquarium room, a home theater, a games room, a dance studio, an office and a wine bar.

The master suite includes a 900 square meter sleeping area, two bathrooms and four closets.

Luxurious landscape

Despite its highly adapted furnishings, the property offers elements that every luxury buyer will appreciate. The 4 acre area overlooks Lake Butler and offers 700 feet of lakefront.

In addition, the royal residence is in the gated golf club community of Isleworth.

The resort-like facility is certainly a selling point. There is a 25m long and 4.5m deep pool with a custom rock waterfall. A summer kitchen, tiki-style cabana, and hot tub are also part of the package.

A covered boat dock with seating area is equipped with an electric boat lift.

O’Neal, 49, has long since left this huge mansion.

After a 19-year career, he retired from the NBA in 2011. He spends more time in Atlanta, where he works as an analyst for Inside the NBA on TNT.

Benjamin Hillman with Premier Sotheby’s International Realty represented O’Neal. Rob Rahter, a broker partner and specialist in luxury real estate for the Stockworth Realty Group, represented the buyer.

Continue Reading
Advertisement

Trending