Australian Property "In Deep Trouble"

SQM Research managing director, Louis Christopher, has given another bearish assessment of the Australian property market in an interview with Ross Greenwood:

“It’s already playing out. We are already recording property price falls… The epicentre of this downturn appears to be Sydney and Melbourne… Melbourne’s recording the largest falls…

“So far the downturn has been orderly. There hasn’t been a lot of forced activity. We believe that the moratorium provided by the banking sector on borrowers that cannot meet their monthly mortgage repayments has contributed to minimal forced sales activity.

“The question is, of course, going forward will it continue?…

“They [the banks] will have to write-off a lot of loans. They will also have to start calling in some loans where they are fully aware there’s no chance of seeing the borrower repay that mortgage…

“I think what is going on right now is the banks are restricting new lending in some ways. They’ve probably lowered the LVR for new borrowers… We know there’s been a big fall in housing finance approvals… So, sooner or later, the ledger has to be squared off for the banking sector and there are negative ramifications for the housing market when it does…

“It’s very likely that we are going to see many SMEs around Victoria not make it through… they may well respond by selling their home… I am anticipating that we are going to see further increases in listings…​

 

Not surprising, but not all markets are equal

I predict everyone leaving Melbourne and moving to safe havens. I dont blame them, policing is causing unrest, nasty stuff. ....and dont go to Sydney, its too close to Melb

But they should move to Perth, weather’s great and zero covid cases. Great lifestyle and housing is cheap is comparison

 

They are MTR. I am reading reports that Perth is chokkas.

Also happening in other spots. On the ground here in Darwin the vacancy rate is now well under 2%.

COVID is causing a mini boom.

It's not just Darwin. Townsville, Perth even Gladstone are showing signs of life.

 

I was actually being facetious, though I think you are right

Its getting very interesting, Perth rents are going up and its becoming a landlord market. Houses are selling very quickly

 

I think its Brissies turn to fly, looks like very likely AFL grand final will be in Bris this year
Geographically makes sense

 

Rockhampton on the up too. Interesting times in the regionals.

 

You can add all of regional victoria to that list. Nothing for sale and nothing for rent. Anything cheap for sale is sold - even in towns where houses can sit on the market for years

Regional boom and capitals bust - been speaking to agents in various towns and apparently this working from home thing is becoming reality very quickly

Also factor in no immigration for the capitals to absorb the new construction and the fact that most of the regionals have no new construction as it wasnt required before now

 

Thats interesting, any regional areas you can share

 

I’m one of the biggest WFH advocates around, read posts from 3 years ago when housing affordability was top of mind and I said this is your number 1 answer.

However making life decisions of movement on a 6 month pandemic I think is a bit nuts. Don’t get me wrong I think WFH will now be widely adopted but surely it would make sense to wait until life is atleast somewhat normal and employers who claim the new WFH balance actually adopt it when push comes to shove.

Just imagine you sold up and moved to the beach 30 minutes to the closest train station which is 1.5 hours to the CBD and your work says “we’ve decided you can work 1 day from home”. What then? Look for a new job in the regional town Centre? Just after a pandemic I doubt their will be jobs galore.

 

thats what I would have said until I watched Steve McKnight’s recent webinar

Also you dont have to sell up you can always rent snd see how it pans out

 

I think it's all a bit nuts too.

Who would have thought that a pandemic would have made markets boom?

The ASX is well over 6k, regional housing markets are booming....

You couldn't make this stuff up!

My crystal ball is clearly still broken...

 

Sydney property is down around 2%. Melbourne a bit worse, others less so, and Canberra doing well. Isn't the real story how well key key markets are going given it is the biggest economic downturn in the last 100+ years?

I think Louis Christopher is great, but when he says, "We are already recording property price falls", while technically correct, it doesn't speak to the magnitude of the falls. Nor does it reflect that the price falls are slowing down.

I am a total economic bear the longer the shut down continues, but it has been remarkable how the real estate markets have responded.

 

300 odd billion in stimulus
probably 50 billion in drawn super (honestly no idea how much was drawn out)

I would have thought there would be a mini boom but unless we get a cure this stimulus will run out and the recession effects will take place eventually.

 

What did he say?
I only watched the first 1hr but his pessimism was killing me. Love Steve though, I’m sure it had a point!

 

100 % agree, but 100 % think the average punter gives it 0 % thought- so it’s probably 100 % happening.

 

hahaha love this.
Quote of the day.

And yes I actually think you could be spot on!

 

I know it's trendy to lump hate on Martin North on this forum but I attended some of his live youtube/webinar sessions where he uses his survey data of multiple thousands of participants and drills down to postcode level - not just for the postcodes the owned-proprtiws are in, but also the postcode where the owner resides.

Some anecdotes point to both growth and decline (depending on the postcodes in question) which I find interesting. Also interesting his his focus on tracking mortgage stress for both owner occupier and investor subjects alike.

 

Any views on why the Canberra market is going up? Is it purely because of the relative security of Government jobs?

 

Canberra is not a market I follow that closely. My guess is that government largess leads to more public programs and public servants, and more demand four housing in Canberra. It's one of the few markets in Australia that has a slight political influence. I suspect is is not good for the rest of us, but that would be my best guess.