Australia – House Price Slump Part Of A Global Drop?

The slump being witnessed in in Australian house prices was a long march towards a predicted screeching halt.

Whereas it was clear almost 6 months ago that such an outcome would be inevitable when the top end property prices started falling, now that the bottom is ready to drop out and the slump has also hit the lower end of real estate, the price falls in the market are far broader.

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Morgan Stanley's Daniel Blake commented: "The price of less expensive housing tends to be less volatile, and price falls much rarer, declines in this segment suggest more persistent weakness in the property market."

<blockquote class="twitter-tweet" data-lang="en"><p lang="en" dir="ltr">Is Australia’s real estate still safe as houses? More tonight on <a href="https://twitter.com/hashtag/abc730?src=hash&amp;ref_src=twsrc%5Etfw">#abc730</a>. <a href="https://twitter.com/geoffthompson?ref_src=twsrc%5Etfw">@geoffthompson</a> <a href="https://twitter.com/hashtag/housing?src=hash&amp;ref_src=twsrc%5Etfw">#housing</a> <a href="https://twitter.com/hashtag/realestate?src=hash&amp;ref_src=twsrc%5Etfw">#realestate</a> <a href="https://t.co/5oOeg8up5G">pic.twitter.com/5oOeg8up5G</a></p>&mdash; abc730 (@abc730) <a href="https://twitter.com/abc730/status/1039427662631002112?ref_src=twsrc%5Etfw">September 11, 2018</a></blockquote>

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"Additionally, spending of owners of housing in this segment are likely to be more sensitive to prices, given that lower income households tend to hold less savings buffers. This suggests we may begin to see signs of wealth effects from housing in the latter half of the year."

<blockquote class="twitter-tweet" data-lang="en"><p lang="en" dir="ltr">Housing market’s big secret AUSTRALIA’S real estate markets are changing extremely fast. Sydney just posted its biggest annual price fall since 1990, sinking… <a href="https://t.co/KvUDKfcG8b">https://t.co/KvUDKfcG8b</a></p>&mdash; NetworkofNews AUS (@NofNews_Aus) <a href="https://twitter.com/NofNews_Aus/status/1058680807454208002?ref_src=twsrc%5Etfw">November 3, 2018</a></blockquote>

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The question remains: is Australia part of a global trend or is this a regional issue? Signs of other English speaking nations point to a bigger crisis indeed.

<b>USA</b>

Over in the US, the economic growth is still riding high overall, but the housing market already evidenced of a slump over the summer when it became known that residential investment, which includes construction and brokers' fees, shrank in the second quarter for a third quarter out of four.

If you add this figure to the fact that you are seeing the worst housing affordability in nearly a decade (combined with rising mortgage rates and a Fed keen on raising them further), all signs say you have a recipe for a slowdown.

Ms Lindsey Piegza, chief economist at Stifel, admits that the housing market "raises a large red flag" about economic growth in the second half of the year.

<blockquote class="twitter-tweet" data-lang="en"><p lang="en" dir="ltr">Southern California suffers its worst housing slump in over a decade<br><br>effect of interest rates and higher property taxes.<br><br>will this lead usa into Recession? <a href="https://t.co/FV3MN5PWJm">https://t.co/FV3MN5PWJm</a></p>&mdash; Vick Timm (@matissemagic) <a href="https://twitter.com/matissemagic/status/1057347515417120768?ref_src=twsrc%5Etfw">October 30, 2018</a></blockquote>

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Given that most mortgages are now lent at fixed rates and borrowers are required to show more evidence they can repay their loans, any subsequent nationwide fall in house prices is not expected to cause a 2008-style collapse.

Investors are receiving warnings from their banks that they should be watching closely to see where home prices are by the November midterm elections (and more importantly, if consumer confidence remains strong).

<b>UK</b>

For the UK, it’s all about the uncertainty of Brexit. International investors have pretty much stopped picking up houses in London and parts of the sout-east as the uncertainty of the Brexit negotiations puts a cloud over prices. With just five months left before the UK is due to leave the EU, London and Brussels remain at a deadlock in talks, making sure that house prices across the British Isles are rising at the slowest annual pace in more than five years.

<blockquote class="twitter-tweet" data-lang="en"><p lang="en" dir="ltr">London house prices: is market slump here to stay? <a href="https://t.co/iOZaH1lVuj">https://t.co/iOZaH1lVuj</a></p>&mdash; Sylvia Matthews (@sylvia_matthews) <a href="https://twitter.com/sylvia_matthews/status/1057575710758440960?ref_src=twsrc%5Etfw">October 31, 2018</a></blockquote>

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Robert Gardner, Nationwide’s chief economist, said: “If the uncertainty lifts in the months ahead, there is scope for activity to pick up throughout next year. The squeeze on household incomes is already moderating and policymakers have signalled that interest rates are only expected to rise at a modest pace and to a limited extent in the years ahead.”

Source:

https://www.news.com.au/finance/why-its-so-hard-to-figure-out-what-price-a-house-sold-for/news-story/e4190982f01135d9f8aa8d10fb3512f5

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