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Australian Housing Market Could See a Historic
Crash
LEVEL 4, 183 WICKHAM TERRACE, BRISBANE QLD
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In 2015 award-winning film The Big Short, Steve
Carell and Christian Bale star in a tale about
the greed and systemic risk surrounding the US
subprime housing bubble and how it led to one of
the most painful housing crashes in history.
Australian housing market is returning to
something resembling nor- malcy in two big ways.
But are we?
Its no secret that Australia has one of the
highest levels of household debt in the world.
In fact, as of the most recent comparable data,
we have almost 50 per cent more debt than the
Americans did during the absolute height of
their pre-global financial crisis debt binge.
Using celebrities such as Margot Robbie and
Selena Gomez to explain some of the more
abstract concepts of finance and real-world
examples such as an exotic dancer having five
investment properties, the film painted a
picture of American greed and regulatory failure.
But this is nothing new. Australians have carried
more household debt than Americans for the past
20 years.
However, with the advent of the coronavirus
pandemic and more than five million people being
supported by the governments JobKeeper or
JobSeeker programs, there are signs that the
Aussie property market may be following the same
trajectory as the Americans did during the GFC.
The American subprime lending bubble and the
eventual housing crash has become a cautionary
tale the world over. In the years since,
Australians have often liked to comment on how
we are different, whether its around a backyard
BBQ or a high powered CEO addressing the media.
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PEXA, an E-conveyancing firm made up by the
various privatised land reg- istry offices,
recently authored a report into the direction of
housing prices in our two most populace states,
New South Wales and Victoria.
Put into contrast with the numbers provided by
PEXA for property price falls in NSW and
Victoria, the falls they are experiencing are
disastrous.
In NSW, prices are falling 37 per cent faster
than Americas were when they were crashing in
2008. For Victoria, the numbers are even more
concerning, with prices falling at more than
double the rate of the US housing crash.
According to PEXA, from the start of the year
until the end of September, housing prices in
NSW are down 9 per cent and in Victoria, prices
were down a whopping 14 per cent. Commercial
property in NSW also fared extremely poorly,
with prices down 14 per cent in the first nine
months of the year.
For a nation like Australia that eats, sleeps and
breathes property and property investment, these
figures are practically blasphemous. Even with
more than 3.5 million workers being supported by
JobKeeper, hundreds of thousands of mortgages
and business loans in deferral and unprecedented
support from the Morrison government, PEXAs
data shows prices falling at an alarming rate.
Price drops of up to 14 per cent paint a pretty
concerning picture for the na- tions property
market, but how does it compare with The Big
Shorts housing crash?
According to the preferred benchmark, the
Case-Shiller National House Price index, in the
first nine months of the American Great
Recession, housing prices fell by 6.6 per cent.
But amid the storm clouds, a break in the weather
may be looming on the horizon, if only for a
little while.
In September, housing prices in NSW showed a near
1 per cent gain for the month. However, PEXAs
report also warned that scaling back labour mar-
ket support would likely put further downward
pressure on house price growth and housing
activity in the medium term.
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Whether PEXA or one of their other competitors
provides the most ac- curate snapshot of a
states property market is a question for the
statisti- cians and market analysts. But it
nonetheless has provided a great deal of food
for thought for any and all interested in
outcomes for the proper- ty market. If PEXAs
data is correct and NSW and Victorias property
markets are falling significantly faster than
American property during the Global Financial
Crisis, then the Aussie property market may be at
risk of a historic housing crash. With the
conclusion of JobKeeper for its 3.5 million
recipients still to come, along with the end of
loan deferrals for hundreds of thousands of
borrowers, its possible that without further
intervention from the Morri- son government,
prices may continue to fall.
Before today, its likely you may not have heard
of PEXA. But with the company processing 20,000
property transactions every week, it pro- vides
an extremely rich and comprehensive data source
for Austra- lian housing price data. However,
where PEXA differs from other housing price data
providers, is that it provides the median price
for all transactions within a given period. It,
therefore, provides a very broad overview of a
states property market rather than the more
targeted approach that takes into account
significantly more variables, often down to the
single property level.
Prime Minister Scott Morrison
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Its important to keep in mind that the economic
aspect of the coronavirus crisis was largely
stopped in its tracks in much of the world,
through the power of around tens of trillions of
dollars in global stimulus.
Now as that stimulus runs out and much of the
Northern hemisphere heads back into some degree
of lockdown due to the explosion in COVID cases,
its possible we could see a perfect storm of
international factors impacting our banks and
property market in the months and years ahead.
THANK YOU
Whether high Aussie property prices will survive
yet another global crisis rel- atively unscathed
through the power of government and RBA
intervention remains to be seen. But if PEXAs
warnings of housing prices declining further in
the medium term prove to be accurate, it may
only be the beginning of the pain for property
owners. In this current economic climate
forecasting, the property market is challeng-
ing to say the least. With the likelihood of
further government intervention to prevent price
falls, it becomes even more problematic. Ultimate
ly, if a convergence of global and domestic
factors all come together to form a perfect
storm for the property market, these existing
price falls may only be the beginning of The Big
Short of the Aussie housing market.
LEVEL 4, 183 WICKHAM TERRACE, BRISBANE QLD
4001 1800 217 217 mail_at_aylwardgame.com.au
aylwardgame.com.au
Expert Solicitors and Family Lawyers For
Immediate Assistance Free Consultations Free
Appointment
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