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From boom to gloom, Australia’s red hot property market hits reverse

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Photo of new homes and lots for sale in South Sydney on 14th August 2014. As the crackdown on corruption in Asia’s biggest economy gains momentum, more wealthy Chinese are moving money out of China to invest in Australia’s property market, property consultants and lawyers said.Reuters/Jason Reed

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SYDNEY (Reuters) – In April this year Australian home repairer Raith Saki sold his parents’ house outside Melbourne in hopes of a quick sale so he could move closer to his family and medical services. I put it out to

But six weeks later, after two interest rate hikes, he withdrew after no offers, despite the price being 10% below the average price of similar properties in the area.

“There was nothing, absolutely nothing,” Saki, 45, told Reuters by telephone. “I was really losing my cool,” she said.

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His experience reflects the rapid reversal of Australia’s A$2 trillion ($1.4 trillion) housing market. The market has entered what many economists say is a downtrend due to aggressive rate hikes from central banks determined to quell runaway inflation after a surge caused by the pandemic.

Pandemic-related savings and stimulus payments have pushed home prices across the country up by a quarter in 2021 alone. But just over half of the properties at auction in most major cities are now for sale, down from three-quarters in March.

Property prices in Sydney, the world’s second-highest housing market after Hong Kong, have fallen 4.7% since April, the fastest decline in 40 years, according to CoreLogic.

Shane Oliver, AMP’s chief economist, said the shift in housing prices from very high interest rates 30 years ago to very low interest rates in recent times made possible a peak in early 2022 through 2024.

Most economists expect further rate hikes in the coming months as the Australian government warns that inflation has yet to peak, with the next one scheduled for Tuesday. read more

seller stress

Sellers face multiple headwinds, from competition to deteriorating buyer sentiment. Homeowners generally prefer to sell in the spring, so a surge in listings next month could add to the pressure, economists say.

Meanwhile, after deferring loan payments from pandemic-affected homeowners, lenders have resorted to “mortgage enforcement” activities, such as filing foreclosures from defaulters, according to court data. We have resumed.

In the first six months of 2022, there were a total of 997 foreclosure applications in Australia’s three most populous states, a 56% increase on the previous year. While still well below pre-pandemic levels, borrower supporters said they were indicative of mortgage stress.

Claude von Arkes, a financial counselor at the Center for Consumer Behavior Law, said demand letters were being issued, especially from second-tier and third-tier lenders.

According to SQM Research, real estate ads containing phrases like “mortgage holders” and “forced bank sale” went from about 15,000 pre-pandemic to 5,500 in April, the month before interest rates started rising. recorded the lowest. By mid-July, that number he had increased by 10%.

“We are in a new environment with higher interest rates and no bank moratoriums, so we expect these numbers to rise significantly and at least return to pre-COVID levels,” said SQM Managing. Director Louis Christopher said:

People facing forced sales or evictions now make up a quarter of the caseload of Mortgage Stress Victoria, a service for those struggling to pay, up from 5% in early 2022. Legal Director Matthew Martin said.

Big Four Banks – Commonwealth Bank of Australia (CBA.AX)National Australia Bank Ltd. (NAB.AX)Westpac Bank (WBC.AX) and Australia and New Zealand Banking Group Limited (ANZ.AX) – said it has not experienced an increase in mortgage originations, a sign that change is being driven by non-bank and subprime lenders charging higher fees to riskier customers, who make up a quarter of the market. be.

Australian Bankers Association CEO Anna Brye said a decade-long initiative to help clients in distress had resulted in the lowest reversals on record and that “long-term data trends have It should always be considered together with a meaningful snapshot.”

($1 = 1.4325 Australian Dollar)

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Reported by Byron Kay.Edited by Kim Coghill

Our criteria: Thomson Reuters Trust Principles.

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