While the real estate lobby groups put on a brave face and shower us with news of a recovery (0.1% increase in property prices in November), surging rents, housing shortages, tight rental vacancy rates and that it is never a better time to buy – you will get in at the bottom of the market, there are signs something is not quite right in property land here in the lucky country.
The Herald Sun reported yesterday on a rental glut in Western Melbourne. This rental glut has left almost 1,000 new homes sitting empty (housing shortage) and has seen the rental vacancy rate surge to 22 percent (extremely tight rental market). New four bedroom, two bathroom homes are now renting for $275/week (surging rents) as landlords fight with each other to secure tenants and an income. If they can’t find tenants, holding costs are likely to send these investors to the wall very shortly.
The Weekend Australian Financial Review reported yesterday “The housing market on the edges of Australia’s major cities is showing signs of significant distress as banks increasingly refuse to lend against sale price valuations in a falling market.” Valuations in many new suburbs have fallen 15 percent last year. According to the article, the problem is most severe in Melbourne with Dennis Family Homes CEO Peter Levinge saying “Banks have tightened up on their finance requirements, part of which is valuation, and we are noticing a higher level or cancellations than 12 months ago due to finance issues.” Dennis Family Homes is one of the biggest developers in Melbourne’s west and says about 25 percent of buyers are walking away from contracts, up from about 10 percent a year ago.
Mirvac’s John Crasi has also reported a sharp rise in cancellations telling the AFR, “This is happening all over the country,”
Despite reassurances we don’t have subprime lending in Australia, The Age has reported today of a potential, but massive, class action against the banks for essentially lending struggling home owners’ too much money. An estimated 300,000 could join Roger Brown’s legal action with Mr Brown saying “The people we are talking about are experiencing severe financial hardship through no fault of their own because they shouldn’t have been given a home loan in the first place or they have been lent way too much money, I think the banks have a case to answer for the irresponsible way they have been lending.”
There must be problems in property land if mortgage holders now want to take legal action. Real Estate agents better watch out, they could be next for endlessly saying house prices always go up, in fact “if you look over the past 100 years, house prices double every 7 to 8 years.”
» Rental property glut means investors are feeling the pinch – Herald Sun, 14th January 2012.
» Banks pull financing rug on outer estates – The Australian Financial Review, 14th January 2012.
» Banks face home loan suit – The Age, 15th January 2012.