Is everything really all right in property land?

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.


  1. Class action. To what avail? Some people vindicated from their large debt? A better feeling that, “…see! It wasn’t my fault I took on all this debt…”? A non-recourse loan deemed for some people? Who ended up with all the money (if it did exist), or who profited from all this debt issuance? Will they take a haircut? Will they be reprimanded to even some degree? Will some people still be allowed to live in their house? Even if they are underwater?

    I don’t think the Real Estate industry will be able to compensate anyone, some may be roasted before public inquiries, but so what!

    Are people here so stupid as to see what went down (and still is) around the whole world with their, public-senate inquiries or public roastings? Over similar things, and didn’t amount to anything good for anyone anyway. Is Australia really so different the downturn will be different here too? Maybe not being able to legislate against stupidity will ultimately rule, I don’t know. When it comes down to class actions, things are bad. Oh look out! The people are angy. The banks are busted! 2gb radio are calling real estate agents criminals! No really…

    “Despite reassurances we don



    The average Australian is an embarrassment to the nation as far as their basic abilities go. I have no respect for them.

    Does this mean that state governments can also be sued for handing out first home loan assistance to these morons as well, since they helped encourage these idiots……..

    Hell I’m going to sue FORD for making a car that goes faster than the speed limit, I mean like they should provide the means for it to stay within the limit without my having to do anything or even be aware of the limit.

    Anyone who signs up for this suit is basically saying they are a moron.

  3. Romsey,

    I like you am flabbergasted at the gall or naivety of these people who by making such an action are as low life as the banks are.

    Both parties on entering the mortgage contract may have readily assumed that these late transactions may have been the last dance before the sun went down on the Great Australian House Price Boom and both knew the dire consequences or at least should have known.

    To take on a mortgage that one can’t pay in these circumstances clearly means that individual cannot wipe their own arse or tie their own laces.

    Good luck to the gormless masses who of course are compelled to absolve themselves of responsibility and lay blame at others. I am incredulous of this news.

  4. After scanning the hundreds of readers comments it is interesting to note that around 95% of them on the various news sites are in favor of the banks.

    Lawyers just out to try and make a buck……. this time I’m rooting for the banks, I hope they crush these fools.

    Hopefully the courts will put an end to this litigation garbage run.

  5. Bankers will always try to make a buck, morons will always try to blame somebody else, and lawyers don’t care who pays them. The pity is that they are all fighting the wrong battle.

    Banks need regulation – pure and simple, with ethical lending practices at the top of the agenda. Morons need to be educated that you can’t have what you can’t afford – it’s too late for the adults, but we can start with our children! As for lawyers, there are more of that lot than car mechanics and plumbers and nurses and teachers – time to get back to some honest trades instead of turning into a litigious society resembling that great beacon of a nation the US of A. Australia is looking more like America every day and it’s frightening. Watch out!

  6. These morons want to sue becouse they got to greedy. Anyone that gets in debt that they canno’t pay they just a modern day slave working for banks. Australia’s private debt is out of control and the cracks are starting to show.

  7. Mad Max,

    Not completely accurate, the credit card debt is $1-1.5 Billion more than this.

    When the tide of credit and debt issuance recedes, we see what is on the ocean floor. So this is the economy that had, “…a strong banking system, and sound economic fundamentals…”. And Australians loved it, they really believed Australia punched off the GFC and were on top of the world.

    Not one of them as thought why it has all come to this. Let them complain, yeah, yeah, the Bank ripped them off, the real estate agent told them this. They signed themselves to their owners. You know how many of them were prime time big shots when they thought they were on their way to riches? Well time did tell.

  8. I don’t know what the landlords are whining about. negative gearing is about making a loss, and they are doing negative gearing TO THE MAX!!

    Throw that cash away!!! yeah baby!!

  9. Whilst I dont condone going out and mortgaging yourself to death, surely the responsibility of due diligence lies with the Banks to safeguard their loan portfolios. In the US banks actively looked for Joe Schmo to lend a million bucks as they knew they were going to package it up and sell it on taking their fees and betting against it. Not quite the same as Aus but still banks should be (and as yet havent) been held accountable for this behaviour, in criminal courts.

    When a kid walks into a sweet shop usually his eyes are significantly bigger than his belly, its no different to your average bogan. I dont know enough about the Aus banking mortgage offerings, are these low doc loans offering teaser rates and other incentives? surely if it was a bog standard loan then most probably couldnt afford even the first repayment?

    People do need to be held accountable for their actions, but there also has to be some means of holding banks accountable for ignoring their own quality checks and due diligence on affordability. If it takes a class action suit to bring it out then so be it

  10. Romsey,
    Anyone would have to be brain dead to get $300k+ loan in these difficult global financial times they must think Australia is not part of this globe.

  11. The only grounds for suing someone in this context would be if the borrower could prove they were enticed into taking out the load on the basis of false and misleading conduct.

    There is ample evidence on this website along to demonstrate that the banks and media have been in cohoots to try and prolong the housing bubble for their own financial benefit. To do this, they have fudged statistics, ran news stories that were paid for by property industry and failed to properly investigate the sustainability of Australia’s debt addiction.

    Therefore, there is a definetly a legal case to be heard.

    The people that say this is hogwash are looking at things too simplisticly. Yes people were greedy and borrowed too much….but if they were also misled by a coordinated campaign of disinformation, then they are not wholly to blame. The law allows you to apportion responsiblity. So even if borrowers were 90% responsible for their own situation, the misleading conduct that occured may have been 10% responsible. 10% of billions…nothing to sneeze at!

    Will be watching with interest. All it would take is an email that proves the banks were fanning the propertyganda and this whole financial system would be brought to its knees in months, as the Governments willingness tyo backstop the banks would erode rapidly.

  12. PuntPal, there will be multitudes of fingers, each one pointing the blame so many different directions that either way, the debt holders will wear the onslaught of the downturn. Its’ almost a law of nature. And many more, even prudent ones will be brought down with them.

    You can see and I gather you have been watching the Senate inquiries and public roastings going on in the U.S? It really looks like a case of so what! Not just with property, don’t forget the derivates black hole that is still upon us ever so big. Who was reprimanded from that? Is Australia so different that the down turn will be different here too?

    Banks won’t be paying out directly, not even 0.001% of billions. I reckon it is better to be hopeful that no Commission or Inquiry of some sort instructs the Banks to payout anything, cause reality has it that we (as in you and I) will be paying for such payout.

    We’re being conned everyday by marketers, advertisers, financiers, real estate agencies,… Have you scored your ‘hot woman’ yet from suckin’ down a can of Coke Cola yet? (Hat off to ya’ if you have). One also has to live by their own wits.

    If ((Mortgage Size / Annual Income) > 3.5) Then Run;

    Cause you can’t afford it.

    In a Democracy, there are the wise, and the majority. Guess who rules? An old Socrates asked, only to be arrested then enticed into poisoning himself.

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