This was supposed to be my topic for this week but given the story on Channel Nine’s current affairs flagship program “60 Minutes” last Sunday night, I felt that this needs to be pushed to the top of my list…especially given the huge amount of discussion that this story seems to have generated.
In case you missed the show, here’s a link below…
(Please note that you may need to login through Facebook or open an account to gain access but this is easy to do).
It’s certainly an interesting piece of journalism in my opinion.
Firstly, I’m a big believer that the media drives the market to a certain extent and it’s stories like this one that don’t give consumers a lot of confidence.
Do I believe that our market in South-East Queensland is going to fall by 40% in value over the next 12 months? In my opinion, absolutely not!
If I had a dollar for every time I’d read that the Australian property market is heading for an almighty crash over the past decade, I’d be retired and lapping up life whilst lying on a beach somewhere.
Note – In case you don’t know me, I’m still selling real estate so this isn’t happening! 😊
Many of the previous ‘Doomsdayers’ have been U.S. based economists that seem to think that if the American housing market fell to its’ knees a decade ago, then the tiny feeble economy of Australia must surely follow and these even comparisons made in this ’60 Minutes’ story to the position of the U.S. housing market pre-GFC.
What many don’t realise is that U.S home owners can simply hand the keys back to the bank without any repercussions which is something Australian home owners can’t do.
In the U.S, if you sell your home for less than the mortgage, it’s pretty much a case of ‘bad luck to the bank’.
I’m sure you know that Australian banks are not quite as forgiving and will hold you accountable for the difference…or simply won’t let you discharge the mortgage at all.
One thing is for certain – the banks do not come and take your home from you if you’re 2 weeks’ late on your mortgage…as claimed in this story.
Having done significant work for the banks myself, I can tell you that the banks do not want to take your home from you at all…and you’d be surprised how lenient they can be if you keep them informed of where you’re at and work with them.
It’s an enormous undertaking to repossess your home (as far as they are concerned) and they’ll do this only when there is no other option and significant time has elapsed.
There is no question that there are certainly economic factors that will put pressure on property prices in some parts of the country – which leads me to my next point about this story…
The focus of their research has been clearly centred around Sydney and Melbourne where median property prices have risen by more than 60% over the past 5 years!
The truth is that if prices do fall by 40% in these cities, anyone that purchased in 2013 or 2014 is likely to still be 20% in front!
Compare this to Brisbane that has experienced a median house price increase of around 18% over the same period and you start to see that despite what’s portrayed in this story, life in Australia does exist outside Sydney and Melbourne.
Even the Reserve Bank of Australia have made comments that it’s hard to slow the growth of Sydney and Melbourne without affecting most other parts of the country that have far more stable property prices and are in some need of economic stimulus.
Let’s face it – if you purchased a one bedroom unit on Pitt Street in Sydney for $1.2 million or a 3 bedroom home in Parramatta for the same sort of figure, is there any surprise that the market would eventually come back from these outrageous prices?
I found it extraordinary that they focussed on an agent from the Western suburbs of Sydney where they were lamenting the median house price had fallen to a figure that was as devastatingly low as one million dollars!
I do feel terribly sorry for these people that purchased at the height of the market are in now facing financial ruin but it was hard to see these sort of explosive property booms end any other way.
So do I feel that Brisbane (and every other capital city in Australia that’s not Sydney or Melbourne for that matter) are immune to falls of 40% in the next 12 months? You bet!
It’s a far cry from what the journalist claimed in the opening statement of the story…”Australia Faces An Economic Catastrophe”.
Furthermore, is it any wonder that the banks don’t disclose Foreclosure Sales and didn’t want any of them filmed on National television?
It’s far more common practice now (thank heavens) that the agents are instructed not to disclose distressed sales as it’s our job to obtain the highest possible price for the sellers.
Advertising a ‘Mortgagee Sale’ is hardly going to bring out the highest offers from buyers as they are certain to try to secure a bargain price if they know that these are the circumstances.
And if you were unfortunate enough to fall on hard times and lose your home whilst the bank auctions it off for whatever they can get, would you want this televised on national prime time TV?
So I hope this puts everything into perspective.
I must have been asked about this story at least a dozen times since Monday morning and I felt it prudent to put it all into context.
Next week…back to our discussion on attracting Sydney buyers to our market.
Until then…Happy Listing & Happy Selling!