According to reporting by Bloomberg, Australia’s housing markets are getting hobbled by a combination of factors from scared lenders and recoiling investors.
Key quotes
“With the downturn now in its second year, the question for home-owners, house-hunters and property investors is how much further there is to go. Prices in Sydney, the epicenter of the preceding boom, are falling at an annualized pace of about 8 percent.
It’s also got much harder to get a loan. All the major banks have tightened lending criteria and introduced stricter expense verification, lengthening the time it takes to get approval and reducing the maximum amount that can be borrowed. Analysts at UBS Group AG believe more credit tightening is almost inevitable, and the outlook for banks hasn’t looked as challenging since at least 2008.
At this rate, the downturn is on track to become the largest peak-to-trough decline in home prices in more than 30 years. The biggest recent drop was in 1982 when Australia, along with most of the developed world, was in the grip of a crippling recession. UBS said this week that house prices could drop 30 percent in a “deep recession” scenario.
Still, the boom was so explosive, prices are only back to where they were a few years ago, meaning few borrowers are underwater. With the average house in Sydney still fetching more than A$1 million and wages stagnating, the city’s unwelcome status as the world’s second-least affordable housing market isn’t under serious pressure.”
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