My line of work is in the property industry predominately selling $1.5m to $10m residential homes and development opportunities within inner Melbourne.
Right now - it is tough, very tough. Prices are being smashed, almost to the point of being back to price levels of 2014 and our internal feeling is that it really is only the beginning, not the middle or end - but the beginning. In some pricing sectors we have personally seen 40% off prices of recent highs - we are talking within 5 weeks. The sudden crunch in the market has been just that - sudden, as if the lights were turned out overnight.
What many may not realise is that the banks have actually stopped lending to builders/developers - to the point of an almost no lend policy. New development has stopped, many small to mid tier developers that purchased 6-12 months ago have now defaulted on settlements / lost their full deposits as banks pulled their funding after initially approving the lend at purchase. Many have gone out of business. Investors are lending at 70-75% and homeowners have to jump through so many hula hoops to get a loan, many just give up. The lend now is 4;1 your income as apposed to 8;1. Valuers are coming in under purchase price on post sale funding valuations, therefore the bank only lends on the val - not the purchase price - buyer needs to tip in more. All of this, actually needed to happen in my opinion - the market has been ridiculously spiking in Melbourne since 2014.
So the flow on effect - what then for trades, plumbers, sparkies, chippies ETC ?? Less work....income. What then for suppliers, small business and brokers ?? Less sales at the door, business ? What about government income from stamp duty for example - Mr. Andrews has pledged $100m toward infrastructure improvement in Victoria ? How does he pay it ? The credit crunch is far reaching.....Labour will no doubt achieve federal office and that has never had a positive effect on the property market. Negative gearing likely to be removed and near to market expiry of interest only loans pretty much nail the market to the floor. For how long ??
The fall in the property market is real and far reaching. I would suggest buying solid residential property with scope for further improvement within the next 12-18 months.....will be amazing buying then as there already is now. But the beginning is in now....plenty of pain left in this thing.
Lookout though, ONCE the banks inevitably open the flood gates again - the pent up frustration in not being able to lend is going to create the next market bubble (we are afterall one of the most loved up countries to debt in the world).....similarly to the stock market now of which many of us sit out now waiting for opportunity - the property market will offer the same opportunity in time. Of interest, amongst the doom and gloom - right now - many of our most astute and wealthy property owners are back out watching, researching and looking to buy - in THIS market.
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