[Ed note: I wrote this post two weeks ago, just as the eurozone was soiling itself and people were wondering if it’d be possible to foreclose on an entire country. I think it’s still relevant, though – maybe even more so.]
It’s a great time to buy a holiday house, sez the Smage oh-so-casually, because “prices in many places along the coast are down, some by as much as 50 per cent”.
Wait, what? But Aussie real estate never goes down! Certainly not by 50 per cent!
At the same time, a two-bedroom home in [cashed-up-hippie enclave Byron Bay] opposite Belongil Beach has just sold for $1,125,000 after being listed for sale at $1,430,000 in March last year, down from $1,775,000 in May 2005.
For those keeping score, that’s a 37% drop in six years; and with a price-to-rent ratio that’s still north of forty – compare it to this almost-identical two-bedroom home in Byron Bay opposite Belongil Beach that rents for $550 a week – you can’t help thinking it’s got plenty of room to go lower.
Update: This rather good piece on the knock-on effects of falling Aussie housing prices ran a few days ago, as well:
Chief executive of home price data group Residex, John Edwards, said this week that sliding home prices could be a leading indicator of what was happening in the broader economy. A slump in house prices – the biggest source of wealth for most Australians – would further crimp the spending and borrowing needed to keep the economy expanding, he said.
“I can tell you that in the whole time I have been studying the market I have not seen the makings of such a perfect storm,” Mr Edwards said.
If you think you’ve heard this story before, you’re probably right.