Home > Finance > Further Proof of Impending Real Estate Crash in Australia

Further Proof of Impending Real Estate Crash in Australia

buy-my-rock

Some people will buy anything.

ABC News (Australia) reports:

The Newcastle University index projects 15 per cent of the suburbs examined are at a significant risk of sliding into high levels of unemployment. … “Because of the reliance on particular type of industries; manufacturing, construction and those types of industries,”

It’s not unexpected. It is just a matter of time before unemployment hits Australia with people defaulting on mortgages and going back from being “owners” to “renters”. For most people, not a great deal changes in terms of their de facto serfdom. They go from renting from a bank to renting from a property investor. After all, only 34% of homes are owned out-right. It is a very ominous statistic indeed.

Soon will be the time when the cashed-up individuals who got out of the stock market before its crash will get rid of much of their spare money in buying up cheap houses throughout Melbourne and Sydney’s working class suburbs. Housing prices in these areas are set to fall sharply, as will rent (because the capacity to pay will be low).

There are other major changes taking place, with the previously highly paid mining workforce returning from mining towns in the western parts of Australia to the Eastern belt of cities. These people will also find themselves unable to find work. They will crowd out temporary residents from many areas of employment which will result in them returning to their countries of origin. The difference is that these people are more likely to be “cashed up” and are unlikely to be in the situation of defaulting on mortgages or being forced to rent. How this will affect housing demand or rental prices is uncertain, but it could turn out to be a buffer against a cataclysmic housing price collapse.

On balance, however, I would guess that, in poorer parts of big cities, housing prices will fall dramatically as the desire to live in those areas vanishes, dragging the market down as a whole. Many up-market areas will also suffer as businesses go to the wall. Again, not unexpected. Top-end real estate has always been the most volatile.

However, farming and the food production industry is an area whose produce is not experiencing any dip in demand. People still have to eat. It is in areas which service these needs where I would think that real estate prices won’t fall much at all. Country towns and regions where food processing takes place, one would think, should be relatively immune from what is otherwise an manufacturing and minerals export slump for Australia.

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