The analysis shows that oversupply, falling house prices and slowing demand have nearly tripled the number of uncompleted apartments in Sydney, which are now valued below the original purchase price.
More than 14 percent of Sydney apartment owners lost money on resale, up from 11 percent in the past 18 months, according to CoreLogic. In addition, the number of flats with delivery prices below the original contract price jumped from 11 percent in April to 30 percent last month.
This does not include various sales and holding costs, which could increase by another 10%.
"New apartment delivery in Sydney and Melbourne will peak, coupled with weak property markets, the credit crunch, and reduced domestic and foreign investors and extreme rental conditions," said Lauris (Tim Lawless), head of CoreLogic research who monitors the property market and prices. We can see a greater trend in loss resale in this industry. "
Perth, the Capital Territory is the worst affected.
If house prices fall by another 20%, where will borrowers be most affected? More than 76% of recent home buyers will be insolvent-negative equity. The worst affected areas will be the Australian Capital Territory and Perth. More than 80% of borrowers under the age of 40 will be insolvent.
In Melbourne, Sydney and Perth, a record number of nearly completed apartments, combined with a sharp drop in market confidence and increased difficulty in raising money, means demand is likely to wane in Australia`s major property markets, according to the report. House prices will continue to fall.
Given interest rates, mortgage costs, stamp duties, bank and legal fees, the number of apartments sold at a loss across Australia is hitting a 20-year high.
If house prices fall 20 percent from their current levels, about 40 percent of households will fall into negative equity, or market capitalisation below the balance of mortgages, according to research by Digital Finance Analytics (DFA), a financial consultancy.
Oliver (Shane Oliver), chief economist at security capital (AMP Capital), said: "the risk of a crash can`t be ignored given the potential overreaction of banks, the risk of tightening credit and the risk of investors deciding to exit."
Economists said a sharp slowdown in property prices could hurt consumer confidence, weaken the liquidation rate of home auctions and slow economic growth.
It will also put pressure on real estate developers` profits, which could lead lenders to adjust their valuations and increase claims from mortgage-lender insurers.
But (Melos Sulicich), chief executive of MyState, a listed bank, played down the possibility of systemic risk from falling house prices, saying most homeowners took advantage of lower mortgage rates to advance payments and created a cushion for deteriorating market conditions.
"the price drop is unfortunate, but it doesn`t mean anything unless you lose your job," he said.
Lenders continue to lend to homeowners or refinancing seekers through low interest rates and cash incentives, who must meet strict new lending criteria.
For example, HSBC Australia`s (HSBC Australia) cut floating and fixed rates on homeowners and investment housing loans by up to 66 basis points, and its lending rates to homeowners and debt-service borrowers by 5 basis points. To 3.59 percent.
"the fundamentals of the real estate market remain strong," said Vecchio (Alice Del Vecchio), head of mortgage business. "they are driven by strong job growth, a growing population and historically low interest rates."
A chance for prices to fall
One of the company`s directors, Salibe (Sam Saliba), owns eight properties in his portfolio. Although he lost money on one of his recent buildings, which he said was a result of missteps, he said falling prices created opportunities.
Salibe, who is considering selling five of Hobart`s properties and one of Albury`s, is poised to focus on Sydney, where a fall in house prices is an opportunity.
"I think this is an opportunity," Salibe said. "many people will have to start refinancing and there will be fewer buyers at auction. I`m going to wait until after Christmas, and then I`m going to fight. "
As the market tightens lending to banks, interest-paying borrowers turn to debt-servicing, reduced foreign demand, occasional interest rate increases, falling prices and less attractive tax deductions and capital gains tax concessions. Losses and volatility in the housing market are rising.
In addition, the near-record number of two hundred and seventy thousand homes under construction-about 70 percent of which are apartments, mainly in Melbourne and Sydney-increases the risk that homeowners may not be able to deliver.
In the rising market, the deal works well for buyers, as they can lock in the purchase price. But if the market is depressed, they will have to absorb market losses or sell them.
Non-deliverable buyers could lose their down payment and be sued, including the difference between the contract price and the final price.
