In some parts of Australia, homes have lost nearly three-quarters of their value, according to a new report by property group CBRE.
Mine closures and the end of the resources boom mean Queensland house prices have recorded the steepest declines. If you are unlucky enough to own a house in Dysart, or Moranbah, your home has lost 73% and 71% respectively over the past three years.
BHP Billiton Limited (ASX: BHP) shut its Norwich Park coal mine in 2012, with an estimated 1,400 workers and contractors affected – hence the reason home prices have tumbled.
Nearby Moranbah was also dependent on nearby coal mines for its survival. Again it was the decision of BHP to cut costs out of its coal mines as commodities prices crashed, that has seen house prices in Moranbah fall off a cliff.
Western Australia hasn't been immune, with Karratha house prices tumbling 44% since 2012, and 31% in the last year alone according to CBRE.
Metropolitan areas on the East Coast are also starting to see house prices come down, with real estate agents in Western Sydney reporting falling inquiries, people at open houses, falling clearance rates at auctions and lower asking prices.
Starr partners Merrylands' Ramin Rahimi has told the Australian Financial Review, "We used to get 100-130 inquiries a day, now we are getting 40-50," adding, "On average, we used to have about 18-20 people attending open homes 7 or 8 months ago, now we're finding an average of about seven people."
Mr Rahimi also told the AFR that sellers were panicking, thinking they need to move now and keep dropping prices. That creates an almost never-ending spiral, where buyers see an opportunity, so drop their offer prices, pushing prices lower.
Units in Brisbane have experienced falls of 5.6%, mostly thanks to an oversupply, which is expected to get worse according to BIS Shrapnel. The research is predicting oversupply will triple from 5,000 to 15,000 over the next year. Couple that with falling prices and apartment buyers could face huge falls in the value of their properties.
The latest Domain House Price Report also shows that Sydney apartment median price growth has run into a wall, dropping from 7.4% in the June quarter to just 1.5% in the September quarter.
The report also shows that house prices in Perth have fallen 2.4% in the last quarter, while Darwin's median property price is down 2.3%, both partly affected by the end of the resources boom.
Foolish takeaway
Most people naively assume property prices always rise, but Australia has had two property corrections since 2008 and we are staring down the barrel of a third.
Once lauded by the property websites and property investment magazines as investing heroes, young property investors with multiple properties face the prospect of negative equity – owing the banks more than their properties are worth – I wouldn't want to be them.
