The Australian housing market is beginning to feel the effects of the subprime housing crisis that the United States housing market has been feeling for several years. The housing market crisis in the United States followed a peak in housing prices in the year 2006. Prices have been dropping since that peak, and in late December of 2008, the home price index experienced the largest drop in price ever. Houses have been foreclosed on at alarming rates, so much so that some banks have decided to hold off on foreclosures for now, and some towns have even banned foreclosures from proceeding.
Thankfully, the Australian housing market has not experienced the same struggles, but they may be on their way to Australia. As of summer 2011, Australian house prices are falling, but slowly. At the end of the March 2011 quarter, Australian house prices had fallen by 2%, and projections are showing that the house prices will keep dropping at least until the end of this year. Not many individuals are in the position to buy homes right now, so the clearance rates keep getting lowered in order to attract buyers. The clearance rates are the bare bottom rates that homeowners drop their prices to in order to sell their homes in this tough economic situation. In fact, there are 30% more homes on the market this year than last year because so many people are anxious to get out of their homes because they no longer can afford the mortgages due to unemployment, underemployment, or raising interest rates. Many people wishing they had taken on some sort of income protection insurance.
The effects of the housing crisis are slowly making their way to major Australian cities, but not all are affected as badly. According to the government’s house price index, during June of 2010 to June of 2011, Brisbane experienced a 3.6% decline in housing prices. During the same period, Sydney experienced a 0.7% decline, Melbourne experienced a 2% decline, Adelaide experienced a 2.1% decline, and Darwin experienced a 3% decline in housing prices. It was not all bad news for Australian cities, though. Two cities actually experienced an increase in housing prices. During the same period, Canberra saw a 2.2% increase, and Hobart saw a 2.8% increase in housing prices. It will be interesting to see if the housing prices in Canberra and Hobart increase during the next period, or whether they too will experience the negative effects of the housing crisis.