www.nytimes.com/2005/07/05/realestate/05aussie.html
Reprints By RAYMOND BONNER Published: July 5, 2005 SYDNEY, Australia - For several years, dinner party chatter here did not linger on favorite Australian subjects like rugby, cricket, sailing and surfing or politics. No, all the talk was of real estate: how much a house was worth, how much more this year than last, and how much more valuable it would be next year.
It was not just the rich who were getting super-rich, their multimillion-dollar homes with water views rising rapidly in value. Every homeowner was making money, at least on paper, and Australia is a country with one of the highest levels of home ownership in the world. A midlevel office worker, for example, who bought a house in a middle-class Sydney suburb for 188,000 Australian dollars in 1996 was offered 720,000 Australian dollars ($504,000) in 2003. As in many regions of the United States these days, house prices here seemed to defy gravity. They just kept going up and up and up - in Sydney, by 11 percent in 1997, according to the Real Estate Institute of Australia, followed by a leap of another 21 percent the next year. After more modest increases, prices rose by 16 percent in 2002, and another 23 percent in 2003. "It overshot all models, all predictions," said Rod Cornish, head of property research at Macquaire Bank. In the last two years, though, the Australian housing boom has come to a halt, in a move that many experts see as the first signs of the end to a housing bubble, not just in Australia, but also in the United States as well as several other rich countries around the world. It is impossible to say for sure how the situation will work out here - or in the United States, for that matter. But so far, despite predictions that housing prices in Australia would plummet by as much as 20 to 30 percent, there are no signs of a crash. Prices have leveled off noticeably or dropped slightly, at least in Sydney, Melbourne and Canberra. They continue to rise at a modest rate in Perth, Darwin and Brisbane, the major cities in resource-rich states, where the local economies are being buoyed by China's insatiable demands for raw materials. Nationwide, for the year ending March 31, the rise in house prices was 04 percent, the lowest since 1996, according to the Australia Bureau of Statistics. "It's been an orderly correction," said Mark Steglick, managing director of Gowings Properties, a Sydney property development company, who said that there had been few foreclosures or forced sales since the boom ended. Looking ahead, local housing experts expect prices to flatten out, perhaps remaining stagnant for a number of years to allow gradually rising incomes to catch up with the sharply higher level of home values. But there are significant differences within the market that may provide some clues as to how housing booms elsewhere could run out of steam. Prices for investor-owned apartments have fallen considerably more than for owner-occupied houses. Nationwide, prices are down about 10 percent from the peak. The most expensive homes, particularly those along the coast, have held up better than the rest of the market. The home does not even have direct access to the beach, though it does have spectacular views of the soaring Opera House and of the Sydney Harbor Bridge. Australia is no stranger to booms and busts in housing prices. The latest boom began in the mid-1990's, following a bust brought about by the recession of 1990, one of the worst in Australia's history, and far more severe than the downturn in the United States at the time. Unemployment soared to more than 10 percent as interest rates reached as high as 17 percent. Those high rates knocked many potential buyers out of the market, but even more importantly they also saddled many existing homeowners with a greater debt than they had assumed when they took out their loan.
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