TOP PROPERTIES STILL STRUGGLINGAt the bottom end of the housing market, borrowers have been putting themselves on the line, taking out mortgages worth at least 95 per cent of the home's value. But it's a different story at the prestige end of the market.
In the country's most expensive suburbs, cash is king. So much so that many of the buyers are getting as close as they can to using 100 per cent equity.In boom times, when bankers were being rewarded with large bonuses, top-end buyers would think nothing of paying $5 million for a home and using $1 million as equity, according to agents operating in Sydney's prestige property market.Now that sort of buyer is choosing to trade down, buying a property for $1 million to $2million, where they borrow no more than 50 per cent. As a result, it is the $3 million to $8 million market that is suffering.This is partly because of banks' hesitation in taking big punts on pricey houses. According to Byron Rose, president of the Real Estate Buyers Agents Association of Australia, banks are prepared to take risks on loans under $400,000 because they are "low-hanging fruit".But they will be very choosy when it comes to those on houses priced closer to $15 million.Figures from researcher RP Data show that during 2008, sales in the top 10 per cent of the market fell 18.8 per cent in Sydney, 14.8 per cent in Melbourne and 10.7 per cent in Brisbane.The situation is not expected to improve in the year ahead. If equity markets rally, so will the prestige market, given that the sale of many of the properties in this sector has been a result of owners hit by margin calls on shares. But this is not set to happen any time soon.Also, the finance sector is the employer of many home owners in the prestige market, and this group of people is among those hardest hit by job losses and bonus cuts.Tim Lawless of RP Data anticipates steeper decline in the prices of prestige property. "There is still supply that hasn't been soaked up," he says."Until we see the distressed sales removed from the market, we won't see any real improvement in top-end values. This could take at least a year."This week a six-bedroom property in Sydney's eastern suburb Vaucluse went under contract for between $16 million and $18million. Its asking price was more than $20 million.The waterfront property, which belongs to the estate of Ian McFarlane, last traded back in the 1960s.On the other side of the Harbour Bridge, two parties are finally in negotiations for the Mosman home of Glenn Willis, who headed the Australian arm of Lehman Brothers after founding Grange Securities. The property passed in at auction several weeks ago for $10.25 million, $5million less than the original asking price.The mansion owned by Paul Sanger at Clontarf on Sydney's northern beaches is still on the market after the Citigroup banker snubbed an offer before Christmas of $9.5 million.He was hoping to clinch more than $10 million for his six-bedroom waterfront property, which has a home theatre.Bill Bridges, of Cassim Real Estate in Double Bay, blames the lag in the $3 million to $8 million market on nervousness surrounding job security."Before they would take a risk and borrow," he says. "Now ... no one knows if they are going to get the chop."
In the country's most expensive suburbs, cash is king. So much so that many of the buyers are getting as close as they can to using 100 per cent equity.In boom times, when bankers were being rewarded with large bonuses, top-end buyers would think nothing of paying $5 million for a home and using $1 million as equity, according to agents operating in Sydney's prestige property market.Now that sort of buyer is choosing to trade down, buying a property for $1 million to $2million, where they borrow no more than 50 per cent. As a result, it is the $3 million to $8 million market that is suffering.This is partly because of banks' hesitation in taking big punts on pricey houses. According to Byron Rose, president of the Real Estate Buyers Agents Association of Australia, banks are prepared to take risks on loans under $400,000 because they are "low-hanging fruit".But they will be very choosy when it comes to those on houses priced closer to $15 million.Figures from researcher RP Data show that during 2008, sales in the top 10 per cent of the market fell 18.8 per cent in Sydney, 14.8 per cent in Melbourne and 10.7 per cent in Brisbane.The situation is not expected to improve in the year ahead. If equity markets rally, so will the prestige market, given that the sale of many of the properties in this sector has been a result of owners hit by margin calls on shares. But this is not set to happen any time soon.Also, the finance sector is the employer of many home owners in the prestige market, and this group of people is among those hardest hit by job losses and bonus cuts.Tim Lawless of RP Data anticipates steeper decline in the prices of prestige property. "There is still supply that hasn't been soaked up," he says."Until we see the distressed sales removed from the market, we won't see any real improvement in top-end values. This could take at least a year."This week a six-bedroom property in Sydney's eastern suburb Vaucluse went under contract for between $16 million and $18million. Its asking price was more than $20 million.The waterfront property, which belongs to the estate of Ian McFarlane, last traded back in the 1960s.On the other side of the Harbour Bridge, two parties are finally in negotiations for the Mosman home of Glenn Willis, who headed the Australian arm of Lehman Brothers after founding Grange Securities. The property passed in at auction several weeks ago for $10.25 million, $5million less than the original asking price.The mansion owned by Paul Sanger at Clontarf on Sydney's northern beaches is still on the market after the Citigroup banker snubbed an offer before Christmas of $9.5 million.He was hoping to clinch more than $10 million for his six-bedroom waterfront property, which has a home theatre.Bill Bridges, of Cassim Real Estate in Double Bay, blames the lag in the $3 million to $8 million market on nervousness surrounding job security."Before they would take a risk and borrow," he says. "Now ... no one knows if they are going to get the chop."
source: the australian
