Beach & Bay’s Real Estate Blog

It certainly looks like real estate worldwide is in for a very interesting year in 2008. Home prices in the USA are in free fall. In fact, USA Today, reported on 30th January 2008 that about 2.18 million vacant homes were for sale in the fourth quarter of 2007 with nearly 1.3 million home owners in some state of foreclosure. Construction approvals to build homes are off 56% from their peak 2 years ago.

To counteract these developments exacerbated by the fact that many loans have been made to people who could never have been expected to repay them, (subprime crisis), the Federal Reserve has reduced US interest rates twice in January 08 already (0.75% – which is 3 times a normal rate change in one go, and then another 0.5% down to 3%)

On the other side of the Pacific, in Vietnam real estate is its hottest market (Wall Street Journal, 30 January 2008)

“Brokers say residential prices have risen 50% since the beginning of 2007, although in some areas prices have tripled…”

Whilst Australia’s economy is going gang busters real estate is feeling the brunt of rising interest rates with further increases imminent. With interest rates now more than double those in the US our Reserve Bank is using one of the few tools it has to fight inflation ie. interest rates. Unfortunately, it has become a blunt tool for some and the Sword of Damocles to others. Those people spending most, have good jobs and high income, do not get affected by 0.25% rises, those not so fortunate get tipped over the edge leading to increased forced sales in many parts of Sydney.

During January 2008 when buyers and real estate salespeople were all on holidays there were some very serious developments in commercial real estate with CENTRO, MFS and Allco all suffering huge falls. The stock market generally has been hurt with superfunds losing retirement money for many.