Are house prices slumping or sliding?

The SMH reported on the weekend that:

"The Reserve Bank published figures yesterday showing Sydney house prices fell 1.1 per cent on average in the March quarter. Prices have now fallen 9.6 per cent on average since property prices turned, slashing the city's median home value from $570,000 to $516,000."

I've decided to start a spreadsheet of house prices in my immediate area focusing on the asking price each week in the paper, together with the final sale price. I want to see what the difference is between the opening asking price and what a house actually fetches. I also want to see how long a place sits on the market before it moves.

When we moved in 12 months ago, the place next door was being renovated. Six months later, it finally went on the market for $1.6 million. No one came to look at it. The owner changed agents. The asking price slipped to $1.55m, then $1.5m, then $1.45m. The agent starting opening the place for inspection on the weekends. On the first weekend, the only people that showed up were the neighbours having a stickybeak.

After around 6 months on the market, it finally sold a few weeks back for $1.315m. The owner has watched nearly $300k evaporate. I am amazed they got that much for it - personally, I think they did a bad job on the place. Not bad as in a poor quality job - just that they made what I would term "odd" design decisions. They renovated the kitchen, but left the 1950's bathroom alone. I don't know about what other people think, but a 1950's bathroom is ugly and is not very functional. Whoever bought the place will have to spend a bit more moola before they can move in to gut and redo the bathroom. To cap it off, the place also has an outside laundry. The only way to get to it is to walk down an outside staircase that has no overhead cover.

Let's think about it - it's Monday morning, it's winter, it's early and it's raining. You are dressing for work and you have no clean jocks. You have to wrap a towel around your waist and run down the outside steps in the rain, unlock the laundry, retrieve your jocks, lock the door (which is also out in the open with no cover) and then run back up the stairs.

If I had paid $75,000 for a beach shack, I would not be bothered by that concept. However, if I had just blown $1.3m, I would expect a place that was a bit more luxurious and serviceable.

I have no idea what the renovators paid for it in the first place. I guess I could go and spend $25 on one of those property monitor reports and find out, but I am not that interested. They might have come out in front after transaction costs, stamp duty, renovation expenses, interest repayments etc, and then again, they might have done their dough. If you just looked at the purchase price say a year ago, and then the sale price a year later, you might presume that prices have gone up a bit. However, how do you discount for renovation costs?

I imagine sales of Mercedes and BMW will go into a hole if tales of woeful speculation like this are repeated across Sydney.