A Sydney house-hunter reportedly had to pull out of a recent deal to buy a multi-million- dollar house and forfeited his $750,000 deposit to the vendor in the process.
Lucky vendor, you would think, since house sellers usually get to keep forfeited deposits. But the way this story goes, the vendor was only able to get a sale by cutting the price by more than that amount. Both sides lost out.
You know things are bad when you hear anecdotes like that one. In the same way that share market horror stories took up most of the first three quarters of 2008, property horror stories are now the stuff of low-key dinner parties in Sydney's shoreside suburbs.
Yes, the Rudd Government has kept the lower end of the housing market alive by a smorgasbord of financial assistance, helped, of course, by the Reserve Bank's 3 per cent cut in interest rates from 7.25 to 4.25 per cent in three months.
But that's not much of a comfort to the people at the grand end of the market, who paid well over the odds in boom cities like Perth for multi-million-dollar mansions last year and who are finding there are now no buyers within cooee of the price they were hoping to get.
There's a strong suspicion out there, particularly in the expensive suburbs around Australia, that there are many more houses for sale than the number of agents' sale boards suggest.
Rob Druitt, a Perth agent who is president of the Real Estate Institute of WA, is a professional optimist but concedes an element of "black hole" in the one-time boom state's property market, most particularly in houses priced above $1 million.
He says the number of for-sale listings in the Swan-riverside suburb of Mosman Park has jumped from an average of 20 to "around 80" and that overall turnover in the city is down by 30 per cent.
Fellow Perth agent Graeme Baxter noted that a number of top-end sales last year were at prices that had more to do with how much money people had than what the properties were really worth. "People were saying: 'If I've made an extra $5 million from the float, why should I worry about paying an extra $2-3 million for the house?'."
He says some deals done in the beachside area called the Golden Triangle, which runs from City Beach down to Cottesloe and across to Nedlands on the Swan River, had been done at "telephone number" prices.
Druitt says the number of houses now for sale in the Perth area is a probable record of about 18,500, against a long-term average of between 12,000 and 13,000.
He says that first-home buyers, who traditionally make up around 20 per cent of the Perth market, now represent more than 32 per cent.
Late last year Australian investors and commentators were saying how different this financial crisis is from 1987. They're still saying that, but it is beginning to look as though the axis has been inverted. The line had been shorthand for the notion that things were worse the first time, most usually because the percentage loss on stocks was bigger.
Yes, but it's now clear that the effect of this Global Financial Crisis is going to be more significant than 1987 on almost every metric, reaching far more widely into the Australian community than the earlier crash because of the damage wreaked on ordinary workers' superannuation.
"Superannuation was barely there at all, barely a factor in 1987," says Rob Douglass, who in 1987 headed Melbourne stockbroker Potter Partners' Sydney office. He says that another concern now is that non-bank financial organisations have proliferated since 1987, which means an explosion in credit.
"Back in 1987 the ratio of banks to unregulated financiers was about one to two," he says. "Now it's about one to 60." "What the authorities have failed to do has been to keep an eye on the extraordinary growth of credit."
John Green, who was a corporate lawyer back in 1987, says in 2008 "a far greater proportion of the population are investors or borrowers" than had been the case back then.
But he suggests that because people are hoping that the current crisis is going to be short-lived, they are forgetting how long the effects of 1987 lasted.
"Business actually slumped for quite some time, including the 'recession we had to have'," he says, noting that interest rates climbed to 22 per cent well after the market bust. "In 1991 and 1992 we nearly lost a couple of major banks," he says. Bill Beerworth, a long time Sydney investment banker, says Australians had been less prepared for the recent bust than they thought they were, because they underestimated the impact of events in the US.
"We've only really seen the government and RBA in panic mode for the last three months when it's actually been going on for about 18 months now," he says. "In particular, I don't think people took enough notice of the potential implications of the drop in US house prices that led to the sub-prime meltdown. And they allowed the China story to sustain what has turned out, at this point, to be unrealistic optimism about how well our economy is equipped to ride it out."
Andrew Inwood, who runs Sydney financial researcher brandmanagement, says that there has been a gradual trend on the part of home-buyers to become over-committed.
"I keep seeing cases where people have borrowed about five or six times their annual income and the moment they lose their jobs, it's all over," he says.
He says it was also clear that many people working in the financial sector had been relying on their bonuses to maintain their lifestyle. "Even if they've still got a job, they may well be badly overstretched," he says.
He says the economists' term for the problem emerging now, a dramatic reluctance by households to spend, is the Permanent Income Hypothesis.
"They found that in financial circumstances such as these, people don't spend what they can now afford," he says. "They spend what they think they can afford when there's a significant chance they might lose their job."
That term looks to get a lot more air time in the near future than a West Australian boom-time term called the "Double Bubble" -- the phenomenon of people letting their employer buy back their holidays to keep businesses going.
There has been one benefit, at least. All those Perth restaurants and taxi operators who couldn't get staff during the boom will start finding things a lot easier.
The "double bubble" will be consigned to history -- until the next boom.
