The IMF says Australia’s house prices may be overvalued by 5 to 10 percent

Those geniuses at the IMF came up with a great report: house prices in Australia might be overpriced by 5 to 10%. Un-be-lievable.

House prices in Australia are probably somewhere close to 50 to 60 percent overvalued in AUD terms; and close to 80% in USD terms (considering the AUD is 20% overvalued against the USD).

As for the US already 4 years ago now, inventory is rising substantially (23% for LJ Hooker, 40% for luxury homes).

No expert believes prices will decline, and yet, sellers are willing to cute prices by 15%, and properties are listed or auctioned, but no buyers.

If this wouldn't qualify as keeping the head in the sand...

Let's dive into the Bloomberg report:

Dec. 22 (Bloomberg) -- Australian luxury home prices may fall in 2011 after listings of properties worth more than A$1 million rose about 40 percent more than average for this time of year, according to the Real Estate Institute of Australia.
[...]
Australia’s house prices may be overvalued by 5 percent to 10 percent, the International Monetary Fund said last week. An 11 percent advance in the Australian dollar this year, the second biggest among Group of 10 nations, is deterring foreign and expatriate buyers, while the most aggressive tightening of monetary policy in the developed world raised borrowing costs.

Prices of the most expensive 10 percent of Sydney properties dropped 7.5 percent in the six months to September, compared with an average 1.1 percent increase in the rest of the market, according to real estate researcher RP Data. Melbourne’s top end property prices fell 10.8 percent in the period, compared with an average 2.5 percent price climb for the remaining homes.
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An auction of homes ranging from A$2 million to A$10 million last month, held at the Sydney Opera House by real estate broker Ray White Group, sold only two of the 11 homes on offer.

“The luxury market is certainly softer than what it was,” Dan White, a director at Brisbane-based Ray White, said in an interview. “There’s a lot of speculation about house prices, comments that they’re overvalued. And that happened at the same time that rates started to increase. Buyers are now feeling that they can search for value.”
[...]
There will be a recovery of between 5 percent and 10 percent in the top end of the market next year, primarily in the second half, as economic confidence returns, said McGrath.
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More properties are selling before auction, “a sign of vendor nervousness,” Curtis said, with some sellers willing to cut prices by as much as 15 percent.
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LJ Hooker, which has 695 offices across the Asia-Pacific region, had about 23 percent more listings in November compared with a year earlier, according to data from the company.
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“I don’t think things will decline further, but I don’t think they’ll suddenly get better,” Jacobs said. “The market will become more firm, but the change will be gradual.”