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Ferrari first, beach house next – rich Oz property owners feeling the pinch

Many of them in exclusive areas like Pearl Beach and Hymas beach were bought as 'trophy' properties by those who made a lot of money in the finance industry. Now they are selling them as times get tough.

'A lot of sellers are in the finance world and caught with margin loan calls or not getting the same bonus or renumeration that they have been used to. The first thing they sell is the Ferrari and the next is the beach house,' said John McGrath, of McGrath Real Estate.

The prices are bargains. A chic beachfront house in the south coast village of Hyams beach is for sale at around $2.6 million but would have been on sale from nearer $3.2 million earlier this year. Similarly on central coast hotspot Pearl Beach a property valued at $2 million would have been worth $3.2 million a year ago.

'Individuals and businesses can reap a lot of great gains right now. It may be the misfortune of others but the buyers should well and truly be smiling,' said Craig James chief economist with Commsec.

Prices at Hyams Beach, a favourite of the banking and finance set, are dropping back to 1999 levels, according to Hyams Beach Real Estate principal Todd Gallant. 'You can buy here now for $100,000 to $150,000 less than you could last Christmas,' he said.

'Clients might have bought a house here that was for their retirement and times seemed great so they borrowed against that house for other things. Now the bank comes knocking on the door saying your assets are worth less than you owe,' he added.

The news that the New South Wales Government will increase land tax on investment properties worth more than $2.25 million adds pressure to the prestige beach house market. The annual land tax will increase from 1.6% to 2% and this could stretch finances in an already hard economic times. On a $3 million investment property the taxes amount to around $60,000 a year.

'More people, who had planned to hang on until the market improved, will sell once they get another big land tax bill,' predicted Ray White Killcare director Kerrie Ryan agents in Palm Beach. One waterfront property was valued at $12 million last year but is now for sale with a price guide of $8 million-plus.

However according to BIS Shrapnel managing director Robert Mellor anyone who bought a coastal property before 2003 is unlikely to have lost much money on it as prices increased so dramatically during the good times.

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