The decline may be a precursor for high-end properties in Australia's cities, which have so far resisted the real-estate slumps suffered in the US and U.K., said Rod Cornish, head of property research at Macquarie Group Ltd. ''The first thing they try to do is sell their beach house,'' Cornish said. ''If they can't sell that, then they may have to sell their residence. That will be an ongoing factor next year.'' The slide in beach-house prices snaps a 15-year bull market for the properties as investors and entrepreneurs, made wealthy by 17 years of economic growth and a boom in mining, bought weekend homes. Compared with the drop in Palm Beach, prices across the nation's eight state capital cities climbed 2.8% in the September quarter from a year ago, according to the Australian Bureau of Statistics. ''Weekender homes are seen as surplus to needs, so people are getting rid of them,'' said King, who has more than 40 properties on his books, double the normal amount, starting at $1 million and going up to $7 million. He said he's never seen so many high-end properties for sale in the area.

Ayliffe's agent, David Edwards at LJ Hooker Palm Beach, said he's got about 40 properties on his books awaiting sale, up from 25 to 30 usually. About five of those are from vendors who need to sell as soon as they can to cover investment losses. Prices across 20 US cities tumbled 17.4% in September, the fastest decline on record, the S&P/Case-Shiller home-price index showed on Nov. 25. UK house prices had the biggest annual drop since at least 1991 in October, Nationwide Building Society said last month, as the average cost of a home plunged 14.6% from a year earlier. 'The first thing they try to do is sell their beach house' Australia's business confidence has slumped to the lowest level in a generation and margin calls on equity loans jumped to a five-year high in the third quarter as the benchmark S&P/ASX 200 Index tumbled 48% since its Nov. 1 record last year.

''High-end household wealth destruction in Australia is far greater than currently believed,'' Charlie Aitken, head of institutional dealing at Southern Cross Equities in Sydney, wrote last month in a note on the ``great beach house sale'' to clients. ''The vast bulk of lifestyle properties aren't selling and the answer will need to be a slashing of price.'' John Edwards, chief executive officer at Residex, a property researcher that supplies data to the Reserve Bank of Australia, said he expects beach house prices to fall further in places like Palm Beach and Noosa in Queensland. ''In a declining stock market, properties that are discretionary and there's a need to sell, they are going to suffer,'' he said. ''There are further falls to occur. You have about a four-month lag to what's going on in the stock market.'' Australian shares slumped the most since the October 1987 crash last month and the S&P/ASX 200 has lost another 12% this month. Last week it traded at a five-year low.

The decline may be an opportunity for overseas buyers and expatriates working in countries such as Japan because of a slump in the Australian dollar, Edwards said. Australia's currency has fallen 40% against the yen and 33% against the Hong Kong dollar in the past four months. Ray White's King said enquiries from Australian expatriates, particularly in Hong Kong and Singapore, have increased, but few have led to purchases yet. That hasn't halted an increase in the number of late payments on loans for seafront properties. Beachside suburbs are among the worst-performing in the nation, measured by value of loans in arrears, according to a Nov. 25 report from Fitch Ratings. Helensvale, an area on the Gold Coast southeast of Brisbane, Queensland, is the nation's worst, with 7.8% of loans by value outstanding having missed one or more payments as of Sept. 30. Others in the top 10 are Nelson Bay and the riverside suburb of Raymond Terrace, both in New South Wales. Loading ''Everything got overvalued,'' said Ayliffe, seller of 3 Norma Road in Palm Beach. ''Our house is only worth what someone will pay for it. You have to be realistic.''