Interesting read, to be honest I do not believe there will be a housing crash in Australia, maybe a slight correction where prices may steady for a few (or many) years until they reach a historical average over time. There is no doubt that they are over-priced at the moment.
That being said, I am no expert, I did not do finance or economics at university so there is a lot about that world that I know nothing about. So my opinion is basically just my personal idea. And like any idea it can be wrong, and if I am wrong I will be the first to admit it.
One question Matt, you said early in the post that we were up to Step 4 with banks starting to restrict lending requirements. If your plan does play out, do you have an idea of the time frame before prices to completely collapse? We saw in USA that prices went from highs to lows over a period of about 4 years (that is if they did indeed reach the bottom). Do you expect something similar in Australia , so prices to collapse and hit the bottom of the trench around 2015 or so?
Couple of other points –
I commented a few months ago at how many boomers who are about to retire are sitting on neg properties. (met predictable replies) . Talked about this with other accountants, and we are now seeing them sell, and talk about unloading, they cannot sit any longer. They certainly are not buying.
China when their bubble goes, may need to nationalise their banks, when that happens more cheap money goes home
Going the "bring in the buyers route to create a shortage- prop up demand etc" may not be the option. They were not trying to prop up property investors, but prop up the building industry itself"
reason 1., why this may not be required is that due to Qld, and the continued demand for infra structure for mining, we may not need to create builders jobs, anymore
reason 2. as NSW and Vic, Federal and Qld will show, the lack of infrastrucure is bringing down all goverments. People are unhappy aboyt congested roads, trains, hospitals, and bringing more people before the facilities will see governments treated very hashly.
gmh454 wrote:I commented a few months ago at how many boomers who are about to retire are sitting on neg properties. (met predictable replies) . Talked about this with other accountants, and we are now seeing them sell, and talk about unloading, they cannot sit any longer. They certainly are not buying.They have to sell places that aren't cashflow positive – what's the point of a NG IP when you are retired?
gmh454 wrote:as NSW and Vic, Federal and Qld will show, the lack of infrastrucure is bringing down all goverments. People are unhappy aboyt congested roads, trains, hospitals, and bringing more people before the facilities will see governments treated very hashly.State governments have become reliant on revenue from house sales. Not sure about all states but it represents 1/3 of the total income for ACTs state government.
If you think infrastructure spending is bad now, wait until no-one buys houses or price decreases effect stamp duty.
I was actually counting on a slight drop in prices to help with my next purchase. problem being is the cash i was going to use was profit( equity) created in my current development. The development should have been completed by now but will probably take until later in the year now. Luckily even with a 20% drop i will still have equity to release for bargains. much below that and i will start to get a little p##ed. Still profit there just that im greedy and want 40% profit. So for me prices stay up thats good. If they drop thats good too.
ummester wrote:gmh454 wrote:I commented a few months ago at how many boomers who are about to retire are sitting on neg properties. (met predictable replies) . Talked about this with other accountants, and we are now seeing them sell, and talk about unloading, they cannot sit any longer. They certainly are not buying.They have to sell places that aren't cashflow positive – what's the point of a NG IP when you are retired?
gmh454 wrote:as NSW and Vic, Federal and Qld will show, the lack of infrastrucure is bringing down all goverments. People are unhappy aboyt congested roads, trains, hospitals, and bringing more people before the facilities will see governments treated very hashly.State governments have become reliant on revenue from house sales. Not sure about all states but it represents 1/3 of the total income for ACTs state government.
If you think infrastructure spending is bad now, wait until no-one buys houses or price decreases effect stamp duty.
there is always the old standby of Land tax…
Great post fellows keep it up. Finally, something curent and interesting to read on this site.
By the way Steve Keen is posting articles again on the current housing prices…Yes, I know lots of people are now saying "what does he know, he sold his property years ago thinking house prices would fall". Maybe he was just a little too early, and as he says didn't think the government would react as strong as it did, reducing interest rate ( yeh yeh its the RBA ) and upping the FHOG etc. But I have just read his part 1 today, suggest it as a good read.
Personally, I am a baby boomer, just retired early, and will be selling off my properties over the next few years ( slowly to avoid too much CGT – although will be offsetting by rolling into super ). But I am worried that house prices are going to fall and have predicted them to fall over the last few years, but was early like Steve Keen maybe ??
Let hear from a few others out there about their situations with regards to buying , selling etc, maybe that will help us with predictions for house prices??
bye
Property would have dropped if The government didn’t step in………. Do we really think they won’t do the same this time??? Of coarse they will. They may be a little more careful not to overstimulate but stimulate they will. To think they won’t is falling into the same trap.
Matt,
How are your views received at your workplace? If this does happen I hope Australia learns off Ireland and does not back the banks, but rather sets up its own bank or starts selling bonds to fund the drastic stimulus that will be required… Hopefully in infrastructure and not Harvey Norman.
devo76 wrote:Property would have dropped if The government didn't step in………. Do we really think they won't do the same this time??? Of coarse they will. They may be a little more careful not to overstimulate but stimulate they will. To think they won't is falling into the same trap.Yep. Unless the govt considers it either too expensive or poilitcally unsafe, they will try and stimulate the market again.
ummester wrote:Rents didn't sore during the depression:) You are reading spruik in a book, it seems.
Haha, good one. But a spruik in a book, from an author who actually dared to get themselves published (rather than sit around here as a nameless face, spewing endlessly), is far better than 'stuff' from nameless people who are calling them 'predictions'. BTW, I'm not saying such 'predictions' are wrong or impossible. But by George, if you believe in what you say, and there's good sense in it, you could get it published and have your own spruik in a book.
Anyway, read the book, then tell me what you think. No use shooting at me, I wasn't the one that said it!
ummester wrote:That's not really true – generally when property crashes unemployment becomes high. Rents are entirely wage dependant. Do you really think in times of high unemployment that people will have lots of money to spend on rent?No, they don't. But when you have a choice to either pay the rents or be homeless on the street, I think we all know which is better. It's about choosing the lesser of two evils really.
And besides, you make a very good point: high unemployment when the property market crashes. Those hoping for a crash or attempting to predict one had better be prepared to lose their jobs. Again, it's down to a choice between the lesser of two evils. Do you want high house prices? Or do you want to lose your job with little hope of getting it back?
Thanks guys,
I really enjoyed the reading your posts, and looking at different perspectives.
At this stage however, I feel that there is too much uncertainty and instability in the world, and the only place I feel safe investing my money is in commodities such as Gold and Silver. I also feel that it would be prudent to watch and see what happens with refinancing at the end of 2012.
G'day everyone.
There has been alot of good discussion on this particular topic but what it all seems to boil down to is if we have a bust or not this is really the not issue. The issue is two fold: 1. If you don't invest into property then what alternatives does the ordinary Aussie (who usually lacks time and knowledge to learn more) have to create wealth outside of working for a wage?: and 2. Do we REALLY stick our heads in the sand and do NOTHING based upon the few who grandstand on hyperbole, supposition and assumptions? You simply can't continue to do a Nostradamus and try and fit what has been written in the past and try and make it fit into the present. As my dear ole Dad used to tell me, "son, you either have to S__T or get off the pot!Hi all,
This is amazing read…. lots of fun really.
Well, I did work as a banker, a financial adviser and a mortgage broker. But the role I’m most proud of is being a MOTHER. So, my sole contribution to this very cerebral debate is this:
An old, proven proverb: Don’t put all your eggs in one basket.
Regardless of where we are in the economic “clock” it is best to have a little bit in cash, a little bit in super, a little in gold and jewellery, a little in blue chips and mining shares, a lots in real estate.
I’m not an economist, but I’m feeding, clothing. raising four kids. So conventional wisdom tells me, that whatever happens in America, I still want to spread my goodies all around.
Not so cerebral… just practical.
Carry on you intellectuals, it’s a fun read.
Angel
streamlineinvesting wrote:>One question Matt, you said early in the post that we were up to Step 4 with banks starting to restrict lending requirements. If your plan does play out, do you have an idea of the time frame before prices to completely collapse? We saw in USA that prices went from highs to lows over a period of about 4 years (that is if they did indeed reach the bottom). Do you expect something similar in Australia , so prices to collapse and hit the bottom of the trench around 2015 or so?I actually think we are only at step 1 now and about to move into step 2. True credit rationing isn’t happening to the average customer that I am aware of at this stage. I would see a timeframe similar to the USA. The concern is that you get stuck in a viscious spiral.
SmartGenY wrote:Matt,How are your views received at your workplace? If this does happen I hope Australia learns off Ireland and does not back the banks, but rather sets up its own bank or starts selling bonds to fund the drastic stimulus that will be required… Hopefully in infrastructure and not Harvey Norman.
I have shared my views with my team. They started to really take notice when what I have been saying for the past couple of months was acknowledged in our senior leadership meeting by the bank’s chief economist. They have asked me for the warning signs to watch out for in coming months…. part of what has prompted my thinking for this post.
fWord,
I write fiction and am trying to get puplished as a fictional author. Reading about and commenting on the Australian property market is more a hobby which rises from what I suppose is a genuine concern over Australia's future. Though I like thinking about it, reading about it and posting on it, it's way too dry to dedicate 6 months and 100k words to:)
I have been sitting around here (on this forum) as a nameless face for many years though. Actually started posting here before reading and posting on bear forums. Besides which, I don't really need to be faceless and nameless – I'm happy to have the housing debate with anyone in the flesh. Many of the people I have it with get very sensative and upset about claims that their house may not be worth as much as they think its is though.
Truth be told, the psycology of this whole thing interests me more than the economics. I've always believed that people and society drive the economy – the economy is just a reponsive construct that some take advantage of when the majority are being greedy.
High unemployment is a very real downside when a fast property crash occurs – especially within the RE and construction industry. The flipside is that the RE and construction industry have probably made more profit from the boom over the past 15 years than other industry. Like I've mentioned before, I have no idea what I think the best outcome will be anymore – there are just too many angles. In the end, what will be will be.
angelinsydney,
Don't put all your eggs in one basket – a great thing to remember. I fear many Aussies have put all their eggs in the housing basket. I fear the countries economy has, to a degree. I hope I am wrong.
In other words, by inflation and then deflation, the whole world is going to be owned by the banks and creditor nations.
I see one problem with this manifesting ultimately – the internet.
tens of millions of people losing their homes, who know who scammed them, are unlikely to go quietly
Dear Streamlineinvesting,
I’d like to put in motherly observation, regarding your question: Matt: You said early in the post that we were up to Step 4 with banks starting to restrict lending requirements. If your plan does play out, do you have an idea of the time frame before prices to completely collapse? We saw in USA that prices went from highs to lows over a period of about 4 years (that is if they did indeed reach the bottom). Do you expect something similar in Australia , so prices to collapse and hit the bottom of the trench around 2015 or so?
I’m not Matt but I’m fat… it rhymes.
Culture has a lot to do with price crashing. This is not highlighted enough. In Amercia, it is so easy to surrender. From what I’ve heard, people walk into their banks and hand over the keys. Full stop.
Not so in Australia. Here, home owners will FIGHT tooth and nail to keep their home from being repossessed, sometimes to their own detriment.
You can never discount the tenacity of the people. Every country has their own values and traditions. The tradition of home ownership in OZ is one of the highest in the world. And, this observation is coming from a transplanted Chinese-Filipino. I think the Australians beat the Asians when it comes to an emphatic desire to have their own roof over their heads.
It will take more than strict lending to constrict supply and demand. In fact, if you ask me, lending has constricted for two years now. Just ask Richard and co.
Thank you.
Angel
Hey guys. This has been an awesome read from you both. big question from me is sounds like you have a great idea of what is happening.
Ive got an investment in melbourne, that i want to sell in a few years. hopefully reap the benifits and buy a house in Sydney and hope have some left over for more investments.reading all this what do you guys think will happen, this doom and gloom that is being mentioned. what research have you got this all from keen to learn all this as starting new in this game. and a 20 million portfolio sound i nice goal to achieve for.
thanks
ummester wrote:fWord,I write fiction and am trying to get puplished as a fictional author. Reading about and commenting on the Australian property market is more a hobby which rises from what I suppose is a genuine concern over Australia's future. Though I like thinking about it, reading about it and posting on it, it's way too dry to dedicate 6 months and 100k words to:)
Yes. But what I meant was, it was rather amusing to be talking about spuriks in a book. I wanted to admit that, I'd rather read a spruik in a book from an author who has been in the business over 30 years, writes enough sensible info to be published in an actual book that has a chance to be widely circulated, and widely ridiculed (if they are wrong).
In short, I respect the people who put their money where their mouth is AND have plenty to lose in the process but are not afraid of doing so. It's the degree of conviction that I respect.
ummester wrote:Many of the people I have it with get very sensative and upset about claims that their house may not be worth as much as they think its is though.Quite understandable, me thinks, particularly since some of the folk you debate with have been saving/ investing for donkey years to buy their first home and I am one of them. As mentioned on another thread, I've been saving and investing for over 12 years and then working full time for 3 years before getting enough savings to buy a home. Of course, I bought a few luxuries along the way, including a brand new car that I bought outright with savings. Even though it's a 1.5L 4-cylinder, it's pretty extravagant for a young worker considering I could have bought a drivable car for less than half that amount if I really wanted to.
So I've made some choices in life that delayed the process of buying a home. Plus I was set back by over 2 years of compulsory military service in my country which paid me less than 10% of the starting wage in my profession. But at least I pressed on nevertheless. I didn't sit around and blame everyone else for not being able to buy a house. I persisted till I could.
This is why it ticks me off when some folk talk as though some greedy investors have made life hard for them. No, they made life hard for themselves, getting loans for a flashy car they cannot afford, going out raving, drinking, smoking, buying hair extensions, acryllic nails and expensive clothes while complaining about high house prices. Meanwhile, they are waiting to splurge on their next iPhone. Priorities, folks.
ummester wrote:Truth be told, the psycology of this whole thing interests me more than the economics. I've always believed that people and society drive the economy – the economy is just a reponsive construct that some take advantage of when the majority are being greedy.Definitely agree here. Emotions are often more important than fundamentals. Hence perhaps, the housing market will do whatever the public sentiment reflects, and regardless of what the fundamentals are. That's why some people think its overpriced, and others feel there is a very good reason for prices to be high.
Ultimately I hope that potential FHB will not bear needless hatred for people who have bought their own home, or investors. Chances are, the vast majority of them did the hard yards to get to where they are now. And do I think they deserve to be rewarded? Hell yeah!
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