All Topics / General Property / Property bubble ‘set to burst’ Australian National University economist says… YOUR THOUGHTS?

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  • Profile photo of bardonbardon
    Join Date: 2004
    Post Count: 557
    coolbutters wrote:
    .  Any takers that wish to explain, by all means respond to what might be my ignorance.

    Allow me to explain:

    To All My Valued Employees,

    There have been some rumblings around the office about the future of this company, and more specifically, your job. As you know, the economy has changed for the worse and presents many challenges. However, the good news is this: The economy doesn't pose a threat to your job. What does threaten your job, however, is the changing political landscape in this country.

    However, let me tell you some little tidbits of fact which might help you decide what is in your best interests.

    First, while it is easy to spew rhetoric that casts employers against employees, you have to understand that for every business owner there is a back story. This back story is often neglected and overshadowed by what you see and hear. Sure, you see me park my Subaru Outback outside. You've seen my big home at last year's Christmas party. I'm sure all these flashy icons of luxury conjure up some idealised thoughts about my life.

    However, what you don't see is the back story.

    I started this company 28 years ago. At that time, I lived in a 2 bedroom flat for 3 years. My entire living area was converted into an office so I could put forth 100% effort into building a company, which by the way, would eventually employ you.

    My diet consisted of baked beans, stew and soup because every dollar I spent went back into this company. I drove a rusty Toyota Corolla with a wonky transmission. I didn't have time to go out with women. Often times, I stayed home on weekends, while my friends went out drinking and partying. In fact, I was married to my business — hard work, discipline, and sacrifice.

    Meanwhile, my friends got jobs. They worked 40 hours a week and made a modest $50,000 a year and spent every dime they earned. They drove flashy cars and lived in expensive homes and wore fancy designer clothes.

    Instead of hitting the David Jones for the latest hot fashion item, I was trolling through the discount store extracting any clothing item that didn't look like it was birthed in the 70's. My friends refinanced their mortgages and lived a life of luxury. I, however, did not. I put my time, my money, and my life into a business with a vision that eventually, some day, I too, will be able to afford these luxuries my friends supposedly had.

    So, while you physically arrive at the office at 9am, mentally check in at about noon, and then leave at 5pm, I don't. There is no "off" button for me. When you leave the office, you are done and you have a weekend all to yourself. I unfortunately do not have the freedom. I eat, and breathe this company every minute of the day. There is no rest. There is no weekend.

    There is no happy hour. Every day this business is attached to my hip like a 1 year old special-needs child. You, of course, only see the fruits of that garden — the nice house, the Subaru, the vacations… you never realise the back story and the sacrifices I've made.

    Now, the economy is falling apart and I, the guy that made all the right decisions and saved his money, have to bail-out all the people who didn't.
    The people that overspent their pay suddenly feel entitled to the same luxuries that I earned and sacrificed a decade of my life for.

    Yes, business ownership has its benefits but the price I've paid is steep and not without wounds.

    Unfortunately, the cost of running this business, and employing you, is starting to eclipse the threshold of marginal benefit and let me tell you why:

    I am being taxed to death and the government thinks I don't pay enough.
    I have state taxes. Federal taxes. Property taxes. Sales and use taxes.
    Payroll taxes. Workers compensation. Unemployment taxes. Taxes on taxes.
    I have to hire a accountant to manage all these taxes and then guess what?
    I have to pay taxes for employing him. Government mandates and regulations and all the accounting that goes with it, now occupy most of my time. On Oct 15th, I wrote a cheque to the Australian tax Office for $288,000 for quarterly taxes. You know what my "stimulus" cheque was? Zero. Zip. Zilch.

    The question I have is this: Who is stimulating the economy? Me, the guy who has provided 14 people good paying jobs and serves over 2,200,000 people per year with a flourishing business? Or, the single mother sitting at home pregnant with her fourth child waiting for her next welfare cheque?

    Obviously, government feels the latter is the economic stimulus of this country.

    The fact is, if I deducted (Read: Stole) 50% of your pay you'd quit and you wouldn't work here. I mean, why should you? That's nuts. Who wants to get rewarded only 50% of their hard work? Well, I agree which is why your job is in jeopardy.

    Here is what many of you don't understand …. to stimulate the economy you need to stimulate what runs the economy. Had the government suddenly mandated to me that I didn't need to pay taxes, guess what? Instead of depositing that $288,000 into the Canberra black-hole, I would have spent it, hired more employees, and generated substantial economic growth.

    My employees would have enjoyed the wealth of that tax cut in the form of promotions and better salaries. But you can forget it now.

    When you have a comatose man on the verge of death, you don't defibrillate and shock his thumb thinking that will bring him back to life, do you? Or, do you defibrillate his heart? Business is at the heart of Australia and always has been. To restart it, you must stimulate it, not kill it. But the power brokers in Canberra believe the poor of Australia are the essential drivers of the Australian economic engine. Nothing could be further from the truth and this is the type of change you can keep.

    So where am I going with all this? It's quite simple.

    If any new taxes are levied on me, or my company, my reaction will be swift and simple. I fire you. I fire your co-workers. You can then plead with the government to pay for your mortgage, your 4WD and your child's future. Frankly, it isn't my problem any more.

    Then, I will close this company down, move to another country, and retire. You see, I'm done. I'm done with a country that penalises the productive and gives to the unproductive. My motivation to work and to provide jobs will be destroyed, and with it, will be my citizenship.

    So, if you lose your job, it won't be at the hands of the economy; it will be at the hands of a politicians that swept through this country changed its financial landscape forever. If that happens, you can find me sitting on a beach, retired, and with no employees to worry about….

    Profile photo of bardonbardon
    Join Date: 2004
    Post Count: 557
    blogs wrote:
    Sorry-Bardon-my comment wasnt necessarily directed at you, it was supposed to be a general comment to the 'property bulls' only realised later (but cant edit) that it would sound that way…

    No worries at all, but when it comes to the wise old bulls dont forget that in the fullness of time they always prevail.

    Not like those pesky bears that have a short and toey life span, they remind me of mozzies, annoying, biting, irritating at night and then before you know it they are all dead for most of the year.

    Profile photo of blogsblogs
    Join Date: 2005
    Post Count: 418

    No doubt…but I dont see it as being either all for or all against. More just being smart and not buying at the top of the market when it was obvious financial gloom and doom was just arounf the corner. Ive been saving and will start buying in around 12 months time I reckon…collecting data now on areas Im interested in so  I have a base line..

    Profile photo of raydrayd
    Join Date: 2009
    Post Count: 7
    blogs wrote:
    rayd wrote:
    Remember house prices are down 19% and 17% in the US and UK respectively so far (not 40%) – and both of these countries have failed banking systems. So to say a 40% collapse in Australian property prices is ahead is a very pessimistic call.

    Remember we still have a lot of this recession to flow through. Deloittes are predicting a further 33% fall in U.K property prices by 2010. They are very respectoible and dont have vested interests….

    Not sure where you are getting you figures from either-the USA is currently 30% down..

    "Average home prices across the U. S. are now at levels not seen since late 2003. As of January 2009, the 20-city composite is down 29.1%, from its peak in the second quarter of 2006. A measure of the 10 largest cities is down 30.2%."

    Either way, sure it may not drop 40%, but it sure as heck aint going to be going up….


    Some measures report such as the Shiller index report that US house prices are down 30% since May 2006 (this includes non-conforming mortgages), but the FHFA index shows a decline of 20% (only includes conforming mortgages). Australian banks indicate <1% of loan books are sub-prime, so FHFA index may be more relevent.

    Profile photo of gmh454gmh454
    Join Date: 2003
    Post Count: 537
    wealthyjvd wrote:
    every single recession we have had, property prices have come out strong each time, why is this any different.,

    sorry, we will experience some drops, but not of 40+% pfft. ridiculous analysis.

    first recession for you, is it ??????? 

    Profile photo of James_JohnsonJames_Johnson
    Join Date: 2005
    Post Count: 86

    Home prices plunge, despite cash boost

    Chris Zappone

    May 4, 2009 – 1:55PM

    Home prices have slumped the most on record, undermining the value of the biggest asset for most Australians.

    In the year to March, home prices fell 6.7%, from a downwardly revised 3.9% fall in the 12 months ending December 31, according to the Australian Bureau of Statistics. The March quarter figure marks the worst year since the survey’s methodology was revised at the start of 2003, according to data from Bloomberg.

    Home prices slumped 2.2% in the March quarter, following a downwardly-revised 1.2% drop in the December quarter, the ABS said.

    House price bubble to burst?

    Property reporter Natalie Craig outlines the key arguments regarding what will happen to house prices.

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    ''It's showing that when the Australian economy goes into recession it's hard for house prices to continue to stay positive," said ANZ economist Katie Dean.

    The prospect of falling home prices is looming as people worry more about the economy and put off major purchases. The Reserve Bank has noted that a shortage of available homes has helped bolster prices, averting the double-digit drops in real estate values seen in the US and UK.

    Weakening home prices suggest the RBA will have to keep rates low for longer, Ms Dean said.

    ''The underlying fundamentals here are very strong relative to other parts of the world," Ms Dean said. "But that hasn't been enough to stop an overall decline."

    "House price falls here are more moderate than the rest of the world where prices have fallen in the UK and US by 20% to 30%," she said.

    Rate cut prospect

    Currently the market predicts only a one-in-four chance of a 25 basis point cut to the key cash interest rate when the RBA board holds its annual board meeting tomorrow.

    Some analysts say the interest rate, currently at a 49-year low of 3%, has lured riskier buyers into the market, setting the scene for more defaults if job losses mount or interest rates rebound. That trend has been accentuated by the First Home Buyers Boost, which delivered as much as $21,000 into the hands of some buyers.

    The official unemployment figure, to be updated Thursday, stands at 5.7%, the highest since late 2003.

    Vacancies advertised online and in newspapers in the year to April plunged 49.9%, ANZ said today in a separate release. That rate of decline compares with a 44.6% fall in the year to March, pointing to slowing demand for jobs in the year ahead.
    With the economy shrinking, JP Morgan economist Helen Kevans foresees joblessness rising as high as 9% by the end of 2010, as companies let go of staff. Higher unemployment will make it more difficult for households to pay mortgages.

    Prime Minister Kevin Rudd has hinted the First Home Buyers program will not be extended past its June 30 cut off period, despite the wishes of the industry and struggling households.

    A surprise

    "We had believed that solid demand from first home buyers would have prevented a fall in house prices in the March quarter," wrote JP Morgan economist Helen Kevans. 

    First home buyer demand has increased since the Government expanded the grant in October, she wrote.

    "This burgeoning demand has kept house prices at the lower end of the house price spectrum well supported," she said.

    "It seems, though, that these price gains were swamped by falling prices at the top end of the market."

    The commodities-driven Perth market underwent the biggest fall in annual home prices, 10.1% to the end of March.

    Sydney lost 7.3% over the same period, followed by Melbourne which experienced a 6.7% fall.

    Home prices in Brisbane, also yoked to the fortunes of the global commodities economy, fell 6.3%.

    Darwin saw the biggest annual increase in home prices, gaining 10.8% in the year to the end of March.

    "While interest rate declines have helped support demand for housing, we believe the RBA is nearing the end of the current easing cycle," Ms Kevans wrote, predicting the RBA will leave the cash rate unchanged at 3% tomorrow.

    However, Ms Kevans sees two more cuts to the interest rate before the end of the year.

    [email protected]

    Profile photo of blogsblogs
    Join Date: 2005
    Post Count: 418

    well…that article sums it up nicely….

    Profile photo of ErikHErikH
    Join Date: 2007
    Post Count: 118

    I have to admit I have not followed the new closely in the last few months due to a relocation, but I still believe the fundamentals of the Australian property market are sound and property will prove to be a good investment into the next decade and beyond. And that’s my focus, wealth creation over the long term so I am not too worried about the current correction. I don’t believe in a wide spread 40% drop in property values, yes there are properties which will be badly hit and the market will stagnate / decline in general to not so severe. So the next 12 – 24 motnhs depending on how this all plays out will probably provide the ideal period to add to my portfolio …

Viewing 8 posts - 21 through 28 (of 28 total)

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