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  1. Australian Mortgage Borrowers Struggle To Pay Home Loans Post by Sharat on October 14, 2010 · Under Australian Economy, Business News, home loans, interest rates, mortgages · Comment Australian Mortgage Borrowers Struggle To Pay Home Loans The results of a new survey suggest that mortgage borrowers are scrapping their holiday plans in order to concentrate on paying off their home loan. According to the results of the latest Bankwest/Mortgage and Finance Association of Australia (MFAA) home finance index, more than half of those polled were sacrificing a number of everyday necessities in order to absorb the cost of higher interest rates. “With interest rates higher than last year, many mortgage holders seem to be holding back on their spending,” Bankwest retail chief executive Vittoria Shortt said. The survey polled over 1,000 property owners across the country, and found that over half said they ate out less, whilst just under half said they were cutting costs at home and taking packed lunches to work. 42 per cent of respondents said they were either scrapping their holiday plans altogether or considering cheaper holiday options. 40 per cent of those polled said they were now purchasing food in bulk. “There is a clear move to more thrifty spending for many Australian households,” Ms Shortt said. Australians seeking to cut their costs have implement measures ranging from selling unused items to seeking additional work and reducing insurance payments and superannuation contributions. “Although some of the cost cutting strategies may seem extreme … it’s actually down to principals of good financial management,” MFAA chief executive officer Phil Naylor said. “Borrowers can’t avoid rising interest rates, but they can minimise the impact by considering making an extra mortgage repayment with extra funds that would have otherwise been used for things like holidays.” Shel be right mate
  2. Robert Gottliebsen: Australian property takes a hit 13/10/2010 By Robert Gottliebsen Business Spectator The money war between the US and China has suddenly engulfed Australia in a surprising way – demand for Sydney apartments has fallen sharply and if the trend continues it will affect significant areas of the Australian dwelling market. It’s important to understand that this is simply part of the spreading of the China-US money war. In hindsight, we now realise that the opening shot in the war came at the Hayman Leadership Retreat when the Chinese government declared that they would cease buying American treasury notes and bonds – the so-called Hayman declaration. Related content Kohler: The great currency rip-off can't last Gottliebsen: China's Hayman declaration Bartholomeusz: Banking on a rate rise Maley: Currency war casualties Another important escalation in the battle between the two countries came when the incredible US dwelling mortgage foreclosure freeze in large parts of the US was revealed, ensuring that when America’s Federal Reserve took to the money-printing presses, a large portion of the money would flood into global share and commodity markets rather than boost the US economy. The end result has been a sharp fall in the US dollar, while global share and commodity markets have posted solid gains – a trend that is now abating as China tries to slow its economy and profit-takers move in. But casualties of the war are starting to mount. Australian education, tourism and manufacturing are in the front line and are being bombarded. I've previously explained that the impact on the Indian clothing and textile industry could affect the jobs of the 24 million people employed in the industry. Now the effects of the US-China money war are spreading into areas that would not normally have been seen as vulnerable. Sydney apartments are at the top of that list, but Melbourne will be next. Brisbane is less affected, but the Brisbane market will be affected by the Surfers Paradise mess. There are two broad buyers of Sydney and Melbourne apartments – the locals and overseas buyers. In Sydney the local market has been subdued by rising interest rates, The Matthew Quinn (Stockland CEO) trigger rule, which says that when the Reserve Bank official interest rates rise to 4.25 per cent it begins to hit demand, has proved a true description of the Sydney apartment market. And so when the Reserve Bank lifted its official rate to 4.5 per cent, with more to come, it really hit local demand. But that did not hit Sydney apartment prices because Chinese investors have been large buyers, reasoning that Sydney apartments were cheaper than those in Shanghai. But the rise in the Australian dollar and the fear that eventually China will cave into the US demand to lift the yuan has turned off the China buying tap. Suddenly Sydney apartments look expensive to those same Chinese investors and they can see the potential of a price decline. It seems better to leave their money at home. If this response from Chinese investors continues for an extended period it will reduce prices of Sydney apartments. In Melbourne the China buying is important but there has been a larger degree of local support, though Melbourne will not avoid the repercussions. There are certain areas of suburban housing where Chinese buying has been important and they may be affected directly by the Chinese withdrawal, but indirectly a fall in apartment prices will subdue large areas of the dwelling market. In Queensland the huge settlements required on the gigantic Surfers Paradise apartment blocks hang over the market. The Chinese have not been big buyers of Surfers apartments. The Reserve Bank is looking to lift interest rates further. If they do that and the Chinese stay away, then the effects will be substantial.
  3. Property's safer income outcome Steve Keen Published 6:19 AM, 12 Oct 2010 Last update 10:19 AM, 12 Oct 2010 Last week I explained a way to stop non-productive speculation on shares – the idea of creating 'Jubilee shares' that last forever, but which once on-sold lose their 'Jubilee' status. But shares are not the only asset that has been built up during the past two decades of credit boom. Property also needs to be made less attractive as an asset upon which to speculate. The property proposal is somewhat different to the Jubilee shares proposal (Curing the credit cancer, October 5), and related to the "productive debt vs unproductive debt" distinction I made earlier. Obviously some debt is needed to purchase a house, since the cost of building a new house far exceeds the average wage. But debt past a certain level drives not house construction, but house price bubbles. As soon as house prices start to rise because banks offer more leverage to home buyers, a positive feedback loop develops between house prices and leverage, and we end up where Australia is now, and where America was before the subprime bubble burst – with house prices out of reach of ordinary wage earners, and leverage at ridiculous levels so that 95 per cent or more of the purchase price represents debt rather than owner equity. This happens under our current system because the amount extended to a borrower is allegedly based on his or her income. During a period of economic tranquility that occurs after a serious economic crisis has occurred and is finally over – like the 1950s after the Great Depression and the World War II – banks set a responsible level for leverage, like the requirement that borrowers provide 30 per cent of the purchase price, so that the loan to valuation ratio was limited to 70 per cent. But as economic tranquility continues, banks, which make money by extending debt, find that an easy way to extend more debt is to relax their lending standards, and push the loan to valuation ratio (LVR) to say 75 per cent. Borrowers are happy to let this happen for two reasons: borrowers with lower income who take on higher debt can trump other buyers with higher incomes but lower debt in bidding on a house they desire; and the increase in debt drives up the price of houses on sale, making the sellers richer and leading all current buyers to believe that their notional wealth has also risen. Ultimately, you get the runaway process that we saw in the US, where leverage rises to 95 per cent, 99 per cent, and even beyond – to the ridiculous level of 120 per cent as it did with Liar Loans at the peak of the subprime frenzy. Then it all ends in tears when prices have been driven so high that new borrowers can no longer be enticed into the market – since the cost of servicing that debt can't be met out of their incomes – and as existing borrowers are sent bankrupt by impossible repayment schedules. The housing market is then flooded by distressed sales and the bubble bursts. The high house prices collapse, but as with shares, the debt used to purchase them remains. If we instead based the level of debt on the income-generating capacity of the property being purchased, rather than on the income of the buyer, then we would forge a link between asset prices and incomes that is currently easily punctured by rising debt. It would still be possible – indeed necessary – to buy a property for more than ten times its annual rental. But then the excess of the price over the loan would be genuinely the savings of the buyer, and an increase in the price of a house would mean a fall in leverage, rather than an increase in leverage as now. There would be a negative feedback loop between house prices and leverage. That hopefully would stop house price bubbles developing in the first place, and take dwellings out of the realm of speculation back into the realm of housing, where they belong.
  4. Beware the "Independent" Analysis Monday, 11 October 2010 – Melbourne, Australia By Kris Sayce * Beware the "Independent" Analysis * Market News This Week ............................................................................................................................................................................. VIDEO PRESENTATION: Aussie stock selector outperforms the market by 16-to-1 New presentation reveals how one obsessed analyst can spot the 'DNA' of a winning stock pick – long before any mainstream analyst picks up the scent. In the last 12 months, Australian stocks he has discovered have outperformed the ASX by a factor of SIXTEEN-TO-ONE... Knowing what he knows could give you a serious advantage in the market... Get all the details right here ............................................................................................................................................................................. The property spruikers have gotten themselves quite excited about an article by PIMCO Australia chief, John Wilson in Business Spectator last week. Mr. Wilson headlined the article, "Our non-existent housing bubble." As you can pretty much guess from the headline, Mr. Wilson sums up the article saying: "The demand for housing is determined by the number of people who are coming into the household forming stage of their lives together with housing affordability. Australia's immediate economic outlook is supportive of household earnings growth and with interest rates back in mid-range, any further tightening will be modest. Housing supply will continue to be constrained. "Taking all these factors into account it is difficult to conclude that Australia's housing market is in a bubble." That's right, no surprise, "it is difficult to concluded that Australia's housing market is in a bubble." We'll give you our thoughts on Mr. Wilson's analysis in a moment. First... It was amusing to read a couple of items out of the UK at the weekend. The first highlights how utterly incapable elected politicians are of cutting public spending. And the second highlights how much influence the public sector and banking sector has over the politicians. And there should be little doubt that both are connected. You may recall that your editor was back in the UK for a couple of weeks during June and July this year. At that stage the newly formed coalition government had only been established for a couple of months thanks to a hung parliament at the May election. While we were in the country, there was talk aplenty about the need for so-called "austerity measures." That Britain couldn't continue to live beyond its means. That cuts would have to be made to public sector spending... but not the defence budget. Nor the health budget. And pensioners would be safe. And don't worry if you're on benefits because you'll be fine too... And so on. The conclusion your editor came to was that if the UK government actually enforced a net cut to spending then we'd be prepared to eat a hat made from chocolate (why risk having to eat something terrible!) And based on what we've seen so far there seems little danger that we'll have to tuck into a chocolate hat. According to an interview with the UK's Telegraph, cabinet minister Chris Huhne said about public spending cuts: "It is a bit like setting sail. If the wind changes, you have to tack about to get to [your destination]. Global growth could be either higher or lower. We just don't know, and it's not sensible, outside the Budget period, for governments to make speculations about what is going to happen." In other words, don't expect any public spending cuts. Another giveway line in the article is this: "Mr Huhne, an economist who started a successful City business before entering politics." And what was this business? According to our pals at Wikipedia: "He set-up a company named Sovereign Ratings IBCA in 1994 that claimed to 'scientifically measure the risks of investing in different countries.' In 1997 he became managing director of Fitch IBCA, and from 1999 to 2003 was vice-chairman of Fitch Ratings." You could hardly describe that timeframe as being the glory years for the ratings agencies. Although we wonder what Sovereign Ratings IBCA would have to say about the risk profile of the UK economy right now? Most likely it would say the government needs to spend more! Perhaps an indication of the size of the mess facing the UK public is the chart below: Spend and spend Total Spending United Kingdom from FY 1970 to FY 2011 According to the government's own numbers, more than GBP600 billion is spent each year by the government on public services. That's out of a total economy with a gross domestic product (GDP) of GBP1.32 trillion. In other words, nearly half of every dollar spent each year in the UK is spent by the government! No wonder the mainstream numpties are so panicked by the idea of what could happen to the economy if the government stops spending. Even though they can't grasp the fact that it's the wasteful public sector spending and borrowing that has caused most of the problems in the first place. But hopefully the above chart should also put to rest the false idea put around by conservatives and socialists (for different reasons, obviously) that Margaret Thatcher took the razor to public spending. As can quite easily be seen, from the early 1980s all the way through until 1990 - when she was turfed from office - public sector spending more than doubled. Contrary to popular belief, Thatcher was no friend of the free market. But I said there were two articles. The other was in the Financial Times headline, "Chancellor backs Bank of England action". I can't provide the link to the article as you'll need to register for free to view it. But if you type "Osborne Bank of England" into the search field at the FT website you'll find it. Chancellor of the Exchequer, George Osborne was quoted saying: "If the MPC [Monetary Policy Committee at the Bank of England] ask - I have said I regard the MPC as independent - if it makes a judgment, I would want to follow that judgment and continue with the procedures of my predecessor in dealing with those requests." In other words, the Bank of England does what it wants. Even if that happens to be the insane policy of quantitative easing (QE). But in reality you can see how these two news items are connected. The first points out that the politicians don't have the guts or the will to cut back on public spending. While the second reveals that the government doesn't have to cut back on public spending when you've got a central bank prepared to devalue the currency. What the QE policy means is that rather than facing up to the fact that generations of Conservative and Labour governments have taxed and borrowed and spent more money than they should have, rather than recognising the mistake and stopping, the UK government is taking the coward's way out by just printing more money. Like that's gonna work. But of course the mainstream economists love it. The Dow Jones Industrial Average rallied on Friday on the back of weak jobs numbers. Weak jobs numbers that almost guaranteed that the US Federal Reserve would press ahead with its QE plans. It's the kind of policy that has the mainstream going ****-a-hoop. Such as this comment we received on Friday before the US jobs numbers from Ben Potter, market strategist at IG Markets in Melbourne: "On one hand, a weaker figure will almost certainly mean more QE while a stronger read could see these expectations decline significantly. Either way, we view it as a win-win situation for equities." When you start hearing people tell you that both good news and bad news will be a "win-win" for equities, you know it's time to brace yourself for a market collapse. So, prepare the life boats, but don't jump in just yet is our stance. But back to PIMCO... So, what does John Wilson, Head of PIMCO in Australia have to say about Australia's housing market? His view is that "Australian housing... will not come under undue downward price pressure providing the economic outlook doesn't falter." He then goes on to cover most of the old ground that's been covered by a thousand property spruikers before him. Smatterings of high Australian home ownership levels, comparable levels of household debt, one third own, one third rent, one third have a mortgage... and so on. As we've pointed out before, none of this is any proof whatsoever. You're welcome to read the entire article for yourself by clicking here. But the fact is, Mr. Wilson makes the same mistake that every other property spruiker makes. And that is to start with the fact that Australian property prices haven't collapsed, produce a bunch of data, compare it to data from overseas and then state that's the reason Australian prices haven't collapsed. It doesn't actually provide any analysis at all. It's nothing more than guesswork. We've used this example before, it's like saying Australians play Australian Rules Football, and Australian house prices didn't crash. American's don't play Australian Rules Football, and American house prices did crash. Therefore Australian Rules Football prevented the Australian housing market from collapse. It's a ridiculous argument, but no less ridiculous than the casual relationships spruiked by the spruikers that are being dressed up as causal relationships. Take this paragraph as an example: "The increase in US housing prices was accompanied by a sharp rise in the level of homeownership; it was steady until 1995, after which it rose from 64 per cent to a peak of 69.2 per cent in 2004 and has since fallen to 67 per cent, with no sign of stabilising. This suggests lower-quality of owners/borrowers in the US were encouraged into homeownershp by the relaxation of lending standards during the upswing. In contrast, Australia's home-ownership rate has been steady at 70 per cent, give or take two per cent, since 1960." See what I mean? According to Mr. Wilson's logic, the US housing market collapsed, the Australian housing market didn't, therefore the housing ownership numbers are directly related to the collapse. Again, there's no evidence to prove that's true. Or even any attempt to draw a connection. But even if we look at the numbers he uses. Wilson claims US home ownership was steady until 1995 at 64%, and then rose to 69.2%, before falling back to 67%. Or, we could say that over time it has been steady at 67%, give or take 2-3%. How different is that from Wilson's analysis of Australia's home ownership rate which "has been steady at 70 per cent, give or take two per cent, since 1960." As we've pointed out before, there's a lot of things you can do with numbers to make them back up your argument. It just depends how you use them. For instance, if Mr. Wilson took his analysis back to 1947 he would note that Australian home ownership has been in a range of 53.4% to 71.4%. That's a much bigger range than the four percentage points noted in his article. What we're saying is, cherrypicking dates to back an analysis which is unproven to be correlated to rising or falling house prices is more than slightly misleading. But all the analysis aside, perhaps the biggest reason to take Mr. Wilson's comments on the Australian housing market with a huge pinch of salt is an article from Business Week in June this year: "PIMCO Buying 'Bullet-Proof' Australian Mortgage-Backed Bonds" According to the article: "Pimco's Australian unit, which manages about A$28 billion... of assets, is buying the securities in its second-largest credit-market bet behind bank debt guaranteed by Australia's government.... Pimco, which manages $1 trillion worldwide, owns notes sold by lenders including Westpac Banking Corp. and Members Equity Bank Pty Ltd." It continues: "Pimco has an overweight position on Australian residential mortgage-backed securities because the underlying loans are of high quality, John Wilson, head of Pimco Australia, said May 24." There you have it. It's called talking your own book. As an independent observer on the market you can hold any view you like on whether housing is over-valued or not, as you're less likely to be influenced by your position. But PIMCO isn't an independent observer. Its view on the market is understandably influenced by its market exposure. Not that you'd know that from reading the John Wilson's Business Spectator article. Reading the article you could be forgiven for thinking it's a completely independent analysis of the Australian housing and mortgage market. But it isn't is it? Don't get us wrong, we're sure PIMCO has invested "overweight" in the Australian mortgage market because it believes its analysis is right. After all, would they really want to invest in mortgages if they thought they were rubbish? Who knows, maybe they would. And anyway, who's to say PIMCO isn't hedging it's exposure using CDO's or CDS's, or whatever other fancy instrument the bankers have come up with. I mean, PIMCO were happy to get on board the CDO bus in 2007, even looking to offer CDO's to retail investors: "We are targeting this fund at the institutional market in the first instance, but there's a very clear plan to take it to the retail space later. That would be our intention down the track." But just because PIMCO has put its clients' money on the line, doesn't mean to say it's right. The reason there are no genuine investment banks left on Wall Street anymore is mainly down to the fact that the wise-guys who were pushing buttons and watching flashing lights got a whole bunch of things wrong leading up to 2008. So while the spruikers get excited again over a seemingly independent analysis of the Australian housing market, let's not forget that PIMCO has $28 billion of client money invested in the Australian market and is heavily overweight the Australian mortgage market. Cheers. Kris Sayce For Money Morning Australia
  5. GeordieAndy HI! every one who can get out of the UK is doing just that, all that will be left behind are the wingies and stumpies. I dont think the country will go all that well and then the government will import more of the people to get a quick fix :angry: Its like a game of musical chairs except as the number of chairs are reduced the amount of players are increased.
  6. Money and grog its the Celtic curse. Giving money to the Irish, is like giving razer blades to monkeys! You know you should not. But you do it because you want to see what happens.
  7. The definition of Rich is to have the things nessisary for survival. 1 food and water. 2 clothing. 3 shelter. The greatest problem is when you comare your situation to others who have more that you.
  8. Why? because she had the strength to not swear on a Bible, I like her thinking, She is brave. Hawk would only go so far as to be a agnostic. Answer this you reconded her man was a "Beard" sugesting our Priminister is a Lesbian. Well how do you explain her opposition to same sex marages?
  9. Wikipedia The crash of the Japanese asset price bubble from 1990 on has been very damaging to the Japanese economy and the lives of many Japanese who have lived through it [1], as is also true of the crash in 2005 of the real estate bubble in China's largest city, Shanghai.[2] Unlike a stock market crash following a bubble, a real-estate "crash" is usually a slower process, because the real estate market is less liquid than the stock market. Other sectors such as office, hotel and retail generally move along with the residential market, being affected by many of same variables (incomes, interest rates, etc.) and also sharing the "wealth effect" of booms. Therefore this article focuses on housing bubbles and mentions other sectors only when their situation differs from housing. As of 2007[update], real estate bubbles had existed in the recent past or were widely believed to still exist in many parts of the world,[3] especially in the United States, Argentina[4], Britain, Netherlands, Italy, Australia, New Zealand, Ireland, Spain, Lebanon, France, Poland[5], South Africa, Israel, Greece, Bulgaria, Croatia[6], Canada, Norway, Singapore, South Korea, Sweden, Baltic states, India, Romania, Russia, Ukraine and China[7]. Then U.S. Federal Reserve Chairman Alan Greenspan said in mid-2005 that "at a minimum, there's a little 'froth' (in the U.S. housing market) … it's hard not to see that there are a lot of local bubbles."[8] The Economist magazine, writing at the same time, went further, saying "the worldwide rise in house prices is the biggest bubble in history".[9] Real estate bubbles are invariably followed by severe price decreases (also known as a house price crash) that can result in many owners holding negative equity (a mortgage debt higher than the current value of the property).[citation needed] Not every country in the world but just about every one that counts. O and gess what? Australia is on the list. Now go back under that rock
  10. Do not fall for talk of European solvency By Wolfgang Münchau Published: September 5 2010 19:10 | Last updated: September 5 2010 19:10 While the Europeans are celebrating the end of the financial crisis, something strange is happening in the bond markets. The gap in the yields – the spread – between the 10-year bonds of peripheral eurozone countries and Germany has been growing at an alarming rate. It is now close to the level that prevailed in the days before the European Union decided to set up its bail-out fund in May. Last Friday, the spreads were 3.4 per cent for Ireland, 9.4 per cent for Greece, 3.4 per cent for Portugal, and 1.7 per cent for Spain. The yield on 10-year German bonds is currently ridiculously low, about 2.3 per cent. The financial markets somehow regard Germany as a paragon of virtue, stability and sound financial management, and are happy to demand virtually no return on 10-year investments. If the bond markets were ever returned to normal, and if the spreads were to persist, peripheral Europe would find itself subject to an intolerable market interest rate burden. This observation gives rise to the immediate question of whether some countries would be able to remain solvent under such a scenario. Solvency is defined as the ability to finance debt in a sustainable way, and is affected both by the amount of debt, and future income through which the debt is repaid. Spain is probably fine for the time being. Portugal’s combined private and public sector debt adds to well over 200 per cent of gross domestic product. In Ireland, the main problem is the banking sector. The economists Peter Boone and Simon Johnson have done some of the maths and found that the total amount of debt likely to end up with the Irish government amounts to about one-third of GDP. They concluded that with 10-year market rates at current levels – close to 6 per cent – Ireland is effectively insolvent. To correct this Ireland would need to generate spectacular rates of future growth. But do we really believe that the Celtic Tiger trick can be replicated? Was the presence of a global financial bubble not inherent in that model? In Greece, the adjustment programme is going well – much better than anyone had hoped. Some of the people directly involved with whom I have spoken are almost euphoric in their praise for the Greek government’s approach to the crisis. I also take the government’s commitments seriously, certainly as regards fiscal adjustment. I am less optimistic when it comes to structural reforms. But we should remember that even if you make a moderately optimistic assessment about policy changes in Greece, solvency is far from assured. I have yet to see a realistic estimate of a trajectory that foresees a stabilisation of the Greek debt-to-GDP ratio at a tolerable level. Instead, the optimists tend to pull the joker of some massive above-average growth forecasts for the future without explicitly stating where this growth is coming from. The business confidence indicators that we have all been admiring in recent weeks tell us that the global economy has recovered from the depth of a near-depression in 2009, but they tell us nothing about the nature and the sustainability of the recovery. To guarantee the solvency of the eurozone’s periphery would require not a few quarters of solid growth, but an entire decade. I am at a loss to understand how countries still recovering from an enormous asset implosion can generate so much growth. We can either dig our head in the sand or prepare for the inevitable – that one day a eurozone state will either default, or, more likely, be forced to restructure its debt. It is important not merely to accept the principle, but also to make the institutional preparations for an orderly default of a eurozone member. It is going to happen. There is a further factor we must take into account in our calculations about solvency. The optimists’ scenario assumes that the various asset price bubbles have already fully self-corrected. That may not be the case, as we are currently seeing in the US, where the housing market is going into a double dip. In times like these, volume and inventory statistics give us a more accurate picture of underlying market conditions than prices. In peripheral Europe, the reality is one of extremely low turnover, and massive unsold stocks. The situation may be a little different in the UK housing market, which along with Hong Kong must be one of the most pathological in the world. But in most countries, real house prices do not change much over very long periods. In the US they have been almost stable for the last 100 years; in Germany they have not grown since the 1950s. If you assume a flat long-term trajectory of real house prices in Europe’s periphery, you must conclude that most of the price falls have yet to occur. So when we assess the long-term path of the Greek adjustment programme, the fate of the Irish economy, or of peripheral Europe in general, we have to take into account some of the potential toxic dynamism of relatively high market interest rates, and further declines in asset prices. Yes, it is possible that Greece will get through this crisis, and repay all of its debt. But it is far more likely that parts of peripheral Europe will end up only repaying parts of their debt. That is what the bond spreads are telling us, and I think that the bond markets have got this one right.
  11. I talked to the neighbour, She is moving out , yes time to own a place for herself. I asked if it was wise to buy when you consider in every other country house prices are dropping? She recons they will only go up because of the increasing population pressure. She is 100% sure you can only make $ from a realestate investment.
  12. Back to the Future? Published in September 5th, 2010 Posted by Steve Keen in Debtwatch 31 Comments Things are looking grim indeed for the US economy. Unemployment is out of control—especially if you consider the U-6 (16.7%, up 0.2% in the last month) and Shadowstats (22%, up 0.3%) measures, which are far more realistic than the effectively public relations U-3 number that passes for the “official” unemployment rate (9.6%, up 0.1%). The US is in a Depression, and the sooner it acknowledges that—rather than continuing to pretend otherwise—the better. Government action has attenuated the rate of decline, but not reversed it: a huge fiscal and monetary stimulus has put the economy in limbo rather than restarting growth, and the Fed’s conventional monetary policy arsenal is all but depleted. This prompted MIT professor of economics Ricardo Cabellero to suggest a more radical approach to monetary easing, in a piece re-published last Wednesday in Business Spectator (reproduced from Vox). Conventional “Quantitative Easing” involves the Treasury selling bonds to the Fed, and then using the money to fund expenditure—so public debt increases, and it has to be serviced. We thus swap a private debt problem for a public one, and the boost to spending is reversed when the bonds are subsequently retired. Instead, Caballero proposes a fiscal expansion (e.g. a temporary and large cut of sales taxes) that does not raise public debt in equal amount. This can be done with a “helicopter drop” targeted at the Treasury. That is, a monetary gift from the Fed to the Treasury. (Ricardo Caballero) The government would thus spend without adding to debt, with the objective of causing inflation by having “more dollars chasing goods and services”. This is preferable to the deflationary trap that has afflicted Japan for two decades, and now is increasingly likely in the US. So on the face of it, Cabellero’s plan appears sound: inflation will reduce the real value of financial assets, shift wealth from older to younger generations, and stimulate both supply and demand by making it more attractive to spend and invest than to leave dollars languishing, and losing real value, in the bank. However, though this is indeed the right time to consider radical solutions, Cabellero’s proposal would do only half the required job. Focusing on the good bit, one reason we got into this predicament in the first place was because private sector, debt-based money swamped public sector, fiat money. Ultimately we need to return to the public-private money balance we had in the 1950s and early 1960s. But if getting “Back to the Future” was all we needed to do, then our problems would already be over, because Ben’s Helicopter Drop of late 2008 has got us there already: the ratio of M0 to M2 is now almost 0.25, far higher than the 1960 level of 0.14, while the ratio to M3 is back where it was then (using Shadowstats data, which I can’t publish here since it’s proprietary). So why aren’t we “Back To The Future” already? Why isn’t the economy booming once more, and why is inflation giving way to deflation? Because, though the money supply is back to where it was in 1960, the debt to money ratio is utterly different. Even after Ben’s Helicopter Drop, the debt to base money ratio is almost twice what it was in 1960, and over 3 times what it was back in the Golden Days of the 1950s. This points out the blind spot in the thinking of even progressive Neoclassicals like Cabellero, who are willing to consider unconventional policies: they don’t understand how money is created in our credit-driven economy. Because of that, they don’t appreciate how much of that credit has financed a glorified Ponzi Scheme rather than investment, nor do they comprehend the impact that private sector deleveraging is having on aggregate demand. I’ve covered the first topic ad nauseam in my post “The Roving Cavaliers of Credit”, so I won’t repeat myself here. Instead I’ll focus on the obvious message from the above chart: if the government simply pumps its money into the system without restraining the financial system from financing speculation on asset markets, the best we can hope for is a repeat of this crisis, on an even larger scale, some years down the track. To see that, all we have to do is look at what happened back in the 1980s. The Debt to M0 ratio, which had risen sixfold since the 1950s, went into sudden reverse as the economy imploded when the Savings and Loans fiasco ended. The growth of debt collapsed, and the State tried to rescue the financial sector from its follies by fiscal policy and boosting the money supply. That rescue ultimately succeeded when the recession of the 1990s finally ended, but since finance was emboldened rather than reformed, it simply financed two further fiascos: the DotCom madness and then the Subprime scam. The reason why the 1990s rescue isn’t working this time stands out more clearly when you look at the changes in debt and M0 in raw dollar terms (the scale of the change in M0 is 1/5th that for the change in debt in next two graphs). In the 1990s crisis, the rate of growth of private debt slowed by 2/3rds, but it didn’t actually fall; and a quadrupling of the rate of growth of M0 (starting half a year after debt growth slowed down) was enough, after several years, to let the Wall Street party resume. This time, the change in debt has turned solidly negative—having growth at up to $4 trillion p.a., it is now shrinking at over $2 trillion. Ben’s far larger quantitative easing (when compared to Alan’s back in 1990-94) simply hasn’t been enough to fight a private sector that is now seriously deleveraging. QE2 could nonetheless work, if Cabellero’s plan was executed with gusto. But if all we do is effect a monetary rescue, and yet leave the finance sector untouched, then it will reborn once again as an even bigger Ponzi Scheme. Do we really want to go through all that again? I’ll explain two truly major financial reforms that could prevent another credit and asset bubble in a subsequent piece.
  13. Did you hear how we have a booming economy? No really, our economy is deifying the odds. It's because of the government – you can pick the party that saved us. It's because of the stimulus. It's a miracle. Or maybe it's just because we're different. The past few days has seen other countries around the world look at our gross domestic product (GDP) figures with envy, or so we're told. And, most newspapers seem to be going with the 'economy-expanded-in-June- so-there-you-are-naysayers' theme. But, do you get the feeling that it's all, a bit, well, not right? Don't you think that the cost of living is higher than ever before? But yet, the media would have you believe that these GDP numbers mean the economy is booming and you should be grateful for it. One of the biggest factors in helping the GDP reach this 'astonishing' figure is that the fact that household expenditure grew. However, no one cared to point out that some of the most basic services helped to 'push the GDP higher'. Health was up 3.3%, transport services gained 5% and insurance edged ahead 0.3%. Now personally, these aren't items that I choose to spend my money on. They're sort of the day-to-day 'have to's'. Cafes, restaurants, hotels and even alcohol, were all lower for the quarter. And personally, I'm sure you'd rather be spending your free cash on these rather than a hike on your home and contents insurance. In other words, non-discretionary spending is up, but discretionary spending was down or flat. That tells you something. It tells you consumers are being forced to spend more on certain items and choosing not to spend on others. Er, so this is the economy you're supposed to be thankful for? One where barely keeping financially afloat is considered strong? Sure, retail spending was the tiniest bit higher which could just be all those end of financial year sale campaigns – which followed the Easter sales, the stocktake sales and every other sale the retailers have offered this year. And then you had the construction industry which added to the figures. However, and I'm sure you'll get a laugh out of this, most of that construction came from government spending... How can they say the economy is booming when you've got the government throwing money away like a drunken sailor? In fact, when you look at the GDP figures from an individual perspective, it's hard to be grateful and see a thriving economy. Especially when the so called thriving economy can thank high government spending and increased living costs. You have to wonder why nobody bothers to look at some of the information in more detail and consider what the numbers really mean. Perhaps that's because the detail doesn't paint such a rosy picture. Shae Smith Assistant Editor Money Morning
  14. Here is my calculation , population 4.5 million 6,400,000,000 divided by 4,500,000 = 1,422 Euro per man , woman and child! Irish borrowing cost are going up every day. The black hole of debt is sucking the life out of the place.
  15. Money as we know it is credit. Its only strength is the faith people place in the government. The gov economists have got it so wrong. Peak credit is apon us. 2 paths are open : inflation : deflation. The gov is hell bent on inflation. No except the swiss what a strong currency. inflation is a tax on savers Can the currencys of the world with stand the punishment of low interest rates and inflation? Money allways goes to were it does best. I gess a some point people will realize the rules of the 1930s depression do not apply.
  16. Friday, August 27, 2010 Safe as (straw) houses Whilst I was on vacation escaping the bitter Melbourne cold, Morgan Stanley Chief Strategist, Gerard Minack, released an excellent research article on the Australian housing market, entitled Living in a Bubble. Mr Minack's article received widespread coverage in the press (for example, see here and here), so it is likely that many Australian readers are aware of his analysis already. And fellow economics blogger, Cameron Murray, has provided some nice analysis of some of the key themes raised in this article. I was lucky enough to receive a copy of the actual article upon my return from leave yesterday. And let me say that it is an enlightening piece of analysis that pretty much supports everything that this blog has said about the Australian housing market. For the benefit of our international readers and those whom this analysis has escaped, I thought that I would provide an overview of the key themes covered and share some of my own thoughts. Houses expensive no matter which way you cut it: In Mr Minack's view, "Australia's house prices are expensive on every value metric. They are expensive relative to history, and expensive relative to houses in comparable countries". He provides four charts showing the extent of over-valuation. The first three charts show that Australian residential housing is very expensive based on standard valuation metrics: * house prices to GDP per capita are around 50% above fair value; * the value of the housing stock relative to household disposable income is around 35% above fair value (based on pre-2000 trend growth); and * house prices when compared to gross rental yields are about 40% above fair value. Further, house prices started to move above fair value around 2000 on all three valuation metrics, which is when the Australian housing bubble began. Mr Minack's fourth chart, shown below, is particularly interesting. It compares the multiple of median house prices to median gross household incomes by city size in the September quarter of 2009 in several Anglo countries - Australia, US, Canada, UK, New Zealand and Ireland. "The best-fit lines suggest that Australian house prices are around 40% more expensive than the average for UK, Canada, New Zealand and Ireland, adjusting for city-size. If the US is included, the overvaluation is around 85%." Bubble Drivers: According to Mr Minack, "the single most important reason [for the housing bubble] is the increasing willingness and ability of households to increase leverage" [i.e. easy credit]. And in what should be a slap in the face of the property spruikers, he debunks the claim that population growth and housing shortages have played a significant role in driving-up house prices. As shown by the below chart, house prices outside of the capital cities have risen faster than capital city prices since the early 2000s. As Cameron Murray correctly pointed out, "If such supply-side constraints really could explain prices, we would expect to see city prices climbing much more than in regional areas. Alas, this is not the case, with almost identical price gains in the past 15 years". Negative gearing explosion: A large part of the increased willingness of households to increase leverage has come from the explosion of negatively geared (loss-making) housing investment. On this issue, Mr Minack's research mirrors the findings of my earlier post, Negative Gearing Exposed. According to Mr Minack: "Australia has become a nation of landlords: in 1988-89, 608,000 taxpayers reported rental income, by 2007-08 1,765,00 taxpayers did – 13½% of the total" [see below chart]. Whilst Mr Minack acknowledges that residential housing has been an excellent investment over the past 10 years, due to the robust capital growth, he warns that it is "extremely unwise to expect such gains to continue given current valuations. The investment fundamentals of housing have sharply deteriorated." As shown by the below chart, "Australian Tax Office data confirm that residential investment is a poor investment: total rent has not covered total costs since FY2000 (the date the bubble started to inflate). In short, this is an investment that depends on capital gain for its payback. With net income not even covering interest charges, this is a classic Hyman Minsky Ponzi scheme". Furthermore, the percentage of landlords claiming net rental losses (where rent fails to cover both interest and other costs) has blown out from 50% to 70% over the past decade (see below chart). According to Mr Minack, "it's not just that there are more landlords, there are more loss-making landlords. This matters a lot. Much of the discussion on the residential market concentrates on owner-occupiers. But arguably property investors represent a significantly larger risk if they became widespread sellers of their loss-making investments". Bubble deniers often argue that the risk of widespread sales by investors is low since rental properties are mostly owned by higher income earners who are better placed to absorb losses. But Mr Minack debunks this claim as well: "Only 3% of all loss-making properties are owned by taxpayers with a taxable income of over $200,000. Taxpayers who earn $80,000 or less own 80% of all loss-making properties...The loss is typically around 10% of income". Australia's debt profile similar to America's: Mr Minack also refutes the Reserve Bank of Australia's (RBA) claim that Australia's high household debt levels - currently 157% of disposable income - is not a major risk factor because it largely sits with upper-income earners: "...our [the RBA's] assessment is that the increase in debt has broadly been concentrated in the hands of those generally more able to service it". Rather, as shown by the below chart, at the peak of the US housing bubble the top 20% of US households held an even larger share of household debt than their Australian counterparts. More debt as a share of the total is held by middle income households in Australia, most likely due to the high level of negatively geared property investment by middle income earners. Furthermore, the argument that debt levels are safe since asset values have also risen accordingly (and household balance sheets remain strong) is questioned by Mr Minack: "The essence of every asset bubble is that asset prices rise as debt levels rise. The process is linked: rising asset prices encourage more borrowers, and the higher asset prices often serve as collateral for additional borrowing. That is why debt-to-asset ratios do not look problematic at the top of most asset bubbles." Mr Minack provides an ominous chart (below) showing the debt and asset holdings of American households ranked by income in 2007. At all income levels, asset values exceeded debt levels. Yet this apparent balance sheet strength did not prevent the widespread meltdown currently being experienced by the US housing market and broader US economy. A bubble in search of a *****: Mr Minack completely rejects the notion that Australia's housing market is somehow different from the rest of the world and that our economy is not at risk from a significant housing correction: "The global financial crisis was rooted in excess debt, particularly housing-related debt. Many analysts take comfort from the differences between the Australian housing market and America. But this was a global bubble, and house prices are down in many countries that had seen house prices rise over the past decade. Many of those other markets did not share the same peculiarities of the US market (fixed rate mortgages, non-recourse lending, sharp increase in supply). To say Australia is not America is to knock over a straw man." Although Mr Minack notes that bubbles more often pop than subside, he believes that it is unlikely that Australia's housing bubble will burst abruptly and we will see large price declines in the near term, since this outcome would require broad-based job losses. Rather, the best case outcome for Australia is that real house prices deflate slowly as they did in Sydney from the late 1980s and from 2004. Nevertheless, he warns that house prices can show no growth in real terms for many years. For example, real house prices in Melbourne did not surpass their 1891 peak until 2001 (see below chart). And he expects real returns on residential property investment to be negative over the next decade. Mr Minack believes that there is a risk that flat to falling house prices could create "selling pressure" from negatively geared (loss-making) property investors looking to exit the market. I will add that the pending retirement of the Baby Boomer generation is likely to accelerate selling by property investors. As discussed in my previous post: "A key driver of Australian house prices since 2000 has been the explosion of negatively geared housing investment as the Baby Boomer generation reached their peak earnings age and started 'saving' for retirement by speculating on housing. But with the Baby Boomers soon to enter retirement, they will no longer be able to negatively gear. Further, since rental yields are pathetically low (around 3% after costs) and with the potential for continued capital appreciation diminished, it is highly likely that the Boomers will dump their investment properties en masse in order to fund their retirements, thereby causing a nasty housing correction". For these reasons, a housing correction is, in my opinion, inevitable. It's only a matter of when and by how far prices fall. Beggar thy neighbour: In conclusion, Mr Minack takes a swipe at policy makers for allowing the housing bubble to inflate in the first place and questions the broader social and economic impacts arising from rising house prices: "It was a major error by policy-makers to let this bubble inflate, in my view. There is no value to society from rising house prices. It is simply a wealth transfer to existing owners from potential buyers. Pumping up house prices creates no more wealth than the RBA printing an extra six zeros on every piece of currency. Worse, by increasing the leverage in the household sector and financial system, it increases the financial risks in the economy, as the last two years have demonstrated elsewhere. In short, there seems a strong case for policy-makers to aim to cap house prices." I couldn't agree more. As discussed in Bringing it Home, in light of the major role that excessive credit has played in creating Australia's housing bubble, and that the Australian banking sector faced insolvency requiring a Government bail-out during the GFC (via the bank funding and deposit guarantees), there is a clear role for greater regulation of mortgage lending to prevent the excesses that lead to asset bubbles. One solution is to introduce macro-prudential measures, such as maximum loan-to-value ratios, debt service to income limits, or limits on the amount of loans that can be extended against short-term funding sources. Such measures would help to strengthen the resilience of Australia's financial system by mitigating the build-up of excesses in credit growth and asset (house) prices. Had such macro-prudential measures been in place globally during the 2000s, it is possible that the GFC would never have taken place, since the kinds of speculative housing lending undertaken in the United States and Europe would not have been possible. It is also likely that Australia's house prices would never have surged like they did post-2000, since access to credit and the ability to undertake highly leveraged purchases would have been muted. Houses would now be much more affordable as a result. Furthermore, the new Australian Government should, in it's first term, undertake another Financial System Inquiry (FSI) to examine some of these financial stability issues. The previous Inquiry (the 'Wallis' Inquiry), completed in 1997, never envisaged systemic risk engulfing financial markets as well as intermediaries, as occurred during the GFC. Nor was the Basel Committee’s idea of macro-prudential regulation (discussed above) ever considered. Finally, the Government's October 2008 decision to guarantee bank funding and deposits completely ignored one of the original FSI's key recommendations - that no government would ever guarantee any part of the financial system. The long-term implications of using the Government's balance sheet as role of guarantor of last resort for the banks’ wholesale debts is also unclear and needs to be comprehensively examined by such an inquiry. Let's hope that the new government tackles these important issues. Till next time. Cheers Leith Posted by Leith van Onselen at 11:02 PM Labels: Australian Housing Bubble 12 comments: Anonymous said... Thanks Leith for another very good article, as I type this i am listening to real estate show..hmm. I'm a boomer (early 50's) own my home and 1 investment flat outright. Have 2 other investment props and just sold 1 of them in inner west Sydney as I semi retired as I agree with all the comments above. Now one other reason that will make boomers sell is that a lot of them were employed in the manufacturing industry which has now moved mostly to Asia. This has led to a lot of redundancies and when this money is spent (travelling around Aus etc) a lot of their investment props will come onto the market as they cannot find any jobs in a non existent manufacturing sector. 6% in bank deposits looks better even with paying a bit of tax. Cheers. August 28, 2010 10:35 AM Anonymous said... Hi Leith, As some one who has mirrored your beliefs for a long time to doubting friends it's great to find such fact filled posts. Some questions regarding the bigger picture. If were so dependent on China. Could we potentially be in greater trouble than the USA during the GFC. If China bursts, unemployement goes up as the mining industry that has propped up our 'solid economy' through the GFC suffers. Shares (read stock market) and spin off benefits to community from our mining boom go down. Super and investments such as property are sold to prop up less than expected retirement benefits, or sold as unemployment affects morgage repayments. I've over simplified it but it is a rather bleak possiblity as it doesn't just concern real estate. Is it an unrealistic one? Is it likely we see the both real estate and stock market fall significantly together? Where would people hide their super and investments to survive such a nuclear financial winter? Regards, Damian August 28, 2010 5:54 PM Anonymous said... Hi Leith, excellent post, I feel like your blog has picked up Steve Keen's torch which is fantastic. I think your dead right and on the money again with this post and Gerard's comments. Sometimes in life it is easier to run with the flock than to 'think different' in fact being different causes odd sideways looks and internal giggles. "Oh so you "rent" well never mind, you might be able to get an apartment or move out of Melbourne". I have had quite a few comments like this over the last 8 years. What makes me laugh inside is that whilst we rent, it costs us less than 15% of our total income and we save. We have saved a lot of money and it is working hard for us including the compounding interest. We want for nothing, don't need anything and are really happy. I guess Australians are blinded by the notion they have to have own a home to be "happy" and safe and secure... yeah right most of the people I know pay 35% plus straight to their mortgage every month. Ouch. Think life is easier when you have savings, no stress about bills and can invest your money. Also we can move at anytime! Anyhoo, love your blog it just reinforces that we are right to have chosen out own path. Thanks Leith! The Mainlander.
  17. robertsherlock Default 9th Straight Month of decreasing Perth Prices!!!! The prices in Perth have been dropping since last year: July ??? (provisional should be released today) June -1.5% May -1.1% Apr -0.3% Mar -0.1% Feb -1.1% Jan -0.5% Dec -0.3% Nov -1.0% Where did I get this from: RP Data press releases Press Releases They make "indicative" or "provisional" data 30 days after the close of the month, then the following month they finalize the information and call it "actual". June and December are provisional as I can not find the actual for those yet. The media use the provisional and do not say anything when it is changed. For instance Perth's March provisional was +0.7% then actual was -0.1.
  18. WEEKEND ECONOMIST: Our rates distraction Bill Evans Published 0:07 AM, 28 Aug 2010 Last update 0:07 AM, 28 Aug 2010 While we have been consistently forecasting a significant slowdown in US growth through the second half of 2010, we have been surprised at the response to the markets' interpretation of what that means for interest rates in Australia in 2011. Sensibly, the US market has now pushed back the timing of the first rate hike by the Fed to December 2011. Our view has always been that the first rate hike by the Fed would be 'delayed' until the second half of 2011. That was even when the US market had around four rate hikes priced in for 2010. The Australian markets are now putting way too much weight on US rate prospects to assess the outlook for Australian rates. As US long bond rates have fallen by around 50 basis points over the last six weeks, Australian three-year swap rates have fallen from by around 30 basis points to a remarkable 4.8 per cent. This pricing is being reflected in the very short end of the yield curve with markets now giving around a 50 per cent probability of a 25 basis point rate cut by the end of 2010. We really struggle to describe an economic scenario that would entail the RBA cutting rates this year. To the contrary, we think the Reverse Bank was quite prepared to raise rates at its August meeting if the June quarter consumer price index had printed around where the markets (including Westpac) were forecasting. That is because a second 0.8 per cent print on its underlying inflation rate would have meant that inflation in the first half of 2010 was running at a 3.2 per cent annualised pace. With economic growth around 3.5 per cent (just above trend) for the year it would not have been possible for the bank to retain its forecasts of 2.75 per cent for underlying inflation in 2010 and 2011. Raising the forecast to 3 per cent (the top of the bank's target zone) would mean that it was forecasting that the low point in the inflation cycle was at the very top of the target zone. The bank is forecasting that growth in the Australian economy will increase from 3.25 per cent in 2010 (trend) to 3.75 per cent in 2011 and 4 per cent in 2012. Both those growth rates are above trend with the clear implication that inflation will be rising through 2011 and 2012. With interest rates 'only' around neutral at the moment there would be a clear expectation in the bank that rates will have to rise not fall in 2011. Of course, central banks get their forecasts wrong along with others, including the market. The key issues from the Reserve Bank's perspective appear to be: whether private sector business investment will recover to fill the gap which is now being created by the slowdown in the government's stimulus package; whether the Australian consumer remains as cautious as we have seen over the last few years; and the outlook for the Chinese economy and Australia's terms of trade. On the investment front, we expect that while the surprise contraction in business equipment investment in the June quarter (and a likely flat result for total business investment in the period) will raise a few eyebrows, the outlook seems quite up-beat. Our analysis of the well respected ABS CAPEX survey of investment intentions which was released at the same time as the June quarter data indicates that investment in the 2010-2011 fiscal year is expected to increase by 28 per cent in nominal terms – up from the last estimate of 19 per cent. We don't think that the US economy or its financial markets are going to figure prominently in the official sector's thinking on interest rates. We think that it is very likely that the RBA will remain on hold for the remainder of 2010. Even if the Q3 inflation print in late October is 'high' we doubt whether it will be high enough for the Reserve Bank to see the need to change its inflation forecast. An extended period of steady rates is likely to see a much more confident consumer than the one who over the last few years has been battered by fears of job loss followed by eight months of rising rates. In May 2009, we surveyed consumers about their expectations for house prices. Around half the sample expected prices to fall. That was a reliable assessment of how 'fragile' consumers were feeling. Only 3 months later the Reserve Bank was raising rates, despite ongoing uncertainty in the world economy. While we don't expect to see the consumer moving back into that mode of drawing down equity in their houses to spend at a faster pace than their incomes are growing at, we do expect them to step up their spending to at least match the growth in their incomes. That is going to see a much more positive consumer spending profile in the second half of 2010. Whereas we estimate that consumer spending grew at a 2.5 per cent pace in the first half of 2010, we expect that to pick up to 3.5 per cent in the second half. A more encouraging profile for consumers is also likely to encourage business to add to capacity. While mining investment looks certain to grow strongly due to the $43 billion Gorgon project the real issue relates to other sectors of investment. Private sector business surveys; measures of capacity utilisation; capital goods imports; and the investment plans as surveyed by the Bureau of Statistics all point to a recovery in business investment over the course of 2010 and 2011. Finally, we are left with the outlook for China. It is clear from various statements and reports from the RBA that the Bank is optimistic about the near- and medium- term outlook for China. Leading indicators and measures of data momentum point to a current slowdown in the Chinese economy. However, we expect that government policy will soon be directed at reasserting China's growth rate. Policies to ease the availability of credit and reboot private and government construction spending are likely to be adopted. Unlike the US, where policy paralysis seems to be forcing an unnecessary fiscal tightening on the economy, Chinese policies are likely to be closely attuned to growth. For market pricing, which is currently predicting a rate cut with about a 50 per cent probability by year's end, to be franked we will need to see a continuation of highly cautious consumer behaviour; a sharp downturn in business investment; clear evidence of a substantial slowdown in inflation and, most importantly, real doubts about China's near term growth prospects. Further falls in US bond rates and disappointing US economic data might be enough for markets but will not sway an optimistic Reserve Bank. As a general comment, those who are currently exposed to interest rate risk and are in a position to take advantage of these very low interest rates should be giving serious consideration to taking some risk off the table.
  19. Well I think they subsidise private rent in the UK and it is not working out at all well , perhaps some one with knowlage will coment? SuitablyIronicMoniker "I wouldn't be surprised to see this become policy on both sides. We have official policy to keep house prices high, why not an official policy of keeping rents up? After all, if rents started to fall, it would be a major problem for the 1.3 million property investors with no prospect of capital gains and huge losses on their 'investments'. They are the only people who matter, aren't they?"
  20. Coalition plan for rental vouchers Jacob Saulwick August 27, 2010 HOME owners and renters struggling to pay bills would be handed vouchers under the Coalition's housing policy, potentially marking a radical shift away from state-provided accommodation to direct subsidies of private home ownership. The Coalition plan for rental vouchers Jacob Saulwick August 27, 2010 Ads by Google Deprec Schedule from $220 Property Depreciation Specialists Maximise your claim - Fully ATO www.writeitoff.com.au HOME owners and renters struggling to pay bills would be handed vouchers under the Coalition's housing policy, potentially marking a radical shift away from state-provided accommodation to direct subsidies of private home ownership. The Coalition's plan, which does not have a price tag, is to corral state governments into redirecting housing budgets towards vouchers that families can use in private rental or even to pay off their mortgage. The policy was released on the Liberal Party's website last Thursday night and given little attention in the countdown to Saturday's poll. While the Coalition says the idea is not developed enough to contribute extra money to, it concedes more funding would help make it work. Advertisement: Story continues below ''The idea is one that obliviously needs to be negotiated with the states, because effectively it is their money we are talking about, although I suppose the implication is that the Commonwealth would help contribute to this over time to sort of make the idea work,'' the Coalition's housing spokesman, Gary Humphries, said yesterday. Senator Humphries said the voucher concept marked a philosophical shift. ''The focus is on independence and a capacity to take charge of people's lives so they can get back on their own feet as quickly as possible and not depend on the welfare system,'' he said. The generosity of the vouchers would be roughly equivalent to what state governments already spend providing public housing, Senator Humphries said. But not everybody eligible for public housing would receive a voucher. There were 328,736 individuals and families in public housing as of mid-last year, and 173,456 on waiting lists, according to Australian Institute of Health and Welfare figures. Another 37,833 lived in community housing, with 49,187 on waiting lists. Senator Humphries conceded that providing vouchers to everyone on a waiting list would blow out costs. ''If you said to everybody, 'We can't get you into a social dwelling but we will give you a voucher to use in the private sector', it would certainly add to the cost, there's no question about that.'' The policy was drawn up after consultation with real estate and property groups. ''We've talked to a number of stakeholders, not particularly any representing renters or people like that,'' Senator Humphries said. Tenancy and social housing advocates are wary of the scheme's potential to drive up rent and mortgage costs by providing more subsidies without increasing the supply of housing. They also claim the policy would need a lot more funding. The Treasury would not be able to cost the policy, because there is not enough detail on who would be eligible and how much they would receive. plan, which does not have a price tag, is to corral state governments into redirecting housing budgets towards vouchers that families can use in private rental or even to pay off their mortgage. The policy was released on the Liberal Party's website last Thursday night and given little attention in the countdown to Saturday's poll. While the Coalition says the idea is not developed enough to contribute extra money to, it concedes more funding would help make it work. Advertisement: Story continues below ''The idea is one that obliviously needs to be negotiated with the states, because effectively it is their money we are talking about, although I suppose the implication is that the Commonwealth would help contribute to this over time to sort of make the idea work,'' the Coalition's housing spokesman, Gary Humphries, said yesterday. Senator Humphries said the voucher concept marked a philosophical shift. ''The focus is on independence and a capacity to take charge of people's lives so they can get back on their own feet as quickly as possible and not depend on the welfare system,'' he said. The generosity of the vouchers would be roughly equivalent to what state governments already spend providing public housing, Senator Humphries said. But not everybody eligible for public housing would receive a voucher. There were 328,736 individuals and families in public housing as of mid-last year, and 173,456 on waiting lists, according to Australian Institute of Health and Welfare figures. Another 37,833 lived in community housing, with 49,187 on waiting lists. Senator Humphries conceded that providing vouchers to everyone on a waiting list would blow out costs. ''If you said to everybody, 'We can't get you into a social dwelling but we will give you a voucher to use in the private sector', it would certainly add to the cost, there's no question about that.'' The policy was drawn up after consultation with real estate and property groups. ''We've talked to a number of stakeholders, not particularly any representing renters or people like that,'' Senator Humphries said. Tenancy and social housing advocates are wary of the scheme's potential to drive up rent and mortgage costs by providing more subsidies without increasing the supply of housing. They also claim the policy would need a lot more funding. The Treasury would not be able to cost the policy, because there is not enough detail on who would be eligible and how much they would receive. :angry: The madness continues
  21. BHP price $38.11 @ 23 August 2010 Monday BHP price $37.12 @ 27 August 2010 Today
  22. The Thatch, Rosenallis, Mountmellick, Co. Laois The Thatch, Rosenallis, Mountmellick, Co. Laois - Click to view photos €89,000 - Finance this property from €259 per month * Detached House For Sale by Private Treaty 2 Bedrooms, 1 Bathroom Contact Name: Sherry Fitzgerald Hyland Phone: 05786 20044 Click to Contact Advertiser Photos (4) * Show Map * Save Ad * Report Ad * Send to a Friend * Print Page Overall Floor Area: 50 Sq. Metres (538 Sq. Feet) Features: * Close to amenities. * Open fireplace. * Set on slopes of the Slieve Bloom Mountains. * Quiet location. * Original features. RENT TO BUY Option 1) €500 per mth for 15 years/No interest Option 2) €600 per mth for 11 years/No interest Beautiful 2 bedroomed thatched cottage, all modcons, furnished, parking to the front for 2 cars, cobblelocked, teak windows, halfstyle door, rockery, for rent to buy, legal bind contract with solicitors, terms and conditions apply. Beautifully restored 2 bedroom traditional Irish cottage in the village of Rosenallis, set on the slopes of the Slieve Bloom Mountains. It is a very rare property. Ideally suited for holiday home it is within walking distance from church, pub, shops and walking trails of the near by mountains. Property is adorned by an open fireplace, which has gas stove fitted. Heating is supplied by fixed electric heaters which have been tastefully installed. Front has been paved with cobble locked paving. This is a must see property which is an authentic restoration. Looks a like desperate seller
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