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Australia Faces Its Demons


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La la la la la. No crash here, nothing to see, prices only go up, trees grow to the sky......http://m.smh.com.au/business/a-property-crash-dont-bet-on-it-20120201-1qthh.html

But those gleefully predicting a US-style crash in the Australian property market are so far wide of the mark it beggars belief that anyone bothers to listen.

In fact, about the only place there has been a US-style property market crash in the past few years is in the United States of America,

Guy obviously does not go to Spain very often. Or Ireland. Or Greece. Or Bulgaria. Or Cyprus. Or Portugal, Or Latia, Solvenia, Hungary, Latvia, Lithuania. I could go on...

What a plonker.

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I have indeed lived, and bought property, in Australia. There are a lot of places in Austrlaia where it costs the earth to rent a place and buying, though also exhorbitant, is cheaper. For example, mining towns in Western Australia.

I lived in Manly, in Sydney for a while. The rentals there were, and still are, way more expensive than buying. Would you pay $2,000 a week to rent a flat (at 7% interest pa that's equivalent to around a $1.5 mill mortgage, interest only) when you could buy the same flat or its close equivalent for around $1mill? Even out in Penrith, where a rental could set you back $1,000 a week for a decent home, you could probably buy quite a nice house for around $500k. The mortgage on $500k is not even going to cost $800 a week over 25 years, AND includes repaying the capital portion. A bargain compared to renting in a place like Sydney.

Thanks for that insight. useful stuff

Im planing on flying out soon for a mining secor job. FIFO arrangements suit me fine as company provides accommodation 3 weeks in 4. The other week I couch surf (in return for meals out) between friends and family.

No mortgage and no rent B)

Edited by Kurt Barlow
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Guy obviously does not go to Spain very often. Or Ireland. Or Greece. Or Bulgaria. Or Cyprus. Or Portugal, Or Latia, Solvenia, Hungary, Latvia, Lithuania. I could go on...

What a plonker.

No, just your typical Aussie. They measure themselves against the US and the Asian countries. Europe is way 'over there' and is in the past, historically and possibly even economically. Why would they give one for what is happening on the other side of the world?

The only reason you hear about the Oz housing market over here is because so many people dream about emigrating there.

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I have indeed lived, and bought property, in Australia. There are a lot of places in Austrlaia where it costs the earth to rent a place and buying, though also exhorbitant, is cheaper. For example, mining towns in Western Australia.

I lived in Manly, in Sydney for a while. The rentals there were, and still are, way more expensive than buying. Would you pay $2,000 a week to rent a flat (at 7% interest pa that's equivalent to around a $1.5 mill mortgage, interest only) when you could buy the same flat or its close equivalent for around $1mill? Even out in Penrith, where a rental could set you back $1,000 a week for a decent home, you could probably buy quite a nice house for around $500k. The mortgage on $500k is not even going to cost $800 a week over 25 years, AND includes repaying the capital portion. A bargain compared to renting in a place like Sydney.

I'm not sure I agree with your figures.

Gross rental yields are less than 5% in much of the city. Negative gearing may hitch that up to 6ish.

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I have indeed lived, and bought property, in Australia. There are a lot of places in Austrlaia where it costs the earth to rent a place and buying, though also exhorbitant, is cheaper. For example, mining towns in Western Australia.

I lived in Manly, in Sydney for a while. The rentals there were, and still are, way more expensive than buying. Would you pay $2,000 a week to rent a flat (at 7% interest pa that's equivalent to around a $1.5 mill mortgage, interest only) when you could buy the same flat or its close equivalent for around $1mill? Even out in Penrith, where a rental could set you back $1,000 a week for a decent home, you could probably buy quite a nice house for around $500k. The mortgage on $500k is not even going to cost $800 a week over 25 years, AND includes repaying the capital portion. A bargain compared to renting in a place like Sydney.

I agree with Aussieboy - if you can secure this place for me for $1m, I'll move back, leverage myself to the hilt and move in - I'll even pay you for your trouble....

http://www.domain.com.au/Property/For-Rent/House/NSW/Manly/?adid=6125502

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I have indeed lived, and bought property, in Australia. There are a lot of places in Austrlaia where it costs the earth to rent a place and buying, though also exhorbitant, is cheaper. For example, mining towns in Western Australia.

I lived in Manly, in Sydney for a while. The rentals there were, and still are, way more expensive than buying. Would you pay $2,000 a week to rent a flat (at 7% interest pa that's equivalent to around a $1.5 mill mortgage, interest only) when you could buy the same flat or its close equivalent for around $1mill? Even out in Penrith, where a rental could set you back $1,000 a week for a decent home, you could probably buy quite a nice house for around $500k. The mortgage on $500k is not even going to cost $800 a week over 25 years, AND includes repaying the capital portion. A bargain compared to renting in a place like Sydney.

I challenge those figures directly. I lived in Manly for 3 years, ending recently, paying 850 a week on a flat that was worth about 1.2-1.5M. Second to top level, beachfront, amazing views. I also had LAFHA ha ha.

Renting is cheap compared to buying almost anywhere. Lots of overpriced shiteholes in the 3-600 multi room market, due to competiton from house sharers, but top end of market, one beds, etc, it's a financial no brainer (except for theiving estate agents - every time but one I've found them making mistakes in calculations, funnily enough always in their favour)

have a look at THIS and THIS. Bet you could get these for 900 bucks with negotiation.

Edited by wherebee
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I challenge those figures directly. I lived in Manly for 3 years, ending recently, paying 850 a week on a flat that was worth about 1.2-1.5M. Second to top level, beachfront, amazing views. I also had LAFHA ha ha.

Renting is cheap compared to buying almost anywhere. Lots of overpriced shiteholes in the 3-600 multi room market, due to competiton from house sharers, but top end of market, one beds, etc, it's a financial no brainer (except for theiving estate agents - every time but one I've found them making mistakes in calculations, funnily enough always in their favour)

have a look at THIS and THIS. Bet you could get these for 900 bucks with negotiation.

Sharers are an important consideration in some parts of Sydney.

I was having a chat with some of the med students last night. One guy looking for a three bedder with an 800 a week budget and he's finding nothing that doesn't have 60 groups appearing on the first opening. Then again he's a bit picky with his areas.

Edited to add: just rented out a property on the northern beaches: taken for full asking rent pre-marketing so God knows what the rental market is doing.

Edited by aussieboy
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Unlikely as it may seem, Sydney was the best performer of all with a decline of just 2.7 per cent over the year. (OK, Canberra outdid Sydney with a 2.6 per cent drop but no one ever pretended it was a normal city.)

Unlikely?

That's what happens every time the commodity cycle turns.

Predictable as clockwork.

Given the tighter lending criteria imposed upon our banks during the boom years until 2008, the only way that we will experience a US-style property crash here is if there is a serious rise in unemployment - a change that would spark loan defaults and flood of distressed property on to the market.

That's not impossible. But it is highly unlikely given our historically low unemployment right now and our place in the global economy as a resources supplier plugged into the only growth region in the world right now.

Only the derivative function of the resources industry (ie, growth rate in export volumes) has any effect on Australian GDP.

Profits are ex-patriated or pissed away on boondoggles.

For a US-style property collapse to occur here, we would need sovereign debt defaults across Europe, the disintegration of the European Union and a banking crisis that would cripple even China. And if that happens, we'll have bigger concerns than the price of our homes.

Actually all* it'd take would be a slowdown in Chinese construction and shipbuilding...

... and given how the above are being financed, a mere a slowdown in the rate at which pension funds increase "China" or "Asia" balances would suffice.

Let's hope no-one panics (and liquidates) when clearly unpossible dividend streams and coupon payments simply fail to materialise - reversal of FDI flows would create a very disorderly exit...

(* the coal and steel consumed by Western lust for whitegoods, farming machinery, cars, and and toys is a drop in the South China Sea by comparison)

Regardless, you won't see an Aussie nominal HPC this cycle.

It'll go club med like it always does - they'll dilute the dollar to save the cheerleader(s).

Edited by ParticleMan
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I see the argument that the Aussie banks were well regulated and there i no subprime raise it's head again. ********. They were better run to some degree, because in part due to the four pillars policy that meant a manicial chief exec seeking to be the biggest balls in town (a la godwin) could NOT take over competitors.

apart from that, the music is the same as UK/US. Liar loans exist - I have seen the paperwork. They were just called lo-doc or - get this - NO DOC loans. The scale, I do not know, but as in the UK/US, until the tide turns the scale is often hidden from all.

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I challenge those figures directly. I lived in Manly for 3 years, ending recently, paying 850 a week on a flat that was worth about 1.2-1.5M. Second to top level, beachfront, amazing views. I also had LAFHA ha ha.

Renting is cheap compared to buying almost anywhere. Lots of overpriced shiteholes in the 3-600 multi room market, due to competiton from house sharers, but top end of market, one beds, etc, it's a financial no brainer (except for theiving estate agents - every time but one I've found them making mistakes in calculations, funnily enough always in their favour)

have a look at THIS and THIS. Bet you could get these for 900 bucks with negotiation.

I would agree that renting is a cheaper option that buying provided you have access to the kind of property you want to rent. My memories of looking for flats in and around Manly and the North Shore waterfront in general were staying up to get the Sydney Morning Herald Saturday edition then spending the next couple of hours pouring over the rentals on offer, discounting half of them, - too expensive - then going to the viewing and applying for the flats, only to be told there are 100 applicants for the flat. And that's just the applicants they chose to put forward, i.e. who had demosnstrated sufficient funds and income to be able to afford the flat in question. This really drove up the prices. And from what I hear from friends and family still there the situation hasn't improved and is getting worse due to the population growth. At least in Sydney it is supply and demand, as opposed to the unnecessarily high local housing allowance over here. As for expensive, no one I knew was paying the recommended 25% or less of net income on rent. More like 40%.

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I would agree that renting is a cheaper option that buying provided you have access to the kind of property you want to rent. My memories of looking for flats in and around Manly and the North Shore waterfront in general were staying up to get the Sydney Morning Herald Saturday edition then spending the next couple of hours pouring over the rentals on offer, discounting half of them, - too expensive - then going to the viewing and applying for the flats, only to be told there are 100 applicants for the flat. And that's just the applicants they chose to put forward, i.e. who had demosnstrated sufficient funds and income to be able to afford the flat in question. This really drove up the prices. And from what I hear from friends and family still there the situation hasn't improved and is getting worse due to the population growth. At least in Sydney it is supply and demand, as opposed to the unnecessarily high local housing allowance over here. As for expensive, no one I knew was paying the recommended 25% or less of net income on rent. More like 40%.

All depends what your net income is. I'm paying about 70% of my net income on rent, but then I determine what my net income will be based on my requirements. I don't like taking a tax hit before I need to.

As for expensive rent in Manli , yep but rather like buying boats and motorbikes, one shouldn't look for a place there in the summer. I got the current place at 23% discount on the asking rent in August.

You coming back to comment my blog today? You might enjoy the Schapelle Corby bit, fellow Queen'slander an' all.

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I agree with Aussieboy - if you can secure this place for me for $1m, I'll move back, leverage myself to the hilt and move in - I'll even pay you for your trouble....

http://www.domain.com.au/Property/For-Rent/House/NSW/Manly/?adid=6125502

At $2k a week, that particular house is an absolute bargain. I don't see a house like that going for anything under $2 mill, whatever the market. But when it comes to flats, or houses away from the water and exclusive homes areas, i.e. the vast majority fo Sydney, I still reckon buying could work out cheaper than renting. I know this is the other end of the market, but if you go out to places like St Clair and Fairfield, renting a place would make no sense at all, because the rentals on offer are in such a poor state compared to bought homes.

I don't think the Aussie property market will crash all that much, even like ours, let alone the States'. Very little available land where people want to live, so if you want to live along the harbour in Sydney, for instance, you are pretty much stuck with what's on offer. Queensland maybe has a chance of a crash. They're not exactly into appropriate flood defences up there. If you know a river has peaked in the past at 14 metres, wouldn't you be better off building the levy to 18 metres, rather than 14.5 metres and live on hope? Mind you, I wouldn't live in Tewkesbury or Cockermouth either, for the same reason - inadequate flood defences. There may be a lot less property sold in Australia as time goes on, as more and more people pour into the country but can't afford what is on offer.

When we first came back to Britain after a long time away, we went to see a nice property, fully expecting, Australian style, 100 people to show up for the viewings. We were the first to see it that day, as in 1pm in the afternoon. We took the property. As we were leaving to go and sign all the paperwork another lady came through. That was it. Two people in the two hours it was on show. I can't think where a property would have to be located in Australia to only get two people along to a viewing. Somewhere out in the bush that takes two hours to get to from the main highway?

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At $2k a week, that particular house is an absolute bargain. I don't see a house like that going for anything under $2 mill, whatever the market. But when it comes to flats, or houses away from the water and exclusive homes areas, i.e. the vast majority fo Sydney, I still reckon buying could work out cheaper than renting. I know this is the other end of the market, but if you go out to places like St Clair and Fairfield, renting a place would make no sense at all, because the rentals on offer are in such a poor state compared to bought homes.

I don't think the Aussie property market will crash all that much, even like ours, let alone the States'. Very little available land where people want to live, so if you want to live along the harbour in Sydney, for instance, you are pretty much stuck with what's on offer. Queensland maybe has a chance of a crash. They're not exactly into appropriate flood defences up there. If you know a river has peaked in the past at 14 metres, wouldn't you be better off building the levy to 18 metres, rather than 14.5 metres and live on hope? Mind you, I wouldn't live in Tewkesbury or Cockermouth either, for the same reason - inadequate flood defences. There may be a lot less property sold in Australia as time goes on, as more and more people pour into the country but can't afford what is on offer.

Did you miss the figures from the SMH above? Most capital cities are seeing year on year drops already. The Gold Coast is being smashed.

What do you think is sustaining prices in Australia?

I reckon it will be employment and access to credit, with the emphasis on credit. The busts elsewhere started with credit tightening and then were followed by unemployment. Australian banks get 40% funding from overseas. They are not immune.

As for immigration driving prices; check out Steve Keen's reasearch disproving a causational link. It was driven by availability of credit, just like everywhere else.

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At $2k a week, that particular house is an absolute bargain. I don't see a house like that going for anything under $2 mill, whatever the market. But when it comes to flats, or houses away from the water and exclusive homes areas, i.e. the vast majority fo Sydney, I still reckon buying could work out cheaper than renting. I know this is the other end of the market, but if you go out to places like St Clair and Fairfield, renting a place would make no sense at all, because the rentals on offer are in such a poor state compared to bought homes.

I don't think the Aussie property market will crash all that much, even like ours, let alone the States'. Very little available land where people want to live, so if you want to live along the harbour in Sydney, for instance, you are pretty much stuck with what's on offer. Queensland maybe has a chance of a crash. They're not exactly into appropriate flood defences up there. If you know a river has peaked in the past at 14 metres, wouldn't you be better off building the levy to 18 metres, rather than 14.5 metres and live on hope? Mind you, I wouldn't live in Tewkesbury or Cockermouth either, for the same reason - inadequate flood defences. There may be a lot less property sold in Australia as time goes on, as more and more people pour into the country but can't afford what is on offer.

When we first came back to Britain after a long time away, we went to see a nice property, fully expecting, Australian style, 100 people to show up for the viewings. We were the first to see it that day, as in 1pm in the afternoon. We took the property. As we were leaving to go and sign all the paperwork another lady came through. That was it. Two people in the two hours it was on show. I can't think where a property would have to be located in Australia to only get two people along to a viewing. Somewhere out in the bush that takes two hours to get to from the main highway?

Debbie - in case you were not aware, many places in Queensland have already crashed by 40% percent and the pace of falls is accelerating....

As a reference point, the apartment I rent in Melbourne costs me $3050 per month ($750 per week). It recently sold for $900K (it sold with me installed as the tenant).

If I was to buy the place the Mortgage would cost $5470 per month (repayment) or $4390 (IO) assuming IRs of 6.5% and a 10% deposit.

Even if I did want to buy the place, I would not be able to, as I am on a temporary visa. However, the benefits of being on a temporary visa are that I can claim LAFHA (living away from home allowance). This is a tax break that in effect halves my rent. So I pay about $1600 dollars per month for an apartment that would cost me $4390 on an IO mortgage. Unfortunately, it looks like LAFHA may end in June though.

Even so, I would have to be pretty crazy to buy over here when renting is so much cheaper.

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Most capital cities are seeing year on year drops already. The Gold Coast is being smashed.

When checking Aus real estate news around 10 days ago I didn't find any real news stories suggesting this turn of events, not that I don't believe you.

I'm still stunned at Bardon's turn around. From years of posting his absolute belief in house price inflation continuing to perform as it has over the last 30 years, for the next 30 years. Warned by so many people over the years to look at debt rather than just equity on this HPC forum, but says recently he's had an epiphany about it with the same warning comes from a wise man he knows. Market caused him and others like him to be more fearful? Now selling rather than posts calculating all the millions he was set to make with ever more debt and hold. Did Laurejohn go on to buy with his 2010 rent is dead money post, and again set to be spectacularly wiped out, just like he did just before the early 90s bust.

Yes but the chances are that in the long term the value will have increased, massively.

Just goes to show that it doesn't matter if you pay over the odds for a property in the long term.

The mind boggles as to how much it will be worth in fifty years time.

One thing is for sure the price you paid for it will be considered in a similar way to the paltry price the previous owners paid for it.

I make it £3.5 million based on the long term average growth rate of 7%pa.

So if you got it on an IO mortgage you would have £3.15 million equity and your monthly interest payment would be equivalent to the cost of a Chinese takeaway

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Off to pick up the SMH and Australian now for the weekend editions. Lets see whether it's BOOM or GLOOM this week in the crazy world of property ad supported media!

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Off to pick up the SMH and Australian now for the weekend editions. Lets see whether it's BOOM or GLOOM this week in the crazy world of property ad supported media!

Ex neighbour of mine's put his place on the market three weeks ago. Two bedder in Paddo bought for 1.4~ish in 2007. He's hoping for the same price... we'll see (he's managed to ****** up the property in a number of ways which won't have helped).

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Read it in the print copy, but can't find it on line - an analysis of the sydney property market showing a number of properties down between 36%-42% "back to 2007 prices".

damn crash - happening too soon for my liking.

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I just got back from a tour of the major coal mines in QLD , its pretty amazing what is happening there, the two tier economy is very evident. Flying into Emerald which is the major town to serve most of the Bowen basin mines, the planes are packed with young miners, nowadays miners are not greasy tough guys but generally clean cut young men ( and women ) toting the latest macbook pro. Even though Emerald is a town of 30k with over 1,000 hotel/motel rooms it is impossible to get a room during the week unless it is booked 3 months in advance apart from on a weekend, rents there run from 650$ a week for a very shabby unit, there is 100% employment for anyone that can get themselves a place to sleep. Out a 2 hour drive from Emerald you get to some of the mine cities like middlemount where you can stay in a 15sqm tin shed at The Mac ( they have 1500 of them ) for 1k a week or rent a 2 bed house if you can find one for 1500$ a week up, out in Dysart its even worse $2k a week will get you a shabby house with about 120 sqm internal space, the wierd thing is there in no construction going on despite a list of massive planned projects as long as your arm, it would seem the general bust in the aussie housing market means people are too scared to build where there is huge demand as they are too scared of a bust ..so all these shabby houses are coining it , visiting the mines all you hear is plans of expansion and the next project down the road for so many billions for anyone with half decent skills a 3k a week job is easy to land and speaking to some guys who are prepared to do long shifts in unsocial hours it seems fairly easy to pull down $7k for a weeks semi-skilled work, set against this paying 400k for a place not much better than a shed thats costing you 1.5k a week to rent starts to seem like good value,

After a week on the mine sites we hit the beach up in noosa ( which a lot of miners are doing on the week off ) a place with a fantastic climate,laid back lifestyle, great food and enjoying a massive bust, prices are down 50% in many cases and apart from beach front most stuff sells at or around construction cost with desperate over leveraged sellers competing for the few buyers. I actually found the prices very reasonable even despite the strong aud$ it seems like all the workers in Brisbane and the coast are being sucked out sent up to the mining towns where there is nowhere for them to stay, its going to be interesting to see how it pans out as these mega projects come to fruition , I think the lifestyle of a week in the mines then a week in noosa would not be a bad life ....

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I just got back from a tour of the major coal mines in QLD , its pretty amazing what is happening there, the two tier economy is very evident. Flying into Emerald which is the major town to serve most of the Bowen basin mines, the planes are packed with young miners, nowadays miners are not greasy tough guys but generally clean cut young men ( and women ) toting the latest macbook pro. Even though Emerald is a town of 30k with over 1,000 hotel/motel rooms it is impossible to get a room during the week unless it is booked 3 months in advance apart from on a weekend, rents there run from 650$ a week for a very shabby unit, there is 100% employment for anyone that can get themselves a place to sleep. Out a 2 hour drive from Emerald you get to some of the mine cities like middlemount where you can stay in a 15sqm tin shed at The Mac ( they have 1500 of them ) for 1k a week or rent a 2 bed house if you can find one for 1500$ a week up, out in Dysart its even worse $2k a week will get you a shabby house with about 120 sqm internal space, the wierd thing is there in no construction going on despite a list of massive planned projects as long as your arm, it would seem the general bust in the aussie housing market means people are too scared to build where there is huge demand as they are too scared of a bust ..so all these shabby houses are coining it , visiting the mines all you hear is plans of expansion and the next project down the road for so many billions for anyone with half decent skills a 3k a week job is easy to land and speaking to some guys who are prepared to do long shifts in unsocial hours it seems fairly easy to pull down $7k for a weeks semi-skilled work, set against this paying 400k for a place not much better than a shed thats costing you 1.5k a week to rent starts to seem like good value,

After a week on the mine sites we hit the beach up in noosa ( which a lot of miners are doing on the week off ) a place with a fantastic climate,laid back lifestyle, great food and enjoying a massive bust, prices are down 50% in many cases and apart from beach front most stuff sells at or around construction cost with desperate over leveraged sellers competing for the few buyers. I actually found the prices very reasonable even despite the strong aud$ it seems like all the workers in Brisbane and the coast are being sucked out sent up to the mining towns where there is nowhere for them to stay, its going to be interesting to see how it pans out as these mega projects come to fruition , I think the lifestyle of a week in the mines then a week in noosa would not be a bad life ....

Meanwhile, the Australian full stop drought continues to blight the country.

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Read it in the print copy, but can't find it on line - an analysis of the sydney property market showing a number of properties down between 36%-42% "back to 2007 prices".

damn crash - happening too soon for my liking.

None for my properties have ever gone up from their 2007 prices which makes me wonder whether the SMH were a bit over-optimistic on prices in the mean time.

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All of Australia is a desert, eh?

I think it's time to accept that the Australian weather is cyclical. BTW Warrangamba dam, when full, could provide water for Sydney for 5 years without being refreshed by rainfall. Or somethimg.

http://www.smh.com.au/environment/water-issues/desalination-test-may-waste-millions-20120218-1tfv0.html

Desalination test may waste millions

Heath Aston and Tim Barlass

February 19, 2012

Surging level ... Warragamba Dam was at 85 per cent yesterday. Photo: Adam Hollingworth

SYDNEY'S water reserves could reach full capacity within three months, raising the prospect that drinking water will be flowing out to sea afterwards while households are paying millions of dollars for desalinated water.

The surging level of Warragamba Dam - now almost 85 per cent full - will top out by the middle of May if the current weather pattern does not change.

Regardless of the rising level - which has climbed 4.9 per cent in the past month - the Kurnell desalination plant will be kept in operation until the middle of June as part of a two-year ''proving period''.

Advertisement: Story continues below

By that date, experts say, the state government will be in the ''embarrassing situation'' of watching millions of litres of ''free'' water wash away into the environment while each household pays an estimated $96 extra a year for treated seawater.

According to analysis by the Greens - and endorsed by Professor Stuart White, of the University of Technology Sydney, one of the authors of the Metropolitan Water Plan - the value of the water flowing over the spillway before the plant could be switched off would be worth $82 million.

If rainfall mirrored that of 2010, that would increase to $140 million worth of water sluicing through the drum gate at Warragamba.

Former Labor premier Morris Iemma ordered the electricity-guzzling desalination plant be built in 2007 after the dam level hit a low of 33 per cent. Since then, levels have climbed, as storms associated with the La Nina weather pattern have dumped water in the catchment region and increased the inflow rate in recent months. In the past week, inflows added more than 2 per cent to storage. At this rate, the dam will be full by May 14.

If the weather of February 2010 was repeated, the dam would be at 100 per cent within six weeks.

In 1998 - the last time Warragamba went to 100 per cent - the dam level rose by 20 per cent in 12 days. In September, The Sun-Herald revealed the dam would already be above 94 per cent if Sydney Water had not quietly stopped pumping water into Warragamba from the Tallowa Dam in the Shoalhaven. That dam is already at 100 per cent and liable to ''environmental releases''.

Professor White said: ''The government could be put in the embarrassing situation of having a desalination plant in operation under its contractual obligations and at the same time having Warragamba spilling over.''

The Minister for Finance, Greg Pearce, who is leading the privatisation of the desalination plant, said the government's hands were tied by a dud deal signed by Labor in 2007.

"Sydneysiders are locked into a two-year proving period ending on June 15 this year thanks to the contract signed in 2007 by the former Labor government,'' he said. "The deal negotiated by Labor locked us into an arrangement under which the plant had to run at full capacity for two years and we have to pay the same amount regardless.''

Sydney Water was able to negotiate a reduction in the plant's output with operator Veolia in December. Output was reduced from 250 mega-litres a day down to 90 megalitres - roughly 36 per cent of capacity.

Read more: http://www.smh.com.au/environment/water-issues/desalination-test-may-waste-millions-20120218-1tfv0.html#ixzz1mo2JxBp5

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All of Australia is a desert, eh?

I think it's time to accept that the Australian weather is cyclical. BTW Warrangamba dam, when full, could provide water for Sydney for 5 years without being refreshed by rainfall. Or somethimg.

http://www.smh.com.au/environment/water-issues/desalination-test-may-waste-millions-20120218-1tfv0.html

Desalination test may waste millions

Heath Aston and Tim Barlass

February 19, 2012

Surging level ... Warragamba Dam was at 85 per cent yesterday. Photo: Adam Hollingworth

SYDNEY'S water reserves could reach full capacity within three months, raising the prospect that drinking water will be flowing out to sea afterwards while households are paying millions of dollars for desalinated water.

The surging level of Warragamba Dam - now almost 85 per cent full - will top out by the middle of May if the current weather pattern does not change.

Regardless of the rising level - which has climbed 4.9 per cent in the past month - the Kurnell desalination plant will be kept in operation until the middle of June as part of a two-year ''proving period''.

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By that date, experts say, the state government will be in the ''embarrassing situation'' of watching millions of litres of ''free'' water wash away into the environment while each household pays an estimated $96 extra a year for treated seawater.

According to analysis by the Greens - and endorsed by Professor Stuart White, of the University of Technology Sydney, one of the authors of the Metropolitan Water Plan - the value of the water flowing over the spillway before the plant could be switched off would be worth $82 million.

If rainfall mirrored that of 2010, that would increase to $140 million worth of water sluicing through the drum gate at Warragamba.

Former Labor premier Morris Iemma ordered the electricity-guzzling desalination plant be built in 2007 after the dam level hit a low of 33 per cent. Since then, levels have climbed, as storms associated with the La Nina weather pattern have dumped water in the catchment region and increased the inflow rate in recent months. In the past week, inflows added more than 2 per cent to storage. At this rate, the dam will be full by May 14.

If the weather of February 2010 was repeated, the dam would be at 100 per cent within six weeks.

In 1998 - the last time Warragamba went to 100 per cent - the dam level rose by 20 per cent in 12 days. In September, The Sun-Herald revealed the dam would already be above 94 per cent if Sydney Water had not quietly stopped pumping water into Warragamba from the Tallowa Dam in the Shoalhaven. That dam is already at 100 per cent and liable to ''environmental releases''.

Professor White said: ''The government could be put in the embarrassing situation of having a desalination plant in operation under its contractual obligations and at the same time having Warragamba spilling over.''

The Minister for Finance, Greg Pearce, who is leading the privatisation of the desalination plant, said the government's hands were tied by a dud deal signed by Labor in 2007.

"Sydneysiders are locked into a two-year proving period ending on June 15 this year thanks to the contract signed in 2007 by the former Labor government,'' he said. "The deal negotiated by Labor locked us into an arrangement under which the plant had to run at full capacity for two years and we have to pay the same amount regardless.''

Sydney Water was able to negotiate a reduction in the plant's output with operator Veolia in December. Output was reduced from 250 mega-litres a day down to 90 megalitres - roughly 36 per cent of capacity.

Read more: http://www.smh.com.au/environment/water-issues/desalination-test-may-waste-millions-20120218-1tfv0.html#ixzz1mo2JxBp5

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  • 433 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • up 2.5%
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