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Australia Faces Its Demons


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Pulling out "it's different this time" with a smiley stopped being arch about two years before you joined this forum so I'm not sure what you hope to disclose about yourself by pulling that old chestnut out.

As you'll see if you read the thread, Australia is not so different. Unlike the UK it stagnated for most of the 00s and started rising again a couple of years ago and so is out of step with the rest of the world (yes, ha ha).

Bardon / Aussie Boy (not sure why you need to post using two handles) thanks for replying. And thanks for confirming that Australia is not so different. So I guess the crash in Oz house prices is just taking a bit longer to arrive than in the rest of the world? I suppose that we are at the end of the chain, so the GFC hits the big spending countries like USA first, then the pain shifts along the chain to the exporting countries like China, who have to prop things up with stimulus packages of useless expenditure until the funds run out, so this is really just delaying the inevitable), and then finally when they no longer need the same amount of raw materials because no one is buying their stuff, they cut back on purchase of Aussie dirt, and Australia finally gets a dose of financial pain. This process is currently being speeded up by Rudd attacking the mining industry like a demented Chavez on speed. :D:P:lol:

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It looks like the crash is starting to kick off in Oz, and this could spiral out of control quite rapidly. If any of the mining companies actually follow through with their threats of suspending projects, the cost of borrowing is going to get more expensive for Australia and the interest rises in mortgage rates will continue their steady climb.

The interest rates were always going to go up, I am just amazed at how quickly it has started.

028748-melinda-mifsud.jpg

Home dreams turn sour in the southwest

MELINDA Mifsud is the face of the so-called Australian dream which is at risk of going sour as interest rate rises and falling property prices in Sydney's southwest force homebuyers into negative equity. Ten months after buying a house and land package for $407,000, Ms Mifsud, 25, and her partner Stephen Holland have been hit by six consecutive interest rate rises. To make matters worse, the value of their Spring Farm home is falling.

"It's basically devastating," Ms Mifsud, who received the $24,000 First Home Owner Grant, said.

http://www.dailytele...0-1225864001029

"People went in thinking they would be better off and their repayments would become easier and the exact opposite has happened," he said.

Jean Evers, 52, and her husband Garry, 45, fear losing their home.

In January, only four months after they purchased their $415,000 new home on the edge of Narellan Vale with a 100 per cent loan and $24,000 First Home Owner Grant, Mr Evers was retrenched. Since they purchased their home, their repayments have risen by $400.

"Every time I see the letters I feel sick and throw them in the bin," said Mrs Evers, who stays home to look after their seven foster children.

"We only got one payment in before the payments started rising," she said. "It makes me angry - they lured us in with a false sense of security and then hit us with everything. I hate to think how many people have bought like we did."

Supermarket worker 21-year-old Danielle Simpson is going for a promotion at work to help her and her partner Lee Mansell, 24, repay the $315,000 home loan they took out with only their First Home Owner Grant of $14,000 as deposit.

This is absolutely insane stuff. Hairdressers and supermarket workers taking out loans of $315,000 and $415,000. These guys are living in urban wastelands where they probably need to run two cars to be able to get to work and shopping centres. These are areas with minimal amenities, high youth crime and unemployment and large unassimilated ethnic enclaves. The real value of some of these properties is probably close to zero. In some of these areas the value of the property would actually be a negative figure because you would have to pay me to live there. They can certainly forget about the value of these houses growing at any sort of speed. Every time I drive to Sydney from Canberra it seems like they have bolted another suburb onto Sydney. There is no physical limit to how far they can spread this urban sprawl of low grade housing.

I do not understand how these people even begin to make ends meet. In my case I own my house and my motor vehicles debt free. I have no credit card debts and have a two income family with all my kids having grown up and left home. But even with all those financial benefits, I sometimes only just get by from week to week. Bills for electricity, water, gas, rates keep rolling in, the house and cars always seem to need money spent for maintenance, food prices keep going up, money gets taken out of my pay cheque for superannuation and tax and at the end of the day there is not all that much left for discretionary spending. And I am an IT worker on a pretty good salary. So can someone explain to me how a supermarket worker can deal with all those same costs that I have AND deal with a $415,000 mortgage with interest rates climbing. I dont see how it is possible.

Edited by UncleKev
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Hmmmmmmmm!!!!

Rate rise to crush 90,000 families - and experts warn of more pain to come

http://www.news.com.au/money/interest-rates/rate-rise-to-crush-90000-families-and-experts-warn-of-more-pain-to-come/story-e6frfmn0-1225862329941

Graham Burden and Emma Chenery are feeling the squeeze, with Ms Chenery looking for a second job / The Daily Telegraph

353635-rate-rise.jpg

Increased grant 'the difference'

Increased-grant-the-difference-6472210.jpg

EMMA Chenery's story sums up the problems facing the Australian economy and the attempts to fix them.

http://www.dailytelegraph.com.au/news/indepth/increased-grant-the-difference/story-e6frewpr-1111118758981

Emma Chenery | Sales Support

http://www.starrpartnerscampbelltown.com.au/RealEstate/pg-emma-chenery-profile.seo

1b757b45-d588-41fe-9d6c-d24dd70d2bfe.jpg

http://delusionaleconomics.blogspot.com/2010/05/it-is-all-re-scam.html

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I find this hard to stomach. We are in a global credit crunch. The Australian economy is tiny compared to the Asian giants it rubs shoulders with. Where the hell is the money coming in from to sustain a housing boom? And to cap it all, Ozzie interest rates are rising, which should set the alarm bells ringing for most people.

I just don't get it.

You just answered your own question. Houses here are supported by immigration and the commodities boom and a government p*ssing tax payers' money up the wall. Australian's who have never lived outside of Australia, also tend to be parochial, naive and economically illiterate.

Currently I'm in Northern Queensland. People want $450-$600k for small, tired, old houses in the middle of the f*cking desert. Even I was surprised at some of the prices wanted for a 3 bed house on a flat acre or half acre block of scrub. None of them even had a pool. I thought Brisbane and the Sunshine coast was mad...but this is just unbelievable.

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Hmmmmmmmm!!!!

Rate rise to crush 90,000 families - and experts warn of more pain to come

http://www.news.com.au/money/interest-rates/rate-rise-to-crush-90000-families-and-experts-warn-of-more-pain-to-come/story-e6frfmn0-1225862329941

Graham Burden and Emma Chenery are feeling the squeeze, with Ms Chenery looking for a second job / The Daily Telegraph

353635-rate-rise.jpg

Increased grant 'the difference'

Increased-grant-the-difference-6472210.jpg

EMMA Chenery's story sums up the problems facing the Australian economy and the attempts to fix them.

http://www.dailytelegraph.com.au/news/indepth/increased-grant-the-difference/story-e6frewpr-1111118758981

Emma Chenery | Sales Support

http://www.starrpartnerscampbelltown.com.au/RealEstate/pg-emma-chenery-profile.seo

1b757b45-d588-41fe-9d6c-d24dd70d2bfe.jpg

http://delusionaleconomics.blogspot.com/2010/05/it-is-all-re-scam.html

Look who's stalking!

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I had some Ozzie friends over to dinner last night. They are returning back to Oz in a few months. Hah, I said, you'll pick up a cheap shack now that prices across the industrialised world have turned negative since the financial crisis.

Not so, they said, shocked at my Pommy lack of nous. There is a massive boom taking place in Australia. Up 20% year on year apparently.

I couldn't believe it. The received wisdom is surely that the global credit crunch has knocked the wind out of the sails of a housing boom caused by cheap credit, and shoddy lending. But Google verified it:

Weighted average of the eight major cities is UP 4.8% on the quarter, UP 20.0% on the year.

http://www.abs.gov.au/ausstats/abs@.nsf/mf/6416.0

I find this hard to stomach. We are in a global credit crunch. The Australian economy is tiny compared to the Asian giants it rubs shoulders with. Where the hell is the money coming in from to sustain a housing boom? And to cap it all, Ozzie interest rates are rising, which should set the alarm bells ringing for most people.

I just don't get it.

Some have mentioned mining, but the ultimate cause of the booms continuation is China. However the recent clampdown on foreign ownership, 40% tax on miners, and 6 consecutive interest rate rises should dampen proceedings somewhat.

It will also leave our highly leveraged friends high and dry.

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As i am sure you know debt must increase at a faster rate than the price of assets that are purchased with finance otherwise the money required to pay the interest would not be available.

Its as simple as this, the system that we have (like it or not) requires that debt grows faster than asset values to service the payments. If this were not to happen the whole dam thing would collapse. and I don’t thin the SYSTEM GUYS will allow that to happen. If it did collapse then we are all on the same boat so that make me ahead right now.

My brother lives in Brisbane and all he sees are prices going up. He believes Australia is immune from the pain the US and UK/EU are feeling. I understand where your confidence comes from. It`s misguided though.

The system guys ? ...I see you believe in tooth fairies.

Edited by tiggerthetiger
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They do look a bit glum in photo of the recent story.

He's given up on his snazzy Estate Agent hairstyle.

The love of property.

stupidFTBs.jpg

post-12306-12734670888478_thumb.jpg

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If you aren't Bardon your knees should be getting rather chafed by now.

Bardon and Aussie Boy are one in the same that is the conclusion I have.

Bardon lives on this computor.

Having 2 names makes it look like he doesnt spend every minute hear

Also gives a advantage when taking opposite view because he loves to try to destablise people.

He has put down many people who are undeserving.

Steve Keen for a example he felt the need to call him amoungst other things of oxygen waster, then months later claims he does not hate him.

In all probablity his life style is pure fiction

Really it is hard to feel any pity for him though he is worthy of it.

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You are very consistent when it comes to getting things wrong.

The only time I have the privilege of reading Blue Skies insights is when you choose to bait him - like now - but I'm getting the strong impression he's on day release from somewhere secure.

Great that this micro-conspiracy is still going: if it makes those who didn't buy a property on the date this thread started a feel wee bit happier, then please keep on going. I get a warm glow when I bring a bit of happiness or distraction into people's lives.

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Is it all “Supply & Demand”?

Published in May 11th, 2010

Posted by Steve Keen in Debtwatch

43 Comments

As we head towards the federal election, the term ‘housing shortage’ will be trotted out again and again by politicians. Their rhetoric will rely on the deeply ingrained received wisdom that Australia has a ‘housing shortage’, and no politician will want to do the hard work of differentiating between a genuine shortage in housing stock (which we don’t have) and a shortage of ‘affordable housing’ which we do have.

And why won’t they acknowledge this distinction? Simply, because admitting that it is only the prices of houses that are dysfunctional, and not simply the supply, would be too much even for their loyal voters.

Once groupthink has infected politicians and media commentators, reason goes out the door. That’s why I find it infuriating to hear constant reference to Australia’s soaring prices being simply a product of a ’supply and demand’ imbalance.

The supply-demand argument is easy to sell. The reasoning goes that there are too few houses being built, and the housing market is just like any ordinary commodity market, so the price rises.

This pricing model is superficially appealing at the level of everyday consumer items – corkflakes, for instance (though even here it’s a flawed logic, as I explain in these two [1] [2] rather technical papers). But the model breaks down completely in asset markets. If the price of corkflakes rises due to supply constraints, consumers switch to complementary goods. They don’t rush to the supermarket to buy more cornflakes at the higher price.

But in asset markets, consumer behaviour is turned on its head. Instead of being more reluctant to buy an asset that is rising in price, buyers reason that they’d better get in quick and buy while the asset is still within their reach. So higher prices actually stimulate demand, and this behavior often reaches a fever pitch a short time before an asset bubble deflates.

In other words, prices have a perverse impact upon asset markets, and it is simplistic to interpret how asset prices behave simply on the basis of “supply and demand” analysis.

It’s also rather hard to sustain the “supply and demand” argument on the basis of the data alone—because it if were true, house prices should have been falling (relative to the price of other goods) for most of the last thirty years.

Firstly it’s obvious that real house prices have been rising in real terms. The next chart deflates the ABS’s index for established houses (ABS 641601 and 641603) by the CPI. Houses are now two and a half times as expensive—relative to other goods—as they were in 1986.

And yet for most of that period, we’ve been building accommodation at a faster rate than population has been growing—so on “supply and demand” logic, house prices should have been falling for all but the last couple of years.

Have a look at the chart below. The average number of people living in each dwelling in Australia in the year 2007 was around 2.6 (the black line)—and it was higher in earlier years. To keep the ratio of people to dwellings constant, we would need to build a new dwelling for every 2.6 new people. In fact, on average between 1986 and 2009, we’ve been building a new dwelling for every 1.8 new Australian residents. Only in the last couple of years—after the GFC hit—has population grown more rapidly than we’ve added accommodation.

This is where neo-classical economists’ ’supply-demand’ arguments fail the common-sense test. If we’ve consistently built more new dwellings than required by the number of new people in Australia, and if “supply and demand” explained everything, then real prices should have been falling for all but the last couple of years (in the past two years a new dwelling has been built for approximately every 3 new people – see chart).

News last week that Sydney has just recorded a six-year high in building approvals (http://www.smh.com.au/business/property/big-surge-in-number-of-new-homes-approved-20100505-uas8.html) will be welcomed by politicians and commentators wanting to argue that the ’shortage’ is being addressed.

But if ’supply and demand’ cannot explain the rise in house prices over the past quarter century, then this additional supply—when it comes online—may have an equally perverse impact: it might accelerate a downturn caused by the end of the great expansion in household debt that has been the real force driving house prices up. The new spike in approvals may actually create an oversupply after the great inflation caused by rising debt has already ended.

We need to bury the ‘housing shortage’ myth, but to do so requires a shift in thinking. Economists follow a model of the economy that is as realistic as the view that the Earth is the centre of the universe, and the Sun, Moon and planets revolve around it. It took the GFC to expose just how unrealistic this model is—a model that ignores credit and pretends that everything happens in equilibrium. We instead live in a credit-driven world which is always in disequilibrium. Until economists and policy makers recognize this, we are likely to have policies that address symptoms but not causes, and ultimately make the problem worse rather than better.

If we are to address the real causes of the GFC, then policy makers have to confront the problem of an out of control credit system that drove mortgage debt up by a factor of five and turned the Australian housing market into the world’s last surviving Ponzi Scheme.

Then again, it is most likely too late – the current frenzy of house buying and house price growth is completely decoupled from any sense of scarcity in the market, and has all the signs of a balloon about to burst.

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Hi guys. Its good to see you all again.

I'm so sad about this property crash. I'm truly facing my property demons now. I just bought a house for 20% off what the investors paid for it last year. Broke my heart as I haggled.

Mortgage of 3.45 multiple of my income and I am financially in a position (touch wood) where I can assume a 10% interest in my payments. Its a very nice house in a great location, and people keep telling me that I got a bargain but I keep telling them that I paid the right price. (or should I now be talking the market up? :lol:)

So a bear becomes a buyer but not a bull - just somebody who believe in the treating the market for what it is and only buying when the numbers add up in any particular instance.

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Hi guys. Its good to see you all again.

I'm so sad about this property crash. I'm truly facing my property demons now. I just bought a house for 20% off what the investors paid for it last year. Broke my heart as I haggled.

Mortgage of 3.45 multiple of my income and I am financially in a position (touch wood) where I can assume a 10% interest in my payments. Its a very nice house in a great location, and people keep telling me that I got a bargain but I keep telling them that I paid the right price. (or should I now be talking the market up? :lol:)

So a bear becomes a buyer but not a bull - just somebody who believe in the treating the market for what it is and only buying when the numbers add up in any particular instance.

Hi Elizabeth.

Enjoy your home. Sometimes you have to get on with life.

Cheers

AB

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Some interesting articles appearing today.

Mortgage stress hits hundreds of tenants

HUNDREDS of renters are being booted out of homes as landlords default on loans.

Banks have been accused of breaking eviction laws by forcing some tenants out too soon.

Some renters are getting just a fortnight's notice to shift and find a new roof over their heads - less than half the legal time limit.

Tenants Union of Victoria spokesman Toby Archer said renters were the forgotten victims of mortgage stress and rising interest rates.

"They are caught in the crossfire when a landlord defaults either because they've lost their job or entered the property market and taken too much on," Mr Archer said.

http://www.couriermail.com.au/money/mortgage-stress-hits-hundreds-of-tenants/story-e6freqoo-1225865767971

Demand for mortgages continues to slump

Smallest amount of loans granted in 9 years

First home buyers dry up

Experts say rate hikes taking their toll

DEMAND for home loans dropped for a sixth straight month in March, suggesting rising interest rates were already biting prior to the last two rate increases.

Australian Bureau of Statistics data showed that just 48,260 home loans were granted in March, a 3.4 per cent decline from February.

This was the smallest amount of home loans granted in one month in nine years, and was roughly in line with the 3 per cent decline forecast by economists.

The proportion of first home buyers taking up a loan dropped to 16.1 per cent in March, the smaller amount since April 2008.

This was down from 18.1 per cent in February and a record 28.5 per cent set in May last year when the Federal Government's more generous first home owners grant was in full swing.

The Reserve Bank has raised the official cash rate twice since March to 4.5 per cent - a total of six increases since October last year - and money markets are expecting further hikes to at least 5 per cent before the end of the year.

http://www.couriermail.com.au/money/demand-for-mortgages-continues-to-slump/story-e6freqoo-1225865470317

Interesting to speculate whether the slump in loans is supply driven - banks aren't lending, or demand driven - buyers are going on strike

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If you want to read an informed opionion on what is going on now and what is likely to happen in the residential market then this report makes useful reading.

PROPERTY REPORT - May 2010

There are plenty of positives in the current market

Introduction:

There are plenty of positives in the current market

When property prices rise, most Australian families benefit. This needs to be remembered, because media tends to forget.

And there you have it. The frankly stupid statement that sums up all that is wrong with the Aussie property market. The only explanation for the guy penning a line like that is that he is thick. And people PAY for his advice?

The people who benefit from high house prices are:

Banks (temporarily)

Developers (temporarily)

Government Tax Collectors (temporarily)

Home owners WHO NEED TO DOWNSIZE and buy a smaller house

Investors (temporarily)

The rest of the population of Australia, i.e the bulk of the populace, are disadvantaged by high house prices.

Of course, many Aussies will using rising house prices as security against taking on mre debt. Perhaps this is what he means by 'benefit'?

The guy is a knob.

Edited by Pond321
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Some interesting articles appearing today.

Mortgage stress hits hundreds of tenants

HUNDREDS of renters are being booted out of homes as landlords default on loans.

Banks have been accused of breaking eviction laws by forcing some tenants out too soon.

Some renters are getting just a fortnight's notice to shift and find a new roof over their heads - less than half the legal time limit.

Tenants Union of Victoria spokesman Toby Archer said renters were the forgotten victims of mortgage stress and rising interest rates.

"They are caught in the crossfire when a landlord defaults either because they've lost their job or entered the property market and taken too much on," Mr Archer said.

http://www.couriermail.com.au/money/mortgage-stress-hits-hundreds-of-tenants/story-e6freqoo-1225865767971

Demand for mortgages continues to slump

Smallest amount of loans granted in 9 years

First home buyers dry up

Experts say rate hikes taking their toll

DEMAND for home loans dropped for a sixth straight month in March, suggesting rising interest rates were already biting prior to the last two rate increases.

Australian Bureau of Statistics data showed that just 48,260 home loans were granted in March, a 3.4 per cent decline from February.

SNIP

ABC was saying that there was an increase of 3% in loans to investors (the source will be out there for those who want to find it).

Looks like the buyer mix is changing.

Edited to ad: 48k loans seems an awful lot. Isn't that figure more than the UK one?

Edited by aussieboy
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ABC was saying that there was an increase of 3% in loans to investors (the source will be out there for those who want to find it).

Looks like the buyer mix is changing.

Edited to ad: 48k loans seems an awful lot. Isn't that figure more than the UK one?

Hah hah, yeah, cause investors are the only people who can borrow enough for a deposit which will allow them to borrow enough to take out a mortgage.

Bubble? There is no bubble here....! :-)

And yeah, Mortgages maxed out in the UK at about 130K PCM at the peak of the bubble. So, when you scale to population size, about where the Aussies are now. Of course, at that point the UK had a 'housing shortage' - according to the housing industry anyway. Strangely, the 'shortage' seems to have disappeared, even though the UK has been building less houses than ever these last few years.

I really am getting a tremendous sense of déjà vu here……

The one bit of sense in that last article that Bardon posted was the stuff about there being no housing shortage. There may CURRENTLY be too little housing to fulfill the amount of CREDIT demand that is chasing it. But the amount of credit can dry up overnight. As it did in the UK.

Edited by Pond321
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The feeling of deja vu is strong in Brisbane for someone who left the UK in 2008.

Lots of for sale signs appear, stories of shortages in press.

Lower and lower volumes, but rising average price

More and more 'for sale' properties offered for rental as they remain unsold

The word 'bubble' becoming more common in mainstream press - mostly preceeded by 'there is.....'

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The feeling of deja vu is strong in Brisbane for someone who left the UK in 2008.

Lots of for sale signs appear, stories of shortages in press.

Lower and lower volumes, but rising average price

More and more 'for sale' properties offered for rental as they remain unsold

The word 'bubble' becoming more common in mainstream press - mostly preceeded by 'there is.....'

I'm amazed that the press would be allowed to use such terms as 'bubble', not in Australia where the VI gangster real-estate so-called 'Industry' owns (via advertising revenue) every single printed page in the country. Maybe the press doesnt want too much CaCa on their faces when the sh*t bubble bursts. As it is I'm amazed that they arn't getting death threats etc unlike http://www.jenmanfightsback.com.au/ploys.php who has been fending them off for years, standing up for more transparent and honest practices (no bulls will agree with this, (check out sommersoft http://www.somersoft.com/forums/index.php, sort of the opposite of HPC who sees this guy as number 1 arch enemy)

As for bubble bursting, friends who have just bought another house and are now fully commited, didnt actualy sell their current house first, was no problem on account of that if it took longer to sell they would get more for it on account of 20% per anum rises. Seems they cant even sell it for 2007 prices and we havent even had a real dip here (apparently), If they rent it out which is now the grand plan they will get a gross income of 4% and still a mortgage, rates, parasite fees, etc to pay out of that

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  • 440 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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      • Even
      • up 2.5%
      • up 5%



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