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The Global Bubble

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How much is Australia a leading indicator re: the market in the UK and elsewhere. It seems that the crash in Ozz is gathering momentum after a period of apparent stagnation, media coverage is increasingly bearish and agents seem resigned to a falling market for several years. The US market is seeing falls on the coasts and southern Spain and New Zealand abound with tales of disillusioned sellers. It seems to me that the growing news of distressed sellers and underwater investments abroad will impact the UK at some stage possibly driving the last weak hands from the market.

GRAHAM DAVIS: Today we'll meet people like nurse Christine Johns, ordinary Australians whose properties are now worth less than they owe the banks.

CHRISTINE JOHNS: It has gone backwards. I paid $313,000 for it, recently I was offered $280,000.

GRAHAM DAVIS: Christine and legions like her face a terrible dilemma right now - cut their losses and run or try to hold on in the hope the market bottoms out and picks up again. How much are you out of pocket for?

CHRISTINE JOHNS: About $55,000 if I sell it now.

GRAHAM DAVIS: $55,000 down the drain?

CHRISTINE JOHNS: That's right.

GRAHAM DAVIS: How do you feel about that?

CHRISTINE JOHNS: I'm pretty sort of upset. You know, I mean, I had dreams and expectations this was going to be my retirement.

GRAHAM DAVIS: As we'll see, some pockets of Australia are thriving, but, unfortunately for Christine, any turnaround is a long way off. For her investment is in one of the country's most precarious markets - high-density apartments in Sydney. They told you specifically that it would double.

CHRISTINE JOHNS: … in 7 to 10 years. Well, it's been nearly five years now, and it's gone down.

GRAHAM DAVIS: And no expert is saying it's going to double within 10 years?

CHRISTINE JOHNS: Uh, no, no.

GRAHAM DAVIS: Do you think you've been conned?

CHRISTINE JOHNS: Oh, absolutely, yeah. Absolutely conned.

Australia, Spain, US, New Zealand

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House prices in Sydney are down by 8.9 per cent from the peak recorded on the March Quarter 2004 - the sharpest decline of any of the measured capital cities since the property downturn started in 2004, Louis Christopher, research director for APM, said.

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Australia's per capita debt is higher than that of the US and Uk I think - they have just hit the liquidity buffer before the rest of us. We will too though. Another xmas on credit and 2006 bills and council tax/gas/eleccy/water/other bill increases will be a real test of the whole house of cards.

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It will be interesting when the UK Media start reporting the Oz crash. Don't forget, Oz is going into its Spring/Summer market currently and by the time we get to our Spring we will have a very clear idea of what is happening in Oz.

At which point many of us will be getting higher bills landing on our doormats and, most likely, IRs will have risen by a point - I think Jan, Feb, March will see two 0.5 point increases, most likely in Feb and March. At which point the UK bubble will go pop.

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It will be interesting when the UK Media start reporting the Oz crash. Don't forget, Oz is going into its Spring/Summer market currently and by the time we get to our Spring we will have a very clear idea of what is happening in Oz.

At which point many of us will be getting higher bills landing on our doormats and, most likely, IRs will have risen by a point - I think Jan, Feb, March will see two 0.5 point increases, most likely in Feb and March. At which point the UK bubble will go pop.

I dont think the ozzie crash will be on the radar for most Uk propsters.

....their mids will be focused(distracted),on all the crap going on in iran at the time!

...it makes a good smokescreen for failing international pleas.

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In addition to the falls in prices, difficulty selling etc. the thing which has become VERY noticeable over the past couple of months in Oz is that many of the properties for sale are in fact empty.

What seems to be happening is that, unable to sell their house quickly, people go and buy another one to live in and plan to either sell the existing one or rent it out if they can't sell quickly. A discussion I had with an EA confirmed that in general terms this is the situation.

However, volumes have fallen quite sharply now. It's down something like 50% from the peak where I am and it's broadly similar in much of the country (except Western Australia which is behind the other states and still has a boom. Also South Australia has only recently peaked).

Now, think about this. When you move house you don't have one family move out and the next move in on the same day. The is a delay of, usually, a couple of weeks or more. Now think about that. People are still living somewhere but a high volume of transactions requires these vacant periods. That in itself is adding to demand for accommodation - even though it is empty during the move it is "occupied" in a financial sense. If you have enough people moving then all these houses empty for a couple of weeks at a time adds up to quite a significant additional demand for accommodation.

To simplify that, the high transaction levels prop up the overall number of homes occupied since for a couople of weeks there is the new home of those moving out, the one they have moved out of that someone else is moving into, and the one those people are moving out of. So that's two households occupying 3 houses for a couple of weeks. Get enough transactions happening and that's a lot of extra houses "filled". Keeping houses empty while renovations are done also adds to this.

But, of course, when the transaction volume crashes and the renovations are done then property demand drops and all of a sudden if becomes VERY obvious that there are more houses than families to fill them. Once that point is reached, as it has been now in parts of Oz, then a crash seems unavoidable. People just can't keep paying two mortgages forever when one is for an empty house. IN DUE COURSE THEY ARE FORCED SELLERS and that will put a LOT of pressure on prices IMO. Indeed it is only since this empty houses situation became visible that price falls have also become far more common.

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Having lived and worked in Australia for a short time a couple of years ago (for an big electrical goods retailer), I can see big problems ahead.

Those Ozzies are big consumers. The amount of goods they were buying on credit... Bar-b-q's (i'm talking $3k barbies!), plasma tellys and cinema projectors etc. American fridge freezers.... Holden Ute's, 4x4's.

Madness!

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Having lived and worked in Australia for a short time a couple of years ago (for an big electrical goods retailer), I can see big problems ahead.

Those Ozzies are big consumers. The amount of goods they were buying on credit... Bar-b-q's (i'm talking $3k barbies!), plasma tellys and cinema projectors etc. American fridge freezers.... Holden Ute's, 4x4's.

Madness!

Is it different in the Uk?

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  • 302 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% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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