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Guest Winners and Losers

Oz Government & Reserve Bank

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Guest Winners and Losers

Are they doing this here too?

At a lunch in Canberra on Tuesday, Dr Ken Henry – a member of the Reserve Bank’s nine-member interest rate board and one of the government’s most senior economic advisers – let slip that the housing bubble was now a major threat to the economy. As soon as he made the comment, Dr Henry asked that his remark not be quoted “outside this room”.

As a federal election looms, a panic-led property crash would erase the ‘feel-good-factor’ enjoyed by home owners who have seen their greatest asset – and therefore their wealth – soar in the past five years. As Prime Minister Howard likes to remind us, no one has complained to him about the value of their home increasing. When the bubble does burst, however, the opposite will apply – there will be plenty of complaints.

So, if the government can maintain the illusion of safety until after the election, it will. And, it has plenty of property spruiking supporters saying that real estate is safe and that talk of a property bust is nonsense.

But last week’s warnings came from those who are chasing neither votes nor commissions.

A survey in May this year by The Economist magazine forecast that Australia’s property prices could fall by 30 per cent over the next four years. Responding to claims that it hasn’t happened, The Economist last week strengthened its warnings. “If house prices become more overvalued, they are even more likely to fall,” it said. Their latest quarterly update showed that property prices are “much too hot”. Australia was at the top of their list of countries with overpriced property markets.

The oft-touted view that low interest rates means there is no danger is an argument The Economist does not support.

First, it says, interest rates are not that low in real terms. Because inflation is also low, a mortgage is not eroded as fast as it used to be. Loan payments will, in the years ahead, account for a bigger slice of household incomes.

Second, there will come a time when interest rates do rise. Borrowers will then start to hurt. The Economist believes that Australia’s housing market is now over valued by “more than 30 per cent”. Does anyone dare make the unpopular claim that property prices could fall by 30 per cent? Quietly, that’s what many experts are predicting.

Last week, one of Australia’s most respected (and accurate) property valuers, Iain Herriot, was quoted as saying that some properties being sold today – especially those sold in new developments flogged by spruikers – will, one day, be able to be purchased for half their current prices.

But, back to the interest rate argument. Shane Oliver is chief economist at AMP Henderson Global Investors. He believes interest rates only have to rise by 1.25 per cent for most borrowers to run into trouble. That would mean a current standard variable rate of just 7.8 per cent.

The Reserve Bank, which has been expressing grave concern for almost two years, seems to be running out of patience. Its warnings are now turning into almost veiled threats. There are strong hints of rate rises – possibly before Christmas.

Writing in The Sun-Herald, Channel Seven’s finance editor, David Koch, urged property buyers to get the message. “What the RBA is saying is that unless we cool off ourselves, they’ll do it for us through much higher interest rates,” he warned.

And the International Monetary Fund – the world’s peak economic institution – issued a stark warning last week. “The short-term outlook for Australia is subject to considerable risk,” it wrote in its latest World Economic Outlook, citing “a rapid cooling in the housing market” as one of the major risks to the Australian economy. “Rapid cooling” is a politically correct expression for “bubble bust”.

Few experts can predict exactly when any market will rise or fall. Or if it will boom or bust. But in the case of speculative investing there are always clear symptoms before a crash. Investment lending has now soared to 45 per cent of all property lending. Thousands of hopefuls are jumping into the property market. But they are jumping into investments where the yields are at record lows and the prices are at record highs. Which investment maxims are they following?

As Noel Whittaker wrote in his weekend column, “John D Rockefeller said that nobody rings a bell at the top or the bottom of the market. But when the cab drivers and waiters start buying, you know the end is near.”

The warning signs have never been more obvious.


or this?

I am involved in high level funds management.I am currently working in Bangkok.Brian is not my real name.We invest heavily in the Australian share market and have many "leads" and "information" regarding the oz market.

In the next few weeks you will see a steady sell down of oz stocks.


There is a major correction about to happen to this market.People in the know are slowly selling out whilst talking up the market to the average punter.

As a fund manager it is my job to talk the market up.That's what we do.If your buying,we're making money.So we will tell you anything to keep this current feeding frenzy going (oz market up over 80% in less than 3 years!)

We have done this many times in the past; the mid 80's,early 90's,late 90's and we are doing it now.

I am admitting this because my conscience has had enough of seeing average people ruined.

The overpriced big banks will be the first to go.

If you're in this market or know someone who is,I strongly advise you to get out now.You will probably leave with healthy profits.

Of course,I could be lying. But,proof is in the pudding.Just watch the next few weeks and see.


Edited by Winners and Losers

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To be fair, the first article you quoted was from September 2003.

The second article was from 3 weeks ago, and the correction "Brian" was predicting for the "next few weeks" hasn't happened yet. Brian sounds like a bullsh1tter to me!

Edited by Tim M

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Guest Winners and Losers

To be fair, the first article you quoted was from September 2003.

The second article was from 3 weeks ago, and the correction "Brian" was predicting for the "next few weeks" hasn't happened yet. Brian sounds like a bullsh1tter to me!

Really? Well, that is when the market in Oz did start to fall. So I guess they saw it coming ages ago. Just goes to show how long they can keep the spin going, but by 2004 it was evident that the market was cooling. The second bit is from 4 March 2006. Are you in Australia? Are you aware of the current state of the property market in Australia? I would welcome any news you have.

Edited by Winners and Losers

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  • 336 Brexit, House prices and Summer 2020

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