# The great crash ahead?



## young-gun (6 October 2011)

Hi,

I have been doing alot of reading lately, and i have just recently finished a book called the great crash ahead by harry s dent. Now this guy has some fairly controversial and extreme views and outlooks for the world economy, but his views also make quite alot of sense.

I'm only young and very in-experienced in the sharemarket, but for those of you that still have hope in trading long on the sharemarket i ask, when is it going to get better?! Everyday i watch business channels(not hoping to get anything from them other than some news updates) and i see economist after economist getting up and saying " the market is definitely oversold, and we see some real bargains coming through now" and have been saying this since the asx was at 4900?

Governments have now had 4 years to repair broken and debt plagued economies and have all but completely failed. In this book the main force behind the research is demographics. It looks at peak spending patterns of generations, and guess what, the baby boomers are at the end of theirs. Hasn't anyone wondered why the hell after the amercian fed has pumped TRILLIONS of dollars into the economy that the US growth has simply stagnated if not dropped marginally? 

Why you ask? Because the fed is working against a force beyond their control, and one that no one has ever experienced! Deflation. Can anyone tell me what would have happened if the fed had of printed 3 trillion dollars in 2005 when the dow was sky rocketing, and pumped it into the economy? inflation would sky rocket?! but it hasn't has it.

It's only a matter of time before governments run out of cards to play, and the world has to face the music. Baby boomers have inflated prices to unsustainable levels for gen y'ers like myself, and something has to give. If your a baby boomer just ask yourself where your at in your life. Are you in the market to be buying a new 7 piece lounge set and a new tv, spending 400$ a week on groceries to feed growing teenagers,and then maybe upgrading your home in 6 months? OR are you thinking, the kids have left home, i need to downsize, and oh sh#$ my supers taken a big hit, and i better start saving for my retirement!

Its this worldwide shift in spending habits that caused japan to crash(which 20 years later they still havent bounced back from) and that i personally believe will cause the next crash that is knocking on our door. Europe has an ageing population, and have been sitting on the edge of financial meltdown for months. America has an unrealised debt in excess of 60 trillion, yes thats right 60 trillion in private, finance, and government sector debt. It will surely all have to come to a head will it not?

Anyway sorry for all the doom and gloom but my main reason for posting is to see what other people thought about the above opinions, and would appreciate other users views and arguments.

Thanks!


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## explod (6 October 2011)

You are on the right track in my view.

It is not all gloom and doom either.   The sun will come up tomorrow and yes a lot of people are going to learn what it is like to be poor.  However people like yourself and others that you can alert will be okay.  Just battern down the hatches.

A mate of mine, acknowledegements Steve, sent this to me this morning:

http://www.fourhorsemenfilm.com/video/


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## young-gun (6 October 2011)

explod said:


> You are on the right track in my view.
> 
> A mate of mine, acknowledegements Steve, sent this to me this morning:
> 
> http://www.fourhorsemenfilm.com/video/




Looks like quite an interesting doco. Hopefully we'll get to view it over here.

I'd also like to raise awareness for those that think "Australia is immune, China will keep us afloat".

China's inflation rates are possibly the most unsustainable figure in the world today. Just recently their growth is coming under pressure and being pulled into question. China has been building entire cities to house millions of people, and not a soul is living there! All to keep their workforce ticking over and in hope of future growth. It won't happen over night, but when china does collapse, we will be sucked into this debt crash just as bad as any other nation. And how do you think the government is going to plug its spending deficits when they can't tax the resource sector due to drastically slashed demand? By taxing you and i.


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## LostMyShirt (6 October 2011)

According to Dent and his reviewers; his prediction of a great boom did come to fruition, thus his accuracy trend is said to continue. I have not read tha book, but looking at Dent's interview, he seems adament on his view. Is there any other self proclaimed Market Guru out there that is not adament on their own perceptions of the market? Why arn't the likes of Buffet commenting on such an outlook?

Unfortunately, I am slightly with dent in the sense that; yes there is going to be some sort of downward trend and correction providing the current situation continues, which it very well may due to the lack of long term fixes and bandaid solution being applied to the markets. We have seen the fruits of the FED and how quickly they rott.

All in all; I don't know. It would be best to stay alert, follow the news, and manage your risk a great deal. I suppose that is the only advice I can give myself.


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## young-gun (6 October 2011)

LostMyShirt said:


> According to Dent and his reviewers; his prediction of a great boom did come to fruition, thus his accuracy trend is said to continue. I have not read tha book, but looking at Dent's interview, he seems adament on his view. Is there any other self proclaimed Market Guru out there that is not adament on their own perceptions of the market? Why arn't the likes of Buffet commenting on such an outlook?
> 
> Unfortunately, I am slightly with dent in the sense that; yes there is going to be some sort of downward trend and correction providing the current situation continues, which it very well may due to the lack of long term fixes and bandaid solution being applied to the markets. We have seen the fruits of the FED and how quickly they rott.
> 
> All in all; I don't know. It would be best to stay alert, follow the news, and manage your risk a great deal. I suppose that is the only advice I can give myself.




He has made numerous predictions that have come to fruition. Perhaps not in the same year as predicted but definitely within a year or two give or take. If governments didn't go on the emergency stimulus spending sprees that they have we would already be well into the worst deflationary period we will ever see in a lifetime.

I'm by no means saying his work is gospel! he has made some outrageous claims in the past that have not been correct. But he has a different view to that of traditional economists, and as far as i can recall none of them predicted the debt collapse of 07/08, hence the huge losses everyone incurred. Present economists are brilliant at explaining what just happened, not so great at whats about to happen.

I'm not familiar with Buffet but will start researching him also.


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## ROE (6 October 2011)

"The market can stay irrational longer than you can stay solvent."

That said enough about boom and bust prediction 

4 years since Keen predict housing melt down ...sold his house and pay rent.

look like the market will stay irrational longer than he can afford to buy the next house


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## howmanyru (6 October 2011)

I don't see a great crash coming, just a slow erosion of peoples wealth. I think the panic & shock of 2008 was the great crash. The bubble burst but was not allowed to run its course. With the bubble re inflated, it will now gradually deflate to where it was going anyway. Now our children will pay for our greed !!!  It's not all bad, frugality will return & maybe we will be less materialistic? thats gota be a good thing? also good for the environment if we are making and disposing of less stuff.


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## Bill M (6 October 2011)

Good ol Harry Dent hey? He predicted 40,000 on the DOW. He was so wrong.

---
Demographic trends guru Harry S. Dent is making the rounds again, and touting his latest book, The Great Depression Ahead: How to Prosper in the Crash Following the Greatest Boom in History ...." *In his 2006 work, Dent predicted, “The Dow hitting 40,000 by the end of the decade*, the NASDAQ['s] advancing at least ten times from its October 2001 lows to around 13,500, and potentially as high as 20,000 by 2009 … The Great Boom['s] resurging into its final and strongest stage in 2007, and even more fully in 2008, lasting until late 2009 to early 2010.” Of course, those who read The Roaring 2000s, Dent's 1999 masterpiece, should soon be buying each of us a turkey with all the fixin's. According to the book, only a year remains before the Dow breaks 40,000 and the Nasdaq hits 20,000

Link here: http://en.wikipedia.org/wiki/Harry_Dent
---


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## medicowallet (6 October 2011)

ROE said:


> "The market can stay irrational longer than you can stay solvent."
> 
> That said enough about boom and bust prediction
> 
> ...




Actually, he could probably buy it now for what he sold it for.   

Wonder what it could be worth in 2-3 years time.

I owuld take $500k in cash as opposed to $500k property at the moment, no troubles.


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## pilots (6 October 2011)

We have just returned from three months in Europe. I watched the money shows most nights they finished the show with this, don't worry about the return on your investment, WORRY ABOUT THE RETURN OF YOUR INVESTMENT.


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## Smurf1976 (6 October 2011)

Looking at the US, they've pretty clearly been going backwards in real terms for more than a decade now. The market may well have gone sideways in nominal terms, but with pathetic dividend yields and after inflation it's gone backwards in reality.

As for other things, I can only point out that one wage was perfectly adequate to purchase an average house and raise a family 35 years ago. Two incomes struggle to achieve the same thing today. Sure, cars and TV's might be cheaper, but the cost of housing relative to incomes has literally doubled and that's the real killer since it's by far the largest expense for most.


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## sptrawler (7 October 2011)

howmanyru said:


> I don't see a great crash coming, just a slow erosion of peoples wealth. I think the panic & shock of 2008 was the great crash. The bubble burst but was not allowed to run its course. With the bubble re inflated, it will now gradually deflate to where it was going anyway. Now our children will pay for our greed !!!  It's not all bad, frugality will return & maybe we will be less materialistic? thats gota be a good thing? also good for the environment if we are making and disposing of less stuff.




Agree with most of what you are saying, the bit about our children paying for our greed, is a bit off!!!!

I know a lot of people in their late 50's, most are tradesmen, that haven't a lot of money.
You have to remember that most of these guys have less than $100k in super and don't own their house.
Just because house prices where pumped up by the real estate agents, doesn't mean all the baby boomers jumped into debt to buy houses and made a killing.
Most grew up in hard times and were risk averse and didn't capitalise on the opportunities that were available. Some did but would have been burnt in the G.F.C.
I guess what I am getting at is there is not a lot of "normal baby boomers " out there,that I know,that don't have a lot of money. 
The baby boomers are constantly demonised for the rise in house prices, but I feel the problem was caused by the real estate agents cranking prices, to increase commissions.
Most sellers look to the agents to give them an indicative price, the agents worked out just slowly ratchet the prices and you get a ponzi scheme happening.
Well now the elastic band is streched as far as it can go, everyone wants to blame somebody for the problem.
Greed was the problem but it was the real estate agents that caused the problem.
Most of the baby boomers who made a "killing" on their house, borowed money to buy another house.

I guess what I am getting at is, the greed wasn't as wide spread as some would have us believe.


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## sptrawler (7 October 2011)

sptrawler said:


> Agree with most of what you are saying, the bit about our children paying for our greed, is a bit off!!!!
> 
> I know a lot of people in their late 50's, most are tradesmen, that haven't a lot of money.
> You have to remember that most of these guys have less than $100k in super and don't own their house.
> ...




Maybe someone should do a study into what the " baby boomers " are really doing.
The last report I read there was a huge amount over 65's back in the work force.


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## GumbyLearner (7 October 2011)




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## young-gun (7 October 2011)

Bill M said:


> Good ol Harry Dent hey? He predicted 40,000 on the DOW. He was so wrong.
> 
> ---
> Demographic trends guru Harry S. Dent is making the rounds again, and touting his latest book, The Great Depression Ahead: How to Prosper in the Crash Following the Greatest Boom in History ...." *In his 2006 work, Dent predicted, “The Dow hitting 40,000 by the end of the decade*, the NASDAQ['s] advancing at least ten times from its October 2001 lows to around 13,500, and potentially as high as 20,000 by 2009 … The Great Boom['s] resurging into its final and strongest stage in 2007, and even more fully in 2008, lasting until late 2009 to early 2010.” Of course, those who read The Roaring 2000s, Dent's 1999 masterpiece, should soon be buying each of us a turkey with all the fixin's. According to the book, only a year remains before the Dow breaks 40,000 and the Nasdaq hits 20,000
> ...




im glad you posted these figures as they are some of the ones i was referring to when i stated that not all of his predictions have been correct he may overemphasize losses or gains to scare people into reading his books, or he may simply be wayy off the mark, either way the general trends seem to head in the direction he predicts.


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## Bill M (7 October 2011)

young-gun said:


> im glad you posted these figures as they are some of the ones i was referring to when i stated that not all of his predictions have been correct he may overemphasize losses or gains to scare people into reading his books, or he may simply be wayy off the mark, either way the general trends seem to head in the direction he predicts.




And now he is saying
---
*"Gold and silver are going to crash, they're a bubble,"* he said.

Link here: http://smh.domain.com.au/tsunami-to-hit-australian-real-estate-20110911-1k413.html
---

At the end of the day he is just another one of the thousands of gurus who think they can see into the future. Why would he be right and all the others wrong? He has made some very bad calls. Good for selling books though.


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## investorpaul (7 October 2011)

Bill M said:


> And now he is saying
> ---
> *"Gold and silver are going to crash, they're a bubble,"* he said.
> 
> ...




I agree no one would buy his book if he said X Investment Class is going up 10% even if he was right each and every time.

He needs to make outlandish statements to get free press for his book. I don't think he appeals to investors and traders who conduct their own research or analysis, but people chasing get rich quick schemes you love his stuff.


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## young-gun (7 October 2011)

investorpaul said:


> I agree no one would buy his book if he said X Investment Class is going up 10% even if he was right each and every time.
> 
> He needs to make outlandish statements to get free press for his book. I don't think he appeals to investors and traders who conduct their own research or analysis, but people chasing get rich quick schemes you love his stuff.




im not sure that predicting a 10 year or so deflationary period is necessarily promoting a get rich scheme to investors? especially given the only way you would make money in a sharply falling market is by going short, which i know of a few people who don't want anything to do with, or even know about cfd's and derivatives. 

he does claim the gold and silver are bubbles, and i believe gold is currently down almost 300$ an ounce from its staggering september highs? dent predicts that the US dollar will become the new safe haven once the US stops printing money(so to speak), they start working down their tremendous debt, and their dollar will start to become more valuable. any thoughts on this?

i have no doubt that extreme predictions helps sell books and triggers that little part of people that loves drama. i just find it interesting as he takes a different approach to everything else i've been reading, not to say hes right as you said. but for those of you that are technical/analytic investors, he produces some interesting graphs and trend lines( and yeah i know anyone can probably pull a graph and draw some lines on it to support your theory)


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## ROE (7 October 2011)

medicowallet said:


> Actually, he could probably buy it now for what he sold it for.
> 
> Wonder what it could be worth in 2-3 years time.
> 
> I owuld take $500k in cash as opposed to $500k property at the moment, no troubles.




Unless properties price reduce significantly he already losing money
Price edge up slowly since he sold out...his place is in inner city Sydney
since 2008 price gone up around 5%

if he buy again he's up for stamp duties and various charges

at this point in time he's losing and the longer the market stay the same
the more money he bleeds.

losing capital gain free status for PPOR etc...

I'm not pro-properties I found most people who act on predictions
lose out through out history....

there are more losers than winners
in predicting market direction...

Only sure way to make money is spend less than you earn and
let time and compounding works for you


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## medicowallet (7 October 2011)

ROE said:


> Unless properties price reduce significantly he already losing money
> Price edge up slowly since he sold out...his place is in inner city Sydney
> since 2008 price gone up around 5%
> 
> ...




5% increase over 3 years does not justify the risk in the property market atm.

He is in a great position, and property is still under a lot of pressure

In fact, he is probably breaking even, if he invested in cash at 6.5% per year, after both investments count their outgoings involved.


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## ColB (7 October 2011)

sptrawler said:


> Agree with most of what you are saying, the bit about our children paying for our greed, is a bit off!!!!
> 
> I know a lot of people in their late 50's, most are tradesmen, that haven't a lot of money.
> You have to remember that most of these guys have less than $100k in super and don't own their house.
> ...




What a load of codswallop.  Real Estate agents don't create the market, buyers and sellers do and market forces, primarily supply and demand will dictate price.  Now as much as I would agree with you that real estate agents are pretty low down the food chain you can't blame them for the boom periods experienced in the housing sector.

The incidence of property investors whether they were baby boomers or not certainly influenced the upward trend in property prices as they soaked up supply.


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## tech/a (7 October 2011)

Wow some people have a very different view.

I see banana prices falling.
Those bloody Grocers have no empathy for the growers.

Have you seen the price of gold!!
Those mining companies how greedy are they!


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## KIWIKARLOS (7 October 2011)

IMO demographics is not the biggest factor influencing the world economy. Sure we have aging populations etc etc so what the biggest driver of economic growth is cheap reliable energy.

One barrel of oil contains chemical energy equivalent to 40000 man hours of work, people do not drive the ecomony and man power means nothing. Robots can build things more efficeintly and better quality than people. A car takes 10 hours to build on a assembly line.

Really think about all the actual productive activity in the ecomony most is not done by man power, the service sector employs the most people and its still the one main industry that requires humans becasue we haven't built machines capable of doing the tasks yet. Man provides the brains power provides the productivity.

In the age of cheap oil one barrel in iraq could be taken from the ground for the cost of $1 (before refinment, transport etc) and oil was $10-30 a barrel. imagine if oil was still $30 a barrel?

USA deficiets would be tiny if even deficiets, their economy would likely be powering on. household energy bills would be 25% of what they are today. Filling up the car would be $20 instread fo $70. Food would be cheaper as all fertiliser and treansport is based on energy. 

Japan is in such a mess because they have no indigenous energy supply, australia should use its vast energy resources to remain competitive and just ditch the carbon tax idea. If you want to save the planet focus on spending the money on finding vast cheap power and energy efficiency 

In the usa currently gas is what $4 a gallon ie about 80cents a litre and electricity is about 8-12 cents a kwh. In sydney its $1.40 and 20 cents. If usa was paying that price they would have been in a resession long ago.

Everyone is worried about China tanking but the only thing that will constrain them is lack of energy supplies.


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## skc (7 October 2011)

KIWIKARLOS said:


> IMO demographics is not the biggest factor influencing the world economy. Sure we have aging populations etc etc so what the biggest driver of economic growth is cheap reliable energy.




Expensive energy would inhibit economic growth, while cheap energy would be inducive to drive economic growth. But cheap energy doesn't *drive *economic growth.

Ultimately the economy only exists because of people's wants and needs. And demographics is a key factor affecting those desires. It trumps cheap energy on first principle alone.


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## Smurf1976 (7 October 2011)

skc said:


> Ultimately the economy only exists because of people's wants and needs. And demographics is a key factor affecting those desires. It trumps cheap energy on first principle alone.



True perhaps, but energy is effectively a "gate". 

Everything we do requires energy. If the supply and use of energy isn't growing then that's really all you need to know - the economy won't be growing either (unless by means of speculation etc).

For the vast majority of people, there is NOTHING you did today that didn't consume coal, oil, gas and/or hydro-electricity in some form. Nothing.


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## sptrawler (8 October 2011)

ColB said:


> What a load of codswallop.  Real Estate agents don't create the market, buyers and sellers do and market forces, primarily supply and demand will dictate price.  Now as much as I would agree with you that real estate agents are pretty low down the food chain you can't blame them for the boom periods experienced in the housing sector.
> 
> The incidence of property investors whether they were baby boomers or not certainly influenced the upward trend in property prices as they soaked up supply.




O.K then, by your reasoning the boom should keep going, as the supply is declining but the demand is increasing. Lets see how that pans out.
Real Estate agents don't create the market but the have a lot of say in the pricing of the product. 
Maybe you have a short memory, but I remember in 2005, 2006, 2007, every time I picked up a paper, it was covered in real estate propoganda.
Buy now before you miss out crap, bordering on hysteria, well now prices are at 7 times the average wage, the proverbial will hit the fan.
By the way, I don't think the Real Estate agents are low on the food chain, they are only doing a job. If they can see that people are prepared to pay more it is their job to keep moving the bar up.
It's a bit like when I go to buy a car, I have a change over price I want to pay. It doesn't matter whether I get $1000 or $10,000 or $50,000 as long as the change over is the same.


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## drsmith (8 October 2011)

skc said:


> Ultimately the economy only exists because of people's wants and needs. And demographics is a key factor affecting those desires. It trumps cheap energy on first principle alone.



The chicken and the egg. What came first ?

Doesn't cheaper energy also affect those desires by driving competition to provide better (more cost effective) products and services ?


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## young-gun (8 October 2011)

sptrawler said:


> O.K then, by your reasoning the boom should keep going, as the supply is declining but the demand is increasing. Lets see how that pans out.
> Real Estate agents don't create the market but the have a lot of say in the pricing of the product.
> Maybe you have a short memory, but I remember in 2005, 2006, 2007, every time I picked up a paper, it was covered in real estate propoganda.
> Buy now before you miss out crap, bordering on hysteria, well now prices are at 7 times the average wage, the proverbial will hit the fan.
> ...





If increasing demand and diminishing supply were the case, we would find ourselves with increasing house prices. the fact that housing prices have stagnated and even retreated across australia(quite gradually mind you), would only and can only indicate that the demand just isn't there?

the funny thing is this propaganda you're referring to is exactly what has allowed the market to sustain the levels that it has already. in 2008/2009 with record low interest rates, and the media and real estate agents pumping first home buyers and investors with all the good news like the first home owners grant, people such as myself raced out and bought our first house. now when an entire generation such as the baby boomers has seen house prices do nothing but sky rocket, with the very occasional and short lived downturn, it is no wonder why the general thought amongst people is that "house prices ALWAYS go up".

so we went out on a limb and built our first house, within 18 months interest rates had soared back to their original values! with no kids we failed to see the point in paying more than 60-70% of my wage each week so we fortunately sold before the house had depreciated. we barely broke even! My point is that there are alot of gen y'ers that have done the same, and even those from generation x! thing is alot of others have just bought there first house for their *family*, and are unable to just cut their losses and get out. 

once europe, america, and china all fall over, IMO it is the above situations that will lead to an even bigger drop in house prices than expected. all they have done is create another little bubble on top of a pre-existing bubble.

In EVERY other country, residents have stood up and said " Our house situation is unique and different, house prices will never fall here!" and they have and they will. Japan and the US are probably the two best examples of it, and in this upcoming crash Australia will most certainly not be immune.


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## sptrawler (8 October 2011)

young-gun said:


> If increasing demand and diminishing supply were the case, we would find ourselves with increasing house prices. the fact that housing prices have stagnated and even retreated across australia(quite gradually mind you), would only and can only indicate that the demand just isn't there?
> 
> the funny thing is this propaganda you're referring to is exactly what has allowed the market to sustain the levels that it has already. in 2008/2009 with record low interest rates, and the media and real estate agents pumping first home buyers and investors with all the good news like the first home owners grant, people such as myself raced out and bought our first house. now when an entire generation such as the baby boomers has seen house prices do nothing but sky rocket, with the very occasional and short lived downturn, it is no wonder why the general thought amongst people is that "house prices ALWAYS go up".
> 
> ...




I agree with you completely, it is sad that the banks took so long to tighten lending criteria.
It is not only housing that has created the credit bubble, lending on the plastic is at stupid levels also.
The only hope we have of avoiding a catastrophic recession is if the U.S and Europe can somehow get their fiscal position in order. 
Also it will require China to float their currency, to give the rest of the world's manufacturing a chance.


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## KIWIKARLOS (9 October 2011)

I don't agree firstly talking about supply and demand, demand is clearly driven by supply in our case if houses in Sydney were 200 k the demand would be huge. To say the entire housing market will crash is crazy and even in the us some places fair much worse than others. IMO house prices are supported by three main things firstly the cost to build a house , second the land value which is a function of the services provided to that land  and thirdly employment . To build a house costs what min 150k as for landand services, roughly in a 400 unit development the service costs in inner Sydney to connect power is about 15k. Water gas and telephone about the same so about 50 to 60 k per dwelling which is build into the price. That doesn't include value / cost for services such as transport ie roads rail buses which is huge. When you buy a house these costs are basically included in the price of the house in most established areas the services are there but large new developments and places where there are no services you pay up front . I would value the services provided to a house next to a main train station / transport to be 50 to 100 k. So the last factor employment supports the house prices and IMO is the main factor that will drive prices in oz. There is a reason why house prices in syd have held up well it's because we have a diverse economy the high end of the market is really only seeing decreases. You just have to look at places like port headland etc to see how employment drives prices. If the mines went bust it would end up like las Vegas which has seen the market crash. All in all I believe house prices in most capital cities are supported up toward medium price range. Local employment will dictate price fluctuations prices in my inner west Sydney area have increased in the last 6 months by about 4%


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## sptrawler (9 October 2011)

KIWIKARLOS said:


> IMO house prices are supported by three main things firstly the cost to build a house , second the land value which is a function of the services provided to that land  and thirdly employment . To build a house costs what min 150k as for landand services, roughly in a 400 unit development the service costs in inner Sydney to connect power is about 15k. Water gas and telephone about the same so about 50 to 60 k per dwelling which is build into the price. That doesn't include value / cost for services such as transport ie roads rail buses which is huge. When you buy a house these costs are basically included in the price of the house in most established areas the services are there but large new developments and places where there are no services you pay up front . I would value the services provided to a house next to a main train station / transport to be 50 to 100 k. So the last factor employment supports the house prices and IMO is the main factor that will drive prices in oz.




The first one the cost of the house. This can vary considerably, in a boom brickies get upto $2/ brick in a low period they are down to 0.50c - $1, same goes for granos, plasterers, painters, roof carpenters, cabinet makers.
Also the price of bricks, timber etc drops. These factors bring down the cost of a house considerably.
The second one the cost of services, does add to the cost of a block but nowhere near as much as location. The cheapest land is still furthest away from the city, but the cost of providing services there are the highest.
Employment, is the key factor in the price of houses, nobody can support the average $400,000 mortgage when unemployed. The greater the recession the more the unemployment, which inturn causes more foreclosures. Less people can get loans so prices have to fall as banks try to minimise losses.
If the mines go "bust", the flow on will affect the prices in the capital cities, as the support services and flow on effect to general employment would be considerable. IMO


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## young-gun (9 October 2011)

sptrawler said:


> The first one the cost of the house. This can vary considerably, in a boom brickies get upto $2/ brick in a low period they are down to 0.50c - $1, same goes for granos, plasterers, painters, roof carpenters, cabinet makers.
> Also the price of bricks, timber etc drops. These factors bring down the cost of a house considerably.
> The second one the cost of services, does add to the cost of a block but nowhere near as much as location. The cheapest land is still furthest away from the city, but the cost of providing services there are the highest.
> Employment, is the key factor in the price of houses, nobody can support the average $400,000 mortgage when unemployed. The greater the recession the more the unemployment, which inturn causes more foreclosures. Less people can get loans so prices have to fall as banks try to minimise losses.
> If the mines go "bust", the flow on will affect the prices in the capital cities, as the support services and flow on effect to general employment would be considerable. IMO




+1...in a deflationary environment the cost of these goods and services would come down considerably. and if builders/contractors weren't to reduce their prices DRASTICALLY in-line with existing houses(if they were to drop in price) they would simply find themselves out of the job also.


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