House prices to keep rising for years

[kincella]

well it says more about the people that make those affordable suburbs, unattractive to others, than anything else....
one of my daughters tried living in the West in Sydney ...she did not last long...
her majority of Timorese and Fijian neighbours threw the dirty disposable nappies out the window, onto the lawn and onto the street.....she said the stench 24/7 was unbearable....and that was about the least of the awful things they did....apart from the almost monthly break ins....she barely lasted 3 months...she did not fit in with that culture

 

[Trevor_S]

Australia is now looking toward Asia for their money.

We're already selling 20% of our Government Bonds to the Chinese.

http://www.news.com.au/business/money/story/0,28323,25247817-462,00.html

Aussies would rather redecorate their house, getting a loan from overseas interests, to purchase goods from overseas, then invest in genuine wealth building and then whinge about immigrants "taking our jobs !!"

 

[aleckara]

well it says more about the people that make those affordable suburbs, unattractive to others, than anything else....
one of my daughters tried living in the West in Sydney ...she did not last long...
her majority of Timorese and Fijian neighbours threw the dirty disposable nappies out the window, onto the lawn and onto the street.....she said the stench 24/7 was unbearable....and that was about the least of the awful things they did....apart from the almost monthly break ins....she barely lasted 3 months...she did not fit in with that culture

That's exactly right. People don't buy land really - they buy location and all the things that go with that to get a lifestyle (i.e services, anemities, parks, environment, jobs, etc). For the same living standard relative to income it is getting harder and harder for people to make a start and I don't think lowering our interest rates to zero so that people who are diligent and save suffer makes the situation any better to make it affordable which it doesn't anyway as prices tend to adjust to interest rates. It doesn't lean to a good society. BTW a lot of people in these areas don't really care about these properties - probably are in them for free or renting.

Retirees lose out because their savings are eroded, the people buying lose out due to higher prices. The people it helps are those in the building industry - the only industry other than mining that can never be outsourced to other countries (i.e natural protection against competition hence it's one of the only industries Australia has left due to its short sightness and its inability to think for the future thinking everything will be right).

 

[Uncle Festivus]

Ask Zimbabwe about yields and see how much they are getting

Actually, you won't have to go that far - ask the Commonwealth bank how easy it is to get money -

COMMONWEALTH Bank has refused to rule out the prospect of a mortgage rate rise ahead of next month's Reserve Bank board meeting.
Banking analysts are suggesting the country's largest home lender is poised to increase its standard variable rate home loan by as much as 10 basis points this month because its funding costs are continuing to rise.
Such a move would be controversial because CBA and the other major banks have not passed on the full benefit of recent official rate cuts by the Reserve Bank.

Now our very own RBA is 'zero bound' at 3% ie lost control of the debt lever. I wonder what will happen when the home sellers grant finishes in September??

http://www.news.com.au/business/money/story/0,28323,25619257-5013951,00.html

More reality for the Glad Gamers -

MORE Queensland families than ever are losing their homes and businesses to the banks, after a record number of repossession claims in April.
As the global economic crisis forces up the jobless rate, new figures from the Justice Department show lenders lodged 176 claims to repossess homes or businesses in the state's courts during April.
A Justice spokesman has confirmed it is the highest monthly total since records began, about 1992, The Courier-Mail reports.

Anomaly corrected -

MORE than 35,300 Australians lost their jobs in May with Australia’s unemployment rate jumping back up to 5.7 per cent, after it took an unexpected slide in April.

 

[kincella]

thats funny...which article do you believe.....is it the seasonally adjusted figures that are out....and look at the different full time and part time figures...one is the opposite to the other....
updated......
so here are the actual figures from the ABS site...
EMPLOYMENT

decreased by 1,700 to 10,793,100. Full-time employment decreased by 26,200 to 7,643,100 and part-time employment increased by 24,500 to 3,150,000.


UNEMPLOYMENT

increased by 27,200 to 651,200. The number of persons looking for full-time work increased by 30,000 to 482,600 and the number of persons looking for part-time work decreased by 2,800 to 168,600.
...................................................................
hmmm.....so full time employment decreased by 26,200 but PT increased by 24500 = difference of 1700
but then how do they come up with unemployment increased by 27200...if employment decreased overall by 1700 ???.....I think the answer lies in those PT people that increased by 24500...were actually looking for full time work....
how else do you explain...on one hand there is only a 1700 decrease in employment....but on the other hand there is an increase in unemployment......
ps I cannot be bothered wasting time on this useless figures

then the article in the age............

Total employment fell by 1,700 to 10.793 million, in May, seasonally adjusted, compared to market expectations for a decline of 30,000 in the month, Australian Bureau of Statistics (ABS) data released on Thursday showed.

The data also showed that full-time employment decreased by 26,200 to 7.643 million in the month while part-time employment was up 24,500 to 3.150 million.
The unemployment rate was a seasonally adjusted 5.7 per cent in May, compared with an upwardly revised 5.5 per cent in April, while the participation rate was 65.5 per cent, compared with 65.4 per cent in April.

http://news.theage.com.au/breaking-...ws-positive-say-economists-20090611-c4d7.html

and then this from the news

Mixed bag for full and part-time employment

Full-time employment increased by 49,100 and part-time employment decreased by 21,800 according to the Australian Bureau of Statistics data released today.
Part-time employment decreased by 21,800 in April. Economists had forecast April unemployment to edge closer to 6 per cent but instead the turnaround figures surprised many.

In March, the rate was 5.7 per cent leaving 650,900 people out of work.

http://www.news.com.au/business/story/0,27753,25619639-462,00.html

 

[Uncle Festivus]

In March, the rate was 5.7 per cent leaving 650,900 people out of work.
.....upward revision to 5.5% for March

That's the only bit that matters?

 

[kincella]

people employed total....wait for it....10,793,100 or roughly 95% of the population in the age groups available for work.....
but you concentrate of the bad news of 5.7%
for me ...its a celebration that we have so many in work...
my glass is half full.....

 

[lasty]

This is right Kincella however the doom and gloomers wouldnt be too happy.

They need some bad news to keep their "Emo"s" fan club rocking.

So far there hasnt been much bad news of late, even Tracey and Gordon, had a happy ending

Mind you Steve Keen the property bear and the Professor of gloom must be elated that the area in which he sold his property has risen by 14pct in the past year.

 

[dhukka]

thats funny...which article do you believe.....is it the seasonally adjusted figures that are out....and look at the different full time and part time figures...one is the opposite to the other....
updated......
so here are the actual figures from the ABS site...
EMPLOYMENT

decreased by 1,700 to 10,793,100. Full-time employment decreased by 26,200 to 7,643,100 and part-time employment increased by 24,500 to 3,150,000.


UNEMPLOYMENT

increased by 27,200 to 651,200. The number of persons looking for full-time work increased by 30,000 to 482,600 and the number of persons looking for part-time work decreased by 2,800 to 168,600.
...................................................................
hmmm.....so full time employment decreased by 26,200 but PT increased by 24500 = difference of 1700
but then how do they come up with unemployment increased by 27200...if employment decreased overall by 1700 ???.....I think the answer lies in those PT people that increased by 24500...were actually looking for full time work....
how else do you explain...on one hand there is only a 1700 decrease in employment....but on the other hand there is an increase in unemployment......
ps I cannot be bothered wasting time on this useless figures

then the article in the age............

Jesus kincella , how many times do you want to demonstrate your ineptitude with numbers? A net 1,700 people lost jobs but unemployment rose by 27,200, why do you think that was?

The change in employment is the change in the number of people with jobs. The change in unemployment is the change in the number of people that aren't considered employed plus new entrants into the labour force. If the labour force grows and employment stays flat the unemployment rate will rise. That's why you need to average around 15-20k new jobs per month in Australia just to keep the unemployment rate steady.

 

[kincella]

dhukka...my numbers and comprehension are just fine...
now since we have been there and done this everytime the unemployment numbers come out....and the reality is....its not taken from centrelink with actual numbers of people registered for unemployment.....

but taken from a survey by ABS...a telephone call to 20 odd households...and the respondents say oh yes...dave still has a job, but the kids looking for work, and sara works pt...but bill down the road is looking for work I think...or is he on the dole....and me mate in timbuktoo just got a ft job...but his mate went pt...and the wife is working pt but looking for ft work...
so there you have it.....a whole lot of rubbish....and then the abs seasonally adjusts the figures....then the treasurer says make them figures look good..

I will leave it to you people who are good with numbers to fight over it
hehehehehehe:sheep:

 

[dhukka]

dhukka...my numbers and comprehension are just fine...
now since we have been there and done this everytime the unemployment numbers come out....and the reality is....its not taken from centrelink with actual numbers of people registered for unemployment.....

but taken from a survey by ABS...a telephone call to 20 odd households...and the respondents say oh yes...dave still has a job, but the kids looking for work, and sara works pt...but bill down the road is looking for work I think...or is he on the dole....and me mate in timbuktoo just got a ft job...but his mate went pt...and the wife is working pt but looking for ft work...
so there you have it.....a whole lot of rubbish....and then the abs seasonally adjusts the figures....then the treasurer says make them figures look good..

I will leave it to you people who are good with numbers to fight over it
hehehehehehe:sheep:

I'll explain it

1,700 fewer people had jobs in May than did in April.

However 27,200 more people were unemployed in May as opposed to April.

Your mistake is in thinking that these two numbers should cancel out.

They don't for the simple fact that more people entered the workforce, that is, more people were looking for work in May than in April.

So they are not added to the employment number because they don't have jobs but they are added to unemployment because they don't have a job and are actively looking.


The opposite case can also happen (although it is more unlikely), that is the number of employed can go down and the unemployment rate can also go down if there is a decline in the number of people looking for work. Simple stuff really.

 

[Beej]

Beej,

I wonder if you could provide evidence that consumer confidence is highly correlated with economic outcomes like GDP growth. I thought the following was the highlight of yesterday's consumer confidence report:

The view that Consumer Confidence correlates with economic outcomes is by no means a new or even controversial idea! So I'll let you research that one for yourself if you think otherwise. I know someone who has based entire medium/long term equity trading strategies around the CC indicator and being very successful doing that over the past 20 years, including using it to signal exit and re-entry for the current bear market at what have turned out to be very opportune times.

Of course it pays to understand the data thoroughly and read all the information as you did.

A survey of 2000 peoples opinions is economicaly irrelevant - it obviously didn't include 2000 people who have just lost their jobs and/or houses.

Again, you can dismiss it all you like, but a sample of 2000 people is statistically significant if done using a correct methodology, and the consumer confidence index based on that survey is a widely followed and well respected indicator.

PS: I've added a CC graph below - if you plot the CC index against GDP growth there is a clear correlation, with CC usually dipping as the economy contracts, and rising as the economy expands. Note that graph is from last year so does not show the recent improvement in confidence to 101.

Now you would have to agree on at least one thing, and that is the importance of interest rates on property buyers? Yes or no? Now you would also have to agree that long US treasuries yields are going up? Yes or no? If Rudd is in the debt market to pay for his deficit then he will be competing with the other indebted economies in the world for funds, of which the US sets the bench mark.

Central banks are now zero bound on 'official' interest rates - the market is now calling the shots on the risk yield of debt! And guess what, public (government) debt is going up, not down!

10 year US treasuries yields are rising - surely you can't deny that? Simple, hard facts not subject to human opinion.

Yes interest rates are important, possibly the most important factor effecting house price trends. I would absolutely agree that a switch from long term low interest rates to long term high interest rates (aka 90s/00s vs 70s/80s Australia) would be one of the only factors likely to really force a significant downward shift in property prices.

Now as for US T-Bonds, well their yields are being driven up in part because the USD is devaluing relative to other currencies, and they are relying on o/s purchasers to fund those bond sales. This makes perfect sense - and might be a problem for the US. Of course the Fed can simply continue to use or expand it's quantitative easing program in an attempt to keep the yield under control, but that would probably backfire ultimately as it should lead to further downward pressure on the US $. So maybe the US is headed into a period of higher interest rates over the long term - how much higher? Time will tell.

In Australia on the other hand we have several factors working in our favour that may mean we avoid the same fate.

* For a start, we don't need to raise anywhere near as much government debt, either as a proportion of GDP or in absolute terms. In fact our cash needs are tiny compared to those of the US (only a few hundred billion over 4 years).

* So far there is significant appetite for a large proportion of our bonds locally - the last auction sold $8B worth right and $7B of those were bought by our own local banks.

* There are over $1Trillion in local super funds in Aussie $$. It is conceivable that if yields were being pushed to high due to excessive reliance of o/s funding, they government could regulate to ensure that some of the bonds had to be acquired by Aussie super funds - where there is clearly more than enough liquidity to fund the whole lot if we wanted to do that.

* The Aussie dollar is likely to be one of the many currencies that will appreciate against the US dollar in the current scenario. We don't have QE going on here, official and bank lending interest rates, while low, are not as out of whack as in the US/UK etc. Couple this with the majority of government bonds being bought with local funds, plus maybe the Chinese, who have a very practical use for our Aussie $$ yield flows (ie buying our resources, and therefore given the US dollar outlook wuold likely buy our bonds even at lower yields than the US ones), and I think it looks like we should not see the same upwards yield pressures here on bonds as in the US.

Cheers,

Beej

 

[dhukka]

The view that Consumer Confidence correlates with economic outcomes is by no means a new or even controversial idea! So I'll let you research that one for yourself if you think otherwise. I know someone who has based entire medium/long term equity trading strategies around the CC indicator and being very successful doing that over the past 20 years, including using it to signal exit and re-entry for the current bear market at what have turned out to be very opportune times.

Of course it pays to understand the data thoroughly and read all the information as you did.

Actually your contention that:

consumer confidence index is an important leading indicator that historically has a strong correlation with economic outcomes (GDP growth etc)

is controversial. i don't need to research it because I've read the research, you are the one who needs to read it. I remember reading a paper years ago published by your mates at the RBA called "WHAT DO SENTIMENT SURVEYS MEASURE?"

Here is the abstract:

Indices of business and consumer sentiment receive widespread media coverage and are closely watched by market economists despite their limited success as leading indicators. In this paper we ask what explains ‘sentiment’ and find that lagged economic indicators (such as changes in GDP, job vacancies and the cash rate) can explain a substantial proportion of the variation in a number of backward and forward-looking sentiment indices. This does not rule out the possibility that they may be useful for forecasting. We find, however, that when currently available economic information is appropriately ‘filtered’ from the sentiment indices, in most cases they fail even rudimentary Granger-causality tests of predictive ability. On a more positive note, we find that the Roy Morgan consumer confidence rating, NAB actual business conditions, NAB expected employment outlook over the next three months and the second question in the Roy Morgan and Westpac/MI consumer surveys all provide some, albeit small, contribution to forecasting employment growth. The second question of both consumer confidence surveys (which asks about anticipated personal financial conditions over the coming year) also appears to have some ability to predict recessions. Outside of these results there is little evidence that the surveys tell us anything we didn’t already know. Thus, there is reason to suspect that surveyed respondents’ forecasts offer little more information about the future path of the economy than a weighted average of lagged economic variables.

 

[Beej]

Actually your contention that:

consumer confidence index is an important leading indicator that historically has a strong correlation with economic outcomes (GDP growth etc)

is controversial. i don't need to research it because I've read the research, you are the one who needs to read it. I remember reading a paper years ago published by your mates at the RBA called "WHAT DO SENTIMENT SURVEYS MEASURE?"

Here is the abstract:

All fair enough and that was an interesting read - thanks for the link! I would note though that my assertion was about correlation rather than causality. The paper and exert you referenced acknowledges the correlation, with some caveats. Additionally, the consumer confidence numbers for a given time are released well before other data like National Accounts etc, and therefore when I say it is a leading indicator, perhaps what I should instead have said was early/first available indicator. Ie you can often get a good idea what other economic data might be going to look like for a given period by looking at the consumer confidence (and related) data for the same period, which is available first.

Cheers,

Beej

 

[Beej]

By the way - back on topic for a while; I don't think anyone has remarked on the big jump in INVESTOR participation evident from the latest ABS housing finance stats? Investor buying up nearly 8.9% over the previous month - interesting isn't it?

Beej

 

[kincella]

interesting article about the age of investors...usually older
Not surprisingly, investor households differ
from non-investor households in a number of
aspects. The survey revealed that investor
households tended to be somewhat older than
the rest of the population (Graph 1). The
median age of the reference person in investor
households was around four years older than
for non-investors, largely reflecting a greater
concentration of households in the 35 to
64 age groups, especially those aged between
45 and 54. The bunching of investors in the
working-age segment of the population
would be consistent with tax considerations
being one of the motivations for owning
investment property.
Investor households across all age groups
tended to have higher incomes than their noninvestor
counterparts (Graph 2). In line with
this, 71 per cent of investors were in the top
two household income quintiles and the
propensity to own an investment property
increased at higher incomes, with households
in the highest quintile being almost three times
more likely to own an investment property
than households in the middle quintile
(Graph 3). Associated with their higher
income, investor households were much more
likely to be working than their non-investor
counterparts, and especially to be
self-employed.
Not surprisingly, investor households were
also wealthier than non-investor households,
partly because higher wealth reflects property
ownership (Graph 2). More than half of all
investor households were in the quintile with
the highest net wealth, while only 2 per cent
were in the least wealthy quintile (Graph 3).
A conventional view of property ownership
is that households tend to purchase their own
home before buying an investment property.
The HILDA Survey provides some support
for this view, with 85 per cent of investor
households also owning their own home,
considerably more than the 68 per cent of
home owners in the general population. Still,
at 15 per cent, a surprisingly large share of
investors were households who rented, but
owned a residential property which they did
not normally reside in. The latter group tended
to be younger than those investors who also
owned their own home: the median age of
renter investors was 39 years, verNot surprisingly, investor households differ
from non-investor households in a number of
aspects. The survey revealed that investor
households tended to be somewhat older than
the rest of the population (Graph 1). The
median age of the reference person in investor
households was around four years older than
for non-investors, largely reflecting a greater
concentration of households in the 35 to
64 age groups, especially those aged between
45 and 54. The bunching of investors in the
working-age segment of the population
would be consistent with tax considerations
being one of the motivations for owning
investment property.
Investor households across all age groups
tended to have higher incomes than their noninvestor
counterparts (Graph 2). In line with
this, 71 per cent of investors were in the top
two household income quintiles and the
propensity to own an investment property
increased at higher incomes, with households
in the highest quintile being almost three times
more likely to own an investment property
than households in the middle quintile
(Graph 3). Associated with their higher
income, investor households were much more
likely to be working than their non-investor
counterparts, and especially to be
self-employed.
Not surprisingly, investor households were
also wealthier than non-investor households,
partly because higher wealth reflects property
ownership (Graph 2). More than half of all
investor households were in the quintile with
the highest net wealth, while only 2 per cent
were in the least wealthy quintile (Graph 3).
A conventional view of property ownership
is that households tend to purchase their own
home before buying an investment property.
The HILDA Survey provides some support
for this view, with 85 per cent of investor
households also owning their own home,
considerably more than the 68 per cent of
home owners in the general population. Still,
at 15 per cent, a surprisingly large share of
investors were households who rented, but
owned a residential property which they did
not normally reside in. The latter group tended
to be younger than those investors who also
owned their own home: the median age of
renter investors was 39 years, versus 49 years
for owner-occupier investors.
Graph 1

and this with the negative views by the younger ones.........
2). Young investor
households were much more likely to gear
their investment properties than older
investors: more than two-thirds of property
investors in the 25–44 year age group used
gearing. In addition, among those investors
with debt outstanding on investment
properties, the typical gearing ratio was higher
for younger investors. Young investors were
also more likely than older investors to report
receiving a negative net income on their
property investment: indeed nearly
50 per cent of investors in the 25–44 year age
group reported negative or zero net income
from letting their property. Interestingly,
26 per cent of residential property investors
in this age group were renters.
http://www.rba.gov.au/publicationsandresearch/bulletin/bu_may04/bu_0504_2.pdf

 

[kincella]

another article on household debt....for the young'uns

In an address to the institute's Public Economics Forum in Canberra today, he will review income data which shows wealthier households, those with the most capacity to get themselves out of financial strife, hold the bulk of the nation's private debt.

The median household had debts that amounted to just 8 per cent of assets, meaning that in the event of a sudden drop in income the repayment obligations, could, in the worst case scenario, be avoided by selling at least part of the household wealth."

http://www.news.com.au/business/money/story/0,28323,25614711-5017313,00.html

 

[Trevor_S]

meaning that in the event of a sudden drop in income the repayment obligations, could, in the worst case scenario, be avoided by selling at least part of the household wealth."

In a "worst case scenario", I would anticipate a general flight to "cash" and/or Au .... so, sell ... To whom ? and if you do sell, will getting 10c on the dollar be enough to to alleviate the "repayment obligations" ?

 

[kincella]

well well well...what have we here....those NRAS houses are being onsold to investors...receive back $8000 pa from the govt for the next 10 years...but you need to rent them out 20% cheaper than the market...
Property ID: 2007739780
MASSIVE CASH FLOW

Want government guaranteed positive cash flow?

Introducing National Rental Affordability Scheme, or NRAS as seen on TV and all major print media NRAS is a Federal & State Government Incentive providing investors an exclusive opportunity to invest in limited properties which qualify for tax exempt Government grants. The scheme provides a minimum of $8,000 in tax exempt incentives every year for 10 years, that's an incredible $80,000 + in tax exempt incentives Plus rent Plus depreciation and negative gearing.
In addition to normal capital growth, these selected dwellings are CASH FLOW POSITIVE around $500 pcm After Tax* . The property is kept continuously compliant by experienced property professionals for a single low fee. This is what makes NRAS properties winners and give piece of mind in a changing market. & nbsp;

Full details are available on application.
eg 290,000 in Perth

http://www.domain.com.au/Public/PropertyDetails.aspx?adid=2007739780

 

[Uncle Festivus]

CBA raises rates 0.1 to 5.74% - the 4 pillars of monopoly?