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House prices to stagnate for 'years'

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Well looks like Inflation will be kept under control by rising food prices.
This will absorb wage rises and curtail discriminent spending.

Interest rates will stay low and increased demand for Rentals will ensure a continuing boyant housing market.

Those waiting will find bargains but wont get the crash in the broad sence they are waiting for.
 
tech/a said:
Well looks like Inflation will be kept under control by rising food prices.
This will absorb wage rises and curtail discriminent spending.

Interest rates will stay low and increased demand for Rentals will ensure a continuing boyant housing market.

Those waiting will find bargains but wont get the crash in the broad sence they are waiting for.
Click to expand...

Tech/a,

Wouldn't rising food prices add more pressure to Inflation.

My recollection was that rising banana and fuel prices were the main reasons for last years Interest Rates rises.

Now apparently, we are going to have broad increases of food prices due to the drought, so from my understanding, this is going add more pressure for Interest Rates to rise.
 
High Oil prices were said to cap interest rate rises.Curtailing Inflationary spending.

Go figure.
 
Well now I'm confused about inflation... :confused:

Actually, perhaps not. Since inflation is a monetary phenomenon and drought isn't likely to halt the RBA's proverbial printing press (unless we really do run out of power) then inflation ought to just carry on regardless. All that will change is where it ends up - in food (and power) prices rather than houses.

Same if oil goes up in price. If the overall money supply isn't changing then it's simply diverting the price inflation from one thing to another. That's my understanding anyway. Print more money and it has to go somewhere - only question is where.
 
Kimosabi said:
Did anyone watch Insight on SBS tonight, about Aussie Housing Affordability etc?

http://news.sbs.com.au/insight/
Click to expand...
I saw it, could only half pay attention though.
**********************

http://www.marketwatch.com/News/Story/Story.aspx?guid={C60E8F06-646F-49ED-BFBD-9543E55AD859}


Sales of existing homes plunge 8.4% in March

By Rex Nutting
Last Update: 10:00 AM ET Apr 24, 2007

WASHINGTON (MarketWatch) -- Sales of existing homes plunged 8.4% in March to a seasonally adjusted annual rate of 6.12 million, the lowest in nearly four years, the National Association of Realtors reported Tuesday. It was the largest percentage decline in sales since January 1989. Economists were expecting sales to fall to 6.45 million. The median price of an existing home fell 0.3% year-over-year to $217,000. The inventory of unsold homes on the market fell 1.6% to 3.75 million, representing a 7.3-month supply. Sales of condos were unchanged, while sales of single-family homes dropped 9.5%. Sales fell in all four regions. "This number reflects subprime lending" as well as the cold weather in February, said David Lereah, chief economist for the real estate group. End of Story
Click to expand...
 
Kimosabi said:
Did anyone watch Insight on SBS tonight, about Aussie Housing Affordability etc?

http://news.sbs.com.au/insight/
Click to expand...

Yes, I saw most of it and, as usual with Insight, it was interesting with balanced representation of various viewpoints.

Too many people who have borrowed to their absolute limit which is OK while all goes well. But if one gets sick, loses a job etc, then they simply can't make the payments.
 
Julia said:
Too many people who have borrowed to their absolute limit which is OK while all goes well. But if one gets sick, loses a job etc, then they simply can't make the payments.
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That's worrying if they expect not to get sick or lose their job over 40 year loans. I believe that when it's time for me to buy a house I'll be buying it off somebody who's selling their home because of debt... This will be reality... USA is of similar land size to Australia yet have 500 million people living there, but for some reason houses there are cheaper and of better value than here... I smell a recession brewing
 
insider said:
That's worrying if they expect not to get sick or lose their job over 40 year loans. I believe that when it's time for me to buy a house I'll be buying it off somebody who's selling their home because of debt... This will be reality... USA is of similar land size to Australia yet have 500 million people living there, but for some reason houses there are cheaper and of better value than here... I smell a recession brewing
Click to expand...

USA Population Clock: :)
http://www.census.gov/population/www/popclockus.html
 
Was it just me or did John Symond's from Aussie Home Loans start looking a bit sick when the Amy Kilpatrick from the Consumer Law Centre started talking about subprime lending.

It's a real pity she didn't elaborate on what is happening in the US at the moment.

What is most disturbing is that what is happening in Aussie Property is very similar to what has been going on in the US before they're property market started crashing.
 
Hopefully this hasn't been posted before...​

The Land Boomers​

“...The boom continued to gather strength. In 1885 the harvest was prolific, the price of wool was high, the railways made a profit for the first time in the colony's history, and optimism reigned supreme. A few warning voices were raised overseas, but heard as from afar...” ​

A Reader Writes...​

Extracts from the book "The Land Boomers" by Michael Cannon, published in 1966... Victoria was made rich by gold, and populous by the immigrants who sought it.​

Two great economic booms and depressions had already shaken nineteenth century Victoria. The first occurred shortly after the early Melbourne land sales of 1837, reaching its peak about three years later. The discovery of gold sparked off the second great boom, which reached its peak in the 1850s. People had money to burn, and either dissipated it in wild extravagance or bought property at inflated prices. But because of the continuous rich flow of gold, there was comparatively little suffering when the inevitable crash followed.​

Then came the land boom of the 1880s. This time every type and degree of man was involved. Clergymen, labourers, widows, schoolmasters all grasped at the chance of quick wealth and invested their savings.​

The land mania of the 1880s took two main forms. The first was based on a plethora of building societies, whose optimistic officials were relieved that every family in the colony could simultaneously build their own house, keep up the payments through good times and bad, and support an army of investors who were being paid high rates of interest for the use of their money. The second form of mania was the deeply held belief that it was impossible to lose money by investing in land a belief that persists to the present day.​

The boom continued to gather strength. In 1885 the harvest was prolific, the price of wool was high, the railways made a profit for the first time in the colony's history, and optimism reigned supreme. A few warning voices were raised overseas, but heard as from afar.​

In 1886 it appeared to some of the associated banks that the land boom had reached its zenith and would now plunge downwards. They became alarmed at the large withdrawals being made to meet land payments, and increased the interest rate on deposits and overdrafts by 1 per cent. For a year land speculation became less profitable​

Then in 1887 there began a new wave of speculation, the land boom proper, so forceful that it over-rode all considerations of interest rates. Land selling in Surrey Hills for 15 shillings a foot in 1884 rose to 15 Pounds in 1887. Land at Burwood rose from 70 to 300 Pounds an acre.​

In the city there was fantastic competition for blocks, fanned by constant reports of fortunes which had been made by holding on to the blocks for a few months and reselling.​

Once again the banks, dismayed by wildly fluctuating values, began calling in overdrafts. Unfortunately, some of the leading banks had encouraged speculation when money was plentiful, and ruthlessly suppressed it when the inevitable reaction set in. This traditional banking policy, aimed primarily at safeguarding the banks' own interests, proved utterly ruinous to the general community.​

The land promotors began looking elsewhere for easy finance. Thus the years 1888, 1889 and even 1890 saw the formation of most of the disastrous land and finance companies, and so-called land banks. Under the loose banking and company laws of the time, they were able to take savings deposits, issue shares, float loans, discount promissory notes and other commercial paper, and in general perform all the functions of an established bank.​

The boom soared upwards to dizzy new heights. How could such values last? The maximum rentals which tenants were willing to pay often amounted to only 2.5% return on the money spent on sites and buildings. As the boom petered out, many tenants could not pay even that. A few experienced speculators realised what would happen, and quietly began to sell off their shares and land while there was yet time.​

Simultaneously, there began a series of calamitous industrial conflicts between employers and the developing unions, mainly in the maritime and pastoral industries. The strike collapsed. But business never fully picked up again.​

For a few months, many investors still appeared to be hypnotized by the boom. By the time they realised that the crash was indeed final, practically every land company was in liquidation and calls on their shares had gone forth. The same pressure was felt by the land banks, many of which owned shares in associated speculative companies. Some were able to use the public's cash deposits to stay open a little longer. But one after another they toppled, the pressure multiplying each day as their depositors took fright and withdrew their cash. From July 1891, when the Imperial Bank suspended payment, to March 1892, when the Australian Deposit and Mortgage Bank suspended, no fewer than 20 major financial institutions, with liabilities of nearly 20 million Pounds, closed down.​

Every day brought news and rumours of fresh disasters, of another land company folding up. And when they folded, there came the inevitable calls of capital on their partly paid shares to help pay the creditors.​

Suicide became a commonplace solution.​

By the end of 1891 the bottom had completely dropped out of the land market.​

As bank shares and other stocks began to slide in value, the Directors of certain companies sent out dummies to buy their own shares and prop up their value temporarily while the Directors sold their personal holdings.​

Said Table Talk, just before Christmas 1892, "Never before in the history of the colony has a Christmas holiday been shrouded in such deep gloom. Shop-keepers complain that their customers appeared to have forgotten that the season of good cheer was at hand, and started on being asked for the accustomed order, as if reminded of the changed condition of their purses that does not admit of luxuries or extras."​

The year 1892 may have been sombre, but the disasters to come in 1893 were quite unprecedented. Enough misuse of financial power had been revealed to make every man suspicious of the soundest institutions, and to be fearful about the safety of his own bank deposits. Quietly, and then more quickly, a general run on the established banks began.​

Public disquiet was multiplied by the suspension of the Commercial Bank on 7 April 1893, following heavy withdrawals and a slump in the value of its shares.​

On the weekend of 29-30 April 1893, the great and powerful National Bank privately advised the Premier that because of the continuous run on its deposits, it intended to suspend business on the Monday. On Sunday 30 April, Cabinet met secretly and decided to declare the whole week a banking Holiday. On Monday 1 May 1893, men picked up their morning papers to read the incredible news that the colony's entire banking system had apparently broken down.​

The Angel of Death came early and stayed late in the Melbourne of 1892 and 1893. The collapse of the boom economy was sudden and dramatic. As each company closed its doors, it dragged others down with it. Clerks, surveyors, accountants, builders, and every other kind of employee was thrown out of work, and onto a labour market which was harsh enough in good times, but almost non-existent in bad times. Their savings ran out, and still there was no work to be had. Nor was there any form of help, beyond private charity which usually came too little and too late.​

In the absence of trustworthy statistics, it is difficult for us today to form a complete picture of the extent of unemployment and the human suffering it produced. Some contemporary observers claimed that every second man was out of work, but these estimates could only be guesswork. Thousands of people were privately supported by others. Thousands left Melbourne. Thousands lived on scraps and municipal handouts. All we can say for certain is that this was the worst depression in Australian history, before or since.​

This correspondence was recently received from a reader of the Daily Reckoning.​

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We will now be crossing to Robots for a Message from our sponsor...
 
hello,

gee another week gone, appears nothing changed in the property market

got anymore stories for the weekend

thankyou

robots
 
robots said:
appears nothing changed in the property market

robots
Click to expand...
Only if you have you head in the sand. There were actually plenty of stories on mainstream TV and papers.

Find them yourself ;)
 
robots said:
hello,

gee another week gone, appears nothing changed in the property market

got anymore stories for the weekend

thankyou

robots
Click to expand...
Certainly have. It was on the ABC yesterday about people losing their homes in NSW. Said it was the worst on record and expected to get worse.

Not quite the weekend, but Friday's near enough I think.:2twocents
 
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