Keen warns Australia headed for sub-prime crisis

[nunthewiser]

I wanted to share with you some advice that a very successful friend of mine gave me is (incidentally he did make his money from property but that is not the point).

He said that if he had listened to all of the people who gave him financial advice he would be broke right now - 'why should I take advice from someone whos net worth is 500K or even a million? Show me the guy who is worth 10mil because thats the guy I want to be speaking to and seeking advice from!'

I wonder how much Keen is worth...

LOL so you would take financial advice from elton john i take it

 

[Knobby22]

whats with all this frenzied discussion....not all houses are priced at 300k or 500k...
sounds more like the game of follow the leader....but who is your leader ???
careful he does not lead you all over the cliff...
if you need mentoring...you need a mentor who can show you how...and has a track record of success...to back up his claims...
keen at 55 years old...and still renting.....thats some record

He sold his house and has the cash to buy back in.
You are distorting the facts to achive your argument.

 

[Prospector]

He sold his house and has the cash to buy back in.
You are distorting the facts to achive your argument.

Just prior to selling his apartment, he went to the media saying he was selling it now, because 'he knew' that its value would fall in the next twelve months and he didnt think he would be able to sell it then. Guess the new buyer didnt believe him then! But what sort of a twat would say that in the midst of selling his own house!

 

[kincella]

pretty certain he borrowed most of the money to buy it...so after paying all the buying and then selling costs..he may have come out with a small loss
wonder if he was a fhb ?

 

[Beej]

pretty certain he borrowed most of the money to buy it...so after paying all the buying and then selling costs..he may have come out with a small loss
wonder if he was a fhb ?

It was a unit in Surry Hills wasn't it? Pretty dumb to sell in that area I would have said as that is an area with lot's of potential price growth (even in a generally flat/falling market), due to it being an "original" Sydney inner city burb that is now about 2/3rds gentrified and walking distance to Sydney CBD.

Also when did he sell? Last year? According to APM the median price of houses and units in Surry Hills have INCREASED by 4% and 2% respectively over the past 6 months (see http://www.homepriceguide.com.au/snapshot/price/index.cfm?action=view&source=apm).

PS: Here is a good piece by Gerard Henderson on Ass. Prof. Keen and his well publicised views:
http://www.smh.com.au/news/opinion/...ts-instant-fame/2008/10/20/1224351149788.html

Cheers,

Beej

 

[gfresh]

Hey look, another house price thread, we already have two already. Funny to see Keen being dug out again, didn't hear much from him for a couple of months, but he's back obviously

One thing to be aware of is there is a *lot* of pressure and feeding of the media the continued price rise story. If you read the news articles somewhat objectively it's quite obvious the sort of angles, and the sources they use to spin it one way or the other. Press releases are put out, and then stories written from these. Anyhow, the best is to do your own research, and at least go beyond the media either side of the fence.

 

[Taltan]

Mr Burns, I think my current position is not far removed from yours in the late 1980's. Difference is I think I will keep renting.

Option A: Keep paying 26k a year in rent for a place in Inner Melb - 26k housing cost.

Option B: Similar place to buy is currently 600k (minimum) so assuming I got a 5.3% mortgage thats 31.8k a year interest. I would also have to pay outgoings myself which is approx 4.2k coming to a total of 36k for housing.

Thats a 10k difference which means the property needs to be worth 610k in 12 months for my investment to be worthwhile. A modest 1.67% rise.

I have not accounted for FHOG or Stamp duty because essentially they cancel each other out, and if anything the stamp duty is more than FHOG.

With that in mind it is then a question of where prices will go? Personally I believe there will be a fall in the 0-10% region so I am better off renting. If I believed in a 5-10% rise the decision would be difficult, beneficial in 12 months but need to factor for the inflexability of locking in now and the added risk of ownership. If I thought the rise would be over 10% I would buy.

So I will continue to rent because with the GFC a rise of over 10% seems unlikely.

 

[It's Snake Pliskin]

Mr Burns, I think my current position is not far removed from yours in the late 1980's. Difference is I think I will keep renting.

Option A: Keep paying 26k a year in rent for a place in Inner Melb - 26k housing cost.

Option B: Similar place to buy is currently 600k (minimum) so assuming I got a 5.3% mortgage thats 31.8k a year interest. I would also have to pay outgoings myself which is approx 4.2k coming to a total of 36k for housing.

Thats a 10k difference which means the property needs to be worth 610k in 12 months for my investment to be worthwhile. A modest 1.67% rise.

I have not accounted for FHOG or Stamp duty because essentially they cancel each other out, and if anything the stamp duty is more than FHOG.

With that in mind it is then a question of where prices will go? Personally I believe there will be a fall in the 0-10% region so I am better off renting. If I believed in a 5-10% rise the decision would be difficult, beneficial in 12 months but need to factor for the inflexability of locking in now and the added risk of ownership. If I thought the rise would be over 10% I would buy.

So I will continue to rent because with the GFC a rise of over 10% seems unlikely.

Yes, you have touched on an important aspect here. The cost of renting vs the cost of buying. the opportunity cost of not buying is you miss out on capital growth, but by buying you miss out on cash growth which you can do serious stuff with. And imagine buying where gang wars are. What a nightmare.

 

[It's Snake Pliskin]

I wanted to share with you some advice that a very successful friend of mine gave me is (incidentally he did make his money from property but that is not the point).

He said that if he had listened to all of the people who gave him financial advice he would be broke right now - 'why should I take advice from someone whos net worth is 500K or even a million? Show me the guy who is worth 10mil because thats the guy I want to be speaking to and seeking advice from!'

I wonder how much Keen is worth...

So if I had bought many properties at some time in the past before stellar growth and now I have a lot of money, would that make me a better judge than the author of the article in question? Even if I had just listened to anyone and took a gamble?

 

[robots]

It was a unit in Surry Hills wasn't it? Pretty dumb to sell in that area I would have said as that is an area with lot's of potential price growth (even in a generally flat/falling market), due to it being an "original" Sydney inner city burb that is now about 2/3rds gentrified and walking distance to Sydney CBD.

Also when did he sell? Last year? According to APM the median price of houses and units in Surry Hills have INCREASED by 4% and 2% respectively over the past 6 months (see http://www.homepriceguide.com.au/snapshot/price/index.cfm?action=view&source=apm).

PS: Here is a good piece by Gerard Henderson on Ass. Prof. Keen and his well publicised views:
http://www.smh.com.au/news/opinion/...ts-instant-fame/2008/10/20/1224351149788.html

Cheers,

Beej

hello,

hahaha, classic Beej, the king of doom done over

please please read the posts from the ASF kings who are out there putting in

thankyou
associate professor robots

 

[Conza88]

RENT.


Is all I can say.

 

[dhukka]

I am sympathetic to Steve Keen's criticism of conventional economists and his affection for the Austrian School of economics. I also think Australian house prices are too high and will fall further but I just can't see a US type scenario playing out as one key ingredient is missing. The US has a huge inventory of unsold homes, supply far outstrips demand and even though home builders are building the least they've built for decades it is going to take by some estimates until 2011-12 at current building rates to work off that unsold inventory.

Whilst I don't buy the 'shortage' argument that the RE industry in Australia likes to push, we certainly don't have a huge oversupply. That said, I wouldn't be surprised to see peak to trough declines in Perth of -20% but it is hard to see Sydney prices falling more than -10% unless we have an economic catastrophe with unemployment at 12% plus.

 

[Aurum]

The reason that there is no housing shortage is because people feel exuberant. I know a few single people that live in 3-4 bedroom houses simply because they can. When money starts to tighten then a few thing happen that fill the housing shortage,

Kids stay at home longer,
Single people move to units,
Single people rent out rooms,
Families rent out rooms,
Singles share,
Couples share,
Families move to smaller homes and kids share.
Etc.

It only takes a very small shift in the number of people per dwelling to dramatically change availability.

For anyone that hasn't seen Keens site it's here. I found his arguments quite compelling.

Aurum.