Idle money has to go somewhere, at the moment it's servicing all this monsterous debt and stretching families to the brink.
And this is all at the expense of Retailers who are down the Shizen, they have been in Recession for a year plus.
The future of Australian property prices
- Thread starter Joe Blow
- Start date
And this is all at the expense of Retailers who are down the Shizen, they have been in Recession for a year plus.
nukz
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In Melbourne CBD its pretty easy to gauge what the market is doing because there are such high volumes.
There market was at absolute peak around Feb/March 2010 and since then its been a real slide in the CBD...
Right now there are buildings that have massive amounts of listing (555/565 flinders st go there on Sat and have a look at how many opens they have in those 2 buildings.. mind you these property's were purchased off the plan 2 years ago for 400k and listing now under that) but generally allot of the property's right now advertised for sale in the CBD have been for sale for quite sometime... going to a few opens 2 weeks ago i was the ONLY one who inspected.... this is a big change from 2008-2009 when i remember property's in the CBD would have 10-15 people at each inspection and there was a feeling or panic that we need to get the places as fast as possible.
The rental market is totally changed as well... i remember going to opens of a total **** hole on Russel st with about 30 people in 2008 asking 300/week rent and people were offering upto 350/week at the open... last open i went to on Collins st i was the only one to look.
I find you can read about whats happening... but just go out and do some ground work to see for yourself.
There market was at absolute peak around Feb/March 2010 and since then its been a real slide in the CBD...
Right now there are buildings that have massive amounts of listing (555/565 flinders st go there on Sat and have a look at how many opens they have in those 2 buildings.. mind you these property's were purchased off the plan 2 years ago for 400k and listing now under that) but generally allot of the property's right now advertised for sale in the CBD have been for sale for quite sometime... going to a few opens 2 weeks ago i was the ONLY one who inspected.... this is a big change from 2008-2009 when i remember property's in the CBD would have 10-15 people at each inspection and there was a feeling or panic that we need to get the places as fast as possible.
The rental market is totally changed as well... i remember going to opens of a total **** hole on Russel st with about 30 people in 2008 asking 300/week rent and people were offering upto 350/week at the open... last open i went to on Collins st i was the only one to look.
I find you can read about whats happening... but just go out and do some ground work to see for yourself.
Hmm - this little campaign is quite likely to cause a bit of a media stir..... Wonder if it will have any impact. Will be watching for the Melbourne property clearances this week with interest....
http://www.prosper.org.au/2011/03/17/buyers-strike-day-3/
Alex.
http://www.prosper.org.au/2011/03/17/buyers-strike-day-3/
Alex.
I have been saying much the same thing on this thread for months.
Volumes are down people, way way down.
Volumes are below their pre-GFC averages.
Thought I would dig up the old cascade model
Housing Collapse Cascade Pattern
* Volume drops precipitously TICK
* Prices soften a bit TICK
* Inventory levels rise slowly TICK
* High-end home prices remain relatively steady for a brief while longer TICK
* The real estate industry tries to convince everyone it's "business as usual" and homes are affordable because rates are low TICK
* Bubble denial kicks in with media articles everywhere touting the "fundamentals" TICK
* Stubborn sellers hold out for last year's prices as volume continues to shrink TICK
* Inventory levels reach new highs TICK (at least, by my research)
* Builders start offering huge incentives to clear inventory TICK
* Some sellers finally realize (too late) what is happening
* Price declines hit the high-end TICK
* Increasingly desperate sellers get creative with incentives, offering new cars, below market interest rates, trips, etc TICK
* Gimmicks do not work TICK
* Price declines escalate sharply at all price levels
* The Central Bank issues statements that housing is fundamentally sound TICK
* Prices collapse, inventory skyrockets, and builders holding inventory go bankrupt
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Thought this article may be of interest to some.. The article itself isnt that good but the topic and feedback is interesting ..
http://www.smh.com.au/opinion/socie...ams-20110320-1c23o.html?comments=181#comments
http://www.smh.com.au/opinion/socie...ams-20110320-1c23o.html?comments=181#comments
There will be a serious correction in the housing market if the banks, to a significant extent, block supply of funds or prevent liquidity from hitting the housing market. With housing being at least twice as expensive here compared to the US on average, there is a potentially serious risk of huge losses of consumer wealth that will eventually drag-down the rest of the economy.
If the banks don't curb supply though, then there will eventually be an even bigger long-term correction of the housing market. So it may be inevitable.
Ask yourself ultimately what is the real difference between us and the United States, with respect to a housing bubble. They have mining just like we do and a whole lot of other world class industries. Paying off a, let's say, $200,000 loan got them in all sorts of trouble. What's the average here? Most markets work on a margin, so don't just factor in those that have a head start; look at the ones that bought all types of property at inflated prices and that's your margin!
If the banks don't curb supply though, then there will eventually be an even bigger long-term correction of the housing market. So it may be inevitable.
Ask yourself ultimately what is the real difference between us and the United States, with respect to a housing bubble. They have mining just like we do and a whole lot of other world class industries. Paying off a, let's say, $200,000 loan got them in all sorts of trouble. What's the average here? Most markets work on a margin, so don't just factor in those that have a head start; look at the ones that bought all types of property at inflated prices and that's your margin!
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Banks have already tightened lending criteria on residential property
People have been talking it down for years. Steve Keen was a victim of his own bearish dialogue and walked to Mt Kosciusko as a result. Yawn.
Some parts have already fallen by 40% BUT ON AVERAGE IS HOLDING STEADY. (capital cities that is)
WE ARE NOT THE USA !!!!!!!!!!! How many times must this be written.
Our banks did not lend 100% borrowings on jingle mail loans to people with poor credit history !! Our banks did not then sell this toxic debt to another bank/fund/hole in the ground only to find out there was no LMI in place. DOH !!
We do not have NON RECOURSE loans.
We do not have RATCHET LOANS which start off cheap and creep upwards on a sliding scale with no limits.
Our regulatory body (The Australian Prudential Regulation Authority) is independent unlike the USA model where nearly half the lending was government sponsored. $900 billion to special loans and rescues related to the US housing bubble, with over half going to the quasi-government agencies of Fannie Mae, Freddie Mac, and the Federal Housing Administration.
We have high employment rates and our interest rates are low.
And our default rates on residential loans is the LOWEST in the developed world.
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The size of the average Australian home loan is $268,900.
The average house in Australia is worth $474,775.
So therefore the "average" house will have to correct it's value by 43.37% before we are in negative territory.
The chances of this are ??? anybody ........ Bueller .... Bueller .... Bueller
The average house in Australia is worth $474,775.
So therefore the "average" house will have to correct it's value by 43.37% before we are in negative territory.
The chances of this are ??? anybody ........ Bueller .... Bueller .... Bueller
wayneL
VIVA LA LIBERTAD, CARAJO!
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Prices are set at the margins. You might only need 10% or less to be in NE to make a big difference.
Allot of people have bought into the market at high prices and low rental yields for one reason and one reason only: Historically capital gains have been pretty huge over the past 2 decades. If capital growth remains flat for a while, and the outlook becomes a bit flatter, the incentive for allot of market participants to stay in the market disappears and they move their money into a different market. This can start a chain reaction with everyone going for the door at the same time. Those that have a loan 8x their household income or 20x their income after living expenses will feel quite queasy and some will sell.
The resulting market correction probably wont last too long though...
The resulting market correction probably wont last too long though...
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a decade ago there were still some signs of responsible lending practices.. before all hell broke out in the crusade to drive the bubble up
in australia in 1990 mortgage debt to gdp was 20%
mortgage debt to gdp now 90%
america in 1990 had 30% mortgage debt to gdp
when it all went belly up in 1980 when they had it up to 80% through irresponsible practices.. then it diminished
first home buyers here are now being totally priced out of the market..
but we all know this one is different... lol
in australia in 1990 mortgage debt to gdp was 20%
mortgage debt to gdp now 90%
america in 1990 had 30% mortgage debt to gdp
when it all went belly up in 1980 when they had it up to 80% through irresponsible practices.. then it diminished
first home buyers here are now being totally priced out of the market..
but we all know this one is different... lol
white_goodman
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average - it means nothing (for whatever argument) as its always skewed to upside...
median wage = $56k approx
average wage = in the $80k
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"The most obvious losers from a price downturn will be the buyers enticed into the market by the FHVB, many of whom began with 5% equity and who can therefore be easily thrown into negative equity territory by even a small price fall.
This won’t lead to “jingle mail” defaults in Australia because our housing loans are full recourse. But since a trigger for the downturn will be a decline in aggregate demand as the Credit Impulse turns negative, unemployment will rise””certainly in NSW and Victoria that don’t directly benefit from exports to China””and this will cause forced sales, though a lesser rise in bankruptcy sales than in the USA."
The author none other then Steven Keen. The same guy who said prices would fall by 40% and sold his own home. Lost a bet to Rory Robertson and walked to Kosciusko. Known in certain circles as the "Merchant of Gloom". Has predicted five of the last two downturns. Legend.
The current ratio of house prices to income for those looking to purchase a property is not an issue that needs to be addressed, the head of the Reserve Bank of Australia (RBA) has claimed.
Speaking at an event in London, Glenn Stevens said the figure is not very high when compared to that seen in other nations.
He explained the broadest countrywide property prices and income figures give a ratio of about 4.5, a number that "has not moved much either way for ten years".
Despite admitting this is "higher than it used to be", other countries have greater ratios, Mr Stevens remarked.
The RBA chief also called on Australia to do a better job of managing growth than it has done in previous years, noting the country has a poor record in this area.
Last month, the bank opted to keep the country's cash rate unchanged on 4.75 per cent, with Mr Stevens saying in a statement that trade levels in Australia are at the highest level since the 1950s.
"Housing affordability and the sustainability (or otherwise) of current house price levels are extremely complex issues and drawing conclusions from simplistic aggregate metrics such as house price to income ratios is very unwise" - ANZ's economists, led by Paul Braddick, have burst many of the myths surrounding Australia's purportedly high house price-to-income ratio.
http://www.anz.com/resources/5/5/55...bd8721/Australian-Housing-Update-20102705.pdf
This won’t lead to “jingle mail” defaults in Australia because our housing loans are full recourse. But since a trigger for the downturn will be a decline in aggregate demand as the Credit Impulse turns negative, unemployment will rise””certainly in NSW and Victoria that don’t directly benefit from exports to China””and this will cause forced sales, though a lesser rise in bankruptcy sales than in the USA."
The author none other then Steven Keen. The same guy who said prices would fall by 40% and sold his own home. Lost a bet to Rory Robertson and walked to Kosciusko. Known in certain circles as the "Merchant of Gloom". Has predicted five of the last two downturns. Legend.
The current ratio of house prices to income for those looking to purchase a property is not an issue that needs to be addressed, the head of the Reserve Bank of Australia (RBA) has claimed.
Speaking at an event in London, Glenn Stevens said the figure is not very high when compared to that seen in other nations.
He explained the broadest countrywide property prices and income figures give a ratio of about 4.5, a number that "has not moved much either way for ten years".
Despite admitting this is "higher than it used to be", other countries have greater ratios, Mr Stevens remarked.
The RBA chief also called on Australia to do a better job of managing growth than it has done in previous years, noting the country has a poor record in this area.
Last month, the bank opted to keep the country's cash rate unchanged on 4.75 per cent, with Mr Stevens saying in a statement that trade levels in Australia are at the highest level since the 1950s.
"Housing affordability and the sustainability (or otherwise) of current house price levels are extremely complex issues and drawing conclusions from simplistic aggregate metrics such as house price to income ratios is very unwise" - ANZ's economists, led by Paul Braddick, have burst many of the myths surrounding Australia's purportedly high house price-to-income ratio.
http://www.anz.com/resources/5/5/55...bd8721/Australian-Housing-Update-20102705.pdf
white_goodman
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time to rehash my year 12 modern history teacher...
"source... reliability and purpose"
Banks have already tightened lending criteria on residential property
People have been talking it down for years. Steve Keen was a victim of his own bearish dialogue and walked to Mt Kosciusko as a result. Yawn.
Some parts have already fallen by 40% BUT ON AVERAGE IS HOLDING STEADY. (capital cities that is)
WE ARE NOT THE USA !!!!!!!!!!! How many times must this be written.
Our banks did not lend 100% borrowings on jingle mail loans to people with poor credit history !! Our banks did not then sell this toxic debt to another bank/fund/hole in the ground only to find out there was no LMI in place. DOH !!
We do not have NON RECOURSE loans.
We do not have RATCHET LOANS which start off cheap and creep upwards on a sliding scale with no limits.
Our regulatory body (The Australian Prudential Regulation Authority) is independent unlike the USA model where nearly half the lending was government sponsored. $900 billion to special loans and rescues related to the US housing bubble, with over half going to the quasi-government agencies of Fannie Mae, Freddie Mac, and the Federal Housing Administration.
We have high employment rates and our interest rates are low.
And our default rates on residential loans is the LOWEST in the developed world.
View attachment 41973
A regulatory body that's independent! Love it. We are not the US, but if you look at how much trouble they're in and with much lower loans than us; even if we have deposits to begin with, the loans are much greater overall. Our interest rates are not low and full-time employment just won't cut it these days with out of control daily expenses for families, that are to a large extent put on credit. We pay more for goods and services than the US does and this is having a real burden on household income. How much (hidden) refinancing has gone on in Australia? How much has this been factored-in?
For fear of there being a run on the banks, they must be getting some clever accountants to 'make' their P&Ls and Balance Sheets look good. Just look at how many small business operators are no longer in business and here is the start of the problem.
Refinancing to refinance refinance. You honestly think this isn't going on. No losses reported on this type of practice. Not yet.
They were shown all kinds of stats in the US too prior to the GFC, and then most thought what just happened, although this was happening years prior. Even with all the great stats.
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The NEW cascade model
Housing Collapse Cascade Pattern
* Volume drops precipitously TICK
* Prices soften a bit TICK
* Inventory levels rise slowly TICK
* High-end home prices remain relatively steady for a brief while longer TICK
* The real estate industry tries to convince everyone it's "business as usual" and homes are affordable because rates are low TICK
* Bubble denial kicks in with media articles everywhere touting the "fundamentals" TICK
* Stubborn sellers hold out for last year's prices as volume continues to shrink TICK
* Inventory levels reach new highs TICK (at least, by my research)
* Builders start offering huge incentives to clear inventory TICK
* Some sellers finally realize (too late) what is happening
* Price declines hit the high-end TICK
* Increasingly desperate sellers get creative with incentives, offering new cars, below market interest rates, trips, etc TICK
* Gimmicks do not work TICK
* Price declines escalate sharply at all price levels
* The Central Bank issues statements that housing is fundamentally sound TICK
* Prices collapse, inventory skyrockets, and builders holding inventory go bankrupt
* Robots goes quiet TICK
* Trainspotter says he sold out months ago
Another massive builder "glenwood homes" went belly up in NQ.
Housing Collapse Cascade Pattern
* Volume drops precipitously TICK
* Prices soften a bit TICK
* Inventory levels rise slowly TICK
* High-end home prices remain relatively steady for a brief while longer TICK
* The real estate industry tries to convince everyone it's "business as usual" and homes are affordable because rates are low TICK
* Bubble denial kicks in with media articles everywhere touting the "fundamentals" TICK
* Stubborn sellers hold out for last year's prices as volume continues to shrink TICK
* Inventory levels reach new highs TICK (at least, by my research)
* Builders start offering huge incentives to clear inventory TICK
* Some sellers finally realize (too late) what is happening
* Price declines hit the high-end TICK
* Increasingly desperate sellers get creative with incentives, offering new cars, below market interest rates, trips, etc TICK
* Gimmicks do not work TICK
* Price declines escalate sharply at all price levels
* The Central Bank issues statements that housing is fundamentally sound TICK
* Prices collapse, inventory skyrockets, and builders holding inventory go bankrupt
* Robots goes quiet TICK
* Trainspotter says he sold out months ago
Another massive builder "glenwood homes" went belly up in NQ.
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Funnily enough, within the current set of gummint rules only builders, developers & individual property owners/investors will ever go bust in a downturn or correction.
The favoured big banks are now and forever will be laughing under this scenario of official protectionism no matter what direction Oz property prices take. Up? Down? Who cares?? They don't!
Foreclosures / surrender of assets to bank = Bank WIN
Rapid rise in home loan values = Bank WIN.
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Steven Keen ... http://www.debtdeflation.com/blogs/2011/02/10/a-motley-crew-interview-on-australian-house-prices/
900 billion in rescue money to government controlled financiers .... http://www.ahorre.com/dinero/realestate/housing_bubble/united_states_housing_bubble/
APRA is the prudential regulator of banks, insurance companies and superannuation funds, credit unions, building societies and friendly societies.
...... http://www.apra.gov.au/
Source and reliability taken care of now for purpose.
Purpose is to evidence that no matter how much people want to compare us to the USA it is not logical nor relevant.
In America when you sell you PPOR you pay capital gains.
In America you can claim the interest portion as well as capital expenditure.
American banks/financiers were driven by a regulatory body that had little checks or balances in practice and was supposedly backed by the government.
In America toxic debt was parcelled off onto unsuspecting funds thinking they were getting a great RoR.
In America you could buy your house for 100% LVR then borrow some more to fill it full of furniture and put a car and a boat in the garage all on the same mortgage. EASY CREDIT.
Blah blah blah yadda yadda yadda. Not the same. Do the research.
P.S. Trainspotter is still in the market . NOT TICKED
