The future of Australian property prices

Thought I better stop lurking and say Hi


Everything going well with the Property erm I mean credit boom ?


Oh and no Robee' Ottics anymore ?


Cheers

Bloomberg Markets has a list of the world’s strongest banks ”” they are dominated by Canada and Singapore firms.

Why Canada? Regulators there set strict criteria on the quality of banks’ assets and reserves. Canadian banks don’t use a lot of leverage, and are required to hold 75% of their capital in equity.

Here is the top 10 list:

1. Oversea-Chinese Banking Corp OCBC (Singapore)
2. BOC Hong Kong Holdings Ltd. (Hong Kong)
3. Canadian Imperial Bank of Commerce CIBC (Canada)
4. Toronto-Dominion Bank TD (Canada)
5. National Bank of Canada (Canada)
6. Royal Bank of Canada (Canada)
7. United Overseas Bank Ltd. (Singapore)
8. DBS Group Holdings Ltd. (Singapore)
9. Hang Seng Bank
10. Svenska Handelsbanken (Sweden)

Other Canadian banks made the list, such as Bank of Nova Scotia ranked 18th, and Bank of Montreal was 22nd.

Only three U.S. banks ”” JPMorgan Chase (JPM) (No. 13), PNC Financial Services Group Inc. (PNC) (No. 17) and BB&T Corp. (BBT) (No. 20) made the top 20.

wayneL said:

To be fair Young Gun, I do recall TS repeatedly being 'realistic' about the prospects of RE throughout this thread since that original quote.

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he has been quite resistive to the idea of a crash in most of what i have read, but I do agree that there is every chance RE will have a bit of a slow burn or a 'leaking balloon' affect, as opposed to a crash. just how low it will go remains to be seen. perhaps i have only been exposed to certain posts.

This is a pretty bearish outlook. Good to finally see the RBA addressing the wage inflation issue and the lack of productivity growth. Unfortunately, this sort of thing should fall to the government, not the RBA, for policy initiatives. Anyone like to wager on the chances of that happening.

Australia needs to slow the pace of labour cost growth and boost productivity to keep a lid on domestic inflation that has been offset by weaker prices for imported goods and services, the Reserve Bank said on Friday.

As the bank trimmed its forecasts for economic growth and inflation, it also warned that Australia faces weaker growth and faster price gains if it doesn’t generate a “sustained moderation in domestic cost pressures”.

“This is likely to require a further easing in labour costs and other costs and/or a pick-up in productivity growth,’’ the RBA said in Friday’s quarterly statement on monetary policy.

“If the anticipated productivity benefits associated with structural adjustment take longer than expected to flow through to lower domestic cost pressures, or are offset by other costs, then activity would be weaker and inflation higher than otherwise.”

The comments follow criticism by businesses including Rio Tinto about the dangers of rising cost pressures. The mining giant this week signalled it may shelve some coal projects because of factors including higher wage costs and the elevated Australian dollar.

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http://www.afr.com/p/national/rba_trims_growth_inflation_forecasts_zi8TLfCOYe49puzEVPZ11H

It really amazes me how expensive Australia is, not just housing but everything. You have to worry about how prepared the indebted housing sector is for the part I have highlighted.

Perhaps a "slow leaking" effect is even worse for individual home owners/money renters, might benefit bankers perhaps as people hold on ....

ie - if you paid 500k a year ago in the boom state of Victoria your now in the hole big time - 7% down , 7ish% mortgage interest , stamp duties etc - alot of ground to make up in a rapidly worsening economy ......

Melbourne 7% down already
Massive amount of stock on the market
Massive amount of apartments to come onto the market over the next 24 months
Incredibly low rates of new land sales
Massively over indebted FHB who bought with the FHBG and high LVR's facing negative equity
The removal of the FHBG
Retrenchments on the rise, how does one pay the mortgage with no job
Retail being squashed

Prediction at least 7% down in the next 12-18months

If correct, the crash will happen as people run for the exits

TS, I think you will look back in a few years and see it was property first that started to decline which resulted in unemployment rising.

satanoperca said:

TS, I think you will look back in a few years and see it was property first that started to decline which resulted in unemployment rising.

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Yes thats been what happened in all the other pops OS. One does not need to cause the other to happen. When it is a confidence game they just fall together.

numbercruncher said:

Thought I better stop lurking and say Hi


Everything going well with the Property erm I mean credit boom ?


Oh and no Robee' Ottics anymore ?


Cheers

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Welcome back numbercruncher, one of the good guys on ASF.

Macquack said:

Welcome back numbercruncher, one of the good guys on ASF.

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A+1. Nice to see you back, Numbercruncher. Hope all has been going well for you.

Thanks guys - been meaning to say hi for a while

Hope your all well too !

numbercruncher said:

Thanks guys - been meaning to say hi for a while

Hope your all well too !

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Glad to meet you

we miss the sunshine and lollipops in this forum

what i miss is the vitriolic attacks you get when you suggest they acknowledge the idea of massive RE bubble

there is absolute no doubt the RE market is is a decline and here in victoria, the state government cant support the bubble further, but we can only hope the fed government can intervene and perhaps come up with a way to keep the bubble growing..

failing that, the reiv has no power to sustain the bubble and week by week their appalling spin on the disaster thats unfolding will just discredit them more and more, and they maintain the active policy of falsely reporting auction sales results without any shame..

i think its time to rethink that a coat of paint and a property filled with new furniture and paintings, leased exclusively for the auction, will deliver you a fat profit.. thats about as much knowledge you need to make money in property.. watch the block and become an overnite bogan developas maate.. lol

reality of the bubble and it true financial impact is finally coming home to roost

should be a disaster for many caught in the hype, but those sunshine and lollipops believers i think will still disbelieve the reality and put their heads in the sand for a long while to come..

lets hope the decline curve stays slow and we dont have a crash and burn,,, but anythings possible and the employment cycle looks sad in the bubble zones imho..

Australian House Prices down 10% from Peak

by Steve Keen on May 1st, 2012 at 2:04 pm Posted In: Debtwatch

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There are several providers of statistics on Australian house prices, but only one that doesn’t have a vested interest in the direction house prices actually move in: the Australian Bureau of Statistics. So despite the criticisms of this series””that it’s based on detached dwellings only, based on median sales data, too infrequent, not adjusted for “hedonic” differences between houses, etc., it’s the only one I trust.
Click here for data in Excel: Debtwatch; CfESI
Click here for more data in Excel: Debtwatch; CfESI
Click here for this post in PDF: Debtwatch; CfESI
Chris Vedelago had a very nice piece about how confusing the various commercial house price statistics are:I’m happy to ignore these numbers””and even more so the spin doctoring that goes with them. The ABS numbers are in, and they show a 1.1% national fall over the March quarter. Sydney house prices fell 1.8% according to the ABS, whereas Australian Property Monitor alleged they rose 1.4%””the latter being the basis for Andrew “Always Look On the Bright Side” Wilson’s latest piece “Confidence rises as prices bounce back” (SMH April 28). Yeah, right.
Australian House prices have now fallen 6.1% from their peak, and have been falling for 21 months, which is the longest downturn in nominal prices ever recorded by the ABS””the previous longest being the 12 months from the beginning of the GFC (which was terminated by my favourite government policy of all time, the First Home Vendors Boost).
Figure 1: Nominal house prices have fallen 6.1% since June 2010


I’m sure the usual spruikers will come out with why this is now the bottom, and it’s a good time to buy, and there wasn’t an Australian house price bubble, and the shortage will drive up prices, and… So let’s put the current data in the context of the bursting of acknowledged overseas house price bubbles.
Firstly the inflation adjusted data: in real terms, house prices have now fallen 10% from their June 2010 peak, and are back to a level they first reached in late 2007.
Figure 2: Real house prices have fallen 10% since June 2010


Now let’s compare the Australian experience to date with the Japanese and US experiences””where no-one, not even Alan Greenspan, denies that there was a housing bubble. The Japanese bubble peaked in June 1991; the US bubble peaked in in May 2006; and Australian house prices peaked in June 2010. Figure 3 shows the three declines from the peak, and while the Australian experience so far is clearly better than the USA’s, it’s only a whisker better than the Japanese experience to the same date after the peak.
Figure 3: Comparing Japanese, US and Australian house prices from their peaks


Anyone who takes comfort from that should also consider the longer term perspective””see Figure 4.
Figure 4: The long term picture for Japan and the USA



http://www.debtdeflation.com/blogs/2012/05/01/australian-house-prices-down-10-from-peak/

The motive force behind Australia’s bubble was the same as in the USA and Japan: accelerating debt drove rising house prices during the boom. Now in both those countries, decelerating debt is driving house prices down. The same pattern applies in Australia””see Figure 5 .
Figure 5: Mortgage acceleration drives change in house prices


Don’t take heart from the uptick in acceleration at the end of the series there: for that to be sustained into the future, ultimately Australian mortgage debt would need to start rising (compared to GDP). But mortgage debt grew more rapidly here and reached a higher peak than in the USA (see Figure 6); the odds that it will rise again are slim.
Figure 6: Australian mortgage debt exceeded the USA’s


And even though the actual level of mortgage debt is still rising, it’s doing so at the slowest rate ever recorded by the RBA (see Figure 7).
Figure 7: Annual growth in mortgage debt (with series break in 1991)


The odds are that the rate of decline will accelerate in the next year””since as Leith van Onselen pointed out yesterday, many Baby Boomers are relying on rising house prices to secure their retirements. Now that house prices are falling, and have been doing so for almost 2 years, many of these Boomers””74% of whom earn less than $80,000 a year, with the average investor losing over $9,000 a year on these “investments”””could decide to get out rather than continue to absorb losses. The unwinding of their leveraged positions could push mortgage growth below zero, and of course accelerate the house price fall.


http://www.debtdeflation.com/blogs/2012/05/01/australian-house-prices-down-10-from-peak/

Agentm, excellent posts - great charts. Anyone who denies the bursting of our housing bubble must have the downs.

Starcraftmazter said:

Agentm, excellent posts - great charts. Anyone who denies the bursting of our housing bubble must have the downs.

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I agree.

They'll try and make it a soft landing with interest rate reduction but it won't stop the inevitable, the banks are well aware of whats happening.

It's a cycle what goes up sometimes comes down for a while, last time it was about 10 years before property recovered from memory. (the 90's)

Starcraftmazter said:

Agentm, excellent posts - great charts. Anyone who denies the bursting of our housing bubble must have the downs.

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thanks starcraft

i follow this decline with interest

Starcraftmazter said:

Agentm, excellent posts - great charts. Anyone who denies the bursting of our housing bubble must have the downs.

Click to expand...

what? there's a housing bubble?

young-gun said:

what? there's a housing bubble?

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Who stole my false teeth?

Can someone post the link to today's results.

Thanks. Good to hear this bubble deflating in an orderly fashion.