The Great Aussie Housing Bubble - Reality or Fantasy?

[Bill M]

Last night, ABC the Business had a little smart story on housing, interest rates, the RBA etc.

http://iview.abc.net.au/programs/business/NU1504H029S00#playing

Starts at 1.30 and runs to 6.18 - love the coconut thinking, there really has been a tsunami of shells over the last 6 years.

Interesting clip however the part after 6.18 really explains the problem. New Zealand house prices are higher than ours. Their interest rates are higher than ours and they have introduced measures to try and curb higher house prices but it hasn't worked. In Auckland it came down to the same problem as Sydney, not enough supply and no matter what the government throws at the problem only one thing will fix it, build more houses and units. This of course doesn't apply to everywhere in Australia but in the case of Sydney it certainly does. Watch the later part of the video, it's quite good.

 

[sydboy007]

Some interesting reports

http://www.lfeconomics.com/reports.html

Today, there are few, if any, examples in modern history to suggest that the cost per square metre of land in such a sparsely populated nation has ever reached so high. It is significantly cheaper to acquire land (per square metre) on the hills of Malibu, California, with a view of the Pacific Ocean, than it is to acquire land in the remote Australian desert town of Alice Springs. Malibu is an affluent suburb in Los Angeles and globally recognized, while Alice Springs is a small, dusty town surrounded by desert with little economic activity or global recognition.

Australia’s largest capital city, Sydney, has one of the most expensive real estate markets in the world but does not share common density or economic characteristics of other cities that are globally recognized for having expensive real estate markets. These include cities such as London, New York, Paris, Monaco and Hong Kong. If Sydney were as densely populated as London, the city would have a population of close to 64 million inhabitants.

 

[Tyler Durden]

Maybe this is the trigger for the domino effect?

Kaisa Group Holdings Ltd. became China’s first real estate company to default on its U.S. currency debt, capping a month of distress in bond markets amid an anti-corruption probe and fueling concern that losses will spread.

The default coincides with the expiration of a 30-day grace period on $52 million of missed interest payments on two dollar-denominated bonds, according to a Hong Kong stock exchange statement Monday. Kaisa, based in the southern city of Shenzhen, is struggling to service 65 billion yuan ($10.5 billion) of debt owed to both onshore and offshore lenders while becoming embroiled in President Xi Jinping’s crackdown on graft.

The developer’s problems have rippled across the region’s debt market, where investors starved of yield elsewhere in the world have swooped in to boost returns. As the government’s anti-corruption probes widen, it’s raising concern that defaults will spread after overseas noteholders bought a record $21.3 billion of bonds issued by Chinese property companies.

http://www.bloomberg.com/news/artic...r-china-developer-says-can-t-pay-dollar-debts

 

[sydboy007]

Maybe this is the trigger for the domino effect?



http://www.bloomberg.com/news/artic...r-china-developer-says-can-t-pay-dollar-debts

http://investinginchinesestocks.blogspot.com.au/

Behind the scenes is the troubled credit guarantee industry.

In Hebei, only about half of credit guarantee firms are still in operation as banks raise their standards for cooperation. The main reason companies are shutting their doors is due to bad economic conditions. These guarantee firms are the lifeblood of small and medium companies who would otherwise be forced into the extremely high interest private lending market, and their quiet contraction is a major deflationary force ripping through the Chinese economy.

The numbers aren't huge, but it shows that behind every bankruptcy in China, there is likely a web of mutual credit guarantees that could pull several, or dozens, of firms into a crisis. At this point, there have been no reports of other firms having guaranteed Baoding Tianwei's credit...

The trouble for China's economy is the under developed financial system. The PBOC can cut the RRR and Li Keqiang can encourage bank lending, but if small and medium companies do not have access, it doesn't help them. Meanwhile, if the credit guarantee market that serves them goes bust, they face tightening credit conditions even as policy shifts to easing

.

Definitely looks like China's peak steel is well behind them, especially as scrap metal becomes a significant source. $20B income cuts to Australia, with many companies barely profitable doesn't bode well to the gearing up of the economy we've been doing for many years.

 

[Joules MM1]

Callam Pickering ‏@CallamPickering

Property investors account for 46 per cent of new mortgage lending. FHB account for 11 per cent #ausbiz #property

 

[Joules MM1]

Pete Wargent ‏@PeteWargent

ABS 5609.0 Housing finance - homebuyer/investor switcheroo #ausbiz

 

[Joules MM1]

CHART: Lending to Australian first home buyers is tanking
David Scutt
May 11, 2016, 1:19 PM



excerpt

Last week, a Moody’s analyst suggested that while housing affordability deteriorated over the past 12 months, the worst may now be over. He believes housing costs may have peaked due to a pullback in housing prices (something that subsequently reversed in April, according to Corelogic RP Data) along the RBA’s latest rate cut to 1.75%.

http://www.businessinsider.com.au/chart-lending-to-australian-first-home-buyers-is-tanking-2016-5

 

[satanoperca]

Last week, a Moody’s analyst suggested that while housing affordability deteriorated over the past 12 months, the worst may now be over. He believes housing costs may have peaked due to a pullback in housing prices (something that subsequently reversed in April, according to Corelogic RP Data) along the RBA’s latest rate cut to 1.75%.

Housing Affordability deteriorated = higher house price
may have peaked due to a pullback in housing prices = emphasis "may" great analysis, pigs may fly as well
reversed in April = how much, one month down is not the start of a new trend
RBA’s latest rate cut to 1.75% = wow, people can take on even more debt, crap, we are already one of the most privately indebted nation in the world, wish the RBA would just get this over with and drop interest rates to 0 and then house prices to the moon, then finally we might see some change when the RBA realizes the low IR don't stimulate growth.

Until this nation stops being obsessed with house prices and junk food, can we see a real transition into growth again. Why would anyone put their money into starting or supporting a business, given the risks when the govnuts and the RBA are to focused on keep the property bubble going?

Where have our leaders gone?

All that tied up debt in housing, really productive and sustainable way to growth again, FFS....

Maybe the RBA needs to a big wall mural in the office : the definition on insanity : keep doing the same thing over and over again and expecting a different outcome.

 

[CanOz]

One thing that you don't hear much of regarding the cost of housing, is the cost of the materials and labor. Generally the value is always in the land anyway. I'm curious as to what effect the exorbitant labor and materials cost in Australia has been responsible for house inflation. Thats not something that can be backed out of a bubble, its there for good.

 

[satanoperca]

One thing that you don't hear much of regarding the cost of housing, is the cost of the materials and labor. Generally the value is always in the land anyway. I'm curious as to what effect the exorbitant labor and materials cost in Australia has been responsible for house inflation. Thats not something that can be backed out of a bubble, its there for good.

Interesting thought. Construction methods can change with technology, to bring down prices, just have to look at how the Japanese and Germans build homes, in factories, greater efficiencies. Labor costs can decrease if we see unemployment kick up, just have to look at tradies wages in WA or demand drops for housing or the type of housing, who needs a 45 Sq home. A shift away from housing as an investment back to shelter could see some changes.

I would guess that the cost per square for housing has decreased over the last 20 years, taking into account inflation, it is just people want big **** housing, sacrificing design and quality.

 

[So_Cynical]

Interesting video...Australia's Secret Sub-Prime Crisis.
`

 

[Mrmagoo]

LMAO@ the denial ism in this thread. The Anglo sphere is more or less finished. We have crippling debt and a broke government. We are going to experience a Greek like financial crisis. Much of the anglo world will experience similar.

I was shocked to learn that in Europe if you clear 500 euro a week, you're considered to be on a good wage. IS $750 a week in Australia considered a "good wage". We simply cannot keep up the earnings required to service our debt.

 

[Ald123]

House prices in Australia are high because of the following reasons

1) cheap credit from overseas sourced from endless money printing
2) given to a mass of unintelligent people
3) to support the building industry of year 10 graduates who can do little else now that mining and manufacturing has been decimated
4) to support the real estate agents
5) who charge about 10 -18% to sell a house thus also raising prices
6) raised prices also supported by unimaginative state governments who rely on stamp duty
8) and corrupt councils filled with property developers who artificially limit land supply and sell it their mates
9) the developers who further limit supply and keep rentals out of the market to raise rental prices
10) which the federal Goverment helps with by flooding the country with immigrants whenever a economic downturn is experienced.
11) and then all the welfare to the rich like negative gearing and subsidies like the first home owners grant and other masturbations of the economy that govt orgasms with like fiddling with capital gains tax
12) plus add to all this the lack of grand aged care schemes of Goverment run aged old homes causing people to greedily screw one another over with housing and rental accommodation.

These all result in high prices.

The end result of all this is finally that the housing prices will crash and the migrants won't come anymore because there will be no jobs for them and the salaries will drop.

Usury economies always, always result in revolutions and collapse.

If you want to avoid this problem.
Do this

1) sellers sell your house privately and stop feeding the real estate agent parasites make them go and do productive work

2) home owners rent your houses out yourselves and raise the rents

3) home buyers stop buying houses and moving house for 2 years

4) renters stop moving houses for 2 year and don't buy houses

5) home buyers don't buy houses, don't go to the home opens for two years.

In two years time by doing this

Interest rates will be 2% and your home loan will have no penalties and no fees and will be fixed for 30 years
Property quality will be greatly improved
Block size will increase resulting in suburbs that are green and full of trees good for climate change
House will be cheap
Jobs will be plentiful
Childcare and medical cheap

But first 1 year of pain and a lot of useless parasites in banking and real estate will become cheap labour.
Your bank manager will be mowing your lawn for $15 a hour. Your real estate agent will paint your house for $2000

 

[tech/a]

House prices in Australia are high because of the following reasons

1) cheap credit from overseas sourced from endless money printing
2) given to a mass of unintelligent people
3) to support the building industry of year 10 graduates who can do little else now that mining and manufacturing has been decimated
4) to support the real estate agents
5) who charge about 10 -18% to sell a house thus also raising prices
6) raised prices also supported by unimaginative state governments who rely on stamp duty
8) and corrupt councils filled with property developers who artificially limit land supply and sell it their mates
9) the developers who further limit supply and keep rentals out of the market to raise rental prices
10) which the federal Goverment helps with by flooding the country with immigrants whenever a economic downturn is experienced.
11) and then all the welfare to the rich like negative gearing and subsidies like the first home owners grant and other masturbations of the economy that govt orgasms with like fiddling with capital gains tax
12) plus add to all this the lack of grand aged care schemes of Goverment run aged old homes causing people to greedily screw one another over with housing and rental accommodation.

These all result in high prices.

The end result of all this is finally that the housing prices will crash and the migrants won't come anymore because there will be no jobs for them and the salaries will drop.

Usury economies always, always result in revolutions and collapse.

If you want to avoid this problem.
Do this

1) sellers sell your house privately and stop feeding the real estate agent parasites make them go and do productive work

2) home owners rent your houses out yourselves and raise the rents

3) home buyers stop buying houses and moving house for 2 years

4) renters stop moving houses for 2 year and don't buy houses

5) home buyers don't buy houses, don't go to the home opens for two years.

In two years time by doing this

Interest rates will be 2% and your home loan will have no penalties and no fees and will be fixed for 30 years
Property quality will be greatly improved
Block size will increase resulting in suburbs that are green and full of trees good for climate change
House will be cheap
Jobs will be plentiful
Childcare and medical cheap

But first 1 year of pain and a lot of useless parasites in banking and real estate will become cheap labour.
Your bank manager will be mowing your lawn for $15 a hour. Your real estate agent will paint your house for $2000

Is that you Donald---T Taking the P---??

 

[trainspotter]

Interest rates will be 2% and your home loan will have no penalties and no fees and will be fixed for 30 years
Property quality will be greatly improved
Block size will increase resulting in suburbs that are green and full of trees good for climate change
House will be cheap
Jobs will be plentiful
Childcare and medical cheap

But first 1 year of pain and a lot of useless parasites in banking and real estate will become cheap labour.
Your bank manager will be mowing your lawn for $15 a hour. Your real estate agent will paint your house for $2000

Not bloody likely Ald123. Why would a developer of land give up yield to make the blocks bigger? The land dollar component would raise exponentially with the size of the block

 

[satanoperca]

Aussie Housing may be in a bubble, but the govnuts will keep it inflated until they have exhausted every avenue and then it may deflate.

Without doubt, they can keep it alive by allowing immigration to keep on flowing at high, unsustainable levels. There are 10 of millions of people who are willing to pay for the right to live in this country.

Lib's latest is allowing visas for foreigners to attend our schools at primary school level and buy established property, yes established. this bubble has a long way to go.

 

[CanOz]

Aussie Housing may be in a bubble, but the govnuts will keep it inflated until they have exhausted every avenue and then it may deflate.

Without doubt, they can keep it alive by allowing immigration to keep on flowing at high, unsustainable levels. There are 10 of millions of people who are willing to pay for the right to live in this country.

Lib's latest is allowing visas for foreigners to attend our schools at primary school level and buy established property, yes established. this bubble has a long way to go.

Yeah, i agree, i think there is still demand. A global crisis might slow things down a bit tho.

Immigration is good, productive consumers are good for the economy. They help pay for the real refugee's and dole bludgers alike. I'd like to think of myself as a productive immigrant. Very low burden on the system, good consumer

 

[Ald123]

Not bloody likely Ald123. Why would a developer of land give up yield to make the blocks bigger? The land dollar component would raise exponentially with the size of the block

Because if nobodies buying he. Has to make the deal attractive. To make it attractive he will have to make a beautiful suburb for families to live in with big blocks and trees. Not this Disney land rubbish on small blocks.

I am sick of hearing my neighbours screwing or arguing and swearing at each other by living on a small block.
I can't even let the kids out to play.

 

[poverty]

All these dial-a-suburbs make me sick. The houses are built so cheaply they won't even last 20 years and you can literally hear your neighbour taking a ****.

 

[trainspotter]

Because if nobodies buying he. Has to make the deal attractive. To make it attractive he will have to make a beautiful suburb for families to live in with big blocks and trees. Not this Disney land rubbish on small blocks.

I am sick of hearing my neighbours screwing or arguing and swearing at each other by living on a small block.
I can't even let the kids out to play.

Ermmm m righto

ERGO the cost of the attractive, beautiful suburb for families with big blocks and trees IS the Disney model and Disney aint cheap !!