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  • Australian housing market 'sleepwalking into disaster'

    From nzherald.co.nz

    Australia, you are getting complacent. Over the ditch, the big lesson of the last few generations is that house prices always go up. That lesson has been learned, passed on, reinforced by experience and passed on again. Generations of Australians have grown rich and comfortable by sinking their earnings into real estate. Parents encouraged their kids to get a house and even sometimes helped fund it. Getting into the biggest possible mortgage has been terrific advice. For just about every Australian adult with a mortgage the house was worth far more than the debt you took on to buy it after just a short while. ... (full story)

Great article, sadly . very much not linked to Aus alone, add NZ, Canada, UK (especially Captain Ponzi - London), most of California to the list (and many, many more) all risen up off 5,000 year low interest rates, mortgage backed securities (Deutsche have $48Tn - yep thats Tn with a T, liabilities on their books) and the Global nature of the Ponzi scheme becomes apparent, sadly the fools Gold is starting to show signs of the devastating crash about to unfold, people are moving away from the high priced areas causing markets with zero buyers and even fewer renters , Libors going nuts as banks start to wake up to their utterly complacent loonacy since 2008, probably not a good idea to allow central bankers to be allowed 2 jobs , one as the Head of the B of E , the other head of the Global banking stability board etc, etc , you can see the history being written clear as day.

80% drop coming in the Global real estate market, look out below
  •  Guest
  • | IP XX.XXX.20.165
fortunately I sold my London flat and bought bitcoin at 18,000
Quoting NewtonsCash
80% drop coming in the Global real estate market, look out below .
And where are the market forces which will make Global property prices fall by 80%?

I tell you what, IMO as long as unemployment and interest rates stay low, property prices are going nowhere in a hurry. The best you can hope for is for prices to go sideways or correct a little (10% or 20% max).

We live in a globalized world where more and more rich people want to live in nice places so there will always be demand for property which you think are expensive.
They could be expensive for you and me but they are very affordable for others.
Quoting billv
{quote} And where are the market forces which will make Global property prices fall by 80%? I tell you what, IMO as long as unemployment and interest rates stay low, property prices are going nowhere in a hurry. The best you can hope for is for prices to go sideways or correct a little (10% or 20% max). We live in a globalized world where more and more rich people want to live in nice places so there will always be demand for property which you think are expensive. They could be expensive for you and me but they are very affordable for others.
Here's the list

1/ Interest rates are currently being held down by the Fed, creating an entirely false price discovery mechanism, tomorrow the Chinese will be buying oil in Yuan , backed by Gold, this massively diminishes the US dollar and hence the Feds ability for IR manipulation as the USD weakens.

2/ Libors pretty much doubled in recent months and is now leaving the Feds rate way behind (let alone the ECB, BOJ, B of E etc), as the banks fail to lend to each other, the sovreigns are too weak to help, rates will sky rocket (nothing to do with what politico's want, the Bond mareket controls all)

3/ Local taxes in all the desirable locations you mention above are going thru' the roof, in California the current price of a U=Haul trailer is 8x last years, why ?, people are fleeing the desirables for affordables, basic math.

4/ Hence asking prices are starting to fall (pretty amazing when you look at all the Politico's efforts Globally to prop it up), since so many properties are now held by private gamblers looking for a quick buck, they are starting to fold their hands as voids, increasing taxes and rising rates take their toll !!

5/ People are losing their jobs as they are replaced by tech / Blockchain applications, some estimate just the Blockchain will replace over 100,000 City backroom jobs in London within the next 24 months, its what tech has done to other industries over the past 25 years, now its the turn of Banks, Accountants , Insurance Co's etc, etc to face the same fate.

6/ Crispin Odey, Nichola Horlick, Ruth Lee have been warning this would happen for the past few years, well, heads up , its happening, Globally !!

7/ The last big drop in London came in 1989, Isaw a flat in W1 for sale for £375k , by March 1990 it dropped to £275, August £175, I offered £125k in October and bought the flat, by Feb 1993 I could not sell it at £40k, this time the financial situation is far, far worse

Heads up folks, reversion to the mean anyone ??
Quoting NewtonsCash
{quote} Here's the list 1/ Interest rates are currently being held down by the Fed, creating an entirely false price discovery mechanism, tomorrow the Chinese will be buying oil in Yuan , backed by Gold, this massively diminishes the US dollar and hence the Feds ability for IR manipulation as the USD weakens. 2/ Libors pretty much doubled in recent months and is now leaving the Feds rate way behind (let alone the ECB, BOJ, B of E etc), as the banks fail to lend to each other, the sovreigns are too weak to help, rates will sky rocket (nothing to...
very well said and thank you for the insight
Quoting Aussi
{quote} very well said and thank you for the insight
No problem Aussi, to be honest you can take that list like a coffee shop business plan and drop it anywhere on the Globe, the Ponzi scheme is coming unstuck everywhere , rates go up prices come down
  • Post #7
  • Quote
  • Edited Mar 26, 2018 3:33am Mar 25, 2018 6:58pm | Edited Mar 26, 2018 3:33am
Hi NewtonsCash
Interesting list, food for thought.
The thing with interest rates though is that they are not held down by governments,
they are held down by low inflation and currently raising inflation seems very difficult.

re: 5 , I wouldn't worry too much about blockchain.
What always happens with jobs, 1 is taken away by technology but another 1 pops up due to the new technology

re: your 6, Don't read too much into what Crispin Odey and the others have been saying, they always forget that governments and central banks adjust their policies to contain unsustainable market movement.

re your 7, Interest rates in 1990 were around 15%
IMO and judging by the central bank's difficulty to raise inflation,
I doubt that we will even get close to half that percentage in our lifetime.

Remember that we all have to live somewhere so there will always be an attraction to property.
Don't worry too much about things, bitcoin may go down to $0 but the end of property is not coming any time soon.

Cheers
add vancouver to this list
Quoting billv
Hi NewtonsCash Interesting list, food for thought. The thing with interest rates though is that they are not held down by governments, they are held down by low inflation and currently raising inflation seems very difficult. re: 5 , I wouldn't worry too much about blockchain. What always happens with jobs, 1 is taken away by technology but another 1 pops up due to the new technology re: your 6, Don't read too much into what Crispin Odey and the others have been saying, they always forget that governments and central banks adjust their policies to...
Hey Billy, well, one of us is right , one further point to bear in mind, agreed , rates were much higher in the 1990's, but that meant debt levels were significantly lower, the fear today is that unlike in the 1990's where rates were going from 12 to 13 percent i.e. a multiple of 1 in a 100, today rates going from 1.5 to 3 represents 100 in 100 or 2x , as we know people are struggling at Zero , this is not a good sign , Libor is the one to watch, loans are already drying up Globally and, the property market is ,like so many others now just a margin call from collapse , Best of luck
Quoting NewtonsCash
... 7/ The last big drop in London came in 1989, Isaw a flat in W1 for sale for £375k , by March 1990 it dropped to £275, August £175, I offered £125k in October and bought the flat, by Feb 1993 I could not sell it at £40k, this time the financial situation is far, far worse ...
That is because you tried to time the market. If you had simply bought somewhere to live you would a) have a really cheap and affordable home, and b) you would now be grinning like a Cheshire cat.

The difference between successful property investors and other moaners is that they buy with a view to never selling. They also manage the risks appropriately.

You missed the primary cause of housing price crashes ... government meddling!

In '89 in the UK Chancellor Lawson moved to level the tax-playing-field for "people buying a home". He announced the alignment of taxation for people who were unmarried with those who were married: unfortunately for a lot of people he then said 'next year' instead of 'immediately'. The rumble of stampeding buyers' feet was matched only by a game of Jumangi.

Then from 2010 - 2016 we had Chancellor Osborne. He stripped private investors of their right to enjoy the same accounting practice as that used by companies and wealthier former politicians. At the same he imposed other taxation disincentives which applied only to private individuals. He also (quite reasonably) applied capital gains tax to foreign property owners. The results have yet to play out but coupled with the government's push to build more houses (for which we have waited 40 years) prices are now softening nationally.

Back to topic. In Oz the primary factors that will need to be evident to crash the housing market are rising unemployment and over-supply of houses "that need to be sold". Any tightening of lending conditions will certainly make things worse. However it is the fire-sale situation that crashes the market.
Quoting Exodus
{quote} That is because you tried to time the market. If you had simply bought somewhere to live you would a) have a really cheap and affordable home, and b) you would now be grinning like a Cheshire cat. The difference between successful property investors and other moaners is that they buy with a view to never selling. They also manage the risks appropriately. You missed the primary cause of housing price crashes ... government meddling! In '89 in the UK Chancellor Lawson moved to level the tax-playing-field for "people buying a home"....
Thanks for that, but give me credit , I was much younger then and I did wait for the drop from 375 to 125 before buying.

Agreed , the most dangerous 9 words in the investors lexicon ar "I'm from the Government and I'm here to help", having had to wait 12 years to recoup my money in the early venture above I then build a small portfolio in London and watched the Duke of Westminster for timings , all was sold in 2014 and am now renting awaiting the drop, but , as I'm now getting on a bit and living more and more abroad I doubt the UK will be on my buy list again
Quoting NewtonsCash
{quote} all was sold in 2014 and am now renting awaiting the drop, ...
Interesting how you sold in 2014, I started selling in 2016 but its a different market.

Here is a link to a recent audio podcast on Libor, you may get an idea of where Libor may be heading but remember that 2018 is not 2008, today banking institutions are very well capitalized and lending standards are much different so I still believe that interest rates will not go up by a lot.

https://www.bloomberg.com/news/artic...nting-us-again
well, everyone knows by now that property is just a scam, value made out of nothing, like bitcoin. The only thing that proves rising property is that inflation is large - more than costs, so we live in old 'hiperinflation venezulea' like place.


it will backfire bad, shattering foundation of capitalist system in not too distant future. Well, other option is war, of course to erase all traces
Sell house and buy gold
Attached Image (click to enlarge)
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Quoting seaman2
well, everyone knows by now that property is just a scam, value made out of nothing, like bitcoin....
I assume you missed out this emoticon ->
  •  Guest
  • | IP XX.XXX.197.175
Does everyone think ttptb are not aware of what is going on. I'm sure they realiize if rates go up to much that it will cause a lot of problems for nearly all borrowers and banks alike.
The cash rates around the West are nearly identical around 1.5-1.75%.
Here in OZ mortgage rates from the 'BIG 4' are 4-5%, well above the cash rate. High end will come back further than the median house prices and they will at least level out for a long time to come.
AS for all you people here that want to see it crash, what the hell is wrong with you. if it does crash, like you morons hope, it will not be nice for anybody anywhere.
With that said the federal reserve may be well aware that a recession is just around the corner, and by moving the cash rate up a 25p at a time will give them room to move to the downside when the next recession comes, as they are a normal part of the economical cycle. Admittedly QE does make the mind boggle
Quoting Guest
Does everyone think ttptb are not aware of what is going on.
I see you have not encountered a 'real' politician. If you had you would realize that their blinkers prevent them from seeing the world outside their own life-stories.

Quote
I'm sure they realiize if rates go up too much that it will cause a lot of problems for nearly all borrowers and banks alike.
....you mean like they realized in 2006/7 ??

Quote
Here in OZ mortgage rates from the 'BIG 4' are 4-5%, well above the cash rate. High end will come back further than the median house prices and they will at least level out for a long time to come. AS for all you people here that want to see it crash .....
I believe that the only people who want to see a crash are the banksters who have loads of spare cash ready to gobble up the properties of the unfortunates who may find themselves in a bad place.

Quote
(>*<)
BTW it is really easy to get a membership on this forum
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  • Posted: Mar 24, 2018 10:47pm
  • Submitted by:
     Newsstand
    Category: Fundamental Analysis
    Comments: 17  /  Views: 5,687