Strindberg is an exceptionally good blogger but he sees things in black and white.
This is backed up by his mentioning previously on this thread a fondness for bearish mathematical theses that are simple, elegant, and wrong.
Danny
12 Oct 2014, 07:14 PM
It'd be rarer than that, a 0.001% chance would mean it happens 50 times a year (5 million mortgaged homes in Oz). If it happened that much we'd have heard about it. If it happened once we'd have heard about it! I've never heard of it happening, probably cos a bank would have no reason to do it. What would be the point of calling in a loan if the repayments are being met. It's one of those silly bear myths that just won't die!
Agree that it's unlikely, but fail to see how it's a 'silly bear myth' - the thread with the debate that PF mentioned was a very techical one, with little emotive bull/bear banter. IIRC most of the participants were bulls at the time.
"It were not best that we should all think alike; it is difference of opinion that makes horse races." - Mark Twain on why he avoids discussing house prices over at MacroBusiness. "Buy land, they're not making any more of it." - Georgist Land Tax proponent Mark Twain laughing in his grave at humourless idiots like skamy that continually use this quip to justify housing bubbles.
But anyone who claims to know exactly when or how this will all keel over is just trying to sell you something. All we can do is get on public forums and rant. And be extremely pedantic to feel superior.
I think the suggestion is that the quality of debate has declined and it's descended into a sort of childish point-scoring exercise and some of the more intelligent bulls can't see why they should lower themselves to that level of discourse. It would be a wonderful thing if you retired from the point-scoring and explained why you think something very bad will happen by October 2015 (which I believe is your timeframe)?
The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt — Bertrand Russell
I think the suggestion is that the quality of debate has declined and it's descended into a sort of childish point-scoring exercise and some of the more intelligent bulls can't see why they should lower themselves to that level of discourse. It would be a wonderful thing if you retired from the point-scoring and explained why you think something very bad will happen by October 2015 (which I believe is your timeframe)?
Well I'm not too sure of your exact definition of 'very bad' or why is has to be by october, I thought this was for the long term.
Perhaps a combination of things would already show it is'very bad'.
And perhaps you can debate the points mentioned seeing as you would appear a self appointed masterdebaitor.
Iron ore prices crashing from 190 a tonne down to 78 a tonne now.
The closure of many buisinesses to reach twelve year highs in unemployment recently.
The winding down of the biggest mining boom in our history.
The record overbuilding going on in every capital city.
Wages falling for the first time in history.
Vacancy rates growing.
Rents falling.
Very little room to the downside on interest rates, but plenty of room on the upside.
The closing of industries we have had in this country for generations, such as the motor industry. Industries that have bought and paidfor generation after genaration of housing. And the fact that the US ,euro and uk have not lost their motor industries despite the doenturn and declines we have seen their over the years.
The fact that more people are now paying interest only loans as that is all they can really afford with prices where they are now.
The fact that our wages are the highest in the world, double that of the US ,euro and uk. We cannot compete with them , let alone cheap chinese wages , with ours being at least 15 times higher.
The fact that when the rest of the world was having a correction of sorts in the housing market, we went on ponzi pumping measure to send them up higher than ever, by doubling of housing grants and removal of stamp duty for some, dropping lvr rates , encoraging foreign investors and also encoraging super holders to leverage their super in as well.
There's a couple of starters, so will leave it at that for now. But feel free to debate the points mentioned . Also feel free to tell me why it does not look 'very bad' already.
Well I'm not too sure of your exact definition of 'very bad' or why is has to be by october, I thought this was for the long term.
That's his timeframe, not mine. He said something bad will happen by October 2015.
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Iron ore prices crashing from 190 a tonne down to 78 a tonne now ... The winding down of the biggest mining boom in our history.
I can't argue with that one.
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The closure of many buisinesses to reach twelve year highs in unemployment recently.
This hasn't stopped house price growth so far ...
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The record overbuilding going on in every capital city.
Similar things were said in 2003 when they were building like crazy around Melbourne CBD (Southbank, Docklands) and then the government simply ramped up immigration. If there is a shortage of buyers, the government will import more people.
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Wages falling for the first time in history.
Are they? If they are it doesn't appear to be affecting house prices so far.
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Rents falling.
I'll concede this one but it will turn around eventually due to mass immigration.
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Very little room to the downside on interest rates, but plenty of room on the upside.
The upside is irrelevant. Interest rates won't be going up if things are as bad as you suggest. Have you contradicted yourself?
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The closing of industries we have had in this country for generations, such as the motor industry. Industries that have bought and paidfor generation after genaration of housing. And the fact that the US ,euro and uk have not lost their motor industries despite the doenturn and declines we have seen their over the years.
Switzerland, Singapore, Norway and Denmark don't have an automotive industry but are among the richest countries in the world. Since when is an automotive industry a prerequisite for prosperity? It has been a taxpayer-funded junket. Thank goodness they are pissing off and taking their hands out of our pockets.
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The fact that more people are now paying interest only loans as that is all they can really afford with prices where they are now.
It's only a slight increase, isn't it?
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The fact that our wages are the highest in the world, double that of the US ,euro and uk. We cannot compete with them , let alone cheap chinese wages , with ours being at least 15 times higher.
Our wages are high but that doesn't appear to be a negative for house prices.
Quote:
The fact that when the rest of the world was having a correction of sorts in the housing market, we went on ponzi pumping measure to send them up higher than ever, by doubling of housing grants and removal of stamp duty for some, dropping lvr rates , encoraging foreign investors and also encoraging super holders to leverage their super in as well.
Government stimulus is a positive, not a negative, for house prices, isn't it? It's likely, if the shit should hit the fan, that there will be more stimulus, leading to higher house prices.
The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt — Bertrand Russell
That's his timeframe, not mine. He said something bad will happen by October 2015. Fair enough, but its not everybody else's timeframe, its just,hows it going to go from here.
I can't argue with that one.
No you can't.
This hasn't stopped house price growth so far ...
No it has not, but do you think it will from here on, the effects take time, payouts and savings can keep people going for a while,so can credit cards.
Similar things were said in 2003 when they were building like crazy around Melbourne CBD (Southbank, Docklands) and then the government simply ramped up immigration. If there is a shortage of buyers, the government will import more people.
Yes they probably were said in 2003, I don'tknow the actual numbers doc, but would say this dwarfs anything in 2003. As for immigration, what if we ddon't have jobs for them. If immigration is the saviuor, how come the US has bought in more immigrants than we ever have to make a population of over 300 million people with a similar land mass to ours and yet we have more houses per capita than the US, and I think also more than the euro and UK yet house prices have dropped here with mass immigrations and populations. Could it be the case here, where it does not matter how many you have or bring in but writer you have jobs for them ?
Are they? If they are it doesn't appear to be affecting house prices so far.
Yes wages are falling doc, an example is cokes recent wages freeze for current workers and a pay reduction of 38% for new workers doing the same job. This has never happened before ,plenty more examples. And no prices have not been effected to much yet with record low rates and the like, but these drops are only just starting for the first time ever, you don't think that will be a problem in future ?
I'll concede this one but it will turn around eventually due to mass immigration.
Why would it turn around, mass immigration and a huge population with less houses per capita than us , did not stop the US on a downturn for six years now with prices still down, prices are about 20% cheaper in California than than were in 2004.
The upside is irrelevant. Interest rates won't be going up if things are as bad as you suggest. Have you contradicted yourself?
Since when do you guys believe everything I say. And they may not be going up anytime soon, and could even drop further. But again there is little room to stimulate with little room to move down on rates. And we never really know when or by how much they may go up. Are you saying they can't or won't go up in future ?
Switzerland, Singapore, Norway and Denmark don't have an automotive industry but are among the richest countries in the world. Since when is an automotive industry a prerequisite for prosperity? It has been a taxpayer-funded junket. Thank goodness they are pissing off and taking their hands out of our pockets.
But it was an Industry here and has been for generation after generation and has now collapsed. What this shows us is, exactly how not only can we not compete with China but are unable to compete with US euro or UK wages, and that's why we lost ours and they did not lose theirs. It shows just how uncompetitive we are. You don't think this is 'very bad' doc ?
It's only a slight increase, isn't it?
No, its a shitload more and has grown like no tommorow since around 2000, Peter Frasercould verify this,but doubt he will.
Our wages are high but that doesn't appear to be a negative for house prices.
You don't think it will be a problem from here, China has only really grown since 2003, its only catching up fast now, shown in 12 year high unemployment and the collapse of our motor Idustry amungst many many others.
Government stimulus is a positive, not a negative, for house prices, isn't it? It's likely, if the shit should hit the fan, that there will be more stimulus, leading to higher house prices.
Government stimulus is a short term ponzi pumping measure, it is not REAL growth and makes things more unsustainable in future as it bubbles prices further by artificial means. This mean people have to borrow more money over longer periods or pay interest only loans which simply draws more and more money away from the real economy over longer periods and slowly destroys your economy. Exactly what we are seemg tthroughoit any western economies.
All in all doc,at least you had a go, that is the most important. And for this much respect goes to you, where most bulls would runaway or ignore it. Like sydneyite or dexter or Bob, when I saw you and all them look it last night and then all dissapear with nothing.
Your argument that it has not effected house prices for many questions is true but weak. We have record low rates and ponzi pumping measures and propping of many buisinesses artificially like ford or holden.We are facing big problems. So my argument to this response of not having effected houses is, you don't think these things pose a major problem in future and for quite some time going forward ?
You had a dig doc ,well done. Most bulls would of just cringed at those questions and runaway. Respect to you doc. There are many other topics that could also be covered as to why things are ' very bad'. Perhaps why are rates the lowest ever since the great depression, is that' very bad,' and youth unemployment and adult unemployment here now being worse than the US,euro or UK , only just a few more of many ,but youcan save those for another day after having a go here. Perhaps some other bulls can cover those.
That's his timeframe, not mine. He said something bad will happen by October 2015.
To be fair, in this forum "by October 2015" means up to 12:00PM, 31st October 2015.
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Similar things were said in 2003 when they were building like crazy around Melbourne CBD (Southbank, Docklands) and then the government simply ramped up immigration. If there is a shortage of buyers, the government will import more people.
That will just make unemployment worse. Large immigration has been supported by the mining boom. NSW and VIC run massive trade deficits, essentially spending the proceeds of the mining boom on maintaining full employment. When unemployment hits 8% we will see what appetite the electorate has for immigration.
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Switzerland, Singapore, Norway and Denmark don't have an automotive industry but are among the richest countries in the world.
Switzerland is full of well educated people that create new technologies and wealth, Singapore has the world's second largest port and have an oil bourse, Norway has oil and Denmark has the world's largest port. If you don't have automotive, aerospace or silicon industries, you damn well better have something else.
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Since when is an automotive industry a prerequisite for prosperity?
Industry is a prerequisite for prosperity. It doesn't have to be automotive, but it can't be digging holes in the ground. For prosperity you need to create new wealth.
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Government stimulus is a positive, not a negative, for house prices, isn't it? It's likely, if the shit should hit the fan, that there will be more stimulus, leading to higher house prices.
Once the Federal government loses it's AAA credit rating, bank funding costs will go up between 70 and 90 basis points. The RBA could launch QE, but we all know where that ends.
------------------------------ " ... which is that all-too-familiar dynamic in Irish life where people tell lies, cover them up and create all sorts of collateral damage, sometimes spread out over decades, and never take responsibility." - Alan Glynn
To be fair, in this forum "by October 2015" means up to 12:00PM, 31st October 2015.
I'm fine with that, if he wants until 31 October 2015, then so be it. All I ask is that he cease using the phrase, "in a year's time" after October because it would enable him to keep moving the date forward.
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That will just make unemployment worse. Large immigration has been supported by the mining boom. NSW and VIC run massive trade deficits, essentially spending the proceeds of the mining boom on maintaining full employment. When unemployment hits 8% we will see what appetite the electorate has for immigration.
As Bob Carr used to say, immigration adds more to demand than it contributes to supply. Here in Victoria, we simply export large percentages of new buildings to foreign investors. I don't agree with it, but why could this not continue?
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Switzerland is full of well educated people that create new technologies and wealth, Singapore has the world's second largest port and have an oil bourse, Norway has oil and Denmark has the world's largest port. If you don't have automotive, aerospace or silicon industries, you damn well better have something else.
Yes, Norway has oil. So it's OK to drill holes in the ground, but not to dig holes in the ground? Would you be happier if Australia was drilling, instead of digging?
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Industry is a prerequisite for prosperity. It doesn't have to be automotive, but it can't be digging holes in the ground. For prosperity you need to create new wealth.
Here in Victoria, we have a new industry: micro-apartment construction and exports. We have no minimum design specifications so apartments can be constructed as small and cheaply as the developer desires and then exported to foreign investors. They may only be suitable for student accommodation, but it's an industry nonetheless, isn't it?
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Once the Federal government loses it's AAA credit rating, bank funding costs will go up between 70 and 90 basis points. The RBA could launch QE, but we all know where that ends.
There will come a tipping point, a time when debt-to-GDP must peak, but that might be years away. You guys can't keep calling the top time and time again. You've got to be more precise. That's one the reasons I've decided to hold Frummy to October 2015.
And perhaps you can debate the points mentioned seeing as you would appear a self appointed masterdebaitor.
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Iron ore prices crashing from 190 a tonne down to 78 a tonne now.
After going up by 12 times over the previous 6 years before the $190 peak..... AND since then the massive investment in new mines / existing mine expansion has resulted in a quadrupling or more of the amount of ore that is being produced and shipped each year - so the export income being earned for Australia even at circa $80/tonne is many multiples of what it has been in the past. The falling price has and will take out a few junior mining firms that came in with a dodgly business plan based on sky high prices for-ever. But the negative impact of that is dwarfed by the long term export income that is and will continue to be earned by the major miners in that space (BHP, RIO, FMG). And unlike the car manufactures that you mention later, a large amount of the equity in these miners is at least held by Australians. So this is certainly nothing that is going to be the trigger for a house price crash.
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The closure of many buisinesses to reach twelve year highs in unemployment recently.
Actually there as many businesses starting up and employing people as there are shutting down - it's just that the closures tend to be in more archaic, union dominated industries and thus they get more press/publicity. The unemployment rate is currently 6.1%, which is about where it was 12 years ago yes, which was followed by a decade of boom-time employment growth - bringing the rate down to 4%. But the number of people employed currently (11.6M people) is higher than it has ever been. The only reason the unemployment rate has been rising a bit is because of population growth, not a net decrease in emplyment, which is what your comment is suggesting. And besides, in the 90s when unemployment hit 11% and we had a massive recession, house prices only went down a bit (after a big boom), and then continued to rise once again during the 90s when unemployment was higher that 6% for the entire decade.
So again, no logical reason there I can see why the current employment situation is going to cuase house price to crash?
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The winding down of the biggest mining boom in our history. The record overbuilding going on in every capital city.
I'll address these together as they are related - the RBAs "plan" was to spark a building boom in order to created jobs as they were being lost due to the decline in mining investment. By your own admission here, this seems to be working. Yes, a good clip of new building will put downward pressure on house prices - or unit prices mainly, given that a lot of the new building is high density in Sydney and Melbourne. But we are no-where near the building levels required to actually cause a "crash"! Especially due to our ongoing high population growth - those dwellings are needed and there is huge demand for them to be bought or rented.
Are they? Maybe a bit, in some places, as would be expected (see discussion re building rates above!) - ie in Sydney are only around 2% right now - nowhere near the 5% levels seen in 2003. And even back then those vacancy rates only resulted in modest house price falls for a couple of years - certainly no crash. So I don't see why you are panicking about vacancy rates right now?
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Rents falling.
Again, evidence please? Looks like more made up crap to me: CPI data is registering rental increases over the past 12 months on average everywhere? http://www.abs.gov.au/ausstats/abs@.nsf/mf/6401.0 Residex and other data providers all tell a similar story in their data
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Very little room to the downside on interest rates, but plenty of room on the upside.
Both rubbish, and moot. For a start, the cash rate could go to zero like it is in Europe and the US - that would take 2 - 2.5% off current mortgage rates, which would basically HALVE them (they are around 5 - 5.5% at the moment). That's a huge capacity for them to be reduced. But it's moot, because they don't need to go down - they will likely just stay low for years - interest rates will only rise in an economic environment that requires them to and has the capacity to handle it - ie high inflation, runaway economic growth, credit growth etc. In which case house prices will be BOOMING, not crashing.
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The closing of industries we have had in this country for generations, such as the motor industry. Industries that have bought and paidfor generation after genaration of housing. And the fact that the US ,euro and uk have not lost their motor industries despite the doenturn and declines we have seen their over the years.
As Doc said, many wealthy successful countries do not have car manufacturing. Our car companies are all foreign owned basically forever anyway - hence no real interest in developing for export markets (other than token efforts) - only interested in the local market. And the local market lost interest in the locally made cars a long time ago (unfortuneately - and I only say that because I do like some of them and own one, but I am not the majority). Hence only 1 in 5 new cars sold presently is made locally. Plus the firms only existed due to government subsidy. At the end of the day, our local market does not provide the econimies of scale for local car manufacturing if only 20% or less of us want to buy them and the owners of the firms have little interest in being export driven.
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The fact that more people are now paying interest only loans as that is all they can really afford with prices where they are now.
Rubbish - this has been covered many times - the prevelance of IO loans is due to the tax advantages, not the ability of the borrowers to afford the loans.
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The fact that our wages are the highest in the world, double that of the US ,euro and uk. We cannot compete with them , let alone cheap chinese wages , with ours being at least 15 times higher.
I agree high wages are an issue with respect to our ability to create competive labour intensive low cost exporting businesses (if that's what we really want to do???)- but as doc said, I don't see why you think high wages will cause house prices to crash? As long as the economy can employ people at current wages, which it is demonstrably able to, then I don't see why wages will cause a house price crash? Also, the falling $AU value will increase our competitveness on the relative wages front - the high dollar has made this worse than it historically has been.
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The fact that when the rest of the world was having a correction of sorts in the housing market, we went on ponzi pumping measure to send them up higher than ever, by doubling of housing grants and removal of stamp duty for some, dropping lvr rates , encoraging foreign investors and also encoraging super holders to leverage their super in as well.
Doesn't this just prove they had bubbles and we didn't? They tried everything to keep prices up in those countries - zero interest rates, stimulus, bank bailouts etc etc, but still prices crashed - here they boomed! Therefore no bubble here.
Bottom line, I don't see anything in your list that is likely to spark a big house price crash anytime in the for-seeable future? Many of your points are factually incorrect, and the rest are exaggerated either in terms of their magnitude, and/or their likely impact on the economy and the housing market. At least you tried though!
Doesn't this just prove they had bubbles and we didn't? They tried everything to keep prices up in those countries - zero interest rates, stimulus, bank bailouts etc etc, but still prices crashed - here they boomed! Therefore no bubble here.
Bottom line, I don't see anything in your list that is likely to spark a big house price crash anytime in the for-seeable future? Many of your points are factually incorrect, and the rest are exaggerated either in terms of their magnitude, and/or their likely impact on the economy and the housing market. At least you tried though!
What countries are we talking about here?
What gave Australia the edge was this.
1. Coming into the crisis with much higher interest rates than either the US or EU. Much more room to cut and stimulate. 2. Being the principle beneficiary of the largest State stimulus package in history (China) 3. Sentiment didn't sour for long ( but long enough to see some pretty decent price falls in 08/09.
We got very lucky; and that's with all the fiscal and monetary levers being pulled and being fortunate to have lots of iron ore.
Right now, economic conditions are deteriorating, slowly but unemployment is rising. Debt is at all time highs. The property market is being driven by pure speculation in many cities and there is hardly any ammo left in terms of monetary policy.
I'm watching Perth and Perth is only going one way: down. All the data shows it. The only question is whether sentiment will sour badly enough to create a significant deflationary cycle.
Right now, there are thousands of units coming onto the market in Perth as a result of the construction boom which began in mid 2012. Much of this stock was bought by investors at a time when the rental market was extremely tight. But that is not the case anymore.
How long will these investors hold those properties if they cant get tenants?
Its these investors that are the weak link in the property pyramid; I expect many will rush for the exits ( as they are already) rather than hold apartments they cant rent.
Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?
The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly. Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
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