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Bulls gone AWOL, a sign the game is up? They've seen the writing on the wall?
Topic Started: 7 May 2014, 11:25 AM (19,783 Views)
Mike
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Veritas
13 Oct 2014, 12:59 PM






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Probably true. What really sunk the banks in the end in Ireland was loans to property developers. I don't see a whole lot of difference between the two countries in how they lend to mortgagees.


Lending to developers in Australia is strict, I know first hand. Typically developers will find it very hard to find financing over 60% LVR. Not impossible but alot of lenders wont touch it unless you have a majority of off the plan sales signed up.

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But more than can be reasonably be expected by the "structural shift".

The structural shift, naturally, explains much of the price gains but what the chief bulls don't like talking about is the rise of the investor. The structural shift doesn't explain why it all of sudden became fashionable for every man and his dog to buy investment properties: a widely held belief that property prices would keep rising and deliver lavish capital gains does.

Like I said, in Perth, right now, thousands of units are coming on line into a rental market that is already becoming oversupplied. Many of these investors have a business plan that depends on having regular rental income. If its not forthcoming what do you think is going to happen next?


Lending to investors or developers in WA is not high at present, activity has increased but we are almost last in the states with investor activity. You will find what is driving the trend into apartments is the demand from owner occupiers. A new trend emerged over the last few years where the population of Perth discovered apartment living and urban infill. Why commute to the far reaches of the metro area when you can live close to the CBD & river for the same cost or close to it.

Investors play a part but Perth has a very blanaced market of investors, FHB and upgraders. I have seen no real increase in investor activity.

If you want to talk about Sydney then you may have a point.
http://mike-globaleconomy.blogspot.com.au/
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Sydneyite
13 Oct 2014, 10:31 AM
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!
Ok sydneyite, at least you had a go here, but no cigar for you.

But there was a lot of facts for which you dismissed as rubbish, and for that you lose credability. You did nt have to disagree on just about evrything just for the sake of debate. So maybe it was a bit of a silly exercise in one reguard.

For example , I claimed there is not much room to move down on rates but plenty of room to move up. And your reponse ,'rubbish'. Is this not a blatant fact, no matter of where we think they might go or where they actually go.

And my claim more are now paying interest only loans, again this is a fact that you dismiss as rubbish.

And then wages, I gave you the coke example andnagain you claim bullshit. Again this is fact, and all around the world, but to bulls its just rubbish. See , you cannot have a proper discusion with people who dismiss facts as rubbish.you want to quote me abs numbers for pay rises, we know how unreliable they are.

Look in the job loss thread, that's the real story, show me the actual jobs , not the bullshit they claim.

I won't continue as it would be a waste of time. What your post does show us is the clear delusion of the bulls, and how they simply dismiss facts as rubbish. Need I really say anymore.

And no rent falls you claim. Click on that sqm research at the top right of the forum page and then tell me no rent declines. Bigger drops that ever before .
I wont bother adresssing the rest , for obvious reasons.

The only thing that was rubbish , was the level of delusion in your responses here today. And you want to call people clueless.....
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Ned Flanders
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Sydneyite
13 Oct 2014, 10:31 AM
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).
You forget falling demand.
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And unlike the car manufactures that you mention later, a large amount of the equity in these miners is at least held by Australians.

Less than 50%.
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Actually there as many businesses starting up and employing people as there are shutting down

Try sticking to the facts as they are known.
http://www.abs.gov.au/ausstats/abs@.nsf/mf/8165.0

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But the number of people employed currently (11.6M people) is higher than it has ever been.

Has the population decreased recently?
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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.

The 90s will seem like a walk in the park in comparison.
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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.

It's a stupid plan and we are celebrating that it is working.
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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.

On established dwellings, but not new dwellings. The market will split into established and new. New dwelling prices will continue to rise as we sell our children's future to the Chinese, but established dwellings will fall to meet the new income affordability. Domestic investors will exit established dwellings, putting downward pressure on prices until they are affordable by Australians.
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Especially due to our ongoing high population growth - those dwellings are needed and there is huge demand for them to be bought or rented.

The dwellings are needed, but the immigration is not.
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Evidence please? This is made up crap - wages are NOT falling. The latest ABS data says wages on average rose 2.6% in the previous 12 months: http://www.abs.gov.au/AUSSTATS/abs@.nsf/allprimarymainfeatures/3F85BC8B42C2D64ECA257B17000D36FC?opendocument

While CPI was 3% over the same period. Meaning, falling in real terms. http://www.abs.gov.au/ausstats/abs@.nsf/mf/6401.0
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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 :?:

Oh look, you can find the CPI data, but only when it suits your story.
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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.

ASX200 to the moon! I hope the RBA does cut to zero. I think it is an inevitability given the economic conditions ahead. I will get back into high yield equities if that happens.
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As Doc said, many wealthy successful countries do not have car manufacturing.

Those countries have something else.
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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?

Wages are sticky, so small businesses that can no longer afford to pay high wages will shut their doors. This is the reason you get high unemployment. If wages were flexible, you could get full employment, even in a 'recession'.
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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.

And cause the price of imported goods, like oil, to rise leading to lower incomes.
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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.

You say that with such conviction I almost thought you believe it yourself.
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" ... 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
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Dr Watson
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Ned Flanders
13 Oct 2014, 04:03 PM
We are close now, this is the end game. I think October 2015 is probably a good call, but it might be as late as Jan 2016 or as early as Mar 2015.
Really? I don't think we're even remotely close. Public debt-to-GDP can continue rising for years to come. (Not a good thing, by the way, but it's the path our policymakers are stuck with and we need to base our investment decisions around it.) When we do reach that tipping point, that moment of "we're maxed out", we'll have some challenges, but it might be another decade away or even longer. Actually, I think a recession would have been preferable in 2008 and it would have flushed out a lot of problems and inefficiencies and provided a more solid base for growth going forward ... but it didn't happen. (Keating was right: recessions ... sometimes you have to have them.) Instead, interest rates will keep falling; the government will keep borrowing and stimulating; the immigrants will keep coming to Melbourne and Sydney; the new hubs Victoria and NSW badly need will probably not be built — that's bullish for house prices, by the way; Australians will keep voting for the major parties to maintain the status quo and house prices will keep rising until the growth model is exhausted. I'll say that game can be played until 2025.
Edited by Dr Watson, 14 Oct 2014, 08:59 AM.
The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt — Bertrand Russell
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John Frum
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Public debt-to-GDP can continue rising for years to come.


So long as global investors see no other low risk, poor yielding assets to divert their capital to besides aussie govt bonds.

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[chronic rising high debt to GDP is] not a good thing, by the way, but it's the path our policymakers are stuck with and we need to base our investment decisions around it.


We may disagree on the timing points and outcomes, but on root causes we are in 100% accord.

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Actually, I think a recession would have been preferable in 2008 and it would have flushed out a lot of problems and inefficiencies and provided a more solid base for growth going forward


Also agree, but that's a tough strategy to sell to the electorate, so I'm not lumping the blame for that one with Ruddmeister & Co.

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Australians will keep voting for the major parties to maintain the status quo and house prices will keep rising until the growth model is exhausted.


Yep. The majority have a vested interest in the stairs quo and don't care for or want to understand systemic risk (unless it falls into their back yard.)

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that's bullish for house prices, by the way; I'll say that game can be played until 2025.


It can be played for as long as foreigners consider keeping their money here a good bet.
Edited by John Frum, 14 Oct 2014, 09:25 AM.
"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.
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Dr Watson
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John Frum
14 Oct 2014, 09:22 AM
It can be played for as long as foreigners consider keeping their money here a good bet.
As far as you are concerned, John, it can be played until October 2015.
The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt — Bertrand Russell
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Sydneyite
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Ned Flanders
13 Oct 2014, 08:18 PM
You forget falling demand.
Less than 50%.
Ok on mining - demand for Aussie iron ore is still far higher right now than it was 1, 2 or 5 years ago. Look at the shipping volumes from Port Hedland etc!!! And 50% of the big miners being locally owned is far better than the 0% of local car manufacturers who are locally owned..... that was the key point. :re:

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Try sticking to the facts as they are known.
http://www.abs.gov.au/ausstats/abs@.nsf/mf/8165.0

Has the population decreased recently?
I phrased my point poorly - what I am saying is that there are just as many (or more) new jobs being created as are being lost from well publicised struggling industries. The employment stats proove this. Yes, the growth in jobs is not enough to keep up with populatio growth, so unemployment has been slowly rising, but this is a far cry from the "all hands panic!!" cries of Ted who I responded to who claims that "industries are collapsing like never before, jobs being lost like never before, unemplyment reaching all time highs" etc etc.

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The 90s will seem like a walk in the park in comparison.

It's a stupid plan and we are celebrating that it is working.

On established dwellings, but not new dwellings. The market will split into established and new. New dwelling prices will continue to rise as we sell our children's future to the Chinese, but established dwellings will fall to meet the new income affordability. Domestic investors will exit established dwellings, putting downward pressure on prices until they are affordable by Australians.

The dwellings are needed, but the immigration is not.
So no real counter points worth addressing there.....

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While CPI was 3% over the same period. Meaning, falling in real terms. http://www.abs.gov.au/ausstats/abs@.nsf/mf/6401.0
Oh so you want to interpret "wages are falling! Run for the hills" type panic / claims as "wages are not growing at quite the same rate as CPI for 1 year"??? I didn't see ANY mention of CPI adjustment or real wages in the original claim of falling wages I responded to? Did you???

The facts are that wages in Australia have outsripped CPI for the past decade or more - it's a pretty good run, and wages right now are still growing, not falling, as claimed. It's hard to see how growing wages, even at a rate less than CPI, is going to case house prices to crash don't you think??? :?:

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Oh look, you can find the CPI data, but only when it suits your story.
Ok so you agree then that rents are actually still rising according to the ABS and all other data sources then - good. So the original claim that rents are falling (everywhere) is still made up crap. QED.

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Those countries have something else.
So do we - iron ore and other commodity exports, primary produce, tourism, world class education sector, and a range of other successful industries.

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Wages are sticky, so small businesses that can no longer afford to pay high wages will shut their doors. This is the reason you get high unemployment. If wages were flexible, you could get full employment, even in a 'recession'.
I agree with this to some extent - although it's not so bad that's it's going to crash house prices! I think our economy would grow / perform better if there was more wage flexibility, especially in the currently highly regulated and unionised sectors. But that's very different from running around like chicken little claiming the sky is falling because of our high wages...... :dry:

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And cause the price of imported goods, like oil, to rise leading to lower incomes.
Except that the price of oil is falling quite dramatically at the moment......so maybe not as much as you think. Also as import costs rise that creates demand for locally produced alternatives for many things (maybe not oil though I agree, but maybe moot anyway as stated).

Bottom line - economies have their ups and downs - the AU economy has it's issues, I'm not saying it doesn't. But there is a big difference between a struggling but still growing economy with some structural issues needing to be addressed / reformed, and running around in a panic claiming it's all in the process of collapsing, house prices about to crash, unemployment to the moon, etc etc etc, as the original post I responded to by Crazy-Dave/Ted/MMM/etc was.
Edited by Sydneyite, 14 Oct 2014, 09:34 AM.
For Aussie property bears, "denial", is not just a long river in North Africa.....
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John Frum
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Dr Watson
14 Oct 2014, 09:25 AM
As far as you are concerned, John, it can be played until October 2015.
The money is starting to leave now as commodity prices decline. We are on tenterhooks.

Your 10 year call looks like hopeless optimism - perchance does that date dovetail with when your mortgage is paid off, assuming the current rate of repayments is maintained?

I'm starting a cleanskin fund for you at the local BWS Doc - the boys reckon there'll be a dozen or so cases there to cheer you up in a years time.
Edited by John Frum, 14 Oct 2014, 09:42 AM.
"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.
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Dr Watson
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John Frum
14 Oct 2014, 09:35 AM
The money is starting to leave now as commodity prices decline. We are on tenterhooks.

Your 10 year call looks like hopeless optimism - perchance does that date dovetail with when your mortgage is paid off, assuming the current rate of repayments is maintained?

I'm starting a cleanskin fund for you at the local BWS Doc - the boys reckon there'll be a dozen or so cases there to cheer you up in a years time.
Your wife would like a conversation with you, John:

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Edited by Dr Watson, 14 Oct 2014, 09:44 AM.
The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt — Bertrand Russell
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peter fraser
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John Frum
14 Oct 2014, 09:35 AM
The money is starting to leave now as commodity prices decline. We are on tenterhooks.

Your 10 year call looks like hopeless optimism - perchance does that date dovetail with when your mortgage is paid off, assuming the current rate of repayments is maintained?

I'm starting a cleanskin fund for you at the local BWS Doc - the boys reckon there'll be a dozen or so cases there to cheer you up in a years time.
Don't lock your call in John.

http://www.businessinsider.com.au/bill-evans-might-be-right-aussie-dollar-and-iron-ore-ripping-higher-2014-10
Any expressed market opinion is my own and is not to be taken as financial advice
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