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When will the 'inevitable' Australian property crash begin? When does 'The Bubble' actually pop?
Topic Started: 14 Jul 2014, 11:31 AM (12,135 Views)
Sydneyite
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Shadow
16 Jul 2014, 03:34 PM
The US has the lowest price/income ratio in the world, but they have very high property taxes, so the overall cost of ownership is much higher than their price/income ratio suggests.
Excellent point! I should have added that one to my list as to why the US vs Oz price/income chart is not apples-apples.

In fact you can show easily that to account for the higher property taxes that the purchase price of a property in the US needs to be about 2/3 to 1/2 the price compared to in Australia, all other things being equal (especially say annual cash rental value), to get the same effective NPV cost of ownership over a long period of time.
Edited by Sydneyite, 16 Jul 2014, 04:48 PM.
For Aussie property bears, "denial", is not just a long river in North Africa.....
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Shadow
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Ex BP Golly
16 Jul 2014, 04:30 PM
Is that household income?
Disposable household income (i.e. after tax).


Veritas
16 Jul 2014, 04:35 PM
Oh, and that we cant talk about the cycle before 2003. That doesn't matter you see.

But we can talk about interest rate fluctuations going back 160 years.
We had this discussion a few days ago and I explained that the cycle existed prior to 2003. In fact the cycle has always existed. House prices have always cycled between periods of growth, decline and stagnation. You were getting mixed up between the property cycle vs the past decade of relative price/income stability. Although I'm pretty sure I also said at the time that my explanation probably wouldn't sink in, and that you would get confused about it again in a few months. Looks like it didn't even take that long this time.
Edited by Shadow, 16 Jul 2014, 04:53 PM.
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
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Ex BP Golly
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So these graphs need to be read at 7.43 for Australia :?:

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Freaky!

Ill work on that when I'm back from the bush.
Edited by Ex BP Golly, 16 Jul 2014, 05:04 PM.
WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
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Shadow
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Ex BP Golly
16 Jul 2014, 05:02 PM
So these graphs need to be read at 7.43 for Australia
Depends on how they are measuring household income (mean vs median, gross vs disposable) and how they measure price (houses vs all dwellings). The top chart says houses and the bottom says dwellings. Top chart doesn't specify gross or disposable income. I think the charts you posted probably use the ABS national accounts figures for household income, which includes non-wage income from investments, and imputed rent.
Edited by Shadow, 16 Jul 2014, 05:19 PM.
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
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Ex BP Golly
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Thanks for starting this thread. Very enjoyable, and not too much bad mouthing :D
WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
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Veritas
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Shadow
16 Jul 2014, 04:48 PM
Disposable household income (i.e. after tax).



We had this discussion a few days ago and I explained that the cycle existed prior to 2003. In fact the cycle has always existed. House prices have always cycled between periods of growth, decline and stagnation. You were getting mixed up between the property cycle vs the past decade of relative price/income stability. Although I'm pretty sure I also said at the time that my explanation probably wouldn't sink in, and that you would get confused about it again in a few months. Looks like it didn't even take that long this time.
Nah, I'm pretty sure I'm remembering correctly.

Your line is that if there is any sign of trouble the fiscal and monetary levers will be pulled.

Therefore, the nature of the cycle is down to the decisions of our elected and unelected elites.

Obviously, there are much higher stakes now the number of people leveraged into property and the banking sectors absolutely gargantuan exposure.

And that's new. But you already know that.
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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Ex BP Golly
16 Jul 2014, 05:02 PM
So these graphs need to be read at 7.43 for Australia :?:

Posted Image
Posted Image

Freaky!

Ill work on that when I'm back from the bush.
The graph shows how bad our housing bubble is compared to the US.

The US did not have negative gearing to pump their ponzi to the same extent we have.

And our wages are also in a bubble which has added fuel to the ponzi which explains why our bubble is bigger than the US housing bubble.

People who have purchased more than ten years ago with little leverage should be fine.

But the others will be first to lose their shirt by paying little deposit and then interest only loans.

Glad Im not in their shoes.

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Shadow
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Veritas
16 Jul 2014, 05:31 PM
Nah, I'm pretty sure I'm remembering correctly.

Your line is that if there is any sign of trouble the fiscal and monetary levers will be pulled.
You disagree?

And how does this relate to your idea that the property cycle only began in 2003?
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
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Veritas
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Shadow
16 Jul 2014, 05:43 PM
You disagree?

And how does this relate to your idea that the property cycle only began in 2003?
You agree?

Your usage of the term "all part of the cycle" is ubiquitous.

You would do your audience a favour by defining the nature of this cycle.

From your posts I believe it means that the purpose of Fiscal and monetary policy in this country is to shore up your investments in property.

Which seems odd given the potential for massive moral hazard that such an arrangement would create.

My view is that the genie is out of the bottle and the RBA know it so all they can do to stop people exploiting this absence of moral hazard it is jawbone.

They cant do anything stronger because, sadly, the real economy and the health of our banks depend on a maintenance of the status quo. Sam reason why there is no appetite to kill NG despite its distortionary effects in the market.

And that's all new. And all happened post the 1990s in line with neoliberal experiment in financial deregulation and the subsequent capture of housing system by the banking industry and attendant VIs.

Big, powerful piggies at this particular trough.
Edited by Veritas, 16 Jul 2014, 06:06 PM.
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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Shadow
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Veritas
16 Jul 2014, 05:53 PM
You would do your audience a favour by defining the nature of this cycle.
The property cycle is simply the process by which house prices progress through periods of growth, decline and stagnation, in response to changes in the fundamental drivers such as supply, demand, interest rates, population growth, employment etc.

Quote:
 
the purpose of Fiscal and monetary policy in this country is to show up your investments in property.
Sorry, I don't know what that means.

Quote:
 
My view is that the genie is out of the bottle
What is the nature of this 'genie' and in what form of 'bottle' was it previously contained?
Edited by Shadow, 16 Jul 2014, 06:07 PM.
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
Profile "REPLY WITH QUOTE" Go to top
 
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