Welcome Guest [Log In] [Register]


Reply
  • Pages:
  • 1
  • 6
Six years on from the GFC, what have we learnt?; Entrepreneurs piling into property faster than ever
Topic Started: 17 Jul 2014, 10:03 AM (4,956 Views)
Guest
Unregistered

This is just crazy.

I read in the Real Estate section of the Saturday Telegraph the chief commentator discuss the run up of prices in Sydney.

He mentioned that the recent 14-15% spurt has increased the equity of those investors with 10 properties by $1m.

10 properties?? Here is the problem… we are breeding a generation of rags to riches landlords.

There is no mention of what happens if prices head south from here. It is all blue sky apparently.

Now they are talking up the central coast saying it is half and hour up the road from Sydney and infrastructure is improving etc.

Unless they increase the speed limit to 150kph… the beaches of the central coast are still a good hour from Sydney’s outskirts.

Add more time if there is an accident on the F3/M1.
"REPLY WITH QUOTE" Go to top
 
Admin
Member Avatar
Administrator

Quote:
 
Risks will rise as lessons of global panic fade

July 25, 2014
Ross Gittins

Almost six years since the global financial crisis reached its height, it's easy to forget just how close to the brink the world economy came. To someone like Reserve Bank governor Glenn Stevens, however, those events are burnt on his brain.

Which explains why he thought them worth recalling in a speech this week. And also why, so many years later, the major developed economies of the North Atlantic are still so weak and showing little sign of returning to normal growth any time soon.

When those key decision-makers who lived through 2008 and 2009 say that there was the potential for an outcome every bit as disastrous as the Great Depression of the 1930s, "I don't think that is an exaggeration", he says.

"Any account of the events of September and October 2008 reminds one of what an extraordinary couple of months they were. Virtually every day would bring news of major financial institutions in distress, markets gyrating wildly or closing altogether, rapid international spillovers and public interventions on an unprecedented scale in an attempt to stabilise the situation.

"It was a global panic. The accounts of some of the key decision-makers that have been published give even more sense of how desperately close to the edge they thought the system came and how difficult the task was of stopping it going over."

But, despite the inevitable "mistakes and misjudgments", the authorities did stop it going over. Stevens attributes this to their having learnt the lessons of the monumental mistakes and misjudgments that that turned the Great (sharemarket) Crash of 1929 into the Great Depression.

Economic historians (including one Ben Bernanke) spent decades studying the Depression and, in Stevens' summation, they came up with five key lessons: be prepared to add liquidity – if necessary, a lot of it – to financial systems that are under stress; don't let bank failures and a massive credit crunch reinforce a contraction in economic activity that is already occurring – try to break that feedback loop; be prepared to use macro-economic policy aggressively.

So far as possible, maintain dialogue and co-operation between countries and keep markets open, meaning don't resort to trade protectionism or "beggar-thy-neighbour" exchange rate policies. And act in ways that promote confidence – have a plan.

There was a lot of action and a lot of international co-operation, and it worked. As a result, we talk about the Great Recession, not the Great Depression Mark II.

"We may not like the politics or the optics of it all – all the 'bailouts', the sense that some people who behaved irresponsibly got away with it, the recriminations, the second-guessing after the event and so on," he says. "But the alternative was worse."

With collapse averted, the next step was to fix the broken banks. Their bad debts had to be written off and their share capital replenished, either by them raising capital from the markets or accepting it from the government.

Fixing the banks' balance sheets was necessary for recovery, but not sufficient. A sound financial system isn't the initiating force for growth, so stimulatory macro-economic policies were needed to get things moving.

On top of all the government spending to recapitalise the banks came a huge amount fiscal (budgetary) stimulus spending. Stevens says a financial crisis and a deep recession can easily add 20 or 30 percentage points to the ratio of public debt to gross domestic product.

Read more: http://www.smh.com.au/business/risks-will-rise-as-lessons-of-global-panic-fade-20140725-zwpvk.html
Follow OzPropertyForum on Twitter | Like APF on Facebook | Circle APF on Google+
Profile "REPLY WITH QUOTE" Go to top
 
stinkbug
Member Avatar


Guest
21 Jul 2014, 11:16 AM

10 properties?? Here is the problem… we are breeding a generation of rags to riches landlords.

Such people have been here all along. Very few investors get to 10 properties, though.
---------------------------------------------------------------

While it's true that those who win never quit, and those who quit never win, those who never win and never quit are idiots.

Profile "REPLY WITH QUOTE" Go to top
 
Admin
Member Avatar
Administrator

Quote:
 
Did we learn nothing from the GFC?

Callam Pickering

It’s been six years since Lehman Brothers collapsed and households and businesses throughout the developed world scrambled to pay-down or write-off existing (and often toxic) debt burdens. During those six years, you might be tempted to think that the global community has been weaned off its reliance on debt, but that’s far from the truth.

The 16th Geneva Report on the World Economy assesses the global debt environment and provides fresh insight into developments since the onset of the global financial crisis. It found that the global debt-to-GDP ratio continues to rise at a rapid pace, with the global financial crisis creating only a temporary moderation in borrowing tendencies.

Global debt, excluding financials, increased to 212 per cent of nominal GDP in 2013, up from 180 per cent in 2008. To the limited extent that deleveraging has occurred -- primarily in the US, the UK and the euro Area -- it has been centred on the household and business sectors and has been partially or entirely offset by government borrowing.

Debt within the developed world is estimated to be 272 per cent of nominal GDP compared with 151 per cent in emerging countries. At the top of the class is Ireland and Japan, with a debt-to-GDP ratio of 442 and 411 per cent, respectively.

For Ireland, its debt is concentrated in its business sector, although leverage within their financial sector is the more pressing concern. In Japan, its level of debt is largely concentrated within the public sector at an extraordinary 243 per cent of nominal GDP.

Posted Image

How does Australia compare?

According to the report, Australia has a debt-to-GDP ratio of 209 per cent in 2013. The distribution of our debt is somewhat unusual among developed countries, with a high share of debt concentrated in the household sector, below average debt in the business sector and relatively little government debt.

Among developed countries, Australian household debt of 110 per cent of nominal GDP sits second to only the Netherlands. But for the business sector we sit above only Greece and Germany among countries assessed. The result is perhaps a little surprising given Australia’s reputation for preferring debt financing over equity issuances.

Our financial sector is not especially leveraged by international standards at only 89 per cent of nominal GDP -- compared with Ireland at a remarkable 584 per cent -- although Australia’s financial debt is largely concentrated within four banks who are all considered ‘too big to fail.’

Analysing cross-country debt dynamics is notoriously difficult. Why do some countries default all the time -- such as Argentina -- while Japan can successfully manage debt levels that tower over the likes of Greece? Cross-country analysis should always be treated with some caution.

It’s important to acknowledge that institutions matter, as does the composition of borrowers. Japan, for example, can service its incredible debt quite easily because it primarily borrows from Japanese citizens and can simply print more money to cover the debt. The United States is often considered to be in the same boat due to the role the US dollar plays in global transactions.

Nevertheless, the report is concerned about recent developments. Has loan quality improved sufficiently within developed countries? Have they improved their risk management systems? And will higher leverage in emerging economies pave the way for more frequent financial crises?

The next global debt crisis is most likely to occur in either Europe or among emerging economies.

A central concern of the report is the combination of rising leverage and moderating growth. Global growth is increasingly dominated by China but when you dig below the surface it becomes obvious that the global economy has shifted towards a lower growth environment. Nowhere is this more evident than Europe.

The persistence of the crisis in the euro zone has eroded the productive capacity of most euro zone economies. The ongoing legacy of the sovereign debt crisis will not be easily forgotten and while progress has been made, debt remains exceptionally high in a number of countries.

The very architecture of the euro zone -- including a range of poorly matched countries utilising the same currency and inadequate policy co-ordination among those countries -- leaves the euro zone particularly susceptible to financial imbalances and crises.

Europe is also confronted by a truly nasty set of demographics that are set to weigh on growth and will make it more difficult to service existing debt burdens.

Emerging countries pose a very different threat and much of it is centred on China. Rising leverage helped to shield China and other emerging economies during the global financial crisis but it isn't without its risks.

In China, the debt-to-GDP ratio has increased by around 70 percentage points since 2008, which has helped finance its residential investment and infrastructure boom. It proved highly beneficial for the Australian economy but is clearly on an unsustainable footing.

China now faces the undesirable combination of rising debt and moderating nominal GDP growth. The country's ability to service its debt will be stretched -- although with relatively low government debt it remains reasonably well placed to ride out any storm. The same can not necessarily be said of other emerging economies.

The report indicates that collectively we learned relatively little from the global financial crisis. We shouldn't forget that it was the countries with relatively low debt that were best able to weather the crisis and the countries that can deleverage -- without compromising employment or growth -- would do well to ease their debt burdens.

Debt among emerging economies is not necessarily too high, but, it is increasing at a rapid pace. Don’t be surprised if they find it more difficult to service their debt burden than has traditionally been the case for more developed countries.

As for Australia, overall we sit in the middle of the pack but our household sector debt is exceptionally high by international standards. As such it should come as little surprise that the Reserve Bank is contemplating policies to reducing lending activity.

Read more: http://www.businessspectator.com.au/article/2014/10/8/global-news/did-we-learn-nothing-gfc
Follow OzPropertyForum on Twitter | Like APF on Facebook | Circle APF on Google+
Profile "REPLY WITH QUOTE" Go to top
 
1 user reading this topic (1 Guest and 0 Anonymous)
« Previous Topic · Australian Property Forum · Next Topic »
Reply
  • Pages:
  • 1
  • 6



Australian Property Forum is an economics and finance forum dedicated to discussion of Australian and global real estate markets and macroeconomics, including house prices, housing affordability, and the likelihood of a property crash. Is there an Australian housing bubble? Will house prices crash, boom or stagnate? Is the Australian property market a pyramid scheme or Ponzi scheme? Can house prices really rise forever? These are the questions we address on Australian Property Forum, the premier real estate site for property bears, bulls, investors, and speculators. Members may also discuss matters related to finance, modern monetary theory (MMT), debt deflation, cryptocurrencies like Bitcoin Ethereum and Ripple, property investing, landlords, tenants, debt consolidation, reverse home equity loans, the housing shortage, negative gearing, capital gains tax, land tax and macro prudential regulation.

Forum Rules: The main forum may be used to discuss property, politics, economics and finance, precious metals, crypto currency, debt management, generational divides, climate change, sustainability, alternative energy, environmental topics, human rights or social justice issues, and other topics on a case by case basis. Topics unsuitable for the main forum may be discussed in the lounge. You agree you won't use this forum to post material that is illegal, private, defamatory, pornographic, excessively abusive or profane, threatening, or invasive of another forum member's privacy. Don't post NSFW content. Racist or ethnic slurs and homophobic comments aren't tolerated. Accusing forum members of serious crimes is not permitted. Accusations, attacks, abuse or threats, litigious or otherwise, directed against the forum or forum administrators aren't tolerated and will result in immediate suspension of your account for a number of days depending on the severity of the attack. No spamming or advertising in the main forum. Spamming includes repeating the same message over and over again within a short period of time. Don't post ALL CAPS thread titles. The Advertising and Promotion Subforum may be used to promote your Australian property related business or service. Active members of the forum who contribute regularly to main forum discussions may also include a link to their product or service in their signature block. Members are limited to one actively posting account each. A secondary account may be used solely for the purpose of maintaining a blog as long as that account no longer posts in threads. Any member who believes another member has violated these rules may report the offending post using the report button.

Australian Property Forum complies with ASIC Regulatory Guide 162 regarding Internet Discussion Sites. Australian Property Forum is not a provider of financial advice. Australian Property Forum does not in any way endorse the views and opinions of its members, nor does it vouch for for the accuracy or authenticity of their posts. It is not permitted for any Australian Property Forum member to post in the role of a licensed financial advisor or to post as the representative of a financial advisor. It is not permitted for Australian Property Forum members to ask for or offer specific buy, sell or hold recommendations on particular stocks, as a response to a request of this nature may be considered the provision of financial advice.

Views expressed on this forum are not representative of the forum owners. The forum owners are not liable or responsible for comments posted. Information posted does not constitute financial or legal advice. The forum owners accept no liability for information posted, nor for consequences of actions taken on the basis of that information. By visiting or using this forum, members and guests agree to be bound by the Zetaboards Terms of Use.

This site may contain copyright material (i.e. attributed snippets from online news reports), the use of which has not always been specifically authorized by the copyright owner. Such content is posted to advance understanding of environmental, political, human rights, economic, democratic, scientific, and social justice issues. This constitutes 'fair use' of such copyright material as provided for in section 107 of US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed for research and educational purposes only. If you wish to use this material for purposes that go beyond 'fair use', you must obtain permission from the copyright owner. Such material is credited to the true owner or licensee. We will remove from the forum any such material upon the request of the owners of the copyright of said material, as we claim no credit for such material.

For more information go to Limitations on Exclusive Rights: Fair Use

Privacy Policy: Australian Property Forum uses third party advertising companies to serve ads when you visit our site. These third party advertising companies may collect and use information about your visits to Australian Property Forum as well as other web sites in order to provide advertisements about goods and services of interest to you. If you would like more information about this practice and to know your choices about not having this information used by these companies, click here: Google Advertising Privacy FAQ

Australian Property Forum is hosted by Zetaboards. Please refer also to the Zetaboards Privacy Policy