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Christopher Joye turns bear - Australian housing bubble is now here; House prices have inflated at a 9.5% annualised pace (triple wages growth)
Topic Started: 19 Jul 2014, 01:12 PM (21,429 Views)
Sydneyite
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Shadow
21 Jul 2014, 10:20 AM
Chris
20 Jul 2014, 09:58 PM
How's this for simplicity, if the median house price in Sydney is roughly $800k, you are stating that the average wage (or household income) net is $200k plus. That's 4 times isn't it???

Or is this wrong?? The maths is pretty basic and the fact you can't get it means you're right, we are on a completely different level!!!
OK Chris, just for you I took the time to compile all the Sydney data into a nice black and white table, as well as a chart. Enjoy...

......

Source data (ABS dwelling prices)... http://www.abs.gov.au/ausstats/abs@.nsf/mf/6416.0
Source data (ABS adult single earnings)... http://www.abs.gov.au/ausstats/abs@.nsf/mf/6302.0
:lol @ Shadow doing all the work for Chris!
For Aussie property bears, "denial", is not just a long river in North Africa.....
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Ex BP Golly
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peter fraser
20 Jul 2014, 08:34 PM
There was a time when they cared, and they would charge a higher rate of interest if the loan became an IP loan, but now they don't give a hoot and would probably rather not know.

I've certainly owned properties where the use changed and I never told them.
And there may come a time when they care again.

Certainly for those who have done this, they risk allowing the banks an easy breach of contract when it comes time to foreclose you because the value of your security has fallen!

WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
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Shadow
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Evil Mouzealot Specufestor

MMM
20 Jul 2014, 08:56 PM
So Joye turns bear....
Only according to 'Crosspost' whoever that is. Probably a bear sock.

The truth is Joye is saying a bubble may be about to emerge. That's about as bullish as you can get. Prices will grow very strongly if a bubble does develop.
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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miw
20 Jul 2014, 08:17 PM
it would seem that:

I cannot under any circumstances:
--------------------------------------------

* Do anything to diminish the value of the security
* Stop insuring the building

I must have Permission to:
-----------------------------------

* demolish
* sell
* conduct "major works". The definition of major works is a little grey, but it seems to boil down to "if you need council permission, you need to get that permission, and then come get our permission." Anything not requiring council permission would seem not to be major works.

I must advise immediately if something happens to diminish the value that is outside my control, like for example finding land contamination, a neighbour building too close to my boundary, etc.

Anything else would seem to be open slather. OK maybe painting the exterior purple would come under the heading of diminishing the value, but I'd just go ahead and do it anyway if I was tasteless enough to want to.
BTW MIW, I find it interesting what people remeber most about their contracts.

Me, I hate all the impositions that seem unreasonable, but others probably see all the opportunity.

No real value judgement in this observation other than I could be seen to be an agry half glass full man :?:
WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
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Dr Watson
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Shadow
21 Jul 2014, 10:35 AM
The truth is Joye is saying a bubble may be about to emerge. That's about as bullish as you can get. Prices will grow very strongly if a bubble does develop.
That is correct. Joye is a bull. Joye is not forecasting price declines (which would make him a bear).

He's basically sending a message to Glenn Stevens, through the pages of the AFR, to keep an eye on things so that prices don't go too much higher.

I saw a 4-bedroom townhouse in my area, not brand new, location good but not great, typical finishes, go for about $100,000 more than expected. 'Sold' stickers appearing everywhere lately and in short order too. Has a new leg up begun?

One wonders if Stevens shares Joye's concerns.
Edited by Dr Watson, 21 Jul 2014, 10:50 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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Lou Ellen
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When we look back in 30 years, we are likely to view the current political term as one of the most divisive eras in Australia’s political history.

Debate over the Budget has reached shambolic proportions with some $40 billion of savings measures at risk of being blocked in the Senate.

We’ve got the Palmer United Party flapping in the wind and seemingly changing its position on key Budget measures on a daily basis, whilst promising a range of pie-in-the-sky and unworkable proposals.

We’ve got Labor and the Greens opposing nearly every Budget measure because they are “unfair”.

And we’ve got cross-benchers, like David Leyonhjelm, opposing any increase in new taxes.

While some Budget’s measures in isolation are undoubtedly highly questionable, such as tougher requirements on young unemployed, changes to university fees and funding, and Abbott’s flawed paid parental leave scheme, the Budget at least acknowledges that the nation’s finances are unsustainable in their current form and need fixing.

Yet, at no time has any opposition party seriously acknowledged the serious long-term structural issues facing the Budget. And nowhere has anyone provided an alternative plan to cut expenditure and reform taxes, such as clamping down on Australia’s egregious tax expenditures (e.g. superannuation and negative gearing) and championing for broad-based tax reform.

Instead, we have become a nation of “Dr Nos”, whereby the default position is to oppose each and every attempt at reform.

The shambolic nature of the current political system is best encapsulated by the Budget’s proposed re-indexation of fuel excise which, shock horror, attempts to ensure that the rate of excise keeps pace with inflation. Both the Greens and Labor are dead-set opposed, citing vague notions of fairness and claiming that the poor would be unfairly disadvantaged by such a measure. Yet, excise is also applied to cigarettes and alcohol – items that are also disproportionately consumed by the poor. And notions of fairness didn’t stop Labor from dramatically raising cigarette taxes when it was in Government, with the support of the Greens.

If you want an example of blatant political point scoring, you would be hard pressed to find a better example than lifting fuel excise. It is fully consistent with both Labor’s and the Greens’ positions on the environment and climate change, as well as the Greens’ desire to reduce Australia’s reliance on fossil fuels. And yet, the measure does not have their support and is currently dead in the water.

Australia has become the first developed world nation to repeal carbon laws – a move that is likely to stifle efforts to reach a global agreement on emissions reductions. The Guardian’s Lenore Taylor has captured the mood of this decision, as well as the “complete and catastrophic failure of the political system”:

After climate policy helped dispatch three prime ministers and two opposition leaders, and dominated three election campaigns and eight years of polarising political debate, it has come to this: we have no national climate policy.

After all that vitriol and hyperbolic attack and all those reports and modelling and studies, and all last week’s drama, we are back to exactly where we were before John Howard reluctantly said he would introduce an emissions trading scheme in 2007.

…the government’s alternative “Direct Action”, as it stands, is no such viable alternative. The legislation that gives it any rigour may or may not pass the Senate…

As eight years’ work by thousands of people disappears with the Senate’s vote, many may have cause for regrets…

But that’s all in the sorry pages of recent political history now, and the absence of any credible policy is the big and pressing question for the future.

The challenges confronting the nation are mounting and they are historic. With Australia’s population ageing, and the biggest commodity price and mining investment boom in our history now unwinding, we desperately need to boost the nation’s productivity. This will require a broad-based reform program capturing everything from tax policy, retirement policy, competition policy, and land-use/planning. Climate change moves forward inexorably and we seem only able to run in circles.

The oft-quoted representation of Australian policy-makers by The Economist is that we manage the good times poorly but the bad times well. The only correlation I can see is that the harder the challenges get, the less effective our political system becomes.
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Ollie
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The fact that housing values in Australia have risen at around four times the pace of wages over the past year – on top of their already lofty valuations – is cause for serious concern and suggests that we are in the midst of a growing housing bubble.

Indeed, Australian housing valuations are likely to hit their highest level on record relative to both incomes and GDP later this year just as the economy embarks on its biggest adjustment since the early-1990s recession. Unemployment – already near 10 year highs – is destined to rise further over the next few years as large scale mining projects are completed and the Australian automotive industry shutters. Meanwhile, income growth is likely to continue to remain anaemic as the unwinding of the biggest commodity price boom in the nation’s history continues to drag on national incomes.

Based on any fair representation of fair value – e.g. incomes, GDP, rents, or construction costs – Australian housing long ago detached from their fundamental level.

With Australian housing values rising briskly as the economy’s fundamentals deteriorate, the risk of correction sometime in the near future is arguably greater now than at any other time in living memory.
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Ex BP Golly
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John Frum
20 Jul 2014, 09:32 PM
What like this:

Posted Image

Hate to break it to you, but that's not 10 years of relative stability for Aus. There's some noticable volatility there, thanks to GFC and the corresponding stimulus reply.

You could just as easily argue that japan had 10 years of 'relative stability' before a short upward burst that popped the bubble.



Wow- thanks for pointing that chart out!

We are allmost a mirror image of Japan, except we inflate- they deflate.

It seems so obvious to me, just from the charting, where we go next.

Glad I have only $1000 in debt! ($0.92c per month interest repayments) to turn my place into an atm @ the drop of the hat.
WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
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Shadow
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John Frum
20 Jul 2014, 09:32 PM
You could just as easily argue that japan had 10 years of 'relative stability' before a short upward burst that popped the bubble.
No... the chart shows Japan price/income ratios trending up for a decade before their crash.

Whereas it shows Australian price income ratios currently at the same level as a decade ago.
Ex BP Golly
21 Jul 2014, 11:22 AM
We are allmost a mirror image of Japan, except we inflate- they deflate.

It seems so obvious to me, just from the charting, where we go next.
Are you expecting our population to fall in the same way Japan's population is falling?
Edited by Shadow, 21 Jul 2014, 11:39 AM.
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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miw
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Ex BP Golly
21 Jul 2014, 10:41 AM
BTW MIW, I find it interesting what people remeber most about their contracts.

Me, I hate all the impositions that seem unreasonable, but others probably see all the opportunity.

No real value judgement in this observation other than I could be seen to be an agry half glass full man :?:
I suspect most people remember nothing much about their contracts and act as if they didn't exist. :-)

Personally I see the restrictions as not unreasonable for something that is pledged as security. I kind of expect to lose some freedom to act if I do that. Certainly I could see situations under which the restrictions would chafe a bit. But I still get to exercise the vast majority of the privileges of ownership.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
AREPS™
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