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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 (21,428 Views)
ThePauk
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miw
21 Jul 2014, 01:04 PM
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 only thing a buyer owns is the debt.

Do not insure your house, a fire burns it down and now what are you left with, debt!

Owners, buyers, renters.

Simple as that and owners are now down to 31%

I personally welcome CJ to the light side....
Edited by ThePauk, 21 Jul 2014, 01:11 PM.
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Dr Watson
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ThePauk
21 Jul 2014, 01:10 PM
I personally welcome CJ to the light side....
Is Joye forecasting price gains or falls? Chew on that for a moment.
The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt — Bertrand Russell
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Veritas
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Dr Watson
21 Jul 2014, 01:21 PM
Is Joye forecasting price gains or falls? Chew on that for a moment.
I think he is predicting price rises of course.

Trouble is the larger the bubble, the deeper the correction.

and the more damage in general.
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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Sydneyite
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ThePauk
21 Jul 2014, 01:10 PM
miw
21 Jul 2014, 01:04 PM
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 only thing a buyer owns is the debt.

Do not insure your house, a fire burns it down and now what are you left with, debt!

Owners, buyers, renters.

Simple as that and owners are now down to 31%
So Pauk - if I have a house (title in my name), and also have a mortgage of say $300k, BUT also have $300k cash sitting in an offset account linked to that mortgage, am I an "owner" or a "buyer" in your books??? Also do you think I count in that 31% stat you are quoting? Should I be in it?
Veritas
21 Jul 2014, 01:36 PM
Dr Watson
21 Jul 2014, 01:21 PM
Is Joye forecasting price gains or falls? Chew on that for a moment.
I think he is predicting price rises of course.
Well clearly then and by definition his view on the market at this point is "bullish" - a fact Pauk seems to not understand when he says :
ThePauk
 
"I personally welcome CJ to the light side...."
Edited by Sydneyite, 21 Jul 2014, 01:43 PM.
For Aussie property bears, "denial", is not just a long river in North Africa.....
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Dr Watson
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In addition to CJ, Leith van Onselen also seems to be of a similar mind:
Quote:
 
I personally think they will rise for the remainder of the year and probably into next year. This will only make the bubble bigger and make the risk of dangerous consequences bigger.
It is a curious moment to see LVO and CJ singing a duet, but there it is ...
The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt — Bertrand Russell
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Veritas
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Quote:
 
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.


Ergo, where price/income ratio was 10 years ago is some kind of sweet spot flowing from the "structural shift"?

Seeing as we have been shuttling up and down from that spot (with some considerable volatility)

From that, we must conclude that you expect that the fundamental/supply and demand factors that have given rise to this sweet spot of price/income ratio will also remain in place.

For you to be right then, economic fundamentals, investor sentiment, Government policy much pretty much remain the same.

That is a huge call.

Take WA for example, only a fool would argue that the prevailing economic conditions of the last ten years will continue over the next ten.

It would be extraordinary.



Edited by Veritas, 21 Jul 2014, 02:08 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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stinkbug
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ThePauk
21 Jul 2014, 01:10 PM
The only thing a buyer owns is the debt.

Do not insure your house, a fire burns it down and now what are you left with, debt!

Insure your house. A fire burns it down and you get a cheque for replacing the structure.

Sell the land, add this value to the value of the cheque, buy yourself another house and pocket the (substantial) difference.
---------------------------------------------------------------

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.

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Dr Watson
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stinkbug
21 Jul 2014, 02:48 PM
Insure your house. A fire burns it down and you get a cheque for replacing the structure.

Sell the land, add this value to the value of the cheque, buy yourself another house and pocket the (substantial) difference.
I'm not sure about that. If it were a profitable venture to burn down one's house (assuming one can evade detection by police) and then claim insurance, wouldn't we see a lot more houses being burnt down?
The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt — Bertrand Russell
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b_b
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Dr Watson
21 Jul 2014, 02:57 PM
I'm not sure about that. If it were a profitable venture to burn down one's house (assuming one can evade detection by police) and then claim insurance, wouldn't we see a lot more houses being burnt down?
Insurance fraud is a crime - probably the main reason it does not happen.

FWIW, I believe most houses are substantially under insured for improvements. I find the replacement cost models for most insurers are inadequate - which is anther way of keeping their premiums competitive. I asked my insurer to increase the $ coverage every 5 years or so (as replacement costs rise another 15% or so).

I would encourage every homeowner to talk to a builder about the true cost of replacement of their home - including all of the hidden costs such as site clean, residual demolition, rubbish removal access / site costs, DA fees, consultants, fixtures & fittings etc.
Edited by b_b, 21 Jul 2014, 03:12 PM.
(S – I) + (T - G) + (M - X) = 0
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zaph
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b_b
21 Jul 2014, 03:10 PM
Insurance fraud is a crime - probably the main reason it does not happen.

FWIW, I believe most houses are substantially under insured for improvements. I find the replacement cost models for most insurers are inadequate - which is anther way of keeping their premiums competitive. I asked my insurer to increase the $ coverage every 5 years or so (as replacement costs rise another 15% or so).

I would encourage every homeowner to talk to a builder about the true cost of replacement of their home - including all of the hidden costs such as site clean, residual demolition, rubbish removal access / site costs, DA fees, consultants, fixtures & fittings etc.
I'm forced to insure my home for 'like for like' rebuild. But in a new house I wouldn't require a hard wood frame, or hardwood floors. I'd be happy with the modern equivalent four bed house that would be a lot cheaper to rebuild.
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