The dotcoms were like that, interestingly the fundamentals supporting that bubble were actually stronger that those of our property bubble. They didn't have a fraction of the personal debt attached to that one. We have clear of a trillion dollars hanging on this one
What were the yields that the dotcoms were paying? What are the yields that property is paying?
I think you'll find that, on average, dotcoms paid nothing, whereas property pays a few percent.
What were the yields that the dotcoms were paying? What are the yields that property is paying?
I think you'll find that, on average, dotcoms paid nothing, whereas property pays a few percent.
Agree - and what were the real assets they held.
Australians own $5 Trillion in real estate, $1.7 Trillion in superannuation, and about $1 Trillion in bank deposits whilst they owe about $1.5 Trillion on their houses. Even if you write down the houses it's still impressive.
Any expressed market opinion is my own and is not to be taken as financial advice
Australians own $5 Trillion in real estate, $1.7 Trillion in superannuation, and about $1 Trillion in bank deposits whilst they owe about $1.5 Trillion on their houses. Even if you write down the houses it's still impressive.
Yes but seriously Peter, is it necessary to explain what would happen to the size of the pie if the housing slice portion deteriorated significantly?
We're a nation hooked on high home prices, just look at the way one of our 'leading' economic figures the Kouk cheers on their ascendancy like he would his football team.
Anyway there's no going back now, we're all in for the all out bull assault. To the moon, baby!
"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.
Yes but seriously Peter, is it necessary to explain what would happen to the size of the pie if the housing slice portion deteriorated significantly?
We're a nation hooked on high home prices, just look at the way one of our 'leading' economic figures the Kouk cheers on their ascendancy like he would his football team.
Anyway there's no going back now, we're all in for the all out bull assault. To the moon, baby!
Yes we are hooked on home prices, ever since the borrowing rules changed and ordinary people were allowed to leverage into a market that they previously were not allowed into except as owner occupiers. Until about 1990 buying a home as an investor just wasn't possible for most people. We can argue all day about the moral issues of that, but the fact is that now someone with the income and a deposit of just 10% can get into the market. No doubt that has had an effect on the market especially as the state governments have walked away from providing social housing and the Federal government has replaced that with "rental assistance" for lower income families.
Housing is now a market subsidised by the government for better or for worse. It appears to be global although I don't know the status of all countries, but in the Anglo sphere the thread appears the same.
I think that you may be right about to the moon. The RBA has little choice but to let it run. That has consequences. Here is an extract from the HTW August report on Unit supply in Brisbane.
Quote:
This leads us to the first market where we urge buyers to exercise caution – inner city addresses where new units are planned or under construction. By that we mean lots and lots of new units.
This group of valuers can see an oversupply happening in inner city Brisbane. I haven't checked the other capital cities yet. The full report is here - http://www.htw.com.au/downloads.aspx - choose the August report. They are sounding a warning for a few areas, although acknowledging the market strength
I expect to see a peak and then nothing for a long time as the market supply reaches saturation point with the new supply. The next 10 or 15 years will be very interesting. Will we crash or just skid to a slow down in price gains?
Any expressed market opinion is my own and is not to be taken as financial advice
This group of valuers can see an oversupply happening in inner city Brisbane.
You only need to spend a few hours driving around inner Brisbane to see all the new apartments and apartments under construction to know there is an oversupply on the stove right now.
You only need to spend a few hours driving around inner Brisbane to see all the new apartments and apartments under construction to know there is an oversupply on the stove right now.
I agree. There has been a lot of urban infill activity in progress for units within 15km of the CBD, and there has been for a couple of years. It has been soaked up pretty well so far though. Listings are well down on 12 months ago in the suburbs I watch, but up on 3 months ago. Rents have been soft for about 2 years. The new stuff is mostly pretty swanky, so pricing on existing units has not been impacted much if at all.
I would not be buying units close to the CBD right now. Probably a good idea to try to snap up one of the last remaining detached houses in Auchenflower though. :-)
Listings are well down on 12 months ago in the suburbs I watch, but up on 3 months ago. Rents have been soft for about 2 years. The new stuff is mostly pretty swanky, so pricing on existing units has not been impacted much if at all.
I would not be buying units close to the CBD right now. Probably a good idea to try to snap up one of the last remaining detached houses in Auchenflower though. :-)
Quote:
I agree. There has been a lot of urban infill activity in progress for units within 15km of the CBD, and there has been for a couple of years. It has been soaked up pretty well so far though.
At first look, I'm surprised at how well it's been soaked up.
Yes, it makes a difference. The question is always whether or not the borrower can service the loan. Subprime borrowers ability to service their loans is very sensitive to a change in personal or economic conditions. In the US, it was interest rates: between 2004 and 2006, Greenspan increased the benchmark rate 400 basis points, effectively killing the subprime borrowers ability to service their highly leveraged loans. In Australia it will be falling incomes/rising unemployment that will bork the subprime borrower.
------------------------------ " ... 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
Yes, it makes a difference. The question is always whether or not the borrower can service the loan. Subprime borrowers ability to service their loans is very sensitive to a change in personal or economic conditions. In the US, it was interest rates: between 2004 and 2006, Greenspan increased the benchmark rate 400 basis points, effectively killing the subprime borrowers ability to service their highly leveraged loans. In Australia it will be falling incomes/rising unemployment that will bork the subprime borrower.
Nice story, except that the changing of the Fed Funds rate did not in general change the rate of those loans at all. The starter rate and the adjusted rate were fixed at time of contract.
The fact is that those borrowers had no chance of ever servicing their mortgages right from day one. The only way they could manage was to refinance or sell before the adjustment rate kicked in. The drop in house pricing (effectively cutting off both options) was what caused them to fall over, not the increase in interest rates.
The truth will set you free. But first, it will piss you off. --Gloria Steinem AREPS™
Yes, it makes a difference. The question is always whether or not the borrower can service the loan. Subprime borrowers ability to service their loans is very sensitive to a change in personal or economic conditions. In the US, it was interest rates: between 2004 and 2006, Greenspan increased the benchmark rate 400 basis points, effectively killing the subprime borrowers ability to service their highly leveraged loans. In Australia it will be falling incomes/rising unemployment that will bork the subprime borrower.
Given that loans are tied to humans I'd argue that whether the sub-prime label is tied to the loan or the borrower is irrelevant.
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