Welcome Guest [Log In] [Register]


Reply
  • Pages:
  • 1
  • 5
The world’s biggest housing bubble - Christopher Joye; CJ calls you bulls, fools...
Topic Started: 1 Sep 2014, 04:36 PM (4,567 Views)
ThePauk
Member Avatar
Diamond Member
I believe that Australian home values measured relative to disposable incomes are currently breaching the all-time records set in both 2007 and 2010.

Yet I expect the current boom, which is arguably turning into a bubble, to continue until the RBA starts raising interest rates. Importantly, you do not require mania or double-digit credit growth to have a bubble, as some pundits claim. What you do need is asset prices way above reasonable estimates of fair value and high levels of leverage, both of which Australia possesses today.

Credit growth numbers are only meaningful relative to incomes and the level of leverage. Like house price appreciation, credit growth is running at multiples of incomes and increasing leverage, which should give us all pause.

Anyone not worried about current Australian house price dynamics is a fool. This only ends two ways: higher interest rates and/or macro-prudential brakes on lending.

http://www.afr.com/f/free/blogs/christopher_joye/record_housing_investment_boom_accelerates_LFmrGSAXr2YBcFBoOhRXIK
Profile "REPLY WITH QUOTE" Go to top
 
Veritas
Default APF Avatar


Quote:
 
Yet I expect the current boom, which is arguably turning into a bubble, to continue until the RBA starts raising interest rates. Importantly, you do not require mania or double-digit credit growth to have a bubble, as some pundits claim. What you do need is asset prices way above reasonable estimates of fair value and high levels of leverage, both of which Australia possesses today.


There you go Shadow; the definition of a bubble you were after.

Not altogether different from the definitions that others offered on that thread but anyway...
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
Profile "REPLY WITH QUOTE" Go to top
 
Dam
Unregistered

ThePauk
1 Sep 2014, 04:36 PM
reasonable estimates of fair value and high levels of leverage, both of which Australia possesses today.

LOL

Depend of point of view, if you re looking at buying in HK, shanghai, KL, and you see Sydney, it looks dirt cheap and well below fair value.And as interest rates are most likely to drop once the property slow a bit ( no inflation whatsoever, high usd), property will look even better as every thing else will look crap ( better get in now of course before they drop the rates)
"REPLY WITH QUOTE" Go to top
 
Sean
Unregistered

Dam
1 Sep 2014, 05:09 PM
LOL

Depend of point of view, if you re looking at buying in HK, shanghai, KL, and you see Sydney, it looks dirt cheap and well below fair value.And as interest rates are most likely to drop once the property slow a bit ( no inflation whatsoever, high usd), property will look even better as every thing else will look crap ( better get in now of course before they drop the rates)
How funny, advice to buy now as prices are set to drop. Stuff me that logic is amazing.
"REPLY WITH QUOTE" Go to top
 
Shadow
Member Avatar
Evil Mouzealot Specufestor

Veritas
1 Sep 2014, 04:39 PM
There you go Shadow; the definition of a bubble you were after.

Not altogether different from the definitions that others offered on that thread but anyway...
'What you do need is asset prices way above reasonable estimates of fair value and high levels of leverage'

It's a pretty vague definition. What is 'fair value' and how much is 'way above'.

Also, leverage (debt to income ratio) is pretty much the same as it was nearly a decade ago.

But Chris is right to be concerned that a bubble may develop. I think a bubble may develop too, especially if interest rates remain at current levels for a while. I'm not concerned about it though since I would benefit financially if we do get a bubble.
Edited by Shadow, 1 Sep 2014, 05:29 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
 
ThePauk
Member Avatar
Diamond Member
Shoddy
CJ said "both of which Australia possesses today."

He is not saying it 'might' become a bubble, he is saying it IS A BUBBLE.

This must really shit you to have your poster child change sides....lol
Profile "REPLY WITH QUOTE" Go to top
 
Shadow
Member Avatar
Evil Mouzealot Specufestor

ThePauk
1 Sep 2014, 05:51 PM
He is not saying it 'might' become a bubble, he is saying it IS A BUBBLE.
No, he quite specifically said it is 'arguably turning into a bubble' - i.e. not yet turned into a bubble but still in the process of turning into one.

'What you do need is asset prices way above reasonable estimates of fair value and high levels of leverage, both of which Australia possesses today'

This does not say there is a bubble today, only that the things needed to create a bubble are present (in CJ's view).

It's like if I say... 'what you need to make bread is flour and water, both of which I possess today. This does not mean I have the bread, just the ingredients.

CJ is very careful with his language. You need to be more careful interpreting it.
Edited by Shadow, 1 Sep 2014, 06:04 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
 
ThePauk
Member Avatar
Diamond Member
Shadow
1 Sep 2014, 06:03 PM
No, he quite specifically said it is 'arguably turning into a bubble' - i.e. not yet turned into a bubble but still in the process of turning into one.

The statement... 'What you do need is asset prices way above reasonable estimates of fair value and high levels of leverage, both of which Australia possesses today' does not say there is a bubble today, only that the things needed to create a bubble are present (in CJ's view).

It's like if I say... 'what you need to make bread is flour and water, both of which I possess today. This does not mean I have the bread, just the ingredients.

CJ is very careful with his language. You need to be more careful interpreting it.
Sure, flour and water, eggs and cream, no bubble here today.

Regardless of how you interpret CJ's words, the average bot, just hears 'bubble'.... :-)
Profile "REPLY WITH QUOTE" Go to top
 
Shadow
Member Avatar
Evil Mouzealot Specufestor

ThePauk
1 Sep 2014, 06:05 PM
Regardless of how you interpret CJ's words, the average bot, just hears 'bubble'.... :-)
Yep, that's what the words were designed to do - generate lots of clicks and controversy, get bears all wound up, but without actually saying there is a bubble.

I bet the Macrobusiness bears have fallen for it too, hook line and sinker.
Edited by Shadow, 1 Sep 2014, 06:18 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
 
Guest
Unregistered

Shadow
1 Sep 2014, 06:17 PM
Yep, that's what the words were designed to do - generate lots of clicks and controversy, get bears all wound up, but without actually saying there is a bubble.

I bet the Macrobusiness bears have fallen for it too, hook line and sinker.
A bubble is formed when artificial stimulatory measures are added, which has been the case in Australia for well over a decade.

Negative gearing

50% cgt discount

Fhb grants

Building grants

Increasing fhb grants

Reduction or exemption from stamp duty

100% and 105% lvrs

Interest only payments

Longer loan terms

Foreign purchases allowed

Superfund leverage into property allowed
"REPLY WITH QUOTE" Go to top
 
1 user reading this topic (1 Guest and 0 Anonymous)
Go to Next Page
« Previous Topic · Australian Property Forum · Next Topic »
Reply
  • Pages:
  • 1
  • 5



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