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ANZ Chairman David Gonski: Correction inevitable, anybody who believes prices always go up is a fool; Going to happen tomorrow, at five o’clock this afternoon or in three months
Topic Started: 3 Sep 2014, 08:49 AM (3,584 Views)
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House price correction inevitable, warns David Gonski

September 02, 2014 3:46PM

ANZ chairman David Gonski says a correction in the housing market is inevitable amid growing concerns that soaring house price growth in the capital cities risks further inflating a property bubble in Australia.

After new statistics this week showed that house price growth accelerated in the past three months, Mr Gonski said in Melbourne today that all the banks “are very aware of history”.

“They know that you can have the growth in prices that we have had and over time and there will be a correction,” Mr Gonski said.

“I don’t know whether it is going to happen tomorrow, at five o’clock this afternoon or in three months. I have no idea. But the fact is anybody who believes that prices will always go up is a fool,’’ he told a lunch staged by the British Australia Chamber of Commerce.

The latest statistic showed 15 per cent annualised capital growth across the eight capital cities in the last quarter.

Auction clearance rates on average across the nation were 70 per cent last weekend and 80 per cent in Sydney.

But Mr Gonski said that provided the proper checks and balances were in the system, there was no reason to curb housing lending.

Read more: http://www.theaustralian.com.au/business/property/house-price-correction-inevitable-warns-david-gonski/story-fn9656lz-1227045173078
Edited by Admin, 3 Sep 2014, 08:50 AM.
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Unprecedented low interest rates won't last forever

Charles Tarbey | 2 September 2014

Over the past year, the Reserve Bank has elected to hold interest rates at an unprecedented low level a level which I’ve never seen during my 42 years practicing real estate.

This has had a marked impact in the property market as historically, continuous periods of low interest rates tend to drive interest in property as an asset class. This is an effect we’ve observed over the past two and a bit years and a contributing factor to the property markets sustained recovery, with the market achieving 15.5% growth since the trough in May 2012.

The Australian property is now entering a very steady adjustment and growth mode driven by the shift to a market where buyers and sellers negotiate a fair price for a property – not one driven by vendor’s expectations.

Despite this, Moody’s recently warned of a growing risk of an overheated Australian property market developing into a real estate bubble, driven by low interest rates and growing interest from offshore investors.

My reaction to this is simple: If the Reserve Bank suddenly raises interest rates suddenly and steeply, it will almost certainly look like we’re in a ‘bubble’.

Similarly, if the world was to experience another global financial crisis, it’s likely that many property markets across the world will look overvalued.

At times such as this, it’s important to remember that in the right situation, almost anything could be deemed in a bubble, but it’s currently unlikely that either of these scenarios will eventuate and push the Australian property market in to bubble territory.

However, I would caution investors, home owners and prospective buyers to budget for the effect any interest rate movements could have on their finance. This is because while interest rates are currently steady at 2.5%, it’s unlikely they’ll stay this low forever.

Buyers who fail to budget for the impact of any potential interest rate increases may find themselves in financial difficulty should the Reserve Bank’s next interest rate movement be upwards.

Read more: http://www.propertyobserver.com.au/financing/interest-rates/35208-unprecedented-low-interest-rates-won-t-last-forever.html
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goldbug
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A correction is inevitable. Correction, is code, if a bear says crash their probably overstated it. If a chairman of a major bank says correction, he's probably understating it.

Sydney will get hit the worst because of it's recent out performance. Boy if I had any property there I would be selling it quick smart. Especially if it was financed on an interest only loan.
Shadow was hopelessly wrong about the Gold Bull Market.
What else is he wrong about?
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Dr Watson
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He sounds like someone from the RBA, you know: 'House prices can go up but they can also go down'. I mean, holy fuck. What an insight. What depth. What perception. Yes, these bigwigs really do earn their money. We should pay them even more. I mean who else can do this sort of thing?
Edited by Dr Watson, 3 Sep 2014, 11:20 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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peter fraser
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goldbug
3 Sep 2014, 09:47 AM
A correction is inevitable. Correction, is code, if a bear says crash their probably overstated it. If a chairman of a major bank says correction, he's probably understating it.

Sydney will get hit the worst because of it's recent out performance. Boy if I had any property there I would be selling it quick smart. Especially if it was financed on an interest only loan.
Over the last decade the average rise in Sydney has been quite modest, as have most cities except for Perth and I think Darwin.

Jennifer Duke had some interesting figures in a brief article yesterday. I'll post it if I can get my work done on time.

I think that Brisbane was just 3.7% annually which is just a shade over inflation.

EDIT - Actually it was Sydney that averaged just 3.7% - Brisbane was lower at 3.4%

http://www.propertyobserver.com.au/finding/residential-investment/35184-which-capitals-did-not-double-in-value-in-the-past-10-years.html

change in dwelling values over the past 10 years:
Darwin - 8.5%
Perth - 7.1%
Melbourne - 6.2%
Adelaide - 4.0%
Canberra - 3.7%
Sydney - 3.7%
Brisbane - 3.4%
Hobart - 2.0%

Source: RP Data

Only Perth and Darwin look frothy based on that average, maybe Melbourne to a degree.

Edited by peter fraser, 3 Sep 2014, 12:24 PM.
Any expressed market opinion is my own and is not to be taken as financial advice
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Don't Buy Now
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Imagine Gonski is correct and the banks have behaved prudently in the sense their exposures are fully protected!

The economic cost of revert to mean which he forecasts then falls entirely on landowner equity!

Those who own outright will endure a shrunken balance sheet, while the ‘Gearers and heavily mortgaged are ruined!

Economic activity grinds to a halt when a big slice of the population turns to debt reduction, voluntarily or not!

This phase could go on for years!

If the mortgages don’t trash the banks, the commercial loans will!

Don’t Buy Now!

Disclosure: I own ANZ
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Ex BP Golly
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Dr Watson
3 Sep 2014, 11:20 AM
He sounds like someone from the RBA, you know: 'House prices can go up but they can also go down'. I mean, holy fuck. What an insight. What depth. What perception. Yes, these bigwigs really do earn their money. We should pay them even more. I mean who else can do this sort of thing?
Take it for what it is. A very understated warning.

Now you cant say he didn't tell you.
WHAT WOULD EDDIE DO? MAAAATE!
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Dr Watson
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Ex BP Golly
3 Sep 2014, 01:29 PM
Take it for what it is. A very understated warning.

Now you cant say he didn't tell you.
It's no different to the multitude of generic warnings that have gone before. Warnings, warnings, warnings. I want someone to give me an accurate timeframe. Is it too much to ask?
Edited by Dr Watson, 3 Sep 2014, 01:35 PM.
The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt — Bertrand Russell
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While the long track record of doing nothing other than pumping house prices higher may continue, the amount of coverage of this issue in the MSM means there is absolutely no justification for any politician or banker to claim they could not have foreseen problems ahead.

Like a little kid, they might make their excuses, but there will be no justifiable reason for their feigned ignorance. They are negligent and in breach of their duty of care to the Australian people.

Do they give a shit? Probably not besides whatever impact it has on their hip pockets and egos, but at least we can recognise them for what they are – frauds.

My missus and I occasionally reminisce about the days when our pay was received as physical currency in an envelope from a hole in the employers wall. While it was always fiat, at least it felt as though it had substance.

Since most handling of money now is nothing more than movement of digits between computers, not only has it become difficult to give kids an understanding of how difficult it is to attain money versus how easy it is to dispose of, but even the supposed educated adults have lost perspective.

It is rendered even more intangible by the fact that banks have been gifted the ability to conjure money out of thin air.
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Ex BP Golly
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peter fraser
3 Sep 2014, 12:16 PM
Over the last decade the average rise in Sydney has been quite modest.....

EDIT - Actually it was Sydney that averaged just 3.7% - Brisbane was lower at 3.4%

http://www.propertyobserver.com.au/finding/residential-investment/35184-which-capitals-did-not-double-in-value-in-the-past-10-years.html

change in dwelling values over the past 10 years:
Darwin - 8.5%
Perth - 7.1%
Melbourne - 6.2%
Adelaide - 4.0%
Canberra - 3.7%
Sydney - 3.7%
Brisbane - 3.4%
Hobart - 2.0%

Source: RP Data

Only Perth and Darwin look frothy based on that average, maybe Melbourne to a degree.
I know....over the last decade......blah blah blah.

Its not the last decade but that previous ones growth that concerns me.

Shadow believes- that we have managed to maintain that decades awesome increase over the following decade- 'all is good'- needs to be tempered with the understanding that the decade long mining boom increased average wages by 30%.

What happens when that additional income disappears, and consumer behaviour had to be re-benchmarked.

Im sceptical the exuberance can continue, especially now the Chinese have located our bubble and have moved in accordingly.

WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
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