Read my sig you are repeating the debt nonsense that doomsters have fed us since the 90s and before.
This idea that house prices were driven by debt is rubbish. People in my generation borrowed the same as people do today relative to income. There was no great expansion of household debt for the individual. Households today only hold debt of about 1.5 years income, and servicing costs are really low.
The huge house price growth in the late 90s onwards was driven by wealth growth and population growth and catch up after the downturn of the 90s. That growth in wealth and population is ongoing. This is why you guys cannot understand why the market did not crash. Watch what happens over the next few years and you will see just how much of a debt problem we do not have.
You are a lost cause and do not understand the most basic of basics.
Why cant you get your head around the simple fact that globilisation is exponentially speeding up and our poli's are cluless in how to take advantage.(the keynesian models that our economy operate under had never even considered globilisation)!
From here on out The only thing that will hold prop up and make it look ok.... is zirp and the sticky nature of real estate.
Zirp is so undesirable as a liquidity trap will set in, look how thats going for the US !
There may be a problem if too many investors build before the metaphoric rubber band snaps.
Migration to Perth has fallen and there have been some jobs lost. Let's be realistic, the mining boom was a positive thing for Perth.
I'm not suggesting any sort of major crash, but seriously, if there was ever a time where things might go wrong it would be now. The fact prices are rising in this environment may not be a good thing in the long run.
All that matter is if you think the demand for housing at this price is sustainable.
I don't.
I don't think the economic fundamentals will be there to support it and I think more and more investors will look to take profits which will put downward pressure on prices.
And there are lots and lots of investors, highly leveraged, who will rush for the door if they think the capital gains they were promised will not materialise.
That is a rather large bet with your own future and a very risky one.
Firstly I think you have totally misread the market and what is actually driving demand/construction hence your pre-occupation with investors. Todays inflation data shows it is owner occupiers driving demand.
I also see no noticeable increase in investment activity on the ground in Perth, most of it seems to be Larger more expensive houses under construction. If you can show me a large increase in loans to investors, that might explain so if it, but you cant because I have seen the data and it does not show any large increase.
I also disagree that there are lots of highly leveraged investors, some yes. Who promised these capital gains that you claim some mythical power has promised them. Do you think investors are stupid and do not factor in price declines, properties being unrented for longer periods and so on. Nearly every investor I have ever talked to has well thought out plans on how to manage such events.
I think you have explained most of your problem. You are getting reality mixed up with what you hope to happen.
The fundamentals will be there to support it and currently are, you will be fighting against the combined might of the Federal & State Governments, RBA, Banks, Investors, current owner occupiers, builders, developers and everyone else in between who will do there best to not allow that to happen.
That is not to say a catastrophic event cannot happen to force a massive correction, however the risk of that happening is very slim. You might be better off buying a lotto ticket each week.
You are a lost cause and do not understand the most basic of basics.
Why cant you get your head around the simple fact that globilisation is exponentially speeding up and our poli's are cluless in how to take advantage.(the keynesian models that our economy operate under had never even considered globilisation)!
From here on out The only thing that will hold prop up and make it look ok.... is zirp and the sticky nature of real estate.
Zirp is so undesirable as a liquidity trap will set in, look how thats going for the US !
I have lots of issues with globalisation, Doubleview.
It is you who is missing the vital piece if the jigsaw.
You think that the downturns in the US and Ireland were not beneficial for the globalists, you believe nonsense fed to you by the MSN on how a crash will hit the bad guys.
Crashes hit the small guys, boom and bust is a bad model full stop. Rich guys buy up poor guys homes during a crash, you have swallowed the doomster mumbo jumbo that poor guys will get to buy rich guys houses if the market crashes. It is a complete and utter fantasy.
The reality is that there is loads more room for debt growth, lots of young people grew to adulthood and lots of newcomers arrived over the last few years and they have held off on home purchases for fear of the GFC. Some time in the near future they will go get a loan and buy a home, they will inflate the market and off we go on the next cycle. Then the rich cash buyers who bought homes find themselves richer and the poor find themselves poorer.
History repeats - there has been no dramatic changes it is the same old same old boom and bust mentality.
Definition of a doom and gloomer from 1993 The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
Look at the long term trend for investors in Perth, it has always hovered between 25-30% of the market. Even when prices are falling it is still around these levels. There has been no real change in investor behaviour in Perth.
As the inflation data shows it is owner occupiers spending/building up big which is driving prices.
I know you don't like this as it goes against your view or hope, that investors and developers will massively over build to create a huge supply overhang. That is not what is happening, Owner occupiers are doing the bulk of the activity meaning they wont create a supply overhang that you want.
Always is a long time Mike
Since when exactly?
Since when has it been 25-30% of the market?
Have you got a data set?
Edit: Looks like the investor bull rush started in the early 2000s and took another good leap as part of the recent construction boom. Just as I was saying.
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
Well we have a market with just that distribution, just above 1 in 4 homes are rented out. What the heck is the big deal?
Definition of a doom and gloomer from 1993 The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
That is a rather large bet with your own future and a very risky one.
Firstly I think you have totally misread the market and what is actually driving demand/construction hence your pre-occupation with investors. Todays inflation data shows it is owner occupiers driving demand.
I also see no noticeable increase in investment activity on the ground in Perth, most of it seems to be Larger more expensive houses under construction. If you can show me a large increase in loans to investors, that might explain so if it, but you cant because I have seen the data and it does not show any large increase.
I also disagree that there are lots of highly leveraged investors, some yes. Who promised these capital gains that you claim some mythical power has promised them. Do you think investors are stupid and do not factor in price declines, properties being unrented for longer periods and so on. Nearly every investor I have ever talked to has well thought out plans on how to manage such events.
I think you have explained most of your problem. You are getting reality mixed up with what you hope to happen.
The fundamentals will be there to support it and currently are, you will be fighting against the combined might of the Federal & State Governments, RBA, Banks, Investors, current owner occupiers, builders, developers and everyone else in between who will do there best to not allow that to happen.
That is not to say a catastrophic event cannot happen to force a massive correction, however the risk of that happening is very slim. You might be better off buying a lotto ticket each week.
Mike,
You should go out and buy as many houses as possible.
In fact, everyone should.
For our elites will do everything in their power to shore up your investment and make sure you get rich.
Why isn't everyone just getting out there and buying as many houses as they can?
Borrow as much as you can and lever up! You cannot lose.
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
The Federal Government has played its card of low rates to combat the slowdown of the mining investment boom... Just ask yourself... Whats next?
In the United States it was a government bailout worth $1.4T, plus a Federal Reserve buyback program of bad loans on banks' books worth tens of trillions. All paid by printing money.
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