Welcome Guest [Log In] [Register]


Reply
  • Pages:
  • 1
  • 12
The crash has begun!; It’s official - the crash has begun!
Topic Started: 4 Mar 2011, 02:16 PM (11,093 Views)
Mahamed
Member Avatar
Morbidly Obese

http://aussiehouseprices.blogspot.com/2011/03/crash-has-begun.html?showComment=1299208430688#c3857319021615060454

The crash has begun!

Posted by Andy

It’s official - the crash has begun!

Let me explain using the following chart. It was developed by Jean-Paul Rodrigue, Ph.D. who studied 500 years of bubbles and found that they all look remarkably similar.

Posted Image

In 2007, as the 15-year Mania Phase of Australia’s property bubble came to an end, we hit the “New Paradigm”!!! (as shown above). This was categorised by claims that ridiculously high house prices were justified due to a supposed housing shortage and the not-so-easy-to-disprove argument that “it’s different here”.

Many people think that the subsequent slump in house prices in 2008 - the Bull trap - was due to the GFC. I say it was going to happen anyway. Interest rates were steadily climbing in order to slow Australia’s record run of economic growth. This was starting to hurt home owners and negatively geared investors in the Greed and Delusion phases. Even though mortgage rates were “only” 9%, people were paying as much interest (as a percentage of their household income) as when interest rates were 17% in 1990 - because the amount of debt was so much greater this time.

However, the GFC did have an effect, and that was to exaggerate the Return to “normal” upswing. In contrast to the theoretical bubble shown above, it pushed house prices even higher than the “New Paradigm”!!! peak. Of course, this was thanks to the government’s first-home-owner bribes and the RBA’s drastic interest rate cuts.

People then thought (and many still think) that the house-price falls during the GFC were the end of it; that we had avoided the dramatic crash that had occurred in the USA, and that prices would resume their march upwards at a rate faster than inflation, rental returns and wages - as they had done for the previous 15 years.

But now the cracks have appeared once again. Over the last few months, sellers have been slowly coming out of the woodwork and buyers are biding their time. As a result, auction clearance rates have plummeted and prices have once again started falling. According to RP Data, there has been no capital growth since May 2010 and capital city values fell 1.6 per cent (seasonally adjusted) in January.

But that’s just the start. Next up, we have Fear, Capitulation and Despair. The Blow off Phase will be slow and steady, but brutal – wiping out all the gains of the last 15 years and not just returning to the long-term trend, but falling below it.

You may then ask: if the government and RBA managed to save us from a crash in 2008, what’s to say they can’t do it again? I’ll attempt to answer that next time.
Profile "REPLY WITH QUOTE" Go to top
 
Deleted User
Deleted User

I think we are just starting to see denial on the way down and have only just peaked. The return to normal is coming up maybe around mid 2012, be short lived and then fear etc....

Denial is breaking down and that is why it is a negative on this chart. With denial a bubble grows....
"REPLY WITH QUOTE" Go to top
 
Marcus59
Default APF Avatar

I'd better make some more Popcorn, this is really going to make the "debate" Interesting tonight.
The Economist article has also just hit News.com http://www.news.com.au/money/property/australian-homes-most-overvalued-survey/story-e6frfmd0-1226015960562
Maybe one day those that really believe that we in Australia are somehow insulated from the rest of the world and that we are different, will take their heads out of their collective figures long enough to consider the 1000's of families and children who are suffering because of this nonsense.. Affordability is the real issue and statistics are just like the Bible.. You can interpret them any way you like to justify anything you want to.. :cool:
Edited by Marcus59, 4 Mar 2011, 02:39 PM.
Profile "REPLY WITH QUOTE" Go to top
 
Shadow
Member Avatar
Evil Mouzealot Specufestor

Mahamed
4 Mar 2011, 02:16 PM
Let me explain using the following chart. It was developed by Jean-Paul Rodrigue, Ph.D. who studied 500 years of bubbles and found that they all look remarkably similar.

Nice chart... here's my version...

Posted Image
Edited by Shadow, 4 Mar 2011, 02:41 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
 
davel
Default APF Avatar


Shadow
4 Mar 2011, 02:39 PM
Mahamed
4 Mar 2011, 02:16 PM
Let me explain using the following chart. It was developed by Jean-Paul Rodrigue, Ph.D. who studied 500 years of bubbles and found that they all look remarkably similar.

Nice chart... here's my version...

Posted Image
Shadow, nice joke but surely you can't believe that we're on the plateau before the peak??

The only way you could make an Aussie house price chart look like that, short of outright fabrication, would be to take say Sydney from 2003 or 2004, like Strindberg has in one of his favourite charts.

Surely you can't believe that house price is going to accelerate versus the last few years?
Profile "REPLY WITH QUOTE" Go to top
 
b_b
Default APF Avatar


I think it is almost certain house prices will accelerate from here.

The biggest problem with Aussie house prices is that they are too low.

Prices relatives to the cost of production is such that industry supply is too low relative to demand.

Prices are certain to rise from here to encourge new supply.

The big issue will be when prices rise well above replacement cost and we have a boom (or even a bubble). By then (possibly by 2014-2015) real experts will be calling the top of the market. But these experts will be ignored because MSM and others will recall this call turned out to be spectacularly wrong in 2010-2011. This will be the equivilant to the "boy who cried wolf".

So yes - it is almost certain house prices will accelerate from here. You aint seen nothing yet!

(S – I) + (T - G) + (M - X) = 0
Profile "REPLY WITH QUOTE" Go to top
 
davel
Default APF Avatar


b_b
4 Mar 2011, 03:21 PM
I think it is almost certain house prices will accelerate from here.

The biggest problem with Aussie house prices is that they are too low.

Prices relatives to the cost of production is such that industry supply is too low relative to demand.

Prices are certain to rise from here to encourge new supply.

The big issue will be when prices rise well above replacement cost and we have a boom (or even a bubble). By then (possibly by 2014-2015) real experts will be calling the top of the market. But these experts will be ignored because MSM and others will recall this call turned out to be spectacularly wrong in 2010-2011. This will be the equivilant to the "boy who cried wolf".

So yes - it is almost certain house prices will accelerate from here. You aint seen nothing yet!

Oh no, not the cost of production argument again.

I was just reading this morning about how a piece of land on the outskirts of Melbourne will cost you $200k, or on outskirts of Sydney, $350k.

Now given cost of clearing, utilities etc, I could buy a price of say $70k, even in the least-densely-inhabited country on earth. But 200 or 350 is absolutely stupid.

Nominal house prices have increased approximately 2.5-3x in Melbourne since 2000 (Stapledon). Absent ridiculous inflation, do you believe the next 10 years will see "accelerated" growth from that?

It would be a very brave person who made that bet IMO.
Profile "REPLY WITH QUOTE" Go to top
 
neomoz
Default APF Avatar

When the crash takes hold, the low education trade wages will fall to reflect their true worth, reducing building costs.
Profile "REPLY WITH QUOTE" Go to top
 
matthew_50
Default APF Avatar


b_b,

I don't care how much it costs the poor developers to make them... I ask, who the hell is going to buy them?

I think the only reason it costs so much to make them is because all of the developer's dependencies, the banks, the government, the suppliers, are just trying to see how much THEY can get out of the bubble... and if they charge too much? well, that just means developers won't be able to develop anything, which will reduce supply and thus sustain the bubble! so its win win for the greedy incompetent supply chain!

the problem with other countries is I guess they didn't realise this, they want for quantity over quality (of the massive rip off) the problem is that when you take that route, if you get too enthusiastic with the quantity, it increases supply, reduces demand, and cools the bubble down (pop).

I said it before, the gov, the banks, they only benefit from high house prices... the other problem would usually be that more people were interested in being able to actually afford their first home, than those interested in massive house price gains for their existing property investments, (such as in the US)

the problem here is there are WAY more existing property investors than there are people looking to buy a place to live in. which is why there is no call to the gov to do something about house prices... there are more people in aus interested in high house prices, than are interested in affordable house prices...
Profile "REPLY WITH QUOTE" Go to top
 
Strindberg
Member Avatar


davel
4 Mar 2011, 03:32 PM
Now given cost of clearing, utilities etc, I could buy a price of say $70k, even in the least-densely-inhabited country on earth. But 200 or 350 is absolutely stupid.
Yes, and if you read the rest of the article where you got those figures from (here) you'll see why plots cost $200k outside Melbourne and $350k outside Sydney. Everyone can compete to buy and sell land. If there were huge profits then others would undercut. Go and buy a piece of land around Sydney and see if you can make a profit. If there are profits to be had then where are all the Bond-type entrepreneurs taking advantage of the situation and undercutting? $350k is what it costs with normal business margins. The bulk of the $350k goes to the three tiers of government and developer costs associated with dealing with those three tiers together with the land and interest charges the developer incurs during the 10 years it takes from purchase to sale of the land.

In my own area there is a development on which the first plots became available in 2001/2. The plots were then priced at $50k-$80k - each from 750sqm to 1200sqm, good wide roads with nature strips, all underground services, even a park built by the developer. The developer could do that then and he still made a profit. But things have changed. Similar plots on later developments now fetch around $250k. The only things that have changed are the charges and processes of the 3 tiers of governments. There are a handful of plots still vacant from the 2001/2 development. Not because they couldn't be sold, they sold ok. The purchasers have done very well. To get one you'll now have to part with at least $250k - the same price as plots elsewhere. New development dictates the price of existing development in a country with household growth. There are thousands of acres of sugar cane (grass) around here but don't imagine that houses can be built on it. Last year a housing development was refused by council on the basis that it could have a negative effect on the profitability of the local sugar mill.

There might be some tinkering with the charges but you'd be daft to imagine that charges and processes are going to go back to what they were 10 or more years ago. Land release will tighten, not relax. The greenies run the country now.
Housing costs to Income broadly unchanged since 1994 - re-ratified here
The People of Australia have the highest median wealth in the World
2002-2012 10 year house price growth the SLOWEST since 1952-1962
"There are two kinds of people in this world: ones that fiddle around wondering whether a thing's right or wrong and guys like us." (Hugo to Gagin in Ride the Pink Horse)
Profile "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
  • 12



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