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The crash has begun!; It’s official - the crash has begun!
Topic Started: 4 Mar 2011, 02:16 PM (11,101 Views)
zaph
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Dr Watson
17 Sep 2014, 11:08 AM
David Llewellyn-Smith's arguments for selling property now:
If I didn't know DLS was a perma bear I would have no idea if he was bullish or bearish from these points.

Quote:
 
- the offshore bid in housing that is coming from China is not sustainable and it will get squeezed by China’s anti-corruption crackdown, as well as by currency fluctuations;


So he's expecting a strengthening of the AUD?

Quote:
 
- there is a supply response in all cities right now, even if not as large as population growth and rents are under pressure everywhere;


If a supply response is not as large as population growth, then by itself it will have an increasing effect on prices. What does 'rents are under pressure' mean?

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- monetary policy is almost exhausted with perhaps 1% more cuts left in the can, versus the 4% plus drop during the GFC;


So according to DLS monetary policy has roughly the same magnitude of drops left in it now compared to the pre/post GFC drops? I'd hardly call that exhausted.

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- fiscal policy is close to spent with the Budget at 21% of GDP per capita and S&P committed to stripping the AAA sovereign rating when it breaches 30%, which is certain the moment the next global downturn hits. As most business cycles last 8 years, we likely only have have only two years left on this one. That will mean downgrades for the the banks and more expensive credit during the next crisis and far less stimulus will be possible;


Some of these points could go either way, but together none of them are a strong indication to sell property. Is DLS selling his property?
Wrong for too many reasons to bother mentioning - I'll leave that up to Shadowberg.

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- the Murray Inquiry looks likely to recommend higher capital for banks meaning more expensive credit as well;
and, contrary indicators like Alan Kohler are telling us that it’ll go forever.


Like most inquiries, is likely to be ignored by govt.
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Dr Watson
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zaph
17 Sep 2014, 12:00 PM
Some of these points could go either way, but together none of them are a strong indication to sell property. Is DLS selling his property?
I think he's addressing property investors rather than OO.

1. The strongest argument for selling property would be rising interest rates which would kill the market — but that simply will not happen. Stevens knows what the consequences would be.

2. A reduction of foreign buyers could have a noticeable impact. I suspect we're only likely to see a slight reduction in foreign buying — even if Kelly O'Dwyer ramps up policing and penalties — because locals with PR can buy property for their relatives (who don't have PR) assuming the funds can be transferred into local bank accounts here.

3. A sharp rise in unemployment would have an impact but that would, in all likelihood, come as a consequence of rising interest rates — see point 1.

Interest rates and unemployment are the foundations of the property market.

Everything else is cream on top.
Edited by Dr Watson, 17 Sep 2014, 12:16 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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Elastic
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The current main drivers for property are population growth and investor demand. There is probably also an effect from foreign buyers but difficult to work out how much.
It is really only Sydney and Melbourne that are experiencing strong conditions. Sydney has ridiculously low stock levels which are exacerbating the effects.
Elsewhere in Australia, property markets are quite subdued. Economic outlook is poor over the next couple of years.
If investor demand falls away, there will only be population growth supporting prices which should be enough to keep Sydney prices growing.
Elsewhere, probably not much to support price growth, but not likely to see any significant falls, except maybe in Perth.
Only a rat can win a rat race.

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b_b
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zaph
17 Sep 2014, 12:00 PM
If a supply response is not as large as population growth, then by itself it will have an increasing effect on prices. What does 'rents are under pressure' mean?
:lol This is a perfect example of the cognitive dissonance which come out of MB.

The other MB blogger (Leith) has been pushing the most contorted argument that supply in Australia is somehow constipated / constrained etc. This is despite the fact we have had a surge in new supply which has coincided with prices rising above replacement cost. I got banned from MB because I mentioned this point each time dwelling approved recored another surge each month...I guess mentioning the obvious was getting embarrassing for him.

Now, apparently we DO have a supply response - but it is less than demand (keeping Leith's tortured narrative alive), but it will still cause a property crash (keeping DLS's tortured narrative alive).

Priceless.
Edited by b_b, 17 Sep 2014, 12:21 PM.
(S – I) + (T - G) + (M - X) = 0
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Veritas
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b_b
17 Sep 2014, 12:20 PM
:lol This is a perfect example of the cognitive dissonance which come out of MB.

The other MB blogger (Leith) has been pushing the most contorted argument that supply in Australia is somehow constipated / constrained etc. This is despite the fact we have had a surge in new supply which has coincided with prices rising above replacement cost. I got banned from MB because I mentioned this point each time dwelling approved recored another surge each month...I guess mentioning the obvious was getting embarrassing for him.

Now, apparently we DO have a supply response - but it is less than demand (keeping Leith's tortured narrative alive), but it will still cause a property crash (keeping DLS's tortured narrative alive).

Priceless.

:re:

High replacement costs are a supply side constraint.
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
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ThePauk
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Veritas
17 Sep 2014, 12:49 PM

:re:

High replacement costs are a supply side constraint.
Veritas
Once again, telling the truth is likely to make no one listen to you :-)
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Trojan
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cokatoo56
17 Sep 2014, 12:54 AM
And there are some fools in Australia (they usually call themselves property experts) who tell you that property prices double up every 10 years, and some even more fools who eat that :re:
I've yet to read a single bull who claims property doubles in real terms every 10 years.
I put trolls and time wasters on my ignore list so if I don't respond to you, you are probably on it ....
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b_b
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Veritas
17 Sep 2014, 12:49 PM

:re:

High replacement costs are a supply side constraint.
I agree. In fact I laboured this point to Leith constantly - and was routinely dismissed. And if you read from this beginning of this thread, it was the point I was making in 2011. And if you posted anything on Steve Keen Debt Deflation blog, you will see I made the same point early in 2009. So it is nice to know 5 years later people are starting to catch up.

FWIW, MB does not think costs are the constraint. They uses tonnes of irrelevant charts showing "building costs" rising less than house prices. They blame a poor planning system and "vested interest political housing complex" - whatever that means.

Now we have a supply response - at the same time was have constrained supply.

Brilliant.
Edited by b_b, 17 Sep 2014, 01:04 PM.
(S – I) + (T - G) + (M - X) = 0
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Trojan
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Dr Watson
17 Sep 2014, 11:08 AM
David Llewellyn-Smith's arguments for selling property now:
So he is advising his readers to sell the properties which they were told not to buy yet? :re:
Dr Watson
17 Sep 2014, 12:15 PM
I think he's addressing property investors rather than OO.
I don't think savvy property investors take DLS' advice.
Edited by Trojan, 17 Sep 2014, 01:01 PM.
I put trolls and time wasters on my ignore list so if I don't respond to you, you are probably on it ....
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Veritas
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Trojan
17 Sep 2014, 01:00 PM
So he is advising his readers to sell the properties which they were told not to buy yet? :re:

I don't think savvy property investors take DLS' advice.
No, he is advising people to take profits now.


b_b
17 Sep 2014, 01:00 PM
I agree. In fact I laboured this point to Leith constantly - and was routinely dismissed. And if you read from this beginning of this thread, it was the point I was making in 2011. And if you posted anything on Steve Keen Debt Deflation blog, you will see I made the same point early in 2009. So it is nice to know 5 years later people are starting to catch up.

FWIW, MB does not think costs are the constraint. They uses tonnes of irrelevant charts showing "building costs" rising less than house prices. They blame a poor planning system and "vested interest political housing complex" - whatever that means.

Now we have a supply response - at the same time was have constrained supply.

Brilliant.
A supply side response made possible only by cheap money and a dangerous rate of inflation in the value of established properties in many parts of the country. And government policies to redirect demand towards new builds.

The "replacement cost" is a variable and like all variables can change due to prevailing economic conditions.

Do you think the current price of land ( the major cost associated with new builds) cannot deflate as quickly as it inflated?

Is there a shortage of it?

Edited by Veritas, 17 Sep 2014, 01:16 PM.
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
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