Doc I'm ok with house prices edging downward, but we are uncompetitive because of our high dollar, and that is because of our mining industry.
House prices don't set exchange rates. Actually our exchange rate has remained fairly constant in relation to the $Kiwi so I could have told your father in law that his company could have sourced dairy products cheaper from NZ many years ago - they are a better and more efficient dairy products supplier than we will ever be.
On a global comparison, our wages are also way too high, so it's not really housing related.
I'm with you on our high dollar Peter, but what will be the catalyst for the dollar to correct itself? The end of the mining boom as you imply. And that will hit national income and employment and should bode very badly for the economy and house prices. We're caught in a trap. I think people sense this.
We weathered the GFC because Labor was willing to borrow big and spend and keep house prices inflated. I don't think many people put our avoidance of pain down to innovation or cleverness. I think people know this.
And they read about job losses every other day.
Our best hope is an orderly deflation and this is what seems to be underway in some parts of the economy now.
Pray it remains orderly.
I think that the mining boom is over the hump, but it will remain to be a worthwhile earner for us.
In the USA the consumers kept eating their housing equity, which did happen to a lesser degree here. When the economic crisis hit that source of money dried up for them, and then retail and construction spending per capita fell. I don't have any figures on how much it fell, but it also peaked here, and retail spending hasn't increased since.
I hope that the guys at Macro don't mind me using their graph.
If our dollar falls to more normal levels - say around $0.80 USD then with some tapering in nominal prices (already happening) plus price erosion via wage inflation (already happening) then we can achieve a reasonably orderly transition to a better long term setting.
I think that we should all have some concerns about either a crash in house prices, or a sudden rise in house prices, but any trajectory around the centre should be something that we can cope with.
There is no perfect solution that won't disadvantage some industry or sector, but with some restructuring we should cope quite well. I just feel that people are too quick to hit the panic button in this country, we probably have better prospects than almost any other country.
Any expressed market opinion is my own and is not to be taken as financial advice
To badly misquote Shakespeare, ‘‘Methinks the Twiggster doth protest too much’’.
Fortescue Metals boss Andrew Forrest has claimed that ‘‘in global economic terms, [the European debt crisis] is more storm in a teacup beaten up by the media’’.
It’s an eyebrow-raising claim given the market ructions that have wiped 10 cents off the Australian dollar in recent weeks and $110 billion in value from the Australian sharemarket in May alone.
‘‘You don’t have to be smart to be rich,’’ tweeted economist Stephen Koukoulas in response to Forrest’s comments.
But his claim is worth examining as an indication of the pressure he is under.
Fortescue’s share price - and with it Forrest’s wealth - have taken a big hit as Europe’s leaders have tried and failed to find a way to resolve the latest round debt turmoil.
Governments in Europe remain filled to the gunwhales with debt. Banks aren’t going to be repaid any time soon, placing them in a precarious position.
Desperate austerity measures and a lack of investment mean half of the youth in countries like Spain looking for work can’t find it. A generation of workers, taxpayers and consumers are being consigned to the unemployment pile while leaders squabble. None of that is a media confection.
So what is going on? Forrest argues the largely untestable claim that Asian leaders say any lost growth in Europe can be made up within Asia.
Markets, on the other hand, are betting that a slowdown in China and a breakup of the eurozone are threatening enough to hoard their money and run for the hills.
That’s arguably reason enough to make Twiggy sit up and take notice.
i'm still waiting for this 40% crash i was told about back in 2008 to happen. in my area (working class burb 14km from cbd) houses prices are up 5.2% since 2008 according to rp data
I am the love child of Tony Abbott and Pauline Hanson
So.... not much then.... Geee... that was worth the effort.
Whilst I'm generally bearish, I think a 40% crash only becomes a real possibility if we see sharply rising unemployment. And we'll only face that danger when the mining boom comes to an end. Pray China keeps buying vast quantities of our minerals.
The big card up the sleeves of the bulls is immigration. A fresh surge of cashed-up migrants could take the property market to new highs. The danger here, though, is social fragmentation. Many Aussies, especially the younger ones priced out of the market, would feel alienated in, and screwed-over by, their own country. The possibility cannot be ruled out, as both sides of politics are very eager to please big business these days, and big business wants more workers and consumers. But there would be a voter backlash.
I think the Australian economy has entered a Great Stagnation where house prices will track sideways to slightly down for the foreseeable future.
All eyes on China.
The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt — Bertrand Russell
5.2% over 3 years? And you state you did nothing for it, however you then mention you have a mortgage.
So you have done something for it - you incurred a cost (interest - 5-7%p.a) to achieve that return (<2% p.a).
Well done
Also - Mortgage cheaper than renting? Thats amazing. Can I ask if you live in a capital city?
Perspective.
He incurred an interest costs so he doesn't have to pay rent (and he states his rent would have been higher) He wasn't incurring 5-7% interest merely to achieve <2%pa capital gains (his total return in rent saved is higher than the <2%pa you stated)
It is now game-on between the sheep of the establishment - with their forecasts huddled in a herd - and the wolves of the hedge fund world talking up their “short” positions and pointing out the negatives.
The revolution in information technology will draw out any recovery as confidence is now so easily undermined.
The other thing to have changed since the GFC is that leverage has been transferred from banks to sovereign states and it is Europe's banks that are in biggest trouble now. Moreover, the economic fortunes of the big developing nations, China and India, are on the slide.
Since Raoul Pal delivered his “The End Game” Armageddon thesis in Shanghai last month further economic data has corroborated the bearish trend in China and India. And the banking crisis in Spain, as Pal predicted, has got worse.
As investors are now more timid than ever, nursing their bruises from the latest share ructions, market sentiment is as susceptible as it ever was to “Armageddon scenarios”. They are whipping anxieties to a point only felt during the financial crisis four years ago.
The truth and the reality, as always, will fall somewhere between the wolves and the sheep - somewhere between Armageddon peddlers and 'the cusp of the bull-market” scenarios expounded so tirelessly by the mainstream rhetoreticians.
The world is deleveraging and can't rely on expanding credit to fuel the same rate of recovery as in previous cycles.
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