Moody's Assessment of Overvalued Australian Housing: Local analysts don't know how serious it is; Stark warning bells sound: Australians blind to impending financial Armageddon
Tweet Topic Started: 16 Jul 2013, 09:36 AM (10,584 Views)
Australians lodging heads ever deeper into the sand while ever measure, warning bell and fundamental screams to stop!
The Australian Real Estate Ponzi Scheme inflated to unprecedented levels, charts below sound the warning but who's listening? The Real Estate industry in this country is the disease that will take it down.
After a bubble has burst, no one denies that it existed. But before it does, the popular refrain is that though bubbles existed elsewhere in the world, “there’s no bubble here”. So housing bubbles are admitted to have existed in Japan, the USA, Spain and Ireland – because they’ve already burst.
Australians lodging heads ever deeper into the sand while ever measure, warning bell and fundamental screams to stop!
The Australian Real Estate Ponzi Scheme inflated to unprecedented levels, charts below sound the warning but who's listening? The Real Estate industry in this country is the disease that will take it down.
Id like to see some to the bulls explain that banking exposure chart away.
I have been laughed at here a few times for pointing out the bleeding obvious in relation to Australian banks.
Clearly though, they are in deep.
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
Id like to see some to the bulls explain that banking exposure chart away.
I have been laughed at here a few times for pointing out the bleeding obvious in relation to Australian banks.
Clearly though, they are in deep.
Would you rather the banks have more lending exposure to mining, retail and manufacturing?
The housing book is high quality assets and the average LVR across the book for, say, CBA is around 30% I recall. Good old fashioned banking business, lots of small exposures, geographically spread, fee and interest margin income. It's where banks depart from this business model they come unstuck.
“You Keep Using That Word, I Do Not Think It Means What You Think It Means” - Inigo Montoya
Id like to see some to the bulls explain that banking exposure chart away.
I have been laughed at here a few times for pointing out the bleeding obvious in relation to Australian banks.
Clearly though, they are in deep.
Would you rather the banks have more lending exposure to mining, retail and manufacturing?
The housing book is high quality assets and the average LVR across the book for, say, CBA is around 30% I recall. Good old fashioned banking business, lots of small exposures, geographically spread, fee and interest margin income. It's where banks depart from this business model they come unstuck.
Good answer.
See late 80s/early 90s for the precarious position they have got themselves into in the past with too much direct business venture financing, wayward o/s adventures and so forth. Big business relies more on venture capital (both local and from o/s) and equity nowadays compared to back then, as it should be. Small business often relies on minimal financing, or financing backed by the owners family home (or via it) - hence it shows up on the banks books as residential mortgage lending.
Id like to see some to the bulls explain that banking exposure chart away.
I have been laughed at here a few times for pointing out the bleeding obvious in relation to Australian banks.
Clearly though, they are in deep.
There are plenty of internation banks operating here now that can scoop up the mortgages for pennies if the big 4 were to actually go insolvent. It's how the Bank of America got so big. It snapped up mountains of mortgages duing the great depression with a line of credit from the fed. How we think banks operate and plan for disaster and how banks actually operate and plan for disaster are 2 entirely different things.
Would you rather the banks have more lending exposure to mining, retail and manufacturing?
The housing book is high quality assets and the average LVR across the book for, say, CBA is around 30% I recall. Good old fashioned banking business, lots of small exposures, geographically spread, fee and interest margin income. It's where banks depart from this business model they come unstuck.
the problem being of course that banks are aware of the government's commitment to maintaining artificially high house prices (through methods discussed here countless times).
So with that distortion of implied risk it makes sense for them to direct most of their capital into mortgages, to the detriment of funding SMEs, tech startups and other activities with a higher risk of loan default, but which ultimately would help the economy to grow in more sustainable ways than the wealth effect.
IIRC there's a chart showing how oz banks have switched from having a 2:1 loan- to-mortgage ratio to the current 1:2 in the space of about 25 years.
"It were not best that we should all think alike; it is difference of opinion that makes horse races." - Mark Twain on why he avoids discussing house prices over at MacroBusiness. "Buy land, they're not making any more of it." - Georgist Land Tax proponent Mark Twain laughing in his grave at humourless idiots like skamy that continually use this quip to justify housing bubbles.
Would you rather the banks have more lending exposure to mining, retail and manufacturing?
The housing book is high quality assets and the average LVR across the book for, say, CBA is around 30% I recall. Good old fashioned banking business, lots of small exposures, geographically spread, fee and interest margin income. It's where banks depart from this business model they come unstuck.
the problem being of course that banks are aware of the government's commitment to maintaining artificially high house prices (through methods discussed here countless times).
So with that distortion of implied risk it makes sense for them to direct most of their capital into mortgages, to the detriment of funding SMEs, tech startups and other activities with a higher risk of loan default, but which ultimately would help the economy to grow in more sustainable ways than the wealth effect.
IIRC there's a chart showing how oz banks have switched from having a 2:1 loan- to-mortgage ratio to the current 1:2 in the space of about 25 years.
Actually the problem is that banks are encouraged to lend into housing because APRA who follow the BASEL guidelines set the rules which push banks towards housing and away from business finance.
The new BASEL III guidelines that are yet to be adopted are even more punitive for commercial borrowers so I can't see it changing anytime soon.
Would you rather the banks have more lending exposure to mining, retail and manufacturing?
The housing book is high quality assets and the average LVR across the book for, say, CBA is around 30% I recall. Good old fashioned banking business, lots of small exposures, geographically spread, fee and interest margin income. It's where banks depart from this business model they come unstuck.
Eh...of course.
Please explain to me how banks switching their lending away from job creating businesses to investment in ensuring we have some of the most expensive real estate in the world is desirable?
I understand why it works for the banks, but why does it work for your average joe?
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
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.
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
