Welcome Guest [Log In] [Register]


Reply
  • Pages:
  • 1
  • 2
  • 14
Australia interest rates to go lower, for longer
Topic Started: 5 Aug 2013, 07:13 PM (9,988 Views)
peter fraser
Member Avatar


genX
5 Aug 2013, 08:20 PM
Why would it be different for housing? Housing is illiquid, so the effect is not immediate (3-6 months), but leveraged investment is leveraged investment, regardless of the asset class.

Because most house buyers won't sell their house to cash out, as shareholders would.

Quote:
 
True in the old economy, but not in the new economy. In the new economy, wealth is printed at the central bank, and share prices rise and fall with the flow or not of the money.


You might be right. Some stocks will fare better than others. I've just checked one stock that I thought held up OK, but it too fell heavily before it recovered. It's the speed of the falls that catch investors in that environment. I wonder what the ratio of people who sold but would have been better off holding throughout compared to those who profited from selling out would be. A lot sold out but didn't buy back in for the upside.
Any expressed market opinion is my own and is not to be taken as financial advice
Profile "REPLY WITH QUOTE" Go to top
 
mel
Member Avatar


Poontang
5 Aug 2013, 08:25 PM
Ok, sounds like a fair bet...

Terms of bet? Call ends 2 days after RBA decision 2nd Tuesday April 2014. Fixed rates go up prior to then.. I win They do not, you win.?
the wonderful thing here is we can pass pictures and videos without this type of thing (april sounds a bit far away though) :lol

'will probably start to rise towards year end or into the new year'


Does febuary 2014 sound fair?

An independent member could quickly determine the 'vibe' of fixed rates in febuary - if it's too close to call with mixed signals from different providers it would mean nothing has really changed

what do you think? :)
Edited by mel, 5 Aug 2013, 09:12 PM.
APF - a place where serious people don't take themselves too seriously. There's nothing else like it.
Profile "REPLY WITH QUOTE" Go to top
 
genX
Default APF Avatar


peter fraser
5 Aug 2013, 08:38 PM
Because most house buyers won't sell their house to cash out, as shareholders would.

It doesn't matter. 20% of Australian property is investor owned, which drives the price of most other properties (with some exceptions i.e. remote towns). But for capital cities, it is fair to say that investors drive the price. When interest rates drop, investors leverage up. This will hold true until investors hit debt saturation, which takes a long time, but it happens eventually, and when it does, the market goes bidless.
Quote:
 
You might be right. Some stocks will fare better than others. I've just checked one stock that I thought held up OK, but it too fell heavily before it recovered. It's the speed of the falls that catch investors in that environment. I wonder what the ratio of people who sold but would have been better off holding throughout compared to those who profited from selling out would be. A lot sold out but didn't buy back in for the upside.
When the price depends on bubble blowing by the central bank, it becomes very volatile. Everybody wants to ride the free-money train, but nobody wants to be left standing when the music stops, so any hint that the liquidity is going to stop will cause markets to drop off a cliff, even more so in today's environment where computers are programmed to sell at the slightest whiff of a change in direction. The problem the US has now is that some of the liquidity in the equities markets is starting to seep into the general economy, causing the bond vigilantes to stir. Credit spreads are widening in anticipation of inflation.
Profile "REPLY WITH QUOTE" Go to top
 
mel
Member Avatar


genX
5 Aug 2013, 09:10 PM
anticipation of inflation
Jenna tells me asset swapping in a deflationary environment may encourage risk taking but not inflation of money supply
APF - a place where serious people don't take themselves too seriously. There's nothing else like it.
Profile "REPLY WITH QUOTE" Go to top
 
genX
Default APF Avatar


mel
5 Aug 2013, 09:21 PM
Jenna tells me asset swapping in a deflationary environment may encourage risk taking but not inflation of money supply
Who is Jenna?

Risk taking is just buying financial assets with the expectation of selling them at a higher price sometime in the future. Aside from banks, the great majority of people sell assets in order to spend the money they receive in return. When more people are selling assets to spend than there are saving money to produce, you get inflation. Somewhere.
Profile "REPLY WITH QUOTE" Go to top
 
mel
Member Avatar


genX
5 Aug 2013, 09:32 PM
Who is Jenna?

Risk taking is just buying financial assets with the expectation of selling them at a higher price sometime in the future. Aside from banks, the great majority of people sell assets in order to spend the money they receive in return. When more people are selling assets to spend than there are saving money to produce, you get inflation. Somewhere.
Good point - risk taking is ultimately speculation, belief or hope :lol Jenna
kudos to Peter for starting this thread. It touches on some very important things that often get overlooked imo
Edited by mel, 5 Aug 2013, 09:49 PM.
APF - a place where serious people don't take themselves too seriously. There's nothing else like it.
Profile "REPLY WITH QUOTE" Go to top
 
Sheepdog
Default APF Avatar


If the RBA does cut there are no guarantees the banks will pass it on, what with the cost of financing rising and all.
Profile "REPLY WITH QUOTE" Go to top
 
peter fraser
Member Avatar


genX
5 Aug 2013, 09:10 PM
but it happens eventually, and when it does, the market goes bidless.

and no sales are made.

share will be dumped en masse, but not houses, the owners will ride out the storm whether they want to or not.
Sheepdog
5 Aug 2013, 09:50 PM
If the RBA does cut there are no guarantees the banks will pass it on, what with the cost of financing rising and all.
that isn't what is happening elsewhere. the cost of funding is falling, not rising. Even without a rate reduction a number of banks have looked to increase their rate discounts over recent weeks.
Edited by peter fraser, 5 Aug 2013, 10:04 PM.
Any expressed market opinion is my own and is not to be taken as financial advice
Profile "REPLY WITH QUOTE" Go to top
 
genX
Default APF Avatar


peter fraser
5 Aug 2013, 10:00 PM
and no sales are made.

share will be dumped en masse, but not houses, the owners will ride out the storm whether they want to or not.
Yes, as long as they remain liquid, they can remain solvent. There tends to be a period of high unemployment while capital is reallocated however, which can force sales at any price above loan liquidation values. The big problem with misallocating capital is that it also misallocates labour, which needs to be reallocated. Labour mobility is not all that great. It takes time to re-skill or re-educate the portion of the workforce who are now surplus to the requirements of the contracting sector. 6 months to a year is a good rule of thumb, but really 2 years to complete the transition. The longer the RBA postpones this re-structure, the longer it will take to complete once it finally gets started.
Profile "REPLY WITH QUOTE" Go to top
 
miw
Member Avatar


genX
5 Aug 2013, 09:10 PM
It doesn't matter. 20% of Australian property is investor owned, which drives the price of most other properties (with some exceptions i.e. remote towns). But for capital cities, it is fair to say that investors drive the price. When interest rates drop, investors leverage up. This will hold true until investors hit debt saturation, which takes a long time, but it happens eventually, and when it does, the market goes bidless.
I don't think it is fair to say that investors drive the price. Rents through investors almost certainly set some kind of floor on the price for low-end properties, but the price of most property is driven by upgraders who represent most of the transactions and who get a direct buying power boost from both price rises and from interest rate cuts.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
AREPS™
Profile "REPLY WITH QUOTE" Go to top
 
2 users reading this topic (2 Guests and 0 Anonymous)
Go to Next Page
« Previous Topic · Australian Property Forum · Next Topic »
Reply
  • Pages:
  • 1
  • 2
  • 14



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