1: How long can this boom or bubble run for before it peaks out (how many years)?
2: How much can prices rise by during that time?
3: How much are they likely to fall by when the crash comes?
Anyone like to hazard a guesstimate/opinion/stabinthedark?
I sure as hell don’t want to put my life on hold for another three years!
Ok. If Sydney goes like Dublin 1997 to 2007, from today's prices it could increase 4 or 5 times over a 10 year period. When it crashes it could come back to just over 2 times current prices.
And now he can publish a 'clarification' article in a few days, getting even more airtime.
As expected...
'Mr Joye said ... He expected robust house appreciation to continue as long as rates remain low, and said it was concerning Sydney’s price growth had reached a double-digit pace. “Very strong capital gains would start to put the Australian housing market into serious bubble territory,” he said. If the market was allowed to run into those conditions, Mr Joye said it would prompt the most serious housing crash in 75 years'
So... how bad was the housing crash 75 years ago? That would have been Great Depression era...
Which is basically what I have been saying for about a year now in relation to Perth.
Low IRs are causing a bubble. Mercifully, at least there is a decent supply response.
barns
13 Sep 2013, 11:07 AM
craigie
13 Sep 2013, 10:57 AM
OK, lets assume Joye is right here.
If so, there are three important questions.
1: How long can this boom or bubble run for before it peaks out (how many years)?
2: How much can prices rise by during that time?
3: How much are they likely to fall by when the crash comes?
Anyone like to hazard a guesstimate/opinion/stabinthedark?
I sure as hell don’t want to put my life on hold for another three years!
Ok. If Sydney goes like Dublin 1997 to 2007, from today's prices it could increase 4 or 5 times over a 10 year period. When it crashes it could come back to just over 2 times current prices.
And take down the banks with it?
That's what true property bubble do.
Finland in the 80s, Sweden in the 90s, Ireland and Spain in 00s.
APPRA and the RBA need to get off their knees and do something.
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
Interesting article even more so when you realise that Chistopher is normally a property spruiker, makes me take his comment a bit more seriously.
That's called confirmation bias The bears here suffer greatly from flipping and flopping from source to source depending on what the report of the moment is.
Ignore posts by The Whole Truth · View Post · End Ignoring The forum fuckwit goes RRRAAARRRGGHHhhh - But not a fuck was given..................by anyone.
Interesting article even more so when you realise that Chistopher is normally a property spruiker, makes me take his comment a bit more seriously.
The only thing Christopher is interested in spruiking is himself
"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.
The only thing Christopher is interested in spruiking is himself
I don't believe that Soul. Chris can certainly talk his own book at times, we all can, but he also offers articles that show genuine concern for his country and I think that we have to distinguish between those moments.
At his best CJ gives incisive commentary from an extremely well informed perspective.
At the moment house price inflation in Sydney and Perth are in excess of 8% and that could very easily tip over the 10% mark before Xmas the way things are going. That will drag the other capitals with it, albeit at a slower pace. There is a danger if we have more than double digit growth nationally especially if it carries on for some time, AND if the RBA have to hike rates they then kill off the recovery in the non-mining sectors.
CJ is worth listening to.
Any expressed market opinion is my own and is not to be taken as financial advice
“If the market was allowed to run into those conditions, Mr Joye said it would prompt the most serious housing crash in 75 years.”
Well, yes, but how can one stop the market from running into those conditions?
Freezing credit growth would mean stagnating / diminishing profits for the banks. I have no doubt that fund managers of large mutual funds / pension funds are leaning against the board to grow their business. The chairman will then call the CEO in and tell him “profits go up or you are fired!”
Moreover, those who end up being picked as CEOs are those with proven track records of successfully expanding bank credit to record highs by inventing ever reckless financial instruments / practices. They devised these instruments / practices because they either did not think through the risks involved or worry about the consequences. Perhaps, they might have thought “I will be gone by then”? If that were indeed their thinking back then, then it is perfectly logical to assume that their current thinking must be similar; “I will keep expanding credit deeper into the sub-prime market, just a bit more. As long as the market holds up until my time is up, I do not worry about the rest”.
In short, no matter how I look at it, I can see only one logical destination for the market.
“If the market was allowed to run into those conditions, Mr Joye said it would prompt the most serious housing crash in 75 years.”
Well, yes, but how can one stop the market from running into those conditions?
New supply will change conditions.
For years, Sydney property prices have traded at or below replacement cost - mainly due to the RBA trying to manage the mining boom by allocating resources away from housing to business CAPEX with higher interest rates (2006-2007, and 2010-2011).
After 10 long years, prices are now heading back to and exceeding cost. Watch for new supply as a response to the rising prices.
Quote:
In short, no matter how I look at it, I can see only one logical destination for the market.
I think there are two potential detinations 1. New supply begins to cap prices for existing stock 2. Prices keep rising in the face of increasing supply (Similar to the US, Ireland, Spain etc). That would be a sign of a bubble.
If scenario (2) occurs, I wonder how many people will listen to the "Bubble Popping" predictions given so many previous calls have turned out to be false?
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