Punting on Australian houses is bonkers, attracting dumb money, speculation, not investment; Ordinary people priced out of Great Australian Dream by cashed-up older generations
Tweet Topic Started: 20 Sep 2013, 10:18 AM (4,924 Views)
ARE "investors" piling into the housing market, or "speculators"? One thing appears certain: wealthier Australians are buying houses and apartments from each other with increasing velocity, dissatisfied with the paltry returns on their bank deposits and are topping up their buying power with cheap loans.
How do we know this? Growth in total housing credit in the economy is still weak but auction clearance rates are matching post-GFC highs and capital city house prices are accelerating and now growing at a 10 per cent annualised rate. Meanwhile, first-home buyers' share of new home loans granted has fallen to its lowest level in a decade and the share of loans for new construction has dwindled.
Ordinary people are being priced out of the so-called "great Australian dream" by cashed-up older generations buying for themselves and their children. But those who've been priced out of the market should be far less upset than they probably are.
Buying a house is not an "investment" but speculation, and one that looks ill-advised given how far out of kilter house prices remain with their underlying return.
The Australian Bureau of Statistics does not, for a good reason, include the value of established dwelling purchases when it calculates national "investment". Buying a quaint 19th-century terrace in Sydney or Melbourne might impress friends, but it doesn't add to the nation's productivity capacity one iota.
Beyond any capital appreciation, the only tangible return from buying an established dwelling is the right not to have to pay rent -- nothing more or less. And rents typically grow in keeping with average household income; they bear no relationship with the skill or effort of the owner as business profits do.
Nor are dwelling prices subject to these factors, instead reflecting the supply of land, population growth, interest rates, and even local councillors' propensity to change a suburb's pattern of zoning, none of which is controlled by the owner.
But this is a gamble that looks less and less likely to pay off. No other asset is attracting so much dumb money.
For a start, borrowing a massive sum on a sliver of capital or deposit and punting it all on a single house is bonkers, according to mainstream economic theory, which emphasises the importance of holding a diversified pool of assets with different risk characteristics. And borrowing to buy an asset because interest rates are low today is equally foolish.
Even yields that fail to account for any of these costs are barely over 4 per cent, much lower than the dividend yield on most Australian blue-chip stocks. Net yields would be closer to 2.5 per cent, and that excludes the stress of worrying about mortgage repayments and house prices.
As for the so-called "housing shortage", about one in 10 Australian houses and apartments are vacant when every census is taken, and the number of homeless people has not increased commensurately with the hype about a shortage.
A massive crash in house prices would cause significant economic damage, but in the longer term would serve as very salutary lesson for all.
Ignore posts by The Whole Truth · View Post · End Ignoring The forum fuckwit goes RRRAAARRRGGHHhhh - But not a fuck was given..................by anyone.
stinkbug omosessuale Frank Castle is a liar and a criminal. He will often deliberately take people out of context and use straw man arguments. Frank finally and unintentionally gives it up and admits he got where he is, primarily via dumb luck! See here Property will be 50-70% off by 2016.
Were you masturbating furiously as you banged that out?
Ignore posts by The Whole Truth · View Post · End Ignoring The forum fuckwit goes RRRAAARRRGGHHhhh - But not a fuck was given..................by anyone.
Just over one year ago I was told that the capital investment promises which I was relying upon for my business plans would no longer be honored.
Basically the Sydney real estate bug had struck and sucked the well dry.
I naturally argued that my venture would generate better returns, what else could I do?
Well guess what a couple of weeks back I meet with the investor group and they took pleasure in pointing out their 30% plus paper profits, in just over 1 year, all backed by solid risk free Sydney property.
Don't know how often I was told (endured):
“What you technical types don't understand is Risk adjusted Returns, 30% return, zero Risk, compare that with even your Best Case manufacturing returns, and you wonder why we pulled the capital?"
I felt like saying fuck you and all your speculator friends too, but that would serve little purpose so I suggested they break out their best Champagne and we could all celebrate.
It appears that in Australia a good drowning of one’s sorrows is all us technical types deserve.
I find it interesting how many prominent bears are becoming bulls, but also how some former bulls are becoming bearish. The crazies like Steve Keen and macrobusiness have capitulated while Chris Joyce is getting bearish.
I find it interesting how many prominent bears are becoming bulls, but also how some former bulls are becoming bearish. The crazies like Steve Keen and macrobusiness have capitulated while Chris Joyce is getting bearish.
Me, Im like always in-between...
Noted. I can not really get my head around the switch.
Perhaps as the denial and delusion, required to pump up the bubble, are questioned, many change their mind?
Ad Hominem, that all you got in your arsenal Frankie? That and a few four letter words.
"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.
Ad Hominem, that all you got in your arsenal Frankie? That and a few four letter words.
It wasn't Ad Hominem, it was a factual observation and linked to as well you Dickhead...................and thats more than 4 letters.
Ignore posts by The Whole Truth · View Post · End Ignoring The forum fuckwit goes RRRAAARRRGGHHhhh - But not a fuck was given..................by anyone.
I find it interesting how many prominent bears are becoming bulls, but also how some former bulls are becoming bearish. The crazies like Steve Keen and macrobusiness have capitulated while Chris Joyce is getting bearish.
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