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Chris Joye: Only fools ignore bubble trouble
Topic Started: 20 Sep 2013, 05:22 PM (6,490 Views)
willy_nilly
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Residential property is the biggest source of household wealth and underlies the most important asset – home loans – held by Australia’s colossal and concentrated banking industry, which accounts for 30 per cent of the sharemarket’s value. There is $4 trillion of housing and $1.3 trillion of debt held against it. It is our most significant investment class…

…anyone not investing serious time contemplating housing hazards, including the prospect of destabilising bubbles, should wake up…

Capital gains exceeding incomes is OK, for a period. But with the major banks leveraged 80 times across their $1 trillion home loan books, one-third of all new mortgages approved with loan-to-value ratios greater than 80 per cent, nearly 40 per cent of loans accepted on an “interest only” basis, 20 per cent of borrowers fixing at historically low rates for only a few years, and the household debt-to-income ratio not far from its highs, there is little room for error…

You can ignore these threats like the US Federal Reserve did before 2007, or confront them and reduce the probability that history eventually repeats itself.

http://www.afr.com/p/markets/market_wrap/only_fools_ignore_bubble_trouble_tcMdVkWXAAWCs1PcK2SG9O


Bugger, this must really piss the bulls of that their bull hawk has capitulated!
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Shadow
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Evil Mouzealot Specufestor

willy_nilly
20 Sep 2013, 05:22 PM
Bugger, this must really piss the bulls of that their bull hawk has capitulated!
On the contrary, I mostly agree with Chris' position...

'Aussie housing is not massively overpriced. This is one reason why values declined only modestly in 2008 and 2011, despite gloomier predictions from many mainstream economists.

The fundamentals are underpinned by strong population growth, which has consistently exceeded government forecasts, and historically inert new supply. But a credible starting point does not mean the future is fine.'


CJ is saying there is no bubble now, but there is a danger that one is developing.

I differ from CJs position slightly, in that I want a bubble to develop, because I am in a position to make a lot of money from it.

A normal boom will be fine for me - i.e. I'll be happy with a Sydney median house price of $1M by 2015 (not a bubble, this would just take the Sydney price/income ratio back to 2003 levels). However if a real bubble does develop, and Sydney keeps growing at that rate or faster, and beyond 2015, then the opportunity for profit is even greater.

So as a greedy capitalist pig, I say bring on the bubble!
Edited by Shadow, 21 Sep 2013, 09:29 AM.
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
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willy_nilly
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Shads
So you agree a bubble is building but you think it will not bust, just reach a 'new normal' high?
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Shadow
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willy_nilly
21 Sep 2013, 10:11 AM
Shads
So you agree a bubble is building but you think it will not bust, just reach a 'new normal' high?
I agree there is a risk of a bubble building, and if a bubble does build then it will burst (all bubbles burst).

The reason why there has been no burst in Australia is because there has been no bubble yet.

Note that a Sydney median house price of approx. $1M by end of 2015 is NOT a bubble.

Approx $1M by end 2015 would just take the Sydney price/income ratio back up to 2003 levels.

However if the price/income ratio grows significantly beyond that level, then we may enter bubble territory.

The indicators to watch are the house price to income ratio, mortgage repayment to income ratio, and rental vacancy rates.

Sydney stalled in 2003 and then fell back 10% in nominal terms because mortgage repayments reached an all time high relative to incomes, and the rental vacancy rate was almost 5%, indicating oversupply.

Today, rental vacancy rates in Sydney are below 2%, and mortage repayments are about 40% lower relative to incomes than they were in 2003.

So this boom has a long way to run before Sydney gets back to 2003 levels in terms of unaffordability and supply/demand imbalance.
Edited by Shadow, 21 Sep 2013, 10:43 AM.
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
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willy_nilly
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Shads
And with approx. 40% of our workforce, which throws your price levels/affordability out somewhat, you can see this happening?
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Pig Iron
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Bogan scum

willy_nilly
20 Sep 2013, 05:22 PM
Residential property is the biggest source of household wealth and underlies the most important asset – home loans – held by Australia’s colossal and concentrated banking industry, which accounts for 30 per cent of the sharemarket’s value. There is $4 trillion of housing and $1.3 trillion of debt held against it. It is our most significant investment class…

…anyone not investing serious time contemplating housing hazards, including the prospect of destabilising bubbles, should wake up…

Capital gains exceeding incomes is OK, for a period. But with the major banks leveraged 80 times across their $1 trillion home loan books, one-third of all new mortgages approved with loan-to-value ratios greater than 80 per cent, nearly 40 per cent of loans accepted on an “interest only” basis, 20 per cent of borrowers fixing at historically low rates for only a few years, and the household debt-to-income ratio not far from its highs, there is little room for error…

You can ignore these threats like the US Federal Reserve did before 2007, or confront them and reduce the probability that history eventually repeats itself.

http://www.afr.com/p/markets/market_wrap/only_fools_ignore_bubble_trouble_tcMdVkWXAAWCs1PcK2SG9O


Bugger, this must really piss the bulls of that their bull hawk has capitulated!
lol. it clearly pisses you right off that keen, macrobusiness etc etc have all capitulated. so much so that you are now completely obessed with trying to prove a bull has capitulated. since when has chris joye been a source of truth for the bears??? fucking hilarious!!!!
I am the love child of Tony Abbott and Pauline Hanson
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goldbug
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Shadow
21 Sep 2013, 09:26 AM
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You really are a bore you know shadow. You just rehash the same old tripe over and over.
Pig Iron
21 Sep 2013, 10:11 PM
lol. it clearly pisses you right off that keen, macrobusiness Yap Yap Yap Yap Yap. so much so that you are now completely obessed with Yap Yap Yap Yap Yap. since when has Yap Yap Yap Yap Yap ??? fucking Yap Yap Yap Yap Yap !!!!
Enter the forum lapdog. Yap Yap Yap Yap Yap Yap


Posted Image
Edited by goldbug, 22 Sep 2013, 12:11 AM.
Shadow was hopelessly wrong about the Gold Bull Market.
What else is he wrong about?
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Blondie girl
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Oooooooooohhhhh

Chris Joyce has an interesting defination that the oz housing market is priced for perfection..never seen it described like that.

What is that really supposed to mean? It can be perhaps interpreted as if prices are fixed??

Meow.
:-)
Newjerk? can you try harder than dig up another person's blog. My first promo was with Billabong and my name in English is modified with a T, am Perth born but also lived in Sydney to make my $$
It's Absolutely Fabulous if it includes brilliant locations, & high calibre tenants..what more does one want? Understand the power of the two "P"" or be financially challenged
Even better when there is family who are property mad and one is born in some entitlements.....Understand that beautiful women are the exhibitionists we crave attention, whilst hot blooded men are the voyeurs ... A stunning woman can command and takes pleasure in being noticed. Seems not too many understand what it means to hold and own props and get threatened by those who do.
Banks are considered to be law abiding and & rather boring places yeah not true . A bank balance sheet will show capital is dwarfed by their liabilities this means when a portions of loans is falling its problems for the bank.
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Shadow
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goldbug
21 Sep 2013, 11:24 PM
You really are a bore you know shadow. You just rehash the same old tripe over and over.
Yet you felt compelled to respond... :re:

I guess that gold price crash is really getting on your nerves, especially with Sydney property booming.

It was supposed to be the other way around, wasn't it?
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
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CSI
Unregistered

"Note that a Sydney median house price of approx. $1M by end of 2015 is NOT a bubble."

This sounds absurd to me. Is your median Sydney house really worth a million dollars? (2015 is less than 2 years away). What is the median income in Sydney? I don't know as much about the geography of Sydney as I should, but I know its a pretty big city. How are service workers supposed to afford to buy or rent there? Are they supposed to live 100 km or more away and commute everyday?
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