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Sydney's Recent Housing Price Boom Is Really Just Making Up For A Slow Decade
Topic Started: 3 Oct 2013, 09:27 PM (4,790 Views)
Gazo
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Shadow
4 Oct 2013, 12:20 PM
One of my assumptions is that Australian interest rates won't move up significantly (by more than 1%) before 2015.

Interest rates in other countries don't really come into it. Our rates are already much higher than in most comparable countries.
Fair enough.
However, are you not at all concerned about the level of equity markets oversees (which many argue are inflated well above fundamental levels based on current Fed policy), and their potential of correcting to an extent that a GFC 2 arrives on our doorstep. I mean, if it were not an issue here to the RBA, then surey they would not have commented on the state of international affairs in every single one of their meetings since the RBA has met post GFC 1?

I think the whole bull vs bear camp here is really just a matter of those that believe the recovery post GFC 1 has been 'real' vs 'artificial'. There is nothing real about asset prices and markets in my mind...
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Sydneyite
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Gazo
4 Oct 2013, 12:15 PM
This must be the most naive comment I've ever read from you. I'd prefer not to waiste my time trying to link the pieces together for you.
Ok so you don't really have an answer then?

I'll give you the answer - SFA! This is one of those things that bears get so wroing and why you have all been so wrong about the local housing market for years. I would in fact say it's naive to draw some clear link between these sorts of things (QE, no QE etc) going on o/s and our local housing market. If you try really hard you can come up with some sort of tenuous hypothetical link based on many layers of indirection - but this is really nothing more than hand waving.

We have had massive housing booms before while the US was in the middle of a recession - eg during the .com bust in 01/02. How would you explain that? :re:
Edited by Sydneyite, 4 Oct 2013, 01:41 PM.
For Aussie property bears, "denial", is not just a long river in North Africa.....
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miw
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Gazo
4 Oct 2013, 12:35 PM
Fair enough.
However, are you not at all concerned about the level of equity markets oversees (which many argue are inflated well above fundamental levels based on current Fed policy), and their potential of correcting to an extent that a GFC 2 arrives on our doorstep. I mean, if it were not an issue here to the RBA, then surey they would not have commented on the state of international affairs in every single one of their meetings since the RBA has met post GFC 1?
There are probably just as many people arguing that equity markets are undervalued. By definition, the market's best estimate for the price of a stock in 2 years' time is today's price, adjusted for some interest rate deflator.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
AREPS™
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doubleview
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Gazo
4 Oct 2013, 12:35 PM
I think the whole bull vs bear camp here is really just a matter of those that believe the recovery post GFC 1 has been 'real' vs 'artificial'. There is nothing real about asset prices and markets in my mind...
Exactly, if you take all the stimulus away, particularity China's its game over !

Artificial scaffolding on top of scaffolding on top of scaffolding again!!

Most of the bulls who think they were smart buying property around 2000 have got arrogant.

Basically a generations capital growth was stolen from them!

The worse thing is instead of letting it correct, that same generation now have to pay future taxes to keep the scaffolding in place !

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Shadow
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Gazo
4 Oct 2013, 12:35 PM
However, are you not at all concerned about the level of equity markets oversees (which many argue are inflated well above fundamental levels based on current Fed policy), and their potential of correcting to an extent that a GFC 2 arrives on our doorstep.
Sydney house prices rose 20% during GFC1, so the thought of GFC2 doesn't really concern me. It will be rising interest rates that takes the heat out of the Sydney market - and we certainly won't have rising interest rates if there is a GFC2. I think the most likely scenario is a global recovery, global interest rates rising (very gradually) over the next few years, Australian rates also rising gradually (not rising fast enough to prevent house prices growing for another 2-3 years).
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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Gazo
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Sydneyite
4 Oct 2013, 12:42 PM
Ok so you don't really have an answer then?

I'll give you the answer - SFA! This is one of those things that bears like get so wroing and why you have all been so wrong about the local housing market for years. I would in fact say it's naive to draw some clear link between these sorts of things (QE, no QE etc) going on o/s and our local housing market. If you try really hard you can come up with some sort of tenuous hypothetical link based on many layers of indirection - but this is really nothing more than hand waving.

We have had massive housing booms before while the US was in the middle of a recession - eg during the .com bust in 01/02. How would you explain that? :re:
I'd just prefer to not enlighten ignorant bulls like you who are inflating asset prices on the belief that the the RBA's interest rate policy and the Aus$ are not in any way reactionary to the US Feds policy. House prices may go up, as Shadow said, but the more 'un-wordly' aussies like you pile in the faster and bigger the eventual correction will come.

There are great fundmental differences between the dot com bust and the last crises (or should I say current crisis as if it were over the biggest economy in the world wouldn't need $85billion per month to stay alive).
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Quote:
 
Sydney land releases fail to meet demand

October 3, 2013 - 5:54PM
Antony Lawes

There is still not enough land being released in Sydney for everyone who wants to build a house, despite sales of these lots increasing over the past two years, a new report has found.

The latest Urbis Residential Greenfields Index found the strongest housing development was in Perth, while Sydney "still has the weakest fundamentals of any major Australian market".

Nevertheless, sales of new house and land packages in Sydney had risen strongly since 2011, especially smaller lots under $600,000 on Sydney's fringe. But it would be several years before there was enough new residential land released to meet demand.

Dr Andrew Wilson, a senior economist at Australian Property Monitors, said there had actually been a "concerning" fall in the number of approvals for new houses in Sydney in August and just 1100 new houses approved in Sydney over first eight months of the year.

This was "despite the lowest interest rates in 60 years, a strong housing market and numerous state government new-house incentive schemes and planning initiatives", he said.

"There is no apparent buyer traction in Sydney's new houses market despite a raging property inferno elsewhere."

Read more: http://smh.domain.com.au/real-estate-news/sydney-land-releases-fail-to-meet-demand-20131003-2ux2d.html
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Sydneyite
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Gazo
4 Oct 2013, 01:18 PM
<rant>

There are great fundmental differences between the dot com bust and the last crises (or should I say current crisis as if it were over the biggest economy in the world wouldn't need $85billion per month to stay alive).
I see nothing in that rant that provides any evidence at all as to how monetary policy actions in the US and other countries has any direct (or even indirect?) impact on the local housing market here? Are US banks buying Sydney property with their "excess" $US reserves they get from QE? :re:

And re the .dot com bust - a recession is a recession. They had one, our housing market nationally boomed. Those are facts. I don't see any support there at all for your argument - in fact it disproves your argument categorically. Same goes for what happened during and after the GFC from 2008 - 2010 - they had a big recession, pumped QE in etc, housing market in the shit. We had no recession, a housing market that boomed after a mild correction. Where's the correlation there???

But don't let facts or actual history get in the way of your myopic bearish beliefs. You are wrong though - been proven already, and you will continue to be wrong because your basic premise is rubbish.
Edited by Sydneyite, 4 Oct 2013, 01:47 PM.
For Aussie property bears, "denial", is not just a long river in North Africa.....
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Gazo
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Sydneyite
4 Oct 2013, 01:46 PM
I see nothing in that rant that provides any evidence at all as to how monetary policy actions in the US and other countries has any direct (or even indirect?) impact on the local housing market here? Are US banks buying Sydney property with their "excess" $US reserves they get from QE? :re:

And re the .dot com bust - a recession is a recession. They had one, our housing market nationally boomed. Those are facts. I don't see any support there at all for your argument - in fact it disproves your argument categorically. Same goes for what happened during and after the GFC from 2008 - 2010 - they had a big recession, pumped QE in etc, housing market in the shit. We had no recession, a housing market that boomed after a mild correction. Where's the correlation there???

But don't let facts or actual history get in the way of your myopic bearish beliefs. You are wrong though - been proven already, and you will continue to be wrong because your basic premise is rubbish.
QE is not only asset purchasing. IR's in the US and other developed world economies are being kept artificially low. The facts are that any hint of tapering by the world's largest economy has had very direct effects on bond yields and curencies. Believe it or not, our RBA is caught up in this mess indirectly.

Dot com was far less debt in the world.
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Veritas
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Shadow
4 Oct 2013, 12:56 PM
Gazo
4 Oct 2013, 12:35 PM
However, are you not at all concerned about the level of equity markets oversees (which many argue are inflated well above fundamental levels based on current Fed policy), and their potential of correcting to an extent that a GFC 2 arrives on our doorstep.
Sydney house prices rose 20% during GFC1, so the thought of GFC2 doesn't really concern me. It will be rising interest rates that takes the heat out of the Sydney market - and we certainly won't have rising interest rates if there is a GFC2. I think the most likely scenario is a global recovery, global interest rates rising (very gradually) over the next few years, Australian rates also rising gradually (not rising fast enough to prevent house prices growing for another 2-3 years).
Or a recession that trumps the cuts.

The GFC was meaningless in Australia.

The Feds (rightly) acted quickly to stimulate through fiscal policy and the RBA ( rightly) acted quickly to stimulate through monetary policy.

But Australia didn't survive the GFC, for there was nothing to survive, the threat did not eventuate.

Perhaps the most interesting feature of the period was the correction that you allude to. Why was there a correction? The simple answer seems to be that there was a temporary loss of confidence on the demand side albeit tempered massively by low IR and the Federal Government's frantic attempts to do something- anything- to prevent a housing bust.

The lost of confidence manifested was across the board but in the recovery period, particularly in Sydney, investors, more than anyone else are leading the charge. In other words, the recent rally cannot continue if investor demand falls off. And how long before prices become even more unhinged from fundamentals before that happens.

The economic fundamentals say soon.

BTW, Comparing the recession of 01-02 to the one that started in 07/08 is like comparing the Boer war to WW2.

Posted Image
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
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