What's everyone's opinion on this?
American Dude (Economist) says our city home prices will fall by 50% at best, because a bubble in China will burst??
fatboyslim on 10/02/2014 - 12:38
Last edited 10/02/2014 - 13:13 by 1 other user
Last edited 10/02/2014 - 13:13 by 1 other user
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Surprise, surprise he is also touring Australia and spreading the word and probably his other investments for a fee!
Read something interesting today, Australia has the lowest Manufacturing contribution to GDP of any OECD country.
IE: When the mining collapses, we have nothing left.
Learn from Dubai - their oil is running low/out soonish, they foresee this like 20-30 years ago so they've done something about it. Us? Nothing. Kill off whatever industries left in this country and let's roll out a broadband network that's prolly better off stay in the hands of private enterprise.
Dubai is not a great example of fiscal responsibility. They've built their grand buildings on the back of Indian and Bangladeshi labour and literally treated them like slaves. Dubai also technically defaulted on its mountain of debt a few years ago by asking (pretty please) for a delay on debt repayments to creditors.
The best example for Australia to follow is Norway, a country that has built its prosperity on the back of an oil boom that is ending. They have a modern economy, complete social welfare system, a very high cost of living while also remaining competitive internationally. Their secret is saving much of the oil money for future generations. Us? We're too busy flipping houses between each other and calling it wealth.
http://www.smh.com.au/business/property/australian-homes-wor…
"Aussie homes worth $5 trillion"
This kind of article angers me as we Australians feel safe and secure that we're sitting on so much 'wealth'. True wealth is being able to produce useful items for export. Apart from a handful of international house buyers we cannot effectively export any of our houses overseas. Housing wealth is often highly leveraged and wealth that can be gone in an instant. We're failing to learn the lessons of other countries. Japan had an epic property bubble that burst in 1989. They still haven't recovered and chances are they never will.
virtually every nation is built on the back of some sort of slave labour.
Japan refuses immigrants/they've settled into the idea of extinction.
No nation in the world would last as well as Japan has. They're a developed nation that has a "immigrant" work ethic and they have technology - modern society "resources".
Without a huge cultural/selfish change, we'll get no where near Norway/Nordic states.
They're HEAVILY, taxed. Closes thing to real communism you can get. their men are also pansy, or what you would call the 1990s "snags".
Norway may be western, but they're just as far from us as Japan.
The way I see it; governments are printing more money (there was never this much money in circulation 50 years ago), population is going up (obviously) and house prices are going up (with demand comes a higher cost, this is the society we live in, and with the more money that's being printed, its all got to go somewhere), in the end, the banks win, that is the only business that is really successful.
More Chinese buying here as I rekon they are wanting to diversify their investments given the shaky real estate market over in China. But its not just Aust where this is happening it is happening in other countries like the UK and US. The world is awash with liquidity due to huge government stimulus all over the world. Both US and China pumped hundreds of billions and this has caused assets to be miss priced every where. Eventually the stimulus has to come to an end and Aust will not be immune to global uncertainty. We are already feeling the pain through lower resources prices and the high AUD. I hope our economy is not going to be too reliant on property. Last time we had GFC everyone got $200 and there was the first home buyers grant but this time maybe less fire power.
Not to say were exactly the same.. but look at the US.
GFC markets and government crashed. Property values crashed.
Now apple are bringing manufacturing back to the states so is GMH.
Apple aren't thought leaders anymore. I think they're trying to get cred back after all the Foxconn messes or keep their IP closer.
We are certainly in a bubble and something has to give eventually. Young people can't just keep moving further and further west forever because of affordability. 50% however is a bit extreme as I'm sure the investors would pile in (whether a good idea or not…) if it fell by say 25-30%.
The recent increases in particular could disappear very quickly as they are largely drive by unusually low interest rates which simply have to rise sooner or later.
Quite frankly Australia is overrated and overpriced. It it does keep going I can see many younger people choosing to move overseas.
This guy Harry Dent specialises in very extreme forecasts, many of which turn out to be wrong.
Quite frankly Australia is overrated and overpriced. It it does keep going I can see many younger people choosing to move overseas.
It'd be nice if you went with them mate, we could do with a few less of your ilk, entitled whingers bitching about our country but happily sucking up the resources…
touchy!
Yep, agreed, very touchy on this subject…outright sick of hearing ungrateful spoiled brats (domestic & foreign) whinging about our country & our people! I make no apologies for that.
"We are certainly in a bubble"
Most economists would disagree with the assessment we are in a bubble so it is very far from certain.
A lot of people make the mistake thinking because something is overpriced it is in a bubble. Housing in Australia is probably overpriced, but not enough to be in bubble territory. A smaller price correction is more likely, and history suggests it would more likely take the form of very little growth for a few years.Also, the nature of bubbles is that if it was certain we were in one, the market would have crashed already - economics can be a bit self-fulfilling.
most economists are also usually wrong. Ratio of home prices to wages is ridiculous and unsustainable int he long term. Ineterst rates will rise sooner or later, current buyer appear to be ignoring this fact.
That still just indicates that there might be a price correction, which as I pointed out is very different to a bubble bursting.
"most economists are usually wrong"
Really?
I suppose economics is all just a big conspiracy and having no formal economics education yourself that makes you more knowledgeable on the topic?"before every bust…bunch of people saying "this time is different""
There will always be people who are optimistic about the economy, as well as pessimistic.
and before every bust, including the GFC, there are a bunch of people saying "this time its different"
My 1 cent:
If the Aus property market crashes we probably won't know for sure until it happens - it is difficult to completely predict it.
One thing that is certain and indisputable is that housing in Australia is overpriced. (Due to many reasons but also because of the Australian Property Love Affair and the willingness to pay more)
An old lecturer of mine once said this in a class - Australia's property market is a little different to others around the world - if you look at the prices over the years - you can see the price corrections at certain periods of time. However, during these price corrections, house prices do not decrease sharply - instead they stay flat for a while and then begin rising again.
Take a look at this graph - it covers a large time period but demonstrates the point my lecturer was making.
http://www.propertyobserver.com.au/trends/a-history-of-austr… .
Would love a property crash though so I could buy my first homeWould love a property crash though so I could buy my first home
If you wait for that & listen to the doomsayers you'll never buy one…your former lecturer was spot-on!
"ABS estimates of residential yields show negative returns, only made tolerable by gains in real housing prices"
When yields are this low, it will inevitably result in subpar growth in the future until yields catch up and investing in housing becomes more attractive.
Here's my comment theory
If you own a house - he's all bullshit
If you dont own a house, he's spot on…..
and to modify what forever saving above says
you wont know for sure until AFTER it happens
Here's my take on 'cash rich asians'. Let's say on average, every country has 5% of the population classified as wealthy. A country with 25m people would have only 1.25m wealthy people. A country like China has (officially) 1.4billion people and 5% means 70m wealthy people. Then throw in other east asian countries like Taiwan, Japan, Korea… Maybe it's just statistics that auction results are what they are.
This whole Chinese argument is just fear mongering. Its the baby boomers that are the actual one's buying up all the property. I know, I'm looking. The Chinese are high in certain areas only.
Its like how the media reporting on ethnic crime ignores the fact that xxx group maybe committing 2-3 times more crime than the rest of us, but it still makes up less than 2-3% of all crimes.
Other than that, I'm in support of foreign ownership restrictions and xx amount of housing that can be owned by anyone individual/company. We can't restrict it to 1-2, that's simple economics.
I feel we should be recession now, but our Governments have created a situation where property prices will be artificially for a long time to come, as per some comments above. There are a range of factors that comes into play when anyone goes down.
Yea those bloody foreigners - the baby boomers - ought to be banned.
You also might find some of them are bidding on behalf of their non boomer kids.
Yeah well…
http://qz.com/176309/now-searching-for-a-good-home-46000-chi…
The visa numbers tell a story - their primary focus (if they got enough cash) is still US and CA before the latter closed the door on them. Keep in mind our significant investor visa is priced at $5mil a pop, Canada's like 1/3 of ours.
Smart of Canada, I'm favour of immigration and Canada has done it well, but you do need to keep some controls in it.
Canada has a strong Asian population, that isn't marginalised like Australia has done to its ethnic groups.
And yeah 5mil… is quite a bit.
The thing is however. If you are an owner occupier with a stable job and have put in at least 20% deposit on a home, who cares if prices crash? House price crashes are a concern for…
-The
investorsspeculators out there that are mortgaged to the hilt.
-Low Doc mortgages with higher costs.If you are an owner occupier and can afford to pay your mortgage there is never a need to sell. Even if you take 30 years to pay off your mortgage there is no better way to financial security/freedom than owning your own property as…
-It is the only asset not taxed.
-Protection from circumstances such as loss of job, low income, etc. Once you own your own home these circumstances wouldn't matter as the majority of your income is no longer paying the mortgage (especially if you are an OzBargainer ;-)"-It is the only asset not taxed"
This is a flawed argument unless u move out and leave the country/move rural.
What does ur PPOR that's very high priced mean? You might still be cash short if you don't have other investments for income producing purposes. Living in an expensive home doesn't produce income (apart fr if you rent out ur rooms for cash)Not everyone lives in an expensive home. First home buyers are better off starting at the cheaper end of the market and progressively upgrading, rather than going to glory from the start.
If you don't own your home and have retired or lost your job for instance with zero income how will you pay the rent?
Not everyone lives in an expensive home. First home buyers are better off starting at the cheaper end of the market and progressively upgrading, rather than going to glory from the start.
Spot on! These are the people who build wealth & also survive economic downturns!
It's the fools that go straight for the giant McMansion in Legoland with the new Landcruiser on hire-purchase in the driveway that go under first whenever the interest rates climb a bit.
how about the fact you're now paying excessive interest on a loan that should be substantially less due to a drop in the value of your home? That also mean you no longer have the freedom of selling your home to pay of your debt.
How about renting for life and paying off someone else's mortgage? With interest rates this low inflation will be eating away your savings in a bank.
With a mortgage you are still paying rent: You are paying rent on the funds you required to 'purchase' the house, until the time comes that you don't need those funds anymore. Honestly, people seem to forget just how much money they are handing over in interest payments as though it's not allowed to be counted. Often a purchase of 400k ends up costing almost double over the full term of the loan.
Another point: short term interest rate movements are pointless for sake of comparison. You need to consider long term averages. People's savings being eroded today is your repayment stress tomorrow.
Signed, outright home owner and general tight ars*
Because statistics show an average of 7 years buy/sell.
You're 20, you want something close to the city.
You're 30, having some kids, inner city flat isn't great anymore.
so on, so forth.If you buy a house and the price drops 40%, your hands are tied. Though of course even if you sell for 40% less then you paid, you can buy something else for 40% less :) (in fact, probably even less. Some people will be forced to accept nearly anything so downturns are a good time to pick up bargains)
Nonono, this will never happen because we're different, we're different, we're different, we're different, we're different, we're different, we're different, we're different, we're different, we're different, we're different, we're different, we're different, we're different, we're different, we're different, we're different, we're different, we're different, we're different, we're different, we're different, we're different, we're different, we're different, we're different
http://www.smh.com.au/business/the-economy/unemployment-rate…
Now that unemployment is rising, is that the beginning of the end of ever rising home prices?
i heard on freakonomics
people generally make exaggerated predictions because theres no downside to being wrong but if they keep guessing very rare occurrences they will eventually be right and then they will boast about it, but they will never mention all the other stupid predictions they made
also,
in general, experts in their field cannot out predict the average consensus (market) consistently. over time a single expert is not as good as the average.
when and if the house prices fall, I can really only see that happening in the top end of town where owners are defaulting on large mortgages, unless your in the market for a mansion on the water that is heavily discounted then I guess a crash wouldn't be too bad.
I don't see property prices falling in certain areas suburban areas. yeah they may stay a little flat for a while but certainly not what this guy is talking about. it will become a buyers market and property prices will still be competitive because of the amount of demand for property.
Book sales are low, trying to target the small Australian market. Get on local newspaper nearly everyone will read.
"Dent says Sydney and Melbourne property markets are being held up by foreign buyers and that cannot last forever" - this does have some truth to it, esp in Sydney and Melbourne
"He says that house prices are unsustainable and will fall by at least 27 per cent in Sydney and Melbourne over the next several years."
That maybe true for Sydney CBD and property near good schools.
But we're also seeing high property prices out west.
That's where I'm flummoxed, property prices out west and other "undesirable" areas are also having rapid growth.
To me it would be clear we're in a bubble when prices out west and other areas aren't growing as much
Look at freakin 2770.
Fairly undesirable yet the prices have shot through the roof. These areas are especially loved by investors and first time n00b buyer because it's cheap and the tenants are there for yonks (if they haven't already destroyed the property) so there's not much room for a drop there.
well, in a way people who now cant afford have to buy out west…
I totally agree with him. If you live in China for more than 2 years, you will agree too.
The Chinese buyers come here with CASH and shawdow banking is all nonsense. The USA is the biggest worry, those crooks are manipulating every financial market.
You guys realize that the recent property price increase has a lot to do with the falling of aud? Last year increase in syd/melb is around the amount of decrease in aud.
Most of the driver of the price increase is overseas buyer and their willingnes to buy and for them the house price has seen reduction so they have more buying power at this stage.
Also most of these are not truly overseas. Most of them are permanent migrant who just happens to have access to funds from their old country. Ever since the fed taperred the 80bn a month bond buying there are lots of uncertainties in the emerging markets. This has make lots of investors sell out and start buying secure investment in advance economy.
There is negative implications to this. For these economy the flow of fund has increased the asset to speculative levels. If this happens for the next 6 mth bubble will start to form. However, property has seen speculative price increase for years now. While 2012 seen adjustment in prices it is still propped up by gov to ensure the crash doesnt happen.
Aussie is lucky that the gov is willing to do whatever it takes to keep property price up. Both labor and libs has ensure it done just that. Back in 2007 2008 when property crash everywhere kev rudd opens overseas investment to old houses for a while. This has increased prices in many high end market instead of crash. Then after the peak of mining boom recently they decide to let property as part of self managed superfunds which again increase the house price again
As long as the gov still kick the can forward there is no way price will crash. However their movement space has been reduced. Now interest rate is the lowest neg gearing super investment overseas investment and now new visa 888. I wonder what next the gov will bring to ensure tax payer feel rich but have no spare cash.
I come from asia where properties usually bought in cash. The idea of living 30y paying your self to bank is abit beyond me. I bought my property 5 years ago and will have paid everything out if I did not take some for my business venture. If I buy now I will still be in debt for the next 5 year or so.
Even if the house price doesnt crash the damage it makes to the aussie economy has been done. When people has less to spend business will struggle. People used to be able to buy large car but not anymore as families doesnt have that much cash anymore. They are richer in paper but poor in cash. The result is closing down of our car industry.
When we have huge mortgage we tend to search for income increased. Most of these is salary increased. As we increased our salary we start to price ourself out certain job market. Keep increasing this will see our options decrease bit by bit. Employment doesnt just happen imo.
Even if I benefit from house price. I dont think high house price is good for the future of australia.
The idea of living 30y paying your self to bank is abit beyond me.
This is where people make the classic mistake, if you have even the slightest bit of intelligence, you get stuck in & pay that loan off as quickly as you can, especially in the first 3-5 years when the loan is structured in such a way that the initial payments consist mainly of interest.
Compound interest can be a killer if you're not aware of it…so you need to pay your mortgage fortnightly at least, and put every spare cent you have into reducing the principal as early as possible in the life of the loan. You can easily halve the duration of the loan by paying just a few extra bucks per week off it early!!!
For some people it's not that easy. I have bugger all left on my mortgage, my place was well purchased though in a regional town and within my means.
If you don't want to live in the sticks of Sydney, you could easily be up for $750k odd buying near the city. When average wage is $60k it's hard to make extra repayments. Because of the compound interest you mentioned you're fighting at uphill battle, it's hard to chip away at the principal.
So what do you do: Live in the middle of nowhere and hate life? Buy something at 10x income and be tied down for a long time? There simply isn't anywhere close to some peoples work that is within a comfortable price range.
I don't feel sorry for the people in their McMansions who are over stretched. I do feel sorry for those in situations like above where it's not easy for them.
It's not all black and white.
How many rooms can you get with $750k house? We can rent out the spare rooms to other people to help paying the mortgage..
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http://www.macrobusiness.com.au/2013/09/the-history-of-austr…
Anyone who owned a house pre-1990 is a property tycoon (I've heard them ALL tell me). Problem is if they sell they'll need to buy another, and the others have also rocketed in value. They won't find themselves with much change after buying and selling. The main benefit for them is they paid a $100k mortgage, not a $500k mortgage, and as such could pay it off a lot early and have more disposable income.
That's another topic though, it was all in relation to the "profit" thing (which it isn't).