Japanese bubble in the 80s VS NSW Real-Estate market, any similarities?

isidore12 on 28/04/2017 - 10:32

Banks began freely lending to Japanese firms and individuals, who purchased real estate, which increased the paper value of land assets. This created a vicious cycle in which land was used as collateral to obtain further loans, which were then used to speculate on the stock market or to purchase more land. This drove up the paper value of land further, while the banks continued to grant loans based on the overvalued land as collateral.

There was little questioning by either the government or the banks themselves over how the loans would be repaid or what would happen once land values started dropping.

http://www.japantimes.co.jp/news/2009/01/06/reference/lesson…

Do you see any similarities with NSW current Real-Estate market?

Financial

Comments

  • Looking4Bargians on 28/04/2017 - 10:46

    So what happened after Japanese Bubble ?

    • isidore12 on 28/04/2017 - 11:08
      +1

      They never really recovered:

      Lost Decade
      https://en.wikipedia.org/wiki/Lost_Decade_(Japan)

    • havebeerbelywillsumo on 28/04/2017 - 14:29
      +1

      Isidore is correct

      If you use stock charts as a quick ,nasty, highly viual indicator of economic health, Google "nikeii chart", choose the Yahoo finance "N225 Interactive Stock Chart | Nikkei 225 Stock - Yahoo Finance" link and on the resultant chart click "Max" at upper middle for max duration. Mt Fuji on the left is the "bubble"……..it echoes isidore's initial "They never really recovered".

      IMHO a "bubble" is a rare cataclysmic overevaluation which, after the event has passed, max value is rarely seen again. The story of the Dutch Tulip Mania bubble I think would interest anyone who's never heard of it, even those whose eyes glaze over at the mention of economics - Google the term.

      I don't think NSW has got anywhere near a true "bubble", a term which I equate to "completely insane". IMHO the Japanese event, although commonly termed "bubble" was not one, that is not to denigrate that it was serious and scarred a generation or two and it's effects will last for decades. I'd equate it to the Great Depression…….whose long term effects were cut short by a small fracas called WW2.

  • CyberMurning on 28/04/2017 - 11:00
    +5

    i prefer bubble milk tea instead

  • scrimshaw on 28/04/2017 - 13:10

    buuut..

    http://www.smh.com.au/business/the-economy/theres-no-housing…

    There's no housing bubble in Australia, heads of big four banks say

    Soaring home prices in Australia's biggest cities don't necessarily mean the country is in the grip of a housing bubble, according to the heads of the big four banks.

    Testifying at the parliamentary inquiry into banking this week, the chief executives of National Australia Bank, Westpac and Commonwealth Bank all said that while they are worried about elements of the housing market, prices aren't over-inflated.

    "I would draw the distinction between a speculative bubble in prices and prices beyond what fundamentals would justify," Westpac's Brian Hartzer told the parliamentary committee on Wednesday. A bubble isn't occurring in Sydney or Melbourne, where house prices have risen the most, he said.

    "There are increasing risks, but I still believe the answer is no," National Australia Bank's Andrew Thorburn said when asked if houses in Sydney and Melbourne are overpriced.

    • altomic on 28/04/2017 - 13:21
      +2

      if the banks say there isn't a problem then that is good enough for me.

      • [Deactivated] on 28/04/2017 - 13:56

        banks are making their money, obviously they going to say there is nothing wrong.

        • altomic on 28/04/2017 - 14:12
          +1

          ddduuuuurrrrr fred

    • djkelly69 on 28/04/2017 - 14:04
      +1

      There's no housing bubble in Australia

      This is definitely true, as it has also been confirmed to me by a number of real estate agents.

  • JimB on 28/04/2017 - 14:42
    +1

    There is one large difference between Japan and Sydney/Melbourne. Well maybe two.

    Sydney/Melbourne hasn't soared anywhere like Japan before the bubble burst.

    And more importantly, Japan's population is shrinking. Sydney/Melbourne is growing, some say too fast.

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