Australia is different

Highly leveraged property investors are set for their first full night sleep in 8 months after a news article out today from The Age’s Ian Verrender saying a chance of a property crash in Australia is “as rare as hen’s teeth”.

Read more on why Australia’s property bubble can’t crash Here. With 265 comments at time of writing this, it has created quite a stir.

» A crash in property prices? Don’t bet on it – The Age, 6th October 2011.




16 Comments

  1. Ian’s quite certain we are different :).

    I can’t help wondering if articles like this with so many followers are actually raising the awareness of our very expensive property bubble.

    On the 7pm project tonight, they talked about letting Gen Y use super to buy a house. They interviewed a property expert, so naturally he had a vested interest and thought it was a wonderful idea. But one of the panel, couldn’t help ask if property is about to crash?

    It seems almost every second day, some one in the media is asking if Australia’s property market will crash? If Australia is just so healthy, why are so many people asking? And does this just re-enforce that we do have a problem.

  2. Wow, we are different here. An over valued housing market with a high cost of living coupled with high taxes, mmm makes me think, “we are different”.

    How is it that the cost of housing is 7 to 10 times some ones income and people like this dope speculates that prices may come back slightly, given that employment stays the same. Even if it did, the cost of living will negate employment and house prices will come down.
    I own a business and am out there every day and I hear the hearts of people and they are struggling. Something will give and it wont be the cost of living or taxes. House prices are set to tumble for the next decade. How do I know this? Demographics has been telling us this for years. Don’t put your investment in housing, put your investment else where, where your money will not be encumbered with
    the high cost of keeping homes particular when they are not making you money.

  3. Quotes of ignorance from the article.

    “Default on a home loan here, and the bank will chase you for the outstanding cash and bankrupt you if need be. Not in America. If you owe double the value of your home, you can simply walk out, leave the keys in the door and let the bank take the pain.”

    Non-Recourse States
    ————————-
    – Alaska
    – Arizona (Truely Non-Recourse)
    – California (If a borrower has significant other assets, the lender may allow a N-R loan.)
    – Connecticut
    – Idaho
    – Minnesota
    – North Carolina
    – North Dakota
    – Oregon
    – Texas (The lender can pursue a deficiency judgment)
    – Utah
    – Washington State

    One Action States
    ——————–
    Lenders are only permitted a single lawsuit to collect mortgage debt. Different laws for different states on how this plays out.

    – California
    – Idaho
    – Montana
    – Nevada
    – New York
    – Utah

    The article speaks of the U.S. being some sort of utopian libertarian mortgage country. States like Michigan that has harsh penalties for mortgage defaults, also has Detroit. The Journalist should research his article before publication.

    “Fear mongers love to compare Australian real estate with American”. Who are these “Fear mongers”, and show us where they compare this?

    Gerenal theme that it is different here, OK I agree, its’ different everywhere.

  4. Well I’d say he is right, seeing that Swanny has said he will not touch Negative Gearing or CGT.

  5. The RBA is about to make a totally disasterous policy mistake IMHO…

    Prices are declining and the RBA will be tempted to ‘Slowly’ lower interest rates.

    The T-Bill futures market / Bill Evans etc are all cajolling the RBA into the trap

    If the RBA lower interest rates, the housing market will totally collapse FOR REASONS THE RBA DON’T CONSIDER OR UNDERSTAND!

    LOWERING the interest rate will allow faster deleveraging… AND… The stock of money will contract because of it.

    WELCOME TO THE ROOM WITH NO EXITS POLICY TRAP!

    GOOD LUCK RBA

  6. There is 100% more stock on the market in Melbourne compared to 12 months ago. DOUBLE. People are beginning to discount by 10-15%. Don’t believe the shit written by the media. Douglas

  7. If an individual uses their super for the benefit of home title now, this for one violates the premise of superannuation entirely!!!!!!!! Well then Yoda wants to dump his super in a bigger yacht. What happened to preserving super until retirement.
    Things are getting desperate when the stakeholders of RE, need to source additional leverage eg – Parent’s equity, individual super. Something is definately wrong with this picture.

    All the more reason to sit on the sidelines and enjoy the yacht.
    Housing wont CRASH , it will rust away over the next decade until no one wants it anymore as its such a crap investment. Then buy!!!!!

    I love doing all the rental property returns for the smart negative gearers. They don’t go on holidays much ATM. Cashflow issues perhaps?

  8. I agree with Peter W although maybe not for the same reasons, Interest rates will need to remain stable or increase. We in Australia are not going to see massive price corrections of 40% overnight, but rather a 10-15 year stagnation or slow decline while the current housing loans are paid off to a point where there is enough actual money within the banking system to further housing growth, rather than what has occured in the last 10 years in relation to credit and its loose availability (if everyone in Australia had the cash in their hands instead of in housing there wouldn’t be enough to go around) A contraction of interest rates or credit making rates will decimate the banking sector for a good number of decades, up to 30 years while these loans are paid off with little reward for the banks at current inflation levels, possibilities of banks going bankrupt, bad stuff. Sadly those who bought into the scheme recently will have ended up paying nearly double for their investment than what it will actually be worth once it is fully paid off, before inflation, so that could mean massive losses, still its a capital loss, able to be written off against capital gains made after the losses are incurred.

  9. Well here we are.. Was down in Oxford the other day and was speaking to an owner of a business, and he said, 4 shops are closing a week there, with the monumental rents they pay. He basically said Retail will never be the same again in Australia.. Just read the Financial history of the world and it looks at the myth, of housing prices go up forvever. Japan has had a serious crash in 1990, and housing has never been the same since.. It will be great to see the curtain falling on the biggest ponzi scheme ever, propped up by these economist, bankers, real estate henchman… Game Over sheeple!

    Follow the link a lot of truth in this..
    http://www.youtube.com/watch?v=g1fHyc9FXJ0

  10. Am I the only person looking at the banner on the top of this page thinking, “Gee, October 2011 already, we must be in for a catastrophic Nov/Dec.”

    “The market HAS to crash in 2011”. 75% through the year and I am absolutely certain that I am on the right side of that prediction.

    Yeah I know, if it doesn’t happen in 2011, it MUST crash in 2012….bahaha.

    Chicken Littles I tell ya.

  11. @ PETER_W

    Please explain how a reduction in rates will increase deleveraging. I’m not saying I don’t believe you, I just want to understand the mechanism which will cause this deleveraging. Thanks.

  12. @invesztor, Chicken Little is a doom preaching conspiracy theorist, I am surprised there are those of you that still take notice of Chick-L.

    It is not the sky people take notice of, after all, you should have noticed by now that we are all beneath the sky, it is already upon us. Don’t worry about it invesztor, its’ OK.

    What is concerning, is when (finally) the mainstream takes note of things like this;

    ‘China ‘faces subprime credit bubble crisis’
    http://www.telegraph.co.uk/finance/china-business/8770945/China-faces-subprime-credit-bubble-crisis.html

    It maybe the case, it may not be the case, nor true.

    You must realise (for your own sake) that this is not doom preaching, or as your esteemed Chick-L puts it, ‘Sky Falling’ stuff. Humans by their nature are hard wired to be vigilant and on guard. Which is why the economy has indeed crashed for many people, about to crash for many people, and some some people (they) will be able to steer themselves through this (yes this) downturn. The vigilant, on guard ones.

  13. Its not that Australia is “different”, more a case of “There are none so blind as those who will not see”. Despite significant “problems” in housing sales, the general consensus is still that of “Property investment is a sure, no risk way to millions”. The problem here is that if EVERYONE follows this route, EVERYONE will gain as much as EVERYONE ELSE, and unless there is a massive increase in money supply (allied with a collapse of the Au$ International value), then this mantra must be flawed.

    It is relevant to investment strategy to note that the “Big Boys” in International Investment (George Soros and others) do NOT “follow the herd”, but make their own decisions. I note that George has just invested $350 million (US$) in Brazilian agribusiness – which is interesting since this is my preferred asset class (one that has provided exceptionally well over the past years), and a class with a very wide potential for diversification, on an International platform. Maybe we are seeing the end of the “old” economies and ther emergence of the “new” ones – which will provide a whole new raft of future investment potential!

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