Smart bears start to infiltrate mainstream media

August 30, 2012 admin Australian Economy, Australian Housing 24

As awareness of Australia’s household debt and associated housing asset bubble continuously permeates, we are witnessing some well written commentary and opinions appear in the mainstream media.

On Tuesday, Michael Feller told Sydney Morning Herald readers that being a bear is not ‘unAustralian’.

Saying that Australia has unusually high house prices, has a banking system vulnerable to external shocks, relies too much on a cyclical and temporary mining boom, or carries far too much household sector debt is not unAustralian, it is patriotic. And calling on policymakers to do something about our vulnerabilities is not negative behaviour, nor does it diminish our otherwise very obvious achievements, it is prudent.

Feller believes our “lucky country is not only becoming the complacent country, it is becoming the country that refuses to believe it’s lucky or complacent.”

You can read more of his commentary here.

Today, Ben Hurley writes in the Australian Financial Review that he would love to own a home, but is reluctant due to his strong belief buying a home is a dud deal. Like many of his friends in their early 30’s, he finds renting less of a dud deal as he typically only gives the landlord a return of about 3 per cent. Relative to owning in a bubble, renting has never been cheaper.

Like Feller, he believes we should be pressuring our policymakers to stop encouraging misallocation of capital to the residential housing sector

I hope my generation actively thinks of ways to resist. Like saving bigger deposits; renting for longer; pressuring the government to stop throwing so much money at home owners;

Read Ben Hurley’s article here.

» Being a bear is not ‘unAustralian’ – The Sydney Morning Herald, 28th August 2012.
» Neither a borrower nor a home owner be – The Australian Financial Review, 30th August 2012.




24 Comments

  1. Smart bears have been around for years. It’s just that their articles and commenst don’t support the MSM’s advertising clients and either don’t get published or their comments are deleted from spruiker articles.

    The spruiker media has no clothes

  3. What my not be so apparent to Ben Hurley is that his mum bought just as the 1973 oil crisis brought about about the stagflation that caused double digit inflation that lasted at least until the 1990 recession. I’m not saying that his mum was not an incredible woman, but anyone who bought at that time saw the value of their debt reduced by inflation as wages also rose due to centralized wage fixing, this may be the reason for the perception “house prices double every 7 to 10 years” it was probably true then, but not since 1990. fast forward to 2012 and with little inflation buffer, prices are now falling in consumer goods as well as commodities and, finally in house prices. only a mug would buy now, the future looks very clouded and not low interest rates or owner grants will save Australia’s economy

  5. @ Matt

    We are in for a 1 in 120 year economic event

    Negative household credit growth

    Housing falling from world price highs

    China rebalancing its economy

    Turnaround in 140 year high terms of trade (iron ore)

    Huge Current Account Deficit

    Decline in Mining Capex

    Decline in retail sales

    Deline in dwelling construction

    Structural rise in long term unemployment

    Huge fiscal deficits as a result of the above

    5 – 10% subprime asset (not income) lending

    All time high bank leverage to housing

    What could go wrong?… A farming drought…. 1890’s style

  6. @ Peter, I agree and Its going to happen very soon. If you haven’t noticed the alarm bells you have pointed out then you are living on another planet. In regards to Kochie and property its already to late to reduce personal debt, the property crash is nearly here and people are still extending debt. Just Crazy.

  7. Kochie is an idiot seriously I am so sick of hearing there is a shortage of houses. There is no shortage and soon there will be more and more reports showing there is an oversupply.

  8. I am amazed that this one dimensional thinking has gone on for so long, if I look at what students are being taught from a young age about housing, borrowing money, and business in general it’s no wonder most people are one dimensional in thought process. Any sane person know’s there is no housing shortage, any one who knows anything about history knows booms end, and anyone who knows anything about China knows no matter how fast they may be developing it’s not a story one hangs the future of their entire country on. If one digs deeper I think everyone is trying to catch that big wave but very few get to ride it all the way to the sand.

  9. Or…just leave move to a place where the housing collapse has already run its course (i.e. the USA). Where I am living now, houses are 33% off their highs and housing hasn’t been this affordable for a decade. Indeed, compared to the Australian housing market there are bargains everywhere. And I mean EVERYWHERE.

  12. @Jj, it will be a good time to buy lots of tech gadgets from overseas websites, and other stuff that may tickle your fancy.

    At first I was dismayed to hear the our prestigious Kleptocracy, or Kleptocaries (Political Class, Polit-Bureau, Esteemed Finance Oligarchs,.. , Everyone But Me, …), trickle a hint Australia has come of age and shall now be apart of Club-GFC. Due to the Mining BOOM ending, or slowing, or not what it was just up to a few days ago. Then I felt a breeze of contentment and a soft inner giggle overcome me. We have always been apart of Club-GFC, I needed to fill an inner void, I had to look into the Myth of Mining BOOM. *Inspired by Damian’s post above*.

    And saw (already knew some of it), mining BOOM is:

    – 8.5% of GDP (The depleting Manufacturing Sector is 9%, who’s fussing over that?)
    – Between 1.8 to < 2% Employment.
    – 83% Foreign owned.
    14% Taxed (being less than the total value of exploration and development costs).
    – 17% in Australian hands.

    Does anyone know out of that 17% in Australian hands, how much of that is private? Hence what is the Government's cut? That would show (maybe not accurately, I don't know) how small our cut of the BOOM really was for us. Maybe we got a pop.

    WA brings in ~$47 Billion, together with QLD Australia brings in ~$51 Billion. Whatever percentage is in Government's ownership (minus royalites and taxes, I don't know what they are), times that by $50 Billion and there's our cut.

    But the people will attribute Australia's downturn to the Mining BOOM subduing or ending, sparing our Kleptocries of laughing at them to their faces. They will be none the wiser, except readers of this blog.

  13. @BotRot

    Foreign banks fund our Fx CAD, they are only interested in the total gross Fx Australia extracts via export…. These banks view all Fx as theirs to repay principle & interest.

  14. I have been following the blog for almost three years and have a baby on the way, so am now at the stage where I either rent a house or buy a house. My gut and all the evidence says ‘Continue Renting’, however on the other hand I don’t want to miss out on a good deal with buying a property. Any advice would be appreciated ?

  15. My advice to australians, is what i should have done here in Ireland 5 years ago… sell your overvalued house at the peak (now), because you’ll never get it again.

    Stick all that equity in the bank (unless you’ve already borrowed against it…oops). Then gop rent a nice house for the next few years while you watch property plummet all around you.

    Then in five or six years, buy yourself a bargain and be practically mortgage free.

  17. I sincerely hope that BOOM CRASH OPERA play at the closing ceremony of the Mining boom.
    /sarc

  19. @FHB Dreamer,
    We were the same as you but with more kids. We have made money from IP’s which have all been sold. I worked out it cost an extra $1500/month to own a house but we had just got so sick of the landlord and decided it was worth buying a house now. We will be in it for 20+ years and for us it was hard to rent a 5BR house and every landlord we have had were total tightwads and wouldn’t fix anything until it was absolutely needed.

    You need to decide how much you would pay to be able to paint the walls whatever colour you like, rip up the stinky carpet etc I haven’t regretted it. We have been in our house for a year and still waiting to see any significant drop in our area. If it takes another 5 years that would have been too long for us to wait for my sanity’s sake…

  20. Hi FBH Dreamer,

    Renting in Australia is generally unpleasant. There is a stigma and a subservience not only to the owner of the property but even more unpalatable to the agent managing the property. Value for money is poor and the natural need to call somewhere home isn’t satisfied. An open and shut case to buy a home…but is it?

    You need to look at the wider picture. If you buy a house you will be a tenant of the bank. The Banks paternal gifting of the loan will turn into a nightmare for you if you find you cant pay the mortgage plus there is a real possibility of negative equity and all the fun that will bring with it.

    Look at the recent contribution by Damian. Australia is not prepared for the future. Our income is from commodities, we sell natural resources…that’s it!
    This means that in the current world climate our income is vulnerable and our future is uncertain and certainly not rosy. Job security is precarious by any standard.

    A home should be the right of any person in a civilized society but self interest and greed, which does seem to be the prevailing human condition at the moment, have mitigated against this.

    You will have put your life on hold to save the money needed for your deposit. Imagine the stress of seeing this disappear as the equity in the home you so wanted is eroded as prices drop. You may see the equity turn negative. Add to this the ever present possibility you may loose your job in what may potentially be a very difficult job market. You will not be able to move to find work and the unthinkable may happen…you may find you cant afford the mortgage…you cant move – down the track your house is sold by the bank and you still have a debt – now you have to pay rent as well.

    This may not happen but it is a real possibility given the current world situation. You have a financial reserve and security in your savings.

    What price do you put on piece of mind? How secure is your job? How do you see Australia’s financial future? You are the only one who can answer these questions

    If it were me, I would suggest that you live your life happily FHB, and enjoy your family. Don’t by into a ridiculous unsustainable risky future that has the very real potential to benefit others and imprison you into a life of servitude.

  21. All property investors are low life scum if you ask me. I would never invest in anything that harms people.

  22. @Miss Moneypenny

    Thanks for your advice. I know I would be at a huge risk if I bought today and think I would have to knock at least 30%-40% off the asking price if I didn’t want to waste all my savings from the past 15 years going down the drain.
    As you say I just don’t think I could handle another landlord and having to move on a constant basis for another 5-10 years whilst waiting for the property crash to hit.

    I think I am going to start putting offers in at 40% less than asking price and see what happens. I know the banks up in Queensland are already starting to undervalue property as they are pricing in the risk of a fall in the market.

  24. Don’t you love it how on T.V or Radio, when a story is run about bad predictions on house prices, followed immediately next day by a panel of vested “experts” telling us to disregard the previous story….aka Sunrise and the Harry Dent story

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