Australian housing bubble too big for government to do anything about.

If there is one person that knows the severity of the Australian housing bubble and the repercussions for our banking system, it is ex Commonwealth Bank CEO David Murray. Murray more recently headed up the the government’s Financial System Inquiry.

In an interview broadcast on Sky News earlier this month, Murray said the Australian economy was “vulnerable because there is a bubble in the housing market”

But not just any bubble.

“Many of the signs are the same as the Dutch Tulips, [..] there are peoples behavior, peoples defensiveness about any correction in that market – all those signs are there.”

The 1637 Dutch Tulip bubble was one of the greatest bubbles in history.

“But when those risks are there, something needs to be done about it in a regulatory sense, and the Reserve Bank and APRA need to stay on it,” he recommended.

He is not alone.

More needs to be done

In a rare move, IMF deputy managing director Tao Zhang visited Australia earlier this month to speak with regulators on the risk posed to Australia’s economy. Mr Zhang told the Australian Financial Review, “both sides agreed that further measures were needed to strengthen resilience to housing market shocks”.

“We’re talking about prudential policies needing to be intensified, with targeted macro-prudential measures and banks being encouraged to robustly increase their capital position into unquestionably strong territory,” he added.

No recommendations from Coalition inquiry on housing affordability

But, in an embarrassment to the government, a two year inquiry into housing affordability by the Coalition has failed to make even a single recommendation. The report, released on Friday has been, and quite rightly, branded a waste of time and money by commentators.

But reading between the lines, it would now appear the Government considers the housing bubble so big and top heavy, they are unable to make any changes, without triggering a devastating correction and creating considerable political carnage to their parties brand.

Best to leave that to the regulators. After all, APRA never saw the collapse of HIH Insurance coming – the largest corporate failure in Australia’s history.

» Switzer Daily – David Murray Interview – Switzer, 1st December 2016.
» “All the signs of a bubble are there,” says ex-CBA CEO – Australian Broker, 12th December 2016.
» Housing affordability: Inquiry that made no recommendations a ‘waste of money’, Labor says – The ABC, 16th December 2016.
» ‘It’s laughable’: Government slammed for housing affordability probe that proposes no changes – The Sydney Morning Herald, 16th December 2016.


  1. It seems as if the bubble is a soft kill . They call it “changing the blood”.
    At half a million immigrants a year , a generous percentage of them cashed up ,
    the global casino that is Sydney just keeps getting more punters .
    Whoever is in the jockeys saddle ( government ) does not want the dominoes to fall.
    Please note , this phenomena only applies to Sydney and to a lesser extent a couple
    of other cities , the rest of the nation has been stagnant since the olympics nearly 17
    years ago . In real terms , we don’t even make kitchens here anymore , it’s all flat pack.
    Everyone here knows ( unless you are a connected fat cat ) that debts outweigh assets
    in the consumption sector . If the borders are closed , the ship that is Oz will sink , and
    we will become homeless to the bankers interest . So our leaders keep playing the game
    wishing and hoping in perpetual growth knowing that two thirds of the worlds population
    is just above us jealous of our seeming luck .
    For the majority of workers here ,past and present , the harsh reality has never been easy.
    Always one pay slip away from difficulties .

  2. Finishing the year off with junk GDP figures, a rise in unemployment and the rest of the world now commentating on how we’re first place trophy winners for debt. I wonder how this Xmas will be for those expecting a rate rise come March? It was being said in 2012 but i think this time this is it, it just went bang

  3. Plus now when we lose our AAA it will he clear what could have,avoided it by reform of NG and CGT concessions, the ship has hit the shore and run aground and the captain is calling it for a bit of a sandbank.

  4. With Australian household debt at 125% of GDP (Ireland collapsed with 117.5%), perhaps an inquiry into how we are going to handle the collapse of Westpac Banking Corporation (inc. RAMS, ST George, BankSA, Bank of Melbourne) and the Commonwealth Bank (inc. Bankwest) would have been money better spent.

  5. So foreigners help screw up Australian housing and now foreigners (the IMF) come to help with normative advice.

    Similar to what Santa does I suppose.

  6. Nothing will change until we make changes to Negative Gearing and place restrictions on our Chinese friends insatiable lust for Sydney and Melbourne property.

    Seeing that our government is currently a whore for the property industry, I see no light at the end of the tunnel.

  7. Cheap debt has created a massive illusion/delusion of wealth which has also created ticking time bomb. Australian households are able to service their debt because unemployment and interest rates are not rising. Unemployment has remained low because, when the mining boom ended, the construction sector took its place. Yet now the construction sector is rapidly slowing. Australia needs magic up another golden goose to keep the economy going and prevent unemployment from rising. Not sure there is one and with so much debt on the line, the RBA is now screwed. It cannot raise the interest rates too high, or it will cause a meltdown. One is coming no matter what they do.

  8. Disgusting how it got to this but as horrible as it may sound people should of done their own research rather than relying on “safe as house”, “they never go down”, “my mum and dad payed x for their house and its worth y now” and relying on the Block ! I could probably think of ten more examples of how people justify the current market. I enjoy hearing that they have gone up simply because if the market was silly yesterday then it is certainly going to seem sillier tomorrow if they are more expensive. 1.1 million for a shit box dog house in Sydney. How dumb are people ? Yes I already know your replies 🙂

  9. And another couple with a lot of properties.

    Will they be the next property of the year investors left holding an unpayable 5 million dollar debt?
    Income from the properties is able to cover 20 interest rate rises of 0.25 per cent, and they quit their jobs to travel the world.
    All built on increasing equity and low rates, peanuts at the ready for the sob story.

  10. @Mark
    It amazing how being bought up in such a spendthrift way, forsaking everything that you can, only to compromise all those values and rack up a mountain of debt, quit your jobs and travel for 6 months at a time and think that you have made it and are now on easy street.
    If it goes south what work experience can they claim at a future job interviews? I know how to leverage myself and travel the world… I get the job?…..I really need it badly to pay down debt.

  11. Will be different in 10 years from now. They will be taking holidays to Cronulla Beach instead of overseas. 2010 till now, we will probably never see consistent growth like that ever gain, yet they will probably ask why. If they sell now then Ill take my hat off to them but they wont.

  12. @Mark,
    The real story is probably not that flash. A $10M portfolio with a 4% net return (assuming gross yield at 6-8% which is already pretty good on such a big porfolio i.e. no mistakes made when buying and no surprises either) is 400k a year. This is equivalent to a pretty good yearly salary (200k each) but with a major difference with an actual salary as an employee: It’s fully exposed to become a zero dollar salary if interest rates move up and in the current economy, it will quite quickly (look at the 10Y australia bond trend)
    Positively geared up to 9% means that at 9%, they get zero money out of the entire portfolio.
    To me, that’s an extremely risky position to be in, leaving aside the massive debt backing-up the whole investment.
    One other interesting fact is that they got their first loan with only $15k or 4% of the first home price… That tells a lot about the lending standards the banks are practicing…

  13. ‘But, in an embarrassment to the government, a two year inquiry into housing affordability by the Coalition has failed to make even a single recommendation. The report, released on Friday has been, and quite rightly, branded a waste of time and money by commentators.

    ‘ … But reading between the lines, it would now appear the Government considers the housing bubble so big and top heavy, they are unable to make any changes, without triggering a devastating correction and creating considerable political carnage to their parties brand.’

    Ha ha ha ha ha ha ha ha ha ha

    1. They are absolutely, stone-cold, bed-wetting, pale-face terrified of what they have created.

    2. They have no idea – ABSOLUTELY NO IDEA – what to do about it.

    3. They are praying that the bubble doesn’t burst before their pensions kick in.

    Plan accordingly, lads and lasses.

  14. Currently reading The General Theory of Employment, Interest and Money, Keynes talks about wages and borrowing often.

    I hadn’t thought about it but Keynes appears to imply that declining real wages proceeds and spurs credit fuelling. When real wages decline, asset prices must follow unless credit can be used to supplement lost wages and keep equilibrium. Since 2012 here, we’ve had falling real wages and falling interest rates, seems to make perfect sense.

    We’ve basically replaced wages with credit for a while, which has become equity then used to supplement the low wages. This is kind of astounding, replacing wages with debt. The lost wages are supplemented by the equity as the house is used as an ATM. People feel comfortable with it and think the equity is income, but it’s actually debt and will remain so until the capital is released/unlocked through selling, which is debt exchange which again requires expanding credit. Credit (Debt) cant replace wages, or not for long anyway, as the credit supply would need to grow exponentially and forever.

    I feel we have done this credit-wage substitution thing now for a good 4 years since new Capital inflow died around end 2012. Pre GFC was different, real wages grew 3 -4 % p.a but not in the last 4 years, growth in the WPI has almost come to a halt and the credit cycle is entering tightening, not expanding. I don’t think many people are onto this.

    Anyone know much on this and care to comment?

  15. @Mark those articles are terrible.

    Comment from the guy in the article about how to invest in property:

    “When you buy that first one — let’s say you purchase it for $400,000 and it grows in value to $500,000 over a few years”

    Umm yeah because making 125% price gain in a few years is normal isn’t it???!

    And they obviously believe there is no housing bubble at all and prices will continue to rise in the future at the same trajectory of the past.

  16. @Mark that couples equity will vanish quicker than Malcolm Turnbull’s popularity in the coming correction.

  17. Lets not forget the war on cash starting to escalate on a world scale. Look at India at the moment and our own wonderful politicians are going to have a red hot crack at the 100 dollar note here because we are all criminals!. You really have to laugh at this world. Cant wait to read the book 20 years from now and read all the information they leave out.

  18. David Coleman is the MP who was chairman of the Housing Affordability Enquiry. The official declaration of his financial interests reveal they own an investment property in Cranulla….what a surprise?????

  19. Friends of mine bought a tiny single bedder in Milton, Bris. a few years back for around $500k. It’s now empty and surrounded by high-risers that are mostly empty and body corporate + rates chew up cash. They are resigned to their fate.

    The Minsky Moment has come.

  20. @ John

    The reason our greedy bureaucrats want to eliminate the $100 note is to increase the tax take on the lower classes and small businesses. Meanwhile 36% of the of this country’s biggest corporation paid NO tax last year. A clear case of continuing the wealth transfer from the bottom to the top. The excuse that large notes finance drugs, corruption and terrorism are a whitewash as no evidence exists to prove it. In fact countries with small denomination notes suffer more from crime and corruption than Switzerland and others which have large denominations. They should take note of what happened in India before they touch the legal tender.

  21. Though private debt and wage stagnation inevitably leads to a down turn, which could be intelligently lessened by increased front line public service staff, the lack of liquidity will be what will impact people the most. Combine that with increasing interest rates, particularly to non owner occupiers, and stricter pension asset tests and reduction in single parent and dual family benefits, and we have the perfect storm coming up sooner rather than later. If you have a return of nine percent on a house surplus to requirements, that’s great, until you can not find a tenant. If you can not sell the asset you can go from rich on paper, to poor in reality. It’s a dangerous game and most people lose everything because they ignore history and downsides. Then when they have a chance to sell, they want the price to cover their losses rather than the value to the market. Longer you wait, lower the value, bigger losses.

  22. The article referred to is only one of many that the real estate gurus and property marketers are pushing to convince people the market is still surging.

    The 4% down payment on the first house, 100k increase used to leverage the next house, quitting work to travel etc. If I could be bothered to look they are probably on a payroll somewhere.

    My biggest issues with it all is the sellers must have terrible agents if property values increase by 25% over such a short time, or the new valuations are fraudulent.

    Because if it was valid then the agents would be purchasing to on sell, as the agents would know the real story.

    As stated peanuts/cashews at the ready.

  23. Max D. Leverage
    Agree with all you have said. Its main aim is to eventually go digital with a cashless society. Every transaction can be accounted for and unfortunately it is gaining rapid momentum worldwide. Very sad world and the sheep of the world will think its a great idea. I could go on but this is the end goal.

  24. The reality is that house prices cannot continue to rise much more, no matter what the demand. Aussie dollar is on the rise again, and prices have already hit, or will soon hit a ceiling. With inflation likely to be low over the coming years, debt owners better be ready to service their debts for decades. Selling won’t help if there is no increase in value, and inflation won’t help them out this time either.

  25. @Charlie Chaplin – all the LNP members on the committee are property owners. Of the six, two (Coleman & Banks) own Investment Properties in addition to their own homes. The other four own no IPs but do own their own homes.

    Surprisingly this wasn’t disclosed in their report /sarc

    So while John Alexander (former Chair) described Australian property as a ponzi scheme

    The new chair and LNP committee members see nothing.

    Clearly Alexander was muzzled and this is why the report was not issued before the election.

    Seriously these criminals should be in jail!

  26. This is getting crazier as the days go by . In 50 years have never such a gigantic scale of apartment developments . Every day , when I get on the roads , seeing new sites replacing and demolishing the not so old buildings and houses (twenty or thirty in a row in most cases ).
    Kenworth double trailer semis and concrete trucks becoming very ubiquitous in suburban traffic .
    These are not your mum and dad or local investors this is way way bigger . Exactly who is financing this growth seems to be the million dollar question . Nobody is saying a word .
    Well I guess the cargo ships are back in business bringing all the Kenworths cranes and building materials to Sydney .

  27. Indeed Chockolate. Greed then fear. People will never learn. Despite what happened a few short years ago in the US and Europe the chumps here in Oz thought the gubmint would never let that happen. There is a point where the politicians and bureaucrats no longer have control. I think we’re pretty close to that.

    But hey, maybe we can still all be multi-millionaires by the time we turn 35.

    Be such a shame to see some of these rentiers learn a few life lessons.

    One of my siblings, who works in the horticulture industry told me of a colleague (a recent immigrant) who the bank would not give a home loan to unless he also took out a loan for an investment property. I reckon he’s f’ed. It’s people like this that I feel sorry for.

  28. I’ve been observing for a while now that this bubble is just too big to allow to pop. Some of the commenters above think the bubble is about to burst, but the fact is that any government, that is, Labor, Liberal, Greens; doesn’t matter who; will do ANYTHING to keep the bubble growing.

    This is why we have the Big Australia policy (without any consultation from the electorate) and dogbox towers springing up everywhere without the infrastructure in place to cope.

    It really doesn’t matter how much they ruin our cities, our way of life, numbers waiting for hospital beds, road congestion – none of that is as important as maintaining and growing the bubble. It’s not enough to keep house prices as high as they are without growing ever higher.

    The fact is that very few Australians would even want the bubble to pop. Most Australians (and a lot of foreigners) own property, whether they are owner occupiers or rentvesting, and none of these people want to see their biggest asset(s) fall in price, so there are few votes for any party that will not keep the bubble growing, no matter how bloated it is already.

    Should the bubble burst? By all measures, it should have burst long before it got to half the size it is now, but fundamentals don’t matter any more, and besides there are still plenty of levers for the government to pull – open the floodgates ever wider, make it even easier for foreign buyers to snap up property, have longer loan periods (think multi-generational), increase first home-buyer grants (in the name of affordability, of course) and refuse to change any bubble-making policies already in place.

  29. md, I think you’re wrong. The overcrowding, lack of jobs and opportunities are really starting to affect people. Hanson is likely to hold 10 seats in the Queensland parliament come January 2018 (according to the experts) and will probably be building support everywhere else. I suspect she will gain traction in places like Tasmania, Western Sydney, and South Australia.

    The problem is for every investor there has to be a renter. And with an average of 39% of income going in rent for those households that rent in Sydney, there are going to be a lot of angry people as jobs disappear. Remember, once a property is built it creates very little employment. It is called passive income for a reason.

    Just for reference Germans generally pay between 10 and 15% of their income on housing.

    This is a zero sum game. At least a third of the population is losing badly. The LNP is going to make things worse for themselves as they talk tough on social security. Their one trick pony (juice housing) is about to be sent to the knackery.

    In any case, whether Australians want it it not is irrelevant. That’s like saying, let’s vote on whether the facts are true or not. It’s similar to the hubris of Karl Rove in early 2000’s with his statement about “creating our own reality”. That reality turned into a clusterf**k in every way it could… militarily, economically, socially.

    Michael Hudson puts it best when he states that “debts that cannot be repaid won’t be repaid”.

  30. @29 md December 22nd, 2016 at 9:56 am

    1. No bubble is immune. The end can only be delayed, but not prevented.
    2. Relentless economic growth is ruining our cities and planet, property bubbles are only a symptom.
    3. People in a bubble cannot see it, let alone admit it for what it is. Human nature.
    4. The bubble will burst. Fundamentals do matter. No government policy can delay the inevitable forever.
    5. Multigenerational loans, inflated grants etc. are the last throw of the dice, just ask the Japanese about them.

    Australia is not special. Football, meat pies, kangaroos and Holden cars notwithstanding. Every place that’s witnessed a bubble always thinks theirs is different, but it’s not. They all end, and for much the same reasons.

  31. I tend to be in agreement with ‘ md . For one major reason .
    There are 90,000,000 members in the CCP . A big percentage of them
    are the directors of co-operatives that produce 90% (maybe more) of the
    goods that we consume in the global (communist) economy . They don’t
    need military might , they are doing it the civilised way , they are buying us
    out . Sadly there is nothing we can do to challenge their power .
    The Dragon has been released to conquer the world , not by arms and wars
    but with finance . Whoever thought that they would become the richest elite
    on the planet . Power corrupts absolutely .

  32. @ md I disagree, its complex, the government don’t even understand it, and will never have true control over it … in fact they more they tinker with it and try and manufacture the illusion of stability, the more uncertain and prone to instability it becomes…like an engine, more fuel and air is better, more fuel and air, more fuel and air , more fuel and ….bang…oh it doesn’t keep revving? but it was going so well…

    If you want evidence, just look at CDO’s and the subprime issue of the GFC. Smart people thought they’d diversified and on-sold bad debt so far from its origin in fragments so far reaching and unrecognisable that it could never be a problem, what happened…it all came back home, all of it. The world is fractal, equilibrium is never far away. The more that idiots full of hubris ignore this by explaining it away with deliberate financial complexity and contriving it with policy, the worse it gets.It always comes home.

    There are numerous simple and obvious things that can upset this apple cart as quick as the wind can change.

    1. China, who knows what they’re really doing, no one does, not even they can make sense of what they’re doing, and we are very, very vulnerable to whatever it is they decide to do. Even if that means explode themselves. They are extremely guarded and financially complex rookies literally having a go in the game. When we are so vulnerable on the newest comers to this game who have less morality than the rest of the world, well, think about it for a minute…there’s many ways it could blow up.

    2. Inflation (or lack of), economies turn..we are in an unprecedented place (globally) where governments cant create inflation, they’ve gotten so good at reducing it they’ve almost eliminated it.Tell me what happens when debt increases but wage growth declines? Equilbrium again, debt cant replace wages….Contrarily, what happens when it rises and debt is astronomically high?

    3. Globalised financial complexity of economies.One country sneezes, 3 others catch the flu, one dies.It can barely be mapped any more.

  33. I’d like to correct some of the comments before me. If the bubble doesn’t burst, there is going to be a decade or two of housing price stagnation, or even a slight correction. This is mathematically unavoidable. This is going to hurt a lot of people nearly as much as a burst bubble.

    So there are 2 scenarios:
    a. Bubble bursts – economic wasteland, like the 2007 GFC.
    b. No house price growth for a decade or two and sluggish economy.

    There is no other possible scenario.

  34. 34
    I agree totally with those only two possible outcomes…..either way…screwed! People need to accept it and deal with it.

  35. I have been holding off buying for last 3 years while I had the deposit in hope of a burst, I was 100% sure it will be flat / down this year, but defying all my expectation, it rose almost 10% this year, I honestly dont know what to do, all my logic says its going to burst and it still keeps on going..

  36. @34

    No, there’s only one out come. It’s human psychology. Fear is way stronger than greed.

    There is no slow melt. There’s only a rush to the exits.

    What will trigger it? I don’t know, but I do know, there is no plateau.

    Never has been in any bubble. Housing or not. It will be an outright collapse.

  37. I was convinced that the bubble would burst in 2008 before the GFC. There were plenty who saw it coming, and at the same time realised that this housing bubble was unsustainable. Sure enough, the bubble did burst in other countries, and it did start deflating here too, but then Rudd pulled out all stops to reignite it. And here we are with a bubble at least twice as big as back then.

    In answer to 34, there is another scenario – the bubble keeps growing; maybe slower than before but it will keep growing.

    The thing we need to differentiate is houses and apartments. Apartment prices might crash and notice that whenever news items appear about a possible housing crash, they are only referring to apartments. Houses on full blocks are another matter. They will forever now be seen as something to pull down and subdivide, with room to build 2, 6, 10 or 20 dwellings, therefore house prices will keep rising, and the traditional Australian way of life will go the way of the dodo.

  38. @ lonewolf (36)

    Everything you just said reflects my thoughts & actions, except it’s been just over a year and a half rather than three, that I’ve been in a holding pattern waiting for a correction. You are not alone.

    2017 is my guess for the start of the unraveling.

  39. Sorry guys, unless Labor wins the next election and makes changes to Negative Gearing and Chinese property hoarding there will be no correction.

  40. @average_bloke

    Labor probably will win the next election, largely due to NG & CGT proposed changes, but as far as I’m aware they have no intention of changing the current immigration settings or rules surrounding foreign ownership of property unless of course Hanson forces their hand.

    Federal election is still a long way off though. 2017 is around the corner though & Australia is increasingly facing economic headwinds largely out of governmental control. We’ll see what happens in the year ahead.

  41. @Antony

    Mate, nothing will happen.

    Your argument for a correction has been the same rational theory that many have had since 2003 … and no correction of any great significance has occurred.

    Reason being you are expecting a rational outcome from a system that is made deliberately irrational by our government. They control Negative Gearing, Capital Gains Tax, Home Buyer grants and foreign investment; all used to great affect to create a Ponzi property market.

  42. Yes but, but, but… low IRs, NG, CGT, FHBGs, Liberal, Labor, all the rest of it. None of it matters a jot if people have no money to buy a home.

    Unemployment is on the rise, wages are stagnant at best, and ‘most’ people have no savings at all to use as a down-payment.

    I think the point is that at some stage the market will simply run out of those people either fortunate enough (or stupid enough) to buy houses, and then bam – you’ve got a correction. It’s not rocket science, and it will have nothing to do with government policy.

    I am simply NOT prepared to saddle myself with debt and blow my life savings in order to buy a house. One day, the majority of people will think the same, and then it’ll be over.

  43. Long term trends would suggest that this bubble is done:

    This bit is important:

    Rents are a function of wages, not the price investors are willing to pay for the asset.

    Tenants have more alternatives than landholders. They can flex to a share house, live in a caravan or go back to mum and dad. The landowner must stay and defend their plot.

    …and is a point I’ve made before.

  44. overpopulation. we still have a very high intake of immigrants and a high birthrate. this is blowing up the bubble more and more.

    we also have many empty houses/units, some not listed by real estate agents. there is no shortage of housing, but there is a shortage of affordable and available housing.

    we have too many people in the world and far too many on this dry continent.

  45. @ 37 Matty, agreed. When the drivers are speculation. Fear alone will be enough.There is no slow melt when rates rise either.Rent seekers move swiftly in packs to prevent collateral damage, the rest catch on and follow. When the majority are rent seekers, the housing market is a jenga.Jenga always ends with a collapse.The OOs then take the long position as the IOs bail…. The OOs on IO loans (now 1 in 4) get hammered.

    This will stop ( largely) when the credit supply stops, either through increased cost of it, diminished ability to repay it, or global credit Freeze. The government has done everything it can to prevent this strongly particularly since 2012. Ironically, the “prices” are up but everything else is down,This has been achieved by living on credit. I mentioned it before but no one seemed to comment on it, we’ve replaced wages with debt by distorting what appears to be disposable income through increased equity and cheap credit .. We’re so rich now, our wages ‘go further’ so it appears we can afford more…. BUT… it’s not real earnings, but it sure as hell is real spendings, which will be the source of pain when the credit party stops.

  46. @43 “None of it matters a jot if people have no money to buy a home.”

    Plenty of people have a lot of money, and I mean a LOT of money. You only have to look at baby boomers and the generation before them who bought properties when they were 3 times the average wage. All these people are sitting on fortunes, and many of them own more than one property. All houses within about 15kms or so of Melbourne and Sydney are now valued at well over $1 million, some much more. This wealth will be passed down to the next generation enabling them to pay over-the-top prices.

    Look at how many young people now are given a head start in the property game by their parents who recognise that housing is now expensive and are able to help their kids.

    Then of course we have the highest rate of immigration in the western world, especially to ensure our housing bubble doesn’t collapse, and we’ve opened up the whole country to sell off to foreigners.

    As for those who don’t have money, they’ll be relegated to the outer suburbs unless they want to rent in the inner suburbs. As long as house prices keep rising, it doesn’t matter that rental returns are out of whack with housing prices.

    One day the bubble will pop, but this could go on for years and by that time, who knows how big it will have grown?

  47. @ 48 md.. You sound like you have faith in the system/ governance to keep it rolling.. Yet you’re betting against it.

    The overwhelming majority of people now feel that the credit can’t expand and won’t expand like it has since 2012, this is the credit crunch that will send this ass up.

    Look at Total new capital inflow and the wage price index (both from ABS) then , keeping this in mind, imagine a 1-2 % rise in interest rates with a bump in unemployment.

    We haven’t been here before, we are literally gripping on to immigration and the ‘export’ that is education to keep the country from recession.

  48. …we still have a very high intake of immigrants and a high birthrate.

    And yet we still had negative GDP in the September quarter. If you cannot make GDP grow with a high population growth rate then what hope is there.

  49. This not just a housing problem. Look whats going on around you around the world. There is a crisis brewing and its bigger than Australia’s Real Estate market. Negative interest rates, quantitative easing, record debt levels, banks going insolvent, cash being banned, I”ll stop here. Seriously have a look, Real Estate in this country is just there for the ride until it all blows. Most debt related instruments will suffer, book a seat, its looking at everyone.

  50. @45 May Hem
    Take a look at this article about the four explanations people give in a bubble to support its ongoing existence and why it will be different this time around. In particular around overpopulation…

    “The historical data shows that there is no correlation, let alone causation, between population growth, dwelling supply and housing prices.”

  51. John,

    There was this in the recent productivity commission report:

    Since 2004, multi-factor productivity has stalled, here and around the developed world. This is a long enough period to suggest something is seriously awry in the economic fundamentals and the consequent generation of national wealth and individual opportunity.

    There are probably a lot of people who were previously in the workforce, who now live off the income from economic rent. How many stories have you heard about people retiring before they’re 30.

    These people subtract from productivity and sap the income out of those who are being productive. So of course productivity has fallen. The tax system needs to be fixed to discourage this behaviour by taxing economic rent to the maximum amount possible.

    If you think about it an investor in residential real estate doesn’t pay any tax on the rent they receive while their tenants are paying off the mortgage, other than any amount over the cost of the mortgage which is treated as normal income and taxed as such.

    A home owner has to pay for their mortgage out of after tax income. Even if you disregard negative gearing, first time home owners simply cannot compete with investors. The tax system seems to have been designed to give every advantage to rentiers and disadvantage those who earning their income.

    Note this statement:

    In recent times the pendulum has swung the other way, and most Western countries tax unearned income more favourably than income from productive work for a number of reasons

    from here:
    Of course those reasons are totally bogus. Supply-side economics has been utterly discredited yet conservative politicians still insist that it works. Could it be that conservatives are lying and cheating a-holes.

    Did you noticed that unearned income includes:

    …income received by virtue of owning property (known as property income), inheritance, pensions and payments received from public welfare.

    Yet politicians only ever bang on about welfare.

    Michael Hudson has pointed out that there has been a concerted effort to remove the idea of “unearned income” from any discussion of how income is generated. It was a term that was clearly described by the classical liberal economists (Smith, Locke, Mill).

  52. Even the media is reporting the country (as an average) is in Mortgage Stress

    At the same time as rental affordability is improving, mortgage stress is rising. The research showed a decline in housing affordability nationally with the proportion of median family income required to meet average loan repayments increasing by 0.1 per cent. Almost one third (29.5 per cent) of the median national income is now spent on servicing a mortgage.

    Northern Territory recorded the biggest improvement in mortgage affordability, where the proportion of income required dropped 1.3 per cent to 19.6 per cent. However, the ACT still remains the most affordable state where 19.1 per cent of income is spent on repayments.

    New South Wales is by the far the most expensive again, where more than a third (35.5 per cent) of income is spent on repaying a home loan. This was 4.6 per cent more than the second most expensive state to own a home, Victoria.”

  53. Dave T
    Good stuff mate. I read info like this a while ago but summarized well here. Nothing is real. I have thought for a while now that Australia has as many sheep like the rest of the world.

  54. “home buyers ‘rentvesting’ their way into the market, declining rents will hurt rental yields on their investment property”.

    A lot of these people are stuffed. They’re going to be left trying to pay for two properties with just the income they were going to use to pay for one.

    At least they’ll have the option to move into the property they were renting out and leave their landlord high and dry. The ones who’ve bought their home and an investment property are totally f-ed.

    On that other article from IA, the point about non-recourse loans is important. It is likely that investors and home buyers are:

    1. Not rational players.
    2. Have not been informed of the risks by their mortgage broker, banker, or financial advisor and are therefore totally unaware.
    3. Believe that a correction is unlikely to occur for all the other reasons provided.

    If full-recourse nature of loans is enforced, imagine what that will do to the economy for many years. All that income that will need to be set aside to pay off a debt for which they have no asset and no tangible benefit.

    That old adage about rent money being dead money applies. This is truly dead money because you’re not even getting a roof over your head.

    from Old French : mort, dead
    As in mortuary, post-mortem, etc.

    “Amortizing” means to kill the loan. But in this case the loan is killing you.

  55. Great news everyone, the WA government has increased the first home buyers grant by 50%.

    It’s contrarian to try and build your way out of a housing glut, but I like it.

    #loving the cheap rent


    “But president of the Real Estate Institute of Western Australia Hayden Groves said while he understood the Government’s need to protect the construction industry, he was worried it could be at a detriment to the property market.”

    Because housing affordability is a bad thing? shows how obsessed the property industry is with ever increasing house prices.

  57. I love this desperation. It validates the whole idea that they are stuck and know they need to feed the bubble. Its that plain and simple. Cant wait to see all the screams when these greedy people get burnt. It will happen and will be better witnessed from the sidelines. That may sound harsh but while they are happy to see unrealistic gains, they are not even considering the consequences because most just expect prices to just go up. That will be the downfall. Keep watching.

  58. I forgot to say, a lousy 5000 AUD increase, 10000 to 15000, you would have to be desperate and stupid to take that bait but like always some will. To some this will be comedy and others a sad story.

  59. @ Bubby,

    This stimulus is already causing distortion to values. Here in QLD, FHOG is $20 k. Values on existing apartments especially Robina and Varsity Lakes on the gold coast are taking a hammering because there’s endless offering of new ones that qualify people for the grant…so people are not buying existing ones.

    Magnify this, it would cause the same effect on housing eventually.

  60. Come and get your hands on some debt folks, WEALTH=DEBT!!!

    Credit is addictive in exactly the same ways as drugs, gambling and all that, however in this case the government is totally supportive of you getting as much as you can.

  61. And this will continue as long as house prices keep rising. The FHOG is certainly a price magnifier, which is why they have raised it in WA. If the bubble ever starts to deflate in other cities, don’t be surprised if state governments increase it there too in the name of more affordable housing, but with the intention of “stimulating” (read increase prices of) the housing market.

  62. Good friends ,
    Many of you will probably rub your eyes when you see the figures below .
    New apartments in the north of Sydney . 1 bed $750k ; 2 bed $1.2 million ;
    3 bed $1.8 million .
    That is , a room and bath to buy is $600k . Let’s put it in perspective , a concrete floor ceiling and coloumns with tin gyprock walls tiles few electrics garden hose plumbing and minimal fit out and paint . I don’t need to tell you how much this costs to produce using global workforce and materials.
    This is beyond a bubble . Who is buying ?

  63. A little over 40 years ago a 2 bed apartment in Randwick Sydney was $20k brand new full brick .
    Net wages were probably half of what they are today . Advance Australia fare ( and I don’t mean fair ).

  64. It’s really Ponzi101 out in the West. Trying to draw the last suckers in.

    Sad for so many, I know a few punters who have bought in the Southern suburbs and simply cannot find tenants or sell.

    Let’s see what these ‘recourse’ loans can do to hold the country together.

  65. @ 66, 56. I wonder who’s buying as well. I’ve been following this subject for 5 years. I’m back home with the folks, It’s not great but it’s my way of hiding this out. My patience is wearing thin. The bubble should have popped 10 years ago. I was in New York last month ( a bi-product of moving back home) Apartments in Brooklyn were $200K US, unsure of quality or size but New York is 15 minutes down the road. Still a better bargain than what is happening here.

  66. @Ben 69

    Oh yes, comparing USA to Australia is eye opening: Years ago a mate was gong to pay something like $400k for a Adelaide CBD apartment, then on ABC/SBS was a USA show, showing apartments on the Vegas strip fully furnished for a fraction of the Adelaide stuff.

    Now Vegas is a strange place, yes I agree. But Adelaide is a basket case. 30% youth unemployment, crime, huge taxes etc. etc. Hardly paradise.

    How can you compare the two? You can’t: Aussie real estate is out of control.

  67. Im sure everyone is aware of the numbers no doubt and to put things into perspective, the same houses worth much more than they were years ago however nothing has changed with many of those houses excluding the renovated ones of courses and yet people think they are getting a good deal. Healthy and steady price inflation is acceptable but this circus has certainly been entertaining and will end in fireworks. If an apple cost 50 cents 6 years ago and today they wanted 5 dollars for it then it is simple, don’t eat apples.

  68. John @71, it’s easy enough to not eat apples, but you have to live somewhere, meaning you either buy or rent. Rents are not cheap (though certainly much cheaper than buying) but there is a stigma against renters in Australia.

    The other problem is that with interest rates being at record lows, the cost of paying the mortgage (interest only) is usually far lower than paying rent. Forget paying off the full loan; most people don’t even think about that, but while payments are as manageable as they are now, prices are going to continue rising and the bubble will continue to defy gravity.

    Will it end in fireworks? For some, yes, but the gap between rich and poor is becoming ever more vast as time goes on.

  69. I came across this post and I am absolutely appalled by the fact that commercial banks can create money out of nothing and then receive interest for this. How banks are incentivised to lend out as much as physically possible knowing that they will be bailed out if they run into any trouble.

    This circus needs to stop. Its getting ridiculous and an economic depression looks almost certain to be on the cards.

  70. @Paulie95

    You best get yourself a copy of the book “The Creature from Jeckyll Island”.

    It’s not just the banks. It’s lead by the central banks: The current world currency system is the same: A handful of people getting rich off nothing (printing cash), a lot of people getting rich off asset price rises (borrowing and buying), and the rest getting burnt by taxes and inflation paying for all this.

    There is very little left in this currency system. The fall out will be catastrophic for nearly everyone. Get prepared.

  71. md.

    My comments may have been misinterpreted but all good. I am implying that although buying a house is normal behaviour, paying too much for a house is not. Just to add to “interest only”, it may create affordable payments for next months repayments however you pay approximately 10k extra for every 500k borrowed per year so what may appear affordable month to month is just an illusion. Our interest rates don’t have much room to move so each successive rate decrease is getting less effective. Exponential Function just wont work forever and Real Estate is no exception. From Nixon to now.

  72. all these waiting and the price climbed another 15% in Sydney..I seriously wonder what is going on?!!!!!!!!!!! who is buying these!!!

  73. @76

    Follow the money: Credit growth stalled in 2015
    Housing approvals have fallen off a cliff

    So domestically the housing party has stopped….

    So follow the money…….

    It’s all Chinese. Hence Canberra poking loop holes in all sorts of legislation and laws to keep the money pouring in.

    With China now tightening down on capital leaving the country, it’ll be interesting to see how serious they get about it. If they do it properly we are stuffed, with a capital F!

  74. @ 76

    The rabid Chinese investors set the price at the margin. Average aussies are forced to over commit for fear of missing out.

  75. Good to see this blog starting to take off, it also shows me more people coming to this site, means more people have come to their senses about the unrealistic property market we have in Australia. I have noticed the commercial TV channels do not televise any bleak news about the economy but I guess thats because their sponsors are the big 4 banks that keep them alive too. Abc news on the other hand are bringing it up more and more often. The clock is ticking and its time to jump ship!

  76. Credit growth stalled in 2015?
    Investors were over 10 % APRA asked them to dial it back, it didn’t stall, investors ate still growing 7-8 % and owners are around 4-5 % last time I checked.

  77. Cullen group folded today leaving Robina groups latest bohemian dogboxes in the lurch.

    Robina group have successfully turned the area into a modern day Bangladesh, they flog up dog boxes all over robina for a premium price to investors, 20 k FHOG suckers and cashed up baby boomer retirees .Their next project is dogboxes starting at 600 k on reclaimed floodplains opposite the stadium

  78. I checked in on stats from RBA

    Investors (housing) 2015 Average growth
    10.1 %
    Owner Occupiers (housing) 2015 Average growth
    5.6% %

    Investors (housing) 2016 Average growth
    5.7 %
    Owner Occupiers (housing) 2016 Average growth
    7.4% %

    Its the only thing banks are making any money off. Business credit is under 5% , personal credit is negative.

  79. @82

    Bingo! So outside the housing market, credit stalled.

    Now, how can the housing market keep growing debt if the real economy credit growth is -ve??? The answer is temporarily (or as pointed out earlier, chinese ‘cash’, which is mostly debt too).

    Debt’s that can’t be paid, wont be paid, it’s that simple.

  80. @ Matty, Agree, however Owner Occupier credit is well above the 2012/13 trough despite the lowest wage growth in history and the most expensive price index to date…why the hell are the banks approving lending to these people now…?

    Investor lending is currently back at 2011 levels after things got silly in 2015….But Owner Occupiers are still buying presumably because of the FHOG lure.. Surely this fire-starter grant cant go on forever.

  81. It isn’t that nothing can be done – it is simply that the majority WANT nothing done. Selling smarts – Australians are far too insecure in their own ability to ever make that bet – politicos know this very well.
    So to defend the intellectually, confidence-poor Aussie – we inflate something he can grasp – mortar. On the side we employ all the tradies (how else would you keep them prisoners out of prison?). For this to keep growing we need to keep squeezing people in – and British empire has already sold Terra Australis to Infia and China in exchange for some peace back home – so it all stacks up.
    The trouble is those old bargains are almost defunct and way out of date – but no one has the stamina to even contemplate new ones – so now we all wait to see what will give – borders or economy. Or housing.

  82. Oh – an worst case, two of the three will give. Hence the high occurrence of mental illness down unda – people instinctively know all this, and as it should it creates a huge anxiety. I for one, and as a somewhat renowned-for-guts European (long story) – can’t remotely entertain tackling WWII order in Asia being re-established – a fight so big I am planning on essentially running away scared as fast as I can. And the 3 months left – feel like far too long.

  83. I’ve got personal reasons for needing to stay in Australia for another 3 months – the economy (such as it is – including if going down) is most certainly going to last longer than that.

  84. Btw, and this is somewhat off topic – my view is that the baby boomer generation, having grown up in austerity – unknowingly creates a reflection of this mindset in the real world – and then fight it back by upping the price of what they own at the expense of anyone else.
    To us younger folks this is sheer lunacy – elbowing anyone out is bound to backfire – to baby boomers this is being competitive – by and large not having the brains or the skills to compete in anything modern, they see elbowing out in basics such as housing as a legitimate political step (for which they will in any case not be alive to bare the consequences, so it is done without reservation).
    This, aided by general cluelessness as to whether there is a queen somewhere at the top, and for how long if she is in fact there at all, or whether Australia is to be a republic soon, or in some distant future – and WHOSE republic at that (egalite, fraternite, liberete here – nah, we need the stealth class system of haves and have-nots because someone always milks) – only confirms matters are as bad as they seem (but Australians find solace in blaming, even for a thought that isn’t optimistic – and so the malaise will continue)

  85. Valid points Petar,
    You can change the rules of monopoly as many times as you like but eventually the game/bank will run out of money or people just not play. For me this equation with the housing market is a very easy decision. If something is overpriced, don’t buy it. Am I concerned that a possibility that I may never buy a house ?, No!. I will always have a roof and I don’t believe it will last, just my opinion and I realise others may disagree but all that really matters is that you are satisfied with your opinion regardless of the outcome and I am. Can I afford to buy ?, yes but I will take my chances and wait and if I’m wrong life will still go on. Its just a house, I still have a family, a personality and other interests.

  86. Petar, I tend to agree with your view.

    The irony being that some Boomers I’ve met act more entitled than the Gen Y’s they claim suffer from entitlement. What you say makes sense if indeed their formative years created a poverty mentality have causing them some time later to reflexively push back (subconsciously or not) against ‘the man’ and ‘take’ what was ‘taken’ from them and what’s rightfully theirs. This would also go along way to describe their mentality in the workplace and general disdain for newcomers, technology, disruption, innovation etc ..its a threat to the status quo.

    You only have to browse the comments on social media when an article is posted on housing, I’ve seen boomers reply in droves absolutely furious at the younger generation for ‘mindless spending’ . Again, this may be their own repressed issues around austerity and their poverty mentality (doing it tough when they were the same age) thus they feel it fair to ‘punish’ the younger generation for their frivolity and goods consumption. Few seems to realise however that the consumption habits of Gen Y and Millennials actually serve the economy and keep their house prices in tact. Many don’t seem to understand that if the younger generations took their advice on frugality the economy would explode.

    What I’m seeing in the last year or so (and it may just be that I’m looking now more) is the unlocking of capital by boomers from the empty nested ‘family home’ to ‘live the dream’ and go purchase very expensive 2/3 bedroom bohemian villas (dogboxes) with astro turf on a man made lake. They can do this because the absurd and unwavering compounding growth in this countries mortar since 2001 has allowed them to do so…and here is where for me it made sense… of course they want Gen Y and Millenals to be savers and buy houses, they need buyers to sell their houses to so they can live the dream in the bohemian dogbox. They have every right to be furious at mindless consumption, it should be directed to the sale of their home!

    I’m a Gen Y, I’m seeing a lot of Boomer’s engaging in this conversions from empty nests to bohemian dogboxes though. I refuse to buy their absurdly priced asset, so for now I’m renting waiting for prices to converge to within 1-3 % of long term CPI since 2001 , I may be waiting forever though, I’m prepared to though.

  87. @ Jaime 91

    I have no doubt that house pricing will return, or even plummet below, their year 2000 values, adjusted for inflation.

    Big falls, especially in capital cities, and Syd and Melb will be a blood bath.

  88. Although I want this ridiculous bubble to burst, the problem is that the government and the banks and the general population seem to be shaping our society in a way that ensures the bubble never bursts, or even deflates. And there are a few unavoidable facts that may ensure it never deflates:
    1. Australian houses (and apartments) are huge in comparison to some other countries. Although our houses are way more expensive than Japanese houses, or NY apartments, for example, they are actually cheaper per square meter. This makes Australian housing desirable, and not necessarily as expensive as it seems.
    2. Our population is growing. Quite rapidly. We’re building apartments rapidly too, but not enough houses.
    3. Australia has a high quality of life, nice environment, stable weather, good education standards, peaceful politics, etc. Very desirable place to live.
    4. There are HEAPS of investors in housing nowadays. Their appetite is insatiable.
    5. Australia is a crap place to do business, business investment and stocks haven’t been very rewarding for the past decade or two. Housing has. People trust it. It’s the only way for some people to get rich. The more people that think this, the longer the housing bubble stays inflated.

  89. @Matty 92

    What do you think will be the catalyst?

    I’m interested to see the effects of the changes to capital outflows from China. While $US50k p.a. still allowed, purchase of foreign property with these funds no longer is…

    Excerpt…”Regulations allow Chinese nationals a foreign exchange quota of $50,000 a year.

    Since Sunday, Bank of Shanghai and China Merchants Bank customers have been required to fill out a new online form when applying to purchase foreign exchange through their respective mobile banking apps.

    The form restricted foreign exchange from being used to buy overseas property, securities, life insurance or other investment-style insurance products.”

  90. Catalyst? Something funky is going on in the energy sector. Price for oil n price for fuel?

    Availability of energy ubderpins absolutely everything everywhere.

    IMO the Aussie debt slaves are gunna soon be a whole lot poorer and the rich a whole lot richer. It arent rocket science.

    Yet … with energy,environment,economic issues all lookin wobbly … housing might be the least of our worries.

    I reckon life down under has appeared pretty n sweet the last couple decades BUT the fabric of our culture has gone to shite. Oh how the flock of sheeple has grown exponentially. The mind boggles.

    Get out of debt! Learn some skills you can trade. Produce more. Buy less. “Collapse now and beat the crowd”

  91. What will the catalyst be?

    Around 40 % of credit used to fund our mortgage debt is borrowed from overseas. What do our house prices look like when that credit is crunched? This country doesn’t have enough money to afford it’s own assets.

    I did some research on medians, Sydney outdoes Vancouver, so we potentially have the biggest bubble out, globally. There’s no doubt the Chinese have pumped Sydney and Melbourne hard… Both grew 15 and 13 % respectively in the same year our wage growth hit historic lows, shit is so far detached from fundamentals it’s a laughing stock now even for the average Joe with little to no idea on what’s really going on.

  92. Antony,
    the catalyst? I don’t know domestically, it’s already happened, it’s just this cash from china keeping it going. Volumes are down, approvals are down, and prices follow, except for the hot cash coming in: We know $50k is the limit, but since when did limits ever stop desperate men from moving money around??????

    I’ve been waiting 15 years for this to implode: I totally under estimated how STUPID aussies are when borrowing money, I totally underestimated how hard the government would go to stop the implosion in 2009, and I totally underestimated Aussie’s response to the stimulus dished up by the government.

    It’s a shocker. By all measures our bubble eclipses USA’s and Irelands.

    What will be left of this country will be interesting to see. Immigration is not the holy grail of property prices. Once the desperation sets in, the jobs vanish, and interest sky rockets, you’ll see immigration reverse to emigration. Oh well.

  93. The immigration is a huge problem – on the one hand, the official policy firmly relies on tradies forever building houses – it’s the one good job the government can offer a voter.

    On the other, that much building – in such a vast country – would bring prices down to 10% of what they are now within a year. Yet importing excessive numbers of migrants – on purpose crammed in existing cities to up the prices, will create the Asian republic in Terra Australis within less then a decade – watch the whole concept of private property shake when one day we all realise the ones enforcing the law are more interested in foreign ownership of Australia (and good luck trying to get them to help you remove non paying tenants from their same background – shared by your property agent too).

    To fix all this the investment will have to turn to where it was always meant to be – large infrastructure projects (roads, energy networks, renewable energy sources) and business – and the housing will need to be just another utility item – the cheaper the better (like gas, electricity, public transport etc).

  94. @95 “Collapse now and beat the crowd”
    Please don’t annoy them with your words looking weird to them (sarc). Greed is the game.

  95. Greed IS the game,

    But after greed there always is a backlash – older civilisations know this (having seen/experienced it).
    Watch for Indians getting back at British empire by corrupting Australia even more – and anyone tell me with any seriousness Indians and Asians (I refer to all as Asians but have noticed Aussies exclude Indians for some reason) will not stand united against the colonial rule in Australia (as soon as they have the numbers – with muslims included),
    And whites are no longer migrating here, except for South Africans who have life threatening crime – Australia is far too hard for Europeans to bother with.
    Maybe if 20% of the UK immigrated as well, the greed can continue – otherwise, bubble trouble coming from two angles at least.

  96. Although come to think of it, now that Brexit has collapsed the empire fully – 20% of the UK might actually rush down unda – sounds completely realistic.
    We might just come to understand property is alive and well – but I still can’t self-approve a gamble of those proportions (having been used to important things being firm and guaranteed as they are in Europe (the continent proper, the one with government social security/pensions, not housing-obsessed-Brexitland))

  97. And another recent golden insight (for you esteemed audience) – the claim there is no such thing as society (as greed based buffoons tend to declare) really is by implication a (clear) statement the nation does not in fact exist (as the uber-tribe-superextended-family that it is).
    So, there either is no Australia – or it has massive social (fabric, being torn) problems. Tell me which of the two is mundane – a torn social fabric or houses?

  98. Petar, unlike many Aussies I know, the Brits know the value of things, and as a Pom myself, I can tell you right now that even if Straya is deluged with post-Brexit Brits, they will not be stupid enough to buy houses at these prices.

    They will also balk at rental costs. Add in the shockingly bad exchange rate, and a 20% ‘rush’ seems highly unrealistic in my opinion.

    The other thing is, after being screwed by Thatherism and Blairism, the majority of Brits have no money. The only people in Britain who have any money are the Arabs and the Russians.

    I lived in London during two recessions and witnessed first hand the obsession with property just before the GFC. The same thing is happening here in Australia.

    Once bitten, twice shy as they say. And the Poms aren’t as stupid as most Aussies when it comes to over-levaraging themselves on an over-priced shit-box and being a debt-slave to the banks for the rest of their lives.

    The tap will turn off at some stage. There can’t be that many fools left, can there?

  99. Must be nice for the various governmental bodies to have all this rates revenue rolling in for apartments that are sitting empty. It’s almost as if there’s a moral hazard there. The whole thing is starting to unravel, it’s now just a question of whether it affects RE at large or not.

    Shaping up to be a nasty year, maybe we can kick off a war with China to dwarf the issues at home…

  100. @Petar
    Totally agree with you Petar.
    Good on you for expressing the views without caring too much about being too politically correct. Honesty seems to be in short supply this days.
    Despite all the mess Europe is currently going through, long term I still think it’s a place with much better perspectives to own my own place, as well as work wise.
    Here in AU had worked for 2 US companies and both packed their stuff and went either to more competitive work force markets or back to US all together (simply we were too expensive here).
    Now work for a small shitty co, that is enough to pay the bills.
    I am tired of living in the country, that sells everything to the highest bidder, with total disregard for own citizen’s needs.
    Sadly lucky country this is no more 🙁

  101. The factors limiting correction of house prices is not economic, it’s political. It took me years to understand that politicians rule not for us, but themselves and they are easily misled or corrupted by vested interests. The recent scandals over politicians travel rorts and the shabby treatment of WellCare recipients being chased for false debts, while tax avoiding multinationals are looking foreword to a company tax cut demonstrates the point. As individuals we can’t be relied upon to decide what is fair for ourselves, or fairly address others.

    The Standford Prison Experiments were a set of social experiments by PHIL Zombardo during the 1960s, where a simulated prison was set up, with some student volunteers being prison guards and others being prisoners. The experiment had to be shut down because people’s behaviour was being warped by the system. The guards became increasingly sadistic, many of the prisoner riotous and belligerent. The point was that regardless of moral fibre or previous values, the system warped people’s behaviour. The frightening conclusion was that evil could often be seen to be the product of surrounding influences and that free will was overestimated.

    I think systems also make us slaves to ideology. The premise of which is, “I am an exceptional humanbeing and what I am and do is wonderful, and I deserve exceptional reward and treatment. Everyone else is entitled and lazy and needs to be taught the value of work and enterprise just like me. ” The system separates us from our fellow human being. They become the other.

    How do you change a political system to overcome the segmentation of the elite ruling class from the ruled. To stop the vested interests of a group dictating everything. It seems to be prevalent in every human system of political governance ever invented. The political problem is a reflection of the underlying human problem. I distort reality in my own self interest, regardless of the environmental or social realities. I justify my greed and dismiss the needs of others the impute my superiority or entitlement.

    All I can say is VOTE! The choices are limited but at least try to pick the best of a bad lot. And write. Write to that bloody Peter Coleman who is obviously a career politician of little backbone of talent keeping his head down and awaiting his pension. Write to him and point out to him his moral contradicting, his derilection of duty, his transparent and genial failure to even speak the most basic of return. He may fall back into the mire of self deception, but don’t make it easy for him. Let him know that at least one person knows what he did and what he really is!

    This rant is incoherent…must ties it together.

  102. @Rupert – figured that out as well myself as I was driving – Poms used to come here when the £ was strong – if they were to immigrate in any significant numbers, the house prices/rents would need to be significantly lower (I know UK is close to dire straights itself – but starting from scratch in Australia is still significantly harder)

    What is also visible (now clearly – to my amazement) is that there essentially is no plan – the game is played by the ear now, next month the world could be a different place. Merkel has already warned Europe they will need to build their own defense (and pay for it) – US of A won’t be bearing that for the EU for long.

    Australia, in all honesty, needs to wake up to the fact the queen couldn’t care less (and can’t help even is she did), become a republic, and stop the sellout. But for that to happen, the bitter pill of property price correction must be swallowed so life becomes livable – as is, the patient might decide to die instead (boomers nearing end of life and not caring much anyhow).

  103. Also – this all-encompassing bitchiness that is the standard in Australia today is going to be far too easily defeated – dogs have emotions just as humans (hence the female dog comparison) – any nation with partially abstract thinking arranged well will easily outmaneuver and outsmart a nation where anger and revenge K9 level are the order of national spirit.

    Back in 20th century, there was the plan to be increasing salaries and thus the wealth (esp. housing), and as a very important side effect we had increasing social cohesion, even national identity (it was so good to be Aussie then). Now – all of that is gone, it’s biting each other in anger as the only valid (re)action.

  104. we live in a capitalist system whose aim is to increase competition until all are vanquished. then a monopoly remains. even bigger profits and greater expolitation of people and environment are possible.

    this system cannot survive sharing, cooperation and connection. it must keep people misinformed, confused, conflicted, frightened and separate.

    sound familiar? well, the bright (?) side is, as karl marx predicted, the capitalist system eventually begins to devour itself, along with all the rest of us.

  105. @110

    Since when was this a capitalist system!?

    What we have more closely approximates a failing socialist/welfare/centrally planned/ resource misallocated ponzi with some of the trimmings of capitalism, just so when it blows the powers that be can blame it on capitalism and then implement more of the same poison.

    Do they fix prices such as interest rates, bail-in/out selected corporations, offer come-ons to first home owners/investors paid for by coercive, at the point of a gun taxation in a free market?

  106. The comments tend take an internal Australian view of the property bubble. I agree that politicians that have a combined property portfolio of over $300m will do anything to keep it going. The decline in rents and not being able to let properties is not a good sign for the over-leveraged.

    However, what is beyond their control is the impact of an external economic shock and that could come from a number of places – EU bank collapses, China’s financial system fails, the US stock market tanks, etc.

  107. “First home buyers now make up just 13.2 per cent of the owner-occupier market nationally. This is the lowest representation since the Australian Bureau of Statistics (ABS) series was commenced in June 1991 and compares to the long-run average of 18.5 per cent”…

    Waiting for the political banter to start..”We must increase the FHOG so first home buyers can get into the market”….and on it goes some more…Along with cries to re-instate it from people who don’t understand the flaw with it, and after pressuring the government they will give in and give them ‘what they want’

    Meanwhile, the absurdity of this isn’t being made a big enough point of..

    “The annual rate of capital growth in Sydney, for example, has eased to 15.5 per cent as at December 2016 from its cyclical high of 18.4 per cent annual growth recorded at the end of July 2015”

    So prices here grew roughly 7-8 times wage growth…

    and more

    “The bank’s view is that capital city house prices will rise a further 3.4 per cent in 2017 before easing to 1.7 per cent in 2018. And this is in a year in which it expects the Reserve Bank to lift interest rates by 50 basis points to a 2 per cent cash rate ”

    Genius, they can see the future, and can predict a figure like 1.7 % ! wow, impressive.

  108. Great article, what is going on in the Australian housing market truly is scary.

    This week Morrison has gone to the London to find out how to revamp Australia’s existing $1.4 billion National Rental Affordability Scheme (NRAS). The only problem is London specifically has worse affordability issues than we do and they have seriously struggled on the supply side themselves, not the best place to be getting guidance from.

    This issue has become almost as large as the economy itself, if the bubble bursts then the ripple effects will be felt throughout our economy. A great article on the topic is where you will see the inverse relationship between mortgage debt and house prices throughout Australia.

    David Murrey seeming certain about the housing bubble in Australia is quite a scary sign, lets hope we can manage to escape a bubble burst for the sake of our economy.

  109. Robert.
    I actually believe it is necessary for this bubble to pop particularly if it is a bubble. Bubbles are meant to pop and the people or the economy should not be held to ransom for irresponsible policy decisions and irrational purchases. I dont doubt that it will pop but I would never pay these Silly prices for a dog box in Sydney, I can easily watch.

  110. So I think I can imagine how it’s going to go. Apartment prices plummet, immigration decreases, and contagion spreads forcing the banks to the brink. Then comes the carefully orchestrated part: we’ll be urged to shore up the banks (though not actually be given a choice in the matter), the politicians will all “await the outcome” of a drawn-out independent inquiry, no banker will serve prison time, and the whole thing will take decades to correct.

    Something like that.

  111. @114 Robert

    Ah, gone to UK has he? Well of course, the UK is the poster boy for how to run a modern economy: Turn the place into a tax haven for the uber rich (London has one of the highest rates of billionaires per capita), create a banking and finance sector that creates huge GDP figures, without needing to spend anything on infrastructure or manufacturing.

    Pretty sure this is where our economy is heading anyway. Turnbulls first law passed was so him and his rich buddies can hide their financials from the public, and it’s only gone down hill from there.

    Throughout history, the divide between the rich and poor has traditionally been huge, this is all very foreign to most australian’s. We are moving back to those days, it’s just human behaviour. The rich will always end up with the wealth, while the 95% fight for the scraps.

    Those taking out huge loans, if they don’t close the loan before the crash, are just accelerating their path to the lower end of the wealth divide.

    Australian’s are so brain washed into believing that home and property ownership is EVERYTHING, they now ask me and my mates in business to negotiate because ‘we have a mortgage’!!!!!!! You want me to discount, in the worst economy in living memory, because you’re personally over leveraged??? You don’t wanna hear my answer on a bad day, for most find it offensive.

    When this folds, it will scar the investment fabric of Australia for generations to come.

  112. The CCP holds everything in the balance . If and when they stop buying , prices should
    come back to reality . Then the youth of Oz may have a chance again . But maybe things
    have gone to far and there is no coming back . Especially in Sydney .
    Tragic , how in the space of thirty years , we have gone from being the best to the most
    unfair place in the world . The middle class is gone , replaced by a two class society ,
    10% rich and 90% struggling . Shame .

  113. @111

    Indeed – what the west, especially the English speaking world, does today is much closer to a command economy than free (and fair) competition/market. There is a presumption that the free market will allocate investments to the most (developmentally) productive parts of the economy (and hence be superior to communist endless waste on social peace/appeasement of people – which only results in more spending on people, who never want to work but do want everything handed out with minimal effort). What Australia now has is exactly that – an economy which ignores investment quality (science, tech, medicine, energy anyone?) and only works to appease the people (as uneducated, scared and selfish as they were in communism – as the least common denominator, that really is strikingly similar in the socialist European east and here – with handouts this time being in the form of rising housing prices).

    With communism collapsing due to its own inability to shape up – and with the US of A assuming the same model as quickly as it could have (who cares about consumer goods, ship that to China or some place, let’s just do big resources and power meddling and military machinery – the success model of the Soviets, what else) – you can’t not wonder about the west now heading for the same fate – once it gets tired of itself (while China, the new US of A – is busy producing, consumer level included – productive work is in the end just that – productive).

    If Australia was actually developing housing, as in making houses better and better/becoming a world leader in efficiency/use of resources etc, you could argue this was indeed productive. But that now is the rhetoric (soviet style) – the underlying reality is closer to a squeeze for maximum social dividends with a minimal investment. And the system is certainly getting fatigued, that much can be noticed anywhere.

  114. But (communist dictator style) – what is this thinking behaviour on display here, who approved that?
    Why are you not contributing to our hard earned housing economy like good little god fearing catholic comrades? You mean you are not happy to buy and watch your wealth continuously grow?
    That is heresy – you invited the wrath of the system upon yourselves – enjoy paying rents while we work to push them up, threaten to privatise healthcare entirely and abolish pensions – maybe that will teach you about not towing the property-always-wins line like the rest of good obedient comrades (and some will be put on display so the mass fear can be perpetuated into the hysteria it is)

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