Australia housing bubble

[Franco Cozzo]

Originally Posted by DoreSlamR

It’s ok, WA will prop up the rest of the country....again

About time they contributed after Melbourne and Sydney have been carrying Perth for the last 170+ years

It's cute that WA thinks it's paid the tab over the last 20 years.

[zipping]

It’s the first time in a decade since I’ve seen the RBA so animated. Don’t think this was by accident. It was carefully orchestrated signaling.

Reserve Bank paves way for further cuts in official interest rates.

The Reserve Bank has paved the way for further cuts to the official interest rate and could even resor*t to quantitative easing — “printing money” to buy government bonds — to ward off a potenti*al downturn.

In a major speech last night, RBA deputy governor Guy Debelle declared the central bank was prepared to “go fast, go hard and not die wondering” by stimulating the economy — a nod to the Rudd government’s $52 billion cash injection to insulate against the global financial crisis.

He also warned that a lending slowdown could hurt the economy, in a sign the bank is fretting about the potential fallout from an emerging slump in house prices*. “There is a risk that a reduced appetite to lend will overly curtail borrowing with consequent effects for the Australian economy,” Dr Debelle said.

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Noting the Reserve Bank had “repeatedly” said the next move in interest rates was more likely up than down, Dr Debelle said there was “still scope for further reductions in the policy rate”.

“It is the level of interest rates that matters and they can still move lower,” he added, in remark*s that could foreshadow a sharp reappraisal of the outlook by the Reserve Bank board when it next meets in February, after the summer break.

The official interest rate has been unchanged since August 2016, when former governor Glenn Stevens reduced the cash rate to a record low of 1.5 per cent — the final in a series of cuts that has seen the rate fall from a 10-year peak of 4.75 per cent in late 2011.

The plain-speaking Dr Debelle, a currency and bond market veteran, said the Reserve Bank was also prepared to create new money to buy government bonds from private banks, a policy pursue*d vigorously — and controversially — by central banks in the US, Japan and Europe to try to keep interest rates low.

“Quantitative easing is a *policy option in Australia, should it be required,” he said, adding it could be even more effecti*ve here than abroad becaus*e of the scarcity of Aust*ralian government bonds.

His comments come against a backdrop of deteriorating econo*mic data: house prices and building approvals have been falling, while the national econo*mic growth rate dropped from 3.4 per cent to 2.8 per cent, it emerged this week, surprising economists.

Analysts at rating agency Fitch said yesterday the Reserve Bank’s growth forecasts were “overly optimistic”.

“We are bearish on the Australian economy, which differs sharply from the RBA’s upbeat outlook,” it said, dumping its expectati*on the RBA would lift rates any time in 2019. Speaking at the Australian Business Economists’ annual dinner, Dr Debelle said the federal government had room to borrow and spend to stimulate the economy, if needed.

“Fiscal space is really important; we still have that in Aust*ralia,” he said, backing former treasurer Wayne Swan’s controversial $52bn fiscal stimulus of late 2008 and early 2009, which gave $900 payments to households, help for first-home buyers, discount roof insulation and a school hall building boom.

“Fiscal stimulus in Australia in my view was absolutely necessary and was a critical factor behind Australia’s good economic outcome*s,” Dr Debelle said.

Adam Boyton, chief economist of the Business Council of Australia, said maintaining fiscal “firepower” was critical. “When it comes to the budget, that means not just getting back into surplus but reducing debt too,” he said.

In a speech that focused on the perils of excessive debt and leverage, Dr Debelle said the jury was still out on how much was too much. “We still don’t really have a great handle on what level of leverage is dangerously excessive for governments, households, banks and corporates,” he said. “Leverage significantly magnifies the effect of any shock that hits the economy; it might not start the fire, but it will pour petrol on a burning platform.’’

Standard measures of household leverage, which showed total mortgage debt was 27 per cent of the value of housing in June, could provide false comfort, he suggested. “(They are) very much dependent on the value of the denomina*tor, house prices in this case, and we know they can declin*e quite rapidly,” he said.

The similarity of the big four banks, reeling in the wake of the financial services royal commission, was “not so obviously benefici*al”, leaving the door open to ideas that they should maintain higher levels of capital.

“Their similar behaviour and similar reaction functions to events such as falling house prices run the risk of amplifying the downturn in the housing *market,” Dr Debelle said.

“Those such as Anat Admati still make the argument that furthe*r reduction in leverage is necessary.’’

Stanford’s Professor Admati slammed the banking regulator APRA in The Australian this week for “outrageously inadequate” minimum capital standards.

[snap0964]

Originally Posted by hayseed

Correct.. & the Aussie Gooberment doesn't have big Budget Surplus to help us ride it out this Time..
I reckon We're in for a Hard Landing, next Time..

ScoMo and Friedy might deliver a surplus come 2Apr - too little too late I'd think, the damage will already be done. But then they might be doing a Wayne Swan, or it might end up a belated April fool joke.

I've got a good idea - let's put in a Mining Tax - we'll rake the $$$ in

[Work Horse]

Originally Posted by snap0964

ScoMo and Friedy might deliver a surplus come 2Apr - too little too late I'd think, the damage will already be done. But then they might be doing a Wayne Swan, or it might end up a belated April fool joke.

I've got a good idea - let's put in a Mining Tax - we'll rake the $$$ in

Important to distinguish between a Government deficit/surplus for a fiscal year and total Government debt accumulated over several years.

Politicians will try and confuse the two to make themselves look good.

Government debt (the amount we have to pay back) was at $174.5 billion in September 2013. Government debt is now about $341 billion. So both major parties have run up this debt.

Is Government debt a good thing or a bad thing?

Ask 5 different economists you will get 6 different answers.

IMHO the housing bubble is deflating. How fast and far it will deflate is the reason this thread is still going.....

[zipping]

Originally Posted by Work Horse

IMHO the housing bubble is deflating. How fast and far it will deflate is the reason this thread is still going.....

Potentially, things could get ugly imo.

Risk for small business is especially horrendous.

And the government is making that risk worse and worse. Electricity prices through the roof. Taxes upon taxes, mostly crazily levied on inputs. Red tape exploding. Green tape exploding even worse.

[Work Horse]

Originally Posted by zipping

Potentially, things could get ugly imo.

Risk for small business is especially horrendous.

And the government is making that risk worse and worse. Electricity prices through the roof. Taxes upon taxes, mostly crazily levied on inputs. Red tape exploding. Green tape exploding even worse.

I'm in small business 20 years now, it's always "swings and roundabouts" with the economy you have to ride it out.

Our governments have some levers they can pull which effect Australias economy, including housing. Australia is a small player in the world economy. Our economy is influenced more by factors outside the Australian Governments control.IMHO

[snap0964]

Originally Posted by Work Horse

Important to distinguish between a Government deficit/surplus for a fiscal year and total Government debt accumulated over several years.Politicians will try and confuse the two to make themselves look good.

That's why ScoMo is crowing it'll be the first surplus in over 10 yrs.

Originally Posted by Work Horse

Government debt (the amount we have to pay back) was at $174.5 billion in September 2013. Government debt is now about $341 billion. So both major parties have run up this debt.

I thought the overall debt now was estimated to be closer to $500 billion.

Originally Posted by Work Horse

IMHO the housing bubble is deflating. How fast and far it will deflate is the reason this thread is still going.....

Well Stuart Wemyss seems to think otherwise, he has been pretty accurate in the past, https://www.prosolution.com.au/calli...e526c8e9e59ac7

[MITCHAY]

Yep it might be a budget surplus but we are still about $500 billion in the hole.

Low rates are very good for me. Not sure it works for everyone else or country though.

These idiots only care about politics though rather than make things better for ordinary people.

[prydey]

Originally Posted by MITCHAY

Low rates are very good for me. Not sure it works for everyone else or country though. .

If rates go up, spending will likely go down, which is no good for the economy. Would likely also cause an increase in govt spending (dole, subsidies etc).

It makes no sense that Australia has some of the highest rates in the world for utilities etc.

[Charliewool]

Originally Posted by prydey

It makes no sense that Australia has some of the highest rates in the world for utilities etc.

It’s because we are willing to cop it!.. “she’ll be right mate”, off to work we go!
Have a whinge down the pub over a beer about it, (or on a forum!)... and that’s as far as it goes!
We are a nation of friggin masochists, I swear!
Meanwhile the “elected ones” pull their snouts out of their troughs just long enough to vote “aye” to some BULL **** motion that benefits either themselves or friggin minority factions!
Watch France this coming weekend.... This is going to be scary stuff!!
But at least they have the balls to stand up to their government and say “enoughs enough”!!
It’ll NEVER happen in Oz though, because we somehow enjoy being bent over and reamed!!
Pura Vida...

[Franco Cozzo]

Originally Posted by Charliewool

It’s because we are willing to cop it!.. “she’ll be right mate”, off to work we go!
Have a whinge down the pub over a beer about it, (or on a forum!)... and that’s as far as it goes!
We are a nation of friggin masochists, I swear!
Meanwhile the “elected ones” pull their snouts out of their troughs just long enough to vote “aye” to some BULL **** motion that benefits either themselves or friggin minority factions!
Watch France this coming weekend.... This is going to be scary stuff!!
But at least they have the balls to stand up to their government and say “enoughs enough”!!
It’ll NEVER happen in Oz though, because we somehow enjoy being bent over and reamed!!
Pura Vida...

Enjoy the prostate massage on behalf of the Government, makes the finger experience at the doctor much easier

[prydey]

Originally Posted by Charliewool

It’s because we are willing to cop it!.. “she’ll be right mate”, off to work we go!
Have a whinge down the pub over a beer about it, (or on a forum!)... and that’s as far as it goes!
We are a nation of friggin masochists, I swear!
Meanwhile the “elected ones” pull their snouts out of their troughs just long enough to vote “aye” to some BULL **** motion that benefits either themselves or friggin minority factions!
Watch France this coming weekend.... This is going to be scary stuff!!
But at least they have the balls to stand up to their government and say “enoughs enough”!!
It’ll NEVER happen in Oz though, because we somehow enjoy being bent over and reamed!!
Pura Vida...

I don't think rioting is the answer.

[mcflux]

Originally Posted by Franco Cozzo

Enjoy the prostate massage on behalf of the Government, makes the finger experience at the doctor much easier

Finger?

[Franco Cozzo]

Originally Posted by mcflux

Finger?

Tuck your knees up and face the wall

In she goes!

[.:4:.]

Yeah utilities arent the cheapest, im not going to elaborate on that and open a can of worms. But technology has come leaps and bounds making things cheaper to be more energy efficient. For example a 35w downlight kit costs $6 wholesale, but an 8w led down light costs $8 wholesale. So the immediate cost is slightly more, but for the added life span of the led fitting youre looking at 5 or 6 replacement halogen dichroics over a few years and the extra power consumption, so cheaping out in the short term costs more in the long run. Granted a house with downlights has more then one, but that means the savings multiply. Its just being proactive not making yourself sound like a victim.

[Charliewool]

Originally Posted by prydey

I don't think rioting is the answer.

I never said rioting was the answer!
I see their government has back peddled pretty smartly on the proposed diesel tax though?... Power of the people?

[BENT_8]

https://www.msn.com/en-au/money/home...id=mailsignout

Hmm..back in 08 we had the GFC to blame for the short term cooling of the housing market, there is no financial crisis now and were seeing bigger falls.

I think the reduction of foreign investment has brought reality back into the equation.

[vztrt]

Originally Posted by BENT_8

https://www.msn.com/en-au/money/home...id=mailsignout

Hmm..back in 08 we had the GFC to blame for the short term cooling of the housing market, there is no financial crisis now and were seeing bigger falls.

I think the reduction of foreign investment has brought reality back into the equation.

Essentially the same thing as the GFC has happened. Money lending has become tighter so less people buying. I believe there have been changed to interest only loans again to slow the house prices dropping.

[BENT_8]

Originally Posted by vztrt

Essentially the same thing as the GFC has happened.

Without the hysteria which is my point, things are worse now despite the lack of media attention that the GFC received.

[Smoke Pursuit]

Let’s not forget the banking royal commission and the fact that banks have been forced to re write their lending criteria, and lvr’s. Can’t say there is no financial crisis when there actually is.

[Syndrome]

Anybody who purchased in the last two years must be crapping bricks

[Bossxr8]

Originally Posted by Syndrome

Anybody who purchased in the last two years must be crapping bricks

Not everyone. Property prices rose 8.2% in this area in 2018. Other regional areas such as bendigo and ballarat were similar. Regional areas are doing ok, and some of the smaller capitals. Its mostly melb and syd copping it.

That’s not to say those rises won’t decrease, but the experts are saying some of those outside the big 2 won’t go backwards, just go neutral at worst.

Syd and melb should decrease because they were so overpriced anyway.

[FTE217]

Originally Posted by Syndrome

Anybody who purchased in the last two years must be crapping bricks

Those who over extended themselves, thats life.

[vztrt]

Originally Posted by BENT_8

Without the hysteria which is my point, things are worse now despite the lack of media attention that the GFC received.

During the GFC the government stepped in and garenteed loans so the money would keep flowing.

At this point in time and after the royal commission money has been tightened (personally this is a good thing). If the money dried up during the GFC then we would have seen the same thing happen as now...probably worse.

[.:4:.]

The whole housing market debate about the current climate sort of falls into the category of people who annoy me and buy stuff then complain because they keep shopping afterwards and complain when what they bought goes on sale. If you need somewhere to live and have the means to purchase and plan to be there a while, its just a purchase. Markets affect people more who are using it as an investment. Buy sell kind of stuff. I am pretty sure the rental market isnt going to deflate as quickly as property prices. So there is still some merit in buying if you plan to live there. I lucked out to a degree being a fool at 25 buying my house because the market isnt going to see a loss as big as the appreciation my area has seen in the past 7 years. I have no plans to sell because i live there.

[Cav]

Some one is always whinging about something in the housing market.

I bought my first house at 17% interest rates.

[Bossxr8]

Originally Posted by Cav

Some one is always whinging about something in the housing market.

I bought my first house at 17% interest rates.

Sure the interest was high, but they were so much cheaper to buy compared to the average wage. So you were still much better off.

[prydey]

Originally Posted by Bossxr8

Sure the interest was high, but they were so much cheaper to buy compared to the average wage. So you were still much better off.

100%.

4% on $500k + is considerably more than when interest rates were near 20%

[mr smith]

Another risk people forget about is that if the value of the property falls lower than than the mortgage then the bank will want some cash. There will be nowhere to lend this from (other than friends or relos) and the bank will forclose the mortgage.
Falls were always on the cards and should have happened 10 years ago but shortsighted policies are now being felt.
There will be a dead cat bounce in a year or so and the big correction around 2022-2023.

[Cav]

Politicians should stop fiddling let the market burn and it will eventually put its own fires out.

Hey I got an idea.

The family home is not included in the asset test for the old age pension.

For a married couple the threshold is a little under $400,000. After that there is a sliding scale of reduction until the pension is no longer available.

So why not include the value of the family home in the asset test?

This will mean that oldies living in a huge home worth $$$ would be forced to sell and move into something smaller, thus opening up the market with more supply of family type homes and therefore reduce prices.

If this seems a bit onerous, the asset limit could be varied or how about we introduce a sliding discount scale on the % $$$? The longer they are on the pension, the lower the discount % becomes.