Adjustment .................. hopefully in a nice controlled manner

If you are interested... a 12 minute tv clip from Ireland in April 2007 where 2 economists argue about the "soft landing or crash landing" of the property market. There are some striking similarities in the arguments raised... but of course "it's different here".



Check this comment underneath the clip: "Morgan Kelly is the reason why I didn`t buy a house in 2007.That house is worth 50% less today in 2011.Thanks Morgan you saved me a fortune.I am glad I listened to your advice I bet most of the country that bought houses before 2008 wished they listened as well."

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nnnbrewery said..
If you are interested... a 12 minute tv clip from Ireland in April 2007 where 2 economists argue about the "soft landing or crash landing" of the property market. There are some striking similarities in the arguments raised... but of course "it's different here".

Check this comment underneath the clip: "Morgan Kelly is the reason why I didn`t buy a house in 2007.That house is worth 50% less today in 2011.Thanks Morgan you saved me a fortune.I am glad I listened to your advice I bet most of the country that bought houses before 2008 wished they listened as well."

I think the timing alone, just before the GFC, makes that a difficult comparison.

If we end up with a GFC mark2 and the government doesn't step in, then all bets are off.

I must admit that I listened to this while doing something else, but was this talking about the housing market in Ireland or elsewhere? I know that they had major issues where all these estates were created "in the middle of nowhere" that people bought into. When the crunch happened the existing residents were caught in a situation where even remaining in their properties was a challenge as there were so many unoccupied houses around them that people started vandalising the houses. This made their own houses worthless as no one wanted to live there.

I am never one to say 'it can't happen here', but it is a slightly different market, and of course it was ready for problems even before the GFC pushed it over the edge.

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FormulaNova said..

nnnbrewery said..
If you are interested... a 12 minute tv clip from Ireland in April 2007 where 2 economists argue about the "soft landing or crash landing" of the property market. There are some striking similarities in the arguments raised... but of course "it's different here".

Check this comment underneath the clip: "Morgan Kelly is the reason why I didn`t buy a house in 2007.That house is worth 50% less today in 2011.Thanks Morgan you saved me a fortune.I am glad I listened to your advice I bet most of the country that bought houses before 2008 wished they listened as well."

I think the timing alone, just before the GFC, makes that a difficult comparison.

If we end up with a GFC mark2 and the government doesn't step in, then all bets are off.

I must admit that I listened to this while doing something else, but was this talking about the housing market in Ireland or elsewhere? I know that they had major issues where all these estates were created "in the middle of nowhere" that people bought into. When the crunch happened the existing residents were caught in a situation where even remaining in their properties was a challenge as there were so many unoccupied houses around them that people started vandalising the houses. This made their own houses worthless as no one wanted to live there.

I am never one to say 'it can't happen here', but it is a slightly different market, and of course it was ready for problems even before the GFC pushed it over the edge.

Yes, this was pre-GFC, in Ireland. They are definitely talking about the Irish property market. Of course "it's different here", and we may get entirely different results. I just find it interesting to hear so many of the same things we hear, from such recent history. I think the "crash landing" economist predicted around 50% value drop, based on his analysis of property bubbles over history, and the growth in Ireland's property prices until that time. He was proved right. He was saying that without any knowledge of the GFC. We will never know if Ireland would have fared better without the GFC.

I think you are wrong to say the homes became worthless because there were so many unoccupied houses being vandalised. It's the other way around. The house became worthless, which meant they would never be occupied. Property fell... people wouldn't buy... "ghost estates" happened because developers went bust and couldn't sell or complete them... kids started vandalising the ghost estates. The saddest thing was hearing stories about people that moved into these estates... imagine living in a half completed estate, surrounded by un-sold, incomplete houses that are empty and being vandalised, and you can't move out, because no one will buy from you and in any case you are in negative equity.

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FormulaNova said..
If we end up with a GFC mark2 and the government doesn't step in, then all bets are off.

We've been treading water due to MASSIVE global stimulus, we benefited directly from China's bigger than ever and continuing stimulus, and near free money (1.5% local but really LIBOR 0.3%).

US tax cuts are stimulating their economy hugely "bigly"; at least short term (2020)... versus Europe's austerity.

What have we got going for us?

Not sure if Zeppo has put this up before. Here is as good a place as any:

www.examineproperty.com.au/economic-cycle/phillip-j-anderson-presenting-on-the-18-year-property-cycle/

house affordability...
www.oneroof.co.nz/news/35261/?ref=nzhhome

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bazz61 said..
house affordability...
www.oneroof.co.nz/news/35261/?ref=nzhhome

House prices will drop there as the NZ State has decided to restrict foreigners from buying property in New Zealand. I guess property prices went down in places like the Russia, China, Kampuchea and Vietnam when their enlightened governments decided foreigners were evil. House prices should drop in Victoria as the government there has decided landlords are evil and have less rights over their property than the tenant does.

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FlySurfer said..

FormulaNova said..
If we end up with a GFC mark2 and the government doesn't step in, then all bets are off.

We've been treading water due to MASSIVE global stimulus, we benefited directly from China's bigger than ever and continuing stimulus, and near free money (1.5% local but really LIBOR 0.3%).

US tax cuts are stimulating their economy hugely "bigly"; at least short term (2020)... versus Europe's austerity.

What have we got going for us?

I tend to agree. We are running on fumes right now. What we do have going for us is rule of law based on common law. Unfortunately as time goes on we tend to move away from Common Law and move towards regulations dictated by decree. What could get Australia going again is getting rid of all of the regulations that have built up over the years and is choking enterprise while favouring the big end of town.

finance.nine.com.au/personal-finance/sydney-rents-tumble-as-vacant-properties-hit-13-year-high/f7e700a8-f7db-47cb-a93b-6d734796d11a

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Kite285 said..

finance.nine.com.au/personal-finance/sydney-rents-tumble-as-vacant-properties-hit-13-year-high/f7e700a8-f7db-47cb-a93b-6d734796d11a

Tons of new unit blocks are still under construction. New developments are still beginning. Thousands of new units are coming onto the market. It's the best way to deal with high prices. Don't bring in laws to restrict demand by prohibiting certain people from buying. Allow development to increase the supply of housing.

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Mobydisc said..

Kite285 said..

finance.nine.com.au/personal-finance/sydney-rents-tumble-as-vacant-properties-hit-13-year-high/f7e700a8-f7db-47cb-a93b-6d734796d11a

Tons of new unit blocks are still under construction. New developments are still beginning. Thousands of new units are coming onto the market. It's the best way to deal with high prices. Don't bring in laws to restrict demand by prohibiting certain people from buying. Allow development to increase the supply of housing.

I think that if lending practices hadn't been restricted for investors, we would still be seeing rising prices, even though the supply is increasing. This whole mania of 'it can only keep rising' was fuelled by other investors.

I laugh when I read about reports now saying that Hobart is outperforming other capital cities. They allude to somehow it being a better market, but my own belief is its investors looking for the new great-thing because all the other options had been pushed up.

Hobart? I have never been there, but I seriously doubt that the rental returns versus price give you a great rental return and great capital growth Its all an illusion and investors are not necessarily smart.

Interesting to read that in trade deals foreigners want access to housing stock & that the Gov cannot back out of the deal .... basically allowing foreigners to push the locals out of home ownership.

www.stuff.co.nz/business/property/106297829/labours-bill-to-curb-foreigners-buying-new-zealand-houses-becomes-law

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FormulaNova said..


I think that if lending practices hadn't been restricted for investors, we would still be seeing rising prices, even though the supply is increasing. This whole mania of 'it can only keep rising' was fuelled by other investors.

I laugh when I read about reports now saying that Hobart is outperforming other capital cities. They allude to somehow it being a better market, but my own belief is its investors looking for the new great-thing because all the other options had been pushed up.

Hobart? I have never been there, but I seriously doubt that the rental returns versus price give you a great rental return and great capital growth Its all an illusion and investors are not necessarily smart.

I would imagine Hobart prices went up a lot because many people are cashing out of housing markets where there were high rates of price increases. They then looked towards places with lower property prices like Hobart. They move there and have a million bucks in the bank at the end of it.

The same thing is happening where I grew up, on the mid north coast of NSW. Property, especially farm prices were fairly cheap there. Where my little farm is prices were in the mid 300K to 500K for a house with just say 10 hectares of land. Today the price is about a million dollars. Clearly people are moving up there after selling out from most probably Sydney and then buying there. The Pacific Highway is just about fully upgraded, taking around 30 years to do it. Its a much quicker, safer and easier drive than what it used to be.

I think if there is to be a big property crash, the areas most affected will be those furthest from the big capital cities where people have moved to, paying increasing property prices. Like the ripples caused by a stone dropped in still water, the furthest away calms down first. Also where I have my land the average income is very very low. Its one of the lowest income areas in Australia. Almost all local industries have disappeared such as timber, animal slaughtering & manufacturing. There isn't much happening there economically now. The local towns has so many empty shops. Many of the shops just have displays in them or are run by a charity. Most of the people walking around town on a week day have grey hair. Its a beautiful area but its pretty quiet.

The other thing about Hobart, if global warming is happening then a place like Hobart will probably be a more pleasant place to live in the future. Although it sometimes gets very hot there and they do sometimes have terrible bushfires.

sensationalist....or truth ..?
www.theguardian.com/business/2018/sep/03/australians-told-to-expect-longest-and-deepest-housing-slump

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bazz61 said..
sensationalist....or truth ..?
www.theguardian.com/business/2018/sep/03/australians-told-to-expect-longest-and-deepest-housing-slump

If prices for Sydney real estate fall by 15% that will bring prices back to the level paid in around 2015-16. Considering the market was hitting fever pitch from 2015 through to 2017 then this is fair enough. Where I live a huge number of new units have been built and many blocks are still under construction. Most of the blocks are around five to six stories in size and I guess there may be 20 to 30 units in a block. They occupy sites where three or four houses were demolished. There are some larger blocks of flats around 15 stories high that have been constructed too.

When driving past it appears most of the units are occupied as evidenced by laundry hanging out to dry or furniture on the patios.

I think this is normal behaviour for Australian real estate markets. There is a period of time where prices fall followed by a period of time of fairly level prices and then a period of time of price rises. At the end of the cycle the prices are generally higher than what they were at the end of the previous cycle.

We're moving in Sydney and of the 20 odd rentals we've inspected so far only one has been occupied. Says something.

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evlPanda said..
We're moving in Sydney and of the 20 odd rentals we've inspected so far only one has been occupied. Says something.

Not that it matters too much as one affects the other, but was it apartments or houses?

When I rented out my house I felt that a lot of people were considering apartments instead of houses, so it pushes down the price of houses as well.

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bazz61 said..
sensationalist....or truth ..?
www.theguardian.com/business/2018/sep/03/australians-told-to-expect-longest-and-deepest-housing-slump

Actual the article downplays the downturn.

Sydney prices are down quite significantly .

We are looking at a place in the Northern Beaches. It has gone on the market for $2.85m, but they will be lucky to get $2.5m.

Current owners bought it for $3.4m a year ago...

We have been shopping for months. There aren't many buyers in the market. Many properties are having their prices reduced by 10-15% within weeks of listing.

Many others are withdrawn from auction when there are no bidders.

RE agents say they often have people who are interested in properties but unable to get finance.

And once again everyone ignores the main contributing factor to house prices ..........

by 2050 we are predicted to have a population of 40million almost double today's level.

more people competing for housing means higher prices ....always has.

strange that the Victorian government attempts to control / help make housing affordable by giving stamp duty concessions but refuses to release land ( other than in drips ) for new housing developments

^^ no need to.
Tokyo only covers 3,3K sq mi. Melbourne does about 4K sq mi.
Imagine how many highrises with dodgy cladding can be fit in here.

Dmitri, that cladding will be very cheap to purchase now

I reckon things are heading towards even more downwards pressure on housing prices. This new income tax arrangement will start to make negative gearing less attractive to a portion of investors and the RBA will be under increasing pressure to raise the overnight rate.

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FlySurfer said..
www.asgoodasgoldaus.com.au/blog/apra-airbrushes-australian-history-to-avoid-economic-armageddon/

This statement, quoted from that report, should open the eyes of anyone under the illusion that the absurd status quo can continue much longer.

"Importantly, Australia's astronomical debt levels comes at a time when global debt is at an all-time high of $USD 247 trillion as reported this week in the Washington Post , or 318 per cent of global GDP.

"Hence, it is beyond dispute that Australia is currently experiencing the biggest debt bubble in its history at the same time we are in biggest global debt bubble in the history of the world."

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Study the cycles, pretty obvious what's happening and why. Also what is about to happen.

Then finally the debt situation mentioned above will magnify the mother of all Farqer crashes (which is always evitable if we privately enclose the economic rent of land) not seen since the great depression.

The bucket changes shape and colour, but the sht inside has been the same for centuries now.

But there is still plenty of cans to be kicked down the road before this. The central bank and all their crony governments will ensure this until the market eventually has had enough of their self interested policies. It will shrug them aside like a little annoying fly.

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harry potter said..
And once again everyone ignores the main contributing factor to house prices ..........

by 2050 we are predicted to have a population of 40million almost double today's level.

more people competing for housing means higher prices ....always has.

strange that the Victorian government attempts to control / help make housing affordable by giving stamp duty concessions but refuses to release land ( other than in drips ) for new housing developments

There's far more to the economy than migration, migration will not force prices to continue to rise. The key factor to prices rising is availability to credit. Prices will fall until the printing press roles again with cheap money to the people. Credits been cut substantially and home prices will follow, you can't pay more than what the bank will give. Migration is not a factor at all, interest rates up and credit down are what's making this story.

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Adriano said..

"Importantly, Australia's astronomical debt levels comes at a time when global debt is at an all-time high of $USD 247 trillion as reported this week in the Washington Post , or 318 per cent of global GDP.

"Hence, it is beyond dispute that Australia is currently experiencing the biggest debt bubble in its history at the same time we are in biggest global debt bubble in the history of the world."

Debt schmedt,

I find it kind of bizarre that the world is turning, and everyone is going about their daily business producing widgets and everything else that society needs to function, yet there are some numbers in a computer in a warehouse somewhere with a negative number in front of them that are threatening to bring the whole thing to a halt.

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dmitri said..
^^ no need to.
Tokyo only covers 3,3K sq mi. Melbourne does about 4K sq mi.
Imagine how many highrises with dodgy cladding can be fit in here.

Really?

Tokyo ive read has a metro population of 38 million,Melbourne around 4.3 million. A mere village by comparison

If they keep on jamming people into Sydney, Melbourne and SEQ, what will those places be like to live in? Where will those who have boats, boards, a few bikes, or a trailer keep everything if everyone moves into high density homes? What will it be like going to the beach if the population is twice what it is? In Sydney it seems that the traffic jams increase faster than the population does - god knows what it will be like when the population gets bigger still.

You can have high density living, but for some reason we seem to ignore the lessons of some other societies where it works. Take sailing for an example - in England they allow sailing clubs on reservoirs and the clubs have big open areas to store dinghies. In Australia they don't normally let you sail on reservoirs, so everyone has to go to the harbour or bay, and there's a shortage of dinghy space so if you don't have somewhere to put your boat at home you may not be able to sail. In Hamburg in Germany, there's tiny marinas for dinghies, often with a little cafe.

In OZ we don't seem to allow for the fact that people living in big blocks of flats may want more than a gym and a cafe. Even along the waterfront, few if any of the big developments seem to have any way of getting down to the water or storing a board, kayak or boat easily.

It's not my problem anymore, thankfully - we've got out of there and now have a nice big front yard, complete with a water feature with platypuses, the occasional black swan and pelican, a Windsurfer and a Laser parked on the shore ready to go, and not a single house in sight.

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Harrow said..

Adriano said..

"Importantly, Australia's astronomical debt levels comes at a time when global debt is at an all-time high of $USD 247 trillion as reported this week in the Washington Post , or 318 per cent of global GDP.

"Hence, it is beyond dispute that Australia is currently experiencing the biggest debt bubble in its history at the same time we are in biggest global debt bubble in the history of the world."

Debt schmedt,

I find it kind of bizarre that the world is turning, and everyone is going about their daily business producing widgets and everything else that society needs to function, yet there are some numbers in a computer in a warehouse somewhere with a negative number in front of them that are threatening to bring the whole thing to a halt.

...he's talking about instability in the financial system. The last GFC was brought about by around 7 trillion of unanswered debts being called in. Now look at that figure above...instability. As long as the can, can be kicked down the road, plenty of widgets are gonna be made.

I'm sure plenty of widgets were being made with people going about their daily lives before the 1929 market crash that eventually then saw people starving to death on the streets.

We looked at 6 houses for sale this fortnight in coombabah, all empty except one, and that tennant didn't want to stay. People are leaving the area