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Australian Housing Crash


Jimmy123

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Worth also posting the retort..

 

House price implosion claims ridiculous, says local economist

http://www.heraldsun.com.au/money/house-pr...f-1225861515696

 

""The story about house prices falling tends to be pushed pretty strongly from overseas groups in particular because they don't understand the growth outlook here and the under-supply of dwellings," he said.

 

"They tend to transpose what's been going on in the US and the UK to the Australian housing market and they are not applicable.

 

"The stories make a good headline but they just don't apply."

 

Mr Workman said Australia's unique situation of strong population growth, a housing shortage, low unemployment and historically low interest rates would keep house prices high"

 

But Mr Workman said it would take high unemployment and people defaulting on loans to puncture house prices - both of which were "unlikely".

 

Our jobless rate will inch toward 5 per cent ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã‚¡ÃƒÆ’‚¬Ãƒâ€Â¦ÃƒÆ’¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã¢â‚¬Å“ not the 10 per cent in the US and UK ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã‚¡ÃƒÆ’‚¬Ãƒâ€Â¦ÃƒÆ’¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã¢â‚¬Å“ and Australia has "an extremely low" rate of late debt payments, even when mortgage rates hit 9 per cent recently, he said.

 

"We just went through a period where interest rates were quite high here and that did slow the housing market down, it stablised it," Mr Workman said.

 

"But these large price falls people talk about really need a rise in unemployment to occur and at this stage the markets are heading in the other direction.

 

____________________________________

 

The "local economist" is Michael Workman, he works for Commbank so one has to factor that into the comments.

 

That said, Edward Chancellor (or the media, we all know how they do blow stories up and out of context) makes a number of contradictory points.

 

i.e. He attributed Australia's "luck" to a comparative lack of competition among local banks, enabling them to avoid much of the reckless lending that occurred in the US. He also points out that the unemployment rate in AUS is half that of the US/UK

 

So on one hand he compares US/UK with AUS.. and on the other lists all the differences between the two (no crazy lending, low unemployment, growing economy). It's a little like claiming apples and oranges are the same because they are both "round" and then noting that they are different colours and taste completely different.

 

Unemployment is the key to all housing prices... until the needle turns the other way I don't see AUS housing prices changing direction.

 

Cheers

Matt

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The "local economist" is Michael Workman, he works for Commbank so one has to factor that into the comments.

 

That said, Edward Chancellor (or the media, we all know how they do blow stories up and out of context) makes a number of contradictory points.

 

i.e. He attributed Australia's "luck" to a comparative lack of competition among local banks, enabling them to avoid much of the reckless lending that occurred in the US. He also points out that the unemployment rate in AUS is half that of the US/UK

 

So on one hand he compares US/UK with AUS.. and on the other lists all the differences between the two (no crazy lending, low unemployment, growing economy). It's a little like claiming apples and oranges are the same because they are both "round" and then noting that they are different colours and taste completely different.

 

Unemployment is the key to all housing prices... until the needle turns the other way I don't see AUS housing prices changing direction.

 

Cheers

Matt

 

Very well stated Matt, now all one needs to do is keep an eye on the drivers of the key.

 

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Unemployment is the key to all housing prices... until the needle turns the other way I don't see AUS housing prices changing direction.

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Matt--surely affordability is THE key to house prices?

 

Another bank rate rise, plus uncertain times for the resource industry?

 

$400,000 for a starter house in an area where full time wages dont exceed $40,000?

 

In my book a recipe for eventual disaster--especially if the resource sector weakens dramatically immediately.

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"Matt--surely affordability is THE key to house prices?"

 

Affordability effects price, but it's not the key to price (employment is). Affordability has a greater effect on the MAX price, then the on MIN price (hence it effects the upwards swing of the curve). It's also worth pointing out "affordability" wise, the media mainly focuses on FHB, affordability isn't a big issue for the other 6/8+ of the market unless they are trying to trade upwards.

 

The 6/8's of the market would be effected IF unemployment rises (as some would default) but that said most Australian lenders go out of their way to make sure "default" doesn't happen (as they have a keen reason to keep the market from falling more then 5-10%).

 

"$400,000 for a starter house in an area where full time wages dont exceed $40,000?"

So that's $80K of income (people need accept dual income is the norm for FHB) all that said, people need to also accept that NOT everyone can/should/will be the owner of their own home.

 

Cheers

Matt

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So,........After Election Either, Rudd will slow economy with resources tax or prevent it becoming an overheated two speed one or it will overheat and cook interest rates, OR, Abbot will pull back immigration but allow two speed economy to cook despite imposing a great big Tax on business to pay for the child caree handout, SO, what will happen to the drivers...... We're left to the whims of the Chinese communist party...... Good Luck!

 

 

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"enabling them to avoid much of the reckless lending that occurred in the US"

??? I would call that sound lending principles, not LUCK, but as far as the housing bubble goes, lets see, oh yes it's because it's different this time around.

 

Now where have I heard those words spoken before?

 

There has to be some sort of limit to affordability surely? some of these people borrowing now, will get to a point where they can't repay the loans, so they will sell, hence cheaper houses, there will be plenty of cheaper houses on the market, builders, plumbers, electricians,concretors, curtain makers, carpet suppliers etc, will not be getting the work they are getting now, unemployment rises, more people out of work equals more houses on the market, but that can't happen this time around because it's different this time,right? like hell it is!

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So that's $80K of income (people need accept dual income is the norm for FHB) all that said, people need to also accept that NOT everyone can/should/will be the owner of their own home.

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$400K House (plus costs)

 

Min deposit $80K (that rules 90% out as non starters)

 

Max Loan 3X both salaries = $240K

 

$400-240=shortfall of $160K

 

Figures CANNOT add up.

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all that said, people need to also accept that NOT everyone can/should/will be the owner of their own home.

 

Is that what the Government is saying--is that what the real estate "industry" is saying?

 

Where are AFFORDABLE houses with 90 year or perpetual leases (as in Europe)(council houses) available?

 

Who is going to get elected using that message?

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Reality looms--for some?

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The goose has already cracked the golden egg somewhat, look at the market over the last few days, post the rent resort tax debarcle, look at what the miners are saying? not that I believe all of their spiel, but if they do slow down, or stop, or move offshore? then we won't need the thousands of skilled migrants that we are getting now, and they are part of the problem of the housing affordability, they have to live somewhere, but all that may dissapear as quickly as it came thanks to our fearless leader we will no longer need them perhaps?
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Flower,

 

Your sums don't add up... lets not make up numbers to try to make a point.

 

"Min deposit $80K (that rules 90% out as non starters)"

20% deposit. What world are you living in? 5-10% is the norm

 

"Max Loan 3X both salaries = $240K"

Dual Income of $80K, Just checked and it would seem they can borrow $386,087 and $514,783

 

Lets go back to basics, LIST the suburb you keep refering to. I'd personally like to double check the that $400K is the starting price for a house and that $40K is the average income (I hate round numbers, normally means someone made them up)

 

I'm sure that after you LIST the suburb I'll find cheaper housing and discover the average income isn't 40K.

 

Cheers

Matt

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If people would have been buying when this thread started, instead of debating about a crash, they would be well infront. If it does crash, it will only go back to the prices at the time the thread began.

 

My latest buy (about 1yr ago in Sydney) cost $500k with rent of $550/week, now similar units in the block sell for $580k. It costs me approx $100/week after expenses, plus depreciation, plus tax benefits.

 

Totally affordable IMO !

 

GIVE UP SMOKING AND BUY A PROPERTY :biggrin:

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