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Australian Housing Crash


Jimmy123

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In reply to: flower on Thursday 26/06/08 08:04pm

Are we destined to follow the US?

 

___________________________________________________________________________

 

About 40 percent of the 7 million subprime loans outstanding will default in the next two years. The defaults of option-adjustable-rate mortgages and other mortgages subject to rate reset will be of the same order of magnitude but over a somewhat longer period of time. This will maintain the downward pressure on house prices.

 

~ George Soros: The New Paradigm For Financial Markets: The Credit Crisis Of 2008 And What It Means

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In reply to: pkay on Friday 27/06/08 01:46am

Wow, I have never seen that chart.

 

IMHO that clearly shows the strength of the Aus economy vs. the US.

 

I had no idea we had outpaced the US at that rate. I can understand why the IMF is concerned about the aussie housing situation.

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In reply to: Mags on Friday 27/06/08 09:48pm

Great discusion all.

 

The amount of Austrlians that bury their heads in the sand, and say we have a housing shortage therefore prices will continue to go up really frustrates me.

 

If oil stays this high or goes higher, it will be game over for Aus housing.

 

I think just one more rate rise would be a major tipping point.

 

All you housing bulls would want to be preying oil drops of to $100 quickly!

 

Basic Bubble Theory: Smart fundamentalists get in early, speculators jump in at the end pushing prices way past their fundamental value.

 

I think for housing this final speculative push was last year, however am just getting the feeling the oil bubble has further to run.

 

GS have a price target of $200/barrel this year!!!!!!!!!! I hope you all understand what this will mean for the world economy and our economy!!!!

 

If you think Australia and Aus housing prices are immune to such a high oil price then please don't talk to me, because I will become too frustrated.

 

Have a great weekend all - and prey like nothing else that oil doesn't break through the large resistance at $140!!!!!

 

As a reminder if oil does clear $140 by a few dollars this will give it a price target of $170-$180.

 

The writing has been on the wall for a long time, so I have no symathy for people that don't wake up and pretect themselves!

 

 

 

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In reply to: Jimmy123 on Friday 27/06/08 10:15pm

I will never forget been at an auction last November and listening to the auctioneer talk about how prices will continue to gain at 20% pa.

 

It opened my opens to how much manipulation and false beliefs are out their.

 

He said this probably within a couple of weeks of the peak of the market.

 

 

If you take all your bias out and just look at that chart a couple of posts below, I don't think it takes a rocket scientist to realise what is about to happen.

 

 

 

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How can you say it will be game over for Aus housing?? All investments, whether it be shares, property, art, gold etc go through cycles. We have been through this same thing in the 90's with the savings & loans crisis. Big deal..................markets are heading south. Good opportunity to accumulate over the next 12-18 months and sell into next bull run in a few more years.

 

History always repeats itself and in 10-15 years time, we will have cheap credit again and go through the same thing with houses and stock market reaching incredible highs once again. The more things change, the more they stay the same. You can never say it's game over.

 

 

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In reply to: street talk on Saturday 28/06/08 11:46am

SS: Correct, but lets stick to housing.

 

Being of a certain age Ive seen 4 major property busts here and in the UK, but this time it really is different.

 

Why? because NEVER NEVER has the ratio of wages to housing loans been this high. Now of course it all depends on the figures.

 

Youve got to consider the mean average, ignoring those with no hope and those with incomes over $100,000. The middle ground is where the TOTAL HOUSEHOLD debt concentration is perilous.

 

Again, I can only comment on what goes on locally. Here we have starter homes, that is land/house package starting at around $380,000. Add on all costs before taking occupation and were talking $425,000

 

Wages locally rise from casual employment at $15 per hour, to a small element on full time wages of $45,000. Unemployment is high, mind you so is the surf! So lets take the case of a couple working in a major supermarket chain in management, both on $40.000. Gross income is $80,000 per annum.

 

Max permissable borrowing limits SHOULD BE 3.5X income or $280,000.

 

No need to go on. Current ratio is 8 to 1, max ratio should be 3.5 to 1

 

So: Either average WAGES DOUBLE or HOUSING COLLAPSES.

 

 

 

 

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In reply to: flower on Saturday 28/06/08 01:02pm

flower

i know here is huge gap between afford abillity to house price, but never try to work out exac figures.

 

you seems very good with house things. if you can gives more figures about how big the gap is, will be appreciated!! http://www.sharescene.com/html/emoticons/tongue.gif

 

i know someone try use nective gearing buying few properties, some end up without roof for themselfs.

 

but the rental market might hodes the hose price to cllapse like US??

i'm not very good at this thing, interesting to learn more from you guys.

 

my undersanding of house is that -------it is for living not for speculate!!

 

 

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QUOTE (early birds @ Saturday 28/06/08 05:34pm)

EB: The current situation appears to be very different across the States, ie hasnt Sydney already collapsed by 20%, or is that only spec flats etc?

 

So I can only comment on country WA, specifically where I live.

 

MR is/was? arguably the go go area, spurred by wine and the surf, trouble is it attracted the so called wealthy to "invest" in holiday homes, and land developers to get into high gear.

 

So far-so good. However the so called wealthy--on the whole--werent wealthy at all, just totally overborrowed which was OK until Opes Prime, where many came unstuck. Dont get me wrong there is a lot of old solid Perth money down here, been here for years will remain so. So we now have a surfiet of holiday houses on the market for $1m plus. Thats not where the main problem exists.

 

Hundreds of blocks have been created, from 200sqm to 1000sqm. 10 yrs ago you could build a modest 3X2 for a total package of say $100K, many locals did on nothing more than a a bankcard deposit, BUT they had a semi decent wage (which wasnt a lot different to todays). That lot did fine and are set for life.

 

Land prices escalated, more blocks created, all were sold,mostly off plan to "speculators'. The wealthier speculators still hold, Mr average who bought a block has built however his massive 4X2 with wrap around cinema 2X4WD's now has his debts at around $500K, not much change in the wages, RESULT: B GREAT PROBLEM that many dont get--yet.

 

About 10% fly in fly out, theyre OK with wages over $100K. Old Money invested is rock solid.

 

Rents rapidly climbing, your 4X2 now asking $600pw. Average local wages cant cope. CRISIS pending, No State housing houses.

 

Id estimate some 300 blocks are still held by speculators, some for ten yrs or more, not the purpose the council intended when granting subdivision.

 

Unleaded down here 1.80ltr Diesel just under $2. RESULT: CRISIS amonst MR Average.

 

Developers still lining up for the next Greenfield subdivision proposal.

 

About 50% of houses built in the last ten years are negatively geared, some owned locally but most by Perth owners. Plenty owned by absent Asian interests.

 

Wages static.

 

Dont really know about Perth, imagine its much the same. WA attracting 800 people per week to live, theoretically a problem shouldnt exist, but it does. Again forget the business/professional top end their fine.

 

Im very clear sea side country WA is in big trouble.

 

Only solution as I said before: Wages to double or property to halve. Alternative: A big % will live with negative equity, with Banks as Landlords.

 

Never forget historically property rises 7% a year, compound that and it doubles every TEN YEARS, NOT DOUBLE one year then rise 50% for the next 5 years. Thats basically whats happened in this neck of the woods, so I suppose if property didnt rise for 20 years things could right themselves.

 

And the esate agents still say: This is only a temporary blip, normality will return in the Spring!

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