Australian Property Speculators can no longer keep their heads in the sand with Today Tonight featuring a story on the impending Australia Property Crash reporting experts views that some suburbs are at risk of colaspsing. It reports that America’s Sub Prime crisis trashed house values. What happened there is happening here – Negative Equity. John Edwards, CEO of Residex says we are heading for the Perfect Storm.
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Not in to the mainstream media thanks to blogs like this site, but this really made my jaw drop. Shyster finance/RE/banking practices, and crap loads of stupid people. Such a dangerous mix. OK granted the bus driver in that vid could have been from a wealthy family, or inherited lots of money. I couldn’t help pondering though, a bus driver? And a $1.5 million dollar purcahase? On borrowed money?
What Australia is coming to is what the world has come too.
Keep us posted Who Crashed the Economy, I think you’ll have many more postings coming in a shorter time space.
What can be said, that already has been said 100’s of times over.
House prices are overpriced and whoever buys in the short term will lose some as already proven. The next 5 years you will see a decline in house values as people catch up to their personnel debt and the cost of living. Started in 2010 and will continue as has the start of every decade
Why 5 years?
History shows that at the start every decade their is about a 5 lag on an average, before growth kicks in
We are in the beginning of a 5 year lag but the growth this time will be minimill if any, as world events are much harsher.
God bless America and the Euro as without their strength things are going to be different this time on. China again is a drop in the ocean compared to the effects that these nations will have now and forever on Australia.
Don’t be mislead by real estate agents some of them, if not all are not leading to a good investment. They are leading you to their bank balance and most of them are not trust worthy. WAIT DON’T BELIEVE WHAT THEY OR WHAT THERE REAL-ESTATE SITES TELL YOU. LET HISTORY BE YOUR GUIDE.
If you understand the above rule you will wait, as the market will drop further.
As they say, “HISTORY REPEATS ITSELF” and yes it will! But with far greater effects this time.
This is great news! What a relief.
Kinda ironic how slanted towards ‘Investors’ this story was.
What really concerns me is that when (not if) unemployment climbs in Australia, the time it will take to recede back to ‘full employment’.
When the GFC hit and we all sat back and watched the US losing 200,000 to 500,000 jobs / month (2.6 million in 2008 alone) I said to myself I could not see how these people will be re-employed any time soon (I’m talking years). The biggest hit areas were …. wait for it
Retail
Construction/Building
Temporary workers
See http://news.bbc.co.uk/2/hi/7820164.stm
A 40 – 50% fall in prices would be good for first home buyers. They would only need to borrow 1/2 as much and save 1/2 as much as a deposit. Their ammortisation rate would be 1/2 as much on the same loan duration or alternatively roughly 1/5th the loan duration (5 – 7 years) if loan repayments were made at levels consistent with present prices. They would be a sound financial footing to start families and make discretionary spending out of income. They would have a higher savings rate.
This should be Government policy
@Free Willy
I can’t really see us returning to ‘full employment’ for decades. It’s taken us 30 years to get this much debt. I would have a guess that the housing market will continue to fall for 10 or more years. But when house prices finally reach back to the equilibrium point, it doesn’t mean households will have fully de-leveraged – No, they will have large sums of negative equity that they will be trying to pay back.
We have brought forwards years, if not decades, of spending. I also doubt if we will have another decade of spending beyond our means like was the case in 2000 to 2010.
One example is the First Home Owner Boost Recepticants. They have probably paid twice too much for their homes, locked that it with the bank on 30 year mortgages, so this is one group of people, unless they go bankrupt, who will not be contributing to consumption (and hence jobs) for probably 30 years.
@Tom
As ugly as it sounds I have to agree.
The way I see it, the only thing that would keep the ‘party’ rolling is
1. Significant increase in wages (inflationary) to catch up with the cost of living
2. A continued source of cheap and loose credit (unlikely)
The time has arrived and all the people that get crunched over the next 5 years can thank K rudd and G gillard for pumping the market up back in 2008-2009 by spending the nations hard saved money and putting us into huge debt to prop up over priced property. I can only hope that the people of Australia see what they did back then for what it was (FN stupid)and get rid of the ship of fools at the next chance they get! If they had of let Australia have a small recession back then the cost of living would be much better now, but they went ahead and set us up for the mother of all crashes! I hope it’s not as bad as I think it could be but I know it ant going to be good for all the mums and dads that have been spending money because they think that the value of the family home will save them if they need to sell? that boat has now cast off. Australia is about to face the fact that we are no differnt to the rest of the world and our debts have to be faced up to!
Seems mining wont save us. LMAO.
Hardest hit areas are Qld and WA…..The mining centres of Australia.
I’m just waiting for the panic to hit fever pitch. I’m guessing around March 2012.
@2bob – this goes back much further than the current government – the Howard government sat back and let this happen – booming house prices are political gold and the Libs let this happen – as a gen y choosing between family or a home I blame Liberal 100%. Labor certainly haven’t helped – but a housing crash on your watch is political suicide so they took the self preservation route.
Interesting times. I agree that the Government certainly didn’t help the situation with it’s 2008 stimulus measures. But I don’t think they are entirely to blame. We the people are primarily to blame for any future collapse. Here are my reasons why:
1. For blindly accepting massive amounts of cash from the bank with out any regard for the potential consequences.
2. For living in denial (or just not caring) about how markets actually work.
3. For having the audacity, arrogance and ignorance to believe that we are inherently ‘different’ from the rest of the world.
4. For being naive enough to actually believe that a few thousand jobs in the mining sector (and associated infrastructure) will be enough to save 20 odd million overly indebted Australians who have nothing to do with the mining sector: Matty – you hit the nail on the head with your reference to QLD and WA.
5. For allowing jobs that we need to sustain our future to be off shored indiscriminately.
6. For shouting down, laughing at, or ridiculing anyone who dares suggest that we may be on a road to complete economic disaster because of our irresponsible greedy, self centred, actions.
My partner and I were visited by a major bank broker in 2008. In our late 20’s at the time, we both had a full time job earning about 120k between us. I cant remember the exact figure, but they were willing to lend us about 800k with a 5k deposit right then and there. At first I thought the broker was joking and I laughed; he wasn’t joking. Needless to say we didn’t enter into the market and I believe it’s the best move we could of made at the time. The whole thing has got completely out of hand and were all to blame for allowing it to happen.
You make your own bed as they say.
Aren’t the banks great, load em up on heaps of debt, inflated valuations, big stamp duties thankyou. It’s a win win for the banksters and their government soldiers.
The tide has turned and now the real fall out is starting. Evil Carbon dioxide to come, stay tuned for the final bullet.
Yoda say – If the objective of the government was to crash the economy and destroy the peoples wealth and power they are doing a fine job. Congratulations on the execution strategy banksters.
Where’s Ralph? He might be interviewed on http://www.infowars.com with Alex Jones. Ha
We now have grown men crying like babies on national TV as some loan shark offers a fresh prawn on the hook, lets solver a debt problem with more debt. Kickin it down the road is the answer?
Has anyone noticed that there seems to be a real push by the Banks towards getting customers to consider investment properties. There are commercials on TV telling us how easy and cheap it can be to own an IP, also noticed full page advertisments in the Adelaide paper pushing the same barrow. I guess they are trying to fill a bit of a gap that is missing now with the drop off in first home buyers.
Yeah the Westpac TV ad for Investment Property is quite blatant and sickening.
The system is simple to understand. The banks control (and pay for) the government (it doesn’t matter which party/parties). We will call this team (the banks and the government) the Y team. You and me and ordinary people play for the Z team.
The aim of the Y team is to get the Z team into as much debt as possible, create huge inflation (to secretly rob the Z team of their savings) and take as much tax from the Z team as possible for themselves. The aim of the Z team is to try to avoid getting into (personal) debt, protect their purchasing power being eroded by inflation and pay as little tax as possible.
Standard tactics used by the Y team are asset bubbles to lure the Z team into debt and make poor investments. Implementation of new disguised taxes (i.e. carbon tax) claiming to be beneficial. Printing of money (United States) which robs the middle class of purchasing power to pay off the debt of the government in diluted money. Borrowing unnecessarily for crap (pink bats, schools program, carbon tax handouts) to further indebt us to the government for taxes.
Who do you think is winning? How well are you playing the game?
Cogitator that was a salient post. I’ll add to it:
Y Team doesn’t have to try very hard since human emotion in the Z team tilts the game in favour of Y. There are no rules for Y team, only for Z team.
Z team got to pick a few players on Y team so Z thinks it has the upper hand.
But Z team is also busy fighting among itself so its too busy to notice that there is no referee. Y gets as many free kicks as it likes.
If you’re on Z team the only winning strategy is to bribe people on Y team who know when a free kick is going to be awarded and to whom and how the rules will be varied on for any given game.
If you don’t know how to play the game its ok to sit on the sidelines and bet against Team Z. Team Z is generally stupid and spends time chewing the grass on the field. For some on Team Z chewing grass and getting fat is a nice day out if they aren’t made to run around the field. What they don’t realise is that Team Y is sending them to slaughter.
There is a simple solution, “not for profit banks”.
When virtually all of the loan book (an hence revenue stream) for the big 4 comes from residential property (investment/speculation) its in their interests to create churn as their business is now commission and recurrent based. They also have teams of “sales” people that didn’t exist 20 years ago… perhaps that’s because they are publicly listed and answerable to the shareholders…
@Lynds
You blame the Howard gov for paying off the debt from the prev Labor Governments and getting Australia into the fantastic fiscal position it was in and let K rudd and Gillard off the hook for in one term taking us from 60Bill in the black to 80 bill in the red! my god if people vote with that sort of logic this Nation is totaly stuffed good luck when you loose your job because thats where we are headed under the Labor Gov!
Current topics of interest;
1. increased insolvencies and phoenix activity,
2. redundancies,
3.super not being paid,
4.ATO debts from SME’s out of control, Governments getting bigger and bigger (leach)
5. Carbon dioxide tax WTF ! Does the science stack up?
6. Floodlevy and with no increase in threshold for marginal tax rates for the year.
7. Cost of living through the roof.
8. Retail in depression,
9. Commodity prices falling, China falling over itself
10. US defaulting for years,
11.Europe bankrupt and sliding into depression and Japan in a depression.
12 Unemployment to rise,
13.Interest rates to be cut
Does this sound like a depression? Lets call a spade a spade
Lots of really good points made in the comments.
I like the idea of not for profit banks. Hasnt that already been done before though? I guess they get squeezed out in the end..
Someone mentioned mining jobs, and how few there are.
I never understand when we hear about how mining is pulling us along. I just dont see how the wealth is flowing to Australians? Most of the mining companies are overseas owned for one.
129,000 people work in mining.
Whats that, 1% of the workforce? Even less?
Doesnt add up for me.
Also, interesting article here, calling for an interest rate drop.
http://www.businessspectator.com.au/bs.nsf/Article/RBA-Glenn-Stevens-consumer-spending-interest-rates-pd20110727-K5TAN?opendocument&src=rss&WELCOME=REGISTERED%20OK
Read the comments, nearly all disagree with the article, I was one.
I guess, Aussies did not learn anything from US Real Estate bubble.
Adelaide W.D.
Would it be true to say that most mining companies are owned by share-holders? And aren’t a lot of share-holders everyday people – Australians even – trying to save for retirement? Or super funds/mutual funds investing on their behalf?
Ellen,
Don’t know how credible this is. If it is true (I think it is but that’s me), 83% of (not)Australia’s mining industry is 83% foreign owned.
http://au.news.yahoo.com/thewest/a/-/world/9753059/australian-mining-industry-83-foreign-owned-study/