Credit rating agency Fitch has placed Australia’s banks on a negative credit watch, citing an increase in macro-economic risks stemming from the property asset bubble.
Fitch indicated a key risk for the banking system was the banks’ exposure to the overheated property market. Of special concerned is strong increases in household debt levels relative to household disposal income – at a time when Australia’s household debt relative to household disposal income sits at a staggering 187 per cent, one of the highest levels in the world.
“Household debt is high and rising relative to disposable incomes, making borrowers sensitive to changes in the labour market and interest rates,” Fitch analyst Andrea Jaehne stated.
Pressure from multiple fronts has forced Australian banks to hike interest rates in recent months following upward trends around the globe. But with significant levels of household debt, Australian households are going to feel the brunt of the rate hikes, more so than other countries with much more prudent household debt levels.
Fitch also expresses concern about growing job losses. Abnormally high housing costs has forced wages sky high in Australia, making the country a high cost economy and one struggling to compete in a global free market. This has caused the closure of complete industries and accelerated the offshoring of an increasing number of jobs, the very jobs required to service the high levels of household indebtedness. Essentially, Australia has a significant misallocation of capital towards unproductive markets such as housing, and at great expense to productive sectors of the economy.
Investor loans surge 21.4 per cent
Adding to macro-economic concerns is today’s release of housing finance commitments from the Australian Bureau of Statistics. Despite efforts by regulators to curb lending growth through macro-prudential controls, the value of loans to property investors surged 21.4 per cent over the year.
It’s more mounting evidence just how ill-equipped Australian regulators are in engineering a controlled, safe landing.
» Fitch Ratings turns negative on Australian banks – The AFR, 16th January 2017.
» Housing investor loan approvals surge 21.4 per cent in a year – The Sydney Morning Herald, 17th January 2017.
Banks, governments, housing associations, real estate agents, greedy politicians, speculators, etc. are struggling in the sinking boat.
What people can do to survive the coming crisis, which is another name of the property bubble curse?
I have lived in many countries, and found Australia is the only country allows foreigner to buy propeties. Only for new apartment? That effect apartment price and other houses also.
AUS gov. acts too slow, basically doing nothing. Also people in Aus dont act much, just whinging.
Aus is going nowhere,just feel like being rich due to the housing price gain, but it is just bullshit as all know.
This country,,, no technology, expensive service, super expensive housing,,,,,easy going,lazy, people, no engineering,,,
Do you really think you can compete against countries like uk, usa, china,or japan.? Sorry to say but the engineering, technical level in Aus is lower than even Malaysia or Indonesia…
I opened this article and there was an add spruiking positive cash flow investment properties for sale.
I clicked on the add and for only 800k I can buy new units in a soon to be completed complex in Melbourne. So not positive cash flow yet, but soon they promise.
I guess I could get the same in Sydney and an even better bargain in Brisbane.
Google add sense was off target on this one.
Must be a big day for positive cash flow property, the second add is for dual occupancy houses with a guaranteed $10,113 a year income, some of which is tax/negative gearing/depreciation, so not really positive cash flow.
They will give you 92% of the stated rental income if the property is unrented 6 weeks after handover starting the 7th week.
@4 Mark ,
Very good point . At $10k rental income per year , how many decades does it take for investment to be payed . Don’t forget to deduct rates maintenance ( and strata fees for apartments ).
@Admin ,
Workers wages have been stagnant here for thirty years . Maybe management has enjoyed the profits . Mechanical workshops and plumbers may charge $100 per hour but they pay the workers $25 in the hand if they’re lucky . Carpenters may charge up to $50 /hr , but this includes maintenance and operating costs for insurance super vehicle tools taxes . When you deduct these
dollars the tradesman is lucky to be making $20 per hour ( in US dollars that’s $13 per hour ).
Globalism ( communism ) and free trade is driving wages down not up .
The wealthy are making such obscene profits that it is distorting “average” figures .
Between April 2015 and January 2016 credit commitments for Investor loans reduced by $3.5 Billion.
In the same period credit commitments for Owner Occupier loans increased by $2.8 Billion.
Now, does anyone care to tell me what they think house prices would’ve done if the Owner Occupier credit wasn’t available?
This drop in credit commitments for investors wasn’t even this evident during the GFC.Who the hell sold out in this period? Only thing I can think of was it may have been Baby Boomers doing a pump and dump to unlock capital form their investments.
@5
I don’t think it’s the super rich making the profits – no one knows one so we imagine they do.
The issue here is the world that went from 5 billion people to 7 in the space of 20 years – and your beloved Indians (if you are English speaking – the rest of us don’t quite belove them) are the main cause.
Australia importing immigrants like crazy and making the world believe there is endless space available doesn’t help.
Shoot … absolutely nothing new here. I mean nothing.
It’s been said your ‘black swan’ reappears when three changes in the weather really kick in.
One new one on the horizon might be the high fuel prices, relative to the low oil prices. What’s going on there?
Maybe a food shortage? Russia (grains) a few years back played a part in the Arab Spring.
20’C above normal in the arctic?
A spike in the interest rates? Surely we can’t kick that can too much further down the road, or can we?
We haven’t had a war for some time?
Culturally weird shit going on as well. The image of the rugged, hard working, clever, adaptable, trustworthy Aussie is sadly long gone. Replaced by … ?
The fella (55) at our local hardware store always complains to me about lads in their twenties. What he fails to see is the young men he shits on are about same age his son would have to be. We were all too busy for the last 20 years buying stupid big over priced poorly constructed homes. Is it any wonder there are so many angry young men in our country.
And over-regulated? Australia is shocking. You practically can’t pick up a hammer without a permit from council. Shoot. No wonder we are all so useless.
And don’t start me on automation!!!
Socially it’s practically taboo to talk of such things at a BBQ. Acceptable topics include reality TV, celebs and the latest apps which promise to bring unimaginable joy to your life and instead make you dumber by the day.
Sorry bout the rant? Am I really off topic?
Len
@56
Yes, the rates charged by business are huge, and only a small fraction hits the workers. How do I know? I own a business. I’d love to pay the staff more, but the reality is there are two main inputs stopping that:
A: Cost of business. As Len says, we are so over-regulated. And regulation just protects the cowboys of the industry. Nothing more, nothing less.
B: Customers pushing prices downwards. Outside the construction sector, prices of almost everything (except monopolies, power, water, insurance etc) are falling or stagnant for years.
Most people think business is greedy and not passing on all these price hikes, but just check ASIC, small business is collapsing at rapid rate: Try getting a business loan from a bank-It’s impossible.
I had a plummer at my place he seen my work ute, asked if I owned it then said it must be great to work for yourself, to which I said ‘you’d be earning more than me’… or so I thought. $21p/h is what he’s on working in a large company, and that’s the standard for the trade. He says it’s unbelievable that people think plumber are well paid, same for electrician’s, one of my biggest customers are electricians, and I see their payslips, $21p/h… again, this is the pay rate for the industry.
Sure there are owner operator tradies that are charging like wounded bulls, but as across the entire economy, most are far from comfortable.
@Len
A wise man told this years ago:
Poor people talk about people (most evident know with social media)
Middle class talk about events (footy, cricket, concerts, sport)
The rich talk about ideas (new services, products, how to improve their businesses)
And I reckon that’s one of the most accurate rules I’ve ever heard. Seriously, what has anyone got to gain from following the grotesque Kardashians??? What has anyone got to gain from talking about this weeks up coming footy match??? Talk about how to stop bleeding cash in your business to a competitor??? Now you’re making progress!
I have been waiting the collapse of housing since 2010. I had a colleque from Pakistan who is a engineer but doesnt know anything about engineering, dont know how to get the qualification and how to got jobs.
Anyway he had been keeping buy properties and renovateed them and rented them. I remember he had about 20 houses in inner west of sydney.
I think i and my other coworkers have worked hard but all ended up with no housing and have possiblity of living houses not belong to us rest of our life.
Yes. The pakistan who doesnt contribute any Aus tengineering became so rich and live like a king.
I may jealous him, but what the hell.!!!
@8 Lenno , sounds like you’ve been reading Nassim Taleb, and no you’re not off topic, the things you speak of ring true for me and many others- don’t talk about it. This stifled mentality is just denial, gloss over the facts, who cares – were the lucky country. Many are insular , apathetic, risk blind and a combination of both desperate and lazy (I don’t even know how you get that but its a thing). This is compounded and reinforced by our arsey economy that never falters, especially on mortar-it just keeps going up -so no one cares to question it, its a confidence game and we’ve got no reason to not be confident, we’ve only ever seen it go up and the generation in control is perpetuating the whole thing as they move into retirement..they need buyers to retire.
I have perused the archives of this site, read almost every article. People have been calling a crash now on here for over 6 years, it hasn’t happened. Not a single person in this country wants to be blamed for slaughtering this $ 6.2 trillion dollar sacred cow, no policy maker ever wants to go down in history for that.
So here we sit, waiting… whilst the government opens immigration, increases quantitative easing FHOG, supports banking deregulating and keeps a flawed tax system…all done right in front of our eyes which were all OK with because were all either too invested or blinded by the propaganda of it (Read up on the Australian Media reform legislation AKA Rupert Murdoch Bill).
As the prices rise, the complaints start, the FHOG goes up, the rates go down and everyone grins says “Thanks Mal” and buys in. Meanwhile, Debt service ratios are off the chart but no one talks of it.
I have come to the conclusion this will go on and on ad nauseum until the supply of foreign debt is cut. There is no way something internal to this insular country is going to allow it to collapse, our smug denial and hubris is too strong. Only once foreign credit is cut (or at least the cost of it increased substantially), will we see the true housing economy emerge.
Replaced by … ?
Replaced by an image of greedy aged property owners luring unsuspecting immigrants by advertising lifestyle – only so they can rip them off for rents (and for spare rooms this time, not even houses or flats) – to satisfy their vanity.
BBQ – you can’t really talk about anything of substance – someone spectacularly shortsighted told Aussies you CAN blame people for being negative (as if that helps at all – except to make the blamer feel they have been absolved of responsibility – so they can not change themselves). Anyhow – you can’t mention anything grim because people are told they can blame you for being negative, as if noticing is your fault – so you can only talk about shoot that doesn’t actually exist (Aussies are also not very good at not talking, it is seen as rude).
@ .6 Jamie
“Between April 2015 and January 2016 credit commitments for Investor loans reduced by $3.5 Billion.
In the same period credit commitments for Owner Occupier loans increased by $2.8 Billion.”
Seems to be a correlation between the two and I know that many speculators reclassified their loans as owner occupier due to the new rules coming in requiring higher interest payments.
Found and old article about it:
http://www.news.com.au/finance/money/investing/sneaky-property-investors-are-lying-to-the-banks-to-get-lower-interest-rates/news-story/935355220dfe46c99b3aaf398c6e7686
@ Bubby 14, I thought of this as I remember hearing something in the media about it but surely it wouldn’t make sense. Wouldn’t a P+I loan repayment be far more than an IO payment, wouldn’t think it would be a good investment strategy?
Also, regarding my comment on Foreign debt access being the party stopper. I also believe that if it meant political favouritism, the government would act quickly through policy to turn this thing on its head without batting an eyelid. As I said, no one wants to be the one blamed for slaying the $6.2 Trillion sacred cow. However, a generational swing with a paradigm shift big enough to influence the power of who is in charge (and thus the flavour of the month changes) then the polies may dance to it, for their own interests ofcourse. The problem is, the people/masses (including politicians in power)are not this , thus the boomer/generation jones types and early gen Xs perpetuate the inflation of mortar to no end.
@11 Jamie
>I have come to the conclusion this will go on and on ad nauseum until the supply of foreign debt is cut. There is no way something internal to this insular country is going to allow it to collapse, our smug denial and hubris is too strong. Only once foreign credit is cut (or at least the cost of it increased substantially), will we see the true housing economy emerge.
Internal Irrationality has fueled the bubble and it is unwilling to stop it. External rationality will be the cause of the collapse. That could be any time between next Tuesday and 10 years from now.
Inflate the mortar…at any cost, dare no one touch the 6 trillion dollar white elephant.
http://www.macrobusiness.com.au/2017/01/coalition-planning-massive-first-home-buyer-bribe/
When the Australian economic crash comes it will be epic and go down in history like the ‘Tulip Bubble’. Imagine if you have a duplex in, say Revesby, worth an inflated $1m and you have a mortgage of $800k and then the value drops to $500k.
What is becoming of this once great country of ours?
Australia before:
> Nice place to live.
> Not too crowded.
> Broad based economy including a decent amount of employment within manufacturing.
> A family with an average income could afford an average house in an average suburb.
> Great successful Australians were talented people who created, invented, and drove industry forward.
Australia now:
> Stressful place to live.
> Too crowded, especially Sydney. Immigration diluting the standard of living of existing population.
> Growing gap between rich a poor. Or more specifically, growing gap between those holding property and those not.
> A family with an average income would struggle to afford a crappy house in the worst suburbs. Husband + wife must work full time and pump every $$ they earn into mortgage.
> “Great successful” Australians are measured by the number of investment properties they have.
> People in their 40’s + generally have an inner smugness about how they ‘got in’ to the property market years ago and their house is now worth 10+ times what they paid for it.
> % of GDP coming from manufacturing is about 0.0001% and getting worse. People seem to have an arrogance against Chinese made goods, but don’t seem to appreciate that at least they are making things. We here in Australia are making almost nothing anymore. We are just a nation of middle men who buy and sell.
> Intelligent young people starting to look overseas for opportunities — except doctors, nurses, and anyone involved with real estate (bankers, solicitors, mortgage brokers, tradesmen etc).
Australia’s #1 priority is to perpetuate a property bubble. We all need to get used to it. Its so deeply entrenched now that I honestly believe they will relax immigration rules in order to perpetuate it further. There is no lack of Indian and Chinese millionaires who would happily come here given the chance.
Oh, and one more thing to add to this whinge of mine… If Australia is all about property obsession, I could live with that if we made world classes houses at reasonable prices. But we cant even do that. Government restricts land supply (shitty 440m2 blocks 10,000 miles from the CBD, adds taxes, building quality is poor, and prices are eye-wateringly high.
I don’t know why one would hope for the sacred cow to be slaughtered. Just spoke to a close cousin who bought a flat for 1.4M. I have that much saved up – and would not in a trillion years pay it for a unit (maybe I would a third of that, at most). But short of becoming a slump like India, the price growth can’t come from anywhere except higher salaries – which Shmalcolm opposes.
As far as I go, prices up is all good – need this for another 5 years at most to retire at a less expensive place (never having owned realestate).
Just don’t think it can be relied on to deliver, that’s all. Australia simply isn’t smart enough for that.
The cow shouldn’t ever need slaughtering, simply because it should never be allowed to become sacred in the first place.
@admin It is ridiculous to think that investor loans are up 21.4% YoY. This is a huge number and it is hard to put into context. This should be investment money being placed into productive assets not speculative investment that doesnt produce anything for the economy. Refer to what has happened in NSW over the past year.
https://www.buildsydney.com/land-value-nsw-increased-150-billion-2016/
From 2015 to 2016 land values in NSW jumped from $1.35 Trillion to $1.5 Trillion jumping $150 Billion in 1 year. Тhis rise in land value has imo been influenced by the major jump in the amount of loans and investors outbidding each other for the same piece of land.
As the article says our household debt is sitting at 187%, just how much higher can it go?
With the government now considering making owner occupier loans interest payments tax deductible and with still interest having a further 1.5% to move, we may just well be in for another spike in 2017.
I really do feel for the younger generation, a house is a necessity not an investment.
@20 Jon, I agree it’s a total rip off here in OZ, especially if you compare what your money can buy say in Europe:
http://www.news.com.au/finance/real-estate/sydney-nsw/these-10-french-castles-are-cheaper-than-sydney-units/news-story/001b1d96b9e9fa99cbdd4d181142d49f
Having seen the number of exotic sound churches and supposed agencies that rent the whole floors in Sydney CBD (while working as a consultant visiting clients around town) – what is the thought on property values simply being inflated as a front for gov. activity when needed?
I know it sounds paranoid/conspiracy theorist-y – but if you think about it, the market is anything but transparent, so the gov. could always be buying enough for published prices to keep going up – anything sold below new highs simply isn’t reported in value.
The banks could be doing this too – and it would come in at a percentage of the interest they collect – again, there’s always an eerie silence to any questions of the sort…
@ John
https://mishtalk.com/2016/01/27/financial-engineering-chart-of-the-day-fed-balance-sheet-vs-sp-500/
Biggest home owner in USA? The fed….. Enjoy
@Matty
It actually makes sense when you view it like that – the banks are the owners (as they formally are), and they keep upping the price – so Australia gets sold slower and for more money rather than for less (seeing how there are always immigrants willing to pay whatever price is set).
So without the demand control, it really won’t stop – until the banking mechanism crashes (either by destroying the dollar or one of the big 4).
I somehow expect this to play out in the next 3 months – the world has changed too much since the GFC/2008 for Australia to merrily continue milking it the way it has since 1990s.
@ 24 John, care to elaborate?
Looks like bubbles are implemented in first place to debt the confident believers & cheat the savers. Then it is burst to slaughter the indebted believers & bail-in the savers again. In this cycle, most population is punished.
@24 John: “so the gov. could always be buying enough for published prices to keep going up”
Everyone ignored my question in the past: What if our govt. is behind the so called chinese money through our major banks already present in China?
My prediction how the housing market will turn out:
https://youtu.be/cd4-UnU8lWY
@John
What that chart shows, is how the FED printed cash, forced it on the banks (by law), which lent it out for property, then sold the loan(asset ie. the house) back to the FED, so the bank ends up with cash for nothing.
Banks know owning property is a dud deal, so where do they put the cash? In the stock markets, which they pump and dump at will.
So FED ends up with a huge balance sheet (ie. houses, which it simply printed to own) and banks get cash for nothing, which they then play games with.
While main street is in debt to their eyeballs, paying interest for loans that were simply printed.
So now the fed has houses, and huge interest income for nothing. They actually did nothing and got rich.
Main street works harder and harder and harder….
This system is so retarded, that you can’t make this stuff up.
Henry Ford said if people know how the banks work there would be a revolution by morning.
Einstein said compound interest is the greatest human invention: Those who don’t understand it, pay it, those that understand it, earn it.
Do not for one minute think that central banks and bankers can’t see or know that massive asset crashes are coming: They CAUSE them. They may not control the exact day, but they control the timing.
When you see these guys on TV, look at the glassy eyes they have, they are liars. When they say USA is in recovery, the only thing that’s recovered is their ability to steal via fiat currency.
But their days are numbered: The peak oil guys say that for each unit of energy we mine, we are spending more energy to get it. So, yes their theory does show that at some stage oil use will be a problem.
Well guess whats happening with the currency system? They have to print harder and harder to get the same amount of GDP growth. They are printing at rates that are approaching the limits of being able to be paid back: Once the printing exceeds the ability to pay the interest they system MUST collapse.
Through 2009 to 15 the FED printed 3X more base currency than already existed, with interest at ZERO and barely got ANY GDP growth or inflation. If you don’t understand that statement, study it hard: They quadrupled base currency, with interest at zero and couldn’t get GDP or inflation to accelerate.
Expect 2009 to be walk in the park compared to what’s coming. The maths guarantee it will be unlike anything in living memory.
Australia was shielded from the world for the past 30 years thanks to opening our economy, floating our dollar, removing tarrifs, a strong ag sector, the mining boom and a rapidly growing population that was generally socially accepted: All that’s changed in the last few years: We are totally exposed this time.
The RBA figures show that companies aren’t borrowing.
Non-mortgage private debt isn’t growing.
So most people have worked out either by choice or via force, that they are at their debt limit, and business isn’t doing any capex it doesn’t need to.
The conclusion? Only a fool would borrow heavily in this part of the cycle.
And you know what they say about a fool? A fool and their money are easily parted.
@ Matty 30 ,I’m going to have to digest that slowly. I read something a while ago stating China and Russia are moving to/are on a gold backed currency..heard of it?
Also, recommend any books for me to read?
I think the bubble won’t burst until one of three things happen. 1.) Interests rate go up. 2.) Unemployment increases. 3.) Immigration rate greatly decreases.
1.) & 2.) Are related to owners being able to pay back their loan and 3.) Is related to demand.
Regarding interest rates, the only way I see them going up is if the RBA has to keep above the fed to prevent capital flight out of Aus. That being said even if the RBA cuts and the USD greatly appreciates against the AUS the bank’s might not pass on any cuts due to them relying on offshore markets to fund mortgages here. I’m hoping we will have an idea of how this is playing out late this year.
From what I understand job growth is benign and underemployment is common. A potential cause of a housing slowdown going forward?
Immigration slowdown will require political pressure or a recession to discourage people coming here. I think winds of change are slowly happening with Hanson’s rise.
I’m not confident that the bubble will burst this year, i hope it does and I am amazed that it has lasted this long. Such a shame my generation has been cooked for the greed of investors. The way I see it I have I could have stepped into the market 5 years ago, likely for a 30 year long ball busting loan. If it busts in 2 years and I can have a 10 year mortgage I’ll be 13 years ahead.
No point in having a fear of missing out when the loans are 30 years in duration anyway and when economic headwinds are coming.
@31 Jamie
Yeah, it’s complex, and no-one (outside the rothschilds??) knows how it will play out. All you really need to know, is that as long as the people (whether by choice or ignorance) have faith in the printed dollar, the system can kind of function. But the maths will finally control it.
As for China and Russia, neither operate a transparent operation. But hey, we can’t even get the USA fed audited, and last I knew, Bullion Baron was trying to get the Aussie gold audited and that wasn’t looking good either.
What we do know, is that the talk of Chinese currency becoming the world trade currency is total trash: Their bond and money markets are just not big enough or transparent enough for banks to be sinking billions/trillions of dollars into, regardless of how easy banks earn it. Some things are just not going to happen regardless of what ‘experts’ say. Just like three rate hikes in the USA in 2017, it just can’t happen, the big money markets would implode. Not a guess, a fact. Anytime someone says three rate hikes in 2017 in USA, you’d spend your time more wisely by picking your nose.
So for the foreseeable future, the USA dollar is the reserve.
Books? The creature from jeckyll Island is a cracker: Funny name, serious topic.
I like Mike Moloneys hidden secrets of money series: Yes he sells gold/silver, but the content, and the way it’s delivered are great.
Nial Furgusen ‘Ascent of Money’ is brilliant: ABC aired it after the GFC, I bought both the DVD and the book from ABC, I’m sure it’s still available somewhere.
In terms of general investing, I scabbed off my dad, ‘The Essay’s of warren buffett’ it’s pretty old now, someone deconstructed his annual reports, and collated them, it’s brilliant: There’s stuff in there that they just wont teach at uni.
The rich dad/poor dad stuff is vague and broad: But in terms of setting out how housing/loans etc. are assets to the bank, not the interest payer are pivotal.
It’s a weird world, where individuals are hard to predict, but groups of people are easy. There’s certain things that are just set in stone, because it’s set in human psychology. Things like 5% will be rich, while the 95% will be best part of poor. These ratio’s remain the same regardless of country, language, economy, and time.
So what you need to know is that ~4-6% of Australian’s (or anyone) will retire financially independent of the government. That means 94-96% of people need money from the government in their retirement….. What this really means, is that despite living in one of the richest nations on earth, with some of the highest wages anywhere on earth, 95% of people still completely cock it up over a 45 year career.
Think about that: Over a 45 year career, 95% will NEVER have enough to not need the government…..
So how is this important? Only 1 in twenty people are worth listening to… Seriously!!! So now you need to ask, so of the 20 closest people to me, which ONE is the one to listen to??? that’s if there is one in your group worth listening to……
See the dilemma here? It’s very, very hard to find anyone worth listening to. But the internet has made it far more easy: 25 years ago, a site like this just didn’t exist.
Bonus tip: Another must read: Millionaire next door: proves the people worth listening to, are far from obvious. but they’re out there.
@30
Matty, the glassy eyes unfortunately is the core part of culture now – Anglo culture is very female based (queen rather than king), and females lie for advantage, it’s a lower cost weapon, they don’t push back with force since they don’t have it.
Reagan lied to Russians about the Star Wars while behind their back rigging the oil prices down so Soviet Union would go bust, and that was celebrated as a resounding success – so of course it filtered down to the media and your neighbour. Heck the same method is being tried again today.
I consider corruption to be destined for self destruction, so it doesn’t bother me too much – but the number of times I’ve been stabbed at the back by liars in Australia is staggering – as soon as you’re better than the top dog (the female version, really) you get bitten – and everyone just nods in approval and understanding, as if men live on another planet.
Hey,
And just for change of pace – why are we all such ‘glass half empty’ kind of people here anyway – it’s not like we’re not living the dream and should be all ecstatic about it, right?
Just imagine – the house prices will continue to steadily grow – if you’re really that pesky thinking type of person and want to know how – well, the advances in medicine will make people live 300 years, so imagine the mortgage possibilities then – you could be paying off a house for 270 years – after all, housing is a basic human right everywhere except in the human right celebrating Britain (and who can Australia look up to now that US of A clearly isn’t the force for good they all dreamed of…)
So, steady growth in housing prices, equity releases for existing owners to comfortably live off – and the young ones, well the 300 years of live is a reward in itself, they are already privileged big time compared to their poor millionaire-stole-it-by-silence parents.
And politics, reality and similar heavy subjects – ah, if we could all just avoid those wouldn’t the world be such a happy oh-my-god-my-house-is-now-worth 10 million place?
It’s all in the mind, right?
What do you think of the idea that the “about-to-burst Australian housing bubble” is partly a conspiracy theory?
For example, sure Australian houses are expensive, but not necessarily compared to other developed nations. Especially if we factor in price per square meter, Australian houses can be considered relatively cheap for their size.
In addition, Australia is a wealthy nation, and therefore a high cost nation. It is also a desirable place to live.
I agree that negative gearing is creating inequality and pushing up prices, but apart from Sydney/Melbourne, the price of Australian housing is quite cheap per square meter when compared with prices overseas.
Perhaps the rapid growth in the past 16 has given people the false impression that Australian housing is overpriced, because before that housing in Australia was ridiculously cheap. We have also had enormous economic growth since then. 1 kg of rice in 1999 was $1. Now it’s $3-$5.
Oh I see…
So given a hypothetical nation of coin flippers, statistically, the vast majority will approximate the mean; That is most will basically flip approx equal heads and tails. Bell curve.
But some small percentage in the cohort (any large cohort) will flip continuous heads.
Should we “listen to” them in regard to coin flipping?
Similarly, any nation will have the uber-rich, doesn’t mean they are worth a damn to listen too.
@36
You say “For example, sure Australian houses are expensive, but not necessarily compared to other developed nations.”
I beg to differ,
Haven’t you been listening to the news for the last 2 days?
It’s official now, Australia has the second most expensive housing in the developed World, right behind Hong Kong.
Sydney is now more expensive to live in that London or New York.
Even 70 km out of Sydney a shack house is $900K now!
Care to provide examples oversees prices? , I did in comment @23
You also say “In addition, Australia is a wealthy nation, and therefore a high cost nation. It is also a desirable place to live.”
I think you must be stack in some sort of time loop 20 – 30 years back in time.
When you consider:
Child care,
electricity, and the news just in (Ch 9), petrol another item that makes to the infamous most expensive in the World list.
Not to mention overpopulation in major cities without infrastructure that can cope with it.
@27
222 Pitt St in Sydney CBD – apart from Wesley Centre, which is the strange non-for-profit something with lots of very expensive space in the CBD, at least 3 full floors were unifying churches of vaguely universal denominations (with very few visitors and even fewer staff – but fully rented and I assume paid for).
Ernst and Young building was the same (international square) – two floors with meeting rooms and the name retained, the rest was vaguely governmentish sounding but obscure agencies – and it is a known fact in commercial property circles that too much space is available for no one to rent – and without 20000 m2 or whatever it is of Barangaroo coming to the market – a number of office buildings are converting to residential because no one needs the space – that part is all well published)
We are, after all, talking about Australia and not Monaco – the space, even the green coastal, is massive, for practical intents and purposes unlimited – except by carefully maintained lack of a proper rail network that would allow for an easy commute from say Wollongong or Gosford to Sydney – because this would halve house prices (both places are easier to breathe in)
jeez,under 100000 and still no offers,houses in areas south of perth like rockingham are only getting sales of houses under 200000
http://www.realestate.com.au/property-unit-wa-orelia-123471718
http://www.realestate.com.au/property-house-wa-medina-124344290
The only things that will cool the bubble in Sydney and Melbourne is rising unemployment, reduced foreign investment, lack of easy credit and tightened lending. In addition, interest rates can only go so low before the party stops. Melbourne is going to be hit with massive car manufacturing layoffs this year so it’ll be interesting to see what happens. Redundancy payments will soon be eroded if these workers can’t find alternative employment. Look whats happening in WA. I’d also like to know where all these future immigrants are going to work to service their mortgage repayments or rent. Australia has dug a hole so deep it’ll never crawl out of it.
@44
Rising unemployment – check (and it’s going to get a WHOLE lot worse in the years to come!)
Reduced foreign investment – jury’s still out, but a strong Aussie dollar and expensive housing and high(ish) taxes, relative to other countries and currencies will certainly help bring about that reduction.
Lack of easy credit – it’s coming (see below)
Tightened lending – already happening, albeit slowly. Just wait for our own version of Northern Rock or Lehmann Brothers. Westpac maybe? A bank will fall (and then get bailed out by the taxpayer), so ringside seats for us renters eh?
Interest rates – all eyes are on China and Trumpfuckistan, toss a coin anyone? Negative interest rates coupled with a loss of Australia’s (somewhat meaningless) credit rating, would be risky to say the least.
PS – I became an Australian citizen today. A citizen who can’t afford to buy a home in the suburb I have lived in, and loved, for half a decade, unless I borrow 14 times my earnings from the bank. Thanks Australia – I will probably be renting until the day I die! Or I could move three hours out of Sydney. Got any spare rooms Mr Joyce? Or get a better paying job – any ideas Mr Hockey? How’s that expense account of yours Mr Ambassador?
In all seriousness, I’m very proud to have become an Aussie today and I wouldn’t want to live anywhere else, but the price of property, not to mention so many other things I won’t list here, really makes my blood boil.
Happy Australia Day everyone.
@ 33 Matty, thanks for the book tips.
Does anyone here know if in Australia superannuation can be used for the purpose of a ‘bail-in’?
This was re-uploaded after the GFC but the video was originally made before
https://www.youtube.com/watch?v=f3d4nZgHNMI
Parralells with right now – this is not millenial (short attention span) friendly even though it’s only 10 mins and will polarize your mind – be warned
@Damian
We all also thought Brexit could not be, and Trump could certainly not win – but then being fed up was a bigger issue than what the media would have you believe.
You might be underestimating how many people can google, think and (for now quietly) hate the status quo.
The fact Malcolm hasn’t worked that out doesn’t make those people uninformed but him…
Maybe?
Chinese Capital Controls Threaten Property Bubbles All Over The Globe As Buyers Lose Access To Cash
@ 47 ourorboros , the video echoes the sentiments of James Richards ‘Road to Ruins’.
@Capitan Rex: Did you read what I said about Australian housing being cheaper per square meter?
@51
I understand what you’re saying, but it’s not a big input into most peoples purchase process: “Let’s buy this one, it’s cheaper per square foot!”, nope never heard that.
And of course, when you have a country the size of USA with less than 1/10th the population, dwellings are going to be bigger: But this doesn’t really change the cost.
Sewage to small block or large? Same
Effort to get approvals, small or large? Same
In fact, the actual cost difference between building a large and small house is probably only 10%, but, the market will pay, what it can take. This is common across industry, for example the cost of construction difference between a corrolla and a Hi-lux is probably only 10%, but the market will pay $50k for a 4wd, where as try getting $50k for a small fwd hatch: Not gonna happen.
I know what you’re saying, but it’s really not that important.
@52 Thank you Matty, you have just saved me time on further elaborating.
@51 Yes ,I have red your statement about $/m2 cost, but you didn’t cite any references, websites, etc. What you claim to be a fact in the light of the current house price crisis, it just simply doesn’t check out.
The fact is, I already have made up my mind.
I am not willing to gamble away the future of my kids (don’t want hem to become for ever renters) at the hands of arrogant, corrupt and detached from reality politicians that current stats quo serves only their self vested interests.
1. http://www.smh.com.au/federal-politics/political-news/how-property-investing-politicians-have-skin-in-the-game-on-the-negative-gearing-debate-20150326-1m8s36.html
2. https://independentaustralia.net/politics/politics-display/barnaby-joyces-pilliga-pillage,5796
With pollies like Hockey, Joyce, Sussan Penelope Ley, Morrison and the “three word slogan PM”, it doesn’t look like anything will change here any time soon (at least at their own good will).
I wonder how long it will take for an average AU citizen, before this discontent will spill beyond blogs like this to the streets instead – food for thought.
@ 53 Captain Rex, the average Joe is catching on, it’s taken a damn long time but the media are giving all this much more coverage, the bread and circus is stumbling..”sit down, eat more, watch the show”… no no no, they’re getting out of their seats… the masses are starting to realise somethings going in outside of the tent!!
The cracks are getting wider…
http://www.straitstimes.com/business/property/chinas-crackdown-on-capital-outflows-sending-shudders-through-global-property