Once you are in the Sydney market, you are set for life!

February 25, 2017 admin Australian Economy, Australian Housing 90

“Once you are in the Sydney housing market you are pretty well set then for the rest of your life,”

It’s the claim of New South Wales Housing Minister, Anthony Roberts.

The Sydney property market is one of the most expensive in the world, and with Australia also having the highest level of household debt to GDP, many argue it is the world’s largest debt-fueled housing bubble. It makes you wonder then, if you were to get into the Sydney market, would you actually be set for the rest of your life?

Robert’s comments were made at the opening of a new apartment development in Olympic Park on Thursday. He helped the developer preach the word of perpetual house price growth, irrespective of serviceability or debt levels.

“We are not dealing with a bubble in the Sydney market,” he said. “There is no bubble here.”

“What I want to do is to get people into the market place and then they can be beneficiaries of the increase in the value of their property.”

Housing affordability is expected to be the number one election issue and has been hotly debated while Susan Ley has been using tax-payer funded travel to purchase her investment properties.

Robert’s comments is just one of many that show how out of touch, if not comical, Australian politicians are.

Here are some of the “practical” solutions being offered by our political elite:

Get wealthy Parents

When Prime Minister Malcolm Turnbull was challenged by the housing affordability debate on ABC radio in Melbourne, his only suggestion was to get your wealthy parents to shell out for a house. Turnbull told ABC host Jon Faine, “You can provide a bit of inter-generational equity in the Faine family,” and a “wealthy man” like Jon Faine should “shell out” and buy his kids a home.

I’ve since written to Malcolm and Lucy asking for adoption.

Move to Tamworth

When Deputy Prime Minister Barnaby Joyce was interviewed by ABC radio, he told young Australian Dream hopefuls to move to Tamworth.

“We believe that houses will always be incredibly expensive if you can see the Opera House and the Sydney Harbour Bridge, just accept that,” Mr Joyce remarked to ABC listeners.

“What people have got to realise is that houses are much cheaper in Tamworth, houses are much cheaper in Armidale, houses are much cheaper in Toowoomba.”

Get a highly paid job

Federal MP Michael Sukkar, Assistance Minister to the Treasurer, says getting a “highly paid job” is the “first step” to owning a home.

“We’re also enabling young people to get highly paid jobs which is the first step to buying a house, it’s not the only answer but it’s the first step,” Mr Sukkar told Sky News.

If the Liberal Party really wants to win the next election, they need to brush up on their macroeconomics. They are coming across just a bit incompetent.

Are these people really running our country?




90 Comments

  1. “They” – the NSW housing political complex, will shut schools and hospitals before they let this Sydney-Jing housing bubble burst.

  2. These responses reflect a complete ignorance and the obvious. These people who are the so called politicians and guardians working for the Australia people who have absolutely no clue what is going on or what they are doing. They have no solutions and are complicit bystanders to an unfolding debt crisis which they supported all the way. These people shove problems under the carpet and act like ostriches putting their head in the sand. It is an absolute embarrassment and these people are not leaders, but takers worried about their own back pocket. Leaders confront reality and take massive action to work for the Australian people. As a foreigner to this country myself this country has become very complacent and is running this country into the ground whilst on autopilot. A complete disgrace.

  3. @ average bloke you forgot Mumbaibourne.
    Not sure how many options there are left, things just keep getting more hairbrain by the day.. The desperation and propaganda is strong.. FHBs are the last hope.. The lambs being led to slaughter.

    How much steam though is left in capital gains speculation, surely must be near up, we’re approaching Denmark levels of debt.

  4. The biggest problem is that these politicians fail to grasp basic arithmetic , or they do but deny themselves and everyone the truth in order to spin the lie that shackles people to a lifetime of debt .
    For the real workers , in the rain today , wages have been stagnant for thirty years . Our leaders seem to think that it’s ok for would be homeowners to pay 50 to 60 years worth of full income to pay for a basic house . This is worse than Dickens England . The FIRE corporations that are the major banks have run this nation into the ground .Maybe they don’t need bail-outs (what a joke ,
    they have actually become so wealthy that their profits are reaching beyond calculation) but we the people most certainly do . They would still make good profits if they charged 5% for the whole loan but what do they do they charge that interest per every year of the loan so that it becomes 150% minimum .

  8. It should be borne in mind that the useless Federal politicians between them have a combined property portfolio of over $300m.

    http://www.macrobusiness.com.au/2014/08/aussie-politicians-300m-property-portfolio/

    “The trends in the data suggest a sizeable majority of federal politicians have a vested interest in maintaining high housing prices, particularly since most have mortgages over their own investments. A fall in housing prices may cause many politicians to fall into negative equity, providing a strong incentive for politicians to enact legislation which has helped fuel a housing bubble, enriching owners”.

  9. How many investment properties does Anthony Roberts own?

    Do you know where I can find the Member’s Interest disclosures for NSW Parliament?

  10. I don’t know many FHB’s whom could realistically entertain the $575K-$749K (according to AFR) price tag at Olympic Park even with just 5% down. Sadly to me, just demonstrates how severe the problem is if this the best they can come up with.

  11. To digress a bit from the article, I recently read Flight Centers 2016 Annual report, interestingly they are seeking “solid future growth prospects” by new business offering ‘home loans’ among other things (p.11)

    Now I have learned the supermarkets such as Woolies are doing the same.

    But of course “there is no bubble here”!

  12. Firstly, I disclose I am a disillusioned Liberal supporter. Roberts’ comments are somewhere between deplorable and ridiculous. Housing is a consumer item, not a casino chip. I hoped the Libs would have learned something form various educational sources (including this site) but judging by the obtuse and ignorant remarks of the overpaid NSW minister, alas, it is not so. If this MP is any guide, the Libs have learned nothing and forgotten nothing. Some Liberal MPS do not conceal their complacency and satisfaction with rising prices. No surprise – they all have property interests. Moreover, Roberts is appallingly typical of the Libs, I am afraid. His dangerous attitude is part of the problem, not part of the solution. Roberts is touting housing as an appreciating investment. If he does his job well, he should be announcing that houses are becoming cheaper. They are not and he does not. Values are as out of touch with reality as the Liberal party is out of touch with the ordinary person. Price rises in Sydney (the national hot-spot since 2009) are completely unsupported by all the fundamentals except the price of money. Prices do not reflect inflation, rents, wage growth or construction costs, all of which have been subdued. They do reflect, though, government policies contributing to scarcity. The most powerful fundamental remains interest rates, but a small rise in rates will only be enough to stifle growth; it will take a sustained high level of building, plus a sharp fall in immigration to drive down prices in Sydney. It needs to happen. Everywhere, there is too much hubris among the property coalition. e.g. this recent little comment about low rates: “if you put your money into the bank you must be lazy and inept”. That sneer refers to the fact that real estate valuations, especially east-coast residential property , outpaced bank interest by factors of seven to ten during the past 4 years. When a housing minister tells you a house is as good as gold, be ready for a change. It will be a welcome change, too.

  13. the thing that disturbs me the most is the lengths that they will go to to keep this going,and the insidious ideas they might actually employ. When you have MP’s Andrew Broads suggest banks should forgo a deposit from first home buyers who have a strong three-year rental history or that FHB’s should access there super for a deposit…. I thought they were running out of ammo to keep kicking this down the road…

  14. Guess it’s good that I’m already in Toowoomba. Indeed, decent houses are significantly cheaper than in bubble territory, though the raging unit construction is looking like a bubble of its own, with many remaining unsold or unrented for years.

    These clueless government members are really part of the problem. At least the ALP has a halfway decent policy on negative gearing. The government is almost as much on the nose as in Abbott’s day (doesn’t he do a great impression of a zombie!) and won’t last the full term. One Nation and other crossbenchers will hold the balance of power after the next election. Speed the day.

  15. So once all these apartments are sold they owners will have to pay rates. Rates which per square metre are way higher if the apartments reach to the sky as opposed to a free standing house. Rates which are to be paid even if the places are empty. Rates that don’t guarantee the quality of infrastructure that will be delivered.

    Everyone loves some income that’s guaranteed with no actual work required.

  17. Gday Folks

    IMO this is all possible because the majority of Aussie, NOT just pollies still believe in this story. Im guessing most of us didnt but lets face it … if we had all started buying property back in 2005 ..we all might feel differently about this, right?

    Of course GREED is god down under. Sadly the consequence are a dumbyed down, obedient,homoginize herd of sheeple who cant think and are unwilling see / understand the consequences of there actions. I suppose if the majority of their little free time is spent watching stupid reality TV what can you expect!?

    Its crazy minning is winding down and all our money goes into cookie-cutter sized houses that produce NOTHING. This is so dumb. I honestly feel pretty #$@ing embarassed being an Aussie.

    We chose to sit on the sideline. Build a very small house. Use tank water .. compost toilets .. vegi patch … orchards … livestock. .. solar power … etc. Good choice? I dont know. Maybe when / if the bubble should burst we will know.

    In the mean time my wifes mates perpetuate the story suggesting we jump on board like them. One of them, a young family, has five houses – all owned by the bank. I have been telling her for 10 years now NO WAY. Maybe we should have got in early and back out again BUT SURELY its too late now right?

    The mind boggles.

    Leno

  18. I take Labour’s policy on negative gearing with a pinch of salt. I would have been impressed if they had moved to abolish negative gearing while in power but they only supported policies to continue house price inflation. Waiting until the party was in opposition reeks of desperation. In either case, it looks like the housing party is on the way to ending: http://www.news.com.au/finance/real-estate/buying/mum-and-dad-investors-lose-hundreds-of-thousands-of-dollars-as-mining-downturn-continues-to-bite/news-story/46af565a981f797f2554b98fb88821ee

  20. Lara, quite right. While the ALP policy is a step in the right direction, however small, it remains to be seen what they will actually do when they form a minority government in the next year or two.

  22. Love the title of the article “Mum & Dad investors lose…”. As if to make out how vulnerable and unfair the situation is. But nobody put a gun to their head and made them do it. They themselves walked into the bank and borrowed ridiculous amounts of money to buy a shit boxes out in the middle of nowhere in the hopes of getting rich quick buy ripping off someone else who comes into the market later on.

  23. @ 21 Chockolate, definately shows signs of desperation to sell those apartments. They claim its all about helping the poor first home buyers when in reality its because they want to shift those properties lest prices drop.

  24. Hey fellas,

    Why does no one ever talk the elephant in the room – the monarch that might pass away any day?
    You do realise Sydney is copying London letter by letter – does the link not strike you as obvious?

  26. So we dodged a ‘technical ‘ recession, but check out these trends.

    http://www.abs.gov.au/AUSSTATS/abs@.nsf/Latestproducts/5625.0Main%20Features2Dec%202016?opendocument&tabname=Summary&prodno=5625.0&issue=Dec%202016&num=&view=

    http://www.abs.gov.au/AUSSTATS/abs@.nsf/Previousproducts/5625.0Main%20Features3Sep%202009?opendocument&tabname=Summary&prodno=5625.0&issue=Sep%202009&num=&view=

    Notice something? Same figures, were at GFC levels of investment.

    2016-17 Total is $27 393 million
    2009-11 Total is circa $27 000 million

    Very little in the media on the bigger picture here.

  27. @ Jamie

    That doesn’t surprise me. Most of my mates have closed up shop, only the dedicated remain.

    Ask people on the street the two (three here in sa) big worries:
    A: Jobs
    B: House prices
    C: Will the air con work tonight…..

    We are in for funny times.

  28. @ Matty the government came to the party last time we were at these levels, the private sector was in alot less debt too.Pretty shitty, 8 years on, back at the same spot and the people have become debt mules in lieu of the government opening the purse

  32. Panic buying has just begun. The last stage of this 30 year bubble (blow off). Just take a look at the Corelogic index. As of 04.03.17, Sydney’s running at 18+ percent y/y, and climbing quickly. It won’t be long, before we learn a very costly lesson, as to whether we are truly different. Seriously? 18%, these are the returns, you get trading futures, not houses.

  34. re: Tony…”Seriously? 18%, these are the returns, you get trading futures, not houses.”

    And lose. Lets hope quickly.

  35. I have been bearish on Sydney house prices since around the GFC.Still proven wrong amongst family and friends who are sydney diehard property punters. I’ve learnt to shut up now, Sydney is different I’m told, different from all the cities in the world. Anthony Roberts comments will be the famous last words of a debt inflated bubble. No one can say when or how, but eventually all bubble bust. It just those inside it usually don’t want to see it!

  36. I hate to break it to you but when Tokyo went bust the average house price was US$2,000,000. Sydney has a long way to go if cheap credit continues to be readily available. Where the hell are Aussie banks getting the money from to lend to investors?

  37. @Damian ,
    They punch the numbers in the computer and the debt is created out of thin air then serviced at
    around 200% over thirty years .

  39. @36 – Out of thin air. It’s called Fractional Reserve Banking, and is the biggest con-job perpetrated on the world ever.

  40. Damian,
    I understand your point and you may be right…..who knows and it could go to 3 million, with all the sheep in Australia I believe it could but its irrelevant when you consider it will only come down. The problem is a smart person would cash out, profit at the peak which could be higher and then make a life elsewhere or wait and buy when it drops. The problem is these sheep just think it keeps going up and they don’t want to sell because they think that they have to get back into the market that keeps going up. Its like a positive or negative feedback loop depending how you look at it. Australia my friends is on its knees and I’m proud to say I’m happy to wait while I keep my money elsewhere.

  41. I’d have to agree, that the Government will stop at nothing to stop the Housing market from collapsing. It will have to be an outside force that pops it, such as interest rates rising in the U.S. March 15 will be interesting.

    This is from December 2016, http://www.abc.net.au/news/2016-12-15/federal-reserve-rate-rise-why-does-it-matter/8122662

    “If Australian banks are offering higher interest rates to depositors, they have two choices: cut profits or raise lending interest rates.

    From your experience of how Australia’s banks operate, which option do you think they will take?”

    And to quote Kyle Bass “Noting that Italy went into full crisis with only a 100 basis point shift”

  42. @ 40 John, what you mention is sometimes referred to as crowd and anti crowd behaviour. Anti crowd typically make first move and crowd join to perpetuate momentum. Anti crowd always act first, crowd second. When both move together in same direction you have a price run.

  43. My feel is anti crowd are already out of Sydney and Melbourne, the crowd are still in and to make it more complex theres a subset within the crowd driving momentum well past the conventional point of fear.. It’s the Chinese, the biggest most naive crowd type gamblers out.The effect is such that it all looks bull, so crowd and even anti crowd join back in, no one really knows who’s in and for how much. The logic behind the agents behaviour remains true though, when both move in the same direction, the price run occurs with momentum. That run has been up for 4 years now. Let’s see how it looks when both crowds act in the same direction. i suspect we will see it in Sydney first, on prestige homes and within 18 months.

    More on this, from James Rickards

    Scientists have conducted experiments using these same crowd-anticrowd dynamics. A group of individuals begin with a preference in their forecasting model. Through experience and feedback they self-organize into crowds, anticrowds, and random actors. The crowd and anticrowd attract the vast majority of participants in roughly equal numbers, while the random actors represent a small minority. This illustrates one of complexity’s most powerful traits: emergence. Well-defined opposing groups emerge without force or prearrangement from an undifferentiated mass through the workings of feedback and memory. Emergent behavior is well documented in complexity science.

    It makes intuitive sense also. A Wall Street cliché says, “For every buyer, there’s a seller.” In a bull market, buyers are a crowd who believe the future resembles the past. Sellers are the anticrowd who believe that the future will be different. With both in equal proportions the markets can function.

    Panic arises when the crowd and anti-crowd act as one. A completely ordered market system is one in which there are all sellers and no buyers. Such a market would instantaneously collapse and prices would go to zero.

  45. @36 Damien,

    the guys are generally right re: money to loan.

    The currency system we use, is fiat currency, coupled with a fractional reserve lending banking system.

    Henry Ford says: It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.

    The currency that the reserve banks print and ‘sell’ to governments is created out of nothing, but a debt plus interest. Hence, at the central banking level, there is always more debt than actual currency (except for when a country has continual trade surplus’s, as Howard did, and was able to have negetive net debt, as costello told it…. negative net debt, that’s a very telling term, the central banks expect debt)

    Then we move to the banks, who are allowed to lend more than they have in reserve. Yes, that means they are trading insolvent. If a business does that, the directors face jail. If a bank does it, it makes a profit and is celebrated by politicians……..

    Some of the banks in USA pre-GFC had $1 in deposit’s for every $100 they had lent out….

    This currency the banks ‘lend’ you doesn’t exist, they literally create it, again with loan plus interest. Again, more debt than currency…..

    We know this is true, the size of debt obligations and derivatives, is many, many times larger than the entire global GDP or currency pool…….

    Many are now waking to the fact that paying interest on a loan that was created from nothing is the greatest scam of our lifetime. It’s nothing new, fiat and fractional reserve lending are very old systems, that always fail, in doing so they empower the elite and impoverish the middle class and the poor.

    So, where are the banks getting their currency they lend out??? Most of it is simply new, created, made up….

    Doesn’t this make sense? When you step back, and look at housing and asset prices (more so in the NYSE than the ASX) these prices being paid, are NOT being paid for with EARNED money, for no-one spends money they EARNED this easily and freely. All these million dollar dog boxes are being paid for with money that didn’t exist, it was created specifically for that ‘asset’.

    This is why the world is so unstable. Those with access to new currency are on an asset binge, while those who can’t access credit are on the breadline struggling to pay the cost of living.

    We are at the point, where some of the banks are now admitting they have loans that will never be paid back in the borrower’s life time. We have governments that can never pay back their bond owners.

    This will end the same as always, history repeats. Technology changes things, but the core problems remain.

  46. Has anyone seen the growth in selected financial aggregates for 2017 ? (RBA D01)

    Personal credit and Business credit negative(-1.3 / – 0.3)
    Housing FHB and Investor just ticking over. (0.6 / 0.5)

    That’s GFC levels of housing credit demand (before the stimulus)and credit contraction in real sectors. The total credit growth for the month was 0.2 , the only credit growth for January was from housing!

    The only other comparable business credit result like this was the month leading up to the election. Prior to this it was 2013 , when rates were over 4%. The Recession masking is in full effect.

    I really don’t want this place to turn into Japan.

  47. Hi all,

    Long time reader first post. I have been waiting like everybody else here on the forum. However, one goes through life stages and needs a permanent shelter. The burning desire is to move closer to work/school and drive less (much less). This is going to be the last move in the foreseeable future. We have accumulated so much stuff that moving house one more time is unfathomable.

    Current rental is fantastic and the landlord is happy to have us for the next x years. Rent has not increased in the past 11 years. I don’t think I will be able to find a better rental like this in the desired location. As such, either stay put and keep driving or buy and hope for the best.

    Did the sum last night and reckoned I can handle the crash, if it happened, like Mike Tyson getting hit on the face and lost eyesight momentarily. Not nice but with the other hedge play, I might still come out ahead.

    I have a question for the board. When SHTF such as an external shock that will eventually come, which of the following scenarios is likely to play out.

    1. House price crash 40+ % due to lending / credit freeze
    2. Australian government/RBA throws in everything it can including the kitchen sink and cuts the interest rate to -1000%, trashing the aussie dollar but manages to keep the house price intact
    3. US/China comes in and save the brother’s life but asked for kidney as repayment
    4. Alien invasion or other unlikely events that distracts us from the reality

  49. Want a house but you do not have a deposit? Never mind the Victorian Gov’t will help you by becoming a 25% co-owner. How insane can this Nanny State become? You know this will end in tears when you let our corrupt pollies get into the mortgage industry.

    http://www.news.com.au/finance/real-estate/buying/new-scheme-allows-first-home-buyers-to-buy-property-with-help-from-government/news-story/9a99b1e7e885e513d0f5f01e46da1cc3#itm=newscomau%7Cfinance%7Cnca-finance-plmnt-trending%7C1%7Csection-finance%7Cindex%7Cmarkets&itmt=1488853462826

  50. @ Jamie ,
    At least Japan has strong manufacturing . Here , our high tech industry is veneer housing that’s
    assembled , after it comes off the truck , with a nail gun . With a two year warranty ( changed from 7 ) and a lifetime of debt , that can never be payed for .

  52. @49

    Co-ownership and 100% mortgages smells of desperation to keep things going. The banks did the same thing in Ireland just before the big property crash in 2007/8. History repeating itself.

  53. Fiddle faddle, the government just can’t help but ‘fix’ the housing situation (which they damn well created), and so we are seeing every more convoluted distortions to the market. Make no mistake, we are in a centrally controlled economy now, and we all know how that ends up.

    I hear about how we are supposed to ‘innovate’ our way out of this, but given the treatment of Uber here (who operated completely legally), it’s hard to find anything the government wouldn’t meddle with if it took off.

    Better to stick to buying and selling houses, it’s a sure thing.

  54. @ 53

    Yes, the Govt is trying to herd peoples economic choices like cattle via these tax payer funded incentives.

    The same thing happens with near zero interest rate cuts; encouraging people into economic choices they otherwise may not make.

    Manipulative!

    Morally abhorrent.

  58. @57

    It’s a misleading pile of dog do-do that article. It’s $60k take home after taxes, the lying prick’s earning fine. Move to a regional town, on a nurses salary he would be in the top 5% of income earners.

    The article, no doubt funded by the union.

    A: Get the workers a raise
    B: Get/keep state labor in power
    C: keep distorting the economy

    The real problem is, of course, too much easy credit, too much foreign cash, and a belief by the masses that property is a bonza investment….

    Just let it crash already.

  59. Agreed Matty,
    Thanks chockolate, just an article to make the idiots piled up in debt feel better. Everyone just stop for one second and just utter these words to yourself without knowing what you know now…. utter “Ive made it cause I have a house”
    Pleeeeeease, it does not even sound right and its because it isn’t right. Where do these people think they will be in years from now ? In tears and saying I could of sold and moved to ABC and owned my home. I am happy to watch it keep going on and I say and let these debt junkies learn a hard lesson. I’m still happy to wait and I am getting on with life. All the best. Cant wait to read more articles!!

  61. I’ve said it before and I’ll say it again: while there probably is a bubble, at least in Sydney and Melbourne, I cannot see any major collapse happening.

    There is a vast array of vested interests involved such as:

    – pollies (all parties – don’t be fooled by any public socialistic leanings)
    – laywers / RE Agents
    – Govt “Mandarins” and their consultant mates on big $$ (Fed, State and Local)
    – Various others on big $$

    Many of these people are able to control such things as release of land, tax/property rules, by-laws, immigration outcomes etc, that effect housing prices.

    Personally, I think that IF (not when) things start to look bad, “they” will take actions such as stopping land release and possibly tweaking various other factors they have control over (eg Immigration intakes).

    Let’s face it, in a country that has a land area we do, with the population we have, one would exepect that, with proper strategic planning (in the interests on the people, not the “elite”), we could have a reasonable balance.

    While I agree with Prof. Steve Keen, I think the fundamental flaw in his reasoning was that he may have presumed we have a “free” property market here in Australia. It is far from that.

    Declared interest: ONE property, with mortgage. NO investment properties.

  62. Exannuc @61, that’s still arguing that we’re different. So none of those other multiple first world nations that suffered a property crunch had pollies, lawyers, RE agents etc etc, heavily invested in their bubbles? Enough to force them into making decisions that would benefit themselves and to hell with the rest and the wider economy? None of these bubbles operated in a ‘free’ property market, they are simply operating in a historic boom/bust cycle, just like we’ve had for thousands of years.

    You’re spot on, they will and have been throwing everything within reach at the problem, including the kitchen sink. But like Governments of all persuasions, they are a bunch incompetents and fail more often than not.

    Declared Interest: One too, no mortgage. Take 60% of the value off it tomorrow and I couldn’t give a toss. Didn’t earn it.

  63. @62

    “Take 60% of the value off it tomorrow and I couldn’t give a toss. Didn’t earn it”

    Bingo! Didn’t earn it.

    No offence meant to anyone, but Mark is 100% right here.

    This isn’t American Pickers, where you have to know what the market wants.
    This isn’t Pawn Stars where you need to be able to sell it.
    Hell, it’s not even like you’re job review where you need to justify your position.

    This is 100% pure bigger idiot syndrome. Yes, some have renovated or developed for profit, but often no. I find the modern styling ugly and short lived anyways.

    We have a whole nation that now BELIEVE that working 60hrs a week is no good, small business is too risky (and that’s a whole other discussion, the government simply see small business as GST generators) and the path to wealth is property flipping.

    They honestly think they’ve ‘earned’ their property valuations. That they are better than those who distrust or are wary of the market.

    It’s sickening.

    But the good news is, no other country has done what we’ve done. We killed the free market cost of money (all central banks do this)
    We killed free market banking competition.
    We then guaranteed the banks via tax-payers
    We then got mortgage brokers, bankers and accountants to convince people that overpaying for investment properties is awesome because you can get a tax refund (on the loss)
    We then got the media and building/construction suppliers to create entertainment that shows how easy you can make profits (except ‘The block’ often runs at a loss, it’s only the advertising income that makes it profitable)
    We then have governments giving bonuses, breaks, exemptions to property owners.

    So now for the bad news (it’s actually good depending on how you see it)
    Four banks make up 20% of our ASX.
    Our banks are valued higher than genuine companies with real tangible assets
    Most of bank ‘assets’ are mortgages
    Mortgages are > 30:1 in terms of median price to median wage in many parts of the country
    Our private debt is amongst the highest in the world
    We have the lowest manufacturing base in the OECD (that is the scariest figure of them all, we have no means to dig out of this hole)

    I could go on, but what should be very, very clear (but almost no-one will agree, because the blinders from the housing bubble completely destroys peoples rationality) is that this country is going to self implode into an economic black hole, where assets half in prices, debts remain fixed, while interest rates skyrocket due to international borrowings.

    We are not Japan, which has now slipped down to the 3rd largest economy. We are Australia, other than Iron ore, and some hydrocarbons, we have nothing the world wants, no products, no services, nothing. We will not be able to print to infinite to keep rates low, our dollar would hit 20cents and imports would cripple us. No, we will watch the USA dictate to us what our interest rates will be.

    So Mark, you’re right. Didn’t earn it. Look around Australia, there’s now over $6trillion of debt in Australia…. Think about that, we’ve spent $6 trillion more than we have!!! Where’s the productivity gains? The return on investment? $6trillion dollars!!!!!!! Is the country any better than 10 years ago? 15 years ago? 20 years ago??? 25 years ago?? 30 years ago??

    Seriously, where has that $6trillion gone??? Educations a joke, hospitals are bursting, jails are full, full time jobs keep shrinking, government deficit’s getting bigger, failing and/or privatised infrastructure.

    What has $6trillion really got us???

    How are we ever going to pay that back with interest????

    Guard your super, they will come for that.

    I suggest learn to manage people, it’s hard and expensive at present, but I have NO DOUBT that in years to come, people will be begging for jobs at discount rates….. The trend has already started, contractors, franchisee’s etc all work for below minimum wage with no annual leave, sick days, super, work cover etc. etc.

    5 years ago we could have saved this country, now it’s just a shell with a few landlords showing how great they are…. Once they’re gone, there will be nothing for the common man.

  65. @Matty, you nailed it!
    I couldn’t have said it better myself.
    You missed on one thing trending in the latest news though. (not that is a news really, but finny being openly acknowledged)
    Because of this unprecedented bubble, couples postpone having kids – not enough disposable income left for raising new generation after paying of the mortgage / rent.
    So, we got to the point that even having babies in this country became an issue. My, oh, my!
    Then again, few things far and between can be found with “Made in Australia” this days anyway, one more add to the list.
    But, no fear knowing Australian ingenuity, we can rest assured our government will find solution to this.
    Peter Dutton, or whoever his next successor might be (Minister for Immigration and Border Protection) will come up with something to solve this problem.

    And that truly will be the end of Australia.

  66. @ Matty any idea in what our banks are geared at? (equity /debt)

    Bears Stearns blew up around 30:1 from memory

  67. Nice work Matty,
    What do you mean we don’t have anything to offer ?
    We’re Australia mate, it’ll be right ‘
    had to say it. 🙂
    The sad thing is that everything you pointed out is absolutely spot on and if you raised these points at work at morning tea, people would look at us as if we are the weird ones. That’s the part I find amazing. No body has the ability to think critically of for themselves.

  68. @ Matty -I’ve been a long time reader and appreciator of this site but never comment as I feel i don’t know enough to warrant contribution but, your post right there… Marvelous. I was literally clapping after reading it. I feel like copying, pasting and sending out to everyone in my address book. SICK of being made to feel less worthy in this society because I don’t own property. Apparently all my friends are now millionaires.

  69. @ Capitan Rex
    Interesting that you mention “Made in Australia”. About 25 years ago I was doing some carpentry and cabinet work in a warehouse in Annandale . When there I noticed that , early in the week , a semi would bring linen ware in boxes marked “Made in China” . Then , for 2 or 3 days , three guys from Indonesia would put the linen ware in new boxes marked ” Made in Australia” . Then another semi would come collect and distribute .

  70. @ Matty,

    Gold mate. This could be soon now, like you stated before the maths is fucked and the Fed rises are a delicious mix.

  71. @56, and let me guess the boxes with “Made in Australia” on them were probably made in China.

  72. Matty … you have very clearly stated the problem (more than once) BUT from a personal perspective what do you do about it? How does one respond in a global state of economic .. ecological & energy decline?

    Maybe a 10 point list? Let me make a start.

    1. Get out of debt asap
    2. Cut back on money going out.
    3 … 4 …5 … ?

    Do we simply hold out … buy up when things go pear shaped and then become the new suburban overlords?

    To have grumbled over this for 10 years … is it worth grumbling for another 10 years?

    Would i / you / we feel any different if we bought up big early like everyone else?

    More questions than answers really.

    Leno

  74. Matty for PM!
    I’ve been a keen reader of this site for several years after seeing a politically charged disconnect in house prices and wages. It seems by the comments this time that a lot of us feel the same way. I’m glad I’m not the only one to see a debt induced bubble!

  75. @74 Danny

    Sorry, I’m a sociopath, narcissist and very, very anti-social. I value a Friday night in front of the TV far more than any PM salary or pension package.

    I once had a very wealthy self made boss, the State lib’s hounded him to become a MP. He always laughed, why would he become a public figure, 24/7 for a few hundred grand a year??? Seriously, why? He worked out how business worked, how to shift money from the customers to his bank account and was more than happy with his lot in life.

    Truth be told, I could never be political. I’d offended way too many people, and meet JFK’s ending.

    So all you can do, is try to lead your closest family and friends on an enlightened path. Even then, many of those will never see your point of view. How the world really works, is very, very wrong and unfair, and most humans will simply never, ever allow themselves to see the world that way: They want to believe we are all created equal, and treated fairly. This is complete BS.

    So, I been toying with writing a book for some time. Thought about a blog, but never committed to it. But a book, yeah I could do that. To offset the time away from my business I’d think about crowdfunding it, is that something anyone would be interested in?

  76. @ Leno

    You really should get out more. Your solutions would no doubt lead to an early grave.
    My solution is to be counter-intuitive and play the banks at their at their own game. Max out all your credit cards then get some more and with the proceeds buy Bitcoin. Then take a trip to Tahiti. I guarantee you will come out ahead and have fun doing it.

  77. Signs of Dutch disease emerge..

    Media headlines beginning to talk stories of pensioners pouring in all their retirement funds simply to rent.

  78. Vino … emty response mate. Simply said it is easy enough to state the problem. It has been regugitated now for years on this blog BUT nobody here seems interested in talking about how to respond personally in the here and now. Ask a difficult question and the room goes quiet. The mind boggles.

  79. @78,

    I have few choices. Run my own micro small business (lawn mowing) I have zero savings/assets. I am also debt free. I’m fortunate to reside in a family owned property. A robot can’t do my job and I’m hedging a bet that when this goes belly up, I might get busier. I might be working for banks.

    I’ve had ex wife issues over the last 10 years. The more I earn, the greater share of my pie she revives. I’ve had to play poor through this boom. If I did have savings, I’d be more eager for this BS to end. Good stories of ppl who paid 1 pound for a Sydney CBD block during the depression. Yes a block.

    All I can say is I’m glad for help revived and that I’m quite content with happy healthy kids, my stuff and music. We are dry from rain and have food in our tummies. I wasn’t dumb enough to borrow just cause I could. Wasn’t that stupid to buy boys toys and just wack it on the family credit tab.

    We are about to see who was swimming naked. Some started by simply skinny dipping.

  80. Patrick,
    Good on you mate. Good too see some people humble and appreciate the simple and real things in life.

  81. Nice Patrick

    I think ya on the right track. Its when the flow of money and /or resources slows down (NOW) that the jack of all trades, renaissance types who can tinker in difficult circumstances find thier place in the world again.

    In such times there is a decrease in efficiency,increase redundancy resulting in greater resilience.

    The last thing our over-regulated dumbied down culture wants is folk who can think for themselves and just do shit.

    I think ya on the right track. As long as the tummy is full and the bed warm?

    cheers

    leno

  82. Given the majority of credit growth for banks at the moment is investor loans, when this tanks and the uptake drops there will be a dive in bank profits. This I feel is why they’re hiking rates on OO Loans, they’re drawing blood from those who are committed , lol… The genuine mortgage holders will pay the price of speculation even though they themselves didn’t speculate. More so , FHBs who entered 2014-17 are being leaned on , the debt mules who will now carry the burden of speculation.

    Add to this banks will dodge any speed limits on IO loans enforced by APRA by allowing reclassification of IO loans to OO.

    When the term is up on theses reclassified loans the magnitude of this problem will really be evident. Assuming these people can even hold on that long I don’t see them being in a good position when their rate ends and they need to resign at a new one.

    Tell me, someone here must know- what does a bank do to a customer who is outside the original loan LVR requirement when they’re at the end of their interest term and is up to sign for a new rate ?

    LVR top up, foreclosure?

  83. @82 Jamie

    Yes: Mortgages ARE a margin loan. So a loan holder CAN get that phone call. One of my staff’s brother got that in the UK in 2009. He had quit his job, owned 7 or 9 places and was a ‘property developer’ (aren’t they all? lol). He had 14 days to come up with 50k pounds… Couldn’t be done. He lost all properties, as the equity got wiped out so their sales didn’t cover the loans. It’s only recently he was able to leave sleeping on his mates couch.

    So yes, if there’s a significant drop in valuation, coupled with questions about their ability to service the debt (service is the key word) then they will need to pay down some principal, or the loan wont be rolled over, or it’ll hit the variable rate, or the bank will repossess it.

    Just think, with over half of all loans now Investors, and at the same time over half of all loans being interest only, there must be millions of properties that have never had any principal paid in the last 3 years…. Outside the rampant Sydney and Melbourne CBD, there would be millions of interest only loans that are still hovering around their max allowed LVR. A 10% fall will be enough to trigger all hell.

    Haha. What a frigging disaster.

  84. Many wants the propety bubble bursting… but very unlikely…

    Politicans in Aus. are hopeless…u know that..

  85. @David. Not sure if our pollies can control international interest rates and the bond market. We borrow approximately 33% from overseas to fund the housing bubble, and that portion of funds could dry up or get really really expensive. We also have an oversupply of apartments that is already putting pressure on property investors.
    Brace for the sell-off: property market at a tipping point

  86. Plus ça change, plus c’est la même chose.

    Nothing will change after this corrects. People are people, will remain who they are.

  87. @ Matty 83 , from the ABS….

    Jul-2015 B All series
    Adjustment for changes to loan purpose: Owner-occupied housing credit increased, and investor housing credit decreased, by approximately $0.4 billion due to net changes to loan purpose.
    Aug-2015 B All series
    Adjustment for changes to loan purpose: Owner-occupied housing credit increased, and investor housing credit decreased, by approximately $7.7 billion due to net changes to loan purpose.
    Sep-2015 B All series
    Adjustment for changes to loan purpose: Owner-occupied housing credit increased, and investor housing credit decreased, by approximately $5.2 billion due to net changes to loan purpose.
    Oct-2015 B All series
    Adjustment for changes to loan purpose: Owner-occupied housing credit increased, and investor housing credit decreased, by approximately $17.3 billion due to net changes to loan purpose.
    Nov-2015 B All series
    Adjustment for changes to loan purpose: Owner-occupied housing credit increased, and investor housing credit decreased, by approximately $1.9 billion due to net changes to loan purpose.
    Dec-2015 B All series
    Adjustment for changes to loan purpose: Owner-occupied housing credit increased, and investor housing credit decreased, by approximately $1.5 billion due to net changes to loan purpose.
    Jan-2016 B All series
    Adjustment for changes to loan purpose: Owner-occupied housing credit increased, and investor housing credit decreased, by approximately $1.4 billion due to net changes to loan purpose.
    Feb-2016 B All series
    Adjustment for changes to loan purpose: Owner-occupied housing credit increased, and investor housing credit decreased, by approximately $1.9 billion due to net changes to loan purpose.
    Mar-2016 B All series
    Adjustment for changes to loan purpose: Owner-occupied housing credit increased, and investor housing credit decreased, by approximately $1.4 billion due to net changes to loan purpose.
    Apr-2016 B All series
    Adjustment for changes to loan purpose: Owner-occupied housing credit increased, and investor housing credit decreased, by approximately $1.2 billion due to net changes to loan purpose.
    May-2016 B All series
    Adjustment for changes to loan purpose: Owner-occupied housing credit increased, and investor housing credit decreased, by approximately $1.1 billion due to net changes to loan purpose.
    Jun-2016 B All series
    Adjustment for changes to loan purpose: Owner-occupied housing credit increased, and investor housing credit decreased, by approximately $1.3 billion due to net changes to loan purpose.
    Jul-2016 B All series
    Adjustment for changes to loan purpose: Owner-occupied housing credit increased, and investor housing credit decreased, by approximately $1.0 billion due to net changes to loan purpose.
    Aug-2016 B All series
    Adjustment for changes to loan purpose: Owner-occupied housing credit increased, and investor housing credit decreased, by approximately $1.0 billion due to net changes to loan purpose.
    Sep-2016 B All series
    Adjustment for changes to loan purpose: Owner-occupied housing credit increased, and investor housing credit decreased, by approximately $1.0 billion due to net changes to loan purpose.
    Oct-2016 B All series
    Adjustment for changes to loan purpose: Owner-occupied housing credit increased, and investor housing credit decreased, by approximately $1.0 billion due to net changes to loan purpose.
    Nov-2016 B All series
    Adjustment for changes to loan purpose: Owner-occupied housing credit increased, and investor housing credit decreased, by approximately $0.9 billion due to net changes to loan purpose.
    Dec-2016 B All series
    Adjustment for changes to loan purpose: Owner-occupied housing credit increased, and investor housing credit decreased, by approximately $0.9 billion due to net changes to loan purpose.
    Jan-2017 B All series
    Adjustment for changes to loan purpose: Owner-occupied housing credit increased, and investor housing credit decreased, by approximately $1 billion due to net changes to loan purpose.

  89. @ Jamie

    APRÈS MOI, LE DÉLUGE. Famous words from the French Revolution. Things do change its just takes a few heads to roll at the top.

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