Difference b/w Oz and UK property markets

[turk]

Those are mutually exclusive statements. Either one is true or the other is. If we are to get back to average long term (ie regress back to the mean) in terms of property prices:average yearly income prices are going to have to go down by more than 20%. To deflate back to even the 5x yearly earnings, average prices would need to come off 30-40%. Hard to imagine now but easier to imagine when it happens !

They are not mutually exclusive

That's what would have to happen at this point in time, however if house prices remained static, time and inflation could lift incomes so that it takes
5xyearly earnings .

There are a number of combinations that can revert prices to mean.

Cheers

Pete

 

[yieldmatters]

You're all arguing around the edges

A driver has his eyes shut while driving and ploughs his car off a cliff (oops). I am driving with my eyes shut but reassure myself that I won't also go off the cliff because my car is a different model, different tyres etc. Everything will be fine.

You are all arguing around the edges. The core of USA, UK, NZ, Australia, Spain, Ireland are EXACTLY the same. Nobody has the money to actually pay back these loans in their lifetime. It was a load of new debt ploughed into existing houses believing we'll get rich by it.

Here is a beauty from Alan Kohler:

In the absence of a decent illusory asset bubble, wealth must be rebuilt the old-fashioned way: by saving.

http://www.businessspectator.com.au/bs.nsf/Article/Bubble-bubble-toil-and-trouble-$pd20090122-NHRQ7?OpenDocument&src=mp)

 

[Satanoperca]

yieldmatters,

Thank-you for your insightful observation. All those countries are the same at macro levels, while have differences at micro levels.

Overwhelmingly they all share one common element, huge debts accumulated over the last decade which they can no longer afford to service.

Cheap credit has lead to bubbles in the equity, property and bond markets. Whether our banks are in a better position does not necessarily protect us from what is currently occurring around the world as we are now a globalized planet of free trade!

Recession is rather a slowing down rather than stopping, after a decade of not stop growth fuel by debt even the world needs a little rest to recover. For those that have gone to hard, just might not recover, but those who look to the long term and progress steadily and with caution, it is just another bump on a dirt road.

I am looking forward to this year immensely as I hope the GFC will lead to greater innovation, improved efficiencies and greater social awareness to make changes for the better of all that inhabit this planet. The GFC is just another pot hole and after we get out of this one, we have the mother of all problems, global warming. Whether it exist on not, the earth is changing and may not be as habitable in the future as it is today.

Benjamin

 

[BoatBoy]

The GFC is just another pot hole and after we get out of this one, we have the mother of all problems, global warming. Whether it exist on not, the earth is changing and may not be as habitable in the future as it is today.

Benjamin

Oh dear I'd best get out and finish my boat then, I can hear the "smokers" firing up the engines now
http://www.imdb.com/title/tt0114898/

Dave

 

[Satanoperca]

I have already started building. So I will see you on the high seas

 

[boz]

A driver has his eyes shut while driving and ploughs his car off a cliff (oops). I am driving with my eyes shut but reassure myself that I won't also go off the cliff because my car is a different model, different tyres etc. Everything will be fine.

You are all arguing around the edges. The core of USA, UK, NZ, Australia, Spain, Ireland are EXACTLY the same. Nobody has the money to actually pay back these loans in their lifetime. It was a load of new debt ploughed into existing houses believing we'll get rich by it.

Here is a beauty from Alan Kohler:

In the absence of a decent illusory asset bubble, wealth must be rebuilt the old-fashioned way: by saving.

http://www.businessspectator.com.au/bs.nsf/Article/Bubble-bubble-toil-and-trouble-$pd20090122-NHRQ7?OpenDocument&src=mp)

good post Yiealdmatter,
I can help to prove this point a bit more with this table about different countrys saving rate
View attachment gross-savings-rate.pdf
that is the private savings then you have to public saving/spending that has been good for last decade for australia and Canada, within -3% in EU and bad for Japan. This year is going to be very bad for UK US and ireland, bad for canada and Australia, Spain, Japan, still within 3% for the major EU countrys.

 

[ziggy2214]

I can help to prove this point a bit more with this table about different countrys saving rate.

emm..... your chart makes no mention of the fact that different countries have different bank products on offer.

For example, here we have LOC's and Offset accounts so most people with a mortgage have their savings parked in their loans so their money won't be counted as savings

 

[BoatBoy]

emm..... your chart makes no mention of the fact that different countries have different bank products on offer.

For example, here we have LOC's and Offset accounts so most people with a mortgage have their savings parked in their loans so their money won't be counted as savings

Yes Sir, just checked our numbers again this evening, large wads of folding savings in the offset that can be pulled out if needed, but none of it would show up as savings as such.

Not to mention the LOC, locked and loaded, ready for action.

Dave

 

[yorke]

Here is a beauty from Alan Kohler:

In the absence of a decent illusory asset bubble, wealth must be rebuilt the old-fashioned way: by saving.

He does make sense. The way to save and rebuild wealth the old fashion way is to buy property and shares.

 

[boz]

emm..... your chart makes no mention of the fact that different countries have different bank products on offer.

For example, here we have LOC's and Offset accounts so most people with a mortgage have their savings parked in their loans so their money won't be counted as savings

I think we went through this debate on ''what is savings" before, mentioning super etc. But in the big picture is that the average Australian doesn't put much of his income generated in the year aside, you can see that also from the external position of Australia agaist other countries, and on the trade deficit data. In any case Australia doesn't have public debt and that is a big plus. In australia even if all the private debt goes into public we'll end up not much different then Japan at around 170% of gdp.
At the End of the day A. Kohler is right that we just have to save more and now that is just happening as with the trouble time people just save more at the cost of gdp and jobs. What I don't like is that most countries try to slow any saving changes down, not to stop it (like eu), while in Australia there is a denial stage and our government increase public spending with no limit to compensate the increased savings. That is very stupid because we'll end up with both private and public debt and on a everincreasing overalll debt. It is a good path to become a banana republic, with risk of country rating downgrade, increased cost of financing and investment etc. (Spain has just been downgraded from AAA to AA+ because of its increased public spending)

 

[ziggy2214]

in the big picture is that the average Australian doesn't put much of his income generated in the year aside

Boz

In Australia we have high numbers of property ownership.
There is no point putting any money into a savings account when we have a mortgage.
At the same time, the banks are giving us almost 0% interest for leaving our money in a savings account and they hit us with huge fees if we choose to use it....

If you look at your chart closely, the savings discrepancy is showing up in the last decade or so. I do believe that property ownership in combination with the banking products on offer and the low returns from savings accounts contributed to this drop in savings. In the same period we also had the stock-market boom and our superannuation was (and still is) attractive.

Don't read too much into those Intl. comparison charts.
Even our national credit card figures will be misleading because most Australians these days use their credit cards to do all of their shopping.
This does not mean that we are increasing our debt.
We are simply (temporarily) using the bank's money for most of our expenses but we pay it back every month. Another reason for using credit cards is convenience and ofcourse their reward programs.

cheers

 

[yieldmatters]

Yes Sir, just checked our numbers again this evening, large wads of folding savings in the offset that can be pulled out if needed, but none of it would show up as savings as such.

That would be saving. The traditional measure is income less consumption. Parking it in an offset isn't consumption. Sounds like you are saving! One of the rare few.

Not to mention the LOC, locked and loaded, ready for action.

Are you implying you see your LOC as "savings"? I think that is the whole problem!

Reminds me of this beauty:

http://thereisnohousingbubble.blogspot.com/

Hello friends. I'm sorry for taking so long between posts but I've been enjoying the fruits of my housing labor. I took a week long trip to Egypt. I flew first class, ate at the finest restaurants, and stayed at five star hotels. It was a trip to remember and the nicest part was I was earning money to take this trip. "How so," the confused renter asks? I used my credit cards to pay for the trip and earned a lot of points. Now I'm paying off the credit cards with my home equity line of credit (HELOC for those in the business) and not only do I get the good feeling of once again being debt free, but I also get to deduct the cost of the trip from my taxes (in the form of a mortgage deduction). Ah, being a home owner means living the high life. I get points, tax deductions, and the security of having no debt. As a wise man once said "owning a home is like printing my own money.

 

[yieldmatters]

This does not mean that we are increasing our debt.
We are simply (temporarily) using the bank's money for most of our expenses but we pay it back every month. Another reason for using credit cards is convenience and ofcourse their reward programs.

That's how I use my credit card but you will find we are the minority. Many have outstanding and growing credit card balances and pay lots of intererest (surprising but true!).

Australia as a whole is (was) increasing it's debt but there will be different groups within that of course that behave differently.
http://www.abc.net.au/news/stories/2007/09/25/2043312.htm

I was shocked to understand that in the 10 years to 2007 Austalians borrowed an extra $770 billion and except for $40 billion in shares and the miserable bit of new building we did the rest was ploughed entirely into existing housing stock. That's an awful lot of "renovations" or we are kidding ourselves into believing we are rich by buying and selling houses to eachother and spending the illusionary profits.

 

[boz]

Boz

In Australia we have high numbers of property ownership.
There is no point putting any money into a savings account when we have a mortgage.
At the same time, the banks are giving us almost 0% interest for leaving our money in a savings account and they hit us with huge fees if we choose to use it....

In the big picture doesn't matter if you geet high number of ownership. For example in Spain and Italy you have higher level of home ownership then Australia, in germany you have low level of ownership, what is the difference? just that the german put the saving in the german businesses that some of them end up buying the homes the german citizen rent from them, savings is still the key of this.
The system we have in Australia set up by the government to incentive debt is pure madness and should be changed.

If you look at your chart closely, the savings discrepancy is showing up in the last decade or so. I do believe that property ownership in combination with the banking products on offer and the low returns from savings accounts contributed to this drop in savings. In the same period we also had the stock-market boom and our superannuation was (and still is) attractive.

That is correct, the debt trouble in australia started about 10 years ago, after the recession of the early 90's Australia was back at its fundamental and at a sustainable growth rate

Don't read too much into those Intl. comparison charts.
Even our national credit card figures will be misleading because most Australians these days use their credit cards to do all of their shopping.
This does not mean that we are increasing our debt.
We are simply (temporarily) using the bank's money for most of our expenses but we pay it back every month. Another reason for using credit cards is convenience and ofcourse their reward programs.

cheers

I am aware that those chart are not giving you a complete picture, that is also why traders looks at very reliable data like trade deficit, external position, public spending (yearly budget), inflation, unemployment rate, exchange rate, confidence, what government and RBA say, etc.
doesn't matter too much about the overall debt as much as the system is stable and is more important if this debt is under control like if it is being serviced and if debt is increasing what is the reason (a good reason is to get more investment in production that would lead to gdp increase) and if the debt can be reversed.
By the way, the national credit card debt last time I looked was going down and repaiment were increasing (increase on savings). What is worring me in Australia is the public spending of taxpayer money, I won't be surprised if in this year budget we'll get 30 bil$ deficit or 3% of gdp. next year we'll not going to be in a better situation if government doesn't change policy and we can get to 60 bil$ debt, then we get into todays UK situation that is closed to not be able to weather the financial storm anymore, and Australia is not as big as UK with a much less important currency.

 

[Bill.L]

Hi all,

YM

That's an awful lot of "renovations" or we are kidding ourselves into believing we are rich by buying and selling houses to eachother and spending the illusionary profits.

Here's the thing though, and I know it has been covered before in other threads,

Money (and for that matter debt) is just an idea, a concept. The paper we use has no value at all unless we attribute value to it. Simply creating inflation makes problems of debt go away (especially if interest rates are kept low) What is the point of saving useless pieces of paper?? (ask a Zimbabwean) Australians already have a compulsory saving of 9%, called superannuation.

bye

 

[boz]

Hi all,

YM


Here's the thing though, and I know it has been covered before in other threads,

Money (and for that matter debt) is just an idea, a concept. The paper we use has no value at all unless we attribute value to it. Simply creating inflation makes problems of debt go away (especially if interest rates are kept low) What is the point of saving useless pieces of paper?? (ask a Zimbabwean) Australians already have a compulsory saving of 9%, called superannuation.

bye

Saving doesn't mean leaving money in cash. It is also put the disposable income you don't spend into your business if you own one or into other businesses (that generate income) and eventually buy your home once you generate enough wealth to pay for it.
When you create the debt you automatically create the creditor, for australia most of these creditors are outside the country and they can pull the plug and send australia to banana republic status anytime.

 

[warmed_cockles]

He does make sense. The way to save and rebuild wealth the old fashion way is to buy property and shares.

Maybe, but I can't see this happening in America or the UK. They've had a wild ride these past 10 years where both shares and property have lost value and plenty of people have gone bankrupt. Do you take the risk?

Then there is the other factor: You can no longer rely on your investments going up as a means of saving for retirement. Therefore you become far more conservative when making consumer purchases. Easy to buy a new car every few years when it's being paid for by the rising value of your home. Not so easy when your wealth is deteriorating.

Investment strategies will become far more conservative. Spending will become more conservative. This will cause a feedback loop of slower capital growth and reduced company profits. Not a huge stretch to achieve a lost decade in this kind of situation.

 

[rogue]

Sure. But the fact there was not really a shortage in the UK does not automatically mean there is no shortage in Australia.

Of course not... just showing how it's possible for there to be a 'shortage' and still end in falling house prices.

Remember that the population growth rate in Australia is much higher.

Jeez. I thought we just went over this. Talk about going round in circles. Relative to population, the growth is actually the same. Around 350,000 additional people.

And Australia does not have the unskilled migrants from eastern Europe who just packed their bags and went home when the UK economy fell over.

bahahahahaha. No we just have unskilled migrants from many other countries. Take a trip out to Campbelltown or Cabramatta one day.
Oh... and Rudd's just shut the door on immigration to protect employment. Apparently you need a job BEFORE coming here now. How quickly immigration levels will change now will be interesting to see.

I don't know any homeless people at all. However I do know people who are living in a caravan park because thay can't find rental accommodation. And I know people who have postponed moving out of their parents house because they can't find affordable accommodation. I also know people who are staying with friends (sleeping on sofa etc.) I believe most of Australia's crisis shelter and public housing is overflowing.

I must hang in different circles but it's interesting that you mention the one's who can't find 'affordable' accommodation. What do you think will change this situation? Your friends earning lots more all of a sudden? Or that prices start dropping because no one is able to 'afford' such accommodation.

A symptom of undersupply would for example be overflowing caravan parks, overcrowded public housing, people staying at parents home for longer, people sharing more persons to a house than they would like etc.

This is also a symptom of inflated prices generated by a property boom that was created by irresponsible lending practices and a once strong economy. Eventually when wages only rise 4% per annum and property has risen at 20% per annum..... something has to give. As i said - Rudd has to PAY people to buy houses now.... not really a symptom of undersupply as much as unaffordability.

For land to be considered 'habitable' in the modern era, it must have infrastructure, roads, services etc. The vast majority of Australia does not have this. Sure, if you want to live a subsistence lifestyle in the outback this can be done, but most people these days want more.

The vast majority of Australia does not need infrastructure yet. Plenty of already serviced land to get through yet.

The point is that much of Australia's desert has not been transformed into Vegas style cities. When it has, we can have this conversation again. But in the meantime lets look at what exists now.

Ok. Well if we're not allowed to speculate....lets have this conversation again when immigration continues at high levels and employment stays strong etc etc within the next few years.

Largest Cities in the UK
City Population
London 7.2 Million
Birmingham 992000
Leeds 720000
Glasgow 560000
Sheffield 512000
Bradford 467000
Edinburgh 450000
Liverpool 440000
Manchester 420000
Bristol 380000
Wakefield 316000
Cardiff 310000
Coventry 305000
Nottingham 285000
Leicester 280000
Sunderland 280000
Belfast 280000
Newcastle upon Tyne 259000
Brighton 248000
Hull 240000
Plymouth 240000
Stoke-on-Trent 239000
Wolverhampton 239000
Derby 230000
Swansea 225000
Southampton 220000
Salford 215000
Aberdeen 215000

1 Sydney New South Wales 4,336,374
2 Melbourne Victoria 3,806,092
3 Brisbane Queensland 1,857,594
4 Perth Western Australia 1,554,769
5 Adelaide South Australia 1,158,259
6 Gold Coast-Tweed Queensland/New South Wales 583,657
7 Newcastle New South Wales 523,662
8 Canberra-Queanbeyan Australian Capital Territory/New South Wales 388,072
* Canberra Australian Capital Territory [3] 339,573
9 Wollongong New South Wales 280,159
10 Sunshine Coast Queensland 230,429
11 Greater Hobart Tasmania 207,484
12 Geelong Victoria 169,544
13 Townsville Queensland 157,174
14 Cairns Queensland 135,856
15 Toowoomba Queensland 123,406
16 Darwin Northern Territory 117,395
17 Launceston Tasmania 104,071
18 Albury-Wodonga New South Wales/Victoria 101,842
19 Ballarat Victoria 89,665
20 Bendigo Victoria 86,510
21 Burnie-Devonport Tasmania 80,241
22 Mackay Queensland 79,172
23 La Trobe Valley [4] Victoria 77,270
24 Rockhampton Queensland 74,530
25 Mandurah Western Australia 73,477
26 Bundaberg Queensland 64,663
27 Bunbury Western Australia 59,876
28 Wagga Wagga New South Wales 56,147
29 Hervey Bay Queensland 53,323
30 Coffs Harbour New South Wales 50,726
31 Mildura Victoria 48,691
32 Gladstone Queensland 47,169
33 Shepparton Victoria 46,680
34 Tamworth New South Wales 44,970
35 Port Macquarie New South Wales 42,042
36 Orange New South Wales 37,333
37 Dubbo New South Wales 36,150
38 Geraldton Western Australia 34,214
39 Nowra-Bomaderry New South Wales 32,556
40 Bathurst New South Wales 32,385
41 Warrnambool Victoria 32,042
42 Lismore New South Wales 31,865
43 Kalgoorlie/Boulder Western Australia 30,700

Here's my list of cities. I still don't understand your point though re whether the two nations have more or less cities. We have more cities over 1 million population. Seems like more options to me for a well serviced place with good infrastructure and jobs.

Sure. Lot's of things might happen eventually. Too hard to predict that far into the future. Lets concentrate on the here and now.

Ok. The 'here and now' where unemployment is growing, house prices are falling, mine's are closing down, doors being shut on immigration, companies collapsing. Happy to!

Weren't we comparing UK vs Australia. If moving the goalposts to London vs Sydney suits your position better, feel free to do so. However I suggest you research Sydney's population growth a bit better.

Huh?

 

[BoatBoy]

Are you implying you see your LOC as "savings"? I think that is the whole problem!

Reminds me of this beauty:

http://thereisnohousingbubble.blogspot.com/

No, but I do see it as additional cash I can access after my cash is depleted if needs be.

Compared to using my cash in the bank and now using the LOC against it.
Oh wait,.............. I cant get a LOC on cash when its gone?

Damn, I'll just have to sell my second hand Ipod and mobile phone collection, plasma TV and Dolce and Gabana underwear

Dave

 

[Shadow]

Relative to population, the growth is actually the same. Around 350,000 additional people.

Clearly you don't understand what 'relative to population' means. The population growth rate of 1.7% in Australia is much higher than the population growth rate of 0.4% in the UK. Relative to population, the Australian growth rate is higher.

bahahahahaha. No we just have unskilled migrants from many other countries. Take a trip out to Campbelltown or Cabramatta one day.
Oh... and Rudd's just shut the door on immigration to protect employment. Apparently you need a job BEFORE coming here now. How quickly immigration levels will change now will be interesting to see.

The majority of overseas migrants to Australia are skilled. Your exceptions to the rule don't change that.

I must hang in different circles but it's interesting that you mention the one's who can't find 'affordable' accommodation. What do you think will change this situation? Your friends earning lots more all of a sudden? Or that prices start dropping because no one is able to 'afford' such accommodation.

Lower interest rates and increased investor activity will make purchasing and renting (respectively) more affordable.

I must hang in different circles

I thought most of you guys (ok and a few girls) from the other forum were poor renters who spend their days praying for a property crash and whinging online that everything is so unaffordable and how the nasty specufestors from SS were to blame?

36 Orange New South Wales 37,333
37 Dubbo New South Wales 36,150
38 Geraldton Western Australia 34,214
39 Nowra-Bomaderry New South Wales 32,556
40 Bathurst New South Wales 32,385
41 Warrnambool Victoria 32,042
42 Lismore New South Wales 31,865
43 Kalgoorlie/Boulder Western Australia 30,700

Now you're just being silly. I snipped my list to show only UK cities with populations higher than 200,000 people. Do you really want me to list all towns in the UK with more than 30,000 people. I think you know how long my list would be. You are clutching at straws here...

Huh?

Sorry if I confused you. I'd forgotten how easy that was...

Cheers,

Shadow