Huge article from Steve Keen on why prices are going to crash

Well, he's wrong on one point.

He says the FHG was first introduced in 1983. We built our first home in 1974 and received about $1200 in a first home grant. We bought carpets for the lounge and main bedroom. Maybe it was called something different and has slipped under the radar.
Marg
 
Size does matter

http://www.businessspectator.com.au...nt&src=mp&is=Property&blog=Keensian Economics

Link to h:eek::eek:uge article from Steve Keen on why prices are going to crash for the SS economists to digest and comment.

Peter 14.7

Thanks for sharing Peter.

T'was very long.......obviously Mr Keen considers that size does matter. :p

Initial impressions as I was scrolling down was that it looks like "copy" for an ad to sell a seminar on............well, you know; his theories ;)
 
yes yes - clearly he is repentent in his views.

he doesn't give up - esp with this Japan tripe.

Japan collasped because it moved into protection mode and was out of time and they got bitten - HARD. Australia is not trying to "shut up shop" and tarrif every foreign thing imported so i fail to see the correlation.

i love his debt to GDP argument. again it fails to take into account ability to service said debt and the quality of the security.
 
I think that Japan took its medicine but is still sick. Whereas Australia (and the rest of the western world) still hasn't taken there's yet.

I think the prognosis is still pending on that one.

I think property here would have taken a hammering if the government's massive stimulus, FHBG, low rates and bank guarantees didn't artificially prop it up.

He could be right. It could be a matter of timing. What if he is only half right?
:eek:


yes yes - clearly he is repentent in his views.

he doesn't give up - esp with this Japan tripe.

Japan collasped because it moved into protection mode and was out of time and they got bitten - HARD. Australia is not trying to "shut up shop" and tarrif every foreign thing imported so i fail to see the correlation.

i love his debt to GDP argument. again it fails to take into account ability to service said debt and the quality of the security.
 
I think that Japan took its medicine but is still sick. Whereas Australia (and the rest of the western world) still hasn't taken there's yet.

I think the prognosis is still pending on that one.

I hope your not talking about bread and butter places......

The reason I say is because most bread and butter places I buy are way below building costs and I mean in some cases below 40-50% and in my opinion the reason for that is because Australia has one of the highest paid labourers in the world, i mean where else can cleaners make more then managers offcourse provided they are doing more hours......

I just cant see the prices of bread and butter places go down because then why would anyone build these type of properties?

And if they dont build these type of properties then what would happen to the existing ones?;)
 
I just cant see the prices of bread and butter places go down because then why would anyone build these type of properties?

And if they dont build these type of properties then what would happen to the existing ones?;)

Ahhh, the marginal cost of new supply in the face of increasing demand. Obviously not a relevant consideration in academia!

Well, at least not in Mr Keen's circles of academia...

After all reputable economists don't lower themselves to consider the housing market in this type of excruciating detail.

:eek:
 
Two things rarely mentioned about Japan:
1) Japan's population is declining. There is almost no immigration, and Japan is neck and neck with Italy as the fastest aging populations because of so few kids, and

2) Japan has had little to no wage growth since the bubble burst. I'm getting this from anecdotal evidence like talking to people in Japan and non-academic sources like yahoo news and so on. Part of what gives a buyer confidence to take up what seems like a gigantic amount of mortgage debt is that in time, they will make higher wages. What allows people to buy more and more expensive (nominal prices) property is rising wages and therefore ability to service more debt. In Japan, they have no expectations of higher wages, and the uncertainty of the economy gives people no confidence to buy because they might lose their job.

A country with a declining population, no wage growth and slips in and out of recession won't have rising property prices, especially when you consider how big Japan's bubble was. After 20 years of stagnant growth and wages, Japan still has some of the highest per capita wages in the world. After 20 years of crashing prices, and roaring prices everywhere else, Tokyo is still expensive relative to TODAY's prices. That gives an indication of just how crazy it got back then.

A country with increasing population, wage growth and decent (if not strong) economy growth, on the other hand......... put it this way, if Australia goes into a long term population decline, long term wage stagnation and economic recession, then property will crash.
 
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Hi all,

First graph can show anything you want by changing the starting date for the 'common' comparison.

starting from the common date of June 1986

Very convenient starting date, if he had used 1980 instead the graphs would look completely different, with Japan's 1989 high being astronomical.

We also had a FHOG in 1981, it was worth $3000 from memory.

bye
 
I read the article this morning, to be honest I am a bit bearish on realestate but this article didnt really convince me of anything, I agree with above comments - you just cant compare Australia to Japan, it just doesnt work. We have a population that is growing, there WILL be demand for housing in the future. What I would like is for housing prices to stabalise or slow down becuase if we continue like we are there will be a correction but I think it would only be minor.

Also dont forget with all these new immigrants there is new foreign money coming into Australia. Can you buy property in Japan if you are not from Japan? (can someone check that one?)

As much as I wish real estate would hit the skids I have my doubts. (but am still being bearish)
 
I think property here would have taken a hammering if the government's massive stimulus, FHBG, low rates and bank guarantees didn't artificially prop it up.

What was artificial about it? Fiscal and monetary stimulus is normal and expected when an economic downturn is approaching. Keen actually expected even greater levels of stimulus. He expected (and advocated) ZIRP and debt forgiveness (just another prediction he got wrong).
 
yes yes - clearly he is repentent in his views.

he doesn't give up - esp with this Japan tripe.

Japan collasped because it moved into protection mode and was out of time and they got bitten - HARD. Australia is not trying to "shut up shop" and tarrif every foreign thing imported so i fail to see the correlation.

i love his debt to GDP argument. again it fails to take into account ability to service said debt and the quality of the security.

i agree with the part about deomgraphics, demographics plays a huge role in property demand and japanese and australian demographics are as difference as chalk and cheese.

I am not so sure about the GDP argument. I can tell you something doesnt feel 'right' at the moment.
 
I am not so sure about the GDP argument. I can tell you something doesnt feel 'right' at the moment.

i am with you there chilli. something aint right. i'm holding off for reasons i'm not sure of, but the "vibe" of it just isn't working for me (ah i love the castle - "it's mabo, it's the vibe, it's.....yeah")

my GDP argument was very simplistic for simplistic's sake - take it with a grain of salt before dissecting.
 
It could be the vibe your honor

I heard today that the seismologists at CBA are talking of reducing LVR's (from 90 %) to 80 % for investors. If (and assuming if) they do this then the other pillars will follow.

Could they know something that is about to hit us here and are preparing for the event and the after-shocks? :confused:

It could very well be "the vibe....yeah it's the vibe your honor" ;)

Are our banks (and councils) exposed to the tranche of ARM loans and Alt-A's that are about to be re-set across the US?

Are there more smoke and mirrors exposure of our organisations here to these bundles (so called) investments and what might be the aftermath?
 
Well, he's wrong on one point.

He says the FHG was first introduced in 1983. We built our first home in 1974 and received about $1200 in a first home grant. We bought carpets for the lounge and main bedroom. Maybe it was called something different and has slipped under the radar.
Marg

I received a first home owners grant in 1981, a sum of about $3000. Keen's definitely got his dates wrong
 
http://www.businessspectator.com.au...nt&src=mp&is=Property&blog=Keensian Economics

Link to h:eek::eek:uge article from Steve Keen on why prices are going to crash for the SS economists to digest and comment.

Peter 14.7

Hi Peter
I wont bother reading this stuff.

If I followed his lines of thinking I would be well and truly behind the 8 ball and be kicking myself for missing out on some of the best investment opportunities over the last 18 months.

I like Steve McKnight comments:
The GFC resulted in a significant redistribution of wealth away from
those who relied on others to make decisions for them, to those who
knew how to read the market and how to take appropriate action.

Cheers, MTR
 
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Hi Peter
I wont bother reading this stuff.
Me either :p

Life's too short and there's too much money to be made by ignoring people like this.

That is not to say I am putting my head in the sand, but really, IMO this is not the time to be listening to Prof Keen. I'd rather he just left early for his walk up the mountain......:p
 
Someone could always enlighten all the home owners out there to the fact that keen is actually trying to talk the market into a crash and he is actually putting people into a greater financial risk situation by doing so. This should be enough to get all homeowners chasing him with torches and pitch forks calling for an old school witch burning. That should make him pull his head in.
 
we got the grant in 88 Lizzie. it was about 1600 up front and the balance paid in decreasing amounts monthly for the next few years. I think it actually ended in about 1990 before the next reincarnation in 2000. It wasn't called FHOG though, had some other dorky name and not advertised the way things are now.
 
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