Investors could create housing bubble: RBA

[Aaron Sice]

I apologise for giving the impression that you stated this specifically. The implication however is clear.

as admitted.

While you may be around for a long time your experience would seem to be limited to Australia? Other countries have seen substantial falls in real estate prices in your lifetime and have also seen substantial falls in wages in real terms. Are you denying that this could ever be a possibility in Australia? i.e. are you of the view that 'Australia is different'?

we can't discuss other countries with great depth because only a handful of forumites have lived in other countries. Australia is VERY different to the rest of the world - ALWAYS has been - but that said ANYTHING is possible.

as an LL, i will ALWAYS try to squeeze the market for a little more. and as more and more squeeze happens, we see rent rises. as rents rise, union memeber complain they're not getting enough money. so wages rise. more rent rises. investors notice better yields and buy. higerh wages means more spending.

we have unions in this country that force feed our real estate growth.

i guess they're good for something, at least....

 

[HomeBuyerStrike]

as an LL, i will ALWAYS try to squeeze the market for a little more. and as more and more squeeze happens, we see rent rises. as rents rise, union memeber complain they're not getting enough money. so wages rise. more rent rises. investors notice better yields and buy. higerh wages means more spending.

That is the same the world over. It's also a recurring theme that economies experiencing bubbles think that they're different. I'm sure I could dig up news articles from The USA, Japan, Sweden, Ireland, Portugal, Spain, Italy, Greece, Netherlands all proclaiming how different they are to the other bubbles.

 

[Aaron Sice]

actually - they are different. the PIIGS are VERY VERY different. incurable.

Japan is still making $100bil loans to the IMF. how is that possible with 20 years of "deflation"....?

http://www.imf.org/external/pubs/ft/survey/so/2009/NEW021309A.htm

the US created a system that collapsed in on itself under it's own gravity of stupidity. no real surprises there, i guess.

Australia has a lawful system of regulated wealth confiscation and a social stigma against those who understand it.

4 very different markets.

so "please explain" how we have a recurring theme across all 4 economies.

 

[HomeBuyerStrike]

so "please explain" how we have a recurring theme across all 4 economies.

The recurring theme is that they all said they were different.

 

[Aaron Sice]

The recurring theme is that they all said they were different.

and going by the above, you would agree or disagree with that?

i say i'm rich, you say you're rich. i drive a corolla, you drive a merc. i wear sports trackies, you wear a suit and tie.

who's lying?

 

[HomeBuyerStrike]

and going by the above, you would agree or disagree with that?

The fact is that they all said that their differences from the features of other economies which had bubbles meant that they didn't have bubbles. Every bubble in history has claimed that they have found a way to defy market and economic forces. Yet time and time again they are proved wrong. Australia is the latest Icarus of the financial world. Of course economies have differences, but the fundamental market and economic laws still remain.

i say i'm rich, you say you're rich. i drive a corolla, you drive a merc. i wear sports trackies, you wear a suit and tie.

who's lying?

Not sure what the point is there.

 

[HomeBuyerStrike]

Leading up to Japan’s bursting real estate bubble in 1990, we were told that this time was different: house prices simply reflected the growing economic power of Japan Inc. and there was a land shortage in overcrowded Tokyo. Today, Japanese real estate prices are still less than 50% of that peak value reached more than two decades ago. During the U.K. bubble, Brits blamed zoning requirements for creating land shortages until prices crashed to the lowest multiple of income on record in 1997. Similarly, builders in Northern Ireland predicted severe housing shortages if planners did not release more land in 2003. And before America’s bubble burst, there were land shortages across the country, from Florida’s undeveloped west coast to the deserts of Nevada.

http://blogs.forbes.com/greatspeculations/2010/07/26/still-speculating-in-australian-housing/

 

[Aaron Sice]

1) an unserviced 'desert' is NOT surplus land. once it is serviced and developed and ready to build on, THEN it is land one can count in ANY figures, bull or bear. the strategic nightmare of expanding Las Vegas is akin to making Coober Pedy a capital city. my studies of that godforsaken place drives my intuition about Perth urban infill instead of urban sprawl.

2) these articles are great. they highlight exactly what people outside of planning circles shouldn't comment on. the lack of available land/houses etc drives prices and frustration to insane levels for acquiring stock. so people just give up - investors and home buyers alike. no-one can be bothered competing with emotional jane or shortd*ck jack at auction bidding prices up to insane levels just to secure something or flaunting their wealth or whatever.

this is the overbought rally i was mentioning earlier. prices get to insane levels before people selling their own house say "hang on, my house isn't worth that". when SELLERS are saying that, you know the sh*ts about to hit the fan - like Perth 2007. you start to see people think they've been swindled and they won't buy, period.

it's the end of a bull run you will see your "Homebuyer Strike", not the start. it's the Homebuyer Strike that sends prices doon doon doon until they hit a target level where yields are acceptable - investors start to nibble, those greenfields options come to maturity and are sold to developers who on-sell to FHBs on stimulus packages and away we go again.

IF IF IF the land had been released earlier, then demand may not have abated, but prices would have been stabilised somewhat and been more sustainable. but govt depts are slow to react (not proact) on purpose - they need to justify their existence.

you will not see a Homebuyer Strike this early in a bull run. everyone's about to get that "equity mate" rosy glow all over again.

 

[craigb]

Gov releases land too slowly.
To few trades nowadays.
Immigration is high.
houses are too expensive.
Investers are buying to many.

It all sounds like a perfect plan in the working , i thinks .

 

[Sheryn]

Locally not much new building work going on and for that matter not much building additions to existing property is going on.
Bunnings is busy so I expect people are doing own little reno's & improvements.
I believe good quaility reasonably priced house prices to hold up. REA's still seeking in houses in good areas for sale. A small lot of properties that I believe are over prices eg cost 420 - 450K to build and people are trying to sell at 629K are not selling and have been reduced to under 600K and will shortly be closer to 550K.

Actually I am seeing a lot of people in our area who build their house and resell. 2 couples I know have done it 5 times in past 8 - 10 years. 1 couple 3 times so maybe not investors pushing up prices but people wanting the designer house to live in.


Regards
Sheryn

 

[HomeBuyerStrike]

it's the end of a bull run you will see your "Homebuyer Strike", not the start. it's the Homebuyer Strike that sends prices doon doon doon until they hit a target level where yields are acceptable - investors start to nibble, those greenfields options come to maturity and are sold to developers who on-sell to FHBs on stimulus packages and away we go again.

I don't think you've fully thought out how painful that deflation will be. Investors will be wiped out and any new investors will have to do so in an environment with lower wages and stricter lending criteria.

 

[HomeBuyerStrike]

Actually I am seeing a lot of people in our area who build their house and resell. 2 couples I know have done it 5 times in past 8 - 10 years. 1 couple 3 times so maybe not investors pushing up prices but people wanting the designer house to live in.

It doesn't take much by the way of brains or balls to make money like that in a rising market. Have a look at the property porn shows from UK Channel 4 from the time of the GFC to see what happens these fixer upper / amateur developers in a crash.

 

[Aaron Sice]

but amateurs and gun-ho investors will ALWAYS lose money.....how does that even apply?

it seems you're pulling every bit of bad news you hear and collating it into one big sob story.

i ain't buying it, not yet anyway.

i said very very early in the piece that this GFC was structured - it was too perfect a storm. the falls across the board were methodical and traceable and i made a lot of money trading a lot of things. there was no cash haven - wherever you invested your money, you lost it, unless it was under the pillow because inflation was negligible. This goes against every grain of investing nouse - ie generally, if soft comms fail, hard comms/metals rise. not this time. if oil fails, bond buying increases. not this time. etc etc.

strutured GFCs have happened before. 1819. 1837 (much like today). 1857. 1873. 1893. 1907. 1929. 1973. 1987 right thru to 93. 2001. 2007.

they used to happen every 20 years. now they happen every blue moon (7 years).

the odds of getting one in three crashes correct over 20 years is pretty good. just as "hope" is not an investement strategy, "guessing" isn't economic modelling.

 

[HomeBuyerStrike]

but amateurs and gun-ho investors will ALWAYS lose money.....how does that even apply?

it seems you're pulling every bit of bad news you hear and collating it into one big sob story.

i ain't buying it, not yet anyway.

In a market where there is huge capital appreciation even flippers make big returns. Even if you make a balls of improving the asset you're not going to eat into that gain much. It's very difficult to lose money in a rising market with this strategy. It's nothing to do with pulling out every sob story it's pointing out the reality.

i said very very early in the piece that this GFC was structured - it was too perfect a storm. the falls across the board were methodical and traceable and i made a lot of money trading a lot of things. there was no cash haven - wherever you invested your money, you lost it, unless it was under the pillow because inflation was negligible. This goes against every grain of investing nouse - ie generally, if soft comms fail, hard comms/metals rise. not this time. if oil fails, bond buying increases. not this time. etc etc.

Cash in certain Euro markets has done very well comparatively over the last two years. Plenty of people have chosen this as a safe harbour.

 

[BayView]

I apologise for giving the impression that you stated this specifically. The implication however is clear.

While you may be around for a long time your experience would seem to be limited to Australia? Other countries have seen substantial falls in real estate prices in your lifetime and have also seen substantial falls in wages in real terms. Are you denying that this could ever be a possibility in Australia? i.e. are you of the view that 'Australia is different'?

No; we are not different as such. But we are different.

The USA GFC happened while we were there, and it was a sequence of factors combined to bring them down.

One of their mistakes was to offer very, very easy credit and silly loan products to penguins who shouldn't have been loaned an umbrella in a rainstorm.

Now, can it happen here? absolutely.

However, our Banking system appears to be more on the ball and a lot more conservative in lending practices. This may change, but I'd doubt it will ever become as out of control as the US did.

The x-factor is wages in real terms.

We are following the US in almost every aspect of life unfortunately, and one of their things they have succeeded in is keeping the minimum wage to ridiculously low levels for several decades. If this happens here, we will see an entire class of adults not ever to be able to afford even your basic dog-box.

It's up to us to make sure we position ourselves accordingly, and not fall into the trap of being lower-middle class; or even plain old middle class in the ensuing decades. This class in the USA are broke.

We will head this way too, and when it arrives, this is when you may see the property armageddon you keep on bleating on about.

 

[BayView]

Cash in certain Euro markets has done very well comparatively over the last two years. Plenty of people have chosen this as a safe harbour.

Cash is the investment for the non-investor.

It's simply a savings plan for the uneducated.

Nothing wrong with that, but you need to be aware of what you are.

Having cash makes you a saver

If you have some investing knowledge, you can do far better than cash.

 

[HomeBuyerStrike]

Cash is the investment for the non-investor.

It's simply a savings plan for the uneducated.

Nothing wrong with that, but you need to be aware of what you are.

Having cash makes you a saver

If you have some investing knowledge, you can do far better than cash.

Forgive me if I think that sounds a tad patronising and to be honest the bolded part quite superficial. I know when to keep my powder dry. If I'm a saver rather than an investor in the prevailing conditions that's fine by me.

 

[willair]

In a market where there is huge capital appreciation even flippers make big returns. Even if you make a balls of improving the asset you're not going to eat into that gain much. It's very difficult to lose money in a rising market with this strategy. It's nothing to do with pulling out every sob story it's pointing out the reality.

Not everyone some sell too early ,some with greed in their minds wait till it's too late till they find the sectors which are contributing to higher %%
in after tax dollars of their profits ,maybe come to the simple reality that not all flippers,reno,day traders make money,and shareholders have stuff all influence on company policy once you do the number on who controls what ..willair.

 

[HomeBuyerStrike]

Not everyone some sell too early ,some with greed in their minds wait till it's too late till they find the sectors which are contributing to higher %%
in after tax dollars of their profits ,maybe come to the simple reality that not all flippers,reno,day traders make money,and shareholders have stuff all influence on company policy once you do the number on who controls what ..willair.

If you're implying they always make a profit, but not as much as they could have made, then you're essentially agreeing with my original point. It's hard to not make money in a rising market.

 

[Aaron Sice]

It's hard to not make money in a rising market.

great, so even you are arguing your own point.

my god, does it end?