thanks Gorco - will let you know when it happens.
Is the Sub-Prime Crisis in US going to affect IPs in Australia ?
- Thread starter xQuIz8
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thanks Gorco - will let you know when it happens.
6. Most of the housing markets in Australia has reportedly slowed down in a more noticeable manner recently since March 2008, as a result of the RBA's various cumulative interest rate increases as well as the frequent additional and higher bank rates imposed by the commercial banks.
Cheers,
Kenneth KOH
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Dear All,
1. It was further reported today that
a. "The national property market, for one, is yet to register a significant slowdown in prices."
b. In the March quarter, housing prices rose by 1.1%, which strongly exceeded the market's consensus that prices would rise by just 0.2%.It would be tempting say the property market was bouncing back to strength, but the divergence in price performance among the capital cities rules that out. "
c. "If anything, the housing market is softening still."
d. "During the quarter, the strongest increase was in Melbourne where prices rose by 4.1%, followed by Brisbane, Adelaide and Canberra."
e. "However, there were sustained falls in the price of housing in Sydney, Hobart, Darwin and significantly Perth. "
f. "At a time when the resources boom is powering WA and Queensland, prices should not be falling in Perth."
g. "The overall growth rate of 1.1 % is a retreat to the growth pace of the same time last year."
h. "The numbers, though, do not herald good news because higher prices combined with the effects of the high mortgage rates mean housing affordability is going to worsen."
i. "The pick-up in prices, according to economists, is attributed to population growth at a time when new home starts is not keeping up with demand."
j. "The number of new homes being constructed is currently running at about 142,000 a year, well short of demand running at about 180,000 this year, according to the ANZ."
http://business.smh.com.au/rba-faces-delicate-task/20080505-2b1h.html?page=2
2. For your further comments and discussion, please.
3. Thank you.
Cheers,
Kenneth KOH
Cheers,
Kenneth KOH
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Dear All,
1. It was further reported today that
a. "The national property market, for one, is yet to register a significant slowdown in prices."
b. In the March quarter, housing prices rose by 1.1%, which strongly exceeded the market's consensus that prices would rise by just 0.2%.It would be tempting say the property market was bouncing back to strength, but the divergence in price performance among the capital cities rules that out. "
c. "If anything, the housing market is softening still."
d. "During the quarter, the strongest increase was in Melbourne where prices rose by 4.1%, followed by Brisbane, Adelaide and Canberra."
e. "However, there were sustained falls in the price of housing in Sydney, Hobart, Darwin and significantly Perth. "
f. "At a time when the resources boom is powering WA and Queensland, prices should not be falling in Perth."
g. "The overall growth rate of 1.1 % is a retreat to the growth pace of the same time last year."
h. "The numbers, though, do not herald good news because higher prices combined with the effects of the high mortgage rates mean housing affordability is going to worsen."
i. "The pick-up in prices, according to economists, is attributed to population growth at a time when new home starts is not keeping up with demand."
j. "The number of new homes being constructed is currently running at about 142,000 a year, well short of demand running at about 180,000 this year, according to the ANZ."
http://business.smh.com.au/rba-faces-delicate-task/20080505-2b1h.html?page=2
2. For your further comments and discussion, please.
3. Thank you.
Cheers,
Kenneth KOH
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I’m not going to take the credit for that. Any idiot could have seen that a credit slowdown in the US would have an effect on us. What I couldn’t predict is how big an impact it would have on our rates. The independent rates increases by the banks have been a little faster than I would have thought (though we’re still getting discounts to the ‘old’ margin on RBA rates that we used to have).
That’s just logical progression. We got the discounts to the standard variable rate that we did because of massive liquidity overseas. When it dries up…… Calling the effect is easy. Calling MAGNITUDE is what would have made me a billion dollars if I could have called it accurately enough to trade bond options.
All simple supply and demand theory.
Pend up demand can manifest itself in rent, not prices. Also, a recession may well take the edge off demand. Fundamentals mean nothing if there is a recession. We don’t know whether the market overshot to the upside in the boom (I suspect so, given the yields we saw). Even if the fundamentals are sound (in that population and the economy grows long term) we can easily have years of stagnation because there just isn’t enough confidence in the market.
The mid 90s showed us that the market can run below its fundamentals for years. How else do you explain positively geared property being available for a number of years, despite improving fundamentals (lower interest rates, growing economy, lowering unemployment, etc)?
The market is made up of people, and people are manic/depressive. My prediction? A few years of stagnant prices. Increasing rents until we have widespread availability positively geared properties.
Alex
Dear All,
1. It was reported in the local Courier Mail newspapers today that
a. "OFFICIAL interests rates are tipped to remain steady this week but the credit crunch threatens to spur more independent hikes by the big banks."
b. "Banks have lifted home loan rates independently of the Reserve Bank of Australia to cover the rising costs for them to raise funds on global money markets, "
c. "... and HSBC Australia chief executive Stuart Davis expected this trend to continue."
d. "The credit crunch, tied to US troubles, has made those global markets more expensive."
e. "But the chief executive at major US investment bank JPMorgan Chase said he did not expect the American financial crisis to end any time soon." "... We can only speculate how deep and how long the recession in the US will really be and how that in turn will impact banks," JP Morgan's James Dimon told a German newspaper.
f. "We are not done with the crisis for a long time."
g. HSBC Australia's Mr Davis said conditions in offshore capital markets had not improved significantly in the past two months and there was no doubt more independent moves would be unveiled.
h. "There's no doubt. We saw a couple of banks move standard variable rates (recently) and there's going to be a least another one, if not another two of those over the next few months," he said.
i. CommSec chief equities economist Craig James said each bank would balance the impact on customers and shareholders.
j. "You can't continue to lift rates significantly if the other banks aren't doing the same because you'll lose market share," he said.
http://www.news.com.au/couriermail/story/0,23739,23643393-3122,00.html
2. For your further comments and discussion, please.
3. Thank you.
Cheers,
Kenneth KOH
1. It was reported in the local Courier Mail newspapers today that
a. "OFFICIAL interests rates are tipped to remain steady this week but the credit crunch threatens to spur more independent hikes by the big banks."
b. "Banks have lifted home loan rates independently of the Reserve Bank of Australia to cover the rising costs for them to raise funds on global money markets, "
c. "... and HSBC Australia chief executive Stuart Davis expected this trend to continue."
d. "The credit crunch, tied to US troubles, has made those global markets more expensive."
e. "But the chief executive at major US investment bank JPMorgan Chase said he did not expect the American financial crisis to end any time soon." "... We can only speculate how deep and how long the recession in the US will really be and how that in turn will impact banks," JP Morgan's James Dimon told a German newspaper.
f. "We are not done with the crisis for a long time."
g. HSBC Australia's Mr Davis said conditions in offshore capital markets had not improved significantly in the past two months and there was no doubt more independent moves would be unveiled.
h. "There's no doubt. We saw a couple of banks move standard variable rates (recently) and there's going to be a least another one, if not another two of those over the next few months," he said.
i. CommSec chief equities economist Craig James said each bank would balance the impact on customers and shareholders.
j. "You can't continue to lift rates significantly if the other banks aren't doing the same because you'll lose market share," he said.
http://www.news.com.au/couriermail/story/0,23739,23643393-3122,00.html
2. For your further comments and discussion, please.
3. Thank you.
Cheers,
Kenneth KOH
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Dear AlexLee,
1. In her recent article, entitled, "Have mortgage and rent payments reached breaking point?" Sarah Mills advises that when assessing the future of house and rental prices in Australia, there are several possible scenarios to consider, as follows:
a. "Banks Moved The Goalposts"
(1) Banks have lowered underwriting standards and valuation practices in the past decade.
(2) Whereas previously, the rule of thumb was "one third for the taxman, one third for the bank and one third for yourself", Johnson notes that have adopted "borrowers will alter their consumption patterns to retain home ownership in times of hardship" approach and migrated towards the Henderson Poverty Line in terms of affordability.
(3) However, this leaves little margin for error, particularly if fuel and food prices keep rising.
(4) It is also a patently false assumption as the US sub-prime crisis is showing.
(5) While the Australian market differs slightly from that of the US, it is still ultimately subject to the same fundamentals.
(6) If mortgage repayments are too high, or asset prices fall, people can and do go to the wall.
b. "The Great Illusion"
(1) There is a shortage of housing in Australia, exacerbated by immigration and tight land supply.
(2) BIS Shrapnel director and chief economist Frank Gelber said an annual construction shortfall of 30,000 dwellings was set to double to 60,000 by June this year and rise to 129,000 by June 2009.
(3) But the supply-demand dilemma Australia faces is largely an illusion determined by government and private sector policies.
(4) There is probably greater elasticity in supply and demand at this point than there is in household budgets.
c. "Pushing the Supply Lever"
(1) The supply side of the equation can be changed.
(2) Governments could increase land supply. This takes time to flow through but it would certainly ease upward pressure on prices.
(3) Improved supply may remove a floor under house prices at a time when the market can least afford it.
(4) It requires a delicate balancing act. The government is working on supply, but analysts believe it will not be fast enough to stall another spike in prices.
d. "Demand Can Be Changed"
(1) But demand can also be altered.
(2) People under financial stress historically have been inclined to alter spending and lifestyle patterns.
(3) In the past two decades, the numbers of people per household have declined as people have enjoyed relative affluence.
(4) These trends could easily reverse.
(5) People can share accommodation, move into smaller houses (slum landlords rejoice), move back in with parents or move out of the cities and into the country.
(6) The Government could also cut immigration, which is at record highs (although this is unlikely and would affect short-term growth.
(7) Interest rates also affect demand — and these can be eased or tightened at the behest of the central banks.
e. "A Sucker's Rally"
(1) Given the high levels of household debt and tightening of credit policies in the wake of the credit crisis, it is likely that any rise in house prices would require investment from high net worth individuals or low-debt-bearing new entrants.
(2) Should rents rise, some property investors may also be tempted back to the market, but again, their balance sheets would need to be very healthy.
(3) If this were the case, then any rise in house prices would have all the hallmarks of a sucker's rally — particularly if interest rates pull back briefly.
(4) Just before sharemarkets collapse they tend to spike sharply on low volume, luring those who believe the market will continue to rise indefinitely and in defiance of fundamentals.
(5) A price rise on low volume is unsustainable and, given the high Australian LVRs, we know that very few people can afford to take on more debt.
f. "House Prices Can Fall — Exploding the Myth"
(1) Johnson said it is a myth that house prices haven't fallen and can't fall and notes large pools of mortgages, originated by non-bank brokers in particular, have led to increased foreclosures and lower house prices in pockets throughout Australia.
(2) "Prices in Sydney don't always go up. They can do nothing in a decade and then double," he says.
(3) Indeed, historical economic data showed that during the Great Depression of the late 1920s and early 30s, Australian property prices fell 30 per cent.
(4) Economists predict prices in Australia could fall 10 per cent on a slowdown, 30 per cent during a recession and up to 50 per cent in some regions.
g. " Household Debt Raises the Stakes"
(1) Johnson adds that the situation with household debt is alarming.
(2) "Given the Australian use of negative credit reporting, it is hard to gain a picture of overall indebtedness. Rolling credit card debt is a huge issue. Most people try and pay off credit cards within the month but we know that credit card debt has rolled out to three months of disposable income."
(3) Interestingly, the banks are the main supporters of the price-rise rhetoric, all issuing economic outlooks forecasting price rises.
(4) This has eery echoes of early 1990s bank forecasts when they insisted that economic growth would continue despite calls from every sector for recession.
(5) Are they again talking up their books?
h. "Dangerous Household Debt Levels"
(1) Lead Banking Analyst for JP Morgan Brian Johnson seriously questions the capacity for household budgets to stretch further, citing the dangerous mix of high household debt levels and rising interest rates.
(2) "Australian households are carrying a bucket-load of debt," says Johnson. "Heading into 2008, they were carrying high LVRs on housing lending.
(3) "Since then, we have had three 25 basis-point rises in official interest rates and 40 additional basis points from the mainstream banks. Non-mainstream banks have lifted interest rates even further.
(4) "In this environment, it seems improbable that housing prices can rise much further.
(5) There is evidence of tight supply and strong demand for rental properties but this is unlikely to drive price rises of the magnitude (20%-50% over the next few years) that some are forecasting."
http://money.ninemsn.com.au/article.aspx?id=454357
2. So, which of the a/m scenarios as outlined by Sarah Mills, are you actually recommending for existing property investors to consider when planning for their own respective property investments in Australia, in the immediate near future, please?
3. Looking forward to learning further from you, please.
4. Thank you.
Cheers,
Kenneth KOH
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Dear All,
1. According to Bob Wilson, who authored the article, entitled, "Sub-prime debacle has knock-on effect Down Under"
k. "Recent housing approval statistics suggest that rising interest rates are already causing investors to back off. And the HIA says any further contraction of investment in housing will cause further pain to those who already struggle to meet rising rental payments."
l. "So what about the Australian housing market, recently identified in an IMF survey as one of the world's most over-valued markets? In the IMF terminology, there is a ‘house-price gap' when increases in house prices cannot be explained by the usual fundamental drivers of real estate prices, such as lower interest rates and higher incomes. "
m. "According to the survey (published in The Economist), Australia's ‘house-price gap' widened to more than 20% between 1997 and 2007."
n. "The real worry for investors in such unstable market conditions is what might happen to the 20% "premium" built into Australian house prices, as this premium is more to do with the bullishness of times now past than market fundamentals."
http://www.hotspotting.com.au/index.php?act=viewArticle&productId=226
Cheers,
Kenneth KOH
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Dear All,
1. According to the ANZ Housing Snapshot Report for April 2008,
a. " in the absence of a credit crisis event, aggregate house prices (in Australia) are more likely to continue to rise, albeit, at a more moderate pace, than to fall significantly."
b. This is in stark contrast to the abovementioned IMF's views which is expecting a market correction in prices.
c. Economists at ANZ Bank reportedly believes that the IMF's views is misguided for two reasons:
(1) the continued record shortfall in housing over the next few years.
(2) the house prices will only fall significantly if enough peoples are forced to sell their homes.
d. Despite affordability being difficult, we believe that interest rate has peaked, therefore this will only happen if unemployment rises appreciably which we do not expect it will.
e. We do anticipate the economy will slow in the coming years but there is a little chance of a Recession.
f. The Australian Economy has unprecedented insurance against the downturn that is occurring in many other development nations economies, with the second leg in the commodities boom delivering 50 years highs in terms of trade.
g. Australian house prices have never fallen and going forward, we believe there will be no reason that they will.
http://www.anz.com/documents/economics/Housing Snapshot April 2008.pdf
2. For your further comments and discussion, please.
3. Thank you.
Cheers,
Kenneth KOH
1. According to Bob Wilson, who authored the article, entitled, "Sub-prime debacle has knock-on effect Down Under"
k. "Recent housing approval statistics suggest that rising interest rates are already causing investors to back off. And the HIA says any further contraction of investment in housing will cause further pain to those who already struggle to meet rising rental payments."
l. "So what about the Australian housing market, recently identified in an IMF survey as one of the world's most over-valued markets? In the IMF terminology, there is a ‘house-price gap' when increases in house prices cannot be explained by the usual fundamental drivers of real estate prices, such as lower interest rates and higher incomes. "
m. "According to the survey (published in The Economist), Australia's ‘house-price gap' widened to more than 20% between 1997 and 2007."
n. "The real worry for investors in such unstable market conditions is what might happen to the 20% "premium" built into Australian house prices, as this premium is more to do with the bullishness of times now past than market fundamentals."
http://www.hotspotting.com.au/index.php?act=viewArticle&productId=226
Cheers,
Kenneth KOH
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Dear All,
1. According to the ANZ Housing Snapshot Report for April 2008,
a. " in the absence of a credit crisis event, aggregate house prices (in Australia) are more likely to continue to rise, albeit, at a more moderate pace, than to fall significantly."
b. This is in stark contrast to the abovementioned IMF's views which is expecting a market correction in prices.
c. Economists at ANZ Bank reportedly believes that the IMF's views is misguided for two reasons:
(1) the continued record shortfall in housing over the next few years.
(2) the house prices will only fall significantly if enough peoples are forced to sell their homes.
d. Despite affordability being difficult, we believe that interest rate has peaked, therefore this will only happen if unemployment rises appreciably which we do not expect it will.
e. We do anticipate the economy will slow in the coming years but there is a little chance of a Recession.
f. The Australian Economy has unprecedented insurance against the downturn that is occurring in many other development nations economies, with the second leg in the commodities boom delivering 50 years highs in terms of trade.
g. Australian house prices have never fallen and going forward, we believe there will be no reason that they will.
http://www.anz.com/documents/economics/Housing Snapshot April 2008.pdf
2. For your further comments and discussion, please.
3. Thank you.
Cheers,
Kenneth KOH
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a. "Much of the sub-prime trouble in the US started in the so-called "rust belt" where home loans were provided to people living in the once-mighty US steel manufacturing cities like Detroit and Cleveland where unemployment is now widespread."
b. "There is also an oversupply of housing in the US, whereas in Australia one of the major drivers of our rising house market has been a shortage of land and housing."
c. " Brisbane-based analyst Michael Matusik observed that housing prices rose about 13% across southeast Queensland in 2007, while in the US prices fell by 10% over the same period. "
d. Matusik explains: "There are two main differences between our housing market and the US.
(1) Firstly, we are undersupplied - we have a new stock deficiency of 32% across Australia and 46% in Queensland, compared to a 16-month over-supply of newly-completed homes sitting vacant across the US."
(2) Matusik also explains the different financing methods.
(i) In Australia we commonly mortgage our house as security for the loan whereas in the US many mortgages are "non-recourse" - that is, in the case of default, the bank is left to rely on whatever it can sell the house for, while borrowers can simply walk away from their debt.
(ii) In Australia, we owe the bank the mortgage amount regardless of what our house is worth.
e. "Many American home buyers also obtained "no doc" loans where there is no requirement for independent/third party proof of income or capacity to pay."
f. "The low-doc/no-doc model has been used sparingly in Australia and now that the major lenders have been forced to look at their exposure, many are backing away from mortgage broker relationships and insisting on more conservative loan to valuation ratios."
g. "And in Australia, the economy continues to grow strongly, thanks largely to China's seemingly insatiable appetite for our raw materials, as well as other expanding markets that need coal, iron ore and copper (not to mention wheat and cotton). However, domestic inflation remains a worry."
h. "Despite the negative signals from the US, UK and some parts of Asia, Access Economics is not overly concerned about Australia in 2008."
i. In its latest Business Outlook report, Access Economics says "2008 looks fine for China - and hence for Australia too."
j. The theory is that as long as China continues to buy our coal and iron ore (at increasingly higher prices), we will sail through the rest of 2008.
k. " But if China stumbles and the US takes longer to emerge from recession, 2009 could be a different story.
l. Let's not forget that the Shanghai market index is down 47% since October 2007."
http://www.hotspotting.com.au/index.php?act=viewArticle&productId=226
For your further comments and discussion, please.
Thank you
Cheers,
Kenneth KOH
The credit crisis combined with the speculative bubble in Australian real estate could cause a worse downturn than seen in many other countries. Residential real estate will not be a good place to be over the next few years (the commercial stuff already seems to have been hit to a degree). I'd expect anyone with over 80% LVR at the moment will end up in negative equity.
How did you come to the above conclusion? Sounds like pure guesswork to me. All the fundamentals indicate to me that house prices will not drop by 20% plus as you appear to be suggesting. You don't have to be economist to work out that a dire shortage of housing, highest immigration for many years, very low unemployment, a commodities boom, increased birth rate all means stable house prices at the worst.
Actually all those reasons can result in rising RENTS but falling PRICES. You can't confuse DESIRE for property and ABILITY to buy property.
Why? Rental demand is made up of number of people, shortage of housing, low unemployment, incomes, etc. That determines rent. Buying, in addition to these factors, is ALSO dependent on bank loans. With increasing rates and tightening serviceability calcs, people simply cannot borrow as much as they used to. Imagine this:
2 years ago a bank values a house at $500k (maybe just on a drive by valuation, because similar houses sold for that price, or simply because that's the contract price) and was willing to lend $500k to a person on 80k salary, based on 7.5% interest rates.
Now, rates are closer to 9%, serviceability calcs are more stringent and valuations are more conservative (or more realistic, depending on your point of view). So that same person may only be able to borrow $400k. If this happens throughout the market, then all prices have to come down.
But wouldn't that person who can now only borrow 400k buy a smaller, cheaper property? That's possible, but then who buys the (supposedly worth) 500k property? Someone who used to be able to borrow 600k. And so on. At the moment, the market is still held up by people on high salaries who aren't as pinched by fuel and food price rises. That's why you see higher-priced properties holding or going up, lower priced properties (Western Sydney etc) falling and the middle of the market floundering.
When people start losing jobs, THAT's when the market really adjusts.
The buyer still has a job. People still want to buy property, but they simply can't pay as much because the bank won't lend as much. With yields still low, you would expect higher rents and lower prices. I don't know by how much, though. 20% sounds like a lot, but if it falls just 5% a year you'll get there in less than 4 years.
I do still believe in property long term, though. With my long term assumption of 7.2% appreciation, we've been running above average for a while, so a fall shouldn't be a big surprise. Also remember, the good thing about property is that in general the banks don't yank back loans as long as you're still making payments. So while a 20% might seem painful, if you're not forced to sell you can hold on until the next boom.
Alex
"Speculative Bubble" in the Australian Housing Markets???
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Dear JoeExpat,
1. "speculative bubble" in Australian real estate"???
a. ... when there is reportedly still an existing housing shortage in Australia of more than 200,000 units that need to be built to house the "more than 100,000" ( 265,000 households?) social homeless families who are presently "without a roof over their head" (of their own) in Australia, at this point in time ?
b. ... When 70% and of the existing house owners are "Owner-Occupiers" and the remaining 30% houses are reportedly being rented out, with less than 1.5% rental vacnacy rate?.
c. ... when Australian housing industry has been building some 50,000 below its projected underlying housing demand for 180,0000 housing units per year over the last few years and with more than 180,000 international immigrants continue to flock into Australia ashore, each year at this point in time?
d. .... when an equivalent A$500,000 house in Australia is likely to cost some A$3 million in price/value in Singapore in today's context???
2. According to Alan Greenspan, the worst of the global Credit Crisis is already over, and with the highly resilient Australian Economy having remained largely much un-affected to date and continue to expand albeit at a more reasonable pace, being continued to be driven strongly by the present ongoing resource boom.
3. Going forward, personally, I expect "better" times ahead for the US Economy and for the major European countries from 2009 onwards, although China and India will remain some sort of a "wild card" with their present high inflationary and fast-growing economies, at this point in time.
4. Though the strong Australian Economy is presently slowing down, as engineered by the RBA, it can also slow down to a soft landing, instead, of a "Recession" scenario type of outcome as some are presently anticipating, at this point in time.
5. For your further comments and discussion, please.
6. Thank you.
Cheers,
Kenneth KOH
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Dear JoeExpat,
1. "speculative bubble" in Australian real estate"???
a. ... when there is reportedly still an existing housing shortage in Australia of more than 200,000 units that need to be built to house the "more than 100,000" ( 265,000 households?) social homeless families who are presently "without a roof over their head" (of their own) in Australia, at this point in time ?
b. ... When 70% and of the existing house owners are "Owner-Occupiers" and the remaining 30% houses are reportedly being rented out, with less than 1.5% rental vacnacy rate?.
c. ... when Australian housing industry has been building some 50,000 below its projected underlying housing demand for 180,0000 housing units per year over the last few years and with more than 180,000 international immigrants continue to flock into Australia ashore, each year at this point in time?
d. .... when an equivalent A$500,000 house in Australia is likely to cost some A$3 million in price/value in Singapore in today's context???
2. According to Alan Greenspan, the worst of the global Credit Crisis is already over, and with the highly resilient Australian Economy having remained largely much un-affected to date and continue to expand albeit at a more reasonable pace, being continued to be driven strongly by the present ongoing resource boom.
3. Going forward, personally, I expect "better" times ahead for the US Economy and for the major European countries from 2009 onwards, although China and India will remain some sort of a "wild card" with their present high inflationary and fast-growing economies, at this point in time.
4. Though the strong Australian Economy is presently slowing down, as engineered by the RBA, it can also slow down to a soft landing, instead, of a "Recession" scenario type of outcome as some are presently anticipating, at this point in time.
5. For your further comments and discussion, please.
6. Thank you.
Cheers,
Kenneth KOH
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Not a guess, there's lots of negative pressures out there. Here's Some.
Evidence from overseas has shown that a percieved shortage of property doesn't stop prices falling. I'm always amazed at the prices in Australia when I go home each year. It can't go on forever. I sold 1 IP recently, didn't plan to, but I just didn't think it was worth that much money anymore & I could invest better elsewhere. Haven't completely sold up though.
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Dear JoeExpat,
1. Perception does not equate to Actual Reality on the ground.
2. Do you personally believe that present housing "shortage" in Australia is "real" or/and merely "perceived" to be so, at this point in time?
3. Most of the Western world where their housing prices are presently falling or/and have fallen recently such as the US, UK, Spain, Canada, New Zealand etc, does not have a similar strong/robust resource-driven Economy structure as Australia, midst the present continuing ongoing resource boom.
4. Morever, the basic current full employment status in Australia is still continuing despite some small increase in its unemployment figures recently.
5. The existing housing market ownership continued to be 70% owner-occupiers and 30% rental investment housing and with most of the rental housing being rented out with less than 1.5% rental vacancy rate and with the present full employment status, existing housing prices appears to be well supported by these and other basic existing housing fundamentals, including high immigration rate, strong Australian Economy, strong housing demand etc.
6. For your further comments and discussion,please.
7. Thank you.
Cheers,
Kenneth KOH
I think there is a genuine housing shortage at the moment, but remember the demand side CAN change, even if population continues to grow. If we have a recession, and grads can't get jobs, they'll stay with the parents for longer. People will share more, etc. Rental demand can stall or even fall in a recession.
Actually Canada DOES have a resource driven economy. It's very similar to Australia in that sense. You're basically saying that Australia is unique. I get very nervous when people use the words 'this time it's different' or 'we're different'.
This is the case NOW. You're still assuming the US recession won't hit us via China. If China starts demanding less from us because the US is demanding less from them.......
Kenneth, your entire position is 'Australia is still doing well so we won't suffer like the rest'. The question is, will Australia continue to do well? Will China keep demanding our resources even when the US falters and demands less from China? Looking at things like supermarket prices, the sales out there (for TVs, etc and other discretionary goods), I'm not optimistic.
I just received a notice saying my PPOR loan has been increased to 8.84%. It was 7.9% when I took out the loan 6 months ago. For a $300k mortgage, that would be 3,000 in interest per year, probably for a family making 60, 70k a year. $60 a week is a LOT of money for a family that's seeing petrol and food prices jump.
How long will it be before the family decides 'I'm really going to start cutting back on all the discretionary stuff'. No more meals out. No more movies. No more holidays. Once the idea takes hold that prices and interest rates AREN'T coming down, spending is going to contract.
The ordinary battler isn't as optimistic as you are. For the ordinary person not in the mining industry making 50 or 60k a year, the mining boom means nothing.
Alex
Bursting Existing Housing Bubble in South-Western Sydney Suburbs?
&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&
Dear Alex,
1. Nick Gardner and Andrew Carswel in their article, "House bubble bursts, but whose fault is it?" has argued that
a. "Rising interest rates, both from the Reserve Bank and those imposed independently by the banks, have been blamed for tipping the market over the edge and "*****ing the house-price bubble".
b. "House prices in some parts of Sydney have almost halved as battling borrowers struggle to keep up with increasing interest rates."
c. "The falls - in Sydney's west, the Hills district, and Sutherland Shire - are far steeper than previously thought, and show the devastating effects of the RBA's rate-hiking spree."
d. "In the past six months, 30 homes across Sydney have been sold for at least $100,000 less than was paid at the height of the property boom, many as a result of distressed mortgagee sales."
e. "One property in Bankstown, in the city's southwest, bought for $500,000 in August 2005 sold in February for $215,000. Several other properties in Sydney's west have recently been sold for losses of more than 30 per cent. "
d. "Sutherland Shire, in the southern stretches of the city, was thought to have escaped relatively unscathed but is now having prices plummet."
e. "One property in Oyster Bay, bought for $1.09 million in December 2001, sold in March for $680,000, while a Caringbah apartment bought for $339,000 in June 2004 was sold for a loss of $104,000 last October."
f. "The worst affected suburb was Parramatta, on Sydney's western outskirts, with 11 homes sold at a loss in the past six months. Neighbouring Merrylands had 10, while Punchbowl also suffered substantial losses."
g. "The data - complied exclusively for The Daily Telegraph - showed that even the more affluent suburbs are now beginning to suffer. Several homes in Waverley, Coogee and Paddington were sold for losses of more than 25 per cent. The worst hit was the Waverley house bought in July 2003 for $725,000 and sold for $465,000 in March."
h. "And experts predict that the losses will get worse as the year goes on. "
i. "Shane Oliver, chief economist at AMP Capital, said: "The pain of higher interest rates has only just started to kick in and we will see further falls over the next 6-12 months. "
j. "The Sydney housing market is in a bind - we have a shortage of housing and huge demand but that isn't going to stop prices declining further. I think we'll see prices fall by another 10 per cent this year - and that's without another interest-rate rise."
k. "If rates rise again it will accelerate the declines, and that's an ominous prospect because price falls can be infectious" Mr Oliver said.
l. "If one house in a street sells for a lower than expected price, then that can have a knock-on effect to other properties in the same area, and so it goes on."
http://www.news.com.au/business/money/story/0,25479,23681230-5013951,00.html
2. Strictly speaking, judging from the heavy 30%-50% plus fall in housing prices for some of these South-Western Sydney suburbs, it seems that there was indeed some sort of a real housing bubble prevailing in these areas, in the first place, at this point in time.
3. This is despite I am still optimistic in their long term performance.
4. Given this ancedotal data, I will further agree that apparently many of the Australian households are facing severe rental/housing stress on the ground, at this point in time, such that they are about to reach the real breaking point for their mortgage/rental payments respectively, even in the absence for a further increase rate increase by the RBA.
5. This is despite RBA's present ongoing official contradictory claim that much of the reported housing/rental stress in Australia, are largely exaggerated by the mass media.
6. For your further comments and discussion, please.
7. Thank you.
Cheers,
Kenneth KOH
&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&
Dear Alex,
1. Nick Gardner and Andrew Carswel in their article, "House bubble bursts, but whose fault is it?" has argued that
a. "Rising interest rates, both from the Reserve Bank and those imposed independently by the banks, have been blamed for tipping the market over the edge and "*****ing the house-price bubble".
b. "House prices in some parts of Sydney have almost halved as battling borrowers struggle to keep up with increasing interest rates."
c. "The falls - in Sydney's west, the Hills district, and Sutherland Shire - are far steeper than previously thought, and show the devastating effects of the RBA's rate-hiking spree."
d. "In the past six months, 30 homes across Sydney have been sold for at least $100,000 less than was paid at the height of the property boom, many as a result of distressed mortgagee sales."
e. "One property in Bankstown, in the city's southwest, bought for $500,000 in August 2005 sold in February for $215,000. Several other properties in Sydney's west have recently been sold for losses of more than 30 per cent. "
d. "Sutherland Shire, in the southern stretches of the city, was thought to have escaped relatively unscathed but is now having prices plummet."
e. "One property in Oyster Bay, bought for $1.09 million in December 2001, sold in March for $680,000, while a Caringbah apartment bought for $339,000 in June 2004 was sold for a loss of $104,000 last October."
f. "The worst affected suburb was Parramatta, on Sydney's western outskirts, with 11 homes sold at a loss in the past six months. Neighbouring Merrylands had 10, while Punchbowl also suffered substantial losses."
g. "The data - complied exclusively for The Daily Telegraph - showed that even the more affluent suburbs are now beginning to suffer. Several homes in Waverley, Coogee and Paddington were sold for losses of more than 25 per cent. The worst hit was the Waverley house bought in July 2003 for $725,000 and sold for $465,000 in March."
h. "And experts predict that the losses will get worse as the year goes on. "
i. "Shane Oliver, chief economist at AMP Capital, said: "The pain of higher interest rates has only just started to kick in and we will see further falls over the next 6-12 months. "
j. "The Sydney housing market is in a bind - we have a shortage of housing and huge demand but that isn't going to stop prices declining further. I think we'll see prices fall by another 10 per cent this year - and that's without another interest-rate rise."
k. "If rates rise again it will accelerate the declines, and that's an ominous prospect because price falls can be infectious" Mr Oliver said.
l. "If one house in a street sells for a lower than expected price, then that can have a knock-on effect to other properties in the same area, and so it goes on."
http://www.news.com.au/business/money/story/0,25479,23681230-5013951,00.html
2. Strictly speaking, judging from the heavy 30%-50% plus fall in housing prices for some of these South-Western Sydney suburbs, it seems that there was indeed some sort of a real housing bubble prevailing in these areas, in the first place, at this point in time.
3. This is despite I am still optimistic in their long term performance.
4. Given this ancedotal data, I will further agree that apparently many of the Australian households are facing severe rental/housing stress on the ground, at this point in time, such that they are about to reach the real breaking point for their mortgage/rental payments respectively, even in the absence for a further increase rate increase by the RBA.
5. This is despite RBA's present ongoing official contradictory claim that much of the reported housing/rental stress in Australia, are largely exaggerated by the mass media.
6. For your further comments and discussion, please.
7. Thank you.
Cheers,
Kenneth KOH
Last edited:
Dear Alex,
1. My corresponding comments to your points of interest that are being put forward in your u/m post, are as per outlined below.
2. For your further comments and discussion, please.
3. Thank you.
Cheers,
Kenneth KOH
&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&
Comments:
I fully agree with you, as per discussed in the Sarah Mills' article.
Comments:
1. Based on Australia's and the RBA's past good track record over the last 16 years, I would expect the Australian Economy to be able to similarly escape relatively unscathed, as in the past global and regional financial crises, all things being equal.
2. Humanly speaking, though I may not have logical reasons, for believing so myself;- other than the fact that I personally believe that as a "God-fearing" nation, Australia is still a much blessed country and would thus, still be able to escape relatively unscathed from the present/emerging financial crises, as in the past, as it is relatively an "unique" nation in/of itself, as we have seen of the Australian Economy, as in the past.
3. So, what I am saying here is that I do expect things to remain "status quo" as far as the Australia and the RBA's past record goes/ Hence, Australia is more likely to be able to escape relatively unscathed this time round too, all things being equal.
4. However, I do also acknowledge that with a different chairman at its helm, in Glenn Stevens, in place of his precedessor, the distinguished Ian McFarlance, the present RBA may not have the same skill or/and accurate and sharp judgement calls as the previous RBA Board, to sufficiently slow down the Australian Economy into a soft landing, without neccessarily "stalling" the Australian Economy into an official Recession subsequently.
5. I further observed that a different and relatively untested ALP Federal Govt is now governing Australia instead of one with a better economic management track record as reportedly observed during the John Howard's Liberal Coalition Govt, over the last 16 years of continued economic prosperity enjoyed by Australia.
6. Consequently, I do have my own concerns and some doubts myself, as to whether the Australian Economy will indeed eventually still be able to escape relatively unscathed again during the present global financial crises because of these "perceived"/ likely performance differences , as a result of the recent changes in the key leadership appointment or/and office bearers in both the RBA as well as the Australian Federal Treasurer, as previously been highlighted.
Comments:
1. No, I still remain much open-minded about this proposed De-Coupling Theory, at this point in time.
2. Personally, I believe it is too "pre-mature" to talk about this Decoupling Theory at this point in time, as China has still not yet officially replaced America as having the biggest Economy in the world, at this point in time.
3. Personally, I do not believe that the Australia is able to effectively de-coupled itself from the US Recession or/and the global Credit Crunch Crises, at this point in time, technically speaking.
4. However, both Glenn Stevens and his RBA, like Access Economics, officially believe that " if China is OK, then Australia is OK", at this point in time.
5. In its latest Business Outlook report, Access Economics reportedly says "2008 looks fine for China - and hence for Australia too." "The theory is that as long as China continues to buy our coal and iron ore (at increasingly higher prices), we will sail through the rest of 2008. "
6. Despite the negative signals from the US, UK and some parts of Asia, Access Economics is not overly concerned about Australia in 2008.
http://www.hotspotting.com.au/index....&productId=226
Comments:
1. So far, I do indeed observe that Australia is still doing much better than its other English-speaking OECD countries counterparts, at this point in time.
2. However, how exactly the Australian Economy will eventually evolve out?
3. Honestly speaking, I am not sure within myself, at this point in time.
4. Nonetheless, I am also not ruling out the likelihood that present RBA, as headed by Glenn Stevens, may over slow-down the Australian Economy into an officially Recession eventually instead of into a soft landing as it has originally intended to do so..
Comments:
Agreed.
Comments:
1. I do agree with you to a certain extent.
2. Having said that, however, both Glenn Stevens and his RBA's have still believe that continuing resource boom specially with the continued high demands from China, is still likely to adequately sustain the Australian Economy to a large extent.
3. Both Stevens and his RBA believe that the continuing resource boom is likely to further drive up the Australian national income levels and aggregate demand within the Australian Economy both in 2008 and 2009 period, and is thus highly "inflationary".
4. Consequently, their current official thinking is that there is, thus, a need to deliberately slow down the Australia Economy further, in the near future where necessary.
5. This can be seen from the following news extract:
a. " However, the RBA Board is worried by the soaring prices for coal and iron ore, which are expected to pump more than $40 billion into the economy over the coming year.
b. "Mr Stevens said this would counter the bank's efforts to slow demand. "It will add substantially to national income and ability to spend, even with the slowing in global growth"
http://www.news.com.au/business/money/story/0,25479,23658457-5016110,00.html
1. My corresponding comments to your points of interest that are being put forward in your u/m post, are as per outlined below.
2. For your further comments and discussion, please.
3. Thank you.
Cheers,
Kenneth KOH
&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&
Comments:
I fully agree with you, as per discussed in the Sarah Mills' article.
Comments:
1. Based on Australia's and the RBA's past good track record over the last 16 years, I would expect the Australian Economy to be able to similarly escape relatively unscathed, as in the past global and regional financial crises, all things being equal.
2. Humanly speaking, though I may not have logical reasons, for believing so myself;- other than the fact that I personally believe that as a "God-fearing" nation, Australia is still a much blessed country and would thus, still be able to escape relatively unscathed from the present/emerging financial crises, as in the past, as it is relatively an "unique" nation in/of itself, as we have seen of the Australian Economy, as in the past.
3. So, what I am saying here is that I do expect things to remain "status quo" as far as the Australia and the RBA's past record goes/ Hence, Australia is more likely to be able to escape relatively unscathed this time round too, all things being equal.
4. However, I do also acknowledge that with a different chairman at its helm, in Glenn Stevens, in place of his precedessor, the distinguished Ian McFarlance, the present RBA may not have the same skill or/and accurate and sharp judgement calls as the previous RBA Board, to sufficiently slow down the Australian Economy into a soft landing, without neccessarily "stalling" the Australian Economy into an official Recession subsequently.
5. I further observed that a different and relatively untested ALP Federal Govt is now governing Australia instead of one with a better economic management track record as reportedly observed during the John Howard's Liberal Coalition Govt, over the last 16 years of continued economic prosperity enjoyed by Australia.
6. Consequently, I do have my own concerns and some doubts myself, as to whether the Australian Economy will indeed eventually still be able to escape relatively unscathed again during the present global financial crises because of these "perceived"/ likely performance differences , as a result of the recent changes in the key leadership appointment or/and office bearers in both the RBA as well as the Australian Federal Treasurer, as previously been highlighted.
Comments:
1. No, I still remain much open-minded about this proposed De-Coupling Theory, at this point in time.
2. Personally, I believe it is too "pre-mature" to talk about this Decoupling Theory at this point in time, as China has still not yet officially replaced America as having the biggest Economy in the world, at this point in time.
3. Personally, I do not believe that the Australia is able to effectively de-coupled itself from the US Recession or/and the global Credit Crunch Crises, at this point in time, technically speaking.
4. However, both Glenn Stevens and his RBA, like Access Economics, officially believe that " if China is OK, then Australia is OK", at this point in time.
5. In its latest Business Outlook report, Access Economics reportedly says "2008 looks fine for China - and hence for Australia too." "The theory is that as long as China continues to buy our coal and iron ore (at increasingly higher prices), we will sail through the rest of 2008. "
6. Despite the negative signals from the US, UK and some parts of Asia, Access Economics is not overly concerned about Australia in 2008.
http://www.hotspotting.com.au/index....&productId=226
Comments:
1. So far, I do indeed observe that Australia is still doing much better than its other English-speaking OECD countries counterparts, at this point in time.
2. However, how exactly the Australian Economy will eventually evolve out?
3. Honestly speaking, I am not sure within myself, at this point in time.
4. Nonetheless, I am also not ruling out the likelihood that present RBA, as headed by Glenn Stevens, may over slow-down the Australian Economy into an officially Recession eventually instead of into a soft landing as it has originally intended to do so..
Comments:
Agreed.
Comments:
1. I do agree with you to a certain extent.
2. Having said that, however, both Glenn Stevens and his RBA's have still believe that continuing resource boom specially with the continued high demands from China, is still likely to adequately sustain the Australian Economy to a large extent.
3. Both Stevens and his RBA believe that the continuing resource boom is likely to further drive up the Australian national income levels and aggregate demand within the Australian Economy both in 2008 and 2009 period, and is thus highly "inflationary".
4. Consequently, their current official thinking is that there is, thus, a need to deliberately slow down the Australia Economy further, in the near future where necessary.
5. This can be seen from the following news extract:
a. " However, the RBA Board is worried by the soaring prices for coal and iron ore, which are expected to pump more than $40 billion into the economy over the coming year.
b. "Mr Stevens said this would counter the bank's efforts to slow demand. "It will add substantially to national income and ability to spend, even with the slowing in global growth"
http://www.news.com.au/business/money/story/0,25479,23658457-5016110,00.html
Last edited:
==================
5. This can be seen from the following news extract:
a. " However, the RBA Board is worried by the soaring prices for coal and iron ore, which are expected to pump more than $40 billion into the economy over the coming year.
b. "Mr Stevens said this would counter the bank's efforts to slow demand. "It will add substantially to national income and ability to spend, even with the slowing in global growth"
http://www.news.com.au/business/mone...016110,00.html
=============================================
Kenneth,
I found it is so funny for G S came out to say "we are charging our resource too high? Please BHP reduce your price". Mr Stevens should send a delegate to China to convince Chinese not to buy at that pirce BHP ask. Ms Steven should go to OPEC to ask to reduce their oil price....
What a RBA governer! What a nonsense!
5. This can be seen from the following news extract:
a. " However, the RBA Board is worried by the soaring prices for coal and iron ore, which are expected to pump more than $40 billion into the economy over the coming year.
b. "Mr Stevens said this would counter the bank's efforts to slow demand. "It will add substantially to national income and ability to spend, even with the slowing in global growth"
http://www.news.com.au/business/mone...016110,00.html
=============================================
Kenneth,
I found it is so funny for G S came out to say "we are charging our resource too high? Please BHP reduce your price". Mr Stevens should send a delegate to China to convince Chinese not to buy at that pirce BHP ask. Ms Steven should go to OPEC to ask to reduce their oil price....
What a RBA governer! What a nonsense!
Australia's Loan Securitisation Market to Re-Open Again in 2008?
Dear All,
1. It was recently reported that
a. "The Reserve Bank believes Australia's securitisation market could start to open again after the prolonged credit freeze as confidence returns to the global debt markets."
b. "In a bid to ensure capital markets did not close completely, the RBA was one of the first central banks in the world to widen their ''repo agreements'' to include residential-mortgage backed securities (RMBS) late last year."
c. "Dr Debelle said the local securitisation markets had become tight after a number of ''structured investment vehicles'' were forced to sell their profitable RMBS to unwind global loss-making positions."
d. "Citigroup is understood this week to have carried out one of the first securitised mortgage issues since the credit crunch emerged in August last year. The $500 million issue is believed to have been priced with an interest rate of 9.25% and 145 basis points above the bank bill swap rate."
e. Dr Debelle says, "... while the Australian mortgage market was different to the US, the (Australian) economy had been shielded from most of the fallout."
f. "The greatest damage to have occurred in Australia, he said, was the higher funding costs that banks and non-bank lenders have faced in securing short-term financing."
g. "The Commonwealth Bank, the nation's largest lender, believes the round of interest rate rises independent of the RBA, have not finished. In a bid to snare market share from major rival ANZ, the CBA has held off raising rates in the latest rush."
h. "Dr Debelle said the local securitisation market, along with the broader domestic financial markets, had become dislocated as a result of the sub-prime meltdown. 'This resulted in an excess supply of RMBS in the local market at the same time as demand was reduced by the absence of the SIVs themselves...'The resultant decline in the price has discouraged local buyers, despite their recognition that the price was very attractive and the product was very sound, because of concerns about recording mark-to-market losses should the price fall even further. The pricing in the secondary market, as well as the excess supply, effectively ruled out any new primary issuance.''
i. "In the speech, the Reserve Bank published numbers which showed the rates on loans provided by some non-conforming lenders had risen by 130 basis points, compared to the 40 basis points by traditional banks, independent of the central bank."
j. "The average rate for non-conforming loans is now at 12%, nearly 320 basis points higher than the standard prime loan."
'k. "'The absence of the securitisation market has had a particularly significant effect on those institutions most reliant on it, which includes a number of the non-conforming lenders,'' he said."
l. "''These lenders have curtailed their flow of new lending and, in some cases, have temporarily suspended lending at all, but this decline has been met by other institutions so that the overall supply of housing credit has not been materially affected.''
http://business.smh.com.au/when-the-credit-squeeze-eases-20080516-2ez9.html
2. Does this mean that the non-confirming lenders are likely to continue with their non-standard loans products but an a higher lending interest rate of 12%?
3. Will the local housing credit be loosen back but at a higher interest rate of 9.25% in the immediate near future?
4. How will these latest developments affect the various housing markets in Australia?
5. For your further comments and discussion, please.
6. Thank you.
Cheers,
Kenneth KOH
Dear All,
1. It was recently reported that
a. "The Reserve Bank believes Australia's securitisation market could start to open again after the prolonged credit freeze as confidence returns to the global debt markets."
b. "In a bid to ensure capital markets did not close completely, the RBA was one of the first central banks in the world to widen their ''repo agreements'' to include residential-mortgage backed securities (RMBS) late last year."
c. "Dr Debelle said the local securitisation markets had become tight after a number of ''structured investment vehicles'' were forced to sell their profitable RMBS to unwind global loss-making positions."
d. "Citigroup is understood this week to have carried out one of the first securitised mortgage issues since the credit crunch emerged in August last year. The $500 million issue is believed to have been priced with an interest rate of 9.25% and 145 basis points above the bank bill swap rate."
e. Dr Debelle says, "... while the Australian mortgage market was different to the US, the (Australian) economy had been shielded from most of the fallout."
f. "The greatest damage to have occurred in Australia, he said, was the higher funding costs that banks and non-bank lenders have faced in securing short-term financing."
g. "The Commonwealth Bank, the nation's largest lender, believes the round of interest rate rises independent of the RBA, have not finished. In a bid to snare market share from major rival ANZ, the CBA has held off raising rates in the latest rush."
h. "Dr Debelle said the local securitisation market, along with the broader domestic financial markets, had become dislocated as a result of the sub-prime meltdown. 'This resulted in an excess supply of RMBS in the local market at the same time as demand was reduced by the absence of the SIVs themselves...'The resultant decline in the price has discouraged local buyers, despite their recognition that the price was very attractive and the product was very sound, because of concerns about recording mark-to-market losses should the price fall even further. The pricing in the secondary market, as well as the excess supply, effectively ruled out any new primary issuance.''
i. "In the speech, the Reserve Bank published numbers which showed the rates on loans provided by some non-conforming lenders had risen by 130 basis points, compared to the 40 basis points by traditional banks, independent of the central bank."
j. "The average rate for non-conforming loans is now at 12%, nearly 320 basis points higher than the standard prime loan."
'k. "'The absence of the securitisation market has had a particularly significant effect on those institutions most reliant on it, which includes a number of the non-conforming lenders,'' he said."
l. "''These lenders have curtailed their flow of new lending and, in some cases, have temporarily suspended lending at all, but this decline has been met by other institutions so that the overall supply of housing credit has not been materially affected.''
http://business.smh.com.au/when-the-credit-squeeze-eases-20080516-2ez9.html
2. Does this mean that the non-confirming lenders are likely to continue with their non-standard loans products but an a higher lending interest rate of 12%?
3. Will the local housing credit be loosen back but at a higher interest rate of 9.25% in the immediate near future?
4. How will these latest developments affect the various housing markets in Australia?
5. For your further comments and discussion, please.
6. Thank you.
Cheers,
Kenneth KOH
Meanwhile, George Negus points his pen and moustache at sub prime via dateline.
Some interesting opinions. another 2 million homes to be repossessed, not enough credit for Gen Y to get a uni education....and George Soros kicks in with his D&G slant.
http://news.sbs.com.au/dateline/the_sub_prime_who_to_blame_547239
Some interesting opinions. another 2 million homes to be repossessed, not enough credit for Gen Y to get a uni education....and George Soros kicks in with his D&G slant.
http://news.sbs.com.au/dateline/the_sub_prime_who_to_blame_547239
David Koch: "Property Crash Not Likely"
Dear All,
1. David Koch, in his recent article, entitled, "Property Crash Not Likely", believes that while "... there is a big increase in home repossessions and loan defaults, and property values are relatively stagnant, but compared with the rest of the world our (Australian) real estate prices are staying pretty solid."
2. "The question now is whether Australian residential property prices are overvalued and could we see the same sort of cracks which are happening overseas."
3. "Average house prices in Britain are running at six times average earnings, which is way above the historic average of 3.7 times wages...Australian residential property values are currently double Britain's historic high - 12 times earnings in Sydney and 10 times in Melbourne."
4. "Australian mortgage repayments are 57 per cent of average incomes compared with 50 per cent in Britain where the historic average is just 30 per cent."
5. "A recent survey in The Economist magazine says Australia has the most overvalued residential property in the world."
6. "All these comparisons make for very nervous reading and you'd think would point to an impending crash the size of that in the US. That may very well be the case a few years down the track."
7. "But for the moment there appears to be a couple of significant planks underpinning Australian property values."
8. "Firstly, the high skilled and business immigration numbers combined with low construction levels is creating a shortage of supply accentuated by the banks tightening development financing."
9. "Full employment also means that even though higher loan repayments are stretching family budgets, household incomes won't fall."
10. "The other factor is the rental crisis. Strongly rising rents are usually a precursor to rising values as investors chase property to take advantage of the strong yields."
11. "For property owners it looks like a crash in values isn't on the cards for at least a few years."
12. " For those looking to get on the property merry-go-round for the first time, property is not going to get any more affordable either."
13. "But it seems there is hope of picking up an affordable bargain if you know where to look."
http://www.moneymanager.com.au/articles/2008/05/31/1211654366746.html
14. Do you agree/disagree with David Koch's views? Why? What would you do next?
15. For your further comments and discussion, please.
16. Thank you.
Cheers,
Kenneth KOH
Dear All,
1. David Koch, in his recent article, entitled, "Property Crash Not Likely", believes that while "... there is a big increase in home repossessions and loan defaults, and property values are relatively stagnant, but compared with the rest of the world our (Australian) real estate prices are staying pretty solid."
2. "The question now is whether Australian residential property prices are overvalued and could we see the same sort of cracks which are happening overseas."
3. "Average house prices in Britain are running at six times average earnings, which is way above the historic average of 3.7 times wages...Australian residential property values are currently double Britain's historic high - 12 times earnings in Sydney and 10 times in Melbourne."
4. "Australian mortgage repayments are 57 per cent of average incomes compared with 50 per cent in Britain where the historic average is just 30 per cent."
5. "A recent survey in The Economist magazine says Australia has the most overvalued residential property in the world."
6. "All these comparisons make for very nervous reading and you'd think would point to an impending crash the size of that in the US. That may very well be the case a few years down the track."
7. "But for the moment there appears to be a couple of significant planks underpinning Australian property values."
8. "Firstly, the high skilled and business immigration numbers combined with low construction levels is creating a shortage of supply accentuated by the banks tightening development financing."
9. "Full employment also means that even though higher loan repayments are stretching family budgets, household incomes won't fall."
10. "The other factor is the rental crisis. Strongly rising rents are usually a precursor to rising values as investors chase property to take advantage of the strong yields."
11. "For property owners it looks like a crash in values isn't on the cards for at least a few years."
12. " For those looking to get on the property merry-go-round for the first time, property is not going to get any more affordable either."
13. "But it seems there is hope of picking up an affordable bargain if you know where to look."
http://www.moneymanager.com.au/articles/2008/05/31/1211654366746.html
14. Do you agree/disagree with David Koch's views? Why? What would you do next?
15. For your further comments and discussion, please.
16. Thank you.
Cheers,
Kenneth KOH
