Steve Keen finally admits he was wrong!

For the record....this is exactly what I am hearing...to top it off some of the developers have stopped releasing unregistered land with a 10% deposit. They think they will much more for it in 10-20%. These guys aren't dumb..if this is what they are doing....you can imagine what is going to happen from a demand perspective for the man on the street as they see prices rise and people jump in.

Havnt seen developers stopping releases round my parts, but have seen prices for staged releases increasing each new stage.

alot of new land releases in the south east of melbourne are selling land which is titleing in March next year and it is getting gobbled up with the demand for it...i dont know how this compares to other states though,
 
Shadow, I am interested in how you think AUstralia is going to finance a private construction led property boom.

What level of GDP growth do you think will provide the debt serviceability for private households to take on the additional debt of a construction led boom.

Where will the credit originate from? And let's not forget why lenders have been tightening credit for the last 6 mths, even before rates start to rise.

What interest rate level do you see threatening a construction led boom?

Hi Winston, in addition to the excellent comments from Sash, Natedog and Michael, I will add this...

Australia's banks are extremely well capitalised. They have plenty of money to lend, and are very keen to lend it.

Australia's GDP is set to grow strongly, despite the doomsday predictions from the bears.

Australia's foreign debt to GDP ratio is not particularly high, at approximately 100%. Ireland has a foreign debt to GDP ratio of over 800%. Where did Ireland get the money from? The money is there Winston. Australia is seen as a fairly safe haven and our banks are some of the soundest in the world. We also have higher interest rates than most comparable countries. Australia does not face any significant problem in attracting foreign capital.

If Australia's population growth is the key to so much, then explain the GDP per capita trend for the last 4 qtrs.

The population continued to grow strongly while GDP fell during a massive global financial crisis, therefore GDP per capita fell. What's to explain? I'm not sure I get your point.

What % of necessary credit will have to be sourced from foreign wholesale funding? and where will that take our net foreign debt?

See above. Our foreign debt is around 100% of GDP. That is like someone who earns $100K per annum taking out a $100K loan. What's the problem? The interest on the debt is easily serviceable.

And finally Shadow.....how does Australia begin to repay the foreign debt it has used to bid up resi property prices......an investment that doesn't generate foreign cash flow (resi housing) to repay foreign debt (money borrowed to buy housing) has to end badly.

There is no immediate requirement to repay debt. We can afford to service the interest repayments and that is all that is needed in the short to medium term. Long term, who cares really? I'm not going to try to predict what will happen 10 or 20 years from now. The bears may have their picnic some day. Just not as part of this current cycle, as I have always maintained.
 
Keen was always shooting too high, in my opinion he was just trying to grab headlines with his bearish predictions, though do think he has done some great research.

My call around 12 months ago was that we would see 15-20% off the top of nominal prices over the next several years. I still think we'll see it.

This crisis is FAR from over.
 
There is no immediate requirement to repay debt. We can afford to service the interest repayments and that is all that is needed in the short to medium term. Long term, who cares really? I'm not going to try to predict what will happen 10 or 20 years from now. The bears may have their picnic some day. Just not as part of this current cycle, as I have always maintained.

By that time most of us will be retired :p
 
Our bulging banks

So, they and the other 3 will reverse the current trend of tightened resi and comm LVRs, and lo docs....

And non bank lenders will be building market share by Chrissy......that'll make a lot of PIers happy.....

Not to mention the loosening of credit to the commercial sector......Maybe Barthy can explain why banks still aren't lending to developers.




Australia in pole position


QED ;)

Cheers,
Michael

Are we in pole position not to borrow 30% of every home loan from foreign source? considering that means 30% of interest payments leave the country, and thereby require our businesses to borrow foreign money as well.
 

Are we in pole position not to borrow 30% of every home loan from foreign source? considering that means 30% of interest payments leave the country, and thereby require our businesses to borrow foreign money as well.

not if the people that sell take those funds and put them to productive use e.g. they invest in super that is invested in foreign indexes. Then inflation erodes the sucker lenders values and the buyer of foreign stock has a tangible cashflow asset

if it doesn't then it is a direct adjustment on the currency which will reduce the value of the debt anyway.

ha... invest in the Dow Jones! after all the yanks have their currency so well under control!!
 
This is ****-about on so many levels it's best that I leave the country for two weeks to get over it. :)

:) I have the same problem to reply to Shadow, you often need a book starting from the ABC and is probably better forget about any reply ;)
Anyhow, Shadow is talking about foreign debt which is pointless if you don't deduct the assets you have with other countries. Today net debt of Australia was released by ABS and stands at around 630 bil $ dropped during the last quarter because of higher AU$ (most debt is in US$). Ireland net foreign debt is in a better shape then australia:
Ireland’s stocks of foreign financial assets and liabilities
approach €2.3 trillion at end-2007
At end-December 2007, Ireland’s overall stocks of foreign financial assets
amounted to €2,267bn while corresponding liabilities reached €2,299bn. Irish
residents therefore had an overall net liability of €31bn to non-residents, up
significantly from the previous year’s revised figure of €9bn
link
So on 31 dec 2007 the ireland net liability is 31 bn euro against 630 bil AU$ of australia in june 2009. But there is a great difference: a weak euro will reduce ireland liabilities (same thing happened in the last year with UK), for australia a weak AU$ will increase the liabilities (that is why australian liabilities went down on june quarter with the rising of the AU$).


Originally Posted by boz
stimulus and rate cutting is solving debt problems with taking on more debt. It is a real long lasting solution is it?

Shadow
I didn't say it was? I am on the record as saying we may have a property crash in the future. Just not as part of this cycle.
So you agree there is or will be a (too much) debt problem? but not now? what is your view on amount of debt that can be supported before you get deflation with property prices dropping?
I don't know this answer, obviously neither Steve keen
 
twoteddybearsonbench.jpg


It's alright Timmy, we can scare em again next season..
 
I buy AXJO !!

the chart shows xjo did better than china, hong kong, brazil, india, and the USA......which defeats the point of investing super in foreign markets to offset interest paid on foreign capital to bid up Aussie property.......

Wouldn't we be better off investing in Australian companies, like Fortescue instead?

Rather, Twiggy has to sell off the company to China.....

And until we stop running up nfd and perpetuating a cad, we'll have to keep selling the farm and the mine to prop our property prices at current levels....
 
:) I have the same problem to reply to Shadow, you often need a book starting from the ABC and is probably better forget about any reply ;)
Anyhow, Shadow is talking about foreign debt which is pointless if you don't deduct the assets you have with other countries. Today net debt of Australia was released by ABS and stands at around 630 bil $ dropped during the last quarter because of higher AU$ (most debt is in US$). Ireland net foreign debt is in a better shape then australia:

link
So on 31 dec 2007 the ireland net liability is 31 bn euro against 630 bil AU$ of australia in june 2009. But there is a great difference: a weak euro will reduce ireland liabilities (same thing happened in the last year with UK), for australia a weak AU$ will increase the liabilities (that is why australian liabilities went down on june quarter with the rising of the AU$).



So you agree there is or will be a (too much) debt problem? but not now? what is your view on amount of debt that can be supported before you get deflation with property prices dropping?
I don't know this answer, obviously neither Steve keen

but ireland has nothing to offer the world except guiness, potatoes and bad financial advice.

australia has uranium, tantalum, coal, gas, gold, iron ore, pig iron, nickel, copper, lithium and a not too bad property market.
 
Just read this good news thread about SK's capitulation on RE price trends.

Now does anyone know when he is going up Mt Kosciusko in penance for loosing his bet with RR? IMO this symbolic act is a vindication for all, including those in SS, who believed there will be a silver lining in the clouds for RE at a time when the public was besieged with D&Gs (such as SK) with the 'persuasive' argument that Australian RE must follow the outcomes in US, UK, Japan, etc, otherwise one would be in denial and self delusion.

For all who were not panicked by D&GS into selling their IPs, they have received a net CG of 1.5% on average through the GFC (so far), with great serviceability to boot!

Of course I am not deriding those in SS who find the D&G crowd has the better rationale and strategy for wealth creation in the last two years. Hey, each to his own reality, but for my sanity and wealth wisdom I know which side I am going with to maintain my retirement. :):D
 
but ireland has nothing to offer the world except guiness, potatoes and bad financial advice.

australia has uranium, tantalum, coal, gas, gold, iron ore, pig iron, nickel, copper, lithium and a not too bad property market.

here they are
not that I am a fan of Ireand (shadow brought it up) but I know lots of company invested in ireland for a more flexible workforce and it is within EU and euro, so if you want to invest in euroland was one of the few places to go. I guess also Ireland have a few more centuries of savings (and many of their homes would have been paid off by now) to back up their home prices and in not big need of money from overseas like australia
 
:) I have the same problem to reply to Shadow, you often need a book starting from the ABC and is probably better forget about any reply ;)

Maybe you and Token Funder could drop the petty sniping and ad hominem attacks and stick to the subject Boz? Or maybe you could both just admit you were totally wrong with your doomsday claims about a big property crash? Go on, man up like Steve Keen and admit the bulls were right all along! :D

So you agree there is or will be a (too much) debt problem? but not now? what is your view on amount of debt that can be supported before you get deflation with property prices dropping? I don't know this answer, obviously neither Steve keen

There may be a problem in the future. Right now there is no problem.

Credit growing faster than GDP is not necessarily a problem. GDP is income received each and every year, while credit is an expense that is only paid once. It makes more sense to either measure GDP against the interest on the debt, or to measure total debt against total assets.

GDP is not really comparable to total credit. If my income rises by $100 and my total debt rises by $110 then even at an interest rate of 10% pa, I’m still ahead by $89 (100 - (0.1 x 110)), even though my total debt has increased at a faster rate than my income. The same analogy applies to Australia’s Credit vs GDP ratio.

Although the interest on the total credit must be paid every year, much of this interest is owed to other Australians, so to some degree we are paying the interest to ourselves. From the perspective of the overall economy, debts are not just negative assets. They simply represent a pledge to transfer funds from one person to another at some future point in time. They are as much an asset to the lender as they are a liability to the borrower.

In short, Australia’s credit vs GDP ratio is not necessarily a problem. Many countries have a much higher credit vs GDP ratio than Australia. The ratio is over 300% for some countries. There is no reason why our ratio can’t continue to grow.

Here is an interesting comment from the RBA on Australia’s debt situation.

http://www.rba.gov.au/Speeches/2007/sp_dg_250907.html
Has the expansion of household credit run its course? Will it reverse? We cannot know the answer to these questions with any certainty, but my guess is that the democratisation of finance which has underpinned this rise in household debt probably has not yet run its course. In the past, the lack of access to credit had resulted in Australian household sector finances being very conservative. Even as recently as the 1960s, the overall gearing of the household sector (taking account of all household debt and all household assets) was only about 5 per cent – that is, households owned 95 per cent of their assets, including houses, outright. This meant that the household sector had significant untapped capacity to service debt and large unencumbered holdings of assets to use as collateral for borrowings. Financial institutions recognised this and found ways to allow households to utilise this capacity. The increase in debt in recent years has lifted the ratio of household debt to assets to 17½ per cent (Graph 6)3. I don’t think anybody knows what the sustainable level of gearing is for the household sector in aggregate, but given that there are still large sections of the household sector with no debt, it is likely to be higher than current levels.

Boz, at the moment house prices are rising. Housing credit growth is accelerating. Auction clearance rates are through the roof. Housing finance commitments are soaring. The boom is back Boz. Why don't you tell me when it's going to end? When has the big crash been postponed to this time. Let me guess... next year? :rolleyes:
 
here they are
not that I am a fan of Ireand (shadow brought it up) but I know lots of company invested in ireland for a more flexible workforce and it is within EU and euro, so if you want to invest in euroland was one of the few places to go. I guess also Ireland have a few more centuries of savings (and many of their homes would have been paid off by now) to back up their home prices and in not big need of money from overseas like australia

so i missed PetroCeltic and RyanAir - geez, my mistake....:rolleyes: those 99p flights glasgow to dublin must have a great profit margin.

they're still heavily financial as their close cousins the UK. have you seen the current UE figures for Ireland....?

http://www.irishtimes.com/newspaper/ireland/2009/0305/1224242304937.html

that's 10.4% UE right now - up 88% since this time last year. jobless rates for u25's is 20%.....:eek::eek::eek:

...while business group Isme said the “dire” figures suggested that the economy was on the “brink of collapse”...

yay - what a fantastic country. they're going gangbusters. we could all learn from them. they must be doing someting right i'm sure.
 
Why don't you tell me when it's going to end? When has the big crash been postponed to this time. Let me guess... next year? :rolleyes:

Q1 2010 now - haven't you heard?

apparently the usual Sept/Oct profit taking on worldwide stockmarket is the beginning of the end.
















again.
 
Q1 2010 now - haven't you heard?

apparently the usual Sept/Oct profit taking on worldwide stockmarket is the beginning of the end.

again.

yeah, might be right, overnight US hare market plunged (even with the overnight green shots like good manufacturing number and home sales), S&P 500 back below 1000 so the reverse might have started (leading this time was the Baltic dry index first, the Shangai stock market then)

that's 10.4% UE right now - up 88% since this time last year. jobless rates for u25's is 20%.....
I know it is bad,
Spain is even worse, remember that those things happen when government and central banks allow bubble to happen and the economy growth and spending is beyond the mean of the country, australia is no different in that. Commodity demand and prices (and investing in resources) is what has been saving australia in the last couple of years (I don't think will last).
Shadow
Here is an interesting comment from the RBA on Australia’s debt situation.
that was an interesting point as that speach was made before the GFC and at that point RBA didn't know with certainity weather the credit expansion run its course, but of course Shadow know for sure that it doesn't...
Boz, at the moment house prices are rising. Housing credit growth is accelerating. Auction clearance rates are through the roof. Housing finance commitments are soaring. The boom is back Boz. Why don't you tell me when it's going to end? When has the big crash been postponed to this time. Let me guess... next year?
I like to reply like the rba would and we don't know with certainity weather the credit expansion run its course, we have to see what happen to growth after stimulus is finished. Also other big factors will play a key role like productivity, unemployment, company profits, commodity prices, markets speculation etc.
My opinion is that home prices are not going anywhere in the future, probably propped up by government (politicians) if they fall and not much room left to rise (unless you get a monetary FIAT money collapse). About rent I see vacancy rate going up with the high unemployment. I also expect trouble for who got too much into debt and with too much leverage with that
I'll expect more interesting developement and volatility on currencies and on the share markets
 
Here is an interesting comment from the RBA on Australia’s debt situation.

Wow, whoever said that at the RBA should run a private bank, because if they really believe that they'd have a competitive advantage against the big 4. I think the risk management of the Big 4 offers a real world perspective on what the maximum household debt might be. Average DSRs are around 30% of gross income. At a median interest rate of 8%pa, that would derive a debt to annual hh income of 30/.08= 3.75 x annual income. Anything beyond that is depriving hh's of spending on other things like having a family, better education, financial security, nest egg, etc. Unfortunately, the fallout of reduced capacity to spend on this other stuff won't be obvious until a crisis unfolds.

Of course, historically, private banks think hh 30% dsr's are a reasonable limit when loans are principal and interest. But Australia isn't paying back any principal on foreign debt. Instead we just keep growing nfd and running negative cash flow (CAD) with the rest of the world. If households could the same, then that would be a neat trick.

And 30% dsr's across the board is unrealistic because debt serviceability drops off in old age, not to mention recessions.



Boz, at the moment house prices are rising. Housing credit growth is accelerating. Auction clearance rates are through the roof. Housing finance commitments are soaring. The boom is back Boz. Why don't you tell me when it's going to end? When has the big crash been postponed to this time. Let me guess... next year? :rolleyes:

If there's a housing boom going on, then why doesn't someone tell the Big 4, who are still contracting supply of credit to developers.
 

If there's a housing boom going on, then why doesn't someone tell the Big 4, who are still contracting supply of credit to developers.

WW, I heard Kholer last night on ABC say the opposite? New unit block approvals were up around 30 odd % (2nd consecutive monthly increase of this %). He said that now finance has become more available developers are lining up at councils to build high rise flats.

He said that building aprovals were up an extraordinary 7% in July.
 
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