Just want to add. Australia is not just Sydney or Melbourne. :0 oh the horror. And believe it or not some of these places are still experiencing normal growth or still recovering from the last correction. In other words many so called bubbles in Australia have been deflating for some time. You just have to look around.
We will defy history if the bubble doesn't burst
- Thread starter Property Meister
- Start date
Margaret Lomas was interviewed on tv yesterday regarding her thoughts on the property market and the latest interest rate rise. She said that Australia had thousands of property markets that weren't accurately represented by what was happening in the better parts of Sydney and Melbourne.
yeah apparently there's a place called Darwin that's been going gangbusters but Michael Yardney hasn't mentioned anything so it must be a ghost town. Probably too risky anyway.
then there's Perth but that's too far away to think about too - i heard something about a mining boom.....? I heard about this place called Karratha, but my dad said that in 1990 it was a risky venture so i don't think i'll go there.
i'm thirsty. might order a soy latte. want one? my shout.
meconium mentioned Tokyo, not broader Japan. The population of Tokyo has increased by 1M in the last 10 years.
Trying to use Japan as a comparison for anything is nigh on ridiculous.
They do not function like the rest of the world and have book keeping systems that words can not describe.
Recently there was thread that went along the line of A borrowing money ($10) from B and gave the money to C as he owed C ($10) who in turn gave it to D because he owed D ($10) . D then gave the ($10) to A who gave it back to B and no body owed any more money.
Now change the scenario to say 1 million but at the same time each person claims the 1 million as wealth/profit but never declares it as a loss when they give it away. This is how Japanese businesses operate and how they can claim to have more money/profits than they really have.
The same situation is applied a little differently to property. Instead of borrowing just sell for a higher price but eventually buy the property back at the same inflated price. No money/properties actually exchange hands but the properties have gone up in value. This same situation is applied to stocks and shares. Now this situation worked perfectly in Japan BUT when it moved out of Japan and into other countries then the system broke down thus helping to create the financial collapse in Japan.
On the other hand houses in Japan are treated the same way as we treat cars. When they get older the value goes down. To understand why you need to understand the mind set of the Japanese and that would take forever to explain. For most anything old is of no value because they like everything to be new. When it comes to buying real estate in Japan most properties are sold to real estate agents at a very cheap price and then sold to a private buyer. The house next door to mine was built for 350K about 15 years ago. The owner decided to sell and as usual it is bought by a real estate agent for the nice price of 150K. He then spent 50K reforming and sold it for 250K all in about 2 weeks. This is not an isolated situation but something I see happen on a regular weekly basis. The original owner didn't even consider selling it privately and sold it without hesitation to the real estate agent. For the original owner it is a quick transaction over and done with out any hassles or negotiations. The new owner didn't care that the real estate agent was making 50K for about 2 weeks work because he was more embarrassed about buying a second hand house.
Make of it all what you want. I just find it very funny when time and time again I read about comparisons to Japan when the people doing the comparisons have no idea where the numbers come from or how Japan actually works. They read a number that is written somewhere and then try to rationale it by how we might do things in oz and that in it's self is absolutely ridiculous.
A classic example of just how strange Japan can be in this so called modern age. A friend of mine 21 years of age has just been accepted as a new recruit for a bank. Part of her hiring condition stipulates she must live with her parents. She can not live by herself, she can not live with her boy friend and if she gets married she has too finish work. Welcome to the real world of Japan in 2010.
They do not function like the rest of the world and have book keeping systems that words can not describe.
Recently there was thread that went along the line of A borrowing money ($10) from B and gave the money to C as he owed C ($10) who in turn gave it to D because he owed D ($10) . D then gave the ($10) to A who gave it back to B and no body owed any more money.
Now change the scenario to say 1 million but at the same time each person claims the 1 million as wealth/profit but never declares it as a loss when they give it away. This is how Japanese businesses operate and how they can claim to have more money/profits than they really have.
The same situation is applied a little differently to property. Instead of borrowing just sell for a higher price but eventually buy the property back at the same inflated price. No money/properties actually exchange hands but the properties have gone up in value. This same situation is applied to stocks and shares. Now this situation worked perfectly in Japan BUT when it moved out of Japan and into other countries then the system broke down thus helping to create the financial collapse in Japan.
On the other hand houses in Japan are treated the same way as we treat cars. When they get older the value goes down. To understand why you need to understand the mind set of the Japanese and that would take forever to explain. For most anything old is of no value because they like everything to be new. When it comes to buying real estate in Japan most properties are sold to real estate agents at a very cheap price and then sold to a private buyer. The house next door to mine was built for 350K about 15 years ago. The owner decided to sell and as usual it is bought by a real estate agent for the nice price of 150K. He then spent 50K reforming and sold it for 250K all in about 2 weeks. This is not an isolated situation but something I see happen on a regular weekly basis. The original owner didn't even consider selling it privately and sold it without hesitation to the real estate agent. For the original owner it is a quick transaction over and done with out any hassles or negotiations. The new owner didn't care that the real estate agent was making 50K for about 2 weeks work because he was more embarrassed about buying a second hand house.
Make of it all what you want. I just find it very funny when time and time again I read about comparisons to Japan when the people doing the comparisons have no idea where the numbers come from or how Japan actually works. They read a number that is written somewhere and then try to rationale it by how we might do things in oz and that in it's self is absolutely ridiculous.
A classic example of just how strange Japan can be in this so called modern age. A friend of mine 21 years of age has just been accepted as a new recruit for a bank. Part of her hiring condition stipulates she must live with her parents. She can not live by herself, she can not live with her boy friend and if she gets married she has too finish work. Welcome to the real world of Japan in 2010.
Trying to use Japan as a comparison for anything is nigh on ridiculous.
They do not function like the rest of the world and have book keeping systems that words can not describe. posted by y33
that's right they save and produce goods we live off credit and don't value add even to our commodities and produce very little without gov assistance . personally think they got the better deal long term
They do not function like the rest of the world and have book keeping systems that words can not describe. posted by y33
that's right they save and produce goods we live off credit and don't value add even to our commodities and produce very little without gov assistance . personally think they got the better deal long term
Absolutely spot on!!!, but then no one really wants to compare and contrast to a country that doesn't appreciate how the property market works, (onward and upward forever).
Try 55% down since 1990 on average, and 76% down in Tokyo, and this from a country with high pop density, and bugger all building land, (too many mountains)
Not exactly correct. Japan has the appearance of savings but reality is totally different. In 1995 when ranked by assets the top ten banks in the world were all Japanese with 29 in the top 100 as against Americas 9 for top 100 BUT when Moodys check liabilities of the banks only 5 of Japans city banks had assets in excess of bad loans. No banks rated A, only one B, three C and just over 20 D. By early 1999, most major banks had an E+ rating basically meaning they were bankrupt. Not 1 bank was in the top 100.
Even if they do have savings in a bank what is the reality of these savings. The average salary man/worker retires with an estimated 20 million yen from the lump-sum pension. On average 10 million will go to the bank to pay off the home loan and the other 10 million in to a savings account earning around 0.25% giving him the grand total of 25,000 yen of interest per year. At today's rate that is about $300 AUD. Not really worth putting money into a savings account.
It is estimated that Japans true debt is between 150-200% of its GDP. No one really knows just how bad Japans economy is today because book keeping still consists of latent profits and magic assets with no accountability to produce accurate financial records.
This where you need to understand the basics of Japanese book keeping with latent profits and assets.
In Australia property prices go up and down due to market demand and forces.
In Japan previously to the Bubble Burst which was about 10-15 years in the making property prices went up due to companies creating latent profits and assets. Basically Company A has a building worth 100 million but owes the bank 150 million. Company A then sells the building to Company B which happens to be an affiliate of Company A for 200 million. Company B then resells the building back to company A for 200 million. Company A then shows that the building is worth 200 million and borrows another 100 million for what ever reason. Now company A has 200 million building plus 100 million cash for total assets of 300 million but wait what about the 350 million they owe. Quite simply the bank which is also part of the same affiliate group will not ask for the money to be paid back but will list the 350 million as an asset because 200 million is the building they hold rights over and 100 million is still owed to them.
A major part of the down fall of Japans economy was when the banks, securities and other financial areas moved off shore into other countries and had to be held responsible for their accounting by producing accurate books. Nomura is a perfect example.
Another factor not being taken into consideration is too compare Australia's population growth to Japans. Japan is demongraphically becoming the worlds oldest with a birth rate that now is either less or on par with death rate.
The population over 65 is around 20% and heading towards 25% at an alarming rate. The 1960's saw an average 11 workers supporting each retiree and this dropped to 4 by 1996 and is expected to be around 2 by 2025. Leaving Japan with further problems from pension funding to health care costs for the age.
Want to complicate it further. The age pension is now given at 65 years of age instead of 60 but many firms and government agencies mandate a 55yr retirement age. Creating a 10 yr gap of trying to live off savings instead of the previous 5 yr gap. Also the age pension is not given to anyone thus the dramatic increase in the homeless rate in Japan.
A few weeks ago, I was looking at OO home loan trends, and Steve Keen has done the same below.
The OO home loan value parabolic curve that started 1980 broke with GFC, and again recently.
The lower band of the trend level for number of OO home loans has also been punched through.
I suppose property bulls believe investors can keep covering trend change in OO lending. But how much steeper can the investor lending curve get?
The OO home loan value parabolic curve that started 1980 broke with GFC, and again recently.
The lower band of the trend level for number of OO home loans has also been punched through.
I suppose property bulls believe investors can keep covering trend change in OO lending. But how much steeper can the investor lending curve get?
Mr. Keen has quite a bit to say here:
http://www.businessspectator.com.au...ntinue-pd20100517-5j4xu?opendocument&src=blb&
http://www.businessspectator.com.au...ntinue-pd20100517-5j4xu?opendocument&src=blb&
yeah, yeah worlds going to end, sky's going to fall down...
When I was given redundacy in 1992 many people were saying there was going to be a BIG depression by the end of the 90's and to keep as much cash available for the pending end of the world....Fortuantely i didnt listen and purchased various houses/flats in bayside melbourne. My first PPOR i purchased by myself with 6X my gross salary - sound familiar?
As i write this from my fully paid off 2.5m house in a melbourne premier suburb, I cant help but wonder what would have happended if I listened to all the sad sack doomsdayers who probably now are struggling to survive retirement.
DONT LISTEN TO EM' just buy quality property when you can afford to keeping an eye on DSR', LVR's etc
FWIW Japans RE at the peak in Tokyo was US1.5m per SQM!!!!! makes our "bubble" look like a slight rise. The sharemarket was at all time similar highs in 1990.
What I've noticed is most people who are negative havent really had a crack at anything and its probably a personality type where they wont try anything new and consequently will fail at most things in life. Gphk was full of them...
have a good day!
When I was given redundacy in 1992 many people were saying there was going to be a BIG depression by the end of the 90's and to keep as much cash available for the pending end of the world....Fortuantely i didnt listen and purchased various houses/flats in bayside melbourne. My first PPOR i purchased by myself with 6X my gross salary - sound familiar?
As i write this from my fully paid off 2.5m house in a melbourne premier suburb, I cant help but wonder what would have happended if I listened to all the sad sack doomsdayers who probably now are struggling to survive retirement.
DONT LISTEN TO EM' just buy quality property when you can afford to keeping an eye on DSR', LVR's etc
FWIW Japans RE at the peak in Tokyo was US1.5m per SQM!!!!! makes our "bubble" look like a slight rise. The sharemarket was at all time similar highs in 1990.
What I've noticed is most people who are negative havent really had a crack at anything and its probably a personality type where they wont try anything new and consequently will fail at most things in life. Gphk was full of them...
have a good day!
Pieman, "when you can afford to" is very much contingent on price growth, considering wage growth is lagging price growth profoundly.
And price growth is contingent not on your DSR, but that of the market's.
And, once again, he is failing to consider this using some sort of game theory logic and allowing for the likely interventions that will follow. Let me explain...
If, as he projects, lending continues to dry up to owner occupiers and prices start to fall, what do you think the RBA and Government will do? Do you think they have scope to take any action to stop a residential house price collapse? Do you think its in the national interest to do so?
The answers are the same as they were last time round with GFC Stage 1. The RBA still has interest rates at the highest levels of all developed economies and are on record as doing so to head off a house price bubble. A bubble people! So, if Keen is right and its armageddon, what do you think the RBA is going to do with its cash rate setting? 2% anyone? Here's the RBA's current thinking:
Resources boom outweights Euro fears
Business Spectator said:
And what do you think they'll do if that outlook changes?
Too much of our net worth and economy is tied to maintaining current residential property prices. The Federal government is daily increasing their economic outlook and booking a return to surplus in 2 years time. They haven't spent nearly as much as the US or the EU. If its armageddon, they will. China has hiccupped and is putting the brakes on, but what happens if they take those breaks back off if things slow down too much.
The problem with all the armageddon comentators is they operate in a vaccuum. They take trend lines and extrapolate them without looking at the capacity of national bodies to influence these trendlines. How's the saying go: "never bet against the fed". I for one am not planning on betting against China, the fed, the IMF, the RBA and the Aus Fed government just yet. They've got some serious firepower left if the world needs it. Inflation is the only real risk and that's why I've got a huge gold position too.
Cheers,
Michael
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At around the late 80's the grounds of Tokyo Palce were considered to be worth more than all of California. TSE was slightly higher than NYSE and hovering around 39,000 points giving the price to earnings ratio of stock around 80 as compared to 20-30 for US, UK and HK. One needs to remember that Japan financial is based on an asset valuation and not cash flow as the norm of other countries. Early Jan 90 saw nearly 60% wiped from the exchange over 2 years and for the following 10 years somewhere between 14,000 & 24,000.
The blame is solely the fault of MOF (Ministry of Finance) considered to be Japans most powerful govt agency but that's another story..
Well if you swap the term 'company' for for population in the above, and relate it to domestic housing, isn't this exactly what we have been doing in Sydney for the past thirty years? creating equity out of percieved profits, to generate yet more leverage to draw on. Main difference seems to be the bubble has been a little longer in its formation here, and hasn't popped yet!
not really becuase the replacement cost of the 150m building probably hasnt changed even when it is revalued at 300m
keen and his folk are too keen to overlook input costs into housing it does have base value
