We will defy history if the bubble doesn't burst

[Munroe_R]

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.

So what you're saying is, there won't be a bust because the government will save us.
Unfortunately you have too much faith in governments to protect us from the ebb and flow of market forces. It's not about "betting against them", it's "betting against their ability to stop the tide from going out".

 

[MichaelW]

So what you're saying is, there won't be a bust because the government will save us.
Unfortunately you have too much faith in governments to protect us from the ebb and flow of market forces. It's not about "betting against them", it's "betting against their ability to stop the tide from going out".

Hi Munroe,

Welcome to the forum!

At the moment they're doing everything in their power to stop a house price bubble from forming. I'm just betting they'll act just as quickly to lean against a collapse in house prices. Can you see Aussie house prices collapsing if we have commercial bank interest rates back at 3.99% for 3 years which is where we were at GFC stage 1? I can't.

Steve Keen is looking at dropping lending rates by owner occupiers and saying "see its a collapse, I told you say". And I'm looking at the same numbers and saying "derr, that's exactly what the RBA is trying to have occur to head off a house price bubble". Those lending figures are more a factor of current commercial lending rates than anything else and dependent on RBA policy settings.

Cheers,
Michael

 

[WinstonWolfe]

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

Who is causing the problems the commentators are referring to Mike?
Why are are our Treasury, ABS, and RBA intellectual elites, who brandish all this firepower, only now realizing CPI, sans asset price inflation, be revised?

IMO, Keen has served a useful purpose, in prodding our irreproachable lord and masters into addressing issues they plainly refused to acknowledge.....

China's lord and masters are of the same ilk. They've allowed asset price inflation to such extremes, that painless solutions are essentially non existent.

As usual, an ounce of prevention is worth a pound of cure.

 

[Ausprop]

i never realised chinese home owners had such low LVRs

 

[WinstonWolfe]

Steve Keen is looking at dropping lending rates by owner occupiers and saying "see its a collapse, I told you say". And I'm looking at the same numbers and saying "derr, that's exactly what the RBA is trying to have occur to head off a house price bubble". Those lending figures are more a factor of current commercial lending rates than anything else and dependent on RBA policy settings.

Cheers,
Michael

Mike, since when has the cash rate taken into consideration asset prices, bubble or no bubble? Bananas impact the cash rate more than house prices....

"Following the cyclone, prices of bananas increased by around 400 per cent, before falling by almost 80 per cent by early 2007, with these movements first adding and then subtracting about ¾ percentage point to the rate of inflation."

As I infer above, our irreproachable lord and masters are a little slow on the uptake.
What criteria, precisely, are they using to determine a bubble threatens?

 

[Aaron Sice]

i never realised the chinese actually OWNED their own home...

 

[MrCrumbpacker]

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

Still not sure how much of a difference there is if you buy a house for 600k, and it is revalued at 800k a couple of years later.

I must admit, the amount of money poured into housing is generally ignored, particularly when referencing increasing house prices as reported in the media.
It would be fascinating to know how many millions have been poured into Sydney renos and upgrades over the past few years.

I noticed when I lived in the Eastern Suburbs how many houses were reported as being having bought for X in 1995, and sold for Y in 2005, for a handsome Z profit, whan no mention of the 1m reno was ever made. Nearly all of the Paddington and Woolhara terraces I saw being bought and sold, nearly all had huge amounts of money spent on them.

The impression in the media however, was that huge coin was to be made, and only in retrospect did we look back and realise that in real terms the market had effectively gone backward from 2003 till 2008, and has probably in real terms only just level pegged due to the recent stimulus inspired gains.

 

[Ausprop]

eg. the house i built in 2001 i recently sold for 3 times its cost (no improvements), yet it was still sold below replacement.

 

[MrCrumbpacker]

eg. the house i built in 2001 i recently sold for 3 times its cost (no improvements), yet it was still sold below replacement.

I presume you mean that the cost to build the same house (not including land), would be more now in real terms as against what it cost to build in 2001?

 

[Ausprop]

I presume you mean that the cost to build the same house (not including land), would be more now in real terms as against what it cost to build in 2001?

absolutely. inflation is a key element to property investment

 

[Y33]

wouldn't you rather know if the area is ours or not? why delay finding out. it's useless if it isn't ours

Yes and no. Most likely we will lose any case. Without a proper back up plan we will be just handing them open slather and don't think for one minute they won't take advantage of that situation. If they win it won't take long for them to claim compensatory damages against those that have hindered their so called rights, which is already under way.

What needs to be understood is that we are dealing with a Japanese bureaucracy that not only doesn't care about whales or the environment but doesn't even care about their own people.

 

[MrCrumbpacker]

absolutely. inflation is a key element to property investment

Ah, gotcha I think, so not real terms, but nominal terms, property as an inflation hedge.

 

[Ausprop]

sorry, nominal. i get confused because there is nothing unreal about nominal prices. or paying back that $5k debt that bought you a house in 1970!

 

[MrCrumbpacker]

absolutely. inflation is a key element to property investment

I'm interested to know is by the above you regard inflation as an important aspect of your strategy, or just an inevitable aspect.

I've never regarded inflation as a freind to anyone in general, as it tends to erode all wealth, and occasionally, as in the case in the mid seventies, when I was in the UK, and inflation was running at 27%, although it masked house price drops, it was generally disasterous, and ended with our 'winter of discontent'. By the mid eighties, house prices had caught up, and were soon galloping ahead again however, and those that jumped ship before the 1990 crash had made a fortune.

 

[Ausprop]

planned inflation such as we have in oz is probably the only reason i hold resi properties in oz. The deflation of the debt exceeds my out of pocket expenses. Cap growth is a bonus but i have learnt not to count on any

 

[Ausprop]

to put it another way - if we were experiencing deflation i would dump the properties

 

[Aaron Sice]

i think i just had a light bulb moment.

 

[Amadio]

i think i just had a light bulb moment.

Me too. Can't decide if it's good light, bad light, or diffused light.

 

[WinstonWolfe]

So what you're saying is, there won't be a bust because the government will save us.
Unfortunately you have too much faith in governments to protect us from the ebb and flow of market forces. It's not about "betting against them", it's "betting against their ability to stop the tide from going out".

I agree......

And where I agree with Keen, Grantham, Schiller, Mises, and the scores who support Keen's theoretical framework, is in the destructive role of excessive credit to cause asset bubbles and misallocation of capital.

However, our ivory towered Lord and Masters, who have repeatedly said for 10 years "there's not even the hiss of a bubble', are suddenly saying 'hmmmm, there's a bubble". Apparently, it just started Tuesday two weeks ago, with no prior warning. Came up overnight it did.......something to do with increased global seismic activity

Nevetheless, sure it was intellectually sloppy of Keen to get up and talk a 40% drop in property prices. But I'd argue the RBA and Treasury are even more sloppy....

BUT....wait......what's this... The RBA are now saying "bubble dealt with, no need for further rate hikes presently, because property lending has fallen significantly, even before we have reverted to the mean interest rate for the last decade."

Ummmm......hang on RBA.....why is housing lending falling before interest rates meet their 10 year mean?

 

[Aaron Sice]

i don't know WW, tell me.

please.

i'm dying to hear.

really.