With so many sources of income, much of which has already been eared and saved overseas and then brought to Australia, I’m glad that I hold property in readiness for further income injections by new entrants to the Australian real estate bucket.
Why it really is 'different here'
- Thread starter Shadow
- Start date
With so many sources of income, much of which has already been eared and saved overseas and then brought to Australia, I’m glad that I hold property in readiness for further income injections by new entrants to the Australian real estate bucket.
Ah, but new money is required just to keep the water level from falling! Do you honestly think that these new market entrants can bring the additional $1,500,000,000,000 that is required to hold the market (bucket?) at current levels? Let alone to put more in than is draining out?
Most new money comes from mortgage debt (remember I'm excluding the recirculated money here). We currently are struggling under the weight of a little under $1 trillion in outstanding mortgage debt. Do you think we could handle $2 trillion in a decade (bear in mind this would then be held by 1/3rd of our population)? My figures suggest it to be highly unlikely.
The RBA have released new figures showing how much "water" is entering the "bucket".
Enough to prevent home prices from falling below 2000 levels. Providing the number who try to take water out of the bucket doesn't suddenly rise, as it would if many people tried to sell their homes before prices fell, or before they fell further.
Enough to prevent home prices from falling below 2000 levels. Providing the number who try to take water out of the bucket doesn't suddenly rise, as it would if many people tried to sell their homes before prices fell, or before they fell further.
Take for example this thread. I have many years more property investing experience than the thread originator (maybe you want to ask him just how experienced he is
I bought my PPOR in 2005, my first IP last year, and another IP this year. My previous posts on this forum make this very clear. However, I do believe that I am reasonably well researched on economics and property investment. Not that I'm claiming to be some sort of 'expert' or to know more than anybody else here. My views are simply that - views.
Plenty of people here disagree with my arguments.
The value of what I have to say is questionable because I disagree, is it not?
It is questionable because you are Foundation/Pollyanna/Scary etc. (a troll from GHPC). Not that I mind you posting here, since I am perfectly able to tolerate people whose views differ from my own. Unlike most GHPC members who drive off anyone with a contrary viewpoint. Sorry mods, you can delete this comment.
Cheers,
Shadow.
If you extrapolate current trends forward but now argue they can't go on indefinitely, aren't you simply saying the trends aren't sustainanable but don't know when they will cease?
Unless of course you have a basis for formulating a time for the end of the "cycle" (a phrase I consider a pretty lame get-out-of-jail-free-card).
Doesn't it follow that next year is as likely as any other year in the future?
No... the house price trend is likely to change only when the fundamentals change. For example, if we get very high unemployment, or very high interest rates, or population growth reverses, or we build too many houses, or credit dries up significantly. I don't think these events will occur next year.
Go back and read a few of the other threads I started here recently - they explain exactly when and why I think we may have a crash in the future.
Cheers,
Shadow.
I thought this was interesting:
Trends in the Ratio between Price and Annual Income for Condominium Apartments
http://tochi.mlit.go.jp/h18hakusho/ch1_se1/setsu_1-1_eng.html
I think the bubble, then the 'reversion to the mean' couldn't be more obvious. The lesson is that our income, over the fullness of time, enables us to recycle all the housing wealth down through the generations. It does not make sense to expect the ratio of home prices to wages to rise, then keep rising.
Trends in the Ratio between Price and Annual Income for Condominium Apartments
http://tochi.mlit.go.jp/h18hakusho/ch1_se1/setsu_1-1_eng.html
I think the bubble, then the 'reversion to the mean' couldn't be more obvious. The lesson is that our income, over the fullness of time, enables us to recycle all the housing wealth down through the generations. It does not make sense to expect the ratio of home prices to wages to rise, then keep rising.
How do you make a dollar out of that ??
Easy. You learn one simple lesson. That people are irrational herd-following large mammals that are simply waiting to be taken advantage of. Spot the bubble, sell early and you'll be in front of the herd. Spot the boom, buy early then sell early and you'll be half-way across the country before they realise you've just pissed orf with all their ekwatee. Mate.
Oh, and do try to find time to write a book about it. Maybe title it "It's NOT different here"
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you'll be half-way across the country before they realise you've just pissed orf with all their ekwatee. Mate.
Excellent Foundation. You made me laugh 5 years ago and you still do. Top stuff. 
Thanks Mr Carnage, very interesting reading. Very smart, very knowledgeable.
Sorry to rain on your parade, but you are suffering from tunnel vision. Thing is that not only water taken from share market bucket will be poured into property bucket, but there is one little thiong that produces their own water. It is called Government. They can print as much water as they want and with the ghost of deflation wandering around they can do it at the moment relatively safe.
But they do not even need to do it. There is whole sea of water around. It is called superannuation. One stroke of a pen, and it will be allowed to be invested into people's own homes. And people will demand this. Who likes the idea of wasting their pension money on share markets?
There is also another untapped supply of water. One stroke of a pen, and CGT exemption on PPOR will be scrapped and interest an PPOR will become tax deductible.
In times like this when country is going to sink into depression lots of magic will happen.
You do whatever you deem is best for you, but may I point out that shares will have couple of decades to recover (after they fall to the bottom). You will have plenty of time for them. It is already 3 days since Government wants you to buy property. I would listen to them.
Good post, I agree with the essence
p) of it.But money out of superannuation into homes isn't going to happen and if it did it would be highly deflationary!
The worst thing to do when deflation threatens is to encourage a contraction of the money supply. What is needed is debt inflation (monetary expansion). Allowing people to pay off debt on their homes with their (forced) savings = debt deflation. Allowing first home buyers to buy with their (forced) savings = debt deflation.
This is why it is so important that the government's stimulus package is spent not saved, and most certainly not used to repay debt!!!
Plain vanilla 'money printing' is always an option right up until the point where deflation sets in. From that moment, you can chuck all the money you want at people and they'll put it aside in order to buy more cheaply tomorrow than they can today. This is why both the RBA and the government are taking extraordinary actions (with doubtless much, much more to come). They don't give a fig about inflation at this point. Inflation is after all their friend. A slowing credit expansion (whether lack of supply or lack of demand for it) is what they're trying to halt. A credit contraction is what they hope to avoid.
yes, it is sad but true, infation will make debt good. But the RBA and GOV have to be carefull as this inflating policy would eventually scare everyone to keep any saving in australia. Even now you can get easily over 7% on deposit and get loans at 7%.Good post, I agree with the essence
But money out of superannuation into homes isn't going to happen and if it did it would be highly deflationary!
The worst thing to do when deflation threatens is to encourage a contraction of the money supply. What is needed is debt inflation (monetary expansion). Allowing people to pay off debt on their homes with their (forced) savings = debt deflation. Allowing first home buyers to buy with their (forced) savings = debt deflation.
This is why it is so important that the government's stimulus package is spent not saved, and most certainly not used to repay debt!!!
Plain vanilla 'money printing' is always an option right up until the point where deflation sets in. From that moment, you can chuck all the money you want at people and they'll put it aside in order to buy more cheaply tomorrow than they can today. This is why both the RBA and the government are taking extraordinary actions (with doubtless much, much more to come). They don't give a fig about inflation at this point. Inflation is after all their friend. A slowing credit expansion (whether lack of supply or lack of demand for it) is what they're trying to halt. A credit contraction is what they hope to avoid.
Like get the loan and deposit it right away and you would make a profit!To answer to Shadow:
do you really believe foundamentals haven't change? or it is just don't want to admit you have to review your forecast?
I just point out few things you might have missed:
-stock market down 40%
-resources down 40%
-AU$ down 30% in 3 months
-RBA cut rates 1% in one event
-house prices falling in UK and US on top of the stock market
-unemployment rising fast in most countries (except australia)
- NZ in recession
do you want more things that happen lately to make you think foundamental are chenged
To answer to Shadow:
do you really believe foundamentals haven't change? or it is just don't want to admit you have to review your forecast?
I just point out few things you might have missed:
-stock market down 40%
-resources down 40%
-AU$ down 30% in 3 months
-RBA cut rates 1% in one event
-house prices falling in UK and US on top of the stock market
-unemployment rising fast in most countries (except australia)
- NZ in recession
do you want more things that happen lately to make you think foundamental are chenged
Hi Boz,
I was actually referring to the fundamentals of the property market, in Australia, but to address each of your points...
-stock market down 40% - good, drive investors away from the risky and volatile stock market into the stability and security of property.
-resources down 40% - great, reduce inflation and allow the RBA to drop interest rates even further.
-AU$ down 30% in 3 months - excellent, aussie property has already crashed 30%, this should attract foreign investors.
-RBA cut rates 1% in one event - and this is a bad thing for property how?
-house prices falling in UK and US on top of the stock market - sorry, I forgot, we're just like the US, and UK, and Japan too! We must follow the exact course set by foreign countries! (note - we must only follow foreign countries where property has fallen - we can not possibly follow a country where property continues to rise.
)-unemployment rising fast in most countries (except australia) - indeed.
- NZ in recession - IMF and government say Australia will not go into recession.
Cheers,
Shadow.
Thanks,
I would have agreed, but the picture is a bit wider than you are painting it.
Since these arguably "deflationary" measures would prop up property market which in turn will prop up construction which in turn will have flow on effect on the whole economy - it will lead to increased wealth and spending. So effect at the end of the day is going to be inflationary.
BTW idea of propping up economy with super money belongs to Howard/Costello. They wanted to implement it, but conveniently resouce boom has come and they decided to shut down property engine and instead to ride resource boom and let the rest of the economy to cave in under the weight of interest rates. What I am saying - it would be incredibly politically easy for this Government to tap into super - Opposition would not even move a finger.
Then, what I say is no different to your point - Government needs to start printing money NOW, and spend like mad. If your engine is going to stall, you open throttle pedal to the metal, worry about revs later. And I am surprised that they actually understand that the only thing that can save them from the depression on their watch is another property boom and have guts to do everrything that it takes for that to happen.
Watch for falling interest rates. Watch for soaring property market.
I would have agreed, but the picture is a bit wider than you are painting it.
Since these arguably "deflationary" measures would prop up property market which in turn will prop up construction which in turn will have flow on effect on the whole economy - it will lead to increased wealth and spending. So effect at the end of the day is going to be inflationary.
BTW idea of propping up economy with super money belongs to Howard/Costello. They wanted to implement it, but conveniently resouce boom has come and they decided to shut down property engine and instead to ride resource boom and let the rest of the economy to cave in under the weight of interest rates. What I am saying - it would be incredibly politically easy for this Government to tap into super - Opposition would not even move a finger.
Then, what I say is no different to your point - Government needs to start printing money NOW, and spend like mad. If your engine is going to stall, you open throttle pedal to the metal, worry about revs later. And I am surprised that they actually understand that the only thing that can save them from the depression on their watch is another property boom and have guts to do everrything that it takes for that to happen.
Watch for falling interest rates. Watch for soaring property market.
Good post, I agree with the essence
But money out of superannuation into homes isn't going to happen and if it did it would be highly deflationary!
The worst thing to do when deflation threatens is to encourage a contraction of the money supply. What is needed is debt inflation (monetary expansion). Allowing people to pay off debt on their homes with their (forced) savings = debt deflation. Allowing first home buyers to buy with their (forced) savings = debt deflation.
This is why it is so important that the government's stimulus package is spent not saved, and most certainly not used to repay debt!!!
Plain vanilla 'money printing' is always an option right up until the point where deflation sets in. From that moment, you can chuck all the money you want at people and they'll put it aside in order to buy more cheaply tomorrow than they can today. This is why both the RBA and the government are taking extraordinary actions (with doubtless much, much more to come). They don't give a fig about inflation at this point. Inflation is after all their friend. A slowing credit expansion (whether lack of supply or lack of demand for it) is what they're trying to halt. A credit contraction is what they hope to avoid.
simple said and all correct. Sometimes people here look into everything with way too much detail and its refreshing to see a good post thats too the point.
However regardless how correct you are shadow people will always hone in on a specific policy, data or some other micro issue and say "but its different this time...".
However regardless how correct you are shadow people will always hone in on a specific policy, data or some other micro issue and say "but its different this time...".
Hi Boz,
I was actually referring to the fundamentals of the property market, in Australia, but to address each of your points...
-stock market down 40% - good, drive investors away from the risky and volatile stock market into the stability and security of property.
-resources down 40% - great, reduce inflation and allow the RBA to drop interest rates even further.
-AU$ down 30% in 3 months - excellent, aussie property has already crashed 30%, this should attract foreign investors.
-RBA cut rates 1% in one event - and this is a bad thing for property how?
-house prices falling in UK and US on top of the stock market - sorry, I forgot, we're just like the US, and UK, and Japan too! We must follow the exact course set by foreign countries! (note - we must only follow foreign countries where property has fallen - we can not possibly follow a country where property continues to rise.
-unemployment rising fast in most countries (except australia) - indeed.
- NZ in recession - IMF and government say Australia will not go into recession.
Cheers,
Shadow.
sorry the time in between posting and remembering this i have completely forgotten where i was going with this comment.....
i had a perfectly logical counter argument and it's gone....Yes, excellent indeed.
May I add my two cents worth:
- Government throws money into property market - terrific
-Government says it will continue throw money into property market - even more terrific
-media started pro-property hype - extatic !
-Job losses everywhere - professionals do not go to US and UK and stay here, immigration increases - delirious!
Job losses everywhere - these greedy buggers who left for UK and US get back home (cash laden) - my nipples go hard!
Falling interest rates and rising rates smoke renters out of their holes in search for homes- orgasmic!
May I add my two cents worth:
- Government throws money into property market - terrific
-Government says it will continue throw money into property market - even more terrific
-media started pro-property hype - extatic !
-Job losses everywhere - professionals do not go to US and UK and stay here, immigration increases - delirious!
Job losses everywhere - these greedy buggers who left for UK and US get back home (cash laden) - my nipples go hard!
Falling interest rates and rising rates smoke renters out of their holes in search for homes- orgasmic!
Hi Boz,
I was actually referring to the fundamentals of the property market, in Australia, but to address each of your points...
-stock market down 40% - good, drive investors away from the risky and volatile stock market into the stability and security of property.
-resources down 40% - great, reduce inflation and allow the RBA to drop interest rates even further.
-AU$ down 30% in 3 months - excellent, aussie property has already crashed 30%, this should attract foreign investors.
-RBA cut rates 1% in one event - and this is a bad thing for property how?
-house prices falling in UK and US on top of the stock market - sorry, I forgot, we're just like the US, and UK, and Japan too! We must follow the exact course set by foreign countries! (note - we must only follow foreign countries where property has fallen - we can not possibly follow a country where property continues to rise.
-unemployment rising fast in most countries (except australia) - indeed.
- NZ in recession - IMF and government say Australia will not go into recession.
Cheers,
Shadow.
I know your joking but just so those out there that might think otherwise.. i am not suggesting a boom. I am just saying that we wont be living in a mad max era as Keen and others are suggesting..
hmm maybe you dont need Max
hmm maybe you dont need Max
Shadow, Essence and Tim,
Cut it out would you. You're making me feel all warm and fuzzy with all this talk of a coming boom.
Where's Scary Max Foundation? I need to come back down to earth.
Hi Boz,
I was actually referring to the fundamentals of the property market, in Australia, but to address each of your points...
-stock market down 40% - good, drive investors away from the risky and volatile stock market into the stability and security of property.
-resources down 40% - great, reduce inflation and allow the RBA to drop interest rates even further.
-AU$ down 30% in 3 months - excellent, aussie property has already crashed 30%, this should attract foreign investors.
-RBA cut rates 1% in one event - and this is a bad thing for property how?
-house prices falling in UK and US on top of the stock market - sorry, I forgot, we're just like the US, and UK, and Japan too! We must follow the exact course set by foreign countries! (note - we must only follow foreign countries where property has fallen - we can not possibly follow a country where property continues to rise.
-unemployment rising fast in most countries (except australia) - indeed.
- NZ in recession - IMF and government say Australia will not go into recession.
Cheers,
Shadow.
I'm sure there was the guy on Tuesday October 29th, 1929 who was running around saying what extraordinary opportunites the unfolding crash would present for property investors.
Now, I still think we're looking a global recession rather than a complete implosion but Shadow......seriously....you're coming across like a nutter.
