Lol - yes quick thinking! that's one possible excuse. they should jot that one down in case they have to roll it out later
Why the American Experts get Australia Wrong
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Lol - yes quick thinking! that's one possible excuse. they should jot that one down in case they have to roll it out later
Well that's why, apart from properties, I hold US$.
1. Full Recourse lending - we cant just walk away
2. Dominance of Australian major banks made them so profitable that they werent tempted to drop credit standards so low as to fill their securitisation programs with junk loans. APRA also regulated Australian lending far more robustly than the Fed did in the US. So Australian banks were able to continue to attract funding during the GFC/credit crunch and continue to offer relatively high LVR's. The supply of credit determines the health of real estate prices before anything else does. Except for Canadian banks, who were also able to attract buyers for their RMBS and consequently were able to continue to lend relatively freely, other western nations banks were all forced to dramatically lower LVR's ( or LTV's as they may call them) and curtail the supply of credit, and that had a very real impact on prices. Interestingly, Canadian real estate also survived the GFC. Coincidence??
3. Low Unemployment and higher rates than the Northern hemisphere, so the RBA had plenty of ammunition to stimulate with, and Australian default rates have remained very low.
4. Councils and State Governments and the completely farcical planning and development regulations and red tape required to get new stock built. Whilst frustrating in the good times, this ended up being a God send because we havent ever had to worry about chronic oversupply, or even moderately chronic oversupply, and this has helped underpin prices. The one obvious exception to this I would point to in Australia is the Gold Coast, which was badly oversupplied, and interestingly, prices plunged there in the aftermath of the GFC.
There's a saying that "this time is different" is the most expensive phrase in finance, so I'm leery of ascribing Australia with an invulnerable property market that will ride out any downturn.
Australia has a similar legal system, interest rates, and home ownership levels as the UK and US. Other jurisdictions have non-recourse loans, and chronically poor planning systems too.
I suspect that what saved Oz during the GFC was the Chinese stimulus package, which fed into the resources boom, along with the currency being the beneficiary of the carry trade. Both of these meant there was inward investment when the rest of the world was foundering.
Australia has a similar legal system, interest rates, and home ownership levels as the UK and US. Other jurisdictions have non-recourse loans, and chronically poor planning systems too.
I suspect that what saved Oz during the GFC was the Chinese stimulus package, which fed into the resources boom, along with the currency being the beneficiary of the carry trade. Both of these meant there was inward investment when the rest of the world was foundering.
Ultimately, it's going to require a jump in unemployment or a reduction in LVR's for there to be any serious issue in Australia in the short term. By serious, I mean a greater than 5 or 10% adjustment backwards.
Rates are lower than normal at the moment, and that has created "short term memory loss" for many investors, who forget all too quickly that when rates were hovering in the 8's and 9's in 2006 and 7 and 8, prices just about everywhere were going just about nowhere....
Big rate cuts in 08 and 9 created precisely what we are seeing now- a 6 - 12 months run on prices... but when rates started nudging back above 6% by 2011- the market became lake Eyre and was as flat as a tack.
Suddenly, rate cuts leading into Spring 2013 and 6 months of sunshine in Sydney prices and everyone's raving about property being 6 foot tall and bullet proof again. But as prices surge, sensitivity to rate rises increases...
While Australians cant walk away from mortgages, an increase to unemployment and or a 1-2% RBA increase may well see investors offload loss making stock to get their heads above water... and we could well see a 5-10% adjustment.
But it would take big unemployment and big credit restrictions to see US or European type price collapses here....
Rates are lower than normal at the moment, and that has created "short term memory loss" for many investors, who forget all too quickly that when rates were hovering in the 8's and 9's in 2006 and 7 and 8, prices just about everywhere were going just about nowhere....
Big rate cuts in 08 and 9 created precisely what we are seeing now- a 6 - 12 months run on prices... but when rates started nudging back above 6% by 2011- the market became lake Eyre and was as flat as a tack.
Suddenly, rate cuts leading into Spring 2013 and 6 months of sunshine in Sydney prices and everyone's raving about property being 6 foot tall and bullet proof again. But as prices surge, sensitivity to rate rises increases...
While Australians cant walk away from mortgages, an increase to unemployment and or a 1-2% RBA increase may well see investors offload loss making stock to get their heads above water... and we could well see a 5-10% adjustment.
But it would take big unemployment and big credit restrictions to see US or European type price collapses here....
the GFC was different and expensive!
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