Thx IV and Kissfan.
I know I come across as a bermabear to some, but I just believe in covering the downside and letting the up take care of itself.
Further, via my parents I have been involved in property since 1971, when dad first built a block of flats. Us kids were up there helping Dad's builder friend mix cement for the first cavity brick 4 pack. we wanted to do at least a 6 pack on the 870m2 Res B lot, but the Pine Rivers Council insisted we save half of the lot for septic catchment, which was serious overkill. In the pic below, the catchment area can be seen behind the carport and laundry.
Since then, I remember clearly the movement of Australian property well. In the mid 80s, Sydney prices saw strong growth, and lots of my 20 something friends were thinking if they didn't buy soon, they'd be unable to for years to come. Mind you, I am talking about urban professionals wanting to buy close to town, not at Campbelltown.
I saw Brisbane flat through the 90s. So when prices started pushing along in 2001-2, I thought ok, here's another boom to make up for the flat 90s, normal part of the cycle stuff. Now every old timer property investor I know (several greeks, italians, my mother, uncle, three high net worth mid sized developers) thought the end of 2003 was the end of the boom for another cycle. They started to progressively offload their self created 'superannuation'.
But then, in 2005, the market started to fire up again and continued until this year. I could not understand this and felt whatever was driving it was historically unprecedented and potentially very dangerous. That led me on a quest to find out what was permitting this growth.
My readings identified looser bank lending and banks borrowing higher portions of foreign capital to keep pushing our property prices up. There was sufficient foreign capital prepared to invest in our mortgages because we have amongst the highest interest rates in the OECD and our economy was being used as a proxy by foreigners who wanted to invest in the China boom, without the sovereign risk. This is the same money that Australia's non bank lenders were tapping into to compete against our banks.
However, global credit was expanding well beyond global gdp growth. And that's where the people I read saw a fragile house of cards building.
So, it is my historical perspective from the age of 8, and my readings, that make me realize this time it is different. It is not that I am a permabear. I have always seen property as a means for people to provide for their retirement. Many Greek and Italian friends of my Dad built 6 packs and had commercial sheds. My father and uncle did the same. Not many of my school mate's anglo parents did though. They all seemed stunned that I had to spend 3-4 hours on Saturdays mowing multiple lawns and cleaning up flats after dirty tenants vacated.
So that's why I have been manically reading macroeconomics for the last few years. The growth of the last decade has been historically unprecedented. And I think anyone with serious debt exposure should be taking a strong interest in what is happening globally. I appreciate the discussions I have here with those who do. Boz is a guy, who being Italian, I identify as having learnt a hell of a lot about macro economics, in English, over the last few years and I always read his posts. I have no doubt he is a smart boy. TopCropper and Sunfish also share similar perspectives to mine, just a different style of presenting it though. And I know many others read the world's designated bear media tarts. As for Steve Keen, I think he has identified there is a problem with too much debt, and I respect his analysis on that. However, I think he was unwise to go to the media and emphatically declare a 40% house price drop. Nevetheless, I can see his motives for doing it. Do I think there's going to be a 40% price fall? probably not. but it will all depend on how developed economies deleverage from the excess credit that built up over the last 10-15 years and global contagion of debt defaulters.