Aussie Dollar Plummets
Checking my Super, I calculate I should be able to retire in ten years, totally broke! 
Sky is reporting a resurgence in Australian real estate sales, following the recent interest rate cut. I suspect we'll feel pain in Australia, but not as much pain as the residents of many other countries - e.g. Iceland......
This may also be the final straw for a few Pacific nations.
Sky is reporting a resurgence in Australian real estate sales, following the recent interest rate cut. I suspect we'll feel pain in Australia, but not as much pain as the residents of many other countries - e.g. Iceland......
This may also be the final straw for a few Pacific nations.
Grandpa Aerotart
Don't kid yourself Torres...look at those graphs on the previous page, they are accurate. Australian real estate is going to crash back to earth bigtime in the next few years.
Real Estate agents are madly trying to talk the market up but to little avail. The rate cut might have given it a little push but it is merely the last gasps of a bubble that is set to burst.
Stupid Govt caused this problem and stupid govt not only cannot fix it but will make the problem worse before it falls completely out of their control as has happened in the US.
They say we don't have a subprime probem in Australia...RUBBISH. We have the least affordable housing (by a long margin) and enormous house hold credit problems (using increased equity to by 'stuff'). All driven by artificially low interest rates and a decade or more of 100% loans etc.
The shoe is loose and WILL drop before long. NSW has been in technical recession for over 12 months, Vic, Tas and SA are always in recession. With China and Japan going into recession QLD, WA and the NT (the mining boom states) will be hit hard.
Real Estate agents are madly trying to talk the market up but to little avail. The rate cut might have given it a little push but it is merely the last gasps of a bubble that is set to burst.
Stupid Govt caused this problem and stupid govt not only cannot fix it but will make the problem worse before it falls completely out of their control as has happened in the US.
They say we don't have a subprime probem in Australia...RUBBISH. We have the least affordable housing (by a long margin) and enormous house hold credit problems (using increased equity to by 'stuff'). All driven by artificially low interest rates and a decade or more of 100% loans etc.
The shoe is loose and WILL drop before long. NSW has been in technical recession for over 12 months, Vic, Tas and SA are always in recession. With China and Japan going into recession QLD, WA and the NT (the mining boom states) will be hit hard.
Join Date: Nov 2006
Location: Sydney
Posts: 157
Likes: 0
Received 0 Likes
on
0 Posts
It's worth looking at the history - the last time Australia suffered from a collapse in demand for resources on the back of a debt bubble was in the 1880's....property prices didn't recover until the 1950's
The scale of personal debt that we have in place now is entirely without precedent and the ability to service it has only been made possible by very low levels of unemployment....and the layoffs have just started to appear in sizeable numbers - prime debts can become sub-prime very quickly.
Even the much vaunted pillars of the Australian banking system are dependent on the international credit market for much of their funding, and they need to refinance nearly A$250bn of international debt in the next 12 months....the international interbank lending market is looking pretty ugly at the moment, and they will be competing with newly re-nationalised banks with sovereign credit ratings.
The A$/USD rate is being hit with a double whammy - on one hand the rate of debt contraction in the US economy is driving the USD up (less debt = less money in circulation....supply vs demand dictates that the USD will rise....when the Japanese property market collapsed in the 90's the value of the yen doubled) and on the other hand the demand for the AUD that was being driven by the resource boom and high interest rates is going away....not a pretty picture, I would not be surprised to see the AUD below USD0.40 over the next couple of years.
The scale of personal debt that we have in place now is entirely without precedent and the ability to service it has only been made possible by very low levels of unemployment....and the layoffs have just started to appear in sizeable numbers - prime debts can become sub-prime very quickly.
Even the much vaunted pillars of the Australian banking system are dependent on the international credit market for much of their funding, and they need to refinance nearly A$250bn of international debt in the next 12 months....the international interbank lending market is looking pretty ugly at the moment, and they will be competing with newly re-nationalised banks with sovereign credit ratings.
The A$/USD rate is being hit with a double whammy - on one hand the rate of debt contraction in the US economy is driving the USD up (less debt = less money in circulation....supply vs demand dictates that the USD will rise....when the Japanese property market collapsed in the 90's the value of the yen doubled) and on the other hand the demand for the AUD that was being driven by the resource boom and high interest rates is going away....not a pretty picture, I would not be surprised to see the AUD below USD0.40 over the next couple of years.
Sprucegoose
Join Date: Sep 2000
Location: Hughes Point, where life is great! Was also resident on page 13, but now I'm lost in Cyberspace....
Age: 59
Posts: 3,485
Likes: 0
Received 1 Like
on
1 Post
not yet anyway...
I am well aware that housing loans can be called, but it is not likely provided there is still considerable equity in the property. If there was to be a major downturn somewhere in the vicinity of a 50% drop in prices then I might be in trouble, but as for now I am not sweating!
Grandpa Aerotart
Anybody talking on a mortgage based on the recent rate cut is an idiot...unless they managed to buy well at one of the MANY 'mortgagee in possession' auctions that are going on now. Home repossessions are at historical highs and have been for a year or more...many of these auctions have seen houses sold for 50% of what they were thought to be worth as recently as 6 mths ago.
With a goodly sized deposit and in the above circumstances and assuming you were buying something you absolutely loved and wanted as a home, as opposed to an investment, you might be ok.
Housing bubbles are the worst kinds of asset bubbles because of the time it takes to work out of the system, for prices to bottom - and demand to be stimulated again - and for people to get over their fear let alone be able to afford to buy at all.
The dot com bubble was hardly noticed by the average man in the street as an example...this housing bubble will be very different.
That is what makes the policy settings (low interest rates/relaxed or non enforced lending guidelines) put in place by our idiot elected officials, that promote bubbles, even more idiotic.
With a goodly sized deposit and in the above circumstances and assuming you were buying something you absolutely loved and wanted as a home, as opposed to an investment, you might be ok.
Housing bubbles are the worst kinds of asset bubbles because of the time it takes to work out of the system, for prices to bottom - and demand to be stimulated again - and for people to get over their fear let alone be able to afford to buy at all.
The dot com bubble was hardly noticed by the average man in the street as an example...this housing bubble will be very different.
That is what makes the policy settings (low interest rates/relaxed or non enforced lending guidelines) put in place by our idiot elected officials, that promote bubbles, even more idiotic.
Join Date: Nov 2006
Location: Sydney
Posts: 157
Likes: 0
Received 0 Likes
on
0 Posts
it is not likely provided there is still considerable equity in the property
Join Date: Apr 2008
Location: Oz
Age: 77
Posts: 590
Likes: 0
Received 0 Likes
on
0 Posts
Miraz
I'm backing your thiunking. Those graphs should be reading for all Australians - except 90% wouldn't comprehend.
Had a beer at the Aero club Fri night with an Aussie Home loans guy who had just been to consolidate debt for a guy who purchased a Harley, all up $54K, on his credit cards - because he had to have one (but could not pay the house mortgage).
A poll on the interest rate reduction last week showed - 45.5% were NOT going to use the cut to pay off their mortgage.
If you'd put up the Balance of Trade also there might have been even more shivering.
Two major crises in the pipeline:
1. The Australian sub-prime crisis. Look at the current trend in bankruptcy and repossession and remember there has to be $ out there to purchase the repos. (Rightly or wrongly a lot of that $ went into super under the Howard changes and is now suffering also). Unfortunately the USA probably won't even know about ours.
2. The lunacy of the carbon trading / global warming action Oz proposes that will add costs to everything further sucking away the household income and simultaneously making us even less competitive with the nations who already supply much of our goods.
The false spending boom of recent years propped up by loans and three years interest free must come home to roost sooner rather than later, or the crash worsens.
I'm backing your thiunking. Those graphs should be reading for all Australians - except 90% wouldn't comprehend.
Had a beer at the Aero club Fri night with an Aussie Home loans guy who had just been to consolidate debt for a guy who purchased a Harley, all up $54K, on his credit cards - because he had to have one (but could not pay the house mortgage).
A poll on the interest rate reduction last week showed - 45.5% were NOT going to use the cut to pay off their mortgage.
If you'd put up the Balance of Trade also there might have been even more shivering.
Two major crises in the pipeline:
1. The Australian sub-prime crisis. Look at the current trend in bankruptcy and repossession and remember there has to be $ out there to purchase the repos. (Rightly or wrongly a lot of that $ went into super under the Howard changes and is now suffering also). Unfortunately the USA probably won't even know about ours.
2. The lunacy of the carbon trading / global warming action Oz proposes that will add costs to everything further sucking away the household income and simultaneously making us even less competitive with the nations who already supply much of our goods.
The false spending boom of recent years propped up by loans and three years interest free must come home to roost sooner rather than later, or the crash worsens.
Grandpa Aerotart
I'd say the bulk of any mortgage action taken under the recent cut was people renegotiating their existing mortgage to the lower rate.
An interesting statistic from the US, and going on your story of the Harley I don't doubt it is much different in Australia. 20% of new cars sold were sub prime loans which are now also defaulting.
An interesting statistic from the US, and going on your story of the Harley I don't doubt it is much different in Australia. 20% of new cars sold were sub prime loans which are now also defaulting.
Join Date: Apr 2008
Location: Oz
Age: 77
Posts: 590
Likes: 0
Received 0 Likes
on
0 Posts
CC
That 20% is another frightening statistic - and an indictment of how the education system is turning out people who cannot work out that 100% of your income is the max you can spend
My home loan in 1971 was a nightmare. Reams of paper, only a certain max % of income, only a % of the wife's allowed in case she fell pregnant, and I had to borrow a thou OTQ from a mate to bridge the gap. But, I paid the lot in 5 years. When I then purchased the rental property, still a tough bank approach but easier because I had collateral. But, I wasn't getting the $ without proof of ability to repay.
Then along came the US gurus to teach our bankers that their job was not to jealously guard the bank's money - but to get it out there working. And, the pendulum swung too far to the other extreme. Now they dish it out without qualms, particularly credit cars with their higher rates.
If you look at Harvey Norman and their "interest free" purchase scheme - the rate on anything outstanding at the end of the interest free period is 29.49%. And, like the pokies, they have a fair idea they will get a good percentage of mugs.
I think Aussie is in a lot of strife and we are just starting to see the effects. Ignoring the Aussie dollar comparison with the USD, I feel a recession coming on.
That 20% is another frightening statistic - and an indictment of how the education system is turning out people who cannot work out that 100% of your income is the max you can spend
My home loan in 1971 was a nightmare. Reams of paper, only a certain max % of income, only a % of the wife's allowed in case she fell pregnant, and I had to borrow a thou OTQ from a mate to bridge the gap. But, I paid the lot in 5 years. When I then purchased the rental property, still a tough bank approach but easier because I had collateral. But, I wasn't getting the $ without proof of ability to repay.
Then along came the US gurus to teach our bankers that their job was not to jealously guard the bank's money - but to get it out there working. And, the pendulum swung too far to the other extreme. Now they dish it out without qualms, particularly credit cars with their higher rates.
If you look at Harvey Norman and their "interest free" purchase scheme - the rate on anything outstanding at the end of the interest free period is 29.49%. And, like the pokies, they have a fair idea they will get a good percentage of mugs.
I think Aussie is in a lot of strife and we are just starting to see the effects. Ignoring the Aussie dollar comparison with the USD, I feel a recession coming on.
Join Date: Aug 2006
Location: All over the place
Posts: 302
Likes: 0
Received 0 Likes
on
0 Posts
Miraz, I was going to hit you up for onwards borrowing my copyright here ( http://www.pprune.org/jet-blast/3130...big-busts.html ) from February but I see you have sourced them differently.
Anyway here is a corker on Aussie banks. James Michael it indeed was Americans that taught us how to run banks properly...
Big banks ignored sub-prime troubles | The Australian
Anyway here is a corker on Aussie banks. James Michael it indeed was Americans that taught us how to run banks properly...
Big banks ignored sub-prime troubles | The Australian
I recently purchased a property in Asia, and despite being on a good income, reasonable length of time in my job and a good credit history, I was unable to secure 90% finance. 85% was the maximum I could get, a deposit of less than 20% is regarded as risky and these loans carry a higher interest rate and are hard to get.
No borrowing 105% of the property value here. However local banks are solid and actually getting increased deposits in these uncertain times. No government bail outs necessary due to the strict regulations.
Seems that the sort of people who can save up a 20% deposit and therefore have a large vested interest in the property, are the sort of people who keep up with the repayments. Unlike those who got more than the place was worth and simply turn over the keys in difficult times, leaving the bank to bear the loss and smiling because it was cheaper than renting.
No borrowing 105% of the property value here. However local banks are solid and actually getting increased deposits in these uncertain times. No government bail outs necessary due to the strict regulations.
Seems that the sort of people who can save up a 20% deposit and therefore have a large vested interest in the property, are the sort of people who keep up with the repayments. Unlike those who got more than the place was worth and simply turn over the keys in difficult times, leaving the bank to bear the loss and smiling because it was cheaper than renting.
Join Date: May 2007
Location: Sydney
Posts: 394
Likes: 0
Received 0 Likes
on
0 Posts
from the age today:
Property clearances on the weekend down 50% in metro Melbourne. It may not end up as bad as US, just depends on if there is a break in the domino line up.
btw, those relying on super and within 5-10 years of retirement...not good.
sc
Property clearances on the weekend down 50% in metro Melbourne. It may not end up as bad as US, just depends on if there is a break in the domino line up.
btw, those relying on super and within 5-10 years of retirement...not good.
sc
20% of new cars sold were sub prime loans which are now also defaulting
It is my understanding, that while rising, the loan defaults here are still low.
Guest
Posts: n/a
btw, those relying on super and within 5-10 years of retirement...not good.
Join Date: Apr 2008
Location: Oz
Age: 77
Posts: 590
Likes: 0
Received 0 Likes
on
0 Posts
Maxter
I did not see the 20% but I did note either Jeremy Clakson or John Connell in the Oztralian talking of GM and Ford being about 10 months from belly up and Chrysler probably also there but due to private structure not being calculable.
Loan defaults here are still low and rising, as you note, but the trend is worrying and how many have extended their home loans to purchase cars, boats etc. If only people understodd the basic rule of 78.
PB
However, then you have to buy back in and time it. I went conservative and only dropped 7% last year - I treat that as within stock market tolerances.
One problem discussing these matters on here is that most pilots (a) have to use their scone and have a basic grasp of maths (although sometimes with 1:60 I wonder about next gen) and (b) have had to save money for their licence and subsequent flying. Not being complacent about this group but I suspect there are many out there far less numerical and logical in purchasing than are we
I did not see the 20% but I did note either Jeremy Clakson or John Connell in the Oztralian talking of GM and Ford being about 10 months from belly up and Chrysler probably also there but due to private structure not being calculable.
Loan defaults here are still low and rising, as you note, but the trend is worrying and how many have extended their home loans to purchase cars, boats etc. If only people understodd the basic rule of 78.
PB
However, then you have to buy back in and time it. I went conservative and only dropped 7% last year - I treat that as within stock market tolerances.
One problem discussing these matters on here is that most pilots (a) have to use their scone and have a basic grasp of maths (although sometimes with 1:60 I wonder about next gen) and (b) have had to save money for their licence and subsequent flying. Not being complacent about this group but I suspect there are many out there far less numerical and logical in purchasing than are we
C.C.
Sorry I misread your reference to U.S. car loan defaults. I thought you were saying it was here in Aus. I have seen these reports re the U.S. and I guess that would apply to most loans there.
I am certain we do not have anything like this level of default yet. Unemployment at 6-8% will change that, if we get there. It is my belief it is too low now for the productive good of the country. My businesses employ something in excess of 250 people and finding good new staff for any growth is a nightmare. The bottom end that are floating around now are unemployable.
It will be interesting when the first of the 3yr interest free deals for plasma's etc become due. I would predict a very high level of default.
Sorry I misread your reference to U.S. car loan defaults. I thought you were saying it was here in Aus. I have seen these reports re the U.S. and I guess that would apply to most loans there.
I am certain we do not have anything like this level of default yet. Unemployment at 6-8% will change that, if we get there. It is my belief it is too low now for the productive good of the country. My businesses employ something in excess of 250 people and finding good new staff for any growth is a nightmare. The bottom end that are floating around now are unemployable.
It will be interesting when the first of the 3yr interest free deals for plasma's etc become due. I would predict a very high level of default.
Guest
Posts: n/a
However, then you have to buy back in and time it.
Obviously, this presupposes that you've reached your financial goals by the time you reach retirement and can "afford" not to take risks that could jeapordise your lifestyle..