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I really should do my research. Our Dollar tanked on July 15th, 2008.
What happened on or around that day? Oil peaked Aluminium started to slide Copper peaked KRudd gave his speech on Carbon Pollution Elimination and the announcment of the green paper. AND the winner is....FAR EAST STEEL PRICES Peaked at over $900tonne in July and now heading south of $335tonne All commodities heading south and we are just sliding with it. This is all linked to a very global retraction that is bought about by corporate greed in the land of the free. So, in a fashion, it is linked to the sub prime meltdown in the US but not because of our own domestic housing market. Housing is fast becoming a victim and as pointed out about that Government forced savings policies?....by the way here is another $24000AU for a new house. BUT wait theres more! My kids just gave me a windfall $8500 to spend for christmas..NOT BLOODY LIKELY! Half of the surplus just disappeared in a pen stroke. This government is trying to remedy the symptoms and doing nothing about the cause. This time last year, we were all collectively berated for causing inflation to increase by spending so much on ourselves over christmas????(What with?)..I wonder what this lever does? |
Show me an oversupply in available housing and I'll show you a housing price bubble Do you think it will cause the prices to spike and then make the housing bubble worse? The housing market is already starting to look pretty sick, the trigger for the crash is likely to be substantial rounds of job losses that force families to sell properties that they no longer have the ability to finance. Have you been to a property auction recently? I recommend it, you'll see more waving hands from a crowd of people modelling strait jackets. One way to look at it is that the rental return represents the amount that someone will pay to live in the house, and the difference between that the cost of ownership (mortgage + return on invested capital) is purely speculative. As the perception of future gains diminish then the speculative spread will shrink as rents rise, and prices drop. |
Personally I was a bit stunned that Krudd could be offering inducements to first home buyers by doubling and tripling the first home buyers grants in this market. Can he really be so stupid as to think this is a good idea when the bubble is set to burst...must burst in fact?
Does he really think 100,000 or 200,000 more sub-prime loans is the answer? The extra money to old age pensioners/carers is good but does he think a one off payment is enough? Are all old age pensioners now expected to fall off their collective perches just as that money runs out? If he announced a massive increase in infrastructure spending I would have applauded, as long as it was sensible - like more dams/water infrastructure etc, not greeny BS like windfarms. That sort of thing creates jobs and has been sadly lacking in all state and federal govts for a couple of decades. He has essentially wasted 1/2 the surplus bequeathed him by the previous federal govt...I even saw a piece, allegedly, written by him in the print media yesterday claiming HIS govt was responsible for the budget surplus ...like we haven't seen previous federal labor govts do that before:ugh: THE world is experiencing its worst economic crisis since the Great Depression. Share markets throughout the world have fallen dramatically and many developed countries are facing the possibility of a recession - this will mean a contraction in economic growth and rising unemployment. The US, Britain and other nations' governments have been forced to bail out some of their largest banks and have moved to guarantee bank deposits to shore up confidence. Australia is not immune from this global crisis. It will affect our financial sector and our economy. Banks are facing higher borrowing costs as foreign banks become less willing to lend, share prices have fallen significantly and slower world economic growth means less demand for our exports and lower tax revenues. What has gone wrong? It boils down to a couple of core facts. Roll the clock back to the US recession of 2001, to what was then described as the "tech-wreck", and to what happened when the US Federal Reserve responded. Capital became very cheap, money became very cheap and, as a result, risk and the perception of risk was reduced. You had excessively cheap finance, resulting in excessive risk in US mortgage markets. At the same time, new financial products came on to the market, financial products that the regulators had not properly thought through. On the one hand, you had excessive risk in the mortgage market, but on the other hand, underpinning those mortgages was the securitisation of them by financial institutions using financial instruments that neither they, nor the US regulators, properly understood. The amount of bad mortgages was a problem. But the much bigger problem was the fact that these sub-prime loans were hidden from the financial regulators. Knowing how much people owed is one thing. Not knowing how much US financial institutions were exposed to that, well, that is something else. And that has created the two core elements of the problem we face. So much for what went wrong. What are we doing about it? I strongly believe in levelling with the Australian people on the gravity of this crisis - it is the economic equivalent of a rolling national security crisis. But in the gloom we also have a silver lining for Australia - out of all of the developed countries caught up in this crisis, we are probably the best placed of any country to ride it out. If you've got money in the bank, if you own shares, if you own property, if you've got a job, or if you're looking for one, then Australia is probably the safest place in the developed world you could be. This is because the Australian economy and our financial system are in very good working order. Our banks are among the best regulated, safest and strongest in the world. On Sunday I announced a guarantee on all cash deposits, whether from a business or an individual, along with guarantees on term funding - the loans banks make between themselves. My Government has also built up a $22 billion surplus as a buffer against tough economic times. (Gee, I remember it slightly differently) Those times are now here. We thought ahead of a future when the rainy day would come, and it has arrived, meaning the Budget surplus can now be used responsibly to strengthen the economy. The recent cuts of 1.25 percentage points in interest rates, along with any further cuts the Reserve Bank might make, mean that families paying off a mortgage have some breathing space after 10 straight rises under the Coalition. (that would be the interest rate rises the economy needed to rein in an economy out of control?) This takes a bit of pressure off the weekly household budgets, which will also help keep the economy ticking over. Back at the time of the Budget in May many commentators and critics told us to abandon the tax cuts we promised before the election - we rejected that approach, and those tax cuts are now also helping to strengthen the economy. And the source of much of Australia's ongoing economic prosperity has been the China-led resources boom. (which will come to a grinding halt when the US stops buying the crap China produces) The Chinese economy is still expected to grow strongly over the next couple of years. (You hope - but not very likely) That will help to bolster demand for our exports and underpin ongoing economic growth here in Australia. We have already acted decisively to protect Australia from the worst of this global crisis but there are many international factors that are out of our control. (Nope, they are all out of your control) That is simply a cold, hard fact. Nonetheless, we will continue to focus on the things we can control and use every economic tool at our disposal to protect working families, pensioners, carers, small businesses and everyday Australians from the damage that will be a consequence of this crisis. Kevin Rudd is Prime Minister of Australia |
Anyone smell fear?
Rates tipped to fall to historic lows Thursday October 16, 2008, 4:07 pm Australian interest rates are tipped to fall to the lowest level since the aftermath of the September 2001 terror attacks as the central bank worries about a recession. One Sydney academic is even forecasting an unprecedented zero interest rate by 2010 on the premise that debt-laden consumers will close their wallets and threaten to push the economy into a deep economic contraction. Macquarie Group interest rate strategist Rory Robertson said the Reserve Bank of Australia (RBA) would cut the cash rate, now at six per cent, to 4.25 per cent over the next year as global financial market turmoil put the economy under pressure. That would be equal to where the cash rate was in December 2001 in the aftermath of the September 11 terrorist attacks in the US. Interest rates have not fallen below that level since the RBA began publishing a target interest rate in January 1990. Debt futures markets are expecting two bigger than usual interest rate cuts by Christmas. They expect the RBA to cut interest rates by 75 basis points in November and follow up with another three-quarter of a percentage point move in December. Another big rate cut next month, following on from October's one percentage point move, would be the most generous series of official interest rate relief since 1992, in the aftermath of the last recession. Such cuts would take the cash rate to 5.25 per cent in November and 4.5 per cent by Christmas, a level not seen since mid 2002. "As the financial conditions continue to deteriorate, the Reserve Bank is becoming increasingly worried about the outlook for growth," Mr Robertson said. "So the Reserve Bank is cutting aggressively to limit the risk of recession in Australia." University of Western Sydney associate professor of economics and finance Steve Keen is radically bullish on interest rates, predicting a two per cent cash rate by the end of 2009, dropping to zero per cent in 2010. Dr Keen said the RBA would become more concerned about high household debt levels than inflation, as deep rate cuts in 2009 failed to stimulate the economy. "The debt bubble is bursting and when it bursts, people stop spending and borrowing," he said. "They (the RBA) can cut the pain but they can't boost the economy." Earlier this month, the RBA cut interest rates by 100 basis points for the first time since May 1992. The RBA cut rates by one percentage point on five occasions during 1991 and 1992. Dr Keen said another series of deep rate cuts were needed now because household debt levels made up a much bigger portion of gross domestic product (GDP) than in the early 1990s. He said central bank policymakers before the 1930s Depression focused on consumer price inflation and ignored asset prices, and have repeated that mistake more recently. "Reserve banks everywhere go it wrong, not just ours," he said. "They focused on the wrong problem which was inflation." Macquarie's Mr Robertson said the RBA was more concerned about reversing the 12 rate rises from 2002 to March this year and would deliver bigger than usual rate cuts before Christmas to reduce home mortgage and business borrowing rates. Source:By Stephen Johnson, AAP |
C.C. Your beloved Liberal party did not back this package? Funny that is not what I saw 'Your Dear Beloved Leader' Malcom say.
Of course the Liberals are the font of all wisdom and virtue.:mad: I really wonder where the closed minded Right-Wing get off sometimes. I don't particularly like Labor and would vote 3-4 to 1 conservative, but at least I will open my mind a little beyond the Rabid ranting of those who just want a Right-Wing dictatorship for life. Thank god we still have a democracy and for that I am pleased. We should be able to change parties in power without the losers chucking all their toys out of bed. Don't like it just stay away as you have already chosen.:mad: Maybe Pinochet in Chile would be more your style. Bondy and a few Aussies took to him many years ago. |
Why did I say to deserve that little rant?
If you read what I have actually written instead of what you think I've written you might just glean the fact that I hold the greatest disdain for ALL politicians of whatever bent...I simply hold MORE disdain for the left. I have stated above that we are in this bubble because of policy settings put in place by the liberals but that doesn't make Krudds claims of fiscal enlightenment any more factual. He was handed the budget surplus last November by the liberals. You remember them, they were in power for the preceding 10 years. If he was half as smart as he wants people like you to believe he would be leaving interest rates where they were recognising that the long term economic reality beats the short term pain inflicted on people who have been stupid. Instead he comes up with a plan to entice more people into real estate? The economy WILL contract, the housing bubble WILL burst and people WILL lose their houses. Whether this is a relatively short term (say two years) recession or something more akin to that the Japanese experienced through the 90s and until recently depends on what the govt does now. The Japanese interest rates went to zero and that didn't stop an 80% crash in real estate...why will it now? So far they, and the US/UK/EU govts are repeating the policy mistakes of 1930. If the Liberals were still in power and behaving the same way I would be equally as scathing of them...as it stands they must be breathing a HUGE sigh of relief that they lost last November...Costello especially...why do YOU think the little !!!! is so adamant that he is leaving politics? |
Chimbu Talks......
You are talking in absolutes.
In economics/finance there is no such thing. Demand outstrips supply in accommodation in pockets all over Australia..that is why rents are high....in pockets There has has been little increase in the housing supply particulalry in NSW for a number of years. House prices are generally stagnant or in decline over most of the country. There are however pockets of real estate that will alwys command prices above the norm/average The bubble as you call it will burst if demand declines markedly and the provision of credit declines with it. People still need somewhere to live....whether they rent or buy. Most peoples wealth lies in their home.Their levels of consumption are tied to that presumption Bone up on the multiplier effect and its relation to inventory levels. Aviation in this country and around the world is about to get hammered as discretionary spending is curtailed |
Most peoples wealth lies in their home.Their levels of consumption are tied to that presumption Many people have bought investment properties (I was until 2004) which is mostly what drove the property boom in SE Qld...people buying investment properties and retirement homes with the increased equity in their primary residences in Sydney and Melbourne. Not to mention their severely skewed idea of values. !!!! a waterfront house for 400k/500/600k? Cheap!!! it would be 2 million in Sydney!!!! I have lost count of the number of people I have met who 'own' 20 houses on a fairly minimal wage...a 20 something J* Flight Attendant as just one example. The adds for these types of schemes are STILL running in Australia. 'Buy an investment property for as little as $50/mth using the equity in your home' When the bubble bursts, as every bubble has in history, the vast majority of those investment properties will become sub-prime and the banks will be phoning those people demanding they increase their liquidity. They will struggle to sell them for anything like what they 'think' they are worth in this market. I didn't learn all this because I am smarter than others I learned the hard way. 5 years ago I was 1.1 million in debt on about 1.8 million in real estate and earning 185k/annum net. I lost my job and spent a year unemployed and was forced to liquidate before my 'wealth manager' at the bank did it for me. I was very lucky in that I had bought these properties at the beginning of the east coast boom and sold at what I thought was the top in 2004. Properties I purchased went up between 50% and 300% in 2-4 years and I knew then it was a bubble. Imagine my surprise to see property double again since 2004. This is unsustainable lunacy and all the policies we are seeing from our elected and unelected officials are hell bent on sustaining it. I have been too frightened to get back into real estate in the last few years because I could see the bubble bursting - I did NOT see the debacle we have unfolding in the US but had it not been that it would have been something else. You can't eat bricks and mortar and you can't sell off bits of your house, unlike shares, to buy 'stuff' with. Unlike a company or commodity (before the last month anyway) it is very difficult to get a true indication on what real estate is worth because the volumes are so small compared to the millions of shares that are traded every day on the stock exchanges. A house is only worth what someone else will pay for it and at the moment foreclosure auctions (those that sell at all) are seeing 50% of what that house was thought to be worth by the owners a short time before. This is happening Australia wide in every major city. Unlike Americans who 'invest' in the stock market (predominately) Australians predominately 'invest' in real estate. That is why our real estate is so much less affordable than US real estate...average house 7 times average wages rather than 3. Each of the prime properties I bought (3 waterfronts, 1 an apartment at Gold Coast, a house on a canal at Carrara and a great house on 1.5 acres on the bend of a river in Berrima NSW) I payed less than 3 times my wage. In no time flat they became 'worth' 6-7 times. They were consuming about 40% of my wages. Easy...until you don't have a wage anymore. In case you hadn't noticed unemployment is rising. A great deal of real estate in Australia is highly leveraged the same way stocks etc were in the US. If you want to ignore reality then fine...but reality will never ignore you. |
Many people have bought investment properties (I was until 2004) which is exactly what drove the property boom in SE Qld...people buying investment properties and retirement homes with the increased equity in their primary residences in Sydney and Melbourne. I guess this was because of the increase in property values, and subsequent low rental yields forcing investors out. Is this not the market correcting itself? Assuming the doomsday scenario of the banks calling in their dosh, where are these tenants going to live? Your not suggesting they will all become owners at the new low prices? A house is only worth what someone else will pay for it and at the moment foreclosure auctions are seeing 50% of what that house was thought to be worth a short time before. This is happening Australia wide in parts of every major city. Unlike Americans who 'invest' in the stock market (predominately) Australians predominately 'invest' in real estate. That is why our real estate is so much less affordable than US real estate...average house 7 times average wages rather than 3+. I'm more worried about our leaders finding something for us to do other than dig stuff out of the ground. But then again, we want more than $50 a week in pay, don't we! |
80% falls happened in Japan in the 90s...I fervently hope they won't happen in Australia for the sake of a few friends of mine. I merely seek to draw comparisons of what our elected leaders are doing right now to what other people's elected leaders did in similar circumstances in the recent and not so recent past.
The sub-prime 'problem' was approximately 3 million mortgages in default. A meaningless drop in the bucket of the US real estate market. Few if any were investment properties rather they were homes sold to people who couldn't afford the repayments. The disaster was caused by what the 'market' did. Massively leveraging and collateralising mortgages and selling them as AAA rated bonds and other derivatives. You don't seriously expect me to tell you when you should upgrade your house do you? Highest bid 150k short of the mark tell you something about what your house might be worth? I will give you a hint...if that bank had reached a figure that got THEM off the hook (not the people who lost it) they would not have passed that house in. |
You don't seriously expect me to tell you when you should upgrade your house do you? Highest bid 150k short of the mark tell you something about what your house might be worth? I'm going to bed now! |
Chimbu Hysterical Rant
You make assertions but provide little understanding of economics or understanding of the australian circumstance.
There will be no bursting of any bubble,but rather a gradual deflation. ..unemployment fluctuates over time within a small band particulalry when an economy is where the Oz Economy is. In reality an economy that has 4.% unemployment is considred to be in full employment. Fear drives an economy and the stockmarket down. The Australian economy is sound. There will be no major collapse here. |
I don't do hysterical:hmm:
Without a mining boom Australia is in deep trouble. We don't produce much of anything else, some cows and wool, the rest of the economy is based on people spending money which they have been, until recently, at an unsustainable rate. The whole world is linked inextricably these days. With the US and EU/UK in trouble that is China and Japans biggest export markets teetering. That puts Australia in a VERY precarious situation. Everywhere else in the western world is madly trying to save banks from collapsing left and right and seeing house prices drop dramatically and foreclosures climbing. Dropping interest rates and flooding the market with liquidity has never worked for very long before why will it work this time? In 1929 the stock market fell about 35% in a very short period and for all the same reasons as now and the US govt did all the things they, and our, govt are doing now. There followed a 50+% rally and then in 1930 the markets dropped by over 80%...and pretty much stayed there until WW2. The Australian stock market has dropped by 35% odd in the last 10 mths or so. The US/EU/UK markets fell more. The Australian Govt is dropping interest rates and flooding the market with cheap money. The US/EU/UK govts more so. The housing market is drying up. Car manufacturers are laying off 1000s of staff and may very well cease to exist in Australia...the parent companies in the states are in HUGE trouble and in no position, or mood, to help. Toyota is about the only car company having a good year, so far at least. My Brother in Law is in marine electronics - the arse has dropped out of that in the last months...ditto boat sales. I have no doubt the same applies across the board with white goods, TVs etc, most purchased on zero down and zero interest for two years - then about 25% interest. Oil is down over 50% (did you know Australia is an oil exporter? - we export our very high quality oil and import !!!! oil to refine) and, as Ozbusdriver pointed out above, steel is down around 60% in the last few months. With demand for steel dropping the demand for coking coal will also be down because that is used to make steel. Coal is our biggest export. Hopefully the Chinese will keep buying it for their power stations but they do have plenty of their own. With the world reeling under the worst financial crisis in 70 years what do you think will happen in due course with inbound international tourism? If Australians aren't buying cars, houses, boats, depth sounders, GPSs and TVs and are worried about the future are they still going on holidays domestically let alone internationally? 4% unemployment? That would be the doctored figure that doesn't show people in part time employment whether they like it or not. It can hit 10% in the blink of an eye and that figure will STILL be a politically doctored figure. Much like the CPI is doctored by close to 50% by stripping out food, transport and housing but includes flat screen TVs that have actually been getting cheaper:rolleyes: About the only really good thing happening is the currency is tanking...really bad for importers but great for exporters..and expats:ok: Rudd has just blown 1/2 the budget surplus trying to get people to go into more debt. Even the 30% of people who own their houses outright will be significantly effected because they are, for the most part, older Boomers relying on the increased equity in their homes to fund their retirement. Don't believe the BS about boomers all being wealthy. Those that retired a decade ago have pretty good defined benefit super schemes but for those retiring now, and in the next decade its mostly wrapped up in their homes and therefore illusory wealth. Can you really not join the dots? Take a look at those graphs at the bottom of page two again and tell me how this ends in gradual deflation...I am a glass half full kinda guy and I cant see it. |
Kaboom
You have been reading political propaganda and the Herald Sun again. In reality an economy that has 4.% unemployment is considred to be in full employment. What we do have is the statistical machine juggled over the past two decades (non-homogenous data if you are purist) so that the unemployed statistic is artificially reduced by altering the ability to register. Fact. Ably assisted by the increase in casual and part-time and contract term jobs at the expense of long term full time employment. (how do you plan your house repayment strategy on a 1 year contract?) Then you have a massive and increasing pool of "unemployed" - the retirees, many paying no tax to drive the Government juggernaut. And in the mature agers particularly 40+ retrenched or reduced without payout you have a substantial group desperate for work that cannot get it - nor register for unemployment in many cases. Chimbu is not being at all hysterical - rather, a realist. We get the Government we deserve and the great Oz public is quite happy to live in a fools paradise under either party. I don't think our economy is sound - it's based on selling holes in the ground at ridiculous cheap pricing and with a limited lifespan - for me, the AUD does not have a very bright future. |
Kotoyebe, you a realo by any chance? :}
Rents have skyrocketed in the last 12 months There's no doubt that housing is in short supply, and here's a novel idea: Why wouldn't the government increase supply by releasing land quicker and reducing red tape to enable faster and more profitable development? But I guess PR stunts like the one we just saw just plays better with the voting public in the short term :ugh: Let's see how the voters thinks at the next general election when they're sitting on negative equity :ugh::ugh: |
Anyone else seen the fees councils charge a developer to develop a block of land?
70-100k:mad: And it goes straight on to the price you pay...for doing precisely nothing. Much like stamp duty...anyone been able to work out why the stamp duty should be more for a 500k mortgage than a 200k one? I mean theoretically they are just stamping a bit of paper.:ugh: And for the love of god will someone shoot that stupid bitch Penny Wong...see her quoted in London in yesterdays media? ETS and saving the planet is a 'personal and moral' crusade that will go ahead in 2010 despite the meltdown. Wanna bet?:= |
I don't know what the real unemployment figure is in actual percentage but up to date it is definitely 'full employment'. It is basically only the dregs left. I operate in 4 states in Aus and in each one the cry form businesses that I see is there is no-one left who wants a job.
That will change no, there is nothing more certain that there will be many good people lose their jobs before this mess is over. Not to certain that food is excluded from CPI. I remember a couple of years ago, after the cyclone in N.Q., the worlds best treasurer blaming bananas for the rise in cpi. I would agree however that CPI does not reflect what I see as real inflation. Reported figure is way to low. |
Hi CC, people only listen and act on what fits into their own perceived reality. You see it here all the time and you are seeing it throughout the world at the moment. Some still need to believe this isn't really happening.
For me, keep it coming. It has been an interesting read to see a different take on all this. I can remember talking to a guy here in HK about 18 months ago. He was involved in setting up China's pension funds and later joined Goldman Sachs. After a few bottles of red he started talking about NINJA loans and what was being sold in the markets based on these kind of schemes. He was buckling down the hatches back then! We have been hammered by exchange rates for the last few years, but as you say there may be a window of opportunity opening up for those of us overseas. Unfortunately someones loss usually ends up being someone elses gain and there looks like a tough time for Australia ahead. If the pollies are looking to China to pull them through this then they are in for a surprise. |
I can remember a certain 'group' back in the late 80's (WW111) within the aviation sector that where advised by their 'minders' to get their affairs in order, meaning to battern down the hatches to weather the oncoming 'storm'. Wise words considering the ugly outcome of the day. Maybe we ought to be doing the same here. We have all been living the high life for yonks, time to take stock of what it has 'cost' us to do so.
FG |
What exactly is the high life. Do you mean expensive cars, plasma TV, ect ect.
So what do we do, sell everything. Buy a !!!!box, live on bake beans. I'm proud to say I have worked long and hard for my toys, and paid cash as well. please don't take my toys away.:= |
thinking_pilot, if you've paid cash for your toys, no-one can take them away, unless you decide yourself that you want to get rid of some (e.g. to get a better toy :E).
The problem is with people who don't think twice to defer debt by buying everything "interest free", loading up their credit card, and generally living beyond their means, thinking the equity in their houses is safe and will get them out of trouble at that point in the future when they'll possibly have to own up to their shopping sprees. They're so wrong it hurts! :ugh::ugh::ugh: Trouble is, it'll hurt the prudent guys too once the idiots are dispossessed en masse, as the stupid hordes will drag the whole economy down.. :{ In today's Australian, there's a piece about rental increases, which shows pretty much no increase in almost all places save Darwin (Perth rents are even going down!). So if a realo or such like serves you BS about ever increasing rents to waffle you into buying property, tell them to f:mad:k off! |
I just put the rent up 25% on commercial holdings in BNE & 20% on a residential holding in MEL.
Prices are going down? But yields are up. Cashflow is what's really important in these times. Actually, with low debt I have really come to appreciate this most basic of concepts. Interestingly, how many properties do the property detractors own on this thread? Seriously. How many? I often find positions of extreme negativity loaded with ulterior motive. No denying short term downward pressures on property. Beyond that? I am after some more international property in the next 12 months and a Sydney apartment in need of a reno. Subject to an availability of bank funds. |
Gnadenburg, I have owned property in London and have profited handsomely from it. I would never buy property here now unless I had money to burn.
Yields may go up when prices go down, but owning property only makes sense if it is set to rise in capital value within the period you're planning to own it for, at least on par with other forms of investment, or unless the risk of falling values is more than weighed up by the advantages of negative gearing.. For the latter to work you'd have to be pretty wealthy already.. Given it could take decades for values to recover after a practically unavoidable crash, I would seriously doubt it would make sense for 95% of the population at the moment to buy into the Aussie property market.. |
Chimbu..Chicken Little
You dont do hysterical...you are giving a good impression of someone who is.
There will be some industries...luxury producing industries...that will suffer as discretionary expenditure is re evalauated. I have a B.Comm LL.B from UNSW which provides a reasonable understanding of what is going on...I liquidated every stock I had in July last year...not being smug or clever...but it was obvious that things were getting ridiculous. Things are serious...sure...but there are opportuniites now that havent been avaialble for awhile. Go down to the local mall..... is it empty?. Are people living in cardboard boxes outside your house? The interest rate hikes over the last 5 years made people re evaluate their debt levels...most did. This puts most people in reasonable shape to ride this situation out. Your arguments are repetitive and circular. The Sub prime mortgage situation in the US was bought about by home buyers being sold mortgage products that had nasty kickers.Introductory rates of 3% that balloned to 12 and 13 % after 5 years.Defaults on these mortgages were inevitable. Hedge funds got in on the cheap money and were paying inflated prices for just about everything. Fair value was destroyed and the gambling mentality took over. The good times were never going to end...well they have...for awhile. The Americans took their eye off their financial instituitons and let them run riot. Not so in Australia...our exposure to sub prime was/is comparatively small. None of our banks needs to be bailed out.Liquidity is a little tight.Thats not a bad thing. The banks are solid...the real estate market is solid.The dole Qs havent lenghtened...nor will they lenghten appreciably over the next 12 months.There will however be a reallocation of labour. Rudd is doing the right thing. Spending is what ended the Great depression. Give people a reason to spend.. Its the oil of economic machinery. Consumers stop consuming ...game over. Fair value is about to return to just about everything. Go out and start bargain hunting. Dont buy what you want...buy what you NEED. Stupidity is about to be replaced by common sense. The people who caused this problem now caused the problem in '87. In another 20 years time they will cause another problem...if we let them |
Yields may go up when prices go down, but owning property only makes sense if it is set to rise in capital value within the period you're planning to own it for, at least on par with other forms of investment, or unless the risk of falling values is more than weighed up by the advantages of negative gearing.. For the latter to work you'd have to be pretty wealthy already.. I though rents should be falling. As mentioned, I have hiked rents considerably in supposedly vulnerable areas- inner city commercial and residential holdings. Good property could very well increase in value if this financial strain is sorted and we don't will ourselves into recession. I am looking at Sydney apartments. I always wanted one. Water front, art deco. Rent it for a year than do a smart reno and run a depreciation schedule on the reno'. I reckon I will be happy with this strategy in 5 years. |
And for the love of god will someone shoot that stupid bitch Penny Wong...see her quoted in London in yesterdays media? ETS and saving the planet is a 'personal and moral' crusade that will go ahead in 2010 despite the meltdown. Make it a grenade and do it when Garrat is standing next to her! (He should have stuck to singing!) |
Ka.Boom = Krudd?
Odds on that KB is a Kruddophile.
As usual CC your posts make good reading - and combined with the likes of OZBD, FB and more present a pretty plausible picture of things past and possibly to come.:ok: |
I often go to pilots for financial advice. And then do the opposite to what they suggest.
Can anyone explain why my rents are increasing dramatically??? Housing shortage, historically low unemployment rate, almost silly levels of immigration; or some things just bullet proof- even in recession? |
Oo look...someone with a degree...last I looked people with degrees got us into this mess:ugh:
I'll grant you that FDR's New Deal helped end the Great Depression but so did WW2 (so you should credit Adolf and Hirohito too) for the yanks anyway. They didn't give away all that stuff that flew, rolled, floated and went BANG!!...and eventually everyone else...when we finished paying the yanks off...was it last year or the one before? What effect did Herbert Hoover's largesse have in 1929/30? Certainly it wasn't a 'soft landing'. Perhaps you could use your degree to explain to all what the effect is on a currency not backed up by anything, besides good will, when the printing presses get put into turbo boost? The Icelandic Govt has just guaranteed to rescue its failed banking system..at a cost of 500k/ Icelandic man, women and child. Could be some VERY good deals there on all manner of stuff...don't expect any capital gains for a few generations though...or 7. Swiss bank UBS has just been effectively nationalised and Credit Swiss just sold a chunk of itself to...wait for it...Qatar Soveriegn Wealth Fund..for 9.4 billion or thereabouts...but they said they didn't really need any help. One Australian bank has written off best part of 900 million $ in US exposure and reckons on recovering 55% of defaulting mortgages...in fact 50% is becoming a very common number in relation to real estate values. The western economies are in completely uncharted waters and you're calling a bottom. Gutsy Move Mav. Even the Oracle from Omaha isn't game for that...suggesting long and deep but it will recover eventually. Listened to him at length the other night...a REAL unreconstructed glass half full type. "It has never paid to write off the US economy since 1776 and it doesn't pay to do it in 2008" and "I only ever buy companies that are so GREAT that even an idiot could run them...because eventually one will...just like Govts" Chumbu chuckles. ATPL(lots), PHD GynA |
Stupidity is about to be replaced by common sense. You know when you claim you made something idiot proof, nature goes away and breeds a better class of idiot!:ugh: J:ok: |
And check this out............
'Top Model' judge's boyfriend on fraud charge So if you call the cops and claim it was fraud, you can't then be seen to be negligent. They say its fraud, I say its BANK STUPIDITY :=. W:mad:kers! J:ugh: |
Fewer Aussies keen on new credit: survey
I think a lot of people will be relieved they don't have to keep spending to keep up with the Jones or maybe discussion over BBQ s may now change from "how many and what investment properties" to "how much one is knocking off the mortgage" :hmm: |
Chimbu:Response and Clarification
I vote neither labour or liberal...both are inept
Most of those responsible for this mess ..those on Wall Street DONT have degrees..part of the problem. The Great Depression was ended by stimulus..... the development and production of war machines...it put people to work and paid them. They spent their wages and bought goods and services,which in turn increased demand and in so doing provided more jobs. Chimbu you are a pilot and a historian. As a non pilot I defer to your expertise in matters related to flying. Perhaps you could extend me the same courtesy without the thinly veiled insults. Just to reiterate....Rudd is doing the right thing. The sky will not fall. Opportunities abound for those who can see them. Think 10 years from now...not 10 days,not 10 months,but 10 years and you will prosper from investment decisions made now |
Degrees
Some do ..many didnt.
Like many in the Aviation industry. Look at Dixon...doesnt even have an MBA Lets Be clear...having a degree doesnt make you infallible. My grandfather referred to many university graduates as educated idiots. A degree should/can provide insight.... but not always. If you are 70 years old and have degree you completed in 1952 you are not really in the game irrespective of which campus you attended. Having an ATPL doesnt make you a fantastic pilot. It does provide some potential however. This is irrelevant. This thread is about a number of things. Primarily about cause,effect and a way forward. There is a way forward...particularly in Australia The decisions being made at a federal level are not being made by one man....he is the spokesperson Lots of heads better than yours mine and his are very active in determining a positive outcome for this country. Like it or not this is a work in progress...the situaton is volatile and decisions need to be made in response to the ever changing circumstances. If anyone in this forum feels that they are better informed and better equipped to resolve the situation then please, by all means, make your way to Canberra. Meanwhile let these guys do their job and stop being sideline sports mums. |
Ka.Boom,
Just one question. Do you suggest that housing prices of 7-9x a person's income is sustainable, and that we could possibly increase this? The globally recognised standard is 3x the average income. |
Clarify
A multiple of 7 to 9 of whose income?
Yours mine or Jamie Packers? The real estate market in each country is different. You can't compare the Australian market with that in Thailand or Japan. Different legislation different cutural mindset,different economic circumstances The Spanish prefer to rent and spend their money on lifestyle. Australians want their 1/4 acre block. Whose wrong...whose right? In the UK you dont buy a property you buy a lease on property in many cases. Some properties are freehold some are leasehold. The price reflects this |
Ka.boom, get real!
Ka.boom, you obviously have no idea what you're talking about.:ugh:
The relation average annual income to average house price is 3 to 3.5 in the rest of the developed world. This is consistent across all sort of different cultures, whether they are ownership focussed or not. 7.5 times annual income as we have it here at the moment, is clearly not sustainable for a number of reasons including affordability for first home buyers (basically if this continues, Joe Average would only be able to buy his first house at 40), long term growth (in a couple of decades with these growth rates, the average owner would not be able to pay off his mortgage during his working life), interest and a few other reasons. Your comment re. the Spanish is total BS, I have lived and worked in Spain, and they like ownership almost as much as the Anglo-Saxons. Incidentally, they are just suffering through a housing price crash at the moment because they had similarly unsustainable price hikes over the last five or so years! Re. the UK, I've lived there too, believe it or not, and I've owned property in London, and unless you buy a very short leasehold (i.e. 50 years or shorter), the difference in price to freehold is negligible. Most purchases are actually long leaseholds (mine was 999 years) because it makes it easier to administer the development, or in case of London, whole blocks are in the freehold of the crown or other aristocracy. I got offered the freehold of my flat for less than 5% of the purchase price after a few years when the developer wanted to get rid of it.. So before you spout bullsh!t here next time, get your facts straight and read a bit, it's all here on the net, mate := |
KB we agree on something...I have never voted in an election in my life.:ok:
In this case we are talking multiples average wage vs average house. When the rest of the western world is around 3 and we USED to be around 3 but now, or very recently, it was more like 7 we are talking an imbalance by any standard. We are not comparing Australia/UK/EU/US to Thailand. So we should all just shut up and keep our opinions to ourselves? Good..shut down all BBs...no more exchange of ideas allowed on the worldwide interner webby thingy...KB says so. I agree with your Grandpa but am prepared to admit you might be the exception so on that basis please accept my humble apology. No one seems the least interested in my PHD in amateur gynecology...I'd thought just a LITTLE nibble:E |
Hysteria
There does appear to be no lack of doomsayers in the market today. Personally, you do have to wonder if things are really that bad. I took a quick look at some numbers (and I know the statisticians are now salivating) today in the Perth market. REIWA website - Perth median prices. (say what you want about their validity)
In 1999, the median house price was $150K and no boom was happening. Historically, property does about 10-11% per annum (8% in real terms) - hence the real estate agents 'doubles every 7' catch cry. So in 2006 the median house price should have been around $300K but it was more like $400K, quite an overshoot. (33% too high) The median price 'should' be $368K this year, in Sep quarter it was $426 however, and it looks like the the peak is definitely tracking back closer to the norm. In fact by 2010, according to the long term average, the median price should be close to $450K. (triple 150K) So to me it appears a natural historical level rate of return is emerging, and I take that to mean that there will be little to no growth in the market for two years. The fact that people are predicting 30% drops, particularly Perth, suggests the median should be around $330 (based on the 2007 peak) but historical data doesn't bear that out. Granted there may be an overswing correction, but the lowering of interest rates should mean homeowners have less reason to sell. The great thing about stats is you can make them say whatever you want, but sometimes they're needed to counter some pretty emotional commentary. Australia is 5 mins away from a market of 2 billion people on the Asian sub-continent who all want a better lifestyle. Even with the doom and gloom being shoved down our throats (no shortage of experts on how bad things are) I have difficulty believing we are headed anywhere near a depression if we are smart and confident in our economy. But the pundits have us scared out of our wits and will will us into one. |
Yep, media has a lot to answer for but once they get what they wish for they point the finger (who else is gonna?) everywhere else.
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