Australia housing bubble

[roKWiz]

Bit more pain heading towards mortgagee's with an estimated 18% rise in electricity prices for NSW. Vic 5%. Ouch.

[zipping]

Originally Posted by Trump

The root cause of the housing affordability problem (and the rest of the economic woes) isn't negative gearing or capital gains related, nor is it about supply and demand. It exists along with the other economic maladies because the banks control the currency and not the treasury. Because as it stands, for every dollar in the form of cash, there are ten more that are credit-derived (any form of bank-sourced credit).

Sound money issued by the treasury and only the treasury (whether it be in the form of physical notes and coins, their electronic equivalent, gold and silver or a combination of all three) wouldn't allow the banks to issue credit hand over fist and fuel a speculators paradise.

Can you expand on this. I get what you mean in regards to 10 more credit dollars for every dollar but isn't currency controlled by world markets as the free flow of capital is highly transferable. How does currency relate to property prices not seeing the link.

[Trump]

Originally Posted by zipping

Can you expand on this. I get what you mean in regards to 10 more credit dollars for every dollar but isn't currency controlled by world markets as the free flow of capital is highly transferable. How does currency relate to property prices not seeing the link.

It isn't about currency and forex transactions. Readily available, cheap (on the surface) bank issued credit is what has made it possible for house prices to rise exponentially. It has made it possible for anyone to buy into the market, regardless of their ability to afford the repayments now and into the future.

If the local currency was only issued by the treasury, it wouldn't be possible for irresponsible lending to occur and it would severely curtail speculative "investing" simply because the money wouldn't be there for it.

[zipping]

Originally Posted by Trump

It isn't about currency and forex transactions. Readily available, cheap (on the surface) bank issued credit is what has made it possible for house prices to rise exponentially. It has made it possible for anyone to buy into the market, regardless of their ability to afford the repayments now and into the future.

If the local currency was only issued by the treasury, it wouldn't be possible for irresponsible lending to occur and it would severely curtail speculative "investing" simply because the money wouldn't be there for it.

If that's the case why isn't the US going through a housing boom? After all they have been at zero interest rates for a long period and actively pushing as much credit as they can into their economy (to prop it up).

I do agree credit seems too readily available but banks are really engaged in a form of leveraging the same as they always have. I'm not sure that the leverage formula they use has changed in recent times are they not limited by RBA in terms of their exposure to available cash?

[Raptor]

Originally Posted by zipping

If that's the case why isn't the US going through a housing boom? After all they have been at zero interest rates for a long period and actively pushing as much credit as they can into their economy (to prop it up). ...

Isn't the US system different? Default (unable to pay) the mortgage and you simply hand in the keys to the bank and walk away, then the bank wears the consequences of reselling to clear the debt. In strayla the buck stops with the purchaser, not the bank, so no one ever defaults unless it's absolutely impossible. Also the reason no one ever wants to see the market drop, as they may have to sell and realise a loss.

How's the Aussie bank profits and share prices been these past few decades

It's a RORT.




.

[Trump]

Originally Posted by zipping

If that's the case why isn't the US going through a housing boom? After all they have been at zero interest rates for a long period and actively pushing as much credit as they can into their economy (to prop it up).

This is because the US is buried up to its eyeballs in debt (at the personal, governmental and corporate levels).

- the US government has a declared debt of almost $20 trillion, with other unfunded liabilities running into the hundreds of trillions.
- personal debt (in the form of credit cards and other credit instruments like car loans and student loans) is close to $3.3 trillion.
- mortgages are running at $8.8 trillion.
- corporate debt in the US was $51 trillion last year.

You also have to remember, the sub-prime collapse in 2008 shook their housing market to the core, and it is yet to recover. However the debt binge since hasn't flowed into the housing market, it went into keeping the carcasses moving to maintain the illusion of an overall economic recovery.

Some sources for your perusal:

https://www.nerdwallet.com/blog/aver...ebt-household/

http://www.cnbc.com/2016/07/20/crexi...-trillion.html

http://www.usdebtclock.org/

[Doreturnonfoot]

I put it down to ; gst - on both the land and the building for new builds
Local council fees and developer contributions that are generally based on for profit private business rates.
stamp duty and commission are a deterrent against downsizing for smaller households.
lack of tradespeople driving up rates
increasing price of materials.
Also the quality of new builds - that is the higher quality inclusions people get the more expensive it is.
The solution - hecs or help style govt loan for the first 10% for first homebuyers. This is paid back via increased tax depending on income level.
Plus funding for apprentices wages - equivalent to the dole to get employers to take them on.

[Sprintey]

Originally Posted by Trump

The root cause of the housing affordability problem (and the rest of the economic woes) isn't negative gearing or capital gains related, nor is it about supply and demand. It exists along with the other economic maladies because the banks control the currency and not the treasury. Because as it stands, for every dollar in the form of cash, there are ten more that are credit-derived (any form of bank-sourced credit).

Sound money issued by the treasury and only the treasury (whether it be in the form of physical notes and coins, their electronic equivalent, gold and silver or a combination of all three) wouldn't allow the banks to issue credit hand over fist and fuel a speculators paradise.

Amen Mr Trump. Add 100% reserve banking to that

[AUXRII]

Fractional lending and printing money in a manner reminiscent of the Weimar Republic. Would somebody lend me a wheelbarrow?

[MattSAU2XR8]

I think a large part of the problem would indeed be supply and demand

Assuming there are around 25 million people in Australia and average household size is about 2.5 people, this means 10 million dwellings are needed

If nearly all available rentals are taken then landlords can continue to increase rents, which in turn increases what the rental property is worth, i.e. a property that can charge $500 per week is 'worth' around $500k, putting aside speculation

Now assume that all the rental properties are full and the government imports 50,000 extra citizens - they are of course going to be competing in the existing market and so prices go up further

On the other hand if the government said 'no extra citizens' and instead fast-tracked some land development, or even unit complexes with reasonable land prices then the pool of properties would increase in size, landlords would be at a relative disadvantage, rents would come down, and so would property values.

Also, if land were made available a little cheaper then more people could but heir own home and again less competition for rentals.

Certainly where I live on the sunshine coast there is plenty of land within 10 kms of the coast being used for low yield farming and agistment that is certainly not worth $300k per quarter acre, even with roads and plumbing installed...

[Pis-ton broke]

please explain,trump

[b0son]

One of the reasons there's a CGT discount is because *investing* provides an economic benefit. Shares provide capital for companies to invest in growth which creates jobs/exports/etc. Building *new* houses creates construction demand, which again supports jobs.

What does sitting on land give back to the community? What does flipping established homes give back?

We don't give any sort of tax discounts for bank interest, perhaps we should start doing the same with some real estate 'investments' too....

[Mercury Bullet]

The middle class welfare in this country has to stop.

We are in so much debt and that hole is rapidly getting deeper.

Disabled and pensioners are forced to live below the poverty line which ultimately kills them. It's far worse than a rort.

[GT0132]

I has it a guess that unless you bought investment property within the past 2 years you're probably positively geared. With low interest rates and rising rents any tax loss is negligible. Different story if you have bought recently (in Melb or Syd) given that you need to borrow a lot more and rental income has remained pretty flat.

[Sprintey]

Good posts Mr Trump

[GASWAGON]

Just seen on the news that Westpac has raised interest rates today. (Cant remember how much buy).

They reckon a quarter of Oz mortgage holders are already under financial stress and could'nt afford and extra $100 per month on mortgage payments.

I think the Oz bubble is starting to burst.

All those years ago on this forum Dave289 was right after all!

[GASWAGON]

http://www.smh.com.au/business/austr...24-gvr2ai.html

[GT0132]

Originally Posted by CoolBFWagon

Just seen on the news that Westpac has raised interest rates today. (Cant remember how much buy).

They reckon a quarter of Oz mortgage holders are already under financial stress and could'nt afford and extra $100 per month on mortgage payments.

I think the Oz bubble is starting to burst.

All those years ago on this forum Dave289 was right after all!

The error with Dave289's prediction is that he didn't expect a boom in prices first.

[GASWAGON]

http://www.smh.com.au/business/austr...24-gvr2ai.html

[vztrt]

I remember a few ago they were saying house prices were gonna stay flat.

[GASWAGON]

Originally Posted by vztrt

I remember a few ago they were saying house prices were gonna stay flat.

It needs to at least flatten out or maybe correct for a few years until wage growth catches up.

They reckon the new government FHB incentives are only going to push prices higher.

Something drastic needs to be done.

[vztrt]

Originally Posted by CoolBFWagon

It needs to at least flatten out or maybe correct for a few years until wage growth catches up.

They reckon the new government FHB incentives are only going to push prices higher.

Something drastic needs to be done.

I don't disagree. Reduces the investment incentive and the money will go elsewhere.

[GASWAGON]

Apparently Perths economy is crashing as and many families are under big financial stress.

Lets wait and see if the same thing happens to Sydney and Melbourne?

[Work Horse]

Originally Posted by CoolBFWagon

Apparently Perths economy is crashing as and many families are under big financial stress.

Lets wait and see if the same thing happens to Sydney and Melbourne?

Not if but when, IMHO.









I'm old so I know if I keep predicting a property crash I will be correct,




eventually......

[Chopped]

In the end, it comes down to the most basic human condition, Greed.

greed
ɡriːd/
noun
noun: greed

intense and selfish desire for something, especially wealth, power, or food.

We are all to blame to an extent, however
Banks are the biggest winners when it comes to property

[Mercury Bullet]

Originally Posted by CoolBFWagon

Apparently Perths economy is crashing as and many families are under big financial stress.

Lets wait and see if the same thing happens to Sydney and Melbourne?

Better hope not.

Real estate is losing big money here.

[Bossxr8]

Originally Posted by CoolBFWagon

Apparently Perths economy is crashing as and many families are under big financial stress.

Lets wait and see if the same thing happens to Sydney and Melbourne?

Perth's issues are mainly due to the mining boom slowly so much. Hardly relevant to Melb or Sydney.

[Mercury Bullet]

Originally Posted by Bossxr8

Perth's issues are mainly due to the mining boom slowly so much. Hardly relevant to Melb or Sydney.

Perths problems were caused by greed.

So many people out to make a quick buck. I'm glad they are getting burnt.

And it's totally relevant to Melbourne and Sydney. Do you guys think you are immune?

[Rallye Sport]

Originally Posted by Bossxr8

Perth's issues are mainly due to the mining boom slowly so much. Hardly relevant to Melb or Sydney.

Everyone on the eastern side thinks all of us Westralians work in the mines. Not so, Half are internationals or interstaters chasing the dollar. After that half are local family types and the rest would be the young crew blowing it all on hookers, maloo's and dirtbikes.

I hear you Mercury Bullet, theres alot of greed and they'll get burnt.

I'm more of the 'Kerrigan' type, we worked hard to buy and pay for the house, no interest in an investment, its time to enjoy life, for me to gather up the cars I missed out on and for the mrs to work on her shoe and handbag collection, all of the things we couldn't do while paying a morgage.

[GASWAGON]

Sorry to hear such bad news mate.

Apparently the Chinese are still extreemely interested in Sydney and Melbourne so I really dont know whats going to happen.

For some reason all other states are pretty flat.

Lets wait and see what Turnbulls new budget brings?