Steve2009

A 40% drop in house prices would be a massive shock to the Australian economy and you would not be able to get credit. There would be huge amounts of homeowners in negative equity which creates problems for the banks. Not to mention that the Australian economy needs Billions in property market derived income to keep it ticking over. There's no doubt it would cause a few years of pain for (mostly) everyone.

Steve2009

That's some serious positive cashflow. Where's the investment property?

eugene43

sorry should of said uk

Steve2009

What are the mortgage interest rates if you don't mind me asking?

eugene43

I have got it at 3% as I had a £40,000 deposit.

pomtastic

OK, who do you admire, trust, respect for their financial views, please share?

What about Jeremy Grantham? Views?

young_lad

Good question..

In any other field I'd try and gauge the 'general consensus' from those considered experts (those who write in the press etc). My thinking being that a general consensus approach would at least take care of 'outliers' (like those who predict many of the last zero bubble bursts).

Unfortunately for me my confidence in the 'general consensus' from economists was shot by the occurrence of GFC. Very few of them predicted it. Then whilst it was happening struggled to explain what would happen next. Then they struggled to explain what to do about it. For me, it was historians that came out of it with credit (pun not intended) as past experience began to guide actions.

The economists don't seem to learn though. Each month they put their neck on the block and (bizarrely IMHO) declare with certainty how the RBA will move interests rates, and will go to great lengths to support their position. Then the RBA takes the option that the economists (and not just economists, but those grand enough to be titled 'Chief Economist') only thought had a small percentage chance of happening (yes they put percentages on the prediction ). Then of course, the economists explain (with certainty, of course) why the RBA did what it did.

If only I could be so wrong so often in my line of work; performance reviews would be a breeze...

I now seek property advice from the Somersoft forums. There I find a great deal of relevant and practical property advice (i.e. what, where, how) from people who have put their money where mouth is - and in many cases very successfully.

Steve2009

Steve Keen, with all his faults, has also put his money where his mouth is and sold his home to rent. There are plenty who are 'actively not' investing in the property market and thereby putting their money elsewhere.

I find Somersoft interesting but it is always going to tend towards being bullish because it's users seek confirmation bias and any dissent is drowned out. The attitude of some posters there is appalling, not that Australian bear forums are any different. CreditCrunch.co.uk has closed off their subscriptions to keep out 'trolls'. It's necessary in my opinion to cast a wide net in your reading.

Amazulu

Me.

As far as I am concerned, if you are going to take the opinion of Keen as valid, then you have to take the opinion of ultra-bulls as valid too.

aroche

Fine, sound logic there....

freebo

Care to name/quote one or two of the ultra-bulls, just for comparison?

aroche

I think its reasonable to anticipate that property investors and estate agents have a bigger vested interest, and will naturally talk up the market. Beware, the media too have a vested interest in propping it all up as long as they can, they need to keep the advertising coming in, and justify their pretty property supplements.
In many cases they will genuinely believe their own hype until well into a crash and it becomes completely undeniable.
That was the experience here in Ireland anyway, - It started with talking up, then denial that a crash was happening. Then when it was irrefutable, every vested interest was bottom picking, - saying that it has "bottomed out now" or is just about to bottom out, - get in before it takes off again. Meanwhile, a few years later, - there's still no bottom in sight......

fish.01

Were their any broader economic changes in the Irish economy that contributed to the crash in Ireland?

Steve2009

There is no landmark event in Ireland that can pinpoint the start of the crash. Things just fizzed out, although the government did try to blame the credit crunch. Ireland's property market was actually already on the crash cart by the time Lehman's collapsed.

aroche

I would agree with this. Prices just hit a tipping point such that confidence got shot. It just got too expensive to buy versus rent.

If you go back a bit further in time, - the root cause of it all (boom and bust) IMO was Ireland's entry to the Euro single currency. Interest rates were set by ther ECB to suit the sluggish German economy (at circa 1% !!!), but were wholely inappropriate for a hot economy like Ireland (Believe it or not we did have a solid, strong economy based on fundamentals once upon a time).
Actually, many economists say that its not even the interest rate that matters, but the availability of money. German, British and French banks pumped money into irresponsible Irish ones and they pumped it into Joes on the street. Throw a shoddy, arguably corrupt Government and poor regulation into the mix and you have a recipe for disaster. But thats the cause of the overheating, not the crash.

I agree with the poster above, - the actual crash was precipitated by excessive prices and an abrupt new reality that prices would not keep going up, and nothing more...

Its all classic boom and bust cycle, - the cycle is as sure as summer and winter. The bigger and longer the boom, the bigger and longer the bust, - Economics 101