"1 in a 100 year slump"
Aug 2nd 2008, 11:26 am
#31
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Joined: Oct 2005
Location: Perth
Posts: 3,453
Re: "1 in a 100 year slump"
They will but they'll still face the same exhorbitant property prices.
Aug 2nd 2008, 11:32 am
#32
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Joined: Oct 2005
Location: Perth
Posts: 3,453
Re: "1 in a 100 year slump"
Interesting article in The Australian today about the Australian economy - this bit by Morgan Stanley's chief economist was worrying (or positive if you're waiting to buy like me)
Morgan Stanley chief economist Gerard Minack believes prices will come down 20 per cent to 30 per cent. He does not accept the argument that housing is in short supply or that high rates of migration will support the market, saying that if houses are not affordable, they will not be bought.
"We are in the process of bringing the curtain down on what has been a super cycle for the Western world's financial institutions, which was built on the willingness of consumers to increase their leverage at fantastic prices," Minack says.
Financial deregulation and an extended period of low interest rates added fuel to the fire. "The escalation in leverage over the past 20years is completely off the scale. It is bigger than the 1890s property boom and bigger than the 1920s. It is bigger than anything we've ever seen, and I think we've reached the limit of how far these trends can go. The unravelling will be extremely painful."
Minack says there is a huge momentum in the growth of borrowing: even with the slowdown, households have $95 billion more debt now than they did a year ago.
There is a danger that what were virtuous cycles during the boom could become vicious in the bust.
Banks that were encouraged to lend by rising asset prices become fearful when prices fall and tighten their lending standards, frustrating the efforts of the central bank and government to stimulate the economy.
Attempts by households to reduce debts can result in a fall in housing prices, putting consumers under greater pressure to reduce debt. The growth in household debt has a counterpart in rising foreign debt, which stands at roughly $700 billion.
Bank deposits have not been enough to fund the rise in household borrowing, so the banks have turned to world markets, which have been more than willing to lend. They are still willing, albeit at a much higher interest rate than was being charged a year ago.
"The funding costs can only get worse if we see interest rates come down here and the currency starts to fall, so that the attractiveness of lending to Australia diminishes," Minack says. The economy may hover along at a reduced but still positive pace of growth for several more quarters.
The darker concerns are for 2009, when the pain of falling share prices is more likely to be compounded by falling house prices, while business will be cutting staff.
Morgan Stanley chief economist Gerard Minack believes prices will come down 20 per cent to 30 per cent. He does not accept the argument that housing is in short supply or that high rates of migration will support the market, saying that if houses are not affordable, they will not be bought.
"We are in the process of bringing the curtain down on what has been a super cycle for the Western world's financial institutions, which was built on the willingness of consumers to increase their leverage at fantastic prices," Minack says.
Financial deregulation and an extended period of low interest rates added fuel to the fire. "The escalation in leverage over the past 20years is completely off the scale. It is bigger than the 1890s property boom and bigger than the 1920s. It is bigger than anything we've ever seen, and I think we've reached the limit of how far these trends can go. The unravelling will be extremely painful."
Minack says there is a huge momentum in the growth of borrowing: even with the slowdown, households have $95 billion more debt now than they did a year ago.
There is a danger that what were virtuous cycles during the boom could become vicious in the bust.
Banks that were encouraged to lend by rising asset prices become fearful when prices fall and tighten their lending standards, frustrating the efforts of the central bank and government to stimulate the economy.
Attempts by households to reduce debts can result in a fall in housing prices, putting consumers under greater pressure to reduce debt. The growth in household debt has a counterpart in rising foreign debt, which stands at roughly $700 billion.
Bank deposits have not been enough to fund the rise in household borrowing, so the banks have turned to world markets, which have been more than willing to lend. They are still willing, albeit at a much higher interest rate than was being charged a year ago.
"The funding costs can only get worse if we see interest rates come down here and the currency starts to fall, so that the attractiveness of lending to Australia diminishes," Minack says. The economy may hover along at a reduced but still positive pace of growth for several more quarters.
The darker concerns are for 2009, when the pain of falling share prices is more likely to be compounded by falling house prices, while business will be cutting staff.
Aug 2nd 2008, 3:57 pm
#33
Forum Regular
Joined: Aug 2008
Posts: 78
Re: "1 in a 100 year slump"
Well as these nations develop the opportunities for their work force are just going to get better and better at home. However, by their sheer weight of numbers you may be correct. However, I do think the quality in terms of the value added to the economy is likely to deteriorate as the cream is encouraged to stay at home.
Aug 3rd 2008, 10:33 am
#34
BE Forum Addict
Joined: Aug 2005
Posts: 1,999
Re: "1 in a 100 year slump"
Interesting article in The Australian today about the Australian economy - this bit by Morgan Stanley's chief economist was worrying (or positive if you're waiting to buy like me)
Morgan Stanley chief economist Gerard Minack believes prices will come down 20 per cent to 30 per cent. He does not accept the argument that housing is in short supply or that high rates of migration will support the market, saying that if houses are not affordable, they will not be bought.
"We are in the process of bringing the curtain down on what has been a super cycle for the Western world's financial institutions, which was built on the willingness of consumers to increase their leverage at fantastic prices," Minack says.
Financial deregulation and an extended period of low interest rates added fuel to the fire. "The escalation in leverage over the past 20years is completely off the scale. It is bigger than the 1890s property boom and bigger than the 1920s. It is bigger than anything we've ever seen, and I think we've reached the limit of how far these trends can go. The unravelling will be extremely painful."
Minack says there is a huge momentum in the growth of borrowing: even with the slowdown, households have $95 billion more debt now than they did a year ago.
There is a danger that what were virtuous cycles during the boom could become vicious in the bust.
Banks that were encouraged to lend by rising asset prices become fearful when prices fall and tighten their lending standards, frustrating the efforts of the central bank and government to stimulate the economy.
Attempts by households to reduce debts can result in a fall in housing prices, putting consumers under greater pressure to reduce debt. The growth in household debt has a counterpart in rising foreign debt, which stands at roughly $700 billion.
Bank deposits have not been enough to fund the rise in household borrowing, so the banks have turned to world markets, which have been more than willing to lend. They are still willing, albeit at a much higher interest rate than was being charged a year ago.
"The funding costs can only get worse if we see interest rates come down here and the currency starts to fall, so that the attractiveness of lending to Australia diminishes," Minack says. The economy may hover along at a reduced but still positive pace of growth for several more quarters.
The darker concerns are for 2009, when the pain of falling share prices is more likely to be compounded by falling house prices, while business will be cutting staff.
Morgan Stanley chief economist Gerard Minack believes prices will come down 20 per cent to 30 per cent. He does not accept the argument that housing is in short supply or that high rates of migration will support the market, saying that if houses are not affordable, they will not be bought.
"We are in the process of bringing the curtain down on what has been a super cycle for the Western world's financial institutions, which was built on the willingness of consumers to increase their leverage at fantastic prices," Minack says.
Financial deregulation and an extended period of low interest rates added fuel to the fire. "The escalation in leverage over the past 20years is completely off the scale. It is bigger than the 1890s property boom and bigger than the 1920s. It is bigger than anything we've ever seen, and I think we've reached the limit of how far these trends can go. The unravelling will be extremely painful."
Minack says there is a huge momentum in the growth of borrowing: even with the slowdown, households have $95 billion more debt now than they did a year ago.
There is a danger that what were virtuous cycles during the boom could become vicious in the bust.
Banks that were encouraged to lend by rising asset prices become fearful when prices fall and tighten their lending standards, frustrating the efforts of the central bank and government to stimulate the economy.
Attempts by households to reduce debts can result in a fall in housing prices, putting consumers under greater pressure to reduce debt. The growth in household debt has a counterpart in rising foreign debt, which stands at roughly $700 billion.
Bank deposits have not been enough to fund the rise in household borrowing, so the banks have turned to world markets, which have been more than willing to lend. They are still willing, albeit at a much higher interest rate than was being charged a year ago.
"The funding costs can only get worse if we see interest rates come down here and the currency starts to fall, so that the attractiveness of lending to Australia diminishes," Minack says. The economy may hover along at a reduced but still positive pace of growth for several more quarters.
The darker concerns are for 2009, when the pain of falling share prices is more likely to be compounded by falling house prices, while business will be cutting staff.
Aug 3rd 2008, 10:54 am
#36
BE Forum Addict
Joined: Oct 2005
Location: Perth
Posts: 3,453
Re: "1 in a 100 year slump"
There are so many variables - just because people are moving over to WA does not mean that house prices will be supported. See the article above and the other thread I've just started. Migrants have apparently been flocking to WA over the last year and yet prices have slumped in suburbs other than blue-chip areas.
Aug 3rd 2008, 12:20 pm
#37
BE Enthusiast
Joined: Jan 2006
Posts: 413
Re: "1 in a 100 year slump"
Bloomberg headline this a.m. "Oz faces a 1 in a 100 year house price slump".
Good news for those facing Perth's 300% house price rise over the last 6 years....kinda compensates for the fact I can only get offers in the UK 18% lower than valued this April. No doubt prices are coming down in the outer Perth 'burbs big time. Only central seems to be holding its own (ooo err!). Watch this space !!
Good news for those facing Perth's 300% house price rise over the last 6 years....kinda compensates for the fact I can only get offers in the UK 18% lower than valued this April. No doubt prices are coming down in the outer Perth 'burbs big time. Only central seems to be holding its own (ooo err!). Watch this space !!
First house I bought in OZ cost around 50K,everybody said I was mad,prices were going down,I should wait.That one is worth anywhere between 300 and 400K,I never look,I think the insurance has it at around 450K.
Last house I bought was around 1990,around 100K,everybody said I was mad,houses are not going to rise in price.I watched that one drop in price and then flat line for around 8-10 yrs.Everybody told me how wrong I was and how right they were.That one is probably in the 400K mark now.
When the banks were on their knees in 92 I slipped into bank shares,everbody said I was mad.Far too risky,nobody else is buying them,.I continued buying shares at each crash.2002-2003 set me up for life.Everybody said I was mad,stock prices would never rise again,the slump was here for ever.
Once again I am buying stocks while they are positively geared.Everybody says I am mad .The headlines in the paper tell me I am wrong,the economists tell me I am wrong.The crowd tell me I am wrong.I wonder how much they will be worth in 10 or 20 yrs time when crowds,economists,newspaper headlines etc will still be full of crap and telling me how wrong I am.
Aug 3rd 2008, 12:24 pm
#38
Proudly Deplorable
Joined: May 2003
Location: Alloha snack bar
Posts: 24,246
Re: "1 in a 100 year slump"
Well I'm an investor,I love these knee jerk reactions on a daily basis.
First house I bought in OZ cost around 50K,everybody said I was mad,prices were going down,I should wait.That one is worth anywhere between 300 and 400K,I never look,I think the insurance has it at around 450K.
Last house I bought was around 1990,around 100K,everybody said I was mad,houses are not going to rise in price.I watched that one drop in price and then flat line for around 8-10 yrs.Everybody told me how wrong I was and how right they were.That one is probably in the 400K mark now.
When the banks were on their knees in 92 I slipped into bank shares,everbody said I was mad.Far too risky,nobody else is buying them,.I continued buying shares at each crash.2002-2003 set me up for life.Everybody said I was mad,stock prices would never rise again,the slump was here for ever.
Once again I am buying stocks while they are positively geared.Everybody says I am mad .The headlines in the paper tell me I am wrong,the economists tell me I am wrong.The crowd tell me I am wrong.I wonder how much they will be worth in 10 or 20 yrs time when crowds,economists,newspaper headlines etc will still be full of crap and telling me how wrong I am.
First house I bought in OZ cost around 50K,everybody said I was mad,prices were going down,I should wait.That one is worth anywhere between 300 and 400K,I never look,I think the insurance has it at around 450K.
Last house I bought was around 1990,around 100K,everybody said I was mad,houses are not going to rise in price.I watched that one drop in price and then flat line for around 8-10 yrs.Everybody told me how wrong I was and how right they were.That one is probably in the 400K mark now.
When the banks were on their knees in 92 I slipped into bank shares,everbody said I was mad.Far too risky,nobody else is buying them,.I continued buying shares at each crash.2002-2003 set me up for life.Everybody said I was mad,stock prices would never rise again,the slump was here for ever.
Once again I am buying stocks while they are positively geared.Everybody says I am mad .The headlines in the paper tell me I am wrong,the economists tell me I am wrong.The crowd tell me I am wrong.I wonder how much they will be worth in 10 or 20 yrs time when crowds,economists,newspaper headlines etc will still be full of crap and telling me how wrong I am.
If you listen to the 'experts', press, people on this website etc, you would think that this current 'slump' is the end of the world, has never happened before and wll be here forever........
Last edited by Amazulu; Aug 3rd 2008 at 12:28 pm.
Aug 3rd 2008, 12:41 pm
#39
BE Forum Addict
Joined: Oct 2005
Location: Perth
Posts: 3,453
Re: "1 in a 100 year slump"
Well I'm an investor,I love these knee jerk reactions on a daily basis.
First house I bought in OZ cost around 50K,everybody said I was mad,prices were going down,I should wait.That one is worth anywhere between 300 and 400K,I never look,I think the insurance has it at around 450K.
Last house I bought was around 1990,around 100K,everybody said I was mad,houses are not going to rise in price.I watched that one drop in price and then flat line for around 8-10 yrs.Everybody told me how wrong I was and how right they were.That one is probably in the 400K mark now.
When the banks were on their knees in 92 I slipped into bank shares,everbody said I was mad.Far too risky,nobody else is buying them,.I continued buying shares at each crash.2002-2003 set me up for life.Everybody said I was mad,stock prices would never rise again,the slump was here for ever.
Once again I am buying stocks while they are positively geared.Everybody says I am mad .The headlines in the paper tell me I am wrong,the economists tell me I am wrong.The crowd tell me I am wrong.I wonder how much they will be worth in 10 or 20 yrs time when crowds,economists,newspaper headlines etc will still be full of crap and telling me how wrong I am.
First house I bought in OZ cost around 50K,everybody said I was mad,prices were going down,I should wait.That one is worth anywhere between 300 and 400K,I never look,I think the insurance has it at around 450K.
Last house I bought was around 1990,around 100K,everybody said I was mad,houses are not going to rise in price.I watched that one drop in price and then flat line for around 8-10 yrs.Everybody told me how wrong I was and how right they were.That one is probably in the 400K mark now.
When the banks were on their knees in 92 I slipped into bank shares,everbody said I was mad.Far too risky,nobody else is buying them,.I continued buying shares at each crash.2002-2003 set me up for life.Everybody said I was mad,stock prices would never rise again,the slump was here for ever.
Once again I am buying stocks while they are positively geared.Everybody says I am mad .The headlines in the paper tell me I am wrong,the economists tell me I am wrong.The crowd tell me I am wrong.I wonder how much they will be worth in 10 or 20 yrs time when crowds,economists,newspaper headlines etc will still be full of crap and telling me how wrong I am.
Aug 3rd 2008, 7:12 pm
#42
Banned
Joined: Feb 2008
Posts: 421
Re: "1 in a 100 year slump"
In Australia who know's, it seems the credit contraction has not affected the Australian market, maybe prices will just stagnate for ten or more years? Prices do not seem to be falling over there unlike here in old Blighty?
Prices are even higher over there but something is stopping them from falling off the cliff, we will have to wait and see? If rates drop in Oz maybe affordability will resume, rents are rising over there, there is a tight rental market, so landlords are lauging, big capital gains, rising yields and falling costs if rates drop? It looks like Oz will escape property price falls maybe, anyone know any more?
Aug 3rd 2008, 9:04 pm
#43
BE Enthusiast
Thread Starter
Joined: Jan 2007
Location: Perth, WA
Posts: 365
Re: "1 in a 100 year slump"
Prices have been falling and numbers of houses on the market have been above average for about a year now in the Perth suburbs. Stuff isn't selling & $100Ks are being knocked off asking prices.
the times they are a changing.....
Aug 3rd 2008, 9:51 pm
#44
(^v^)
Joined: Sep 2007
Location: North East Tasmania
Posts: 2,199
Re: "1 in a 100 year slump"
Aug 3rd 2008, 10:04 pm
#45
Timelord
Joined: May 2006
Location: Lost in space...
Posts: 2,834