Seneca21

Like I said above - Australia did OK because of its close trade links with China. When - and it is when not if - China goes pop so will the Australian housing market. The only thing is China might not go pop any time soon, so those waiting to buy a house at 50% of the current levels may be waiting many, many, many years.

Australia is not inherently different to any other western economy.

markbhx

Here it comes http://www.smh.com.au/business/banks...929-15xh9.html

Timber!!

http://www.news.com.au/money/interes...-1225932120260

Now get that rate to 7% so I can pick up a nice bargain :-)

littda01

Exactly my experience. I don't live in a great area (Malvern East/Carnegie). Its not a bad area at all, but if you walked up my street and didnt know anything about Aus you;d conclude it was an up-and-coming area moving from lower-mid-class to mid-class. Yet an average 3bed house on a piece of land costs just shy of $1M. Most homeowners are by no means wealthy, they're just ordinary people who are either sitting on a huge paper profit, or have to scrimp and save just to make ends meet to live there.

BTW, in all the talk of figures noones mentioned the anecdotal signs of a bubble. These were the things that convinced me this was a huge bubble after I arrived, more so than the numbers -

Property porn magazines - weekly glossies of 100pages plus of property double-spreads.

The fact that everyone you meet either owns an investment property(s) and/or, has a friend in real-estate, and/or is thinking of getting into it themself.

Agents telling you "buy quick, it's only going to go up".

Adverts in the papers for "wealth creation systems" based on property.

Property descriptions which say things like "this is a rock solid investment, you can't go wrong".

Every house even in crappy areas, being spec'd out to the max in an effort to justify ridiculous prices.

etc etc

Seneca21

We had the whole 40% fall imminent thing in the UK two years ago. What actually happened was they fell 20% over a fairly long period and then went right back up again after all that money-printing.

Aus would do the same. They will do anything to keep these houses propped up at dangerous levels. It's like holding a wolf by the ears, as Jefferson said - you don't like doing it but you're more scared of letting go.

littda01

I have argued in lots of other places that China will not pop, and I stick to that (at least, even if growth slows, enough momentum will be maintained). Aus does very well out of that situation obviously.

But its not enough on its own to sustain a housing bubble of this magnitude. We've seen already (GFC) that the very mechanisms that allow asset bubbles to inflate so efficiently in our global economy, can also bring them down just as quickly.

IMO, sentiment in the Aussie housing market could change soon. Once the country at large starts to realise that property will not go up indefinitely, the party will be over. Its impossible to predict when this might happen, obviously.

Seneca21

I'm not so sure. First, China has had some real ups and downs on its markets and also specifically some of its housing sector has started to creak. Second, Australians will react no differently to the realisation you describe than anyone else. How did the Brits react? They battened down the hatches and refused to sell. The redundancies were not not big enough to cause a wave of forced sales. The only difference I can see is that rates are much higher in Aus but they always have been traditionally.

I am not expecting a crash in Aus property prices any time soon. I was expecting it in both UK and Aus for a long time but I have changed my views. The Govts will go to any lengths to stop it happening and could keep a crash at bay for years.

Vash the Stampede

I'm not sure how closely the Australian market is linked to the Chinese demand for mineral resources, but you make an excellent point.

Rod-Helen-Poppy

the realtion to the american $ is a tricky one too. commodities are traded in it, the chinese and far east have lots of it, and the yanks need this to stop them going belly up.

all interlinked a slightly tenuous link, but one nontheless.

Seneca21

Thanks. I read somewhere that Aussie mineral exports were not as big a share of total exports as many people think - cannot remember the percentage - but it was a large enough portion to make a real impact on the economy if it was taken away or reduced.

However any reduction would be temporary of course as China and other buyers recovered. I think most homeowners would be able to ride out such a dip and that as a consequence house prices are not about to drop any time soon.

On top of that is basic affordability of these houses. While they are very expensive relative to other eras, they can still be managed. Couple on 120k between them is a realistic and sensible wage IMO. A sensible ratio to borrow is 3.5 which comes to 420k. You can buy a pretty nice home for 420k IMO.

So again where is the imperative for them to drop because simply wanting then to drop really, really, badly is not enough.

renth

The thing is there are loads on people on higher LTV mortgages, much higher. Also there are plenty of "liar loans" out there too. Lot's of sub-prime IMO.

All it will take is for a few interest rate rises, people going into neg-eq and and investors unloading then it will be race to the bottom.

Seneca21

As a renter waiting to buy a house, I want to see prices crash and crash hard. But my opinion has changed now. 2001 - 2009 I thought a crash was imminent - nearly ten years! After watching governments cooperating with each other on the international level just to stop a housing crash I realised that they will do anything to stop one happening. Anything. I no longer expect a serious crash, although I want one of course!

renth

Actually, yes, you are right about this. I keep forgetting just how corrupt and inept the govt is. They will try anything and it will probably work too.

Just like in the UK, they'll punish the savers and the prudent and reward the feckless.

Seneca21

Exactly. If you had 50k in the bank at 5% and were earning 2500 per year in interest, you are now earning basically 0 per year. If this lasts from 2008 - 2018 then the government has stolen 25k off you. At the same time it uses your raised taxes to pay off the mortgages of people who borrowed irresponsibly just to keep them in their McMansions while you carry on renting, your savings destroyed as they inflate house prices into the stratosphere.

Who is fine with that?

renth

Secret is not to have savings in fiat currency but in shiny stuff.

MartinLuther

I reckon the peak in cleanskins around here was 3 years ago. There's a lot less around now than there was then. Also back then Safeway's cleanskins were Australian now they seem to be South American.