pomtastic

I don't take the opinion of any 'one' view, I DYOR - do your own research.

Steve Keen doesn't have a vested interest, that is, he's not an economist who works for Westpac, Commonwealth, NAB, etc who HAVE a vested interest in keeping optimism high because they rely on consumers borrowing more debt. Keen might perhaps want to make a name for himself by making far out predictions but I don't see Keen pushing books or public appearances or meeting/greeting the media. He gives the impression to me that he's just an economist because of the love of it, he doesn't embrace celebrity.

What I have learned is that the Australian press is the most dodgiest on the planet, on par with a communist country!

FYI Amazulu, check this out. For those who said Australian banks are prudent and far superior to those silly US and European banks ......... well, the cat is out of the bag. NAB and Westpac needed massive US Fed money to keep solvent during the GFC. This info has only just been released by the US Fed and yet the Aus Govt and authorities kept it secret until now. How *****ing embarassing - we've all been duped and hood winked!!! (except me of course !!) This is just the tip of the iceberg in the Great Australian Swindle.

http://www.smh.com.au/business/nab-w...202-18i58.html

http://www.moneymorning.com.au/20101...-revealed.html

pomtastic

You've missed out the large financial donaters to the political parties here in Australia. Developers, big businesses are amongst the most generous, hence the continuous drive for a growing big population, land banking and other obvious routs.

I think (Perth) we're at the stage where people think we've just hit a 'pothole', as the press like to call it, and the market will bounce back to 10% gains in no time. Trouble is, the economy is run out of stimulus fumes and mining is the only thing that is going well. Retail, manufacturing, tourism have all hit 'potholes' and China is a basket case waiting to implode.

I watch the RE market in Perth closely and my gut feel says come June - Sept next year, the realisation will set in that the market is not going to turn anytime soon. Real Estate agents will have to get their clients to lower prices if they want to make a sale and stay in business. It's all going to get nasty but takes a while for reality to set in as you astutely said!

Steve2009

Google "Mahon Tribunal". Plenty of that in Ireland.

mulben

A quick read of the documents reveals that it was in support of the USA bank NAB owns much the same as Clydesdale having support in UK.
The USA bank is essentially a major rural (farming ) bank not really into hybrid housing loans.
Is it not just access to credit when none was available ?

Westpac is more of a mystery as the article says.

Steve2009

The pertinent issue from my understanding is that the Aussie banks required a bailout from the Fed, implying that their investments were not as prudent as they espouse them to be, regardless of whether the distressed assets were within Australia.

Amazulu

How cool is this gun:
http://www.theaustralian.com.au/nati...-1225964999015

I might sell my house and buy one.

mulben

If you look into the American bail out ,every bank had to take credit loan irrespective of whether they needed it or not , the majority were not distressed borrowers. This was to "protect " the confidence in the banking system (IMO it failed on that score )

Steve2009

Regarding the mortgage to income multiples discussed above, the below linked figures from the British Bankers Association paint a very different picture.
http://blogs.thisismoney.co.uk/2010/...age-wages.html
Also the statistics from the council of mortgage lenders....
http://news.bbc.co.uk/2/hi/7711689.stm
http://www.cml.org.uk/cml/media/press/2771
They state that the average LVR was 75% which would make sense as the dataset would be skewed away from the minority FHB segment. If that skew were more pronounced in Australia then the LVR would be even lower, we also don't have a figure for new mortgages in Australia as opposed to refinancings.
Have a listen to this...
http://www.thepropertypin.com/viewtopic.php?f=4&t=34741 (more user friendly version of below link)
http://www.wlrfm.com/DesktopModules/...963&portalId=6 (from 15 mins in, Monetary Advice and Budgeting Service)
FYI, podcast is from 2009, things have deteriorated considerably as you can imagine.

Vash the Stampede

Well said.

This forum has seen countless "bubble burst" prophecies over the past few years. We were told it would all go belly up in 2008... then 2009... then 2010. The timeframe stretches with each new failed prediction, and the armchair pundits are running out of recycled arguments.

Yes, Australian property is overvalued and we are long overdue for a price correction. Will it come in the form of a crash or a gradual decline? I don't know, but I'd be surprised if we saw the same type of disaster that wrought havoc in the US and UK. Australia has no equivalent of the US sub prime timebomb, or the UK's banking crisis. When the correction arrives, it will be most likely due to other factors.

The people with overpriced property and potential negative equity will not be the folks who bought cheaper, older houses in the outer suburbs. They'll be the folks who bought new or near-new houses in desirable, rapidly growing inner suburbs, and paid top dollar for the privilege.

This all sounds terribly exciting, and you've spun it quite well. But the reality is rather banal.

I found nothing in either of those articles which either stated or even implied that NAB and Westpac "needed massive US Fed money to keep solvent during the GFC." On the contrary, one of the loans was used to support a US banks owned by NAB, while the other seems to have been nothing more than a means of ensuring daily cashflow of a specific currency in the face of a global shortage.

These loans were very small ($US4.5 billion for NAB; $US1 billion for Westpac) and nowhere near the scale required to rescue a major bank from financial collapse. The frenzied article at www.moneymorning.com.au ("NAB and Westpac’s Secret Bailout Revealed") is so hilariously over the top, I am surprised it wasn't picked up by the Sun or Daily Mail. The very title itself is a lie, and the article offers not a shred of evidence to justify it.

Steve2009

That's equivalent to mortgage interest on a $300,000 house. Show me a house I can buy for $300,000 that's equivalent to one I can rent for $400 within 30km of a major city please. Property rent in places where most people want to live is about half the cost of mortgage rent.
God forbid anyone would want to live in a desirable area.

Implicit in what you two have said is that it will be the areas within 15km of CBDs that will decline and that those in the outer ring will be fine. No man is an island. If the properties within 15km of the CBD fall then so will properties in the outer ring.

Vash the Stampede

I am talking about boutique areas; classic "des-res", not just "a place I'd feel comfortable living in."

Why? There's less demand for them in the first place. Even if they did fall, the drop would be negligible because they're not overpriced to begin with. In fact, demand for these properties might even go up, as victims of the bubble burst try to downsize.

Steve2009

Yet, still these are the places people want to live.
You think that these areas are a completely seperate market to others? All markets interplay, these areas are less attractive and hence relatively inexpensive substitutes for more desirable areas. They move relative to the more desirable areas. Hence why you hear from boom subscribers and real estate types about the latest fringe suburb ready to go pop. The values in these areas go up as buyers are priced out of other suburbs. And believe me, this debate about where the crash would hurt most was had in Ireland too, and it's playing out on Somersoft right now with people's perspective coloured by where they are invested.

Vash the Stampede

Sure, but they're not the only places to live. People need to be realistic and understand that they can't always have everything they want.

Of course they're not completely separate markets, and of course they'll go up in price as buyers are priced out of other suburbs. I said this myself. You're still missing (or avoiding?) the point, which is that unlike other areas, these outer suburbs are not overvalued and oversubscribed. They are terrifically affordable, and ripe with good investment opportunities. Living 30 minutes from the CBD is not a sin, and it won't kill you.

So, what's the latest "catastrophic-Australian-property-price-crash-as-prelude-to-Armageddon" prophecy? Next month? Next quarter? Next year? Next decade? They've all been wrong so far. The armchair experts in this thread can't agree, and the related poll shows that anyone's guess is as good as anyone else's.

Steve2009

If people had a choice they would choose these suburbs. I live where I want to live and pay peanuts compared to what my neighbours pay. Of course you can't always have what you want but I'm on the pigs back in terms of where I live right now. As a comparison a buyer on my street just bought a derelict house on an overgrown site similar in size to my home for more rent than I pay.
These suburbs go up in price as buyers are priced out of the overpriced suburbs but yet remain good 'value'. Is that to imply that if the over priced suburbs suddenly become good 'value' that these areas will not go down in price also? It seems to me that these suburbs are overpriced just the same as their alternatives/substitutes.
Picking bottoms is for baboons, likewise for peaks.

pomtastic

Errr, the Perth price correction is actually happening right now, 9 months of straight price falls.

Perth has an oversupply of 38% of homes for sale and yet the HIA were saying that we had a shortage early this year - amazing how the perceived shortage evaporates overnight, eh?

Tasmania, Queensland and Gold Coast are also in decline - it's well and truly started, like it or not Vash! Coming to a town near you!