The Great Australian Housing Market Debate Rages On

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The Great Housing Debate rages on over at our new Daily Reckoning Forum. We are interested in Australian housing only to the extent that it may be a symptom of the worldwide credit bubble currently deflating. But the mail bag here at the Old Hat Factory is full of letters advising us to quit acting like morons and get in on the action already. Hmm.

It is true that over the last five years, the mineral boom in the West has driven Perth house prices higher by 137%. There’s lots of new money in the West. It has to go somewhere. And people have to live somewhere, don’t they?

Still, the ABS report shows prices in Australian capital cities up by an average of 12.3% year-over-year. The ABS all says that two out of every three Australians lives in a capital city (64%). If you live in Melbourne or Brisbane and are looking to buy a new home, they went up by 20% last year. Buy a house! You know it makes sense.

In other news, the ABS reported 1,862,000 lambs were slaughtered in December. That’s 40,000 tonnes of delicious meat and the highest number on record for 30 years.


Source: Australian Bureau of Statistics

Should you buy a house? Should you sell? Is negative gearing a good thing? Does Kevin Rudd’s new plan to help first-home buyers save a little extra make any sense?

We don’t have any answers to property questions. We have, though, been thinking about lowering our rent here in Elwood by digging a bunker in Coober Peddy, producing some extra income from our opal operations, and resuming our reckoning there. Have your say over at the Daily Reckoning Forum.

Dan Denning
The Daily Reckoning Australia

Dan Denning
Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.
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13 Comments on "The Great Australian Housing Market Debate Rages On"

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kayle
Guest
Not surprised at the interest in Aussie housing. This is the asset bubble that drove the credit surge in the first place, really, and this is where the credit collapse begins first. When the US Fed lowered interest rates to 3% in 2001 and 1% in 2002, and kept them low to avoid a mild recession, it began the inevitable series of events that created today’s financial crisis throughout the world. (Generally, and simplistically, speaking.) I find it enlightening to watch the housing crisis unfold day by day in the US. I see the same events happening here in Australia,… Read more »
beyondtool
Guest
The most interesting comment I’ve read on this topic is that if housing prices had continued at today’s rate a couple of hundred years ago in Finland, the cost of the average property there would be about as expensive as all the remaining property left on the earth today. The point is that property has always been a percentage of the wealth owned on the planet. When the middle class are starting to struggle with home loans it’s a sign that the bubble is about to burst. Add to this picture Australia’s reliance on the mining gold rush heading for… Read more »
David
Guest

your reservations are excellent,the action is hot now , wait until Australia gets a wiff at what is to come,when they are told they are joining the Asia Union. Should Australians buck the system of things, the powers that be in the world will visit Australia with the same taste of what America is getting.Asia Union will entail bowing to a higher set of laws. and might even mean china’s laws ! but it might be Australia’s laws who knows.

Paul
Guest

i remember seeing a tv article many years ago which found that real estate agents were going to different regions to stand in the crowd of hopeful home “mortagers” and push the bid up a bit. this started in sydney and melbourne. a long time of little “bits” adds up to overvaluation of property and rich real estate agents… ya know i love fantasy stories where certain societies evolve by “killing all the lawyers”, im waiting for a story of a society with no real estate agents :) real or unreal.

Iain
Guest

Australia is merely a subset of the wider global explosion in asset values (inflation). This will readjust as under performing loans are unwound and asset values fall. Many see rising property prices as virtuous and yet react in horror when other living costs rise. They are one in the same – inflation.

Estate Agent in London
Guest

Interesting issues. It’s the same here in London. There is a long way to go with the credit crunce. There’s a lot that still doesn’t make sense. The money supply has been inflated and now they want it all back.

LL
Guest
>We have, though, been thinking about lowering our rent here in Elwood by digging a bunker in Coober Peddy, producing some extra income from our opal operations, and resuming our reckoning there. Don’t bet too much on it. The supply of dugouts in/near Coober Pedy is scarce and the council are adding onerous red tape on digging/fitting new ones. If the new mines in region come on stream (China story again) then expect prices to keep going up. Good luck with the opals though as they are like gold … the demand (driven by US) has dropped which means fewer… Read more »
Paul M
Guest
Here are just a few issues to be aware of with Australian housing. First, when supply is lagging demand every subsidy for “new home owners” goes straight onto the price, every form of assistance goes straight onto the price. The only “cure” for affordability is to flood supply. But that then depresses value of homes already hocked. Second. Real Estate agents or “experts” are yet to be regulated in the way Financial Services Licensees are regulated with detailed plain english disclosure of costs and risks and commissions in formal documents called Statement of Advice. When one area of high level… Read more »
Pete
Guest
Paul M: I agree with what you say, apart from “The only “cure” for affordability is to flood supply.” That is one possible cure, but is it really? The problem with affordability is that with easy credit, houses at their current price are still considered affordable. Imagine if no-one could get 100% loans for 35 years, or there were no Low Doc & Sub-prime loans available? Where would these home buyers get their money to buy the houses? The answer is, they couldn’t. Also imagine if interest rates were half of what they are, and banks were even more keen… Read more »
Chris
Guest
I have only ever taken out one loan (apart from a mortgage)in my life and that was from my father for £50 to buy a motor scooter many years ago. He charged me interest and it took me much longer than I expected to pay him back. Parents don’t teach their kids lessons like that now, as it is the reason that I am totally clear of debt in spite of owning my own house and being a totally self funded retiree. When I was working I never earned more than $20,000 a year, but then I was brought up… Read more »
Luke Clements
Guest
I agree with some of what Pete says above. Greed and envy(I add) inducing eveyone to want a 4 bedroom, 2 bathroom home. With 2 kids of my own, I still can’t see the need for such silly extravagence. Although I felt very sad to see those poor people lose “their” homes on 4 Corners last night, I couldn’t help but shake my head at what they had bought in the first place. From memory they had 2 kids, and yet they forked out at least 650k on a four bedroom, 2 bathroom(one of the bathrooms had a massive spa… Read more »
barry
Guest
I couldn’t agree more with the previous comment. I felt sorry for the couple but they were victims of their own greed. However what can one expect from a society that encourages rampant materialism as a way of life and govt’s go along with it, terrified that if they preach restraint they’ll be tossed out of office. When people cut back on the number of children they have just so they can afford to buy a biger home or have the latest reno’ they get what they deserve. The sad part is that is what they’ve been told from babyhood… Read more »
justin
Guest

Australian housing prices are most certainly a symptom of the credit bubble currently deflating. There is no housing shortage in this country. I offer my parents as an example;

Selling their house in Sydney two years ago, they bought a beautiful, huge old triple brick monster, on 350 acres of prime basalt country for half the price of their place in Sydney. They were the only bidders at the auction.

Building a new house of that magnitude today would cost far more than what they paid for the house and the land.

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