Bankers Warn Against House Price Speculation….No, Really, They Do

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–Well ANZ’s Phil Chronican is not going to win any friends at the country club if he keeps saying things like this. Chronican says there isn’t a house price bubble in Australia because there wasn’t the huge over-building of new supply here like there was in America. The lack of inventory overhang, he reckons, will prevent prices from crashing. But he’s not exactly bullish on house prices either.

–“There is no doubt,” he writes, “the capital gains made by most people in the property market over the past 15 to 20 years has created an unsustainable perception of housing as an attractive investment vehicle…Remember, the primary purpose of a house is as a place to live, not a speculative investment vehicle.”

–Ye gads. That is downright sensible.

–Chronican also had the audacity to suggest some of the Australians who were lured into the housing market over the last two years with the first-home buyer’s grant are in danger of getting behind on their mortgage. He said mortgage arrears are, “a problem that is going to stay with us for a while. I don’t know if it will get worse or not…It is a concerning trend … yes, you want to watch it, but it is not a disaster.”

–Hopefully it won’t be. But if it is, it’s largely self-inflicted, or government inflicted. Australia did not have a huge “sub-prime” class of loans that led to house price gains but put marginal buyers at risk. So the Rudd government went ahead and created that class with the first-home buyer’s grant. And now those folks are in trouble.

–By the way, our own in-house house-price uber bear, Kris Sayce, is on his way up to Sydney this week to clash swords with the property bulls. The  massive steel cage match event features eight speakers, each of whom will make their case, followed by questions from the crowd. It begins at noon tomorrow at the Wesley Centre on Pitt Street. Tickets are $50. Go here for details on how to register.

–It looks like the share market will open up this week doing more of what it did last week: going down. Wall Street had another bad Friday. The Dow Jones Industrials have closed lower for five straight weeks. That’s the longest losing streak on the Dow since 2004—the early days of Alan Greenspan’s great reflation.

–You’d expect the Australian market to have “de-coupled” from the performance of the Dow and the S&P 500. After all, the earnings of Australia’s biggest companies are determined by Chinese demand for things like iron ore and coal, or the ability of Aussie banks to grow their loan books in commercial and residential property. Yet take a look at the chart below and you’ll see that since markets became even more casino-like in early March of 2009, the Aussie market has tracked the U.S. market step by step.

Dow and All Ords Bounce 50% from GFC Lows

aordvdow.png

–The chart shows the weekly closes of both the Dow and the All Ords. The weekly close smooths out a bit of the day-to-day volatility in the price action and gives you a picture of the trend. By the way, this chart doesn’t take into account currency movements. That’s important.

–Foreign investors, especially Aussies, would have much smaller returns in U.S. stocks once they converted their money back into local currency. The decline of the U.S. dollar may make U.S. equities cheaper and more attractive. But it can also ruin your return. Conversely—and this is one of the arguments behind a recent recommendation we made in AWG—a weaker Aussie dollar means you might get a nice bounce in your U.S.-listed investments.

–What else is interesting on the chart? Well, both the All Ordinaries (the green line) and the Dow (the black line) have gone up by about 50% since March 9th of 2009. That’s a big bounce. What’s notable is that the All Ords—mostly because of rebounding commodity prices—recovered a lot more quickly. You can see that by April of 2010, the Aussie index was easily outperforming the Dow.

–The Dow has only recently hit the 50% up mark from the March lows of 2009. And as you can see, the All Ords have consistently bounced at the 50% level. Murray Dawes at Slipstream Trader has identified this level—about 4,700 on the All Ords—as the “point of control” for the price action. If you’re not sure what all that means, you should check out Murray’s explanation of what’s going on in this video presentation.

–Murray ducked his head into the office this morning, incidentally, to point out how strange Friday’s action was. The euro rallied. But both the U.S. dollar and U.S. stocks fell. This is an unusual departure from what’s been going on the last 18 months are so. The dollar has habitually rallied a bit when fears about “growth” dent emerging markets and commodities. Is that changing now? Hmmm. Stay tuned.

Dan Denning
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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163 Comments on "Bankers Warn Against House Price Speculation….No, Really, They Do"

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Ned S
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The DJIA put in a bottom at around 6600 in March 2009. So it’s up about 100% since then according to my maths. The All Ords bottomed at around 3300. So it’s now up around 50%.

Ross
Guest

Somebody graphed QE3 hits on google for me

http://www.zerohedge.com/article/google-trends-qe3

I have something of my own invention to contribute though. I’m calling it downward index extorsion …. (die)

the barbeque cometh …

Stuart C
Guest

Your chart shows the XJO and DOW at roughly similar levels since March 2009, but the DOW is up 82% and the XJO only 45% in the same period of time (as of today).

Ned S
Guest

Yes. I was just working to the nearest 50% – Which seems reasonable enough given market volatility over the last decade doesn’t it??? :D

Though the basic point is still valid I guess – Namely that the All Ords hasn’t decoupled from the DOW?

Biker
Guest

Must have missed something here… . Chronican is a bankers(?) :D

It’s DRA’s policy to amp any bad news, but multiple Chronicans???!~ ;)

Stuart C
Guest
@ Ned.S I suppose it depends how you look at the figures. The chart is supposed to exclude currency movements and still show a bounce in the XJO of 45%, yet the XJO effectively flatlined in May of 2010 – the same time as the AUD started to rise toward the $1.10 mark. The AUD has matched the DOW since then, offsetting the performance of the XJO. I don’t see how you can exlude currency movements from the argument. I think the chart is misleading however, as it shows the percentage increase over time of the XJO on the LHS… Read more »
Ned S
Guest

Agree about it being inappropriate to exclude exchange rate movements Stuart. But Dan does make the point that the graph doesn’t include them. And stresses the fact they are important.

Also see he’s acknowledged the maths error in today’s DRA article.

Biker
Guest

Awaiting a correction, too. Deletion of ‘They’ in the headline, perhaps? ;)

Ned S
Guest

You ONLY get so many corrections for free on a free-for-all service Biker! :D

MIng
Guest
lol! While the current and previous governments can all be found guilty of driving a housing bubble, its a bit rich for the banks to call foul. Afterall, they are the ones who are now lending out 95% and 97% mortgages! They even lend out 100%+ mortgages to first home buyers saying that the grant will bring the leverage back down to 95-97%… Yet, they encourage them to redraw he money out for ‘personal holidays and house goods’. You may have heard the so called biggest recovery in home loan approvals in the past 25 years today (after the biggest… Read more »
Biker
Guest

Ming: “…its a bit rich for the banks to call foul…”

BankS?

BankerS?

tHEy?

HE.

Reread the headline. Reread the article. ROFLMFAO… :D

mike
Guest

…i don’t see the link between “price” and “supply” when buyers avail themselves with heaps of money so generously lent to them from the bottomless barrels at mortgage bankers’ disposal…heck, add helium to a balloon and it rises, makes no difference if some kid wants it or not…

Biker
Guest
Ming: “Shocking, 36% between 80-95%….” Easily shocked if you believe a homebuyer who has 19% equity in his home is sub-prime, Ming. Now if RateCity had given a 20% figure of 5 – 10% equity, how much more convincing would their data be? But, as Chris Joye recently noted (9/06/11): “The RBA estimates that only 2.5% of all borrowers have a loan-to-property-value ratio equal to or greater than 90% and are paying away more than 50% of their disposable income to service their repayments.” Other recent research indicates that while Aussie homeowners have more debt than eight other western nations’… Read more »
Not Fooled By Property Spruikers Hype
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Not Fooled By Property Spruikers Hype

Ming

You are arguing with “Biker Pete” he thinks he is earning 7% tax free on funds he puts into a mortgage offset account.

This simpleton is not able to understand the basics.

He has my vote for Village Idiot & after you converse with him for a while you too will be casting your vote for him.

Not Fooled By Property Spruikers Hype
Guest
Not Fooled By Property Spruikers Hype

Pinhead (That’s you Biker Pete) where is you link to prove:

But, as Chris Joye recently noted (9/06/11):
“The RBA estimates that only 2.5% of all borrowers have a loan-to-property-value ratio equal to or greater than 90% and are paying away more than 50% of their disposable income to service their repayments.”

The US Fed gave a ringing endorsement to their banks late 2008 & publicly stated that they were comfortable with US Debt levels.

You are just a Idiot in search of a village.

Biker
Guest

Your village has already found _you_ N Fool.

Here’s the link, fidiot:

http://www.propertyobserver.com.au/residential/aussie-housing-stock-is-not-too-expensive/2011060850447

Biker
Guest

“There’s no buyers. There’s no demand. The economy is just not strong enough, and in which case we could go back to test some horrible lows.”

Are they talking about the property market? NOPE, the share market: http://www.perthnow.com.au/business/business-old/market-to-track-sideways-for-six-months/story-e6frg2qu-1226074127886

Not Fooled By Property Spruikers Hype
Guest
Not Fooled By Property Spruikers Hype

Pinhead he quotes the RBA but gives no link to the RBA where they say it.

He is selectively quoting them out of context.

When you read the RBA comment in whole it is totally different.

Don’t worry I don’t expect you to understand after all you think you are earning interest at 7% + Tax free in a mortgage offset account, when in fact all you do is save paying interest.

Do you get that yet?

Simpleton!!

Biker
Guest

Don’t worry, I don’t expect the angry tenant of a housing commission home has any experience whatsoever in property. ;)

You’ve repeatedly proven, by your _own_ admission, you’re a chronic liar.

Not surprised to find you over here. They all know you _much_ too well over at PerthNow. Want a link or two for that? :D

Biker
Guest

HaHa.. Minus One? Don’t go sooky on me, son!
Steve, this fidiot is hitting me with Thumbs Down, mate. Fix it, will ya?

I nominated you for the Queen’s Honour List, N Fool…
for services to landlords. Reduced construction, less homebuyers, less investors in the market… we owe you a debt of gratitude.

Rents are rising. You’re a leg end, N Foot. ;)

Not Fooled By Property Spruikers Hype
Guest
Not Fooled By Property Spruikers Hype

Rents up $30 pw in the past 18 months & Holding costs up $180 pw ?

Do the Math!

You are a clueless Mum N Dad investor with no idea.

Biker
Guest

Yes, we’re mum’n’dad investors, living (and travelling) very comfortably and fully independently in retirement, thanks to great information and excellent advice about property.

You’re a Homeswest tenant, who has felt it necessary to continually lie about his circumstances during the last eighteen months.

You are, in every respect, a poor troll.

Biker
Guest
N Fool: “Rents up $30 pw in the past 18 months & Holding costs up $180pw ?” According to RPdata, during the last five years, the cost of renting a house in Perth rose on average 8.7 per cent each year. That’s a 43%+ rent hike. During that same period we financed an additional seven properties, mostly at around 8.7- 9.45%. Interest rates then fell out of the sky. The very worst interest rate we ever copped was 7.24%. Holding costs fell by tens of thousands of dollars. Your calculation that holding costs would be $180 pw EXTRA* in 2011… Read more »
Not Fooled By Property Spruikers Hype
Guest
Not Fooled By Property Spruikers Hype
Biker: “”The RBA estimates that only 2.5% of all borrowers have a loan-to-property-value ratio equal to or greater than 90% and are paying away more than 50% of their disposable income to service their repayments.” You say 90% are paying 50% more repayments? { WRONG PINHEAD } http://watoday.domain.com.au/real-estate-news/at-31-firsthome-buyers-are-getting-older-20110609-1fut0.html This article says half your alleged claim,? “As well, 45 per cent overpaid on their repayments, well above the average of 26 per cent in the other surveyed markets.” Thats 45% & not 90% of people making extra payments. The housing market is not about one individual idiotic investor!! I pointed out… Read more »
Biker
Guest

N Fool: “You say 90% are paying 50% more repayments?”

Where? I directly quoted Chris Joye. I didn’t cite the 45% overpayment data. It is, however, quite significant. Nearly half Australian homebuyers are _overpaying_ on their mortgages.

N Fool: “…your own circumstances highlights your stupidity…”

Amusing, from a self-confessed liar, a Homeswest tenant who is bitter about his impoverished circumstances… and whose guesses about crashes and interest rates have been _consistently_ wrong. ;)

Not Fooled By Property Spruikers Hype
Guest
Not Fooled By Property Spruikers Hype

Up there with retired wealthy investor who travels the world for six months of the year & has a hobby farm. But still spends 24/7 Blogging Property?

Biker
Guest
N Fool: Homeswest tenant, chronic liar, dismal prophet of doom’n’gloom, who spends his _life_ pretending to be someone else (continually admitting to previously having lied); whose predictions unerringly fail. Probably unemployed economic refugee, with minimal prospects of ever being employed. Frustrated, sad, bitter fearmonger. Goals: Spread fear, host funny little blogsite radiating envy and covetousness… ;) Biker: Retired very comfortable property investor with other diverse assets, who travels abroad for extended periods annually. Enjoys lifestyle property which provides food, water and energy needs… . Blogs around 10% of the time the Enfooled One does. Happy with life, lifestyle, health and… Read more »
Not Fooled By Property Spruikers Hype
Guest
Not Fooled By Property Spruikers Hype

Biker: Fantasy investors who thought he was earning interest TAX FREE on funds he deposited in a mortgage offset account. Established himself as a fool with no idea & Zero Cred.

Not Fooled By Property Spruikers Hype
Guest
Not Fooled By Property Spruikers Hype

Biker Pete:

Merrill Lynch is forecasting that house prices will fall 10 per cent from their peak in June last year, while another broker, JP Morgan, reckons there’s a particular bad debt problem building for loans made in 2009

Read more: http://www.smh.com.au/business/house-prices-to-fall-but-not-bank-profits-20110614-1g10n.html#ixzz1PFYsLooi

Not just me Pinhead!!

Not Fooled By Property Spruikers Hype
Guest
Not Fooled By Property Spruikers Hype
FAMILIES struggling to pay their bills are staring down the barrel at a $3000 increase in the cost of living in the next 12 months, a new financial year burden that could push them to the brink. From July 1 households will be hit with one of the largest rises in electricity, water and gas prices in decades, on top of usual yearly hikes in council rates, childcare, rent and car registration. Then add the Federal Government flood levy, which will cost the average family between $300 and $750, and the Federal Budget cuts to middle-class welfare that substantially reduce… Read more »
Biker
Guest
Real people? As opposed to _chronic liars,_ you mean? N Fool: A proven liar, by his own admission. Claimed to be at an auction he later admitted he didn’t even attend; claimed he owns SIX properties: Karratha (4), Woodlands (1), Mandurah (1). Now admits he’s in a Homeswest unit. Here’s a fella who predicted a 20% property crash for 2010; then sent us all a vidclip of Steve Keen stating the Oz market ROSE 20% in 2010. Didn’t even have the nous to realise his SNAFU! He predicted homebuyers would be up for an EXTRA $9K+ in 2011, as a… Read more »
Not Fooled By Property Spruikers Hype
Guest
Not Fooled By Property Spruikers Hype

Biker Pete why skip over your claim of earning 7% plus Tax Free in your Mortgage Offset Account?

It goes to the Heart of your claim that you are a sophisticated investor, but revels you are a simpleton!!

Biker
Guest

They were accountS, N Fool. I revel in your ignorance. ;)

My claim that I’m a ‘sophisticated investor’? Let’s see that link. :D

X
Guest
Biker said: “Yes, we’re mum’n’dad investors, living (and travelling) very comfortably and fully independently in retirement, thanks to great information and excellent advice about property.” Well I’m glad the Baby Boomers are living well off their generational theft. We’ll just carry on being your slaves then shall we? While you live the high life on our crushing tax burden? Here’s what I predict for GenX in the future: 1) Rising cost of living 2) Rising tax burden to pay for the Baby Boomer ponzi scheme known as superannuation. 3) Declining wages. 4) Rising interest rates. 5) Crushing debt that can… Read more »
Biker
Guest

X: “But by all means, enjoy your retirement Biker.”

Thanks, X.

Happy to pass on what we’ve learned.

You might add:

4.5) Rising rents. ;)

X
Guest

>> Happy to pass on what we’ve learned.

You mean I should be stealing from GenY?

Biker
Guest
X: “You mean I should be stealing from GenY?” Well, I actually agree with much of what you say, X. Your generation is definitely doomed. Your future is bleak and hopeless. You are completely powerless. Look on the bright side. Let’s skip your generation. Generation Y (often termed The Boomers’ Kids) have a very bright future. http://www.perthnow.com.au/business/generation-y-most-likely-to-make-sacrifices-to-buy-their-own-home/comments-e6frg2ru-1226071532730 Our own two GenYs are a pretty good example… . They put themselves through uni, independently; live overseas, independently; and they have significant assets: property, cash, shares, bonds and Super. One even owned PMs until he cashed ‘em. Neither works more than 45… Read more »
X
Guest

Bleak? Ha! What makes you think I will be sticking around here so I can pay 70% of my income in taxes to support you and your spoiled brats?

Sure, if I wanted to enjoy the experience of fascism, a police state and a banana republic, I would stay in Oz, but I will be leaving and taking my children with me before you lot move right on to cannibalism to satisfy your rapacious greed.

I guess your kids will be renting from you right?

Biker
Guest

X: “I guess your kids will be renting from you right?”

They’re _both_ landlords! :D

So you’re leaving our fruit-ridden, nazi, cannibalistic shores, X?
Where do you think you and your children are better off?
(Probably back where _you_ came from?)

When I last heard, my rapacious pillaging BB generation had spread right
across the entire planet, ‘rapping’ and pillaging each new utopia and nirvana we encountered.

Looks like you’re employing 3.), 4.) and 5.) above, anyway.
When you and your children arrive at Newtopia, I’m sure jobs and homes
will be showered on them, just as you’ve taught them.

Sounds wonderful! :D

X
Guest
>> So you’re leaving our fruit-ridden, nazi, cannibalistic shores, X? I mentioned fruit? >> Where do you think you and your children are better off? Pretty much anywhere in APAC, except NZ or Singapore. >> (Probably back where _you_ came from?) My mother’s stomach is not a country, but I guess you were trying to imply that I am an immigrant. This is because you can’t imagine why any Australian would not want to be a slave to support your ignorant, lazy, incompetent arse? >> When I last heard, my rapacious pillaging BB generation had spread right across the entire… Read more »
Not Fooled By Property Spruikers Hype
Guest
Not Fooled By Property Spruikers Hype

Biker Pete

No doubt about it you are a world class DIP$HIT!!

X Nice Bitch Slap keep it up.

But remember you are dealing with the “Shallow End of The Gene Pool”

Biker
Guest
NF, I’ve never forgotten I’m dealing with the “Shallow End of The Gene Pool” but I’m generally too polite to infer your intellect issues are genetic. You’re probably right. X, N Fool, I can see you’re both _happy_ with the choices you’ve made. If you’re not, it’s never too late to change them. N Fool, if a Homeswest unit is your preferred accommodation, stay with it. Now you’ve admitted your true situation online, you can play the ‘victim’ card, like X. You’ll enjoy more empathy and sympathy. Misery loves company! X, if you believe you and your children (note I… Read more »
X
Guest
>> X, if you believe you and your children (note I didn’t say ‘spoiled brats’) are better off overseas, start packing for your new improved life. Already done. I’ll be taking my superannuation with me too. >> Note also that I ceased reading your angry rant at the point when you used the term “idiotic ad hominem attacks”. I don’t imagine it improved after that… . Well, since you attacked my character in your second post, and you attempted a racial slur in your third post, along with using the word ‘nazi’ (who were not fascists btw), I estimated your… Read more »
Biker
Guest
Much better, X. You see, bitterness and anger aren’t necessary. Hope you’ve enjoyed your extended stay with us. Advised the missus you’re taking the kids, yet? During our lives we develop strategies for getting what we want… and need. If you’re a firm believer in luck, you may not have bothered to develop these skills to full extent. I suppose that if you were taught early in life that the cards are stacked against you, or that someone else limits your potential, why bother? If, however, the strategies you are employing aren’t working, you might need to reassess them, rather… Read more »
X
Guest
>> Much better, X. You see, bitterness and anger aren’t necessary. You mean I should just enjoy my enslavement? >> Hope you’ve enjoyed your extended stay with us. By ‘us’ do you mean the owners of Australia, or Australians? Are you implying that I was only here by ‘your’ grace? You are trying to imply that I am not an Australian right? I guess you must be a Koori. >> Advised the missus you’re taking the kids, yet? I know where you are going with that. >>During our lives we develop strategies for getting what we want… and need. If… Read more »
Biker
Guest
X: “I wondered how long it would take you to use threats.” X: “I kill you, and take all of your money.” OK, let’s analyse that. I advise that people who get sick of your whingeing will turn off… and you ‘hypothetically’ kill me. :D Biker: “If, however, the strategies you are employing aren’t working, you might need to reassess them…” X: “What makes you think I will be sticking around here so I can pay 70% of my income in taxes …” Now that’s a good example. It’s difficult to imagine why a person with your extraordinarily-high IQ would… Read more »
Not Fooled By Property Spruikers Hype
Guest
Not Fooled By Property Spruikers Hype

Biker Pete you truly are a Oxygen Thief.

But hey you get more & more irrelevant by the day. Keep it up you Muppet!

Have a look at this post about housing activity in Perth down to 30 year lows & Realtors fleeing the market like Rats on a sinking ship:

http://nfbpsh.blogspot.com/2011/06/perth-property-activity-at-30-year-lows.html

BTW my humble blog is averaging over 1200 hits a day this month. the message is getting out there while you howl at the moon.

Biker
Guest

Read your blogshot, N Fool?

A blogshot written by a self-confessed liar, a pubic housing tenant who claimed ownership of six investment homes for nearly a year?

NF: “But remember you are dealing with the “Shallow End of The Gene Pool”
(We screamed with laughter! Let me guess… You do _stand-up comedy_ on your blogspot, right???!!!~ :D :D :D )

Not Fooled By Property Spruikers Hype
Guest
Not Fooled By Property Spruikers Hype

But Trav’s I know & you know you had to have a peek!! (Tee Hee Hee)

Biker
Guest

HaHaHa…! Yes, about a month ago, with friends present, I had a look.
Happened during a dinner party… and we ALL had a good laugh. :D

Look, here’s a free, life-changing tip:

First get your 12 yo…

Now, display the sentence “You truly are a Oxygen Thief.”

Ask “What’s wrong with this sentence?”

Yeah, I know, I’ve attempted to help you with this a dozen times,
without success, but I’m not giving up on you, DH Lawrence… . :D

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