Today's Daily Reckoning will be mercifully short. Your editor is working on two projects for paid subscribers that need to be finished before we head off to South Africa on Friday. It's okay though. There doesn't appear to be anything to worry about in the markets at the moment.
Stocks are surfing a sigh of relief that Dubai hasn't precipitated a global crisis. Plus, huge amounts of liquidity in the market are bound to take it higher for now. This makes valuing stocks a risky - dare we say futile - proposition. But we'll push on.
Someone has called us out on the message board and demanded we put an exact date on our prediction for an Aussie house price collapse. This is a moronic suggestion. The claim is that if you say anything often enough, sooner or later you're going to be right...only you're not really right...you're just repetitive...and lucky.
But we've done plenty of homework on the Aussie housing market. We're either right or we're wrong. Our forecast is not an option. There is no time decay. True, there may be people out there who are weighing up whether now is a good time to buy a house based on predictions about the direction of prices.
However this more or less proves our point. Buying a house is one of the most important financial decisions you make in your life. It should be based on whether you can afford it, leaving plenty of wiggle room for rising interest rates, the loss of income, and, of course valuations.
On the last subject, we couldn't be clearer about what we think of Aussie house valuations. They are outrageous. Even if demand is being fuelled by foreign buyers, this simply makes them more unaffordable to people just getting on the property ladder. Besides, getting into the property market now with a huge mortgage at a variable interest rate because you think you can sell to a foreigner for a capital gain is not an investment. It's a gamble.
Aussies have been gambling on houses for at least ten years now (credit to Steve Keen for that description). We don't know when it will end. But we know that it has to end eventually. It could end if something drove up unemployment or down existing wages.
But we think the more likely shock will be an external one. There are two big looming factors out there. The first is the rising cost of capital which makes importing funding more expensive for the big banks. The government is trying to soften this blow by supporting the housing market with the AOFM's purchase of residential mortgage backed securities.
The other big factor is China. And for the sake of argument, let's just put this out there: China's boom is entirely a function of the credit cycle. The expansion in Chinese fixed asset investment and productive capacity is fuelled by a trade surplus and a currency policy that are on borrowed time. China's economy is every bit a symptom of the credit bubble as the U.S. housing market.
Obviously a pop in the China bubble is a game-changer for Australia. Specifically, national income would go down (export volumes and prices probably plunging). Australia already has a mountain of debt to service. At higher rates with lower national income, that debt gets even more burdensome.
The only realistic argument is that the government will not let house prices fall. Too many people have too much to lose. The banks, the real estate industry, the builders, the spruikers, the tax man, and Australians with mortgages. In other words, Australia's housing market is too important to fail.
But even this argument fails. Just because the government wants it doesn't mean it will happen. As we are learning, national governments have limited resources too in a global credit crunch. Pouring them into the housing market to support prices is one part wasteful and two parts stupid.
Besides, a nation doesn't get wealthier buying and selling houses. The ability to purchase your own home and elevate your standard of living begins with rising incomes, and those come from productivity increases and innovation and trade.
For the Australian government to make housing the centrepiece of the national wealth strategy is every bit as disastrous as the Wall Street/Washington axis making finance the crown jewel of the American economy at the expense of manufacturing. It's a massive selling-out of Australia's long-term economic future for short-term political gain.
This Anglo obsession with getting rich off of houses is just that: an obsession. It's also lazy, and perhaps a sign of civilisastional decadence/fatigue. We wrote a report in 2004 called, in subtle fashion, "The Total Destruction of the U.S. Housing Market." Excuse the formatting there. It's the only on-line copy we could find.
You should have a look at it - but don't order yet, we're working with a friend to relaunch the product shortly. And if you think our advertising copy is hyperbolic, of course it is. We're operating at the margins of the financial publishing world, writing about the kinds of scenarios that terrify the mainstream media because they alienate advertisers. They laughed when we first made the claim, and those were just the people who weren't calling us "un-American" and a "fear monger."
Of course it turns out we were two years early on our call. Did that make us wrong? Well, if it was a trade, yes. Way wrong. But as a macroeconomic call about an unsustainable set of circumstances, it was right. And that's the call we're making here about Australia. If you want a date, check out the online personal ads.
Dan Denning
for The Daily Reckoning Australia
P.S. to get The Daily Reckoning direct to your inbox sign up to our free e-mail newsletter or if you prefer to use RSS, subscribe to the Daily Reckoning RSS feed.
Related Articles:
- Housing Market is Becoming More Affordable but That’s Not Necessarily a Good Thing
- When Will Housing Stop Falling in Price?
- Geithner Says it Would Take a “Long Time” to Repair the Housing Market
- House Prices in California and Las Vegas Hit Hard by Wave of Foreclosed Properties
- Gold, the Aussie Dollar, the Greenback and You
About the Author
Dan Denning is the author of 2005's best-selling The Bull Hunter (John Wiley & Sons). He began his financial publishing career in 1997 and has covered financial markets form Baltimore, Paris, London and, beginning in 2005 Melbourne. He’s the editor of The Daily Reckoning Australia and the Publisher of Port Phillip Publishing.
Comment by Ned S on 2 December 2009:
Hey Mr Denning - If ya can't give us a date mate, I'll settle for a decade ... This one? The coming one? Or the one after? Or do ya mean in our really futuristic dreamtime cuz?
Comment by Sambo on 2 December 2009:
"If you want a date, check out the online personal ads."
Brilliant!
Nostradamus? No. Analytical and logical thinking? Yes.
Comment by beyondtool on 2 December 2009:
Compounded rate rises that are a historical first, coming off historical lows, 15% housing price increases in a tough year, a drop in demand, the expiration of the first home buyers grant...all sounds like a certain way to start a housing crash.
To be honest I am astounded that this didn't all start at the end of last year. You want a date..I'd say if it doesn't happen in the next 2 years I'll eat my hat.
Comment by GB on 2 December 2009:
The AFR has an article today about steel makers in China and there are a few key points i think are important
1. 32 new steel mills have been built since a ban on new mills was imposed in July
2. Steel capacity outside of China is down 50%
3. China now produces 50% of the worlds steel, EU and north america 7%
4. Quote: 'there's money everywhere in China at the moment'
That's the mother of all mothers of a bubble
Comment by Joyce on 2 December 2009:
I totally agree with what Dan said. I do not have a crystal ball, so I do not know either. For property investment in certain (most) parts of Australia, patience pays under the present circumstances.
Comment by Dan M on 3 December 2009:
I'll offer a date. Shortly after the government stops messing around with the market! Get rid of the first home "sellers" grant, stop guaranteeing private bank borrowing, and then we'll see. If we were really in a property bull market we wouldn't need either of these massive crutches, so stop them and put the theory to the test.
Having this ratio of mortgage debt to income is like jumping off a very tall building. The outcome is inevitable. The government is digging a hole at the bottom of the building by borrowing and spending to support the housing market. This does absolutely nothing to stop people from falling, and only makes the impact harder when they hit the ground.
Comment by Peter T on 3 December 2009:
Dan,
You are doing some of the best, informed writing in the industry on the impending house price crash. The mainstream media are merely parrots of vested interests, in comparison.
Keep up the good work!
Comment by GB on 3 December 2009:
WOW!!!! Everyone turned insane overnight
Business Spectator commentators seemed to be suffering from brain farts
Carr reckons Australia should print money and buy gold!! 'Why not everyone else is' he said
Kohler reports China now has 2.3 trillion reserves of gold - i guess they have NO USD left then. That means they got out of USD and the dollar didn't collapse or he might have got his figures wrong
Retail/main stream are now on the gold bandwagon - warning, warning!!!
I'm going to buy some more USD i think
Comment by GB on 3 December 2009:
Mike Mangan reports today on commodities and states he is concerned over resource stocks. I have pasted his comments below
*************************************************************************1. aluminium LME inventories are 75 per cent higher than the prior 20 year high set in May 1994.
2. Nickel inventories are only 6 per cent below the 20 year high set around the same time.
3. Zinc inventories have risen six fold since the start of the subprime crisis in September 2007.
4. Lead inventories are up five-fold over the same period.
5. copper inventories have increased for 20 consecutive weeks and are up 70 per cent since 30 June.
All this suggests investment flows rather than healthy economic demand have been the primary driver of higher commodity prices.
*************************************************************************
But hang on a minute... China, Brazil, India, Russia, Australia, Asia are all booming. we are about to witness growth in Asia and developing economies over the next few decades that is going to dwarf the previous boom we just witnessed.... RIO Tinto is bringing another iron ore mine online to support this massive demand from BRICAA
If this roaring demand for commodities proves up to be farce then our heavily indebted economy may get a bit of a slap in the face....
Comment by Jason on 3 December 2009:
This investing environment is crazy. I dont't know whether to buy stocks, sell stocks, buy gold, sell the gold I already have or just spend all my money and enjoy it before it's devalued/taxed/stolen by governments
House prices in this country beggars belief. I mean, this is Australia. It's not like we have a shortage of land.
Comment by Chris on 3 December 2009:
Jason, I agree completely. I have a 3-5 year plan to save up a substantial enough deposit (thinking 6 figures with a 2 in front is big enough) so that I can buy a house and bring up my family. I don't know too much about finance (hence i have recently subscribed to independent sites such as this to increase my knowledge base) but the more I read the more I realise how absurd the markets actually are. Although I am getting independent financial advise to work out what suits my current situation and where to maximise my returns, I want to understand as much as I can about what I am investing in before handing over my hard earned cash. And what i have been able to decipher, there certainly is no such thing as as a sure thing, only shaky at best!!
Comment by Justin on 3 December 2009:
Yes GB, the so called economists over at Business Spectator have quite literally gone mad. Alan Kohler is now a gold lover!? I know, he must have just been disparaging gold a couple of months ago in an attempt to 'shake out' weak hands & pick some up on the cheap!
I wonder how Adam Carr thinks we can pay off debt by printing money & buying gold? Last time I looked money was debt & you otherwise pay off debt by selling gold, which we can't likely do because Howard sold most of it in 1997. The RBA says it still has 2.57 million ounces, but the IMF admits that this may include gold on loan.
And how much of Australia's gold commitment to the IMF just went to India in return for the recent remarkable rise in SDR's on the RBA's list of Official Reserve 'Assets'?
Comment by wasabu on 3 December 2009:
Roughly June 2012!
* Mayan calender ends on December 20, 2012 (I think that's the date).
* Nostradamus prophesies have been nicely leaked for decades... now suddenly his 'lost book' turns up in Rome national library! Oh boy it was just sitting there waiting to be discovered was it? hehe Oh those cheeky freemasons. I wonder where they're bunkering down for the big one?
oh sorry.. point of the second point is that the world can't end without a good solid housing collapse - surely. If not by market sentiment then by a 60 metre meteor and a sprinkling of brimstone for effect.
The fun aside, I think it's absolutely silly to be wondering "where do I put my money? RE? stocks? commodities?" while the titanic is springing leaks.
Just get in the lifeboat stupid and preserve what you've got! This is no time to gamble! Got gold?
Comment by Bertie on 3 December 2009:
Looking for a date?, sometime during the Rudd govenment's next and last term. They are a pack of Wallys.
Comment by Coffee Addict on 3 December 2009:
I could take punt on the August next year. Why then? Because "quantitative easing" in the US will really start to fall by then and US interest rates will start to rise.
I may be wrong. Maybe quantitative easing will continue ..... but I don't think the US Treasury will wear that option given that the export of the cheap money though the carry trase does not benefit business in the US.
Comment by Justin on 3 December 2009:
Mr Denning, go to http://www.rba.gov.au, find the statistical bulletin and hence D01-Growth in selected financial aggregates. Graph the figures on Excel & you'll see how close we may be.
Comment by GB on 3 December 2009:
Coffee Addict
thats what everyone is watching for, i.e. people seem to be watching for US rates or a sovereign debt default or China removing its stimulus. its what no one is watching that may trigger a crash prior to that
What if it was something as simple as the LME refusing to accept any more shipments of aluminium etc... because their warehouses are full? Currently investors globally are selling USD, which they believe is worthless, and buying physical assets such as commodities. Now we have a situation where there is a huge surplus of commodities. A surplus of commodities will mean a reversal of prices making them worthless. Would you rather hold $3 or 1 pound of copper? Remember that you have to find a buyer for that copper before you can buy your groceries and if everyone has sheds full of copper then copper will be worth nothing
So one possibility is a correction will occur when people stop believing in the physical assets story
Comment by GB on 3 December 2009:
another possibility
I remember not long ago commentators were saying things like 'oil at $200' and 'i just cant see how oil wont keep up' then everyone blinked and oil was at $30. Now replace the word oil for gold...
gold bulls say that gold has been in a 10 year bull market and the USD has been in a 10 bear market. Its possible to assume that the USD has been going down over the last 10 years at the same time the US consumer debt levels have been increasing. So, gold up, consumer debt up and USD down. BUT NOW!!! the US consumer debt levels are falling....
Are we witnessing the end of the gold bull market and possibly the start of the USD bull market?????
Comment by Jason on 3 December 2009:
Chris, it seems the problem with learning how the finanial markets work is that the more you learn the less you know. At least for me, lol. Smarter people out there may fare better.
I'm just happy I bought a bunch of Gold back in 2004. I owe it to sites like these challenging the accepted wisdom and forcing me to think. Good luck with your plan and let's hope that by the time you are ready to buy, this housing madness will have come back down to earth.
Comment by Greg Atkinson on 3 December 2009:
I just follow a few simple rules when reading investment advice, they are:
Do the people telling me how to invest:
1. Actually disclose any actual trades?
2. Derive their main income from investing?
3. Ever admit they are wrong?
4. Focus on facts? (or simply attempt to grab attention with scary headlines etc?)
Unless I can see a "yes" to every question above then I treat that person's advice with extreme caution.
Comment by Dan on 3 December 2009:
You need to live in a dwelling, right? It's cheaper (if you live in a house more than a few years) to buy than to rent, for an equivalent house - hear me out.
How much would you be prepared to pay in rent? What kind of house does that get you? That's the kind of house you can afford to (and probably should) buy, and once you do there are no more moving costs, etc. For most people, this means they have badly overbought and are in a potential (or eventual) debt trap, because they are ashamed to live within their means. There's the bubble, and it WILL burst, especially as interest rates rise. The top end of the housing market will suffer badly, as it usually does in a downturn, and the rental market will become very competitive and nasty (lots of bad tenants, etc, and likely changes to tenancy act against landlords).
People might be earning 80K plus on a single or double income, but they are really poor if they live in a 500k indebted house. Not many spare dollars, and not much left to put down in principal after interest. Very vulnerable. But do you think the bank cares an iota? Not a chance.
But, if you own a house outright, then don't obsess about its valuation. Accept that you own some land with a building, live in it, and be thankful. Whatever happens, it's almost certainly going to be exchangeable for another house - rest assured. It's folly to boast "my house doubled in value over 5 years", because it didn't, won't and can't. It is still the same value as a house - only the prices change. If you sell, you still have to buy, or rent.
Beyond that, Dan Denning is quite right, it's not a good time to be investing money in houses - not yet. The only real estate purchase I'd be making now is one which has a definite plan for generating useful income, such as buying a commercial building for running a business (one likely to survive in depression circumstances), or farmland for actual farming, etc. Rentals work, but the speculative aspect of real estate is now far too risky - three cheers to those who had their fun and didn't get burnt, but best not linger any more. The political landscape is set to change dramatically, as is the economic approach taken in Australia.
China is dangerous because of its large population and military ascendency - dangerous not because it will take the world over (it can't), but that it might just try to. However do not assume that the level of stupidity portrayed by the media is the same as that which exists in other areas of society, especially with respect to planning. Many of the most important world events are not reported (or criminally underreported), and most people are unaware of them, especially in Australia.
The way to work all of this out is to think in two ways - firstly with numbers (dollars), and then in tangibles. Dollar wise we see China being strong, though frothy, the US being weak, Australia lucky but foolhardy, houses overpriced, etc. Everything you read about on DR. But tangibly, houses are still houses - good and bad, the US still has the tech, the guns, the ships, the bombs and the friends. Australia has the dirt, the metal, the food, and the comparatively sustainable population size and defensible (and is useful and essential to the global strategy of US/NATO). China is corrupt, overpopulated and disorganized by comparison, so for all its dollars and even for all its guns, it is still weak. The government can't trust its people, and vice versa. They can't win that way.
Further, on tangibles, is the changing of freedoms and the political landscape, and in this it becomes clearer that what really is happening in the US is regime change - reduced democracy, the establishment of a privileged elite (perhaps like apartheid) and probably the establishment of a wider, umbrella government spreading over the continent. There is no apparent plan for such changes in Australia yet, and the EU is not going to be dissolved IMHO.
Buying gold is reasonable, but trading it later might not be so simple. Trading anything might well become a thing many will lose access to altogether.
Comment by Davo on 4 December 2009:
Spoke to a friend on the weekend who has just come back from China, visiting various factories. The factory owners are told to continue production levels, not sack workers, and if necessary, store unsold/unwanted production. One asked what he should do when he runs out of storage space - the answer was "we will give you money to build another shed to store surplus stock". Obviously, the Chinese masters are looking to placate their people, and will do whatever it takes to ride out the storm of a lack of export demand, in the hope that the situation turns around sooner rather than later.
Sounds like a dangerous strategy.
Comment by Antony Haines on 5 December 2009:
You know the more i read your newsletters the more i am starting to disagree. In today's email you talk about a unit in Sydney selling for 189. I think your comments dis-respect other peoples situations, this unit is near the University of Sydney, near the Botanic Gardens, near the city, near the trains and is renting for more than the loan would cost at 6%. If this was a young couple very much in love and studying at the University, then tell me this wouldn't an option at 90,000 each? Let's say the parents were able to afford this or at the least go guarantor, then it would be something that will still rent out after they finish University or sell to buy something else.
People need somewhere to live and as you say, most of the homes being bought are new homeowners so if there is a bubble, who cares? the prices aren't going to go down as these new homeowners don't need to sell as the only place they will have to go back to, is there parents place and they will have most likely downsized, so the room won't be there for them anyway.
The only way house prices can "burst" is if people, like in the states move into tent cities and tell me that the banks and or Govts want that?
I'm not saying that this can't happen but with a potential 14 interest rate cuts the resrve bank can still make i think we are a long way from that situation.
Growth could be a problem, that i can see.
Comment by Greg Atkinson on 5 December 2009:
Maybe DRA and Steve Keen can get into a huddle and come up with their next property prediction...eventually one of them will come true.
By the way Dan I don't think it is a moronic suggestion for anyone to ask you to put your property prediction into some context. Steve Keen did it..and was proved wrong, so how about you just put some rough numbers around what you reckon will happen?
In any case, some of your articles have conveyed the impression that a property crash in Australia was imminent, so don't get annoyed when one of your readers questions your judgment...or did you get issued with the same model glass jaw as Kevin Rudd?
Comment by Watchful eye on 5 December 2009:
Antony you are very mis-guided, leaving aside scenario's of young couples in love living in studio apartments that are the size of their old bedroom at mum and dads but now accomodate kitchen. and bathroom you can't be serious that you think this sitation is sustainable. $180,000 for a studio, correction, 3m x 5m concrete box with carpet and a kitchen.
When ratios of median house prices Vs Median income swell to 8-10 times then this floor is about to open up and swallow people whole, starting with the niaive first home buyers who punted up big time to get in and are now S#$Ting themselves that rates are going up, nobody said they would do that!!
Its subprime OZ but we are all to greedy to ralise that non of this is sustainable, it is a pyramid scheme at its best at Rudd has ensured it remains for now but it will not be forever, not even he can stop what is only a matter of time.
Comment by watcher7 on 5 December 2009:
Unfortunately it appears that Steven Keen is not a follower of the Pittsburgh Steelers. If he had been he would not have bet on a property crash. In a post earlier this year I included this quote:
"Since the first Super Bowl was contested in 1967, the average annual return for the S&P 500 index has been 25 percent in the six years the Steelers competed, regardless of whether the team won or lost, according to Capital IQ, a division of Standard & Poor's" (Ros Krasny, Steelers in Super Bowl may bring luck to investors, reuters.com, January 30, 2009).
History suggested then that the Dow Jones would rise at least 70% in a future rally. Since the low in March the Dow has increased 58% and the S&P 500 63%.
History also suggests, which Steve Keen did not consider, that 2009 has a ‘rhyme’ with 1932 and 1974, so that an economic recovery would postpone the crash in Australia.
(The Central Bankers’ Intervention in December 2007 suggested that there was one more bubble left in this ‘fiat’ cycle - cp. 1927).
“And while we believe this will not turn into one of the longer bull markets, or perhaps not even match the average Bull Market Duration of 3.8 years, it would be a rare exception to see this bull market expire before the end of next year. Note that not one bull market in the past 60 years has lasted less than two years” (James Stack, The Dismal (Lost) Decade …but we survived it well! Investech Research Market Analyst, Ocober 23, p.8).
History suggests a future housing bust will occur sometime after the end of the present bull market. Interest rates raised to contain inflation will be a warning sign.
Using Stack’s information, we maybe looking for a housing crash at a minimum of at least 18 months and a maximum of 3 years away.
I am looking towards the minimum scenario so that economic difficulties will contribute to a Republican victory in 2012 and the worst of the coming depression occurring in that Republican administration.
Comment by Slim Pickings on 5 December 2009:
One day an article will be written and state that Australian house prices are directly proportional to Government policy (all levels). Take time and think about it.
Comment by watcher7 on 5 December 2009:
Just to clarify, in the comparison with 1927 I was suggesting a connection with Central Bank Intervention only, as America was on a gold standard.
"Had the situation continued, most European nations would have had to leave the gold standard. Given the complexities of the reparations situation, the United States would be dragged down with them in a major financial crisis. Accordingly, Secretary of the Treasury Andrew Mellon and Benjamin Strong eagerly accepted initiations from European central bankers too a conference on the question. In 1927 Montague Norman of the Bank of England, Hjalmar Schacht of the Reichsbank, and Charles Rist of the Bank of France met with their American counterparts. The situation might well be saved, the argued, if the Federal Reserve cut its discount rate. Such an action would lower American interest rates in relation to those in Europe, and therefore attract funds to European banks. At the same time, low rates would encourage borrowing in America and stoke the speculative furnaces. Strong was unhappy about the latter probability, but in the end proved willing to further stimulate an already active American economy in order to save international liquidity. In 1927, the Federal Reserve lowered its discount rate from 4 to 3½ percent.
["... the Federal Reserve promptly began its great burst of expansion and cheap credit in the second half of 1927. This period saw the largest rate of increase of bank reserves during the 1920s, mainly due to massive purchases of U.S. government securities and of bankers' acceptances, totalling $445 million in the latter half of 1927..." (Kevin Dowd & Richard H. Timberlake, Money and the Nation State, (Edison, Transaction Publications, 1998, p.144)].
"Wall Street greeted the lowered rate... Thus, the international situation was resolved in such a way as to encourage speculation on Wall Street" (Panic on Wall Street, New York: Macmillian, 1968), pp.360-61).
The present ‘fiat’ system, introduced during the Cold War, is playing a major role in the post-War boom as it did with the ‘fiat’ systems introduced during the Napoleonic Wars, the America Civil War and WW1.
In regard to the last mentioned:
“...it is clear that World War 1 and the collapse of the Gold Standard resulted in a surge of gold reserves in the United States and the enormous expansion of public sector debt in Europe. It is important to emphasize that U.S. gold reserves could not have increased as significantly during these years had the European not abandoned the gold standard, just as the worldwide explosion of central bank reserve over the last three decades could not have occurred had Bretton Woods not collapsed.
“In attempting to discover the causes of the Great Depression, most studies limit their analysis to events occurring during the 1920s. In doing so, they ignore the doubling of credit base that occurred between 1914 and 1920 and the impact this expansion of credit had on the country’s industrial production. During those seven years, the value of the output of industrial machinery and equipment rose by 205% and the value of the output of all producer durables increase by 275%. It was this surge of industrial capacity during those years that was primarily responsible for bringing about a general oversupply by 1926, when wholesale prices in the United States began to decline...
“During the second half of the 1920s, credit expanded at a moderate rate, but on the back of a greatly inflated credit base. When the real economy was no longer able to profitably invest the available liquidity in new plant and equipment due to overcapacity and falling prices, increasing amounts of money were shifted into the stock market...” (Richard Duncan, “The Dollar Crisis”, pp.57 & 58).
Comment by GB on 6 December 2009:
watcher7
i think you are saying that easy credit/overcapacity caused the great depression????
Back then the US was the manufacturer and the consumer too. Now China is the manufacturer and the US the consumer
Easy credit - US: popped and repairing itself
Overcapacity - China: still getting larger
We've seen what happens when credit bubbles pop, i.e. the US downturn but what about when overcapacity pops?? Will it be a bigger bang or only a mild one??
I think the more China waits to reduce capacity the more severe the pop will be...
Comment by Justin on 6 December 2009:
I think the heart of the Great Depression was a currency crisis. By the way, anyone notice the moves in currencies on friday? The Euro took a pasting, the Yen down the most on a single day in a decade, gold down $50.
Big moves?, the Pound Sterling lost 30% of its value in one day in 1931.
Comment by Bargeass on 6 December 2009:
I sure am glad I can watch from the safety of the sidelines in my $150 per week beach house.
The other bonus is all the extra holidays, spending, fun and peaceful sleeps I can have without a huge mortgage on an overvalued property over my head.
I love property investors who subsidise my lifestyle.
Comment by Pete on 7 December 2009:
And we love tenants who finance our world travels.
Comment by Ned S on 7 December 2009:
So Bargeass loves paying rent and living well. I love collecting a little bit of rent and staying home. And "Pete" loves collecting lots of rent and travelling abroad. Seems we're all happy little vegemites then? Heck, who'd a thunk it ... Does this mean Kev Rudd really is managing to keep all of the people happy all of the time??? I might have to reasses my assessment of him!
Comment by Ned S on 7 December 2009:
Justin - Japan deciding to extend QE might at least partially explain what happened there - The Nikkei was up over 8% for the week based on same maybe?
The traders of the world are brave chaps (unless like Goldman they have an edge) - I'm pretty sure I'll never develop the nerve for it. But good luck them that do - Except the likes of Goldman - They're cheating thieves. IMO.
Comment by Don on 7 December 2009:
"And we love tenants who finance our world travels." I knew that this article would bring the Biker out of his hiding place
- or is this another property owning Peter?
Comment by Justin on 7 December 2009:
Undoubtedly Ned and you know two months after the Pound was devalued in 1931 the Japanese government 'went off gold', that is to say devalued the Yen, or whatever it was called at the time.
The North Koreans have also devalued their currency in the last week! What the #*@*! North Korean toilet paper too strong!?
Comment by Tom Sugar on 7 December 2009:
I think it was me who asked for a date of the next crash....
And I also said I think there will be a crash.... in 2030!
99% of the time you should buy a property if you are going to live in it.
If you take TheDailyReckoning advice you would never buy. Here's a reasonable scenario....
A) House costs $300,000 in 2009. You decide not to buy.
B) Over the next 11 years, property increases 50% (not a huge amount).
C) Then in 2020 the big crash that DailyReckoning has been predicting, finally occurs. Property drops 30%.
Well guess what... the property is back at $300,000!
So you could wait 11 years to buy the property, and get absolutely NO discount over today's price. You are better off buying now so that you reduce the loan amount.
Predicting a big crash is pointless if you are 10 years too early!
Comment by Nirvan on 7 December 2009:
If property has only grown by 50% when it is 2020, it has already crashed.
Comment by Dan on 7 December 2009:
Doesn't necessarily work like that, Tom. With a floating value currency (fiat currency) it is necessary to use a tangible item as an index of value. For example, the average income of a street-sweep, or of any person in your own area of work at your current level of experience, or the price of a hamburger or can of soft drink.
Then you can say a house today is worth 80,000 Big Macs, or 5 gross incomes, or whatever. As Nirvan says, if your house is worth $300,000 by 2020 but your income (for someone at the stage of life you are now) is doubled, then your house lost value as indexed against your income.
Everything in investing needs to be based on this. So the fact that gold is rising in price (not value) while other things stagnate means gold is a winner at the moment. That housing is looking like it will stagnate in the coming years makes it a probable losing bet (except that, again, rent is usually adjusted to ability to pay, which is as good an index as you can ask for - most landlords without debt probably understand this).
Housing markets are usually slower in adjusting than what happened in the US, which is a special case because of the way loans work there (you can't walk away from a financially "underwater" house in Australia .. they take the shirt off your back first and screw you over in other ways also). In a way the US is better than here, because the banks DO have to take on some risk for their folly. A pricing collapse in Australia is not going to be instant, if it does occur, but would need to accompany a collapse in the failure to pay, which would mean a collapse in all consumer sectors, etc. It'd be nasty all round - but would take months to years to unroll.
Predicting a crash is not pointless in Real Estate if it is +/- 5 years, because it's a market where moving in and out is expensive and something worth doing only once or twice in a generation. If you miss the crash by 2 years, you got pretty close!
Comment by Bargeass on 7 December 2009:
Tom Sugar where is this inflationless, rate free, maintenance free, holding cost world you refer to?
Can't say I believe it exists myself.
Cheers again to my landlord who only charges me $150 per week for a beach house which is slightly less than he pays for rates, maintenance etc.
Comment by Richo (the Second) on 8 December 2009:
Therein lies the problem with the housing investment industry - too much emotion - you don't see people saying "how dare you suggest my BHP shares will fall by 30%" but substitute the word property and its like you have insulted the Queen.
Comment by Tom Sugar on 8 December 2009:
Bargeass
You talk about "inflationless" information....
You seriously think rents won't increase in the next 10 years!?
It is only a matter of time before rent increases to a level above (loan repayment + holding costs).
Lets convert $$$ figures into slabs of beer. $150pw is around 3.5 slabs. I will guess the Aussie dollar is almost worthless in 2025, and the cost of 3.5 slabs will be $450pw.
In 15 years time when the Australian dollar is worthless, you will be renting at $450+ per week. On the other hand the home owner will have almost paid off the bank loan and have weekly repayment + holding costs of $200 per week. In 20 years the loan will probably be paid off and then it is holding costs vs rent... a no brainer contest.
Assuming inflation will occur, then rents will always go up, and therefore you are better buying in the long term (99% of the time). I stress I am only talking about the house you personally live in. Also, I did say there are always some 1% exceptions.
Comment by 2 cents worth on 8 December 2009:
Tom/Bergeass
I rent because I think it is "cheaper"and easier. I pay $ 400/pw for a house I guess will cost about $1000/pw to "own". Assume I will still not own at $1000/pw but rent from bank and carry all the risk. I do not want to own this house. It is 5 yrs old and need about $20k spend om maintanance. No damage, just wear and tear. Aussie houses are not built to last 100 yrs.
I will rather make my cash work somewhere els. I actually like BHP( I have cash to buy the house if I want). The entry and exit cost, together with the ongoing expences simply mean I do not want it.
I know my rent will increase, by $ 40pw come February, but I did not just spend $3500 on termite protection. The owner did
Comment by bargeass on 8 December 2009:
As long as the landlord is prepared to accept a return of less than 1% after expences I think I'll enjoy the hospitality.
Comment by Pete on 9 December 2009:
If you're happy renting and a landlord is subsidising you, bargearse, enjoy it while you can. I doubt whether you understand how property deductions work, if you believe your landlord makes just 1%... but ignorance is bliss! Meanwhile we've been enjoying the Mexican riviera, Ned. Beautiful one day, even better the next. Realty seems to be booming. Our guess is that the average price here is at least eighty times average earnings... but how can that be? Interesting link here, in that gold does rate a mention:
http://www.nuwireinvestor.com/articles/puerto-vallarta-real-estate-sailing-ahead-51985.aspx
Comment by Ned S on 9 December 2009:
I've got a long term tenant - Been there since about 2000. I gather they had a windfall maybe a year or two after moving in and could have bought their own place for cash. But they took financial advice and decided to invest the money differently. They gave a bit of thought to buying again after Kev upped the FHOG last year. But decided against it. So renting apparently suits them. And collecting the rent suits me. All good.
I'm still sweating on the Tax Review recommendations Biker. Latest is a reminder that compulsory annuities for them with "modest" super amounts are seen as "efficient" - No surprises there: http://www.smh.com.au/business/tax-review-considers-annuity-plan-20091208-khrb.html
Looking forward to hearing from you when you get home ... In the meantime steer clear of pumas and Aztecs wanting their gold back!
Comment by Pete on 9 December 2009:
Ha, ha... good one, Ned. No pumas. Watching for hammerheads while diving, though... . All our rentals are returning a nice income, except the guest house which is permanently gratis, anyway. Can highly recommend the coastal strip between Sayulita and Quimixto. At present we're enjoying the entire top floor of a magnificent casa overlooking a green valley by the sea, dotted with the mansions of the super-rich. The best part of it is that our current accommodation is totally free... a gift from the kind owner in Seattle. We also have a central apartment one block from the beach in Puerto Vallarta (empty at the moment... .) Western (coastal) Mexico is astonishing, once you're well south of the US. So is the realty. We've taken several hundred photos to inspire our architect... .
Comment by Wally on 9 December 2009:
Wow, some of the reponses on this one leave a lot to be desired. All I have to say to the bulls, go all in and up to your eyeballs in debt (if you are not already), use all that leverage you've built up and buy more houses, units, whatever you get your hands on. real estate never go down right. Residential real estate at some point was a good investment, but anyone that thinks in the current environment it is a good investment should get their head checked. It is impossible for the crash not to occur, its a matter of how bad, and based on actions of government and its citizens over the last 10 years, this is going to be the mother of all crashes. Value is present value of future income, try running a simple cash flow analysis for your typical home and see where you end up!
Comment by Pete, Mexican riviera on 10 December 2009:
Where's Wally?
Comment by Ned S on 10 December 2009:
Pickin' cotton in da fields for da man?
Comment by Bargeass on 10 December 2009:
I think I'll just sit back and watch increasing interest rates do their job.
Comment by Pete, Mexican riviera on 11 December 2009:
Raise your rents, you mean, Bargearse?
Comment by Pete on 11 December 2009:
Raise your rents, you mean, Bargearse?
Comment by Dont believe the hype on 11 December 2009:
As flavour flav once put it 'don't believe the hype'!! There will be bo crash in Australia and this has been proven at the end of 2009 through to mid 2009. Interest rates were diving, stimulus money was being hurled at us at a rate of knots and unemployemnt kept steadily rising with nothing but bad economical news every snngle night and yet we didn't bat an eyelid.
The will of the Australian people to just hang in when times are tuff is something you cannot not over look. It is also the debt default system we have here is much more punishing. Some US states allow you to walk away from the debt and put the ownus on the banks so if they have leveraged themselves against an asset that is overvalue they were the burden. Here in OZ if the mortgage is not paid you get kicked out they sell the house and you gt stuck with a shortfall or a bankruptcy notice, either way you are screwed and have tha dded factor of losing face in our society as the loser who couldn't do something as simple as paying of his mortgage (pubic perception not my view).
Their is also the hidden stigma that you are failure if you havent owned a new home before your low 30's so most have jumped in out of disperation and shame and will claw at aevery cent they can to ensure they keep it. We have an overwhelming affinity with owning our own home/mortgage and we see it as worth dying for, this is a cultural thing that is born into our way of life and one that will see people keeping up their mortgage payments no matter what.
Thier is also the immigration issue, our government keeps pouring in new migrants at an astounishing rate. Last year we took in a total of 360,000 new migrants 150,000 more than the year prior. Our hospitals, roads and general infrastructure cant cope as it is and our apparent housing crisis grows larger with every new migrant. As stated early our Government is aware that most new gome buyers ae leveraged to the eye balss and the majority of our citizens believe their home is their wealth by pushing in migrants they are keeping valuations high and vacancies low, this is also a factor that determines a change will not occur anytime soon if at all
Comment by John Mazzarollo on 11 December 2009:
Chris, you are not an investor or speculator. You want to own a home and to bring your family up there. Talk of house price crashes is just silly. They were silly last year and they are silly now. By all means be careful and don't over commit (a six figure sum with a two at the front is not dangerous territory). The same criteria always apply. Do your homework, research, research, research and seek a wide range of opinions. Don't rely on this site for all of your information or you will never do anything. Seriously! A quick read here finds America collapsing again, China about to and Australia following suit.
People I know sat on their hands last year waiting for the Keen Kollapse and lost their chance to enter the market at the bottom. They wouldn't listen to a variety of views; I hope you do. Just buy.
Comment by Lachlan Scanlan on 11 December 2009:
The only thing guaranteed in life is change. If things have been very good then they will change to not good in the future.
The hyping is currently all focused on residential property as and endless ocean of prosperity not the other way around. I notice on ABC last night the usual tirade of property nowhere near the top yet, housing shortages etc.
Comment by Bargeass on 11 December 2009:
Americans didn't think they're property market could fall either! At least not until it actually did.
Denial is not a strategy for success.
Commie China will also lead you to believe that their economy can grow for eternity at double digit figures if you're gullible enough to trust them.
For all you true believers just keep re-leveraging to the max on those half million dollar average Aussie houses and see what happens down the track.
Comment by Ned S on 12 December 2009:
It really just comes down to whether the inflationists or deflationists will win Bargeass - IMO. We have a debt deflation happening. And Bill Bonner talks regularly about a depression - Which may or may not be so.
But assuming there IS a depression, the question that still must be asked is will it be a deflationary depression? - Or an inflationary depression?
Bill Bonner doesn't seem to want to make a call on that anymore??? Whilst Ben Bernanke is saying We see no signs of inflation - Cross me heart and hope to die!!! While the RBA is panicking and saying inflation could cook our goose - And is hammering up interest rates and moaning about same in rest of world being too low.
Fun times ahead - Whilst we all get to suck and see - And play our hunches. Whilst hedging our bets in accordance with our own personally perceived fears/risks perhaps? (On that score, not owning a home made me feel very much at risk - So I bought one in 2008. But accept that your perception of risk is probably way different to mine for all sorts of reasons.)
Comment by Pete on 12 December 2009:
"...they're property market..." ?!~ We should listen to a genius like you, o lard-arsed one? You failed elementary English, but excelled in secondary economics? Please enlighten us. How _did_ you become so wealthy?!
Comment by Bargeass on 12 December 2009:
Americans didn't think their property market could fall either! At least not until it actually did.
Denial is not a strategy for success.
Commie China will also lead you to believe that their economy can grow for eternity at double digit figures if you're gullible enough to trust them.
For all you true believers just keep re-leveraging to the max on those half million dollar average Aussie houses and see what happens down the track.
Thankyou for so politely pointing out my spelling error Pete as you seem like such a level headed investor.
As I said before wishful thinking is not an investment strategy so don't be too disappointed if those overvalued average Half Million dollar Aussie bungalows start going down
Comment by Bargeass on 12 December 2009:
Ned I think you have answered your own question ie the RBA is going to jack up rates as far and quickly as necessary to prevent inflation ergo property prices ain't going nowhere except down whether in real terms or inflation adjusted.
Please accept my apologies Pete for any misuse of the queens English you may find me guilty of as that is much better for your health than having a fit.
Comment by Ned S on 12 December 2009:
I think we've got to try and take into account a range of factors Bargeass - With interest rates probably being the most important. And at the moment they are still low with the indication being the RBA would like to get them back up to maybe 5.5% (6% even?) over the next 18 months. That in itself won't cause a significant correction - Unless accompanied by very high job losses. And high job losses in Oz aren't looking too likely to me now.
Comment by Pete on 13 December 2009:
Let's repeat my question, which in parroting your mantra "Denial is not a strategy for success", you've side-stepped. Please enlighten us. How _did_ you become so wealthy, Bargearse?! The assumption is that you have made a very, very large amount of money, practising your own strategy for success. Share your secret with us...
Comment by Greg Atkinson on 13 December 2009:
Just on inflation, all I would add is that in Australia we have managed to get ourselves into a nasty spot where interest rate are rising, imports are rising and yet exports are falling. Some in the media seem to think this is a good situation but it simply highlights how unbalanced our economy actually is. If commodities prices & volumes don't pick up strongly next year, then hang onto your hats I reckon!
We need to focus on more than just GDP: http://www.shareswatch.com.au/blog/economy/gdp-growth-does-not-equal-a-quality-australian-economy/
Propping up GDP by injecting government money is a risky, risky strategy. (especially when you borrow the money to do it!)
As for house prices, hasn't this topic been done to death now? The Australian house price bulls/non-collapse crowd were right in 2008-2009. The bears are yet to get runs on the board.
For 2010 we will just have to wait and see. No need to get emotional about anything because none of us can say for sure where property prices will go...that's life
Comment by Dan on 13 December 2009:
Well, based on the assumption that just about every opinion given through mainstream news is just disinformation and a fair proportion of facts presented through same is also disinformation, it probably means that because ABC news is talking about am Aussie real estate boom over next three years just about guarantees there will be a bust, but who the hell knows, because it's not a natural market.
The US is now most likely going to not default on its debt obligations (yet) by allowing itself to borrow a couple more trillion (ie: ? x $1,000,000,000,000) - but how much longer will this last? As long as three years? Again, not a natural event and heavily influenced by overriding human factors.
So even though people point to graphs and say look, there should be a correction because houses are too damn expensive, it's not possible to graph the government's behaviour which can drastically change the timing of events (to whose benefit? hmm!)
Comment by jazzwoman on 13 December 2009:
I had a look at this article "total destruction of the U.S. House market" and I was pretty impressed. Unfortunately I am not an expert but according to that article Australia is now somewhere between Domino #1-#3.
But what are the differences between the USA and Australia that Australia can prevent the Dominos #4-#6 from falling?
Comment by Pete on 13 December 2009:
Well, we ascribe to Gelber's view, 12/12/'09: "....but we need to build more to satisfy demand and we're not doing that. By the time this is over in three or four years' time, we will have built momentum into a boom... "
No emotion here at all. We subscribe to the view that shortage of supply, increasing demand, overseas interest in property, strong employment figures, and increasing population, will push property up. Any government initiative which reduces construction (say Ken Henry's recommendations) will simply reduce supply.... and push prices up. We're always interested in the path to riches very other ordinary people like us employed to become wealthy. How did you reach that happy state of independence and freedom which allows you to follow summer around the planet forever, Bargearse?
Comment by Bargeass on 13 December 2009:
Australian property is undeniably overvalued by any metric you choose and will therefore inevitably correct as any and every bubble in history has.
What is propping it up now you may ask?
In no particular order they are as follows and each one in turn will eventually fail.
1. An unsustainable rate of population growth especially through immigration (communist, nanny state government policy)
2. Land rationing that must eventually end (communist government policy supported by greenies and generous developer kickbacks - sorry election donations).
3. Artificially low and unsustainable monetary policy ie low interest rates (communist, nanny state doctrine).
4. Loose fiscal policy or more correctly total lack of discipline (communist vote buying policy)
5. The pass the parcel gambling instinct supported and fed by those that profit from it as well as failed nanny states that become a hostage to the status quo) that fuels all great bubbles ie if it went up yesterday it will go up tomorrow therefore I can't loose and will pay any price for a piece of the action regardless of the consequences. Also known as the greater fool than me theory.
Comment by Ned S on 16 December 2009:
This April 2005 DR article on Oz house prices by Eric Fry is a bit of fun in hindsight: http://dailyreckoning.com/the-australian-canary/
Some quotes from same (where "he" is a bloke called Jeremy Grantham):
'The British bubble is, by far, the most dramatic. But it is
the Aussie bubble, he believes, that deserves the most
attention. "The Australian residential real estate market
could be the canary in the coal mine – that is, a harbinger
of bad things to come for a lot of us," Grantham warns.'
'Today, though, in the U.K., the price/income ratio would
have to fall by 37% to merely get to trend…Any overrun
would inflict substantial pain…Australia and New Zealand
would be in the same boat as the U.K., but the U.S. would
obviously be less bad."
Nevertheless, "less bed" would still be unpleasant.'
Gave me a smile anyway!
Comment by prozak on 16 December 2009:
Ned,
you are confusing being right with the market.
I can be 100% right about something and the market could remain irrational for 100 more years.
Property is an especially slow moving asset and we could be in a recognised bubble for 25 years without it popping. Then add intervention and the NOMINAL bubble may never quite end.
In 2005 we were definitely in a bubble. Some of those bubbles have started to correct.... all are being propped up by governments try ing to prevent the loud POP!
Who knows for sure the outcome of each bubble. Maybe Aussie nominal house prices wil never correct and everyone will think the bubble never popped.
The last pop in the UK happened in the 90's. Nominally average prices fell just 13%.... but about 40% in real terms...
I am sure if this happened in australia people will claim there was no crash.
Comment by Ned S on 17 December 2009:
I don't think I'm confusing being right with the market Prozak - As in my interest is really much more about acquiring enough mortgage free residential rental property that I can live off the proceeds of same, than in what the prices as such of those properties might really be/do. So I'm not a trader. And I don't use leverage ... No job - So banks would laugh at me regarding same. Unless I wanted to put up mortgage free property as collateral - In which case I'd laugh at banks! And I don't especially like work - Leastways not for a boss anymore.
I found a few things about the article amusing. But probably the one that stood out most in hindsight was that even though it contained significant elements of truth, the basic contention (Watch Oz - That mob'll most likely crash first!!!) was SO far wrong that EVERYONE who followed it was pretty much GUARENTEED to get hurt - Aussies because they would have bailed and ran on any hint of a correction. And others who were watching the Oz canary because they would not have responded as their own national prices were wobbling precisely BECAUSE they were expecting Oz to crash first - Which it didn't. (Not that I think many Brits or Yanks would have really been silly enough to be watching Oz - But that is what the article suggested.)
I probably sound a bit like an Oz property bull - Comparatively - On this site anyway. I haven't been in the past - A 15 to 20% drop was my gut call - But recent government action has shook me "faith" a lot ... At least to the point where I'm prepared to entertain the possibility that Oz prices might be pretty much tapped out at the top and could go up a bit or down a bit adjusted for inflation without crashing at all!
Where's me money been and where's me mouth been? : I've got a little bit of mortgage free Oz property - Both in my own name and that of a super fund. But given my prior lack of total committment to Oz property, I've also had some cash "vulture funds" on hand to buy more on a significant correction - Same yet to eventuate - If ever - Smile!
Re the UK elections, cross your fingers is all I can say - It would seem a bit much to hope for that the general populace would really know what it was voting for and why. (Doubt that I REALLY would - It isn't everyday the average mug gets to consider how a global debt deflation might unfold!)
Comment by Bargeass on 17 December 2009:
Spot on Prozak.
If Australian property prices weren't in a massive bubble that is ready to burst the government wouldn't need to desperately divert so much of the country's productive capacity via taxes to prop it up.
Comment by John B on 17 December 2009:
I wish someone would do an article on the loosening of the foreign ownership laws. Can they buy established dwellings? I thought they still couldn't? In any case, a lot of foreign investors are buying established property here in Melbourne. Many of those are probably ineligible unless they relatives they can use for loopholes, but a couple of agents I spoke to aren't aware of the changes in the first place.
Comment by John B on 17 December 2009:
Please delete my previous submission as it had errors:
I wish someone would do an article on the loosening of the foreign ownership laws. Can they buy established dwellings? I thought they still couldn't? In any case, a lot of foreign investors are buying established property here in Melbourne. Many of those are probably ineligible unless they have relatives they can use for loopholes... A couple of agents I spoke to aren't even aware of any recent changes to the foreign ownership laws in the first place.
Comment by Ned S on 17 December 2009:
OK - I repent all that I ever was and thought and did - Property and cash stink - Gold and gold stocks are where the only true value is - Tommorow I'll sell me houses, pay the CGT, couple proceeds of same with me cash holdings to buy gold, pop same in a thimble somewhere and scratch dirt over the top like a cat burying its business - Then go and live in a rusted out water tank on a creek bank where I can find some goannas to eat.
Comment by Ned S on 17 December 2009:
John B - I'm no expert, but my understanding is that if you want to call yourself Humpty Dumpty (or Donald Duck etc) when you buy a house, noone too much cares? I've certainly never had an RE agent or solicitor ask me for ID (let alone a TFN OR proof of citizenship) in the course of a property transaction.
Comment by Ned S on 17 December 2009:
It opens up some interesting possibilities in relation to avoiding tax I imagine - But as that isn't my game, I've not explored same.
Comment by Ned S on 17 December 2009:
Some Yank mob wanted to see a copy of me passport one day when I was signing up to have a bit of a gamble on currencies - I told them to get stuffed.
Comment by prozak on 17 December 2009:
Ned,
Have you been drinking?
Your last few posts seem rather irratic.
Comment by Ned S on 17 December 2009:
No more nor less than usual Prozak?
Comment by Ned S on 17 December 2009:
The comment re selling me mortgage free houses and buying bullion was a tad sarcarstic of course.
Comment by Ned S on 17 December 2009:
As I said - "Tommorow I'll sell me houses, pay the CGT, couple proceeds of same with me cash holdings to buy gold, pop same in a thimble somewhere and scratch dirt over the top like a cat burying its business - Then go and live in a rusted out water tank on a creek bank where I can find some goannas to eat" ... Whilst I mooch around for some more really valuable Au type stuff. But then maybe I won't - Because I'm "pullin ya chain"!
Comment by Ned S on 17 December 2009:
Hope that clarifies all and any misunderstandings?
Comment by Lachlan Scanlan on 17 December 2009:
Gidday Ned. Grow some sugar cane in da happy garden Ned....sugar equals gold. Or value add and distil rum....mmm happier gardener.
Dislosure:Very high levels caffeine, not drunk.
Comment by Pete on 18 December 2009:
Great to see progress in our perceptions about property, folks. Ned, the coastal Mexican towns appear to be booming. Still a great divergence between rich and poor, but many of the well-off became so through property. Americans and Canadians seem to be the current buyers.... . Looking for a 'siesta-change', I guess... .
Comment by Ned S on 18 December 2009:
A mate of mine fell in love with Mexico Biker - Looking at his pics was a bit boring - But listening to his stories was entertaining! He obviously wasn't an especially dedicated siesta type of bloke ...
Comment by Pete on 19 December 2009:
I've fallen in love with several cities along the road, Ned. Foremost I guess would be Lunenburg, Nova Scotia. Too cold in winter, scoffs the missus, yanking my leash. Five months into the trip and we still haven't bought anything in the northern hemisphere. Contrary to many of the views here, Aussie realty seems better value to us, especially in terms of initial price, cost of rates, population growth, employment prospects and building quality. We're waiting to see what Santa Henry intends to put in our $tocking$, before committing anywhere. Just a few more sleeeeps... !
Comment by Ned S on 19 December 2009:
You gotta keep an eye on the old bloke Biker - As Rodney Rude reminded us in relation to the kid who was hanging out for a bike. Must admit there do seem to have been some parellels between Santa Claus and a certain Sydney based economist of late.
Comment by Pete on 19 December 2009:
Glad we've left all options open, Ned. Even the 'government super annuity' has some appeal, if it's tax-free, big enough and not means-tested in any way. The pessimist in me expects we'll probably need to shift assets to other classes, post-Henry, but the optimist is already drawing up the next house plans. Current project will be interesting to actually see. Building commenced _after_ we left... and the house will be virtually complete _before_ we land back in Oz. We've exercised a lot of trust in our builder. Hope it's rewarded... .
Comment by Greg Atkinson on 19 December 2009:
Isn't the Henry report due out around now? Mind you I don't expect anything drastic to happen in an election year. BTW - what happened to the tag "Biker Pete"?
Comment by Pete on 19 December 2009:
Not riding at the moment, Greg. 'Car Rental Pete' somehow doesn't have the same mystique (or is that mesquite, amigo?!)
Switched when my tag was being misused by (M)others. May resume it once I'm back on my motorcycles in Oz... . Last I heard for HR was 24th December. If that's true, it might mean Santa brings something extraordinary for _all_ homeowners... perhaps something even bigger, wider and longer than the FHOGs.* Tend to agree it's unlikely anything negative will happen during an election year, but we think long-term; so 2010 may be the year to create new three, five and ten year plans, based on PEPs. To be frank, we'd rather pull our combined super as a tax-free lump sum and whack more into offsets, than have to buy forced annuities, but we'll wait to see whether it's coal or gold in our stockings on (White) Christmas morning.
* If that punt is correct, the tabloids will have a field day with their headlines... .
Comment by annie on 20 December 2009:
Been reading some reports about the Henry tax changes. Looks like a new national land tax based on price of property. That may have an inpact on property investment. I wouldn't be surprised if there was a resource management tax in there as well to cover the management of water, power etc. It's already being formulated at a state level. Superannuation changes are a cert.
Comment by Bargeass on 20 December 2009:
Presumably the RBA will be left with the task of trying to defuse the Aussie property timebomb before it results in catastrophe.
Comment by Pete on 20 December 2009:
Yes, it would be a _major_ catastrophe if house prices rose, Bargearse. We remember selling our first house, (purchased for $33K) for $105K, a few years later. The result of that was an increase in cyclones, tsunamis, bushfires, droughts, floods, arson, unemployment, suicides, crime, fraud and extraterrestrial attacks on the planet. Unforgettable drama. We expect more. The median price in that suburb is now $550K. If you listen carefully, you'll hear a slight c-r-e-a-k-i-n-g sound, as the earth shifts on its axis... .
Comment by Ned S on 20 December 2009:
To some extent Bargeass. So I think they will actively try to keep interest rates below their long term average for a very long time.
And we could also be seeing a couple of other fundamental shifts in the Oz housing markets: a) lower % home ownership and higher % renters (with PIs being accepting of lower % returns and renters seeing their life as OK too given that - As compared to taking on the debt to buy; and b) more sardine type living becoming accepted as entry level housing for FHOs. (Others anyone???)
And as Biker says, all they'd need to do is make expenses on homes (as opposed to IPs as things now are) tax deductible, and we'd be launched into a different realm altogether. Although if I was government I'd probably want to keep stimulus that was that heavy duty up my sleeve to counter a very real change in Oz housing fundamentals - Stuff like baby boomers and X Gen investors cashing out in another decade or two. Or Oz deciding to put up the "We're full!" sign in 2040 or 2050 maybe? But governments in democracies are basically self focussed short term vote grubbing numpties - So yeh, it certainly could happen even if there is no real need.
Comment by Ned S on 20 December 2009:
Dan Denning pretty much summed up the DR Australia attiutude to Oz housing above (IMO) when he said: "... we've done plenty of homework on the Aussie housing market. We're either right or we're wrong. Our forecast is not an option. There is no time decay."
So they are Oz RE permabears - Until they get THE collapse that accords with THEIR view of how things in Oz SHOULD be - Providing one understands this as they make their investment decisions, one has nothing to whinge about. After all, DR Oz is a FREE site as people sometimes remember to point out.
Comment by Peter K on 20 December 2009:
Not sure what's coming but have some anecdotal evidence to mull over. For the last three years, I rented a lovely one bedroom unit in the best suburb in Adelaide for $165/wk. The unit then sold at auction for $235K.
A mining cousin has to relocate from Whyalla,SA to Mt Isa,QLD for work but says he can't sell his two homes in Whyalla. He claims they are worth $350K+ but he has had no offers after six months.
A friend at work bought a unit for $330K then took a redundancy of $50K cos he could get lots of casual work here anyway. He spent all the money paying off credit card debts. Now the casual work is drying up and he is complaining that the pay office is shut for Xmas. One missed fortnightly paycheck and he will miss a mortgage payment. Living hand to mouth.
An old guy at work owns 12 units in country towns. He is approaching 60 and still has to work full-time. And occasionally repair his units after having bad tenants destroy them.
I am not sure what will happen in the Aust housing market. I do know that stock market bubbles burst because stocks are so liquid. Housing bubbles deflate slowly like they've got a leak. In the US prices didn't drop overnight. It took a couple of years. People hung on to their homes as long as they could, until forced to sell. Then it is only worth what someone will pay for it. And it was less than they wanted.
We will only really know what will happen here (and in the world economy) when the trillions of dollars of stimulus money starts running out and the largest Western demographic (the baby boomers) start downsizing. I think the $6 Trillion in US home equity that has disappeared will not be quickly replaced by the Chinese who have no pension/welfare/health cover and a median wage of $3K. Can't see it happening. It might eventually but not soon enough to avoid tough times.
Also stop arguing about housing v gold. Diversify, man! I got a third shares, third cash, third precious metals. When I can find a positively-geared rental property, I'll put a quarter into that. Until then wait and see. It's going to be interesting...
Comment by Ned S on 20 December 2009:
Oz government attitude (IMO): Them what wants a house has bought one - God knows we did enough to encourage ya ... Lowest interest rates in 50 years and plenty of bonuses to boot. If ya wants a house price crash like the rest of the world then we had a look n' reckoned it sucked - So Oz gov iz ya enemy - If yar iz a DR disciple, then headbutt same! (Maybe ya'll win? But maybe ya won't?)
Comment by Ned S on 20 December 2009:
Da Oz gubment whipped ma ass wi' all ma own tax money - I think it's time to get realistic here - As opposed ta hopeful.
Comment by Pete on 21 December 2009:
Maybe we've just been lucky... . Every property I've owned since 18 has made me great returns. Yes, there was an ultimate beachfront block I let go too cheaply two decades ago, but _every_ personal property investment has resulted in a win (sometimes, post '90, for the taxman, too!)
The only sad anecdotes I could relate are instances when acquaintances paid too much, became impatient... and sold during a plateau. Some may have actually made a loss on vacant lots, when interest and rates were factored in. Who knows what governments may initiate to achieve a desired outcome? If the desired end is the demise of the construction industry and higher unemployment, the tax base is reduced. If cessation in property investment is the intended goal, fewer homes will be built and rents will rise. Where Peter K is entirely correct is in the need for diversification. While our three asset classes are dissimilar (property, cash, super) they still provide options for quick transfer if required. Only property is providing a good return at the moment, but interest rate rises must mean that cash and super will start to pull their weight proportionately, soon... ! 
Comment by Ned S on 21 December 2009:
Whyalla was one place in Australia that the people at bubblepedia still seemed keen to highlight maybe 6 months ago when the broader Australian property market was obviously challenging their cries of the Crash Cometh. Having a look on the www it appears the population peaked at about 33,000 back in 1976 and was 21,122 in the 2006 census. So my strong suspicion is that Whyalla has some rather specific local issues.
Comment by Pete on 21 December 2009:
Agree, Ned. A thirty percent decline in population will do that.... !
Just had a look at the main outline of the KHR. Nothing I can see there, at this stage, which might affect our personal investment strategies; but it appears there are no announcements on Super, yet. Agree with Annie that this is too large a ba$ket for Henry and Labor to ignore. The day I read that Kev has approved a Super Grab is the day I'm officially retired! 
Comment by Insanity on 21 December 2009:
As i have said in other posts the income to value ratio is the biggest determinate to whether housing is viable. On the weekend the Age ran an article outlining the median house price is now $525,000 in Melbourne and rising. This makes it 10 times the annual median income and by far one of if not the most overvalued property in the world.
House prices in echuca went up 37% since this time last year and this area alone incapsulates the insanity. Echuca is a small country town that is surrounded by land land land. A far as the eye can see really, start your car in main street and drive any direction for 6-8 minutes and there is nothing but flat land all around. It has become the biggest pyramid scheme ever.
And for those who say it won't drop, fool you, i read several forums in 2006 that were US based. Al these people 35 years and over rubbing it in to renters saying 'we purchased and its gone up and up and up" "If you don't get in now you'll miss out!!" The most common expression from all owners was 'property never goes down, it hasn't in the last 20 years and won't in the next 20" How wrong they were but when you need someone to supply you with a stable floor for your financial future in the form of another pyramid member, you will do as much dirty desperate coaxing as you can.
No amount of immigration, land shortage, employment opportunities could justify turning our housing market into what will be soon overheated, overvalued and borderline 101 "Didn't feel the effects of the subprime in your area. why not build your own?!"
Comment by Ned S on 21 December 2009:
KHR - I did like the guess "The review is also expected to recommend that income tax on savings and investments be axed". But as a wit said "Beware of taxmen bearing gifts!!!"
A super grab - Yes, as has been pointed out, the thought of trying to stand between Kev and a bucket with a trillion dollars in it IS a bit daunting.
I imagine Ken Henry's major interest in super is the tax implications of same. With a seperate super review due to finish up in mid 2010 from what can make of things - It gets a mention here:
http://www.smartcompany.com.au/superannuation/20091215-superannuation-review-proposes-simpler-system-for-default-super-funds.html
Comment by Pete on 21 December 2009:
Thanks for raising the old US dramas again, 'Insanity'. Crap houses, shonky loans and a corrupt system are symptoms of insanity, as you say. The UK is even worse. Our contention, for as long as ADR has existed, was that we would not suffer the same fate. We've listened to the bears (while they roared), and watched them shuffle off as Australian property rose in defiance to twenty different suppositions argued for a crash. Happy to disagree on this one, mate!
Ned, we believe little will change with the KHR. Our greatest concern is that a very large amount of our 'cash' is in Super at present. We can pull mine without penalty today, but the missus can only take a quarter of hers tax free. She has two more years to go... . Many thanks for the Super link. We'll print and study it now.
Comment by Don on 21 December 2009:
I have mentioned it here before but keep an eye on the prices in Cairns as a "canary in the coalmine" for the effect of high unemployment on house prices - currently 10.3% officially which we know is the low figure. Council rates and body corporate fees are quite high as well and tourism's prospects are not the best. That said there has been no big crash as yet.
As far as super is concerned I am with you guys - they will try to get their claws on it for sure. I feel a pressure point will be when the Federal and State governments have trouble selling their bonds, forcing the interest rates up. It wont happen suddenly, rather it will be a slow macarbe dance
Comment by GaryB on 21 December 2009:
Pete, my superannuation situation is the same as your's. I'm >60 and tax free and my wife is between preservation age 55 and 60 and also tax free. But the super funds still record your 'tax free' and 'taxable components' even after withdrawls become tax free. If you or your better half carks it and your super is paid to a non-dependant beneficiary (ie anyone other than your spouse) then they're taxed at their marginal rate on the taxable component of your super. So there is still a tax angle, and also if the Henry review does come up with any nasty ideas for super, it's likely to affect only the taxable component. So that's 2 reasons to minimise the percentage taxable component of your super balance, either by making straight out after-tax deposits or the strategy of re-contribution.
Comment by Pete on 21 December 2009:
Agree with all your points, Gary. We've already made some after-tax deposits, as you've suggested. There are some benefits to staying as long as we can within Super (our ability to reduce the continuing impact of CGT for instance); but the attraction of pulling it before any enforced annuity system might be imposed, is that we'd put it all into offset accounts, completely neutralising property interest, while a.) still immune from tax on that money; and b.) giving us the ability to draw on that capital, to top up rental income if necessary. We do need to review our 'beneficiary' situation. Thanks! We think we've ticked that box, but we're not sure. I expect you're both on tax-free TTR pensions? That's a windfall I could never have predicted a decade ago... . Wonder how long that amazing gift to those 55+ can persist?!~
Comment by annie on 21 December 2009:
GaryB there is a way around the taxing of super when someone carks it. Just make sure that whoever you want to leave it to can prove some sort of dependency. If you pay their rent or school fees or even sports fees, as long as there is some dependency. The trustees will look at that and allow a tax free portion. Also make sure if you want to leave part of your super to anyone other than a spouse, make sure you have it in a will and not just list them as a beneficiary on your super forms. Unless you state in a will any non-dependent will miss out. This is not legal advice and any reading this should consult an expert in the field.
Comment by annie on 21 December 2009:
I have two friends who have bought property in Cairns. One bought last year and sold this year. He came out even. Another bought 5 years ago and can't sell the unit even though he would take 20 grand less than what he paid.
Comment by Pete on 21 December 2009:
Melbourne might have been a better buy, Annie? We've had friends and acquaintances mistime the market, too. It's also a minute-by-minute occurrence in the sharemarket. We've limited our property investments to areas we know intimately, so far. Mind you, we've also 'held' through some l-o-n-g plateaus, to make some highly rewarding gains, too. Apart from the 'location, location, location' rule, there's also that old injunction not to gamble with money you can't afford to lose. Anyone who _has_ to sell in a flat or slow market is gambling, whatever the asset class.
Comment by annie on 21 December 2009:
Hi Pete
I didn't watch the Melbourne market, just the one in south east queensland where I live. The figures for Melbourne over the last couple of years are pretty good I think.
In SEQ there are varying gains. On the Sunshine coast there has been a bit of a plateau and the cbd of brisbane keeps going up. I have decided to buy somewhere in northern nsw as i want to live there so I'm not going to purchase for the purpose of making money. Perhaps not sensible but I think I'm past the need for "more things" and just want the simple life.
I worked a while in Vanuatu and the real estate market has tanked over there. I looked at a property on the waterfront, 2 acres could fish off the wall. the asking price was 425,000. I jokingly said to the real estate agent, I'd give hime $250,000. He was prepared to take it. Just then we had a tsumani alert and we all headed for the hills!!! hA HA. Long story short I didn't buy and came home to good old aus. there's no place like home. But I met a very wealthy lady that gave me some very good advice when it comes to investing overseas. she said no matter what, don't buy unless you can afford to lose it. You will never ever be a local, you will always be a foreigner.
Comment by Lachlan Scanlan on 21 December 2009:
Sounds fantastic Annie. I spent some time on the Granite Belt and down into northern NSW recently Annie(working outdoors)and was very taken with it...although I haven't experienced Winter there and I'm sure its very cold....good excuse for a warm fire but.
Comment by Ned S on 21 December 2009:
Biker, point 5 of the tax review terms of reference states "5. The review will reflect the government's policy not to increase the rate or broaden the base of the goods and services tax (GST); preserve tax-free superannuation payments for the over 60s; and the announced aspirational personal income tax goals;" - Is the middle bit of any use/relevance?
http://taxreview.treasury.gov.au/content/Content.aspx?doc=html/reference.htm
Comment by Bargeass on 21 December 2009:
Australia is determined to go down the path of a property bust (and I'm determined to watch it)which is hardly surprising given the majority have opted for wall to wall socialist, nanny-state governments.
Comment by annie on 21 December 2009:
Hi Lachlan
Yes it is lovely down around the Granite Belt, and yes it does get a bit chilly around Stanthorpe during winter. But most places have a fire place and if you buy right you can coppice lots of trees for as much fire wood as you want. Went down a couple of weeks ago to check out a place on 60 acres near the wineries down there. The place on realestate. com said it was solar powered. I get there and there's one panel that runs one light. No power otherwise. Gotta love those real estate agents.....haha
Down further in the northern rivers area there is a lot more water and not so much scrubby country.
Comment by Don on 21 December 2009:
Sorry to hear about your friends experiences in Cairns Annie. I bought a unit in early 90's here and sold soon after divorcing (messy) later in the decade at a loss. Living here again now - the town hasn't changed that much but the tourism trade is looking a bit worn and tired
Comment by Lachlan Scanlan on 21 December 2009:
Hi Bargeass
I agree with your comments but Im just wondering which party I can vote for which isnt socialist....some features common to both Labor and Liberal being
(a) debt whether by promoting private debt or directly by public debt
(b) inflation/currency debasement as policy
(c) welfare state
Though ALP seems more aggressively interventionist in most/all respects.
Comment by Pete on 22 December 2009:
"You will never ever be a local, you will always be a foreigner." I'd agree with that premise, Annie. Only Canada seems the exception. Across the provinces, we've been _given_ beautiful homes and late-model cars to mind, as their owners have gone off on cruises, or jetted to Hawaii, Rio or Spain. People have made us feel very much at home. We're tempted to assume that Canadians are the _happiest_ folk we've met while travelling. Their property markets are booming, though. Median prices in Vancouver and Victoria eclipse those we're used to in Australian capitals.
Your goal sounds like a special rural, or small rural lot. We bought the same (ten acres, creek, orchards, forest) as a lifestyle (rather than investment) choice, twenty years ago. While capital gain was never part of our rationale, the property is now valued at 7.8 times our original purchase price. Although we very strongly contested the development, a recent successful subdivision next door may mean our valuation doubles again. We may decide to sell and move to the beach house. If we're going to be part of suburbia, we might as well be on the beach... !
Comment by Pete on 22 December 2009:
Thanks, Ned. Almost missed your post, right at the bottom of the Home Page column. Yes, that is a rather comforting note, providing they stay within their original charter. Actually, rereading the whole document and the most recent announcements, we both feel a lot more confident about our existing plans... . As Greg has noted, it's an election year, anyway!
We won't start the next housing project immediately on return (I still need to wrap-up the latest construction, anyway); but there are so very few available rentals in our location of choice that there's a great temptation to build another one or two in 2010. The next one will evolve from our last design. Three garages. (Don't laugh! That's the kind of thing today's tenants are requesting... . Double fridge space is now expected! They won't walk through the front door unless there's air-conditioning. Our agent thinks we're spoiling 'em!)
Comment by annie on 22 December 2009:
Hi Pete
Yes this lady had spent a lot of time in PNG and the pacific and probably not as far as Canada. You are housesitting yes? It's a great idea. I am about to head down to Mount Tamborine in the new year and then Jiggi after that to do some housesitting. Gives time to look around the different areas and you help people out by looking after their animals and gardens. Poor little things don't have to go into kennels and such.
I was actually very close to buying a place at woodford when I heard rumors of subdivision just up the road. I want peace and quiet and so didn't buy even though it probably would have increased the value of the property.
I will have to go back to work at some stage though. eeekk!!
Comment by Pete on 22 December 2009:
Hi Annie,
When we bought back in 1990, we hadn't figured the city would march west towards us 5km... or 5km east towards us from the beach, so we're still a little stunned to find that two nodes have merged with our little piece of paradise in the middle.
Housesitting is brilliant. We have never consciously sought it (we offer a free guest chalet to the world) but we have close friends a little older than us who have made this a major part of their retirement plan. They also belong to 'Couch Surfers'. They travel continuously.
For a little under $300K, we can buy a self-contained 2 BR unit with garage, on Vancouver Island. Similar would cost $420K in Perth... and probably $500K+ in Melbourne. Mind you, it's not the city... Properties I'd consider in Vancouver start around $1.8 mil; or in Victoria $1.5 mil. All we need is a toe-hold in the Northern Hemisphere, a stepping stone to Europe, North and South America.
Not sure I'll go back to my profession. Our projects are quite appealing and I'm enjoying being outdoors, rather than locked up! If the government restores the full 50% solar subsidy, we'll go fully electric, including the Tesla.. and show the servos the finger as we pass them...!!
Comment by Bargeass on 22 December 2009:
Pete you're not related to Walter Mitty or Baron Von Munchausen by any chance?
Comment by Ned S on 22 December 2009:
Best I dig up on it follows Biker:
http://taxreview.treasury.gov.au/content/StrategicPaper.aspx?doc=html/Publications/Papers/Retirement_Income_Strategic_Issues_Paper/Chapter_5.htm
Where the real guts of it would seem to be the statement: "The preservation age is currently legislated to increase to 60 years by 2024. The preservation age should continue to be adjusted until the preservation age is aligned with the Age Pension age. Thereafter, the preservation age should remain aligned with the Age Pension age."
With a pretty reasonable interpretation being that the recommendation was to continue the current push up in preservation age from 60 to 67 progessively from 2024 onwards I think?
The following seemed to interpret it that way as well when it said "Dr Henry's plan, for a phased lifting of the super age from 60 to 67 from 2024, is part of a broad push to keep Australians at work longer to help the nation cope financially with its ageing population." :
http://www.investsmart.com.au/news/news.asp?Action=Display&DocID=AGE090514Q26OH7LPRBH
It's possible he could have gotten more aggressive since I guess? But either way, it will be very handy to know!
Comment by Pete on 22 December 2009:
No, Bargearse, but I see your Buddhist mindset has convinced you that repeating the same mantra ad infinitum will cause the Australian property market to dissolve. May the Laws of Attraction be with you!
I'm flattered that you think our lifestyle is fantasy. From time-to-time we wonder how well, relatively, we're doing. Your implied disbelief is very complimentary and quite reassuring. 
Comment by Pete on 22 December 2009:
Thanks Ned. I'll be 63 in a few months, so it appears I'm inside the gate. As you say, things may discolour somewhat in the final wash, but we sense that time really is on our side. From our perspective, the new limit on Super contributions is a pity, but it really just means we need a (better) plan / timeline to sell off holdings carefully, to limit our annual CGT exposure. Reduction of our ability to wash off that tax has been effectively reduced by two thirds; but it really just means a slower selling-off of any property which is less productive over the years. Muchas gracias for these links, Ned. They're very helpful.
Comment by Ned S on 22 December 2009:
I'd doubt things will go bad on that one Biker - There's still a fair few baby boomers capable of getting our decrepit old carcasses down to the polling booths as you imply.
)
Jeez ... I'm 51 and am STILL hoping to squeak through the gate - Based on what I've read to date anyway. I'm line ball on being self funded - Stopped work (by and large) 2.5 years ago. It's had it's moments but I've hung in so far. (At this stage I'm thinking of it as an extended early retirement "trial"
Your comments on TTR (amongst other things) have been very useful - I had no idea that was even available - Totally missed it with being overseas for a decade! So I'm still in active catchup learning mode on all such stuff.
Keep a good eye on CGT I think - I've seen stuff that indicates Henry reckons the 50% discount is a bit iffy? Although he also seems to know there are potential downsides to doing stuff that makes Oz investors hate housing. He was up to his ears in limitting neg gearing back in the 80s - And lived to regret it - A lot. "Still bears the scars" in his words.
We'll just have to see I guess. But when it comes right down to it I share your view that what is really needed is a bit of clarity and long term direction - So we can all get down to reworking our plans and then moving right along. Cheers! Ned.
Comment by Lossed on 22 December 2009:
First time reader and I an a little lossed. Wasn't this forum based on the merits of a house price crash???? It seems for the best part you are all giving advice as investors for investors. It's a two fold thing, firstly we have lost track if the initial post theme and ended up with the majority arguing over who is the better investor and where the next hot spot in property is. Thanks baby boomers for perpetuating the housing issue for everyone my age who will never own a home. I hope they bury you with a smile on your face after a long comfortable retirement
Comment by Greg Atkinson on 22 December 2009:
Pete, glad to see you are active again. I have been away for a few days and have returned to find out nothing was achieved in Copenhagen, house prices have not collapsed and gold is still a metal. But I am sure we will all debate these issues again in 2010
Comment by Pete on 23 December 2009:
Wondered where you were, Greg! Yes, I'm sure vigourous discussion will continue with or without us... . My active participation is temporary, as our kids fly in from Montreal and Perth, today. Hoping for a White Christmas, but the first falls have already disappeared. All the best for the festive season, Greg, Ned, and DRA contributors in Oz and abroad. May Ken Henry bring us all cheer in the New Year!
Comment by Greg Atkinson on 23 December 2009:
Pete all the best for the festive season. We might get a white Christmas here as well although so far all we have had is very light snow. This is fairly typical down where I am and is in no way related to global warming! In fact Japan had a very cool summer this year, but this did not get much attention in the media as it does not fit the "planet is warming" storyline.
Anyway all the best to one and all!
Comment by Ned S on 23 December 2009:
No white xmas in brissy - But 'tis the season to be jolly regardless! Yep, cheers to all.
Comment by annie on 23 December 2009:
Yes a happy and safe festive season to y'all. Thanks for giving me some wonderful reading over the year. You have taught me lots of valuable things. All the best to you and yours where ever you are. xxx
Comment by Bargeass on 24 December 2009:
It sure will be interesting to see how Australia's overpriced property market and mortgaged to the hilt worker drones will handle the coming rate rises of 2010. Either way property seems to be a dud investment especially when it's retuning about 2% and a lot of hassles.
Comment by Dan on 24 December 2009:
Merry Christmas everyone, and remember - teach your kiddies value (and values) over price.
Comment by Greg Atkinson on 24 December 2009:
Yes Dan and let's remember there are far more important things than trying to understand how markets move etc! Enough boring investment talk..time for Christmas cheer and goodwill to all!
No holiday in Japan for Christmas Day but I will give myself a day off anyway!
Comment by Lachlan Scanlan on 24 December 2009:
Yep Merry Christmas everyone. I especially like DRA's forum for company when living alone every second week so everybody here is like a friend.
Cheers all.
Comment by Ned S on 26 December 2009:
22 Dec Lossed said: "Thanks baby boomers for perpetuating the housing issue for everyone my age who will never own a home." I wouldn't be so negative Lossed - You'll set yourself up to never own a home thinking that way. The trick for you is to figure out how you can own one given your generation's expectation you'll eventually be able to retire on your super maybe. While the trick for me is to figure out how I can own a couple more given my generation's expectation that we'll never be able to retire on our super maybe. (Or shares - But I reckon shares suck - Companies can simply print more of them - Just like governmemts printing money.)
Comment by Ned S on 26 December 2009:
Saw a good mate of mine (Muldoon the Coon - A mixed race Cloncurry Kalkadoon/Scot) many years years ago being chased around a kitchen table by a three yo - The kid's name was Derek - And Muldoon was baiting him with a sing song chant of "Nah, nah ... Derek's a blackfella." Thought Why are you doing that mate ... Eventually the penny dropped ... He was toughening the kid up for school! Sometimes suspect the baby boomers might have fallen down on the job regarding toughening their kids up for school - It does have the potential to become a bloody tough world out there.
Comment by Lachlan Scanlan on 26 December 2009:
Good point about share printing Ned...its bitten me in the butt this year
Comment by John on 27 December 2009:
"Thanks baby boomers for perpetuating the housing issue for everyone my age who will never own a home." You're welcome, Lossed. It appears you may have strayed onto the wrong site. This isn't a home owner site. It is an investment site. But back to your main issue. As you know, Baby Boomers were given homes, free, of course. The government came around and gave each of us a home. No effort whatsoever on our part. No 17.5% interest, either. The Baby Boomers are unquestionably to blame for your failure to own a house and our intent is that you will rent forever. Your generation, weakened and enfeebled, will never, ever break free. No member of your generation owns a home and not one of you ever will. The answer is, of course, to blame your parents and grandparents for your complete disempowerment, indenture and enslavement.
It is indeed fortunate that a profit has come among us, promising half-price-homes. Believers need only wait. His ultimate sacrifice, divesting himself of His own home, means you need only wait. Nothing more. It must help to blog about your loss while waiting. Blaming others always worked for the BB generation. And wishing a smiling death on us must, of course, speed the process of discounting. Your plan to obtain a house seems flawless to those of us who just woke up one morning and found we had been given one, like finding sixpence under the pillow, where we had left a tooth. Sometimes, if we bleated loudly enough, we found a shilling. You might want to add this useful strategy to your complex plan, or you may be keen to keep it simple. A course of multivitamins, to strengthen your tiring waiting strategy, has been recommended to replace that tired old BB standby: "I'll have a Bex, a cuppa and a nice lie down."
Comment by Bargeass on 27 December 2009:
There should be a glut of property n the market soon when the baby-boomers start dying off in droves or moving into institutions for the decrepit.
Geny Y etc can just sit back and wait to inherit a freebie or pick up one on the cheap.
Comment by Steve on 27 December 2009:
A house should never be an investment, it should be a ROOF over your head, it should be achievable without being a life long slave to a bank and to a property investor.
It should not be handed to you on a plate but none the less it should be ACHIEVABLE like it once was.
About 15 years ago and before that a house was just that a ROOF over your head until greed came and people who are now aged about 55 to 65 decided that 1 house want good enough and that they wanted house prices to outstrip inflation and go from 3 or 4 times yearly income like they had been for donkeys years before to 8,9 and 10 times yearly wages.
They are happy to see the next generation not own a home, just so long as they are rich nothing else matters,
Even though I am a young Australian I think back in the day Australians cared about each other but we have gone the wrong way (at least Australians in that age bracket) all they care about is ME ME ME.
Sad very sad, it will all come crashing down soon and you will not see any sympathy for them from me.
Comment by Ned S on 27 December 2009:
Ya sound like a man after me own heart Bargeass - What say we get together and form the EOF (Euthanize Over Fifties) Party for the next election mate? - Unless they are elderly pollies of course!
Comment by Ned S on 28 December 2009:
Yeh Lachie - Lots of us have had a disappointment or two this past 12 months - I was really truly genuinely expecting Oz house prices