Shareswatch Australia

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• 1 Greg Atkinson // Jun 11, 2010 at 9:53 am

  Looks like the housing market might be cooling with home loan approvals falling for seven straight months as reported in this on the Bloomberg site. See: http://www.businessweek.com/news/2010-06-08/australian-home-loan-approvals-fall-for-seventh-month-update1-.html

  It looks like the reduction of cash to first home buyers is also having an impact (which is something a few of us were discussing last year) as Bloomberg reports:

  “Borrowing has tumbled since the start of the fourth quarter after Prime Minister Kevin Rudd’s government began reducing A$21,000 ($17,300) grants to first-time buyers of newly built dwellings. Those grants were lowered in two steps to A$7,000 on Jan. 1.”

  Since business and consumer confidence are both trending down now then I would be expecting to see house prices fall back, but so far they seem to have pushed upwards no matter what is happening!

• 2 Ned S // Jun 11, 2010 at 2:00 pm

  RBA reckons decline of FHBs in market is showing up as less lending and higher medians:

  http://www.smh.com.au/business/loss-of-stimulus-hits-home-20100610-y0hs.html

  Article also says “This explanation ignores the central role of housing investors, who on average borrow 40 per cent of all finance for home purchases.” Got to admit I’m not real tempted to rush out and pay $330K for stuff that I could have bought for maybe $295K before we had the stimulus though.

  But that’s just me who has no income that I especially feel to negatively gear. And I’m regularly wrong …

• 3 Ned S // Jun 11, 2010 at 2:23 pm

  Investors ARE picking up the slack maybe? :

  “data show investors continue to return to the market as investor finance rose 1.8% for April. This means an increase of 39% in investor finance since the start of 2009, with most of the interest appearing to be in the established market rather than the development of new projects”

  http://money.ninemsn.com.au/article.aspx?id=1067247&rf=true

• 4 Greg Atkinson // Jun 11, 2010 at 8:34 pm

  Ned makes sense that investors are heading towards property since the stock market is not that popular these days. It looks like many investors have given up on stocks and are heading for what they see as a safe haven for their money….residential property.

• 5 Anon // Jun 12, 2010 at 4:43 pm

  “It looks like many investors have given up on stocks and are heading for what they see as a safe haven for their money….residential property.”

  What a disaster in the making this will be. Move from an undervalued asset class into an overvalued one…ouch!

  Marc Faber has just given very sobering guidance re: Australian Residential Housing:

  “And as a special tip, I think I would short the Australian dollar, because talking about a housing bubble, Australia has 10 times a bigger bubble than China,” Faber said. “In Australia you have what you said we don’t really have in China, namely the low leverage that we have in China, we have the opposite in Australia, very high household leverage. … So I think a big downfall is about to happen.”

• 6 Biker // Jun 13, 2010 at 10:06 am

  “What a disaster in the making this will be. Move from an undervalued asset class into an overvalued one…ouch!”

  A cleaner and her retired husband didn’t flinch yesterday when I gave them both options: rent at $360 pw; or buy the house for $396K. They’ll rent their family home to someone else, either way.

  I’ve no idea if stocks will rise or fall. My eldest kid could lose hundreds of thousands in indexed funds. His younger brother, buoyed by his brother’s early success, has done a packet already. With world economies as they are, I’d almost rather they were online gamblers… . In a way, they are.

  In that scenario, the modest regular gains from rental properties shine like sanity in a freaking lunatic asylum.

• 7 Greg Atkinson // Jun 13, 2010 at 11:01 am

  Well I think we need to be careful when we say ‘world economies’ because a lot of the world exists outside Europe and the U.S.

  I don’t think it is gambling to expect that Asia as a economic region will power ahead in the next few decades. In general the region has plenty of savings and a middle class that is growing significantly. In Singapore and Malaysia the number of million dollar households for example is growing much more rapidly than Australia.

  As for regular income, well I like fully franked dividends myself.

• 8 Biker // Jun 13, 2010 at 11:57 am

  “Asia as a economic region will power ahead in the next few decades.”

  Completely agree.

  Will their rise be completely to ‘our’* advantage, I wonder?

  Are you bullish on China again, Greg?

  * ‘our’ in the most general ‘western’ context, here…

• 9 Ned S // Jun 13, 2010 at 3:02 pm

  “Move from an undervalued asset class into an overvalued one” -- Another way of looking at it might be to say “Move from a highly volatile asset class into a less volatile one” maybe.

  With the danger for a mug being that if he is in a highly volatile (and liquid) asset class, he’ll make mistakes both as the market goes up and down more than once with it not taking too many mistakes of even maybe 10 or 12% added end to end to see him very significantly poorer.

  Whereas in a less volatile asset class, same mug will more likely sit there and do nothing and at the end of the day say Well I started out with three houses and I still have three houses -- Albeit worth 15 or 20% less than what they once were perhaps?

  ‘Course if Steve Keen’s vision came to pass and he could buy back into his $526K apartment for $263K then things would start looking very significantly different all round I guess.

• 10 Greg Atkinson // Jun 13, 2010 at 3:09 pm

  Biker I am bullish about Asia as a region, not so much on China. I was just reading the other day for example how labour costs in China have risen to the point where companies are now looking to move manufacturing to other countries because costs are getting too high! Workers are actually striking for higher wages..seems they are capitalists after all

  But China’s possible loss will be someone else’s gain..Vietnam perhaps?

• 11 Anon // Jun 13, 2010 at 3:20 pm

  “With the danger for a mug being that if he is in a highly volatile (and liquid) asset class, he’ll make mistakes both as the market goes up and down more than once with it not taking too many mistakes of even maybe 10 or 12% added end to end to see him very significantly poorer.”

  Thats true Ned, and like you said the compounding of losses through mistakes can be very costly.
  Volatility can be controlled if you hedge investments with Out of the money puts. You buy long dated puts on the stock say 20% lower than your entry. Then you have a guaranteed sell price on that stock for say (1-2 years?) and it doesn’t matter where the stock price goes. This makes a huge difference psychologically when the stock falls through the floor.
  However this becomes expensive if the stock is inherently volatile (i.e. the premium paid on the puts are excessive).
  In fact excessive premiums on puts are usually the sign of a bottom…and i’m seeing very rich premiums on most of the puts out there currently.

  “Move from a highly volatile asset class into a less volatile one” maybe.”

  Good point…but we’d need to see if that holds up once housing mean reverts. People may then say stocks are better than housing.

• 12 Ned S // Jun 13, 2010 at 3:59 pm

  Thanks for that Anon. It was probably only about a year ago that I figured out that such things as stop losses existed. And that reading the saying “Sell in May and go away” maybe helped me understand why my practice of dumping a heap of loot into super around May/June each year when I had a reasonable idea what my taxable income would be, tended to have unsatisfactory immediate consequences. Add in the fact that the court let me keep my super as a reasonable portion of a property settlement that took place not long before the dot com crash, and I’ve probably got to admit that my opinion on stocks could be a bit biased.

• 13 Greg Atkinson // Jun 13, 2010 at 4:00 pm

  I think the volatility of the stock market is being talked up a touch. I have posted a few charts on this site and tried to explain previously that corrections are “normal”. Okay so the May correction was nasty, but let’s not forget that the run up from the low of March 2009 was pretty impressive.

  So maybe housing looks like a good investment at the moment and maybe it is. But if the stock market continues to struggle and house prices keep rising then we will have a serious disconnect.

  A lot of money flowing into our housing market is either from offshore borrowings or offshore investors. Either way it isn’t being fueled by wealth created in Australia alone.

  So the question for me is, how much more debt can we take on in Oz? If households still have the ability to borrow and can pay off loans then I guess house prices will keep tracking upwards?

• 14 Biker // Jun 13, 2010 at 4:00 pm

  Another way of looking at it might be to say “Move from a highly volatile asset class into a less volatile one” maybe.

  *Chuckle* (Couldn’t help m’self… .)

  “…we’d need to see if that holds up once housing mean reverts.”

  You mean ‘if’. That’s a little like me saying ‘when’ the ASX falls to 3200 again. A check on my posts will show that I’m going back in _IF_ the ASX falls to 3200.

  And I think many of us accept that some property marketS may drop. There are many I’d never buy into now… just as there are some stocks you wouldn’t touch with a bargepole.

  Can you imagine Keen’s glee, had Oz property fallen 54.5%?
  And remember that (our) mortgage rates fell by almost the same percentage during that period… .

  Yet any similar future prospect for property is heralded as:
  “What a disaster in the making this will be.”

• 15 Anon // Jun 13, 2010 at 4:04 pm

  “You mean ‘if’. That’s a little like me saying ‘when’ the ASX falls to 3200 again. A check on my posts will show that I’m going back in _IF_ the ASX falls to 3200.”

  Biker ok IF I shouldn’t speak in absolutes.

  “And I think many of us accept that some property marketS may drop. There are many I’d never buy into now… just as there are some stocks you wouldn’t touch with a bargepole.”

  Fair comment Biker

• 16 Anon // Jun 13, 2010 at 4:41 pm

  “And that reading the saying “Sell in May and go away” maybe helped me understand why my practice of dumping a heap of loot into super around May/June each year when I had a reasonable idea what my taxable income would be, tended to have unsatisfactory immediate consequences.”

  Yeah May-Novish generally is pretty shocking. But you have to be careful, stock seasonality does not hold up every year. It depends on valuations and sentiment etc and sometimes pure luck.
  I think some years May/June actually rose and July crashed. In 09 Feb/March crashed and then May onwards was great. I guess the trick is to know when it works and when it doesn’t

• 17 Ned S // Jun 13, 2010 at 5:14 pm

  I reckon it’s volatile when I look at the djia each day and providing it hasn’t moved up or down more than maybe 0.5% think of it as a nice quiet day for the markets. And that “fat finger” thing probably was NOT a mistake when one looks at the chart -- Someone knew something and made a mint has to be my guess.

  Housing and reverting to the mean -- I pretty much accept that lots of factors including dual income families, the size and style of our homes, negative gearing, the ease of obtaining comparatively low cost credit, high immigration and restrictive land release policies (even stuff like OH&S) have all shifted the mean up.

  To what extent will any or all such factors reverse/change? And if so when? Or might conditions become conducive to us producing a surplus of housing? (Spain seems to have shot itself in the foot big time in relation to the latter -- They’ve got 6 years worth of surplus supply I gather.) Or is it possible the deflationistas will finally have their way (in Oz?) Lots of questions and no catagorical answers from this corner is about all I can say.

• 18 Biker // Jun 13, 2010 at 9:45 pm

  Y’know, I wondered if the recent rise in the minimum wage might see a boost in confidence from that sector… and our recent spate of interest actually comes from that group. Not the cashed-up tradies and miners we’re used to, but a demographic we’ve had _no_ past interest from whatsoever…

  Yeah, I know, much too small a sample to be valid… but interesting, nonetheless.

  Our experiences in Spain and Italy indicated that the British middle class, riding on their ‘equity’, boosted their property markets. A lot of the stuff constructed for that market was jerry-built… and warnings were rife even back in 2005. Even the roads leading to some of these developments in southern Italy were highly sus… .

• 19 Ned S // Jun 14, 2010 at 3:13 am

  I find it a bit unsettling when Satyajit Das is this negative:

  http://www.abc.net.au/pm/content/2010/s2918803.htm

  http://www.marketwatch.com/story/europes-latest-fashion-rage-the-austere-look-2010-05-27

• 20 Greg Atkinson // Jun 16, 2010 at 7:03 am

  What do people make of this dire predication by Jeremy Grantham that the Australian housing market is in a bubble? See: http://www.theaustralian.com.au/business/housing-market-a-time-bomb-says-investment-legend/story-e6frg8zx-1225880119320

• 21 Max Manning // Jun 16, 2010 at 1:04 pm

  Rise or fall that is the question.

  I have been of the same thought for a long time, that house prices will come down and at present are far to inflated. Many times I thought that house prices would drop and I was ready to purchase a bargain, but it never happened, prices did steady but not the drop I was expecting.

  I do believe that if interest rates continue to rise it will have a definite impact on house prices but to what level I’m unsure (I wish I knew it would make investing so much easier). When I purchased my first home (as the article states) the cost of my home was about 2.5 times my wage but interest rates were also 16 to 17 percent, but now the same house at its current value is 5.5 times my wage and my wage is considerably more than when I initial purchased it. I also understand if interest rate were able to rise to 16-17% then it’s possible it can happen again.

  I believe that interest rate will be the major player in the determining where house prices will end up and most people understand that including the RBA. The RBA for good or bad have a juggling act to perform; they need to keep the economy moving and need to cool the economy when it start getting out of hand. Man…..I hope they get the balance right.

  Then again house price are what people are willing to pay at the time of purchase which is influenced by personal need and availability of money.

• 22 Firebug // Jun 16, 2010 at 1:32 pm

  If we look at historical data, then the case for a correction is strong. But are we going to see a very large correction as per the article? I doubt it.

• 23 Anon // Jun 16, 2010 at 2:29 pm

  I do hope you are right, and its not going to be deep and large, as the consequences for Australia would be a disaster.
  But I know i’m betting on something very deep and perhaps prolonged in terms of how fast prices will comeback. Albeit 42% is abit of a stretch…we are not Japan

• 24 Firebug // Jun 16, 2010 at 2:48 pm

  My prediction is that the ROI for real estate will be lower than other asset classes in the next few years.

  I think even if there is a second low in the stock market to say 3,000, it will rise back up and provide better return than houses in five to ten years.

  Of course this is generalisation as some areas be much better off than the others

• 25 Ned S // Jun 16, 2010 at 3:29 pm

  No mention of time when, or timeframe over which any such return to “long-term trend” might occur. Or how it might occur. Except to say “Sooner or later, the rates will go up and the game is over.” Which would tempt one to think Grantham reckons it will happen suddenly and catastrophically -- And it will be caused by higher interest rates. Or how high rates would have to be to cause lots of forced sales. Because one doesn’t get sudden crashes without those I’d guess?

  What can one say? Sudden and catastrophic is very bad for banks. And for nations. So the nation’s savers and taxpayers are called on to prevent it. (The Fannie/Freddie debacle could set the US taxpayer back anywhere up to $1t is the latest worst case scenario I read.)

  As to how might it happen? (Assuming it does happen.) Other than through high interest rates causing a catastrophic crash? -- Well, building housing that is more suitable to our needs would seem like a sensible way to decrease the median price to me. But I must admit that I’m not at all sure we will do that.

  Over what timeframe might any such change occur? Steve Keen’s second guess was sometime over the next 15 years I gather? A deflationist by the name of Mike Shedlock (who reckons the crash is pretty much here) also stated “Australia buyers might need to wait 5-7 years or more for reasonable valuations”; And on the off chance anyone still sees any likelihood of Oz riding Asia’s coat tails to Ken Henry’s “golden era”, it could play out over 40 years I guess; Albeit with a few speed bumps along the way.

  Plus at the same time we have lots of souls buying gold because they are concerned about high inflation -- Which could push house prices significantly higher in absolute terms even if not in real terms perhaps?

  So I’ll leave radical calls to those who have a bit more commitment to an extreme view than I’m qualified to take.

• 26 Biker // Jun 16, 2010 at 6:29 pm

  Tried to solicit our agent’s views about the sudden upswing here, this morning. She seems frantic to add the new house to their rental stock… but she may simply be concerned that our private signs on two properties are getting a lot of attention.

  Beginning to think that it’s a scarcity of great blocks/houses close to the beach. Maybe someone has seen the pricelist for the next release further south… and realises everything established is a steal. Must trot down to the developer’s office Tamara; to see if they have a pricelist.

  I feel a little out-of-the loop, at present.

  Grantham? I think Ned’s first take, a month back, on that rehash was correct.

  As with Soros’ views, it’s important to ask not simply about the timing of any announcement, but the possible purpose(s)…

  I recall friends and colleagues approaching us in the early-mid eighties, concerned that things were SO flat. Some had held great properties for several years… and valuations hadn’t moved one iota. Those who took our counsel to hold made five, six and seven times their original investment… and we did even better on one lot.

  Yes, those days are over. I never expect to see them again in my lifetime. But I do expect to see properties we hold double and treble in that time.

• 27 Greg Atkinson // Jun 16, 2010 at 10:54 pm

  Max what makes me worry is the Australian’s seem to be willing to keep taking on debt to fuel the housing market at a time when most other developed economies are trying to get their debt levels down.

  Is the Australian economy unique or are people simply talking themselves into believing it is?

• 28 Firebug // Jun 17, 2010 at 9:54 am

  Biker, are you saying that you believe house prices could double or trible in the next couple of decades?

  Do you predict the average income in Australia going up by the same %?

• 29 Max Manning // Jun 17, 2010 at 3:36 pm

  Greg, I agree with you about the spending by Australians, taking on debt seems to be a pass time for some. If you read today’s papers credit card debt has eclipsed mortgages. It could be another sign that people are not managing with their mortgage repayments and relying on credit cards to supplement their lifestyles. I guess we may get the answer in the coming months.

  The blame should not only be directed to the public in general but the banks and mortgage brokers need to take some responsibility.

  What I find strange is the way financial institution advertise bank loans. A while ago I went past a bank advertising a sale on home loans. The slogan went like this “Sale…. Sale…. On Home Loans today…. Come in and we’ll make a deal with you”. Now seriously, what am I buying, the pleasure of paying back more money than what I originally got…. Now that’s a bargain! And another line I remember from some time back by a well known financial institution…. “have we got a loan for you”…… OYCH!!! Now the banks and financial institutions need to stop and have a good look at themselves, they should not be promoting loans as a product. I personally know bankers and mortgage brokers and have spoken to them many times about the way they conduct themselves with regards to giving out home loans and I was surprised (well not really surprised) with some responses…… “in the end if they cannot pay back then they will have to sell up or the bank will shut them down… I got my commission/bonus”. I’m not saying that this is the case with all bankers and mortgage brokers; some are very diligent and place a lot of pride in what they do. But this behaviour does exist and we all know what happened in the US, I think it’s well documented.

• 30 Senator13 // Jun 17, 2010 at 8:32 pm

  A saying I found interesting – “Owe a bank one hundred thousand you have a problem; owe a bank one hundred million the bank has the problem.”

• 31 Anon // Jun 17, 2010 at 9:35 pm

  lol senator so true.

  This version is probably more accurate:

  “Owe a bank one hundred thousand you have a problem; owe a bank one hundred million the [Government] has the problem.”

• 32 Biker // Jun 18, 2010 at 1:10 pm

  Firebug: “Biker, are you saying that you believe house prices could double or trible in the next couple of decades? Do you predict the average income in Australia going up by the same %?”

  Yes

  No

  I predict that the wealth of a _significant number_ of Australians will more than treble in this period. My starting salary, as a qualified graduate with a degree, was $2200 per year. My earnings are now well over twenty times that. Had you told me what I’d be earning by 2010, I’d have laughed at you. Had you told me what even _half_ our assets would be, I’d seriously have tried to have you committed.

  What I’m suggesting is not simply that wages will rise beyond your wildest guess, but that the gulf which already exists, between those afraid to act… and those _continually acting_ with optimism… will become wider. I could put it more crudely, in terms of the ‘rich and poor’. I’m not that crass.
  It has been suggested however that the latter boost our population, reaffirming my optimism… .

• 33 Biker // Jun 18, 2010 at 2:38 pm

  “My starting salary, as a qualified graduate with a degree, was $2200 per year. My earnings are now well over twenty times that.”

  Well, I waited for laughter and derision, but it never came.
  You’re all too kind… .

• 34 Ned S // Jun 19, 2010 at 10:57 pm

  “You’re all too kind” … Nothing unbelievable about having a $440k plus pa income these days Biker.

  The gap between the “haves” and the “wants” -- Yeh, it’s one of the things the “wants” aren’t all that good at getting their heads around when their lives are so good in so many ways in our society perhaps?

• 35 Greg Atkinson // Jun 20, 2010 at 12:06 pm

  Max what I find surprising is that most Australian’s don’t appear to understand that we are getting more into debt as a nation as each day passes. People keep talking about a mining boom, but the fact is that we import more in dollar terms than we export, so we are actually living beyond our means.

  Besides commodities (hard and soft) our other major exports are in trouble; namely tourism and education. So I don’t understand why people expect Australia’s wealth to keep growing or why wages will keep heading up strongly.

  Perhaps the golden era of economic growth in Australia is over?

• 36 Ned S // Jun 20, 2010 at 2:47 pm

  “Perhaps the golden era of economic growth in Australia is over?” Could be Greg. And it wouldn’t be pretty because we have developed awfully high expectations! So I suspect it’s a good thing to have a personal Plan B and even a Plan C.

  Interesting reading about home ownership rates in Japan -- Less than 50% in Tokyo (in 2003) where prices (were -- ?) high. Although much higher in the rural areas this says:

  http://en.wikipedia.org/wiki/Housing_in_Japan#Home_ownership

  And given that Germany’s home ownership is only about 42%, it isn’t out of the question that we might see a fundamental shift in such stuff in Oz over time. Quite possibly with falling real prices. Absolute prices even if Oz did deflation.

  We’d go back to “the good ole days”; Sort of; Maybe? …

  There’s a lot of stuff here about inflation versus deflation:

  http://www.economist.com/economics/by-invitation/questions/inflation_or_deflation_greater_threat_world_economy

• 37 Ned S // Jun 20, 2010 at 8:14 pm

  Would certainly seem that the finest economic minds in Oz’s RBA don’t have any particuarly significant insights into what the heck is really happening over and above those who try to read a few economic reports regularly? :

  http://www.theaustralian.com.au/business/markets/rba-to-keep-interest-rates-steady-to-assess-inflation-risks/story-e6frg926-1225879971415

• 38 Vince L // Jun 20, 2010 at 8:26 pm

  Biker perhaps nobody cares about what you say you earn simply because there is no way to know for sure if what you say is correct or not. I really don’t see what value that little bit of information added to the debate.

• 39 Firebug // Jun 21, 2010 at 10:28 pm

  Biker,

  It is not hard to see your point.

  My in-laws’ first home, a two bedroom unit at Randwick was in the paper three months ago. It was auctioned off at about $600k. They sold it for $30k about 35 years ago. Nobody would have believed this kind of appreciation.

  However, I am not sure whether this trend would continue in a straight line though. The prices of houses may well be much higher in twenty, thirty years’ time. How do we know there won’t be ten years with no appreciation?

• 40 Biker // Jun 22, 2010 at 1:40 am

  “How do we know there won’t be ten years with no appreciation?”

  Nothing is impossible, FB.

  We can look back to the eighties when there was a five-year period of zero property value growth in WA. Property spruikers will tell you that these five-year plateaus are followed by two years of rapid appreciation. I’m not sure I believe that, but it’s precisely what we experienced.

  Currently, the period I’m hearing cited as the next boom is 2012. If the <3% unemployment figure predicted for WA that year is correct, it may well happen.

  I don't know why this 5 + 2 claim exists, other than to reason that after five years of developers and builders suffering low confidence and therefore _doing_ little, shortages start to occur and it all flares up again. We know of four large projects put 'on hold' in the last three years, due to lack of confidence. There's little sign that they're ready to go ahead soon. Watching all four I hope that when the earthmovers go into action, projects we have nearing completion, or ready to sell, will pre-empt the release of competitive developments.

  Note the 'I' here. My missus is quite happy to hold… and keep building… !

• 41 Greg Atkinson // Jun 26, 2010 at 9:07 am

  It seems the ABS is seeing the population growth in Australia slowing a touch so if this trend continues things could get interesting. You can read more here: Australia’s high population growth starts to slow: ABS

  If this trend were to continue it could make things interesting in regards to property prices.

• 42 Ned S // Jun 26, 2010 at 8:40 pm

  A bit of the March 2009 cuts to skilled immigration coming through in the stats Greg? :

  http://www.smh.com.au/national/immigration-slashed-to-protect-jobs-20090315-8yy2.html

• 43 Greg Atkinson // Jun 27, 2010 at 8:19 am

  Indeed Ned, that is probably a big reason the immigration numbers are down.

  The warning for the housing market is this. 64% of the population growth is being driven by net overseas migration and if the economy slows the numbers of migrants entering Australia will drop.

  This will then lead to lower economic growth and thus the economy could find itself in viscous circle where unemployment starts to creep up and net migration numbers fall again.

  Remember a lot of bullish calls made about the housing market are based on forecasts of high population growth for the next decade or so. I wonder if anyone has done some calculation regarding what would happen if we have a decade of much lower population growth?

  By the way, I also suspect the demand for rental apartments is probably going to get hit hard in some areas due to the decline in foreign students coming to Australia as a result visa changes and bad press. (i.e student bashings)

  So there seems to be quite a few factors at play that would normally cool housing prices…and yet this does not seem to be happening yet. Is that a good thing or a dangerous omen?

• 44 Ned S // Jun 27, 2010 at 9:08 pm

  “there seems to be quite a few factors at play that would normally cool housing prices” -- The expectation (again! ) would seem to be that they’ll cool Greg. With the question being whether and to what extent they could even correct. I wouldn’t mind a little buying opportunity in Brisbane personally. But am not sticking my neck out like I did in late 2008 and predicting I’m going to get one.

• 45 Biker // Jun 28, 2010 at 11:52 am

  If the unions put Gillard into power, then they’ll dictate immigration policy. This _will_ result in a labour shortage. Expect wages to rise.

  Our European friends will still bring relations out. So will all the South African and Brit miners. I wouldn’t write off our higher education imports too soon. They’re a big money-spinner for Oz… .

  Interesting markets here in WA. House prices may have levelled off somewhat, but block prices continue to rise. Bargain home right by the beach: $390K for a 4 BR, 2 BR, DG home, ten years old. If it’s there next week, we’ll check it out.

  Have evacuated our most recent project. Good to be home after months completing that one, seven days per week. Eleven serious rental inquiries. No sale, though… .

• 46 Anon // Jul 2, 2010 at 5:31 am

  So what bets are we making re: house prices?
  I think maybe 20-25% falls in median prices over the next several years…I feel the recovery will be much slower than people currently anticipate given most think a repeat of the 2008 situation is likely -- which inturn makes this more unlikely given rear view mirror bias.

  Bubbles usually come off slowly and then pick up pace as reality sets back in. So I wouldn’t be surprised with a small fall first and then it increases over subsequent years…perhaps a final capitulation in 2012?

  So theres usually a time lag between house price falls and loan losses at banks. And the brunt of the falls may not happen until another economic downturn occurs (i.e. 2011-2012). Reason being people are more likely to lose their jobs in economic downturns and combined with negative equity and/or inability to service loans they become forced sellers and the downwards dominoes effect occurs re: price falls. Then negative prices feeds fears of more price falls, supply drops. Rents dont increase as sellers who are unable to sell their properties are forced to rent them out.

  So I guess, i’m abit worried that Biker is seeing a slowing in offers/interest so quickly. And a thankyou to Biker for letting us know whats happening on the ground.
  Still not shorting Australian housing as I feel its too early, but am watching on with interest. The wolf packs are forming

  *All posts by this poster is not financial advice or reccomendations to do something.

• 47 Anon // Jul 2, 2010 at 5:33 am

  “Then negative prices feeds fears of more price falls, supply drops.”

  That should be demand drops btw (damn cant edit!!)

• 48 Ned S // Jul 2, 2010 at 9:53 am

  20-25% falls over the next few years? You are a brave man Anon! At around about those levels in that timeframe I suspect the whole game could unravel as a deflationary crash towards Steve Keen’s beloved 40%. 10-15% wouldn’t especially surprise me though. Followed by a plateau period. Such is the life of an Oz RE property owner!

• 49 Ralph // Jul 2, 2010 at 10:28 am

  Hard to really predict things with any great confidence, but I think we’re at or very close to the top of the curve. The biggest indicator is the lending figures, which had been trending downwards. However, I think May might have shown a slight uptick, I’m not sure. With house prices as high as they are, access to credit is the key to increasing house prices. Less credit for housing by definition means less money available to purchase over-priced housing.

  I agree with anon that prices will be slow to move down because vendors will be reluctant to believe that their asset can actually be worth less than they think it is. But if credit remains weak, vendors will have to reduce their prices if they want to sell. If people are not getting as much credit, how can they pay asking price? Or they pull their house off the market.

  The world is clearly worried about the massive levels of debt sloshing around, and rightly so. I think that makes banks wary and more inclined to not be quite so loose in giving out money. On top of that, I think the appetite for debt in the Aus community is moderating. Personal fiscal consolidation is the new black. There is a growing sense that house prices are high enough and the rush to ‘buy now or miss out forever’ is not as strong, which of itself suggests that the bubble is under threat.

  I think the key to things at this point is whether the government can come in with some more stimulus to keep the game going. That’s the ‘known unknown’ elephant in the room -- we know that Gillard/Abbott are unlikely to let the housing bubble go down without a fight. THey know that it’s got to the point where the entire economy is dependent on continuing high house prices. What a disgraceful situation to be in. However, I’m not sure how credible increased home buyers grants will be this time. The public knows it’s just an excuse to inflate house prices, so I think they’ll be more cynical this time. But perhaps the government will be so desperate they just don’t care. The government’s shown that they can be bought by the mining industry, so I think there’s a good chance that the RE industry will also have their way when the bubble starts to deflate. So they might try something else. Who knows. We’ll probably find out after the election.

  So I agree pretty much with Anon’s assessment of 20% falls in the near term. I think it’s really only limited by the extent to which the government tries to intervene. I hope they don’t come in with a ‘shock and awe’ approach, spending money willy nilly to keep house prices up. Unlikely with the current scare campaign about debt that’s being run by the Liberals. But it’s hard to predict what they’ll do if they’re desperate.

• 50 Greg Atkinson // Jul 2, 2010 at 11:00 am

  I know Biker will scold me for saying this but I think we should take note of what happened in Ireland regarding their housing market. One thing that happened was they kept building houses for people migrating to Ireland and as more people came, they built new houses.

  Eventually they ended up not only with too many houses, but too much building capacity in the housing sector. Of course none of this seemed to be case during their economic boom and everyone went around talking about a chronic housing crisis and home prices soared.

  Sound familiar?

  Have property prices now gone too high too quickly in Australia I wonder?

• 51 Ralph // Jul 2, 2010 at 11:44 am

  It’s hard to see how Australia’s going to get out of this. With modern media the way it is, plenty of Australians can see that Europe’s teetering on the brink and about to topple over because they’ve got too much debt. This is making people gloomy and reluctant to spend because there is an increased realisation that the sh*tstorm could be coming to a store near us soon. We see it in lower auction clearance rates and lower lending figures.

  Even if there is a housing shortage (and it’s debatable if there is), that’s not going to keep prices high and increasing banks aren’t lending and people don’t want to go into more debt. Of course, banks (and the gov’t) are in a catch-22 -- they need to lend big to keep the economy ticking over, but they are also scared that they are actively stoking the bubble.

  The more I think about it, the more I think that the main motivation is to get to the election as soon as possible. Then whichever party gets elected can breathe a sigh of relief because they’ll have 3 years to spend like crazy to pump up real estate prices and bail out the banks (again) before they have to face the people. I think this is all they have left.

• 52 Greg Atkinson // Aug 1, 2010 at 11:40 am

  Here is an interesting article by Michael Yardney about Australian house prices and the differences in opinion between views regarding the property market between Australian and overseas observers. See: Is Australian property really the most overpriced in the world?

• 53 Ned S // Aug 1, 2010 at 12:53 pm

  Michael Yardney’s article cum sales pitch -- I’m always a bit suspicious of those who tell me “fortunes will be made by those who understand what is really going on”.

• 54 Biker // Aug 1, 2010 at 2:11 pm

  “The Economist magazine’s latest survey of global housing reported that Australian property had the poorest return on investment of the 20 countries it evaluated.”

  Don’t mind either the Libs or Labor reading this article!

  We’ve been doing our Depreciation Schedule for the latest project, all Sunday morning. Our total cost was $326K + interest. We have around $90K equity in this one. At $350 per week rent, I’ve got to ask how terrible an investment this is, particularly after tax benefits are calculated!~

  We won’t _sell_ the house for less than $395K.

  While we recognise that some punters are getting better returns, ours are guaranteed, year-after-year. Anyone chasing quick(er) riches may be better off in another asset class, but neither our Super nor our cash-in-the-bank* are matching our property returns.

  * Although our offsets currently return 6.71% tax free… .

• 55 Biker // Aug 1, 2010 at 6:51 pm

  “Our total cost was $326K + interest”

  OK. Correction needed… that’s now up to $335K plus interest.
  We’d forgotten landscaping and fences… .
  Still pretty remarkable and underbudget.

• 56 Greg Atkinson // Aug 2, 2010 at 11:21 am

  I don’t think we are seeing much value being added by property commentators now. There is either a real estate bubble or there isn’t depending on how you view (or trust) the available data and the available data is pretty unreliable in my opinion.

  One thing does does strike me is that the pro-property crowd are all counting on Australia’s population growing fairly robustly for many years to come which means they must be counting on fairly high levels of immigration?

  But it seems both political parties may cut immigration numbers so I wonder what impact that might have on the housing supply/demand equation?

• 57 Ralph // Aug 2, 2010 at 12:26 pm

  Maintaining high house prices is the top priority of both political parties -- the economy as we know it depends on it. And don’t forget that property developers are massive donors to both sides. Immigration cuts will be quietly shelved or ‘massaged’ to keep enough migrants coming in so as to not weaken housing demand too much.

  The first monthly house price falls are in -- 0.7% down in June. Lending figures are also slowing and/or falling. In short, appetite for debt is down and this must logically flow through to reduced demand for housing. If this continues, the government will be sorely tempted to re-introduce some form of housing-related stimulus. First home owners boosts will look ridiculous so soon after the last ones, but a desperate government could resort to anything.

  Impossible to say with any great accuracy what will happen next. But it is clear that, left to its own devices, the housing market is about to embark on a bit of a downward trend. We now just wait and see what the government’s response is going to be.

• 58 Greg Atkinson // Aug 2, 2010 at 2:06 pm

  Yes Ralph I agree that both major parties will want to support house prices. It seems these days that property is one of the main ways people gauge their wealth/success by and politicians won’t want to tamper with it too much.

  There are some people say that “fondness” for owning/investing in property is a bit of a throw back to 18th/19th century thinking where the landed gentry wielded great power. But in Australia with so much favoring property perhaps real estate is a fairly safe asset class to invest in?

• 59 Biker // Aug 2, 2010 at 3:39 pm

  Ralph: “…0.7% down in June. Lending figures are also slowing and/or falling. In short, appetite for debt is down and this must logically flow through to reduced demand for housing….
  …left to its own devices, the housing market is about to embark on a bit of a downward trend.”

  No question that appetite for debt is down.

  You lose me in the next bit, where you argue that this means “…reduced _demand_ for housing”. It actually means reduced supply. We’ve put our construction on hold. We’ve withdrawn two properties from sale. Our builder calls us regularly… !!~

  If you argued that reduced immigration (less population growth) means less demand, or that rising rates mean less sales, I’d completely agree. In fact, fear of debt means reduced construction and less supply. Demand for shelter remains… unless you have a FHOG sucking 200,000 plus families from the rental pool. In WA, large numbers of young families took the $21K and built. Construction boomed.
  Despite our population being expected to rise by 120,000 in 11-12, due to the mining boom, construction is now right down.

  Greg, there’s no doubt that you’re right about the history.
  The reluctance of those renting to refer to themselves as ‘tenants’, preferring ‘renters’, harks back to the days of serfdom and tenant farmers. The term ‘landlord’ is also part of that heritage. The Eureka Stockade possibly marks one of the real breaks in that tradition.

  I think your closing sentence sums it up for us. As you know, that doesn’t mean that inexperienced buyers are safe buying at the top of the market or should ignore the need for equity… .

• 60 Ned S // Aug 3, 2010 at 12:37 am

  “It seems these days that property is one of the main ways people gauge their wealth/success by and politicians won’t want to tamper with it too much.” -- With the corollary being that when property prices fall, people judge themselves less wealthy/successful and spend less, which in an economy like ours is not viewed as ‘good’ by too many at all. It’s bit of a chicken and egg argument as to whether asset prices drive growth or growth drives asset prices with the cost and availability of credit seeming to be critical either which way?

  “18th/19th century thinking where the landed gentry wielded great power”/”the days of serfdom and tenant farmers” -- It goes back a long way alright. Of course, we’ve had 70% home ownership in Oz for 4 or 5 decades now. And still do. Must admit I’ve got doubts about wanting to see it go much higher than that though. Unless our pollies can come up with some sort of plan on how it might be supported long term? And I’ve seen nothing to indicate they are that bright or forward thinking.

• 61 Biker // Aug 4, 2010 at 12:00 am

  Riding north today, I was stunned to note large areas sprouting multiple dwelling projects. Most had street parking… those cutaway bays serving new residents’ accommodation. Our state government is attempting to address the lengthy list of those waiting for access (25,000+). Interesting to note that just 150 new residences were built last year… and that the ‘damage’ bill reached nearly eight million.

  My guess is that we’ll see ten times last year’s expenditure on public housing this financial year… the last of the stimulus funding no doubt. At that point, I predict the construction industry may take a dive. Mining may take up the slack here.

  Despite this, the HIA will be actively lobbying government for support… .

• 62 Plornt // Aug 7, 2010 at 4:57 am

  Begining to put probe bets in, against the Australian Housing market. In my modeling I am assuming 2-3 year capitulation and a 25% fall. But the longer I wait to take a position in this the more expensive its going to be. More and more hedgefunds are becoming aware about the aussie housing bubble trade, so might be abit of Euro reactive situation occuring in a few years. Don’t think it will be as bad as the Ireland situation, but the landing will not be soft i’m afraid. It will be hard and slow to recover. I will have to be careful buying real estate too quickly once the crash occurs.
  Rents have risen ~100% from the mid 90s whilst house price have risen ~180%. The two usually correlate closely together. This is arguably a better short than US treasuries.
  Also I could be completely wrong here (I regularly am) and this is not financial advice, I am just merely discussing my thoughts regarding how I am going about this position.

  All posts by this poster is not financial advice or a reccomendation to do something. Can change my mind quickly on any decision I make, given markets always change. Have positions in instruments discussed unless otherwise indicated.

• 63 Biker // Aug 7, 2010 at 10:53 pm

  “I will have to be careful buying real estate too quickly once the crash occurs.”

  Wouldn’t worry too much about this. The interest rate will be zero, perhaps less. Unemployment will be running around ten percent, so you’ll have little competition. Most owners will have gone to live with ma & pa anyway.

  All you’ll need is Monopoly money. Terrified FHOs and investors will throw houses at you… . If you use low-denomination notes,
  you’ll appear to be paying more… and they’ll probably queue to give you their keys.

  I figure you’ll have plenty of time. This is all unlikely to happen for several weeks.

• 64 Ned S // Aug 7, 2010 at 11:31 pm

  Steve Keen’s advice to aspiring home owners -- “I think it’s only going to be political change and getting those sorts of legal reforms I’m talking about, that’ll work. Don’t bother saving money for it.”

  http://www.finnewsnetwork.com.au/archives/finance_news_network15376.html

  Bloody government -- And property speculators -- Stitched him up -- When he was speculating on them going down!

• 65 Plornt // Aug 7, 2010 at 11:36 pm

  I suspect you and Ned will make a killing given your experience in the housing market, IF we do crash.
  Many fortunes will be made when the rug is pulled under the housing bubble no doubt.
  And like your said, when the negative psychology hits not many will be wanting to buy, meaning I can throw a dart and hit a bargain. Good for us inexperienced types

  “All you’ll need is Monopoly money”
  Got 40% in cash, in a term deposit waiting now, for a house deposit. Although I have 60% invested in equities now, but I heavily leverage my 60% (giving me a fully invested total portfolio) and borrow @ 1.3% in USD and get 6.5% on the other cash, getting a positive carry. When the stock market hit bottom I was getting paid to borrow USD on my portfolio, whilst being long the AUD (paid ~4% borrowing at USD 1.3% to buy AUD) in addition to the positive carry from the bank a/c -- quite crazy when they said that it was risky to buy in late May!! I dont see how its risky to buy severely depressed bluechips and get paid to borrow??

  “The interest rate will be zero, perhaps less. Unemployment will be running around ten percent,”

  10 percent is an extreme amount. Not sure it will get that high? Agree with the near zero interest rates, they will need to do that to stop the rot. Imagine the leverage you could get then!!

  All posts by this poster is not financial advice or a reccomendation to do something. Can change my mind quickly on any decision I make, given markets always change. Have positions in instruments discussed unless otherwise indicated.

• 66 Ned S // Aug 8, 2010 at 12:30 am

  I’d love to know Keen’s real storey -- He certainly does seem to have few clues on the perils of debt.

  I sometimes muse that he might have bought his apartment back in 1980 for maybe $25K; Dipped into the equity over many years to buy crap and do the occasional property settlement with a partner or two; Then with a potential sales price of $525K and a mortgage of maybe $225K and the strong sniff of a GFC coming up, went Yep, it’s now time to dig myself out of this hole!

  Only to see his hopes ‘n dreams for his dotage turn to poo -- And be paying $26K pa rent! Poor ole bugger … He wouldn’t be only clever man to ever mishandle his personal finances though.

  But he does have a heck of problem -- It’s not as if he can just quietly buy back in unless we do get a very significant drop now is it? And he sure would seem to be getting frustrated when he starts advising the youngies “Don’t bother saving money for it.” Wonder if he’ll live long enough to ever be a homeowner again?

• 67 Plornt // Aug 8, 2010 at 12:37 am

  Somehow I can envision Steve saying “we’ve got further to fall” when we are all pilling into housing in 2-3 years time.
  The hardest thing to do when you take an extremely bearish stance is to reverse your opinion when prices compensate you for the risk.

  All posts by this poster is not financial advice or a reccomendation to do something. Can change my mind quickly on any decision I make, given markets always change. Have positions in instruments discussed unless otherwise indicated.

• 68 Plornt // Aug 8, 2010 at 12:47 am

  Hows this for a traders screen setup?
  Perhaps abit overkill?

  http://www.stocktradingtogo.com/wp-content/uploads/2007/08/massive-trading-system-copy.gif

  Somehow i’m thinking brain cancer from that kind of radiation!

• 69 Ned S // Aug 8, 2010 at 1:00 am

  The gif definitely makes renovating houses look like a nice relaxing pastime!

• 70 Plornt // Aug 8, 2010 at 2:38 am

  lol Ned
  I wonder how much that trader paid to set that many screens up. Crazy stuff.

• 71 Ned S // Aug 8, 2010 at 3:48 am

  He’s got to be a computer geek who fancies himself as a trader on the side Plornt? Either that or he’s in for a hell of short career -- I reckon the whiplash injuries will nail him before anything else!

• 72 Plornt // Aug 8, 2010 at 4:17 am

  LOOOL Ned, almost fell off the chair.

  Oh dear.

  I’m not sure whether he knows what he’s doing. You do get some people who spend heaps on a huge setup thinking it will improve their performance. I reckon if you can’t make money on a basic setup first, you shouldn’t really outlay or expand until you can do that consistently.

  BTW I think i’d have an epileptic seizure, if I had to monitor that many screens Ned.

  My setup is really basic, although am in the process of adding another screen. I dont really monitor things enough, which is abit lazy and costly at times. I find the more I do, the lower the quality of my decision making and lowers returns (law of diminishing returns in effect), so generally do keep it simple and less is more.

  So the second screen is setup next to the television in the loungeroom, to force me to occasionally look at support levels. Its a risk management strategy against my procrastination

  All posts by this poster is not financial advice or a reccomendation to do something. Can change my mind quickly on any decision I make, given markets always change. Have positions in instruments discussed unless otherwise indicated.

• 73 Ned S // Aug 8, 2010 at 5:39 pm

  I’ve had a strong suspicion there is a lot more to the Yank housing crash saga than meets the eye for some time now. And the following seems to confirm it:

  http://www.bis.org/statistics/pp/pp.xls

  If my take on those numbers is correct, then the US is only down about 12% off its 2007 peak. (Existing single family houses) -- Although the new ones are a bit sicker at 15%

  And the UK is down 19% since their 2007 peak. (All dwellings)

  And yes, I do see Oz is up 5 or 6 times what we were in 1986. Similar level of naughtiness to Norway which is up about 4 times since 1992 maybe? What wicked Scandinavians they are -- The following certainly has a familiar ring to it:

  http://www.bloomberg.com/news/2010-06-29/norway-housing-bubble-risks-grow-as-euro-region-crisis-delays-rate-rise.html

  With Norway being worthy of mention as the other resource based economy listed perhaps?

• 74 Ned S // Aug 8, 2010 at 5:43 pm

  It isn’t exactly the sort of stuff that should smite a property investor with absolute fear and trembling -- Not for mine anyway?

  Although, yeh, I’m happy to hang out a bit longer on the thought that we might get a modest correction here too.

• 75 Biker // Aug 9, 2010 at 3:26 pm

  “Many fortunes will be made when the rug is pulled under the housing bubble…”

  Now I’m sure you mean ‘if’… .

  I agree with your views on Keen’s predicament, Ned.
  I’d hate to think he put his capital gain into the ASX!

  Probably did, as it was the one thing he failed to see coming…
  and everything else he prophesied failed to occur:

  Unemployment 10%
  Housing crash 40%
  Interest rates 0%

  If he was seeking fame, rather than fortune, he has certainly achieved his wish.

• 76 Ned S // Aug 12, 2010 at 11:33 pm

  I thought someone else out there might enjoy this. Amongst other things it points out some of the potential pitfalls of having socialised housing (and then trying to not have socialised housing) where it says:

  “Since the end of the Soviet Union, the government’s main policy has been to establish market relations throughout the housing sector. All residents in multi-apartment blocks were granted the right to privatize the apartment in which they were living, for free. Over 70% of all housing stock is now in private hands.

  This policy has left an enormous residue of problems. It was assumed that with this transfer the new owners would take over the management and maintenance of the housing stock. They have not.”

  http://www.globalpropertyguide.com/Europe/Russia/Landlord-and-Tenant

• 77 Biker // Aug 13, 2010 at 11:58 am

  “The recent improvement in capital growth performance of units is ascribed to affordability issues. The current capital city median unit price is $420 000 compared to houses at $495 000.”

  Good news if the majority of one’s homes are worth around $420K!
  

• 78 Greg Atkinson // Aug 17, 2010 at 1:32 pm

  Well another analyst has made another very bearish call regarding the housing market as reported today in The Australian.

  According to the article: Local property investors have become “Ponzi borrowers” in a market 40 per cent overvalued, according to a Morgan Stanley strategist.

  See: http://www.theaustralian.com.au/business/property/morgan-stanley-analyst-bearish-on-housing-market/story-e6frg9gx-1225906316683

  Sounds like a big call to me!

• 79 Ned S // Aug 17, 2010 at 3:17 pm

  Wouldn’t sound like Morgan Stanley is advising its clients to fund the Aussie banks then. Wonder what it is advising them to invest in.

• 80 Biker // Aug 17, 2010 at 4:10 pm

  Never heard the term ‘ponzi’ applied to Oz housing before.
  That must be a first.

  Same, too, with the ’40% overvalued’ call. Quite original!~

  But, coming from a US-based source, I guess they have to be right, right?!~ D)

• 81 Greg Atkinson // Aug 17, 2010 at 5:23 pm

  Biker -- the analyst who made the comments works for Morgan Stanley Australia and is Australian.

• 82 Biker // Aug 17, 2010 at 6:04 pm

  Oh, I get it. Sorry.

  It’s like there’s no connection between DR(US) and DRA… .

• 83 Greg Atkinson // Aug 17, 2010 at 6:21 pm

  To be fair I would not equate Morgan Stanley with DR. However the guy who made the call has been predicting house prices would fall for a couple of years so I guess he is a patient fellow.

  I see the property bubble theme is getting quite a bit of attention in the mainstream media lately..must be an election coming

• 84 Ned S // Aug 17, 2010 at 7:03 pm

  He’s certainly not sticking his neck out: “Mr Minack said the most plausible trigger for a correction in the Australian housing market — broad-based jobs losses — doesn’t appear likely in the near term. This means big price declines in the near term “seems low”.”

  And: “The real return on residential property over the next decade is likely to be negative, in my view.”

  Wonder if he’s a stagflationist.

  Some headlines DO make me laugh. I thought this was a classic: “Secular Bears tend to be long events” :

  http://pragcap.com/secular-bears-tend-to-be-long-events

• 85 Ned S // Aug 17, 2010 at 7:23 pm

  “the property bubble theme is getting quite a bit of attention in the mainstream media lately..must be an election coming” -- Actually Greg, it doesn’t seem to be a topic the pollies want to touch with a barge pole!

• 86 Biker // Aug 17, 2010 at 7:56 pm

  “…it doesn’t seem to be a topic the pollies want to touch with a barge pole!”

  And what does THAT tell us, Ned?!~

  I’d be worried by Greg’s attitude to Oz property, but for the fact that he _always_ balances the number of ‘negative’ links with ‘positive’ links about property.

• 87 Ned S // Aug 17, 2010 at 9:20 pm

  “And what does THAT tell us, Ned?” -- My suspicion would have to be that they don’t want to come out and say that they will always support house prices Biker. Because a) it will piss off the small percentage of the population who want to see them collapse and b) make a few others inclined to load up on risk that the government would definitely rather that they didn’t.

  On another issue, if (as we can probably quite reasonably hope -- except in an out and out deflationary global crash) any “bubble” slowly deflates (with wages rising and rents also rising to “catch up”) then real returns can be expected to improve -- And for me, that’s actually more important than real values -- And I imagine that anyone who can live on the real returns he’s getting now may well see it the same?

  I see the megabears going to great lengths and doing all sorts of calcs to explain why housing is such a lousy investment -- And by and large don’t care because they look at the whole exercise WAY different to me.

  Puts me in mind of an American blogger’s comment re offers he’d had to purchase his investment property -- Not interested -- What would he do with the cash? Put it in stocks where he could lose it -- No thanks. Put it cash where he’d get even less return -- No thanks. And that from a bloke who has presumably been on the warm end of a property correction.

• 88 Biker // Aug 18, 2010 at 10:44 am

  I see housing got a mention this morning, Ned:

  Joe: No bubble.

  Wayne: No bubble.

  Bet on: No change.

  You make a good point: What else would you do with the cash?

  We’re going through that very scenario, now… with our Key Questions exercise. We _may_ be better off keeping a half dozen highly productive properties… selling the rest… and mixing cash (no tax on bank interest to $50K) and Super (no tax at all).

  This plan would _not_ work if we were both working… or one of us was working… so it may have to wait until June 30th 2011.

• 89 Greg Atkinson // Aug 18, 2010 at 10:57 pm

  I don’t think I would rely on Joe or Wayne to spot a bubble for me

  I personally don’t see housing in Oz as being in a bubble, but like I have been saying for a while I reckon it will come off the boil.

  But even though housing finance is down I still haven’t read anything that would suggest prices nationwide are falling.

  Let’s face it, people who have predicting a housing crash in Oz since 2007 have egg all over their face.

• 90 Ned S // Aug 24, 2010 at 3:33 pm

  “people who have predicting a housing crash in Oz since 2007 have egg all over their face” -- You can call me an egghead then! (Although ‘correction’ rather than ‘crash’ has been my feeling)

  Matusik isn’t sounding especially positive today:

  http://www.couriermail.com.au/money/investors-disappointed-over-quick-housing-gains/story-e6freqoo-1225909165963

• 91 Biker // Aug 24, 2010 at 5:29 pm

  And Minack is doing a Keen: OK, I was wrong, but I wasn’t really.
  You-just-wait:

  http://news.domain.com.au/domain/real-estate-news/new-risks-threaten-house-price-bubble-20100822-13auc.html?posted=sucessful#makeComment

  To be fair, WA has taken a light hit: 2.5% in the capital, 6% elsewhere. As someone has pointed out, that’s a bad _day_ on the stock market!~

  I put our falls down to the mining tax debacle… .

• 92 Biker // Aug 25, 2010 at 4:15 pm

  Ned, you may want to register for this Webinar.
  It explores some fairly radical approaches to rentals. We’re already using some of the strategies ourselves, so we know it’s worthwhile.

  Think it’s entirely free:

  Webinar Session 1: NSW, VIC, QLD (AEST) 7:30pm or SA & NT (ACST) 7:00pm

  https://www2.gotomeeting.com/register/427922795

• 93 Ned S // Sep 14, 2010 at 3:16 pm

  31 and 52 m2 apartments to help affordability apparently:

  http://www.couriermail.com.au/property/small-units-now-rich-pickings-as-downsized-homes-gain-in-popularity/story-e6frequ6-1225917591408

  Not too sure about the prediction that in the future we’ll see shared TV rooms and suchlike though?

• 94 Biker // Sep 14, 2010 at 8:31 pm

  Interesting link. Definitely not happening here, yet. Our 3BR, 2BR, DG experiment hasn’t been our best initiative. At $335 pw, it’s paying itself off, but there’s no $urplu$… . We should have left the plan as a 4BR… and picked up an extra $25 pw.

  That Webinar was such a waste of time, BTW, Ned. Incredibly basic… an online kindergarten of realty investment.

• 95 Biker // Sep 15, 2010 at 9:16 am

  Brisbane units top rental list, Ned:

  http://www.watoday.com.au/wa-news/perths-best-and-worst-unit-rental-suburbs-20100914-15a6h.html

• 96 Ned S // Sep 19, 2010 at 4:47 pm

  The market is severely challenged over this way at the moment Biker. Both rentals and sales. Keep an eye on Sydney and Melbourne too though I guess. If they look like getting too quiet then some stimulus could be forthcoming.

• 97 Biker // Sep 19, 2010 at 7:35 pm

  A mate of mine has been house-minding in Brisbane for the last few weeks, Ned. He’s now heading towards Gladstone. It’s his first trip to QLD and he’s quite impressed.

  I guess your unemployment rate is the issue at present(?) We are looking at falling below 4% unemployment, which some contend may be close to full employment, if you factor in the number who don’t particularly want to work.

  Mining tax uncertainties must be affecting both our states… and SA’s recent moves complicate things. WA is humming at present, despite that. Restaurants and cafes are full and there are long queues at all the retailers. And every (other) b*stard is driving a new car!!

  If this is a recession, bring on a depression! You only have to look at Australia’s tourist imbalance this year. More of _us_ are off on overseas holidays than those visiting from abroad.

• 98 Ned S // Sep 19, 2010 at 8:59 pm

  Was talking to my property mgt agent recently Biker. One comment she made that I found very interesting was that she has a bunch of 1 BR units on her books pulling about $250 per week in rent. And running as high as $300. While my 3 BR brick place and 4 BR timber place are each pulling a touch under $350 per week. Money is just tight here maybe?

• 99 Biker // Sep 20, 2010 at 8:52 am

  “Money is just tight here maybe…”

  Hard to say, Ned. Single bedroom units are pulling the same figures here: $250 -- $300pw.

  Admittedly, only two of ours are getting under $360 per week, with $450pw our top rent. But over half our rentals are less than five years old and very well appointed.

  I’m a little surprised rents aren’t higher. We see very silly prices advertised: $500 -- $650pw, but we don’t know if owners are getting those rents. We’re just happy to have full houses… and great tenants.

• 100 Greg Atkinson // Sep 27, 2010 at 8:41 am

  Well we have yet another view of the Australian housing market this time by the chief economist at Goldman Sachs.

  According to an article in the SMH today: It’s not a bubble, but there’s other trouble brewing home prices are overvalued buy up to 35%.

  It was interesting to read in this article that the ABS does not take into account rural house or apartment prices into it’s statistics. I wonder what % of the market this excludes and is it significant?

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