I would say a 0.1% or 0.3% rise or fall means very little.

Good chance I will be in Japan (Tokyo) in April Greg… Might have to have a beer with you…

Statistical noise. Q on Q and Y on Y figures give a better scope of what is happening.

Property is a different beast to track

The media doing whatever it can
to distort the truth.

Quoting private firm saying House values,
have wait for it,
increased in 2011.

http://www.theage.com.au/business/property/home-values-rise-for-first-time-in-2011-20111230-1pf28.html
(with no comments to rebuke how
convenient! )

But go look at The State Revenue Office data
(each State has its equivalent).

The actual sales result for each settled property
settlement is there shown.

This takes normally 3 to 6 months to show. They’re shocking truths.

So, any figures relied upon are just that,
unreliable and out-of-date.

Like other punters’ predictions, even for 2011, these punts have proven wildly speculative and incorrect.

Biker, Statendam

By the way Steve Keen has written an article for http://www.businessspectator.com.au conceding his house price prediction was wrong and he will be walking to Kosciusko. But like all economists who seek the limelight he says it is not his fault.

Yes it is Steve..we live in the real world not one driven by spreadsheets alone.

The bet was in two parts, 20% within 2 years, 40% within 10.. The 2 years ended up being incorrect, biggest reason was the FHBG..

Whilst I do not have an opinion on whether Keen will be correct on the second part.. I would not be so eager to dismiss his comment as the ramblings of a fool.. He could well turn out to be right, or even conservative in his original “bet”. I vaguely recall a mention of him since saying that it will be higher than the 40% he first envisaged.. Might be wrong on that.. I browse through the occasional Keen article in the papers but do not follow him on his blog…

I guess the people that purchased his inner city apartment are happy

He writes as if it is so obvious that the FHB’s were the reason. If it was so obvious he should have been able to predict it being the case.

Just throwing up some observations. Please let me know if I have misread something or am way off the point…

I don’t know if this figure is correct, but he states 171,000 people received the grant. Now in the grand scheme of things that number sounds pretty small to me. That is just a few suburbs worth of people… Out of an entire nation, for FHB’s to be the driving force behind the move I would have thought that number would need to be a lot larger? But I don’t know… It just seems on the low side to me…

Also, as stated in the article, an 8% increase in house prices is not all that much I don’t feel either. Even an 8% decrease I would still be saying that is not much of a decline (and I expected around negative 10% in the current environment). When comparing to the double figure returns on the sharemarket 8% seems pretty tame… I’m not saying that it is sustainable, just that it is not a super high increase. On that note, I would love 8% increase per year!

A few people have made some comments about the changing investing environment. These days, not only do we have to analyse any actual investment, we also seem to have to second guess what the Government is going to do and if it is going to pull the rug out from under us. Now to me this feels more dangerous then what we had before. Maybe it is just me… But it does feel like the Government thinks it is ok to change the rules and where the goal posts are with zero notice… Makes things harder that is for sure.

You all sing the same tune -- “the Gov. is all powerful and has guaranteed house prices”.

Do you think the USA wanted their house prices to fall? The UK? Anywhere? They tried. If it only costs a few dollars to support the bubble then i’d have much more faith. The reality is that it will cost the economy.

And the Libs will get some more use out of their debt truck.

Second-guessing the Government and the actions of Mr Rudd -- in contrast to considering the fundamentals of economics -- seems like a gamble to me. But each to their own.

And on that note I won’t be posting here for a little while. I said what I wanted to say, and tried to be helpful and provide an alternate view to the bullishness. Time for time to do its work.

Yes it is Steve..we live in the real world not one driven by spreadsheets alone.

The stock markets aren’t reflecting it right now -- Largely because the Americans are giving their banks every opportunity to trade themselves out of insolvency I think. (It’s really about the banks there too.) But the effects will be felt in those markets in time.

Might be time to stop focussing so much on supposed “free markets” and thinking more in terms of what governments want us investing in and why -- Which again is what will make Ken Henry’s report so potentially informative. I hope?

The consequence is that the government has now designated an asset class that is a rolled gold protected species because the entire economy has become so heavily dependent on lending for real estate purchases. Is that the fault of government? Partly, because they’ve encouraged real estate speculation through favourable tax treatment for real estate purchase and investment. It’s a factor of the free market, so we can’t quibble too much, but then again, the government has shaped the market such that this was the inevitable outcome.

That doesn’t mean that investors in real estate are guarranteed windfall profits. But it does seem to mean that they are guarranteed not to take anything more than a very minor loss. You could make more money investing in gold, shares, whatever. But uninformed mum & dad investors who are told and believe that property only ever goes up would be given a secure haven to store their ‘wealth’. Perhaps.

I accept the situation, but I think it’s a disgraceful situation. If this is the way it’s going to be, I just wish they would come out and publicly state the rules of the game rather than pretending to dance around it.

Bank failures are very, very bad news of course. With the tax payer getting to bail out the banks aka the UK and US. Way better to not let the rot get into the banks in the first place. So keep housing ticking along.

With my second point being that so far they have done that successfully -- A little too successfully for their own liking even? But bank failures simply could not be risked and at the time the RBA crashed interest rates and Rudd upped the FHOG and the States came on board with slashing stamp duties for FHBs they had no idea what they were facing except it looked like being VERY nasty.

Although if an individual’s major focus is the fact that house prices are way higher than they can or wish to pay, then it easy to lose sight of the fact policy makers are playing a way bigger game in which house prices are only one element (albeit a very important one.)

As to Chrissy pressies -- I’m thinking in terms of suggestions “Uncle” Ken Henry might have for us. With Rudd OK’ing a few of them soon. And some of them being more the “trick” than “treat” variety just maybe as well! But it still helps give investors some direction. There is a super review being carried out as well. And that’s of significant interest to me too.

10 year plan hey Greg? Some of it could be way longer if the last one is anything to judge by. But my interest levels are high!

Overall, I think Pete’s right in that the real estate bubble is unsustainable in its fundamentals. What we don’t know is Rudd’s level of desperation and/or stupidity. If he’s as desperate and stupid as I think he is, I think we’ll see him try to keep the bubble going until he can get re-elected. What other choice does he have?

At the moment, we could be looking at a slim Christmas for the retailers, based on underlying desire to deleverage, stimulus wearing off and higher interest rates. Alternatively, if Oz racks up the credit cards again for a big Christmas spend (please, yes please!), retail might fall in a heap right after Christmas. So Rudd could stimulate going into Christmas or he could save the world with a bailout in the new year.

Did anyone mention moral hazard? They should name a horse ‘moral hazard’ and enter it in the 2010 Melbourne Cup -- would be an unbackable favourite. The TAB would have to suspend betting!