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The Australian economy, house prices and economic outlook

April 5th, 2011 · Greg Atkinson · 194 Comments

Back in April last year I suggested that the Australian economy was not quite as robust as most market commentators appeared to think and that it was quite possible for economic conditions to deteriorate quite markedly over the next few years.  So now one year later after I wrote about a possible economic slump in Australia let’s have a look at how events have unfolded since then.

Before I start let me just remind readers that I am not a journalist.  This means I provide sources or links to the material I quote from or refer to, I admit I could be wrong and I don’t try and tell you want to think – I lay out some thoughts and ask people to draw their own conclusions.

So please don’t ever think I have some unique insight into the stock market, economy or the global markets,  I could be and may possibly be,  a complete loon.

The article I wrote back in April 2010 about a possible economic downturn was entitled: What might an Australian economic slump look like? and this is what I will use as a base to reflect on how the economy is faring now in April 2011.

I suggested back then that the rosy economic outlook and forecast from the Government, Reserve Bank and market experts were based on the expectation that the Australian economy would continue to enjoy an environment where:

  • House prices keep rising.
  • Incomes keep rising.
  • Inflation remains under control.
  • Iron ore and coal prices continue to rise.
  • The population continues to grow at records levels but the economy is able to keep creating jobs in order to keep unemployment low.
  • Taxes are not raised.
  • Government spending is kept in check.
  • The Chinese economy continues to grow strongly.

So let’s now look briefly at each of the areas above and see how they are tracking at the moment.

Australian House/Home Prices

The Australian residential property sector has held up remarkably well over the last few years and has done much better than I expected.  But with interest rates at current levels it can be a bit misleading just to look at the rise in home prices and say all is well.

What is a possible area of concern is that we could be entering a phase where house price gains will be less than inflation.

According to an article in The Australian recently RP Data senior research analyst Cameron Kusher is quoted as saying:

When you consider that Australian inflation was 2.7 per cent in the year to December 2010, in real terms, Australian residential property values have been declining, which is a good outcome for prospective buyers”

(Source: House prices flat in Australian capital cities as market cools: survey)

This is based on data showing that for the 12 months to February 2010 capital city house prices rose by just 0.8%.

Maybe this is just a short term trend and home prices will post strong gains this year, but I doubt it.  So it looks quite possible that Australian home prices could be about the enter a period of little or negative growth and if so, then one of the pillars that has propped up the economy is about to be removed.

Income Levels

It appears that wages in Australia are still generally speaking, on the rise which in turn is giving some of the folks at the Reserve Bank of Australia (RBA) heartburn.

Without getting into the reasons why wages are still edging upwards I will simply note that at the moment income levels at present don’t seem to be in a holding pattern and are still growing.

Inflation remains under control

Rising energy costs and rising wages suggest to me that the RBA would still be concerned about rising inflation.  I would not go so far as to say inflation is out of control, but the so called inflation genie does appear to be out of the bottle again although I doubt the Australian Treasurer Wayne Swan will ever admit that.

But underlying inflation seems be at decade low according to this report from Reuters: Australia core inflation running at decade low so maybe all is well?

At this stage I would have to say that in my view inflation at the moment still appears under control but inflation does appear more likely to edge upwards than downwards over the next six months.

Iron ore, coal prices continue to rise

I have been expecting a short,  sharp correction to hit coal and iron ore prices for quite a while but alas they still seem to be holding up very well.  So at present the higher than long term average commodities prices are propping up GDP and the commodities boom appears to be still rolling along.

However I would like to point out that back in April 2010 the Baltic Dry Index was trading around the 3000 level whereas today it is trading at around half that level.  This leads me to believe that a commodities correction might not be that far away.

Growing population/low unemployment

The growth in Australia’s population has slowed over the last 12 months mainly due to lower immigration as a result of some Visa changes made by the Government.  It’s hard to say if this will have a long term impact on population growth or not so at the moment I simply look as this as a short term trend.

All I think we can conclude at present is that the unemployment rate is still relatively low at just under 5% and Australia’s population is still rising enough to stimulate demand.

Taxes are not raised

I believe it’s only a matter of time before a whole range of tax increases will start to be rolled out either directly or indirectly such as the Mining Tax and Carbon Tax.

In addition State Governments have been creeping up public transport fares and levies for some time, so slowly the tax burden on individualise and businesses is on the rise.

So it appears to me that taxes will be raised and this is likely to have a negative knock-on effect into areas such as consumer spending and home prices.

Government spending is kept in check

Need I write anything here?  Does anyone seriously believe the Federal Government has spending under control?  Government debt continues to rise, the NBN budget grows each hour and funds seem to be so scarce that a levy has to be raised to help fund the rebuilding in Queensland after the recent severe floods.

The Chinese economy continues to grow strongly

At present the economy in China still appears to be expanding quickly but it also becoming fairly clear that this growth is slowing.

Recently in an article in the China Daily Barry Eichengreen made the following observation:

“….a significant slowdown in Chinese growth appears imminent. The question is whether the world is ready, and whether other countries following in China’s footsteps will step up and provide the world with the economic dynamism for which we have come to depend on the People’s Republic.”

(Source: A slowing Chinese economy?)

When it comes to China you can either pretend all is well and that nothing will slow the growth of the world’s latest economic miracle or you can accept that like all other fast growing economies,  China will run into some pretty serious speed bumps sooner rather than later.

I tend to agree with Barry Eichengreen and reckon that the Chinese economy is due for a major slowdown.  If that happens, then I have little doubt that the Australian economy will be dragged down as well.

—————————————————————-

So putting all the pieces together I would say this – that the Australian economy is closer to entering a period of economic downturn than it is to entering a period of strong economic growth.  I also doubt that in April next year I will be writing about a booming Australian economy or surging Australian stock market.

But it’s also quite possible I am looking at the economic data in the wrong way and misreading short term trends as long term ones.  So I welcome as always any dissenting views or comments.

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194 responses so far ↓

  • 1 Biker // Apr 6, 2011 at 9:02 am

    You probably summed it up well, years ago, Greg; when you defined the Australian property market as marketS.

    I think we’ve seen the dip in the West. It has passed. Wish I’d been smarter and bought more than two during that period. Now the sale of that block has gone through, we can see how well we’ve done: 16.4% annually. Now halve the CGT and halve it again… and it’s a very reasonable return.

    Even in the same location, some of ours appreciate at different rates, as different market sectors are stimulated by sales. Our final block still owes us money, perhaps $30K*…. a drop in the bucket of a large seascape, but proving nonetheless, that even an experienced player can get it wrong!~
    A temporary situation. It’s virtually the last
    vacant lot in a streetful of lovely homes with
    lake views, by the sea… .

    * Interest

  • 2 Greg Atkinson // Apr 6, 2011 at 12:29 pm

    Well it’s a funny old world when one of the mining boom states appears to be technically in a recession as per this article doing the rounds today: WA economy technically in recession

    Indeed the Australian real estate market is actually made up of many different ones but a national trend does seem to be taking hold with news also out today that housing finance has fallen 5.6% according to the ABS.

    Let’s see how things look in a few months.

  • 3 Barry L. // Apr 6, 2011 at 5:23 pm

    The next few quarters are going to be very interesting. You can the feeling Wayne Swan is getting a little nervous about the numbers he is seeing.

  • 4 Greg Atkinson // Apr 7, 2011 at 12:30 pm

    Well the AUD is looking strong today, unemployment is below 5% and generally speaking most market commentators seem to think the Australian economy is set for a strong second half.

    But I just don’t feel like joining the crowd for now and reckon the second half of 2011 is going to be a tough one.

  • 5 Biker // Apr 7, 2011 at 2:34 pm

    Technically a recession… (?) Colin Barnett has some strengths. Standing up to Jools is one of them… . But he has some weaknesses too. One of them is a failure to listen to those around him. He’s not alone in that failure to consult widely (it caused Rudd’s downfall) but his conviction that he knows best means HE will fully bear the brunt if merde-hits-the-ventilator.

    In his belief that mining will carry us through, he has ignored key sectors of WA’s economy. This would be disastrous in the event of a mining downturn. I think that unlikely, but Labor would quickly capitalise in that event.

    Wages are rising here, particularly for those with much-sought skills. Can’t see any sign of a downturn, but much of the exce$$ may be credit-card-fed.

    Second half? I’m betting on an upswing here… . ;)

  • 6 Greg Atkinson // Apr 7, 2011 at 6:02 pm

    Biker I think as a nation we have relied on mining for perhaps too long and as you know I have talked about the unbalanced economy for quite some time. At the moment all seems well as mining exports soar but everything moves in cycles and as sure as night follows day, we will see commodities prices come down at some point.

    Am I crazy? probably ;) But supply and demand works for iron ore and coal just as it does for everything else. At the moment the mining companies are rushing to bring on extra capacity and so the extra supply will eventually put the brakes on prices.

    What may also happen is that too much supply comes online just as say the demand from China started to cool and that could possibly result in sharp commodities prices correction.

    Do I believe what I am saying? Yes, and that is why I have been taking some money out of mining stocks for the last few months. Sure I might miss out on some of the upside but I feel more comfortable having the profits in the bank for now.

  • 7 Biker // Apr 7, 2011 at 10:45 pm

    That’s one perception, Greg. You’re probably correct about our over-reliance on mining.

    And if you’re right, it’s also likely that China will source what she needs from Africa. But that’s fraught with some major difficulties, as my grandfather-in-law discovered in his Liberian Iron Ore adventures. Africa IS different. :)

    I think India will take up when China drops out.

    I’ve personally reached that happy state in which I care less-and-less daily. I’m truly free of any money-related anxieties… and while that’s possibly going to be construed as the country-can-go-to-hell, mountain roads in foreign countries look pretty good to us… .

    I’ve enjoyed this forum… and your patience… and wish you well for the future. May clock in from time-to-time, from abroad; but, for the time being, I’m taking a rest from posting.

    Our travels commence again next week; and I’ve a book to write.

    Cheers!~

  • 8 Greg Atkinson // Apr 7, 2011 at 11:12 pm

    All the best with your travels! I am off to China myself on the weekend so I hope to learn a few things about what is happening there which is in fact just a hour or so away by plane from this part of Japan. It’s a small world.

  • 9 Ned S // Apr 8, 2011 at 7:35 pm

    “Africa IS different.” -- Having worked with a few Boers off and on over the years plus one black Zimbabwean and known a couple of white Rhodesians and had a bit to do with senior Oz and Canadian mining staff who’d had cause to check out one of the group investments in Africa, I’d concur with that! :D

    While I’m not a stock market investor Greg, I’m as sure as I can be about your ‘supply and demand’ argument re Oz minerals -- With there being no absolute shortage globally re coal and iron ore (or gas?), it’s just commonsense really I’d say?

  • 10 Greg Atkinson // Apr 8, 2011 at 8:56 pm

    Ned I forgot to mention gas…. thanks for reminding me. It seems we are now banking on LNG exports from projects that are years away from even starting. That’s a bit like counting your chickens before the hen has even gone near the nest, let alone lay any eggs!

  • 11 GoWest // Apr 13, 2011 at 5:18 pm

    NSW went liberal -- as much as many despise them they do get business investment going again -- that combined with Victoria should be the single biggest impact on our economy this comming year.

  • 12 Greg Atkinson // Apr 14, 2011 at 12:30 pm

    GoWest the developments in Europe, the US and China will probably have quite an impact on the Australian economy this year. Both the US and Europe seem headed for years of government spending cuts and low economic growth and in China, one wonders why the government there is tightening up the capital requirements for the banks. Do they feel the property market is becoming overheated?

    I wonder who much the state government’s can do in NSW and VIC if the overall economy starts to struggle?

  • 13 Biker Pete // May 5, 2011 at 3:27 pm

    Greg: “Do they (the banks) feel the property market is becoming overheated?”

    Old post, I know, but here’s my take on it:

    * CBA and WP are focusing on business;

    * ANZ and NAB are focusing on housing;

    * Despite that, the other three scored more mortgage loans
    than ANZ recently. Why?

    * And, interestingly, ANZ is _now_ more competitive, if pushed.
    Eldest just got their variable rate 0.3% lower, down to 6.8%.
    They want to keep his custom!

    * Only the ANZ is publicly expressing real doubt about Oz
    economic strength. Mike Smith recently applauded the ‘fall
    in housing prices’, in fact. His rationale appears to speak
    to the FHB group, rather than investors.

    Difficult to make comparisons, but Oz housing and rents seem cheap, compared to Singapore. It seemed any apartment worth owning was worth around A$800K+… and rents on very basic 2BR apartments A$20K plus per year. And from what we saw, many companies seem quite happy to subsidise valued employees in S$1million apartments, which rent for around S$50K+ per year.

    Public housing is widespread, of varying levels and standards.
    An 1838-unit complex (Pinnacles@Duxton)was oversubscribed; quickly sold out; each new stage more expensive, doubling earlier stages. According to friends, thousands missed out
    on getting a unit… .

  • 14 Greg Atkinson // May 6, 2011 at 7:47 am

    Hi Biker, I tend to stay clear of comparing the Australian real estate market to other countries since there are simply too many differences. I guess we can look at incomes, loans and housing availability etc and draw some conclusions but that is about as far as I would go.

    Australian house prices now are not quite the bargain they use to be if you are an overseas investor due to the strong AUD, but if the current commodities sell-off gathers pace then that might all change.

    Later this year we will either be talking about how robust the Australian economy and housing market is or be watching the start of a downturn.

    I guess it is no secret that I believe the Australian economy is most likely to start slipping backwards in 2011/2012.

  • 15 Firebug // May 6, 2011 at 11:01 am

    Hi Greg,

    What do you reckon the RBA will do in H2 this year? It seems the consensus is rate rise(s) will return.

    Wouldn’t the RBA get it all wrong by lifting rates at the start of a downturn?

  • 16 Greg Atkinson // May 6, 2011 at 2:11 pm

    Hi FB, I guess there are two answers to that question. If I were a business and financial journalist I would give you a long story about why rates will rise because of the bullish economy blah blah blah…but the second answer is that I don’t know and I reckon the RBA doesn’t know what they will be doing either.

    They are making a lot of noise about raising rates but I doubt they will be inclined to do that if consumer confidence is falling and house prices are cooling.

    However the truth is that the next interest rate decision will be largely determined by decisions made in Washington and Beijing and the RBA will basically be reacting to how these impact the Australian economy.

    If the Chinese authorities for example keep tapping on the brakes to cool their housing market and ease up pumping money into construction then this would cool growth in Australia and probably help bring inflation back into the range the RBA likes.

    Finally I think you are right that the RBA may end up starting to raise rates during the early stages of a downturn and thereby ends up making matters worse…which funnily enough is what they did just before the GFC!

  • 17 Firebug // May 6, 2011 at 11:04 pm

    Thanks Greg. Listened to an economist from the CBA on 2GB Money Show tonight. He was saying the CBA anticipated four rate rises in the next 12 months.

    I really hope they got it wrong.

  • 18 Greg Atkinson // May 7, 2011 at 7:26 am

    Hi FB, I reckon four more interest rate rises would send home prices lower and really start to hurt households. In a way the RBA is between a rock and a hard place because strong commodities prices help push up inflation and the tool they have to cool things down is interest rates.

    Personally I think they should sit back and see how the growth story in China plays out for a few months. If we see signs that the economy there is cooling quite a bit then commodities prices will slump and the RBA might find they don’t need to do anything.

    I see oil prices have fallen back quite a bit so if they stay at say below $100 USD a barrel that will do some of the work for the RBA as well.

  • 19 Biker // May 9, 2011 at 2:44 pm

    Gaily Kelly: One rate rise will do enough damage.
    Mike Smith: A drop in home values won’t harm us.
    Uncle Cam: Two lumps, please.
    Ralph Norris: Who cares?
    Gunner Glenn: We’re gonna…

    Some trends?:

    * Reduction in residential construction

    * Rising rents

    * Reduced bank growth

    * RBA back-pedals furiously, but too late(?)

    * Both major parties realise their leadership issues

    Aussie dollar should stay high.

    Silver: Hunt Bros all over again?

    Enough stream-of-consciousness for today!~ :D

  • 20 Greg Atkinson // May 9, 2011 at 3:21 pm

    That little commodities sell-off we had last week illustrated how unsure investors are about the global economic outlook. Many sound bullish but give them a good reason to sell and they start selling stocks, gold, silver etc quicker than you can say “Chinese property bubble” ;)

  • 21 Biker // May 9, 2011 at 4:16 pm

    Chinese property bubble? Who knows?
    Just finished Bill Bryson’s ‘At Home’.
    If there was ever a more interesting documentation of man’s aspirations, achievements and failures, I’m yet to read it!

    Also just read Michael Pascoe’s latest. He echoes my sentiments on RBA ‘jawboning’:

    http://www.watoday.com.au/business/why-june-is-too-soon-for-an-rba-rate-rise-20110509-1eez3.html

    Gotta Laugh Dept: I actually saw someone recently quoting Nelson Hunt on silver. :D

  • 22 Mike // May 15, 2011 at 11:46 am

    Can we say that if someone is struggling to make the mortgage repayments now they should be better off to sell the house now, even at a capital loss of 10 odd percent rather than waiting for market to bounce back in short term?

  • 23 Biker // May 16, 2011 at 12:18 pm

    Well, we can say whatever we like, Mike!~ :)

    I guess the classic case for us was a colleague, back in the eighties, who had bought a nice beach block for $10,500, complaining that her property hadn’t appreciated in two years. She sold it, whingeing like crazy, for $11K… made a loss.

    Within three years, those blocks were selling at $55 -- $60K. They’re worth over $350K -- $500K now.

    In the case of one’s home, at least it’s ‘rent-free’ and has no CGT. No property inspections, no parking limitations, no court cases.

    Our policy is to hold through flat periods… and that’s worked for us for 34 years now. Some of our properties are worth 3 -- 8 times what we paid for them. Yes, it was a struggle when interest rates were 17%+ but we never sold any of our properties at a loss. You’d have to believe Steven Keen was _correct_ to actually consider selling your home… . :D

  • 24 Anon // May 16, 2011 at 11:32 pm

    “Silver: Hunt Bros all over again?”
    lol Biker.
    The Silver bubble is off snd away! Tulip the 2nd.
    Last 8 years silver has gone parabolic every 2-3 years, each time with increasing magnitude. So next big gains in silver likely to be 2012 or 2013. Longterm investment makes sense. But stress longterm and with lots of volatility.

    “Aussie dollar should stay high.”
    Agreed, longterm its headed higher. Lots of retail investors are calling for a USD rally. I was too previously until i realised everyone else was doing it and the direction rates were headed and the effect of the carry trade.

    “Both major parties realise their leadership issues”
    We should get rid of them all! ;)

    This drivel is not advice. Seek a licensed financial advisor. Runaway from the incompetent ones.

  • 25 Ned S // May 17, 2011 at 12:19 pm

    Seems some others are starting to agree Greg:

    Kerry Stokes:

    “There’s no question we’re in a two-speed economy. There’s no question that outside of major (mining) activities and infrastructure activities our economy is not very well at all”

    “Retailers, people who are involved in all sorts of activities, are finding it really tough.

    “In fact, it has got all the feelings of a major downturn in the economy.”

    http://www.couriermail.com.au/money/interest-rates/stokes-warns-of-major-downturn-as-non-resources-economy-struggles/story-fn3hsks6-1226057249365

  • 26 Anon // May 17, 2011 at 12:30 pm

    I heard from a few businesses, they are barely above Credit crisis levels in terms of profitability.
    Not a good omen.
    High probability DJIA is below 11,000 this year. How low can it go, not sure -- 9,000 next year?
    2013-2015 could be back at 6,000. This is not going to end well!
    I hope my 6,000 call is horribly wrong, but its probably not!
    If the housing market implodes in Australia, 1750 XAO is possible in 2015. Scary numbers indeed. But still a fair way off and may not happen.

    If interest rates explode, the markets will have to be seriously re-rated to the downside to allow for the higher risk free cash yield. Might be a shorters dream?

    This drivel is not advice. Seek a licensed financial advisor. Runaway from the incompetent ones.

  • 27 Greg Atkinson // May 17, 2011 at 12:58 pm

    Well Ned, Julia Gillard reckons Kerry Stokes is wrong. I guess she is drawing on the experience from the long and successful business career that she never had hey? ;)

    Anyway last year I wrote about what an economic slump in Australia may look like and it appears to me like that the economy is either in a downturn now or is pretty close to it. See: What might an Australian economic slump look like?

    I am actually starting to think the Australian economy is in a nasty Catch-22 situation where the mining boom will help drive growth while at the same time destroying other parts of the economy. In others words, the economy will be in serious trouble without the mining boom but will be in serious trouble because of it. (if that makes any sense)

    @Anon -- I guess anything is possible for the DJIA in the current environment. If they keep printing money and hold rates low then I would guess the DJIA will rally again. But I get the feeling a major correction downwards is on the way especially if the USD starts to recover.

  • 28 Anon // May 17, 2011 at 1:11 pm

    “I guess anything is possible for the DJIA in the current environnment.”
    Yep, be prepared for anything and everything. Definitely a major correction, just a question of how severe and the duration. My intuition is thinking its going to be a few years down, so lots of people will be buying the dips getting slaughtered. Gotta watch for people giving up and waving the white flag calling for eternal doom, before our trucks are loaded (and the semi-trailers!)

    Silver bull should keep going through this; unless another GFC type fall occurs, I don’t see it tanking 50+%. In early 2008 it actually went up /held its own during the first leg of the bearmarket and mainly went down heavily at the end due to liquidity issues and margin calls. Very low probability GFC mark 2 happens during this major crash/correction.

    Watching silver closely atm, looks like bottom is about 28-30$. Have a big order in just under 30$ (will move if confirmed bttm higher). My feel is that people will think because 30 is breached that its time to pile the shorts in, the big boys will flush the stops below 30 with some heavy selling, we’ll get a spike down to 28-29 and the snap back very quickly to 37. But its all irrelevant as holding for the longterm.

    This drivel is not advice. Seek a licensed financial advisor. Runaway from the incompetent ones.

  • 29 Ned S // May 17, 2011 at 1:40 pm

    I did notice that Julia’s contribution went along the lines of “I wouldn’t personally use THOSE sorts of words about it at this time!” :)

    “the economy will be in serious trouble without the mining boom but will be in serious trouble because of it. (if that makes any sense)” -- The resource curse in action hey? With them having chosen to run with it rather than fight it.

    Inflation is alive and well Anon. Merv King is apparently sounding a bit miffed that the UK is looking at a CPI of 5%. And reckons it must be you nasty commodity speculators causing it! :) While not getting round to asking himself who printed the money and kept interest rates low so his favourite speculative bankers have the loot and the motivation to speculate I’d guess?

    It’s all just a bit hard on my head sometimes I afraid! (roll eyes)

  • 30 Anon // May 17, 2011 at 1:55 pm

    “Inflation is alive and well Anon. Merv King is apparently sounding a bit miffed that the UK is looking at a CPI of 5%”.

    I’m not up to date with all the info Ned. I exited the markets once we got into mid ~11s and have been extremely indolent since. Self imposed chill time :) I thought the markets would go higher even after I exited, but geez what a run!

    But abit sad we are blamming the commodity speculators when they are printing to wazoo, agreed. Hypocritical, blame everyone but yourself dysfunctional dunce.
    And btw, i’m not a commodity speculator, I invest in commodities :P.

    Just out of curiosity, the new major cycle bullmarket in equities should start in 2017. So commodities for the longterm look very promising! (commodites bull markets and equity markets move inverse of eachother).

    This drivel is not advice. Seek a licensed financial advisor. Runaway from the incompetent ones.

  • 31 Anon // May 18, 2011 at 7:31 pm

    “I’m not up to date with all the info Ned. I exited the markets once we got into mid ~11s and have been extremely indolent since.”

    Correction that should be needed time off not indolence.
    Note to self: don’t use words you don’t fully understand.

  • 32 Ned S // Jun 27, 2011 at 12:50 pm

    BIS Shrapnel’s take on things:

    http://www.theage.com.au/business/rate-rises-loom-but-home-prices-wont-crash-20110627-1gmow.html

    Not that I’m a huge fan of BIS Shrapnel.

  • 33 Greg Atkinson // Jun 27, 2011 at 1:09 pm

    Ned, I am not quite sure how mining, which accounts for say 8-10% of GDP is going to keep the whole economy propped up for years on end. For sure the mining sector will help bring the dollars in and will support home prices but if the rest of the economy slumps then I can’t grasp how house prices would hold up.

    Like I have said many times, I am not a housing market crash believer but I do think we might see them fall back 10% or so and not do anything spectacular up or down for some years.

    I recall reading similar outlooks (like the one from BIS Shrapnel) about the Irish housing market about the same time Gerry Harvey thought that going boots and all into Ireland was a great idea.

    Back then the Irish housing market was support to benefit from the long term support from a booming services sector. I am not saying we can compare the two housing markets, but we do seem to be getting carried away in Oz with the concept of the never-ending mining boom.

  • 34 Ned S // Jun 27, 2011 at 3:16 pm

    If mining does well Greg, my suspicion is that the RBA will be happy enough to see our house prices wind back a bit. Though if there’s any serious setbacks for mining, then things become interesting all round I guess?

    Truth be told, my real personal interest in Oz housing is specifically Brisbane housing. Things are correcting downwards here. And I can’t see much chance of that trend changing over the next several years perhaps?

    Though I also accept that what happens in Sydney is important in Brisbane -- If they get a major housing price correction the RBA will drop interest rates I’d imagine. Which will impact Brisbane prices. And to the extent that Sydney continues to have housing supply/demand issues that keep their prices up, that potentially keeps SE QLD prices up a bit I’d guess.

  • 35 Greg Atkinson // Jul 1, 2011 at 9:24 am

    Ned, it looks like the RBA is well and truly sitting on their hands now…they probably should have been doing that a rate hike or two ago. I stand by my view that they have already raised rates too far.

    If the mining boom cools then I am sure home prices will come under pressure further and the RBA might even move into rate cut mode?

    By the way, this article from Bloomberg pretty well sums up the Australian property market debate fairly well: Australia Bulls vs. Foreign Bears on Housing

  • 36 Ned S // Jul 1, 2011 at 2:16 pm

    Rate cuts? : I note that the RBA sees rates as being slightly above their long term average Greg. And thus mildly “restictive” or whatever the word is. (The RBA view of what long term is, must be different to mine, but that’s a different issue.) So yes, they’ll have no qualms about cutting should circumstances warrant it.

  • 37 Biker // Jul 1, 2011 at 11:02 pm

    Greg: “If the mining boom cools then I am sure home prices will come under pressure further and the RBA might even move into rate cut mode?”

    It’s very much out-of-their-hands… and I’m sure Stevens is glad it is!~ For the first time (in my memory, anyway) the banks are doing the rate-cutting themselves!

    A new era dawns 1st July 2011: It’s now a cutthroat business, in which the banks will wage war with each other. The RBA need do nothing at all. They can sit back and surrender control as rates drop. Banks’ profit growth is almost completely dependent on mortgage business, as other business declines… and for the first time we can remember, in 35 years buying-and-selling, competition between banks will initiate a far better deal for buyers.

    Tenants? Doesn’t look all that good for those who bet against property in WA. Our rents are up 6% -- 9%. Holding costs have fallen. Only increase? Insurance: $60 approx per property.
    (Rates expected to increase by 6%, too. Small beer… .)

    Still a buyers’ market… but who would be foolish enough to sell, in this market, with rents rising? (We’re back to tenants _voluntarily_ paying months-in-advance here, to secure a rental, Ned. Glory be!~ ) :D

  • 38 Ned S // Jul 2, 2011 at 5:26 pm

    Prices are getting hurt over this way Biker. (Though rents are holding OK.) I’ve just spotted one that I reckon is at least 25% down on what I would have expected to pay 12 months ago. Fulfils all my basic criteria on the surface anyway -- Brick, decent sized block of land, close to rail. Heck, it’s even a locally produced brick that I know and can still match by the looks?

    Appears to have had tenant damage. And is only a 2 BR job. With a single shitty carport. And a yard that needs a visitation from the Texas Chainsaw Massacre Man. (Plus the agent doesn’t seem brave enough to show a pic of the kitchen -- Which could be a bit of a worry?) But I’d say the same is all factored into the price providing the joint IS structurally sound? With there being no indication whether it is or not in the advert.

    I’ll ask the questions tomorrow.

  • 39 Biker // Jul 4, 2011 at 1:40 pm

    Newsflash: Rental is situation crazy, Ned. Prospective tenant has not only accepted our increased rent, paying us three months’ rent in advance; but has just UPPED the rent by another $5 per week! References all check out.

    ABC News: I see residential construction is down 8.9%.
    Maybe this helps explain it… ! :D

  • 40 Ned S // Jul 4, 2011 at 2:06 pm

    Different markets Biker -- We’ve got a glut of stock with more in the pipeline I gather. Well, apartments anyway.

    Looks like Morgan Stanley is bearish on Oz residential RE:

    http://www.smh.com.au/business/developers-to-feel-pinch-as-home-values-sink-further-20110703-1gxdx.html

    They’ve probably shorted the Oz banks? :)

    But no rush to buy here. I’m happy to basically keep living on bank interest for now. Until something I do see a lot of potential in pops up anyway. (But I MUST remember to be QUICK! :D)

  • 41 Lachlan // Jul 4, 2011 at 3:27 pm

    Rents have kept increasing in our little town…it’s squeezflation you know.

  • 42 Lachlan // Jul 4, 2011 at 6:32 pm

    People still have to live somewhere Biker and there are cost pressures. I think rents will certainly rise more. As Greg alludes there is inflation even if not out of control. Then I would add with a very strong AUD backdrop it shows the potential for inflation going forward ie if we have price inflation even with a strong currency…

  • 43 Biker // Jul 4, 2011 at 7:47 pm

    Lachlan: “…People still have to live somewhere Biker…”

    Yeah, I know, mate. We’d become conditioned to much smarter folk claiming we’re mugs for providing very cheap accommodation, but lately, after years-and-years of reading that put-down, we’ve recently decided to make hay while the sun shines. ;)

    I just did the sums on a couple of our cheaper 4X2s… and we’re very close to that situation in which it’s as cheap to _buy_ as it is to rent.

    Where it will be _really_ interesting is when that starts to happen in the $450 -- $630K range. We haven’t tested the ‘high rent’ potential of our homes in that range, in this ‘new’ rental market. Will someone really pay us $700 pw for a home which cost us just $375K a few years ago?

    Inflation hasn’t really touched us, personally. Living off/on the land has many great benefits, as you know!~ :D

  • 44 Greg Atkinson // Jul 5, 2011 at 1:00 pm

    Lachlan if the economies in China, India and South Korea keep showing signs of slowing over the next few months then a fall in commodities prices might bring inflation back into the RBA comfort zone. I was reading the WSJ Asia yesterday (while sitting on the plane) and from the reports it seems pretty clear the big Asian economies are slowing. The question is will they bounce back in 2011 or keep slowing further?

  • 45 Biker // Jul 5, 2011 at 4:00 pm

    Greg, there’s already a perception that the RBA went too far last November. There’s also a strong belief that we’ll see no interest rate rises in 2011 at all.

    Yes, there’s a confidence crisis in most states in Australia. Maybe it’s carbon-tax-related, perhaps the rapid-cycle information circuit of the internet fuels it, perhaps a significant number of Aussies are affected by it.

    The growth of TV shows telling us all how families can live on $60/week supports the two-speed economy principle*.

    But I’d back harder-working Asian economies to manage any downshift before I’d bet on the Yanks… and while the Chinese have trillions in US funds, I’d say they’ll continue to stockpile.

    * Yet everyone over here in WA is driving a you-beaut-shiny-new car. All our tenants drive ‘em! The only way we can keep up with the Joneses is on a really quick bike! :D

  • 46 Lachlan // Jul 5, 2011 at 9:33 pm

    “will they bounce back in 2011 or keep slowing further?”

    That is a big question Greg and I’d like to think they’ll just have the usual growth/recession business cycles of any secular bull-market. However I do not know for sure. India needs a lot more of our coal going forward. I hope nothing changes that.

    Yes maybe the Asia tightening could be the start of a hiccup. Moody’s have just hit China with a bad report.
    It may be telling though since 08 how things have chugged along considering all this drama. I’ve factored that in to my thinking.
    What are the possibilities within the current global financial paradigm…does anyone really know?
    Will the an west to east wealth transfer process just keep chugging along over time?
    I’m guessing probably yes.

  • 47 Biker // Jul 6, 2011 at 9:50 am

    Lachlan: “It may be telling though since 08 how things have chugged along considering all this drama. I’ve factored that in to my thinking.”

    You’re surely not suggesting that “…the more things change, the more they stay the same…” are you, Lachlan?

    Sounds like heresy to me! ;)

    Funnily enough, things _are_ changing in the banking world…
    Labor’s regulation of the banks is already having a major effect.
    The ‘on hold’ delays may indicate migration of mortgages on a scale we’ve never before witnessed. :D

  • 48 Lachlan // Jul 6, 2011 at 3:28 pm

    I’m sure things will change BP as they do however analysts often have trouble with time frames. Market news has been so dire the last few years and yet here we are still. The eventualities are still wide open I see over shorter terms. Granted Asia appears in contraction as per Greg’s commentary.
    Re RBA … high rates give us room to loosen has been my thought.

  • 49 Biker // Jul 6, 2011 at 3:51 pm

    Lachlan: “Granted Asia appears in contraction as per Greg’s commentary.”

    I’m not so sure. Our Ozbuck is higher than in decades, but:

    http://www.perthnow.com.au/news/breaking-news/even-more-chinese-visitors-for-australia/story-e6frg133-1226089038310

  • 50 Lachlan // Jul 6, 2011 at 4:55 pm

    Interesting article..I can’t see why people would not flock here.

    I guess I’ve become somewhat immune to market news Biker. I only trade on price action. Markets rally on bad news often. There has to be more going on than we’ll ever know.

  • 51 Greg Atkinson // Jul 6, 2011 at 7:57 pm

    Overseas tourists don’t flock to Australia because it’s getting expensive and quite simply they have plenty of other choices. The tourism industry in Australia have managed to take a sector that should be booming and turn it into one the is actually struggling.

    Tourist numbers from Japan for example have been on an overall decline for years.

    By the way, here is some data from the ABS that clearly shows that overall short term visitor numbers coming to Australia are trending downwards: Overseas Arrivals and Departures, Australia, May 2011

    The numbers don’t look that good to me.

  • 52 Biker // Jul 6, 2011 at 10:48 pm

    Greg: “Overseas tourists don’t flock to Australia because it’s getting expensive and quite simply they have plenty of other choices.”

    Hmmm, did we read the same article, I wonder?

    My word, Greg, you’ve become quite grizzly, of late… . ;)

    Is _anything_ going right, anywhere??? :D

  • 53 Greg Atkinson // Jul 6, 2011 at 11:13 pm

    Biker yes I read the article, did you look at the ABS statistics? I don’t put much faith in articles based on one source and with no links to the raw data. The ABS data speaks for itself…the trend is not good.

    But once again everyone seems to be relying on the Chinese to save the day but even so our tourism sector under-performs:

    “In all, inbound tourism to Australia is lagging behind the rest of the world, with visitor numbers increasing just 2 percent compared with a global average of 6 percent growth last year.

    Read more: Chinese boost Sydney’s lagging tourism sector | CNNGo.com http://www.cnngo.com/sydney/visit/chinese-influx-saves-lagging-tourism-industry-306471#ixzz1RKmV6dhm

    Tourism is yet another sector that will slump if the Chinese economy keeps slowing..we really do have all our eggs in one basket.

  • 54 Biker // Jul 7, 2011 at 7:38 am

    Greg: “…In all, inbound tourism to Australia is lagging behind the rest of the world…”

    And you don’t think that has anything to do with out booming buck? It’s certainly a factor in _our_ decision to spend the next three months in North America.

    In that respect, I believe your statement that:

    “..the tourism industry in Australia have managed to take a sector that should be booming and turn it into one the is actually struggling…”

    …is a little unfair.

    This medium, the internet, appears to have an unhealthy feedback loop. It appears to offer immense scope for negativism which actually feeds more of the same. In most threads I have read recently, around 80% of responses are posts bitching about _every possible range_ of wrongs.

    One might argue that’s simply a reflection of where Aussies are at economically and politically right now, but even the most recent arrivals seem to have brought doom’n’gloom with them. Very sad people… .

    Maybe we should leave the new laptop home! :D :D ;)

  • 55 Ned S // Jul 7, 2011 at 9:51 am

    No standing ovations for Julia from China this week apparently:

    http://www.smh.com.au/national/china-delivers-blunt-message-criticising-patchwork-economy-20110706-1h2kz.html

  • 56 Ned S // Jul 7, 2011 at 12:14 pm

    Biker: “doom’n’gloom”

    Unless one is very financially secure (or so financially insecure they have nothing to lose), it’s a bit like we are sitting around just waiting to get pinged again maybe Biker? :

    http://www.marketwatch.com/story/the-next-worse-financial-crisis-2011-07-06?dist=beforebell

    And anyone who is bit income constrained is feeling the effects of stuff like this I guess:

    http://www.theaustralian.com.au/business/economics/high-dollar-pushes-relative-cost-of-living-in-australian-cities-up-world-rankings/story-e6frg926-1226089795642

    And the big picture stuff going forward for the welfare states of the West simply isn’t good when one considers their demographics.

    Plus anyone with even half a brain now knows that our political leadership is both incompetent and farcical.

    GO ASIA! :D

  • 57 Biker // Jul 7, 2011 at 12:49 pm

    Ned: GO ASIA! :D

    I’ll second that, Ned!~

    Pretty careless of you QLDers to shaft your tourism industry, mate!~ Get yourselves organised a little better, so you can contol ya weather over there, son!~ ;) ;) ;)

    Your control of the Ozbuck is pretty p*sspoor, too.
    Didn’t you blokes realise that by keeping it low,
    you’d attract millions more in tourism? ;)

    If every Chinese reported to have visited in May spent $2K…
    and if that happened twelve months of the year, that’s
    close to an extra BILLION dollars spent in Oz…
    so get yer act together, Ned!~

    Priorities:

    1.) Bust the buck!~

    2.) Control the weather!~

    :D :D :D :D :D :D :D :D :D :D :D :D :D :D
    (Back2Pack… or I’ll get me ear twisted… again!~)

  • 58 Ned S // Jul 7, 2011 at 1:06 pm

    “Priorities” ???

    Geez Biker, we’ve been busy doing the BIG stuff -- KICKING NSW’s ARSE IN FOOTY!

    But yeah, I s’pose we can go back to sorting out the Oz buck and the weather now the important stuff IS taken care of … :)

  • 59 Ned S // Jul 8, 2011 at 2:54 am

    As I’ve said for a while now, I want to get two houses built -- Would seem a bit silly to not sign up for them between now and Jan next year hey? :

    http://www.budget.qld.gov.au/current-budget/tax-reform/faqs.shtml

  • 60 Lachlan // Jul 8, 2011 at 7:28 am

    I know the high dollar is causing problems here for export and now that you mention it Greg I only just finished talking to someone not so long ago who said they are relocating in to some part of Asia. Apparently they can live like kings there. Oz too dear they reckon. But then I like what I see in some ways with the strong currency. People are happier to save and pay down debt. They don’t waste money so much… as was more common just 4-5years ago. Devaluing causes its own problems as we all know. Damned if you do…

    Having said this the AUD has been strongly bought for a long while. Maybe it will have a break down very soon, maybe not too. The USD index is in a tight little consolidation as are many things. Will it break up or down? Resolution to come soon judging by the action. We could get a strong break out (up or down) which will give us all something to talk about. Or maybe just a weak break out (couple points) and a broadening of the consolidation pattern which may be a little boring.

  • 61 Biker // Jul 8, 2011 at 9:48 am

    Ned: “Would seem a bit silly to not sign up for them between now and Jan next year hey?”

    We may look back on this period as one of opportunities lost, Ned. I console myself that we picked up two prime blocks cheaply during the real slump (now very much over in WA) but can’t help wishing we’d been just a little more optimistic at the time… and gone for four, or six. We really should have ‘speculated’ instead of merely invested.

    Even my missus, always buoyant, got a dose of the ‘ifs and buts’ at the time; so we built on just one. As it turned out, the other sold very well. But I recall being asked around the slump if there were any ‘bargains’ to be had… and not being really confident enough (with other people’s money) to pass on advice. Wasn’t confident enough to even advise my kids to buy!

    Just put up a vacant rental at $70pw more. It will fly, because there’s nothing that good so cheap! We see lesser houses advertised for $55pw more than our new rent… .

    The question you must ask yourself is will rents cover your expenditure… and if not now, when…? The bears can argue that you’re behind (initially) but at what point do you predict inflation and rental growth will push you out of debt?* That $17K starter is tempting. A $10K grant in WA would cause all kinds of havoc to rental growth…!!~

    * I think real debt reduction through inflation takes as much as a decade myself. And rents here are up 87% over a decade.
    I think this period they may jump 16%… ie., nearly double the usual rate, due to reduced residential construction here.

  • 62 Ned S // Jul 8, 2011 at 3:53 pm

    All good points Biker -- Thanks. And yes (re the $10K grant), from what I can see we’ve already induldged in a bit of overbuilding here.

    Relocation is tricky Lachlan -- I know a city of a million people in Russia that I actually like a lot where I’m told one can buy their own house on its own bit of land for maybe USD 30K these days? (Property there has dropped.) In a location called ‘Central’ which is true to name and thus very convenient. Though being the old centre from the Soviet days from what I could make of it, it’s not regarded as being nearly as trendy as some other ‘central’ shopping precincts that have sprung up since I’d guess. (And the houses are most kindly described as ‘compact’ I believe!)

    Cost of living -- Working class Russians make do on about USD 5K pa each in theory. With it pretty much being a given that both mum and dad work. Though I fully suspect that quite a few of them have ways to supplement that income through means that ‘we’ might regard as somewhat nefarious? :) But either way, to live reasonably well -- Drive a car, eat a bit of protein other than eggs occasionally, heat the house in winter etc I reckon I’d want VERY considerably more than USD 5K pa. (A lot of the costs are just the same as Oz and some are actually higher.)

    And one would be bit silly to not factor in 10% pa inflation absolute minimum. Plus one has to think about what the tax implications generally might be whenever one considers giving up the residency of one country for another -- Including stuff like land tax on any land one still has in the “old country”. (Changes in residency status of trustees and members of an Oz SMSF even have implications for the compliance status of the fund!)

    But back to Russia -- My gut guess would be that there is still a significant political risk factor for foreigners who put any money into the country -- Anytime I look at their national emblem with those two predatory birds looking both ways, I can’t help but suspect they might have been put there to specifically symbolise Putin and Medvedev! :D

    In some ways it’s tempting. (Vodka is CHEAP!!! Though I’m yet to check what the costs of liver transplants are? :)) Suspect I’ll leave it as a Plan C or D type thing for now -- Leastways until such time as I might figure I’ve got maybe USD 50K I really don’t need perhaps? (And the SMSF issue could actually be big one for me if I was to get really seriously interested in relocating anywhere else.)

  • 63 Biker // Jul 8, 2011 at 5:21 pm

    Ned: “Plus one has to think about what the tax implications generally might be whenever one considers giving up the residency of one country for another…”

    Tax was one of a few considerations factored in by our eldest when he moved to Asia. He now pays 3%… not just on his salary, but also on his cash, bond and indexed fund investments. Not sure how he fares on his Aussie properties, but my guess is that he does the same as his younger brother in North America and pays OS taxes! :D

    Russia? Hmmmm…. . Think if I really _had_ to live comfortably in a depressed economy, I’d choose NZ or Tassie!~ ;)

  • 64 Ned S // Jul 8, 2011 at 6:04 pm

    Tassie could be OK Biker. Though I tend to encounter significant language barrier difficulties with Kiwis? ;)

    Russia -- Depressed? Yes, it still is. Thus the house prices I mention presumably. And the demographic issues (declining population) are absolutely shocking. But it is a country that I really do like a lot -- Lifestyle wise. And I’ve never quite managed to shake the thought that there just could be some serious money to be made there -- IF one can avoid being ‘disappeared’ in the process!

    Russia’s tax rate is basically 13% flat. With a VAT of 18% if I recall correct? No CGT on property held more than 3 years. Though given their demographics I struggle to see how one will earn much capital gain on residential property going forward -- Outside of inflation. But Putin seems dead keen to go into building mode anyway. And get mortgages going gang busters.

    But if I was there I’d be looking at businesses that had nothing to do with property anyway.

  • 65 Biker // Jul 8, 2011 at 7:55 pm

    Ned: “IF one can avoid being ‘disappeared’ in the process!”

    My exact thoughts. We’d be considered billionaires there!

    Ned: “No CGT on property held more than 3 years.”

    There ya go. But NZ has no CGT on property at all. And every time I counted just beyond five, I might just end up in bed!! ;)

    Mate, I reckon WA is gangbusters right now. I know the apocaholics say we’re in for some downside if China slows, but at least we have something solid and dry to count on!~

    Cheers, mate!

  • 66 Lachlan // Jul 9, 2011 at 6:57 am

    Anyhow what happened to your love for USA Ned?
    Sorry mate I take it back.
    Look at their latest anyhow…they want to do this …

    “Every employer making payment of wages shall deduct and withhold upon such wages any amounts so elected, and shall pay such amounts over to the Secretary of the Treasury…”

    As a part of this…“Reduce America’s Debt Now Act of 2011.”
    (Found this stuff in the latest article at ZH)

    Gum leaves are looking better every day ;)

  • 67 Biker // Jul 9, 2011 at 9:32 am

    Best line, Lachlan?

    “…con somebody’s missus to drive the flamin’ car…” :D

  • 68 Lachlan // Jul 9, 2011 at 11:08 am

    Yes well it’s often a long walk home in Oz…but then Biker, I do love her far horizons ya know ;)
    I’ve been reviving last few weeks after becoming quite ill sleeping out in the cold. I’ve kept my body warm but breathing cold air led to a series of problems. Anyhow I had met a cockie recently who said I should live in one of two spare homes they have while I’m bushed (300kms from home). I’m going back to work next week. I’ve lined one of those spare homes up…going to run my heater at night. Call me soft eh. I run into excellent people out on the land. Granted our leaders are on a different planet but I love the place.
    I know I keep saying it, we have a small population and a lot of resources. Even if things are tough I cant think of a better place. Granted I’m not travelled, maybe I’m not qualified to comment like you older gents (i’m forty this year btw). The farmers I know are mostly travelled and they know economic hardship better than most and yet they fight to stay out on the land.

  • 69 Ned S // Jul 9, 2011 at 11:18 am

    Lachlan: “Anyhow what happened to your love for USA Ned?”

    I considered the US once Lachlan -- For about 3 seconds -- Scenario:

    Ned invited to get to know the neighbours (Yanks can be quite friendly); Have a bourbon Ned: Ned has a bourbon (or 4, or 14); Ned gets bored with the discussion about who’ll win the super bowl this year; And proceeds to rationally explain his thoughts on the US’s role in world finances, geopolitics etc …

    Made that ‘disappearing’ thing in Russia sound like a really low risk possible inconvenience by comparison! :)

    Biker: “I reckon WA is gangbusters right now”

    Probably just got to accept that in a best case scenario, hightened uncertainty, risk and volatility is going to remain part of the brave new world going forward mate? While in a worst case scenario, yes, “home among the gum trees” could well be about as least bad as it gets -- Well, for an Aussie anyway.

  • 70 Lachlan // Jul 9, 2011 at 11:21 am

    Some of us love the town/city life and there is nothing wrong with that. Some of us love the bush. Most of us will probably die the same way and the world works well this way. I don’t see it as one better than the other. At one stage we had our nursery in an outlying area. Took our produce in to the towns where the money was. Suited me fine…I know I didn’t want to live there but I’m sure glad someone did and if they’re happy then am even happier. Of course it makes sense to have high density living and industrial activity near bye that feed back in to the rural areas. If everybody decided to be an agrarian tomorrow there would be an imbalance and we would lose technological advantages from industry. I’m not lost on the advantages of technology and the joy and comfort it allows humanity. Now whens my solar farm ute coming BP ;)

  • 71 Lachlan // Jul 9, 2011 at 11:26 am

    You funny boy Mr Ned
    Like how you projected yourself in to that situation…I came to the same conclusion rather rapidly ;)

  • 72 Ned S // Jul 9, 2011 at 6:23 pm

    Have you sand gropers got any money you can give the rest of us Biker? (Under different circumstances I’d call it a loan -- But as we are effectively insolvent, I truly doubt we’ll ever be able to pay you back) :

    QLD: “The Budget Papers show the total state debt levels will rise from $52.8 billion this financial year to $65 billion in the coming year, rising to $84.9 billion in 2014/15.”

    http://www.brisbanetimes.com.au/queensland/ambulance-levy-scrapped-in-tough-budget-20110614-1g1ba.html

    I’m not sure what is more amazing; The fact we are in the situation we are, or the fact that none of our pollies ever get shot?

  • 73 Lachlan // Jul 10, 2011 at 6:06 am

    Anna’s working on the proven Greek model Ned.

  • 74 Ned S // Jul 10, 2011 at 11:28 am

    “Anna’s working on the proven Greek model” -- Yes Lachlan. She and Mr Fraser must have both missed that Boyer lecture of Macfarlane’s where he quoted a past Brit PM as saying something to the effect that nations paying themselves more than they earn never ends well. (Or maybe they just figured it didn’t apply to states? :( )

    The housing market concerns have started hitting the more mainstream economists like Oliver and Eslake it seems:

    “MELBOURNE’S property market is likely to remain in the doldrums for the next 10 years.”

    http://www.news.com.au/money/property/decade-of-house-pain-predicted-for-melbourne/story-e6frfmd0-1226091470380

  • 75 Greg Atkinson // Jul 11, 2011 at 3:22 pm

    Ned I think people are also starting to wake up to the reality (slowly) that counting on China tossing money our way for decades is probably not the greatest economic plan ever developed.

    Eventually many mainstream finance reporters will also wake up and realise that if China’s major trading partners like Japan, Europe and the US are struggling then this will also cause them problems. Unless of course Chinese consumers will suddenly start spending like mad.

    We are on the verge of finding out if the commodities boom is about the pass through the bubble stage and enter a cyclical downturn. Just like all booms do. The next six months might not be kind to the Oz economy.

  • 76 Ned S // Jul 12, 2011 at 12:08 am

    My personal suspicion is that our policy makers have had a look at our demographics (aging population) and our entrenched welfare mentality and decided that it’s either “Asia or Bust” Greg. And are looking at Asia being good for us for 40 years. (You will undobtedly still recall Ken Henry’s “Golden Age” comment of course.)

    And to the extent that they believe it (want/need to believe it maybe?), they’ve hitched our wagon to it. Like you, I can’t help but ask if they might be underestimating the risks?

    But my other suspicion is that they don’t see themselves as having a politically acceptable option at this time regardless -- Leastways not until it should become obvious to all and sundry that to the extent Plan A didn’t work, we will have to come up with a Plan B. (Though even that Greek Home of Democracy that Lachlan mentioned doesn’t seem to think much of the Plan B their policy makers have come up with for them. :) -- Not that Oz is Greece; Thank gawd!)

    But either way, in the interim, it would have to help if we had a sane and stable government. (This one is simply too unsettling for business.) But we don’t. And that doesn’t seem like it’s going to change for at least two more years.

  • 77 Ned S // Jul 13, 2011 at 6:11 pm

    Just be grateful you aren’t visiting Greece or Ireland or Spain or Portugal or Italy maybe Biker? (And steeer clear of QLD for a year or three ’til the voters ditch Anna and the state recovers a bit maybe! :))

    I really do like Russia as I said -- But Aussies who flee home and become non-residents get to pay 29% minimum on income from their Oz assets. Plus there are those SMSF hassles I mentioned. So I’m hanging tight for now.

    And Russia has it’s pat-downs too -- Amongst them things like when you walk into the foyer of a motel you’ve pre-paid AUD165 a night for a room in as part of the state run scam to get a visitor’s visa and notice the chalk board sign advertising that the overnight snooze rate is USD27.50 ! :D (With that being a provincial centre -- Moscow when the European Footy Finals are being held there gets expensive for drunken Aussies and POMs with more cents and pence than sense!)

  • 78 Biker // Jul 13, 2011 at 11:30 pm

    User pays and pays and pays, Ned!~

    After a Jetset flight across Oz, I think the regulators grounded the wrong airline. Swore after the FNQ flight we’d never fly with them again…*

    Staying with friends in Vancouver. They tell me property in this more affluent suburb is still rising rapidly. No checks on immigration of the wealthy to Canada….

    Renovations are the big deal here. It looks like 30% of the homes in this street are getting makeovers. Deck rebuilds are apparently the go at the moment.

    Our hosts, manufacturers of specialist aircon systems, aren’t suffering any economic hardship. Bob claims they’re unaffected by US ructions. His perceptions on US recovery are interesting and his optimism is infectious.

    * So the missus failed to _tell_ me we were flying with them this time, until the day before! Now her left foot is twice its usual size. Talk about cramped and uncomfortable. Air Alaska flight from LA to BC was 100% better. Great legroom, as had QANTAS. Shouldn’t really complain. All flight points…

  • 79 Ned S // Jul 14, 2011 at 7:23 pm

    Seems HIA reckons we aren’t building enough houses and it will be bad for employment and it’s gov’s fault for adding so much unnecessary cost to the price of land:

    http://www.abc.net.au/news/2011-07-14/land-sales-hia-rp-data/2794972?section=business

    (Weaning gov off the land development and housing industry teat generally would be a VERY interesting trick.)

  • 80 Biker // Jul 14, 2011 at 11:51 pm

    Ned: “I think Greg might have just given us a “stay on topic” hint Biker! :)

    Yes, it appears one of my comments was ‘disappeared’, Ned! :D
    Own the site, you own the right, I figure… .

    Their Catch22 is that without grants (and confidence) residential construction is slowing rapidly. Right or wrong, Barnett & Co believe that FHOGs will simply raise prices.
    There’s no question that FHOGs flatten rents… for years.

    I’m ambivalent. Withhold grants and rents rise.
    Bring ‘em back? We sell the least productive.
    Flexibility and choice rule.

    Ferrying to Victoria BC. Will prices come even close to these, I wonder? http://www.westsidehome.ca/ShaughnessyHousesforSale.ubr

  • 81 Stillgotshoeson // Sep 17, 2011 at 2:59 pm

    Things are looking even more grim for Melbourne,,,,,,, Most of the suburbs stated in the article are dominated by recent first home buyers..

    http://www.prosper.org.au/2011/09/17/melbourne-%E2%80%98stale-stock%E2%80%99-hits-70800/

  • 82 Ned S // Sep 19, 2011 at 12:47 am

    Brissie is looking crook too Shoes.
    Wait and see until 2012 is my game now.

    Just in case you don’t know, Prosper is a vested interest group -- But then pretty much everyone who manages to get a writeup IS I guess hey? :)

  • 83 Stillgotshoeson // Sep 19, 2011 at 1:14 am

    Ying and Yang Ned….

    Socialists vs Capitalist (barring extremes of each)
    Labor vs Liberal
    Real Estate Industry vs Prosper
    Pro Global Climate Change believers vs those that don’t.

    They will each exist, always will.

    More and more 4 bedders coming on to market under 400k around my area… 18 months ago you would never have seen one.. That is an indication of falls greater than 10% (getting closer to 15%) on the ground despite what the papers say of 6%.. Have no idea how much further they will fall, must admit they are getting closer to my comfort zone for purchase. Still see no catalyst for any reason for them to start to climb again (locally anyway) Bad news in the Northern Hemisphere still abounds the market speak.. Next year could very well see me as a buyer.

  • 84 Biker // Sep 22, 2011 at 9:57 am

    Well, our old mate at Perthnow has predicted a complete meltdown for the Oz property scene, by 6th December 2011, Ned!~

    NF claimed almost a year ago that in “…12 months time the US and Irish will be thankful things are not as bad as in Oz…”

    Later, updating this wild punt, he noted that “… in the US & Ireland prices fell 40% -- 60% & it became affordable…”

    Nasar’s history of the world’s ‘economic geniuses’ indicates that most of those who were advising presidents and prime ministers how to run their nation’s economies were personally wiped out when financial crises hit. It’s unlikely _mere mortals_ like us can predict the future with any accuracy, so it’s always a good laugh when _wild_ claims about financial outcomes are made!~ :D

    Biker, LV
    (Behind US$33.25… :) )

  • 85 Stillgotshoeson // Sep 28, 2011 at 1:40 pm

    From Australian Financial Review…

    Mortgage delinquencies surge: Moody’s

    Australia’s mining boom may be powering the economy, but it is taking its toll on the nation’s borrowers, as 11 regions have mortgage arrears of more than 2.5 per cent, says Moody’s.

  • 86 Ned S // Sep 28, 2011 at 3:39 pm

    Shoes: “Ying and Yang Ned …”

    Mining is powering the econony but making it difficult for the nation’s borrowers.

    Rock and hard place Shoes? :)

    Negative equity is also getting a bit of a mention these days as well.

  • 87 Biker // Sep 28, 2011 at 11:22 pm

    Don’t forget interest rates, Ned… fixed for three years, at 6.29%! Probably means banks expect less than 6% next year.

    Perth sales up 20% in August. Rents still rising… .

  • 88 Stillgotshoeson // Sep 28, 2011 at 11:49 pm

    Biker // Sep 28, 2011 at 11:22 pm

    Don’t forget interest rates, Ned… fixed for three years, at 6.29%! Probably means banks expect less than 6% next year.

    Possibly. A more likely scenario is the 40000 loans collectively the big banks have not written with the subdued action in the property market leaving a 3 billion hole in their combined forecasts. New loan growth has dropped significantly for the banks, retention of customers is a necessity for them now. Bank retention teams are working overtime to keep customers, new ones are a little harder for them to come by.

    I said the banks would be on a hiding to nothing this year… it has started, it will carry over into next year but the rot has very much started now.

    Was over at friends on Sunday, they have a 5 acre property out of Melbourne, nice little set up, anyway the friends missus was saying that I was right about property becoming cheaper and now they have come down I should look at getting a place. I replied that time is still in my favour on property prices, even if the stop coming down, they certainly will not be going up any time soon, not at any great rate anyway.

    House near me has been reduced from high 600′s to mid 600′s, I expect more reduction in price before it will be sold. Personally I think they will be lucky to get 600k for it in the current market.

  • 89 Biker // Sep 29, 2011 at 12:08 am

    Shoes: “…the friends missus was saying that I was right about property becoming cheaper…”

    Well, there you go! Proves you were right. ;)

  • 90 Stillgotshoeson // Oct 7, 2011 at 7:33 pm

    Interesting video shot up your way Ned..

    http://www.youtube.com/watch?v=tJB4frVnilQ&feature=email

  • 91 Ned S // Oct 7, 2011 at 8:21 pm

    It’s out round Amberley (Ipswich) way judging by the aircraft Shoes. Suspect the ‘value’ just could have to take in their revised flood prospects these days perhaps? But yep, it was a funny clip and well done! :D

    I’m sitting quiet until mid 2012 minimum unless some real ‘fire sale’ stuff comes up. Just how it has to be I’m afraid.

  • 92 Ned S // Oct 8, 2011 at 12:50 am

    Just reviewed that clip Shoes -- You do know a kaffir basher isn’t ever to be especially trusted with your money I hope hey? (Even if he can con a drongo type Aussie into going for a drive with him!) :)

  • 93 Lachlan // Oct 8, 2011 at 5:21 am

    Certainly an oversupply there Shoes. The question is whether
    or not it will translate into a crash of US/Irish proportions (was my 2010 prediction which did not pan out) and one reason I am not so sure any more is because the oversupply has been there a long time and rates have surged in that entire time so I get the feeling that “monetary” inflation is the greater threat which could result more in a sideways market for real estate. I see real estate has weakened with prices coming off by small percentages (<20%) like you would expect in a sideways/consolidating/recessionary market. My mother and father still have their place up and looking for top dollar but every agent is trying to talk price down. Some places near to them have sold for modest discounts…they live in a place like your video showed.
    I see Ross from DR comments was trying to explain recently how Aussie rates could not possibly come down. That would put a spanner in my theory if correct…hence potential price inflation hard to achieve.

  • 94 Stillgotshoeson // Oct 8, 2011 at 8:32 am

    I have not read the comment by Ross over at DRA, however I do agree, even if it is for different reasons. The situation in the NH is still bad and getting worse. The banks are free to move rates outside of the RBA but are not lowering variable rate loans at this point. Fixed term rates have dropped a little, I still see this more as a retention move than a competetive move. Headline rates on Fixed Term Rates look attractive, comparison rates make them a little higher ;)

    Fixed term interest rates have been cut too, however online savings accounts are still available above 6.5%

    People are saving more and banks (for the moment) are flush with cash but yet are not lowering interest rates to attract more custom, this implies they still see trouble ahead and are being cautious.

    Can not be bothered looking for it but there was an article in the Heraldsun.com.au or the Age.com.au maybe 2 weeks back highlighting overseas funding costs have increased, any move by the RBA to reduce the Reserve rate could well be met by the banks just keeping the status quo stating the higher overseas costs do not allow them to move on rates any more than they already have.. afterall “we” have already lowered our fixed term rates blah blah blah… The Europe situation is likely to make credit more expensive.

    As for house prices I tend to think we will have maybe 10% to 15% more decline in prices then a long period of stagnant prices. On paper they will look like they have not dropped that much, in real terms we could well be looking at the 40% S Keen first mentioned. Average price data for Melbounre homes varies greatly between publishers, 500k to 600k. I think 600k was the high point but we are down about 10% from that. So 540k, or nearly 8 times average earnings, another 10% to 15% down, say 12% or so brings it down to $475k for the bottom, then a long period at $475k $475k is about 7 times average wage. 4 or 5 years of stagnant prices wages go up 20% Brings the the price back to around 5.6 times average wages. So we have direct price deflation giving 20% to 25% reduction and wage indexation taking care of the other 15%. Even Biker agrees with the last part, he quotes it often, differently but same meaning.. 70 cent dollars in the future ;)

  • 95 Greg Atkinson // Oct 8, 2011 at 9:27 am

    Interesting clip thanks! The unemployment rate will also be a key factor in determining the house price trend if only because of the impact it has on consumer confidence.

    By the way, this is worth reading: First home buyers locked out of market as research shows it takes four years to save for deposit

  • 96 Stillgotshoeson // Oct 8, 2011 at 10:41 am

    With unemployment, I think as house prices continue to trend down confidence will continue to wane, spending will reduce then unemployment will rise. I don’t think it is a case of unemployment rising then property prices falling. Read somewhere that mining and manufacturing only account for about 15% of jobs. So a reduction in consumer spending has more impact on retail and service industries (the bigger employers of people) Many casual/part time workers in Melbourne have had hours cut, still technically employed so not showing on employment figures but that reduction in household income is that much less spending being done, combine that with the now obvious (mainstream press are running articles on it) declining property prices and the confidence and thus the desire to spend has started to kick in… the unemployment rate rise comes latter (we have had a small increase so far)

  • 97 Biker // Oct 8, 2011 at 11:10 am

    “…the unemployment rate rise comes latter…”

    Gawd, how l-o-n-g have we been reading _that_?!~ ;)

  • 98 Biker // Oct 8, 2011 at 11:13 am

    And more bad news… or good news for the ‘patient’:

    http://www.watoday.com.au/wa-news/perths-high-price-high-demand-property-market-people-signing-leases-not-loans-20111007-1lde7.html

  • 99 Stillgotshoeson // Oct 8, 2011 at 2:13 pm

    http://watoday.domain.com.au/real-estate-news/theres-little-positive-about-negative-gearing-20111006-1la92.html

    There is another article on letting First Home Buyers use their superannuation to help them purchase a house.

  • 100 Ned S // Oct 8, 2011 at 3:05 pm

    No shortage of stock in SEQ as such from what I can see. Was talking to a mate who lives on Bribie Island this morning. He reckoned “Half of Bribie Island is for sale.” :)

    Another one of our markets that attracted lots of southern speculators would be my guess?

  • 101 Stillgotshoeson // Oct 8, 2011 at 10:22 pm

    Told you things are not so good here in Melbourne..

    http://www.heraldsun.com.au/news/more-news/home-owners-300-blow/story-fn7x8me2-1226162101573

    “By the time the market bottoms at the end of next year, Residex expects the city’s median house price to have shed 15 per cent. Families living in a $500,000 home can expect to see $75,000 wiped from its value.

    “The adjustment process in Melbourne is just beginning,” Mr Edwards said.”

  • 102 Biker // Oct 9, 2011 at 3:37 am

    “Families living in a $500,000 home can expect to see $75,000 wiped from its value.” There ya go, Shoes. Be patient.
    By December 2012 Keen might be 37% right!

    “Interest-rate watchers are predicting a Melbourne Cup day interest-rate cut of 0.25 per cent by the Reserve Bank.”
    Mind you, smart(er) folk than us might just rent ‘em rather
    than sell ‘em. It’s happened before, ya know!~ ;)

  • 103 Stillgotshoeson // Oct 9, 2011 at 8:07 am

    Seeing as a $500,000 house has come down from around $540,000 to $550000 already that would bring Keen closer circa 80% right and that is an above average score in any school… even the school of economics.

    Rate cut is a line ball call, Retail Spend is up, (steady rates bring a little confidence too ) New Car sales are still tipped to break a million for the year, Dollar has come down taking a little pressure of exporters and there is still the strong possibility that even if the RBA does lower rates the banks will hold firm citing the overseas funding costs/turmoil.

    If the banks wanted to lower variable rates, they could do it now, nothing to stop them acting outside the RBA (they have proved this before) Lowering the variable rate outside any move by the RBA would probably be good PR. (Until next year when the banks put em up again ;) )

  • 104 Not Fooled By Property Spruikers Hype // Oct 9, 2011 at 8:14 am

    Have a look how Perth investors went in the last 18 months. Even without a mortgage. Lets assume on the 1st July 2010 the property was worth $500K & it rents for $500 pw or $25K pa -3% vacancy factor & 5% property Mgt charges= $23K -rates -water -- insurance -- maint =$18K less 7.5% capital loss past 12 months -$37.5K (Source RP DATA) = Loss of $19,500.00 it cost you almost $20,000 to accommodate you tenant for 12 months (You have to count capital loss even though you have not realised the loss because investors always count the capital growth even though they have not realised it) Now investors have to get a capital growth of at least 8% in the next 12 months just to get back to where you were in July 2010 (FYI thats 2 years wasted) The chance of capital growth in the next 12 months is nil in fact all serious commentators predict a further fall of at least 8% by the end of June 2012 Remember July 1.63% price fall & Aug 2% price fall so half of the 8% fall has already happened in the first 2 months. Investors had a $37.5K loss not including the interest on a mortgage of say $22K plus. Ouch $60K loss in 12 months & the same in the next 12. Down 3.6% first 2 months of the year! Ouch!

    (Hey biker why so shy on Perth Now Site? )

  • 105 Greg Atkinson // Oct 9, 2011 at 8:53 am

    House prices move in cycles just like everything else despite how hard we might wish it were otherwise. It’s more of a question of how the current housing cycle plays out not if there is one.

    Some markets appear to be holding up well on paper (like inner Sydney) but there are plenty of other areas in Sydney where prices have been stagnant or drifting down for years.

    The RBA might just sit on their hands for the rest of the year as far as rates go. They don’t appear to be in any rush to cut rates.

    We should also not forget that the benefits(?) of negative gearing sometimes appear to confuse people. I have heard so many people happily talk about how they can write off a loss to the taxman without apparently understanding what this actually means.

  • 106 Not Fooled By Property Spruikers Hype // Oct 9, 2011 at 10:31 am

    Hey Biker / Trav’s the times you are posting don’t addup you are slipping on your fantasy world trip you fraud. property owner with millions of assets flying “Jetstar” across OZ then LA to BC. Oh please sounds like you never travelled before why the milk run? Amateur!!

  • 107 Greg Atkinson // Oct 9, 2011 at 10:49 am

    Let’s stay on topic please.

  • 108 Not Fooled By Property Spruikers Hype // Oct 9, 2011 at 11:05 am

    Greg your “Biker” is our “Trav’s” on Perth Now website. he has been caught out many times pretending to be in Canada but keeps getting AM & PM confused.

    OK Lets stick to topic.

    Trav’s says he has 10 houses in the $300K -- $400K range fully offset. That works out to about $3.5 million Trav’s has in the “Property Game” & in the past 12 months property has gone down at least 6.3% ($220K) Plus the CPI went up around 3% plus so in real terms Trav’s has LOST $330,000 CAPITAL V’s Rental income of under $150,000 (After all costs) for a nett loss in the vicinity $180,000 (5%) or $3,500 PW . Now just imagine if Trav’s was like most investors & had his investments leveraged with 80% debt he would also have a interest bill of $196,000 to give him a total loss of over $376,000 in the past 12 months. Hardly surprising there not a lot of investors keen to enter the market. In fact it might explain why the number of ex investment properties up for sale is currently up 500% Investors have seen the light & are either leaving or staying out of the market till house prices return to 11 times rental yields. Remember if you are house hunting & you see it is a vacant ex-rental the Vendor is going to be very very keen to get out quick smart before he loses even more money.

    RP Data compounded Trav’s problems reporting a further 2% fall in Perth prices for the month of Aug, that’s another $70K wiped off his assets.

    Yet he persists trying to bite his own neck, refusing to acknowledge that with hindsight it would have been better to sell out in 2010.

  • 109 Greg Atkinson // Oct 9, 2011 at 11:11 am

    When people post under an alias they can claim to be whatever they want. That’s why facts, links, data and analysis work best I reckon.

  • 110 Biker // Oct 9, 2011 at 5:07 pm

    Not Fooled By Property Spruikers Hype, Posted at 10:13 PM December 06, 2010 “12 months time the US & Irish will be thankful things are not as bad as OZ … one Bubble at a Time or as some folks would say BOOM BOOM POW …”

    Link: http://www.perthnow.com.au/business/business-old/construction-slowdown-to-pause-rate-rise/story-e6frg2qu-1225960148535

    Extent of the crash predicted by NFBPSH?:

    http://www.perthnow.com.au/business/wa-building-approvals-fall-to-27-month-low/comments-e6frg2ru-1226125558870

    Biker,
    Vancouver
    (I’m back in Canada, NF… . You’re way off in FantasyLand. :D )

  • 111 Not Fooled By Property Spruikers Hype // Oct 10, 2011 at 9:56 am

    Again you try to quote me out of context? Is that the best you have? Nothing positive to say about property? How come you are so quiet on Perth Now Site these days?

    The topic I was discussing was “Construction Slowdown” I was talking about construction slowdown & said in 12 months time the US & Irish would be glad things were not as bad as they were here down in OZ. Through your poor perception skills you concluded prices would drop 40% or 60% & you then go on attribute your thoughts to me? With your poor perception skills you stayed in the property market not able to read the signals that were there for all to see. No wonder your investments in the property market have lost you $3,500 pw for the past 12 months & if you have still not realised it yet they continue to cost you $3,500 pw.

    BTW have you worked out that the funds you have deposited in your offset accounts are yielding less than 3% pa? Do you still think you are earning 7% plus tax free?

    BTW in addition to this RP Data said Perth property fell 2% in Aug 2011 so you can chalk up another $70,000 in equity dilution in one month of 10% for this financial year. You must be kicking yourself for not listening to me this time last year.

    Also whilst your away another block of apartments in Perth have been put up for “Distress Sale” with 35% discounts.

  • 112 Biker // Oct 10, 2011 at 12:56 pm

    NFBPSH: “You must be kicking yourself for not listening to me this time last year.”

    Why would I pay any heed whatsoever to someone who has been consistently, publicly, wrong, NF?

    Take this statement, for example: “…your investments in the property market have lost you $3,500 pw for the past 12 months…” (That’s $182K, NF.)

    First, you have no idea either what we own, where it is, or what it’s worth. Second, you have no idea what we owe. Third, you really don’t understand how property investment works. Fourth, your past posts demonstrate you have no idea how tax benefits work for property.

    I could go on, but let’s simply look at the flawed logic you used in your original (screenshot) post, in which you claimed I wasn’t abroad… but concluded that while I’d been _away,_ I’d lost these fictional sums of money. Do you not understand these continual contradictions?

    Here’s an opportunity to show me up for the fraud you claim I am. Ask our host to check my current location. It’s a very easy ask, NF. Ask Greg. Don’t be shy… ;)

    Biker,
    Vancouver, BC

  • 113 Not Fooled By Property Spruikers Hype // Oct 10, 2011 at 3:36 pm

    Tell me Biker still earning 7% plus tax free on funds deposited in 10 offset accounts or do you only earn the yield the property has after expenses?

    You said you had 10 offset accounts against 10 properties & you are on record saying you like the lower end of the market. ($300-$400K)

    10 x $350k = $3.5 mil down 10% = $350K

    Wealthy property investor on holidays in Canada spending most of his time blogging on websites trying to breath some life into a declining market.

    Biker you should chillax you made sound investment choices over many years why worry about a piddly $350K drop in 12 months & $70K in Aug.

    In ten years time you will haver the last laugh property prices will have doubled you will have assets of $7 mil plus & this minor hicup will just be a distant memory and I will still be bitter & angry in my homeswest flat.

    Enjoy your wealth your a great man you deserve all the spoils you have.

  • 114 Biker // Oct 10, 2011 at 10:47 pm

    NF: “Enjoy your wealth your a great man you deserve all the spoils you have.”

    No, I’m simply the ‘dad’ component of the ‘Mum & Dad Investor’ team you once derided me for being.

    All your assumptions are wrong. We have more properties than you have listed. We have one property with a 100% offset. It’s earning, untaxed, 6.8%. Your summary of our assets falls well short of the figure you cite. We lost no money in the last 12 months. To the contrary, not only did we make a comfortable living, we raised rents on vacated rentals by 10%. Our annual income tax return alone is sufficient for us to be comfortable.

    NF: “In ten years time you will haver the last laugh property prices will have doubled you will have assets of $7 mil…”

    Again, you base such calculations on unknowns. There are too many Xs in such an equation. The _last_ laugh? Remember we sold a property late March 2011 for a profit far greater than three months abroad has cost us, after owning it two years. Times of uncertainty present great opportunities for anyone with resources and experience, providing they’re not greedy…

    Finally, your list of cities we’ve visited was less than a fifth of those we’ve enjoyed in three months. Clearly I haven’t been “…spending most of (his) time blogging on websites…” I have, however, picked up a lot of useful information from folk who know much more about investment than we do, by _listening_. Travelling abroad is a tough job, but someone has to do it… . ;)

  • 115 Not Fooled By Property Spruikers Hype // Oct 11, 2011 at 12:03 am

    Oh Biker I must have come down in the last shower.

    Now I don’t want you to name a suburb you have any investments in but I would dearly love to know any suburb in Australia where a residential property returns 6.8% “Untaxed” .

  • 116 Biker // Oct 11, 2011 at 1:11 am

    NF: “I must have come down in the last shower.”

    Some of our properties earn as much as 11% after tax, NF.

    And we made 16.4% _annually_ on the one we sold this year.

    I’m not sure which shower you descended in, but your illusions about property returns, if shared by tenants across Australia, probably mean we’ll continue to live, laugh and (l)earn in some comfort.

    Boarding… . Gotta fly.

  • 117 Greg Atkinson // Oct 11, 2011 at 10:12 am

    At the end of the day we can only go on what information is publicly available. Investing in residential property can financially rewarding but it can also bring down even the biggest of developers as several high profile Gold Coast types found out recently.

    In any case Perth is just one corner of the Australia-wide property market. Overall nationwide house price data appears to indicate that at the moment house prices are fairly flat or falling back a touch.

    But perhaps the best indicator to how the property might be fairing is to look at what the big four banks are doing and at the moment they are all in cost-cutting mode. Perhaps this means that amongst other things they are anticipating a downturn in their home mortgages business?

  • 118 Stillgotshoeson // Oct 11, 2011 at 10:03 pm

    http://www.heraldsun.com.au/business/home-cheap-home-becomes-reality/story-fn7j19iv-1226164289890

    “But in the residential market, would-be house buyers would be deterred by a likely 100-basis point increase in interest rates over the next few years as economic growth and inflation climb. Such a rise would take the official rate to 5.75 per cent.”

    “mortgage rates of 9%” In a few years… this does not bode well for many.

  • 119 Biker // Oct 12, 2011 at 10:08 am

    “At the end of the day we can only go on what information is publicly available.” (?)

    For example, check out this up-to-the-minute ‘report’:

    http://www.perthnow.com.au/business/perth-house-price-to-surge-20pc-by-2014-qbe-insurance/story-e6frg2ru-1226164112395?class=mostpop-item-link&amp;

    Surge? 7% per year increase? Even if ‘true’, 7% pa is hardly the stuff of major ‘surgery’!~ :D

  • 120 Greg Atkinson // Oct 12, 2011 at 2:36 pm

    Biker the link to the report is broken.

  • 121 Not Fooled By Property Spruikers Hype // Oct 12, 2011 at 5:04 pm

    Greg Here is a working link that Biker tried to supply to a story to support his position.

    http://www.perthnow.com.au/business/perth-house-price-to-surge-20pc-by-2014-qbe-insurance/comments-e6frg2ru-1226164112395

    The article is just a SPRUIK for the property sector, but Biker gets comfort from it.

    However if he took the time to read the readers comments he would see that the sentiment of the Australian property buying public is negative & he is in a asset class that is on the decline.

  • 122 Biker // Oct 14, 2011 at 6:52 am

    Thanks for correcting that link, Shoes.

    “Biker gets comfort from it…”

    It’s possible you misunderstand our situation. Rents now provide a major part of our retirement income. We don’t care if folk rent or buy. If they don’t buy or build, our retirement income increases. A ten percent increase (so far) this year is better than the average 8.7% for the last five years.

    Readers comments? There are very, very few individuals commenting. I accept that your own comment there is genuine.

    You are correct that I do gain some comfort from reading these reports. I particularly enjoy revisiting many experts’ and respondents’ prophecies as their stated timelines expire. ;)

  • 123 Stillgotshoeson // Oct 14, 2011 at 8:27 pm

    Biker // Oct 14, 2011 at 6:52 am

    Thanks for correcting that link, Shoes.

    Umm was not me it was NF.. If you think I am NF and he is me then you are mistaken, I assure you of that….

    I am far more bearish than NF.. Property, Shares and precious metals are all going to drop in value, not at the same time and likely not by the same amounts. If I am reading the economy right over the next few years I think I am going to (continue) to do well.

    Whilst bearish I am ultimately bullish on the Australian economy in that Australia will prosper into the future. Bad times will be upon us before these prosperous times though.

  • 124 Biker // Oct 14, 2011 at 9:24 pm

    Sorry about that, Shoes. Sometimes mixed up black bears with grizzlies, too. ;)

    “I am far more bearish than NF.”

    True. I have a list of your predictions.

    As I stated almost immediately you first posted, it’s always interesting to study online economists, particularly when they often _date_ their predictions so precisely, rushing in where angels fear to tread.

    Sometimes these punts are sold to us as ‘optimism’. There may be some strange truth in that… a kind of hopefulness when the only direction left to look is up. The other admirable trait is of course, patience. The ability to wait (quietly) for the collapse of the universe, year-after-year, is extraordinary. Even when certainties fail to be fulfilled, bears can find (and list) more… .

    What perseverance! :)

  • 125 Stillgotshoeson // Oct 14, 2011 at 10:06 pm

    Melbourne a few months ago 40 Suburbs in the Million Dollar Club, now 28…

    http://www.heraldsun.com.au/news/more-news/melbourne-property-prices-falling-amid-global-gloom/story-fn7x8me2-1226167095993

    Biker: “As I stated almost immediately you first posted, it’s always interesting to study online economists, particularly when they often _date_ their predictions so precisely, rushing in where angels fear to tread. ”

    I care not a one little bit if I am 12 months, 18 months or 5 years out on my “predictions” They will still come about and I will be as prepared as I can possibly be.

  • 126 Biker // Oct 15, 2011 at 8:16 am

    “I care not a one little bit if I am 12 months, 18 months or 5 years out on my “predictions” They will still come about and I will be as prepared as I can possibly be.”

    Let me guess, direct quote from Steven Keen?

    “…my “predictions” … will still come about…”

    OK. I get it. You’re God, right?
    You must be well-placed for tonight’s Lotto… ;)

  • 127 Not Fooled By Property Spruikers Hype // Oct 16, 2011 at 8:16 am

    Biker aka Trav’s

    Did you see or bother to read the readers sentiment?

    These are the people property speculators are relying on to pay them higher prices so they are able to offset their losses on negative rental yields.

    These speculators are not as shrewd as you earning 6.8% plus tax free after all holding costs (Rates- Ins -- Vacancy- Mgt Fees etc)

    How do you do that again you buy a property for $500K put a $100K deposit {20% so you don’t have LMI}& borrow the rest with a loan that has a Mortgage Offset Facility @ 6.8% then you pay it down so that the balance is Zero & the property then yields 6.8% despite the rental income being under 3% nett?

    I tried to explain this to my accountant but struggled to do so there were too many blanks that did not make sense to him & frankly I did not know the answers.

    I know we have had our moments over the years but could you explain this concept in more detail so as to help my understanding better?

  • 128 Biker // Oct 16, 2011 at 11:00 am

    NF: “How do you do that again you buy a property for $500K put a $100K deposit {20% so you don’t have LMI}& borrow the rest with a loan that has a Mortgage Offset Facility @ 6.8% then you pay it down so that the balance is Zero & the property then yields 6.8% despite the rental income being under 3% nett?”

    When did I (ever) buy a property for $500K, NF?!~ :D

    NF: “I tried to explain this to my accountant but struggled to do so there were too many blanks that did not make sense to him & frankly I did not know the answers.”

    No wonder you were unable to explain it, NF. If you start out with _invented_ figures, you’ll shoot blanks every time.

    I prefer to work with (f)actual, known quantities. Take your stated online prediction that by 6th December 2011 our property market would be in ‘popping’ worse shape than the markets of Ireland and the US, for example.

    Explain _that_ one to your ‘accountant’. ;)

  • 129 Biker // Oct 16, 2011 at 11:07 am

    NF: “I tried to explain this to my accountant but struggled to do so there were too many blanks that did not make sense to him & frankly I did not know the answers.”

    Mathematics issues? You probably need to study this very helpful clip, NFBPSH:

    http://jezebel.com/5815965/should-math-be-taught-in-schools

  • 130 Not Fooled By Property Spruikers Hype // Oct 16, 2011 at 11:55 am

    Oh biker that was a disappointing response. I had hoped to learn so much for you.

    Why are you avoiding the question.

    Forget what the actual number was $500K , $300K $200K it is the concept you employ in your investment strategy that truly interest me.

    I remain open minded that you may have stumbled on to something that the Accounting Fraternity has missed.

    Come on Biker be a Champ explain how I too can be earning 6.8% plus “Tax Free” investing in residential housing using a Mortgage Offset Account facility like you do. Forget about my numbers put up any example you like.

    BTW it is still saddening that you were not able to comprehend my comments on the 6th of Dec 2010, the discussion was about the construction industry stalling & I was saying that in 12 months time the US & Irish would be grateful things were not as bad as they would be in OZ.

    I was discussing construction & unfortunately you took it to mean pricing.

  • 131 Biker // Oct 16, 2011 at 12:04 pm

    NF: “BTW it is still saddening that you were not able to comprehend my comments on the 6th of Dec 2010, the discussion was about the construction industry stalling & I was saying that in 12 months time the US & Irish would be grateful things were not as bad as they would be in OZ.”

    Untrue. You were talking about the property ‘bubble’, as you term it:

    Not Fooled By Property Spruikers Hype Posted at 10:13 PM December 06, 2010 “12 months time the US & Irish will be thankful things are not as bad as OZ … one Bubble at a Time or as some folks would say BOOM BOOM POW … ”

    You’ve now invented a ‘construction bubble’? Priceless!~ :)

  • 132 Not Fooled By Property Spruikers Hype // Oct 16, 2011 at 12:25 pm

    Sorry Biker,

    I missed your explanation on how you can make 6.8% “Tax free” using a Mortgage Offset Account.

    What’s holding you back?

    Voodoo Economics at work here perhaps?

  • 133 Biker // Oct 16, 2011 at 5:02 pm

    * Built a home for $258K, land included. Current rental $390pw.
    * Bought a display home for $375K. Builder paid us $600pw for 30 months. Now rented for $495pw.

    Two examples of many. You want more? Want to know what each home is _now_ worth? Both have performed at least as well as the house you claimed _you_ were living in, NF:

    “The house we currently live in bought 2002 for around $250K nothing done to it yet it is valued at over $750K” (Want a link for your claim this property trebled in three years?)

    I can see you’re _keen_ to forget about your Big Day Out. :D Here’s a much earlier _classic_ quote supporting your inane prophecy about the great 6th December Property Crash. Made just after you morphed into your New PerthNow Identity, BTW:

    Not Fooled By Property Spruikers Hype of Perth Posted at 4:49 PM Today: @ WA is Good comment # 71 …Eyes Closed … Thinking … Thinking … Thinking … Property in 15 -- 18 months will be very affordable in Perth when we follow the Irish & USA…. Thats got to be good news? … My kids will be able to buy a house @ 3 -- 4 times their incomes and not be slaves to the Banks? Your kids too!” Comment 72 of 73

    Jeez, you’re a laugh, son. Hoist with yer own petard… . ;)

  • 134 Biker // Oct 16, 2011 at 6:16 pm

    Correction: NF: “The house we currently live in bought 2002 for around $250K nothing done to it yet it is valued at over $750K” (Want a link for your claim this property trebled in EIGHT years?)

  • 135 Not Fooled By Property Spruikers Hype // Oct 16, 2011 at 8:16 pm

    Biker you get less than 2.5% yield after tax on your funds you have invested in the property sector.

    The fact you are not able to grasp this indicates at best a naivety about investing.

    This is what you get from $700 pa investment advice.

    You avoid giving dates or suburbs so that nothing is verifiable.

    Clearly you have something to hide otherwise you would be more forthcoming.

  • 136 Biker // Oct 16, 2011 at 8:55 pm

    What tax? The fact that you don’t understand the simplest aspects of property is highly amusing, NF, but let’s return to your prophecy of an early December property crash, shall we?
    You don’t get off that easy, son!~ ;)

    Not Fooled By Property Spruikers Hype Posted at 9:47 PM August 30, 2011: “@ Too Easy nice attempt to Spruik the market & scare people into thinking the better buy now? What do you mean “Not Gonna Be Affordable” it is not affordable Today -- Now. But this exactly what it was like in the US & Ireland then prices fell 40% -- 60% & it became affordable. THE DAYS OF AFFORDABLE HOUSING IS JUST AROUND THE CORNER.” (My caps)

    I’m intrigued why, in these days of instant technological recall, amateur economists make these silly online punts. Are they made in an alcohol-or-drug-induced funk? When the world’s ‘best’ economists continually get it entirely wrong, what makes very average laymen think they have crystal balls? Do they actually follow their own advice? Perhaps they do:

    http://www.perthnow.com.au/business/first-home-owners-grant-needs-upgraded-mortgage-broker/comments-e6frg2ru-1226075720580 (Comment 26 of 63):
    “I am a bitter Homeswest Tenant who drinks half his Dole cheque. …I am a fraud who claimed he owned property all over the state.”

    One of the very few times we’ve heard NF speak with any real clarity. Do you regret leaving the UK six years ago, NF? Perhaps WA was a mistake(?) Britain is imploding. Why not seek sobriety and success back in JOE? Let’s face it, you’re not likely to ever commit to buying WA property, despite your claims to ownership of six WA properties… .

    I recall _you_ do list the suburbs of these fictional homes:
    Woodvale, Mandurah, Karratha, Karratha, Karratha, Karratha.
    You want links with that?!~ :D

  • 137 Not Fooled By Property Spruikers Hype // Oct 16, 2011 at 11:24 pm

    Yes please Trav’s I will have a link with that.

  • 138 Not Fooled By Property Spruikers Hype // Oct 16, 2011 at 11:26 pm

    Biker

    I missed your explanation on how you can make 6.8% “Tax free” using a Mortgage Offset Account.

    What’s holding you back?

    You keep deflecting a simple question. Why?

    The fact you talk about me & not the topic is amusing to say the least.

    Now go back to biting your own neck

  • 139 Biker // Oct 17, 2011 at 8:17 am

    NF: “I missed your explanation on how you can make 6.8% “Tax free” using a Mortgage Offset Account.”

    I supplied the numbers. You called 2.5% after tax! :D Explain your maths on that figure.

    As usual, your calculations depend on figures you _don’t_ have.
    You _assume_ we actually _pay_ tax after submitting tax returns.
    You continually base your (mis)calculations on sheer guesswork.

    Explain your ownership of six houses as a Homeswest tenant.
    Does Homeswest have this information?

    Bottom line: The ‘biting-your-own-neck’ taunt is pretty tired.
    You use it when you have _nothing_ else. I suspect that describes
    your situation well.

  • 140 Greg Atkinson // Oct 17, 2011 at 8:32 am

    Okay time out. A debate between two people that goes over the same points is not adding any value and is not in the spirit of this thread. Please agree to disagree.

  • 141 Not Fooled By Property Spruikers Hype // Oct 17, 2011 at 9:36 am

    Greg

    Agreed let the reader judge.

  • 142 Not Fooled By Property Spruikers Hype // Oct 17, 2011 at 10:01 am

    Greg

    What is often lost or forgotten in the housing debate when people only focus on interest rates is afforadability.

    Forget about interest rates look at percentages of wages to service a mortgage.

    In 1975 only 24% of average income was needed to service a typical Australian mortgage. This was with a prevailing interest rate of 10.38% --
    By 1985 it was still steady at 24% of average income needed to service despite interest rates soaring to 13.5% --
    By 1990 Interest rates went to 16% plus but you still only had to use 34% of average income to service a mortgage.-
    By 1995 you needed to use 29% of average income to service a mortgage (10.5% Interest rate)-
    By 2005 it had soared to 40% (7.3% Interest Rate)-

    Now in 2010 it takes a staggering 50% of average income to service a typical Australian mortgage despite HISTORICALLY LOW interest rates of 7.79% (Norm 10.11%)-

    REALTORS continue to say Australian property prices will double every 7-10 years? -- How will anyone pay for it? --

    Historically interest rates have averaged 10.11% over the past 30 years --

    Just 3 years ago in 2008 it was 9.5% --

    A 7% interest rate is equal to paying a 22.5% rate in 1990 in comparative terms.

    Investors strategy in residential property investing is to obtain sufficient capital growth to offset negative rental yields. For property investment to work for them they must get capital growth of 7% -- 10% or property doubling every 7 -- 10 years.

    This has worked in the past as home buyers have sacrificed spending money elsewhere to achieve the great OZ home ownership dream.

    But with 50% -- 60% of income going to service mortgage & home ownership costs today, home buyers incomes are now limiting what they can bid up houses prices by, thus denying investors the capital growth they need & without the capital growths of the past investors are exiting or not entering residential property sectors.

    Property speculators have had a 10 year sweet spot where easy credit has allowed house prices to sky rocket.

    This link explains this in better detail: http://www.khanacademy.org/video/the-housing-price-conundrum?playlist=Credit+Crisis … Take the time to watch all 4 videos in the series & discover where the real demand drivers that drove prices up came from.

    http://nfbpsh.blogspot.com/2011/01/home-ownership-getting-tougher.html

  • 143 Greg Atkinson // Oct 17, 2011 at 10:38 am

    We also seem to assume that rising house prices are always a good thing and I talked about this a little in this post: Are rising Australian home prices good the economy?

    But at the moment it appears many people are willing to push their finances to the limit to own a home.

  • 144 Biker // Oct 17, 2011 at 12:46 pm

    Greg: “But at the moment it appears many people are willing to push their finances to the limit to own a home.”

    I don’t believe the stats support this at all, Greg. I believe more and more people are now renting. Anecdotal evidence may indicate they’re caught in the rental net in retirement, with at least 60% of combined pensions committed to rent.

    Rising house prices are not ‘a good thing’… if you haven’t got a home. Rising rents are not ‘a good thing’ if you haven’t got a home. Both are pretty damned good if you _do_ have a home… and you _do_ have rentals, I can assure you. :D

    Good the economy? I suppose one could argue that our inability to get one cent in pensions saves the economy a dual welfare payment for the period of our longevity. Mine dew, that one also evokes the negative-gearing benefits we received for three decades, doesn’t it?

    I see you’ve opened up the debate again. Enter NF… . ;)

  • 145 Greg Atkinson // Oct 17, 2011 at 1:15 pm

    Actually Biker I was not opening the debate again, I was simply pointing to where such a debate had already been covered.

    Also I said “many” not “more” & the ABS/RBA statistics do support what I said. Maybe there is a short term trend change in progress regarding renting versus ownership but according to the ABS:

    “Home ownership rates have been fairly stable at around 70% for many decades. As measured in the ABS Census of Population and Housing, in 1971 the home ownership rate was 69% and in 2006 it was 70%, with small fluctuations around 70% in the intervening Censuses.”

    That sounds like many to me.

    Source: ABS: LEVELS OF HOME OWNERSHIP

  • 146 Biker // Oct 17, 2011 at 1:38 pm

    Thanks for that data, Greg. It will be interesting to see the latest figures.

    I expect home ownership will be even higher after 6th December 2011…!

    I take your point that investors should commit to asset classes which strengthen the Australian economy. Funnily enough, folk just seem to selfishly put their own needs first… .

    And governments? Even worse. They want to get re-elected!

    Very short-sighted, counter-productive and unethical…

  • 147 Not Fooled By Property Spruikers Hype // Oct 17, 2011 at 1:55 pm

    Biker “6th Dec 2011″? What’s happening then?

    Since the 6th Dec 2010 housing in WA is about 10% cheaper on average, are you expecting it to get even more affordable by Dec 2011. Interesting forecast you make I will keep a eye on that.

    Greg I agree rising houses prices are not good for our economy as housing draws more & more dollars from other sectors.

    Also despite Australian savings have improved since the GFC in 2008 a large part of funds used by our Banks to fund rising house prices are sourced from offshore & the subsequent interest costs go offshore. Money taken from our economy to support speculation in our property sector.

  • 148 Biker // Oct 17, 2011 at 2:35 pm

    NF: Biker “6th Dec 2011?? What’s happening then?

    Selective memory? Amnesia? Alzheimer’s, perhaps?

    Not Fooled By Property Spruikers Hype, Posted at 10:13 PM December 06, 2010 “12 months time the US & Irish will be thankful things are not as bad as OZ … one Bubble at a Time or as some folks would say BOOM BOOM POW …”

    http://www.perthnow.com.au/business/business-old/construction-slowdown-to-pause-rate-rise/story-e6frg2qu-1225960148535

    You should have settled for my :D response to his last nonsense, Greg… ;)

  • 149 Not Fooled By Property Spruikers Hype // Oct 17, 2011 at 3:13 pm

    Keep up old timer read the article again it is about “Commercial” construction.

    What has that to do with residential property being “Even Higher”

    Tell you what biker see my comment #142 above , go to town find a fault in that?

    You continue with this Dec 6th thing , keep clutching at straws you appear to be losing the plot.

  • 150 Biker // Oct 17, 2011 at 3:27 pm

    Three separate posts demonstrate clearly that you believed The Big Crash would occur in early December 2011, NF.

    Many more indicate that you believed that rising interest rates in 2011 would be the cause.

    More still show that you expected owners’ costs to be an EXTRA $9K in 2011.

    Man up. Admit you got it _hopelessly_ wrong, son!*

    * I see you’re also running from your ‘rents are flat’ claim over at PerthNow. How many links (more) do you need to ‘man up’ (your term, BTW) and admit this latest in a l-o-n-g series of miscalls?!~ :D

  • 151 Greg Atkinson // Oct 17, 2011 at 3:31 pm

    Didn’t you both get my hint above to agree to disagree? Time to move on. This site was not set up for people to have running debates which end up going in circles. I will be moving into comment delete mode soon.

  • 152 Biker // Oct 17, 2011 at 3:36 pm

    Didn’t YOU get my smiley hint that I _accepted_ your decision, Greg? Deleting it and posting your own bearish sentiment was your right, as site owner, of course, but I wonder(ed) why it was necessary… ;)

  • 153 Stillgotshoeson // Oct 18, 2011 at 12:56 am

    Very good article…

    Explains how and why property is going to continue to decline in price…

    http://www.theaustralian.com.au/business/property/property-values-sliding-says-bill-moss/story-fn9656lz-1226169144054

    I await the obvious response…. from_someone. any_guesses_whom_that_could_be? ;) :)

  • 154 Biker // Oct 18, 2011 at 8:18 am

    I think the focus may have been on commercial property, Shoes(?)

    If you were bold, you’d probably predict a collapse of say, 54%, in Melbourne residential property(?)

  • 155 Not Fooled By Property Spruikers Hype // Oct 18, 2011 at 10:48 am

    Shoes,

    What many property speculators fail to understand is the drivers in the market that were responsible for the rapid rise in property prices.

    Many Speculators wrongly think it is was under-building / migration or population growth that drove prices up.

    However ABS Data says the Australian population grows by 1 person every 97 seconds (Births minus deaths plus immigration minus outbound migration)

    { http://www.abs.gov.au/ausstats/abs%40.nsf/94713ad445ff1425ca25682000192af2/1647509ef7e25faaca2568a900154b63?OpenDocument }

    This works out to a population increase of 325,000 people PA in Australia & with census data indicating there are 2.6 people per household we should be building about 125,000 homes pa to accomodate this population increase.

    The HIA have come out & said that even with our current record low housing starts we built 151,000 homes in the past 12 months,{ http://www.news.com.au/money/property/housing-starts-crash-as-home-buyers-stay-clear/story-e6frfmd0-1226137516424 }

    But this works out to enough housing for 392,000 or 25,769 too many homes Australia wide. Record low housing starts yet we are still building too many.

    Just imaging how much excess housing we have built in previous years when our housing start numbers were around 175,000.

    I certainly hope nobody’s investment strategy is based on strong capital growth due to a shortage in housing supply.

    No wait that is exactly what all investors are banking on to offset negative rental returns. Ouch that hurts!!

    In Californian prior to their housing collapse Property Spruikers were warning of upcoming housing shortage, yet years later they have a glut?

    The link I posted previously in comment #142 { http://www.khanacademy.org/video/the-housing-price-conundrum?playlist=Credit+Crisis } clearly demonstrates that lax lending standards & easy credit were the real drivers of property prices.

    It supports what your link in comment # 153 says about easy money… “Debt is necessary to inflate asset values; take it away and asset values fall,” …… “Imagine a world with no debt and there would be less development, smaller buildings, cheaper finishes and fewer home owners.”….”Once you turn off debt, the property market begins to act like equities.”…”The balance between spending on shelter, food, energy, and health is changing. This will affect all forms of real estate. How we own it, finance it and rent it.”

    Most property speculators in the Australian property market are “Mum & Dad” investors with little knowledge other than 30 minutes at a property seminar or a relative that made money in property before so naturally they can do the same.

    The biggest problem is that the Tax office is on record saying that the average investor claiming deductions for residential property investments has a taxable income of under $72,000 pa so they are not wealthy enough to keep sustaining negative rental yields in the vicinity of $6,000 pa after deductions with no prospect of capital growth to offset these losses.

    In fact Perth prices are now back to 2006 levels so investors in Perth have had losses of $30,000 with no capital growth to offset it against. Now they are faced with a number of years with little if any capital growth ahead as housing has hit it’s affordability ceiling & without capital growth over 8% -- 10% PA property investing is not viable.

    Owner occupiers in US / UK / Irish markets were not the ones that drove prices down, they stayed in their houses as prices plummeted because speculators were exiting the market at any price, but more importantly they were not entering the market either removing a major demand driver that was either sustaining prices or driving prices up.

  • 156 Biker // Oct 18, 2011 at 12:05 pm

    NF’s comparisons with the US and Ireland are laughable :D

    For most of the last decade, the US generated _three times_ the number of housing starts per head of population as Australia. In 2006 -- 2007, there were 4.5 times the number of housing starts p.h.o.p., as in Australia. The US bubble had been steadily building since 2001, but in those two years construction went _crazy_ as supply not only peaked, but went into hyperdrive. By 2007 -- 2008, the US started cutting back, but even during 2009 -- 2010, an economy with oversupply AND a housing collapse was still more than doubling Australia’s building starts!! Comparisons between the US and Australia are just silly. We have a strong, resource-based economy; sound banks; half their unemployment; stable property prices (as NF’s own $250K -- $750K capital gain in eight years shows!); much higher consumer confidence; and manageable debt levels. NF’s predicted interest rate rises in 2011 demonstrate how far from reality (and realty) he’s travelled into the ether!~

    Nor did our Aussie banks permit the massive borrowing excesses of the US and Europe. “Non-conforming housing loans (the closest Australian equivalent to “sub-prime”) accounted for only around 1% of the mortgage market in mid-2007, compared to around 13% in the United States….”

    This report is well worth studying, to show just how ‘different’ Australian property markets are to those NF would like ours to become: http://www.financialstabilityboard.org/publications/r_110926b.pdf

    Meanwhile, 6th December 2011, the Day of Reckoning NF states will make Ireland’s and the US property markets look good, rolls on… . Delightful!~ ;)

  • 157 Not Fooled By Property Spruikers Hype // Oct 18, 2011 at 12:17 pm

    Biker ” Meanwhile, 6th December 2011, the Day of Reckoning NF states will make Ireland’s and the US property markets look good, rolls on… . Delightful!~”

    I will not respond. It is unfortunate you don’t have the maturity or respect for Greg’s request to agree to disagree & just discuss the topic.

    Perhaps Greg should delete the comment to set the boundaries?

  • 158 Not Fooled By Property Spruikers Hype // Oct 18, 2011 at 12:35 pm

    “NF’s predicted interest rate rises in 2011″ No I did not!

    Would love to see a link where I said interest rates would rise as I did not.

    Again why quote me out of context am I that big a threat to your property dreams?

    If anyone examines my comments they would see that I point to other economic forecasters who in late 2010 & early 2011 were saying that rates would rise in 2011. Not me saying it but them.

    I then said to people that with forecasters (Again not me)saying interest rates will rise in 2011 if they are not able to afford a higher rate they should look at selling before they are trapped.

    Late 2010 & early 2011 it was a perfectly legitimate & well founded observation to make.

    As for your “demonstrate how far from reality (and realty) he’s travelled into the ether!~” comment…. demonstrates your desperation to shut down debate by ridiculing anyone who’s opinion differs from yours.

  • 159 Biker // Oct 18, 2011 at 12:38 pm

    Your continual ill-advised comparisons with the Irish/US debacle invite comment, NF. Even if Greg deletes my response, your silly claims, based on the US/Irish experience will follow you l-o-n-g after that day passes _without_ The Big Aussie Property Crash…

    I KNOW you’d love to see that comment deleted. You have _no answer_ to the two points I’ve made about housing construction and borrowing. For that reason. I’ve just copied both, to use repeatedly whenever you make these foolish comparisons, here and elsewhere.

    You probably need to eventually come up with some reasoned responses. ;)

  • 160 Biker // Oct 18, 2011 at 12:42 pm

    NF: “Would love to see a link where I said interest rates would rise as I did not.”

    OK, it’s on the way. You’ll ignore it, of course, as you always do, when:

    a. you demand a(ny) link…

    …and…

    b. …I supply it. :D

    You really should be aware by now that I track and record every little bit of your ongoing nonsense… . :)

  • 161 Biker // Oct 18, 2011 at 12:47 pm

    OK, here’s the FIRST. (How many do you want?)
    PerthNow, Comment 10, 21st Jan 2011
    http://www.perthnow.com.au/business/business-old/rate-rise-risk-from-inflation-figures/comments-e6frg2qu-1225994191839

    “…now interest rates are rising people have stopped buying & you might be too late…”

  • 162 Stillgotshoeson // Oct 18, 2011 at 1:19 pm

    Biker // Oct 18, 2011 at 8:18 am

    If you were bold, you’d probably predict a collapse of say, 54%, in Melbourne residential property(?)

    :)

    http://www.prosper.org.au/2011/10/18/house-price-falls-steeper-that-the-us/

  • 163 Biker // Oct 18, 2011 at 1:34 pm

    Well, there ya go, Shoes. The Doom’n’Gloom Mob say 50% drop by 2017*. You’ll be in like Flynn, son! ;)

    Maybe you should have ‘dove’ right in just over a year ago:

    Shoes: “I think we will see an average decline (Melbourne at least) of around 20% If I was to be bold and to presume the real estate market in a share market theme.. The share market dove 54% at it’s worst but yet some shares have thrived, some stayed the same.”

    You should have boldly gone where no man has gone before!~
    Uhhh, wait-a-bit, Steve K probably trekked before you! :D

    * You should definitely buy in 2017. By your own reckoning you’ll be retired _well_ before that. Right?

  • 164 Biker // Oct 18, 2011 at 1:37 pm

    NF: “Would love to see a link where I said interest rates would rise as I did not.”

    LOVED that one, did you, NF? Don’t be shy, Oliver Twits.
    Ask for MORE!~

  • 165 Not Fooled By Property Spruikers Hype // Oct 18, 2011 at 1:56 pm

    For most of the last decade, the US generated _three times_ the number of housing starts per head of population as Australia. In 2006 – 2007, there were 4.5 times the number of housing starts p.h.o.p., as in Australia. (Wrong)

    The US bubble had been steadily building since 2001, but in those two years construction went _crazy_ as supply not only peaked, but went into hyperdrive.

    (2000 -- 2010 WA population increased by 330,000 people yet we built enough housing to house 572,000 clear oversupply here)

    By 2007 – 2008, the US started cutting back, but even during 2009 – 2010, an economy with oversupply AND a housing collapse was still more than doubling Australia’s building starts!! (Wrong)

    Comparisons between the US and Australia are just silly.
    (Why because you say so?)

    We have a strong, resource-based economy;
    (China all our eggs in one basket, FYI all of Chinas markets are in decline & cutting back flow on to OZ to follow)

    sound banks;
    (You mean like bank of America & Irish banks that had “AAA” ratings prior to the crash. What are the levels of exposure to the housing sector do our banks have as a percentage of their loan books? 60% -70%++ twice what US banks had)

    half their unemployment;
    (Unemployment in the US did not go above 5% till July 2008 2.5 years after housing markets had stalled & prices had been falling)

    stable property prices.
    (Prices exceeding incomes is not how you would describe a stable housing market in fact it is a indicator of a unstable housing market, also prices have been falling for 12 months WA prices down 10% plus in the past 12 months with a fall of 2% in Aug 2011 alone,listings soaring, sales down 25% plus, defaults rates rising etc etc this would hardly be described as a stable market)

    much higher consumer confidence;
    (Retail spending down, manufacturing sector laying off or cutting back hours, tourism sector struggling with high AU dollar, Overseas eduction sector down 30% again high AU $,)

    manageable debt levels.
    (housing costs at close to 50% of income is not manageable in the long term0

    NF’s predicted interest rate rises in 2011.
    (No I did not that is a lie)

    Nor did our Aussie banks permit the massive borrowing excesses of the US and Europe.
    (Low doc Loans?, LVR down, Same Same)

    OK Biker easy question, what is your forecast for the property prices in 5 years , 10 years

  • 166 Not Fooled By Property Spruikers Hype // Oct 18, 2011 at 2:13 pm

    Sorry Greg

    OK Biker you were challenged to show where I predicted that interest rates would rise in 2011 so in comment #161 you put up a link to a article & selectively show this snippet whisch is out of context:

    OK, here’s the FIRST. (How many do you want?)
    PerthNow, Comment 10, 21st Jan 2011
    http://www.perthnow.com.au/business/business-old/rate-rise-risk-from-inflation-figures/comments-e6frg2qu-1225994191839
    “…now interest rates are rising people have stopped buying & you might be too late…”

    Firstly is says nothing about forecasting a interest rate rise so your wrong there & here it is in proper context:

    Remember this is from Jan 2011 the RBA had put rates up in Nov 2010 & the banks doubled the RBA increase citing the increase in borrowing funds offshore.

    “if you were a smart INVESTOR & not a simple SPECULATOR you would have read these FUNDAMENTALS in 2008 & started to exit the market as prices had started to fall but was saved by the GFC & the RBA dropping rates plus the BOOST to the FHBG … now interest rates are rising people have stopped buying & you might be too late”

    So in Jan 2011 this comment is accurate & prudent. I have to question your motives to quote people out of context what are you frightened off the truth?

    You say you save every comment I make? Well I save nothing you say because frankly what you have to say is often dishonest & irrelevant to any sensible debate.

    I have to wonder just how much you fear the truth. You are supposed to be a wealthy investor with many assets you you spend all your time on internet sites trying to talk up the property sector?

  • 167 Biker // Oct 18, 2011 at 2:19 pm

    NF: “OK Biker easy question, what is your forecast for the property prices in 5 years , 10 years”

    Easy question? You just DON’T get it do you? Read back through my posts and you’ll find I continually question the crystal ball approach to investment. You’re an unqualified Brit with six years’ residence here, compared to my 64… yet you’re expert in WA property? Amazing!~

    But I do admit I enjoy ridiculing escapees from failed NH economies, who parachute down here… and then attempt to *POP* our Aussie economy, with statements like they’ll “offload at any cost…” and predicted 50% crashes… ;)

    Now you’ve returned, let’s continue with your (failed, again) prediction that interest rates would rise this year. Try this:

    Not Fooled By Property Spruikers Hype Posted at 3:35 PM June 23, 2011: “… as interest rates rise this year investors will offload at any cost & buyers will be priced out as they fail to qualify for loans….”
    http://www.perthnow.com.au/business/local-property-players-build-portfoilios/comments-e6frg2ru-1226080466625
    You believed rates would rise. You cited additional costs of $9K extra for 2011. Would you like _more_ reminders of your inane crystal-ball gazing?

  • 168 Greg Atkinson // Oct 18, 2011 at 3:57 pm

    I suggest that any ongoing debate head over to the discussion forum: http://www.shareswatch.com.au/blog/australia-house-prices-and-real-estate-discussion/

  • 169 Ross T // Oct 23, 2011 at 10:53 am

    I am following posts over at Menzieshouse.com concerning the property rights threats being engineered by our green council LEP’s and DCP’s. Recommend those with property investments take a look.

  • 170 Biker // Oct 23, 2011 at 1:18 pm

    Unable to find that link, Ross.

    Interesting read here:
    http://au.news.yahoo.com/thewest/a/-/breaking/10588767/pilbara-prices-hit-city-rentals/

    As Greg suggested long ago, we should remember there are property marketS. I see the Shoeless One has recently discovered this… . :D

  • 171 Biker // Oct 30, 2011 at 8:50 am

    “These so-called experts have now changed their positions stating that we have started a new bull market in recent weeks. How can anyone take these people seriously?”

    Or fudge the facts to reduce the incredulity: “We’ve spent the last THREE YEARS trying to convince you and other Australians that house prices can and will fall.” (CAPS mine.)

    http://www.moneymorning.com.au/20111027/if-a-butterfly-flaps-its-wings-in-frankston-will-house-prices-fall-in-st-kilda.html#comments

  • 172 Stillgotshoeson // Nov 16, 2011 at 1:02 pm

    http://finance.ninemsn.com.au/newsbusiness/aap/8374866/falling-home-prices-a-pain-for-refinancing

    Seems some of the late entrants into the property market may not be able to take advantage of new lower rates even if they wanted.

  • 173 Biker // Nov 16, 2011 at 7:44 pm

    Delightful article. Check out Mr Happy, here:

    http://www.perthnow.com.au/business/tough-to-refinance-as-home-values-fall/story-e6frg2ru-1226196825086

    Our sons renegotiated 7.28% (ME) down to 6.55% (ANZ) …. and got $1K expenses funded on each loan transfer, by ANZ.

    How are _your_ predictions for 2011 progressing, Shoeson?
    Month-and-a-half to go, son… . ;)

  • 174 Stillgotshoeson // Nov 17, 2011 at 9:42 am

    Who would have thought that the banks would be in trouble this year?
    Who would have thought that the RBA could go into rate drop mode and we find ourselves in a position where the banks will not pass on those RBA rate reductions and will in fact continue to raise mortgage rates due to the European FInancial Crisis?

    Some people even thought that with the reduction in fixed rate mortgages meant that variable rates would also follow the downward trend..

    http://www.perthnow.com.au/business/business-old/nab-chiefs-credit-alert/story-e6frg2qu-1226197614073

    Side note: Has anyone else noted the large push in credit card advertising from the banks and other financial institutions?

  • 175 Biker // Nov 17, 2011 at 11:29 am

    The banks in trouble?

    http://www.watoday.com.au/business/nab-posts-55b-record-profit-20111027-1mkr6.html

    http://www.perthnow.com.au/business/westpac-posts-699-billion-profit/story-fn7kjv7y-1226183205191

    http://www.watoday.com.au/business/anz-profit-tops-5-billion-20111103-1mwe1.html

    http://www.perthnow.com.au/business/business-old/commonwealth-bank-on-track-for-record-profit/story-e6frg2qu-1226195343996?from=public_rss

    Are you _really_ living in Australia, Shoeson? :D

  • 176 Not Fooled By Property Spruikers Hype // Nov 19, 2011 at 12:57 pm

    Shoes

    I have a friend in Real Estate & he has 5 Vendors who wish to sell but are not able to because the proceeds from the sale would not allow them to discharge the mortgage, so the bank will not allow the deal. They are trapped & will ride the market down.

    One of these vendors parents have now provided them with $35,000 so that the sale can go through & they can cut their losses.

    Total loss will come to $85,000 inc parents $35K

    There must be hundreds if not thousands of recent home buyers who cannot afford to keep their homes but due to falls in prices they cannot afford to sell them either.

  • 177 Biker // Nov 22, 2011 at 11:35 am

    So they’re going to _rent_ if they sell?

    http://www.watoday.com.au/?gclid=CJqo882NyawCFWRNpgodSlf_pw

    You have a _friend_ in real estate? :D :D :D

  • 178 Not Fooled By Property Spruikers Hype // Nov 22, 2011 at 6:35 pm

    Yes Trav’s they are going to rent at half the cost of ownership.

    Dec 2006 rents $280 pw 5 years later it is $395 pw a rise of 52%.

    Just look at the bright more customers for you to offset capital losses in the vacinity of $40K per house in the last 15 months.

  • 179 Biker // Nov 22, 2011 at 7:38 pm

    Yes, the queues grow longer every day, NF. And as residential construction dwindles, rents will continue to climb. :D

    http://news.domain.com.au/domain/home-investor-centre/rental-yields-to-continue-climb-due-to-low-supply-20111119-1noah.html

    As a Homeswest tenant, you’re unaffected by rent increases, queues or references. Nor can you afford to buy any more homes.

    Have you sold those six you own, or have you personally ‘lost’ a quarter-mil in the last fifteen months? Like your real estate mate, it’s all fiction, of course. ;)

  • 180 Greg Atkinson // Jan 17, 2012 at 4:56 pm

    Well one thing we know for sure and that is the rate of growth in China has slowed. The big question now is how will the Chinese property market hold up? Also from what I have read Foreign Direct Investment (FDI) into China is also slowing so that is going to have an impact over the next 6 months.

    So far parts of the Australian economy have held up fairly well but I think even the most bullish of commentators would admit that cracks are starting to appear.

  • 181 Ned S // Jan 17, 2012 at 10:02 pm

    Where’s me ole mate Biker? I’m missing him.

  • 182 Lachlan // Jan 18, 2012 at 4:27 pm

    Australian property is going to go down 50% tomorrow Ned ;) ;)

  • 183 Ned S // Jan 19, 2012 at 7:17 pm

    Appreciate the effort Lachlan, but it just doesn’t seem the same as an original Biker type comment … :)

  • 184 Not Fooled By Property Spruikers Hype // Jan 20, 2012 at 7:11 am

    Ned

    If you need a “Biker” fix he is still active on the Perth Now property page under the name of “Trav’s”

    His latest clanger is the in 30 years he has never paid a single dollar in advertising to sell a property because the quality of the properties he buys are so good they sell themselves with buyers knocking on his door throwing money at him. (Full Market price)

    FYI: He is also “Mike of Perth” on this site

    http://www.perthnow.com.au/business/property

  • 185 Ned S // Jan 21, 2012 at 12:28 am

    Goodo — I’ll keep that in mind if I ever want to observe or participate in a poo pouring pageant where no sane moderator exists then …

  • 186 Greg Atkinson // Jan 30, 2012 at 5:52 pm

    Interesting to see that a rating agency has put the spotlight on the big four banks. According to a report today in The Australian:

    AUSTRALIA’S four largest banks were placed on rating watch negative by Fitch Ratings today, which said the lenders continue to have a weaker funding profile than similarly-rated peers.

    Source: Fitch puts Commonwealth Bank, NAB, Westpac, ANZ on ratings watch negative

  • 187 Ned S // Jan 30, 2012 at 6:02 pm

    Yes, I saw that. I’m just waiting for Swannie to come out with another “Oz is just fine and dandy -- Don’t you worry about that!” type statement.

    Be interesting to see if the BDI goes down another 50 points or so tonight hey? :)

  • 188 Greg Atkinson // Jan 31, 2012 at 8:33 am

    Ned the BDI is just above 700 now and not far from the low it hit during the GFC. I am surprised how little attention this is getting in the mainstream business & finance media. Maybe it’s a bit too complex to write a cut & paste article about ;)

  • 189 Stillgotshoeson // Oct 1, 2012 at 2:35 pm

    http://www.theage.com.au/business/manufacturing-contraction-picks-up-pace-20121001-26uc3.html

    http://www.theage.com.au/money/saving/households-struggle-to-save-cash-20120930-26tj2.html

    These are not signs of a healthy and prosperous economy.

    Currently working on site for a large multi national firm.
    Decommissioning 2 lines, pulling down another to send to their facility in NZ and leaving the remaining 2 here.

    Workforce of 80 here, 26 go at Christmas, 24 more in May 2013.

  • 190 Stillgotshoeson // Oct 1, 2012 at 3:51 pm

    and further to above…..

    http://afr.com/p/national/income_to_fall_as_mining_slump_bites_hK1Z3Rdbj5L37zUAtXCybI

  • 191 Anonymous // Oct 11, 2012 at 12:33 am

    Well done on making an accurate prediction. The reality is Australia is in for some tough times ahead.

  • 192 Greg Atkinson // Oct 11, 2012 at 9:30 am

    Well I’m not sure my forecast was all that accurate but I reckon I did do a better job of reading the tea leaves than the RBA, Treasury & Government :)

  • 193 Phill George // Dec 13, 2012 at 12:05 pm

    Incredible accurate prediction. The RBA, Treasury & Government are definitely wrong in their economic outlook for 2013. Times are going to get hard.. Real hard.

  • 194 Greg Atkinson // Dec 13, 2012 at 4:23 pm

    Thanks Phill. I find it hard to understand where the Government, RBA & Treasury get their optimism from. Must be something in the water coolers in Canberra? ;)

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