Society/Culture Australian Property Prices to Crash?

[Long Live HFC]

I gave you something. What more do you want?

i already said- something akin to the fitch analysis which discusses a few numbers. i am skeptical of your 20% assertion and im asking for evidence. better still- more info on the uncertainties noted in the AFR article because i think that's where the real dangers would be lurking. it was a genuine question; other than derivative risk i don't appreciate too many secondary factors to which you may have been referring.

 

[its free real estate]

What is the process for the banks to suffer from a property price dropping? Does it make sense for those underwater on their loans to declare bankruptcy and leave the bank to take the hit or just keep paying their mortgage and not move for a good ten years.

The rules on assets to lending could just be loosened to allow more above water loans to be pumped out to balance the books again?

The risk is multifaceted. It’s not just the individual mortgages that may default, it’s the large developers that have geared up into the teeth of the boom, that then find they can sell properties or commit to new projects. They go bankrupt, and the banks are left to clean up many multi million dollar projects that sell at a discount, or can’t be moved (the overbuilding of apartments in the eastern major cities is a sight to behold, and there are plenty in the pipeline).

Around 10% of Australia's workforce is in construction, most of that residential. What happens when many of them lose their jobs? Etc. There are second, third, fourth, and nth order knock on effects that are unpredictable. This is usually why the government steps in.

i already said- something akin to the fitch analysis which discusses a few numbers. i am skeptical of your 20% assertion and im asking for evidence. better still- more info on the uncertainties noted in the AFR article because i think that's where the real dangers would be lurking. it was a genuine question; other than derivative risk i don't appreciate too many secondary factors to which you may have been referring.

The evidence is that serious property declines result in financial panics. Find an exception to that rule, prove me wrong.

You want to be fooled by numbers. You have faith in analysis like those produced by the RBA, who produce ridiculous forecasts like this

 

[Long Live HFC]

The evidence is that serious property declines result in financial panics. Find an exception to that rule, prove me wrong.

i'm not denying that these result in financial tears, i'm asking you for specifics. you said 20%, so presumably not 1%. how about 2%? 5%? in order to explain why a given figure is "evisceration" you need to explain why your chosen number is beyond the tipping point. that's all i'm asking.

You want to be fooled by numbers.

no, i want more than an assertion on a footy forum. that's how debates work. people make arguments and support them with evidence.

You have faith in analysis like those produced by the RBA, who produce ridiculous forecasts like this

as already noted i've acknowledged the analyses may be off. im asking for alternatives. so far all i'm getting from you is "it's the vibe".

 

[its free real estate]

no, i want more than an assertion on a footy forum.

Lmao. Good luck.

20% is my tipping point for financial meltdown, based on nothing more than reviewing past crashes. The fitch claim that the Australian banking system can withstand a 40% decline in nominal property values is absurd!

 

[Seeds]

The risk is multifaceted. It’s not just the individual mortgages that may default, it’s the large developers that have geared up into the teeth of the boom, that then find they can sell properties or commit to new projects. They go bankrupt, and the banks are left to clean up many multi million dollar projects that sell at a discount, or can’t be moved (the overbuilding of apartments in the eastern major cities is a sight to behold, and there are plenty in the pipeline).

Around 10% of Australia's workforce is in construction, most of that residential. What happens when many of them lose their jobs? Etc. There are second, third, fourth, and nth order knock on effects that are unpredictable. This is usually why the government steps in.

The evidence is that serious property declines result in financial panics. Find an exception to that rule, prove me wrong.

You want to be fooled by numbers. You have faith in analysis like those produced by the RBA, who produce ridiculous forecasts like this

If the RBA were correct with their wages forecasts and had them falling their only response would of been to lower interest rates even further and inflate the housing market even more. Thankfully they didnt do that as they already lowered them too much.

 

[Seeds]

Serious house price declines tend to be followed by sharp falls in household consumption due to the decline in the percieved wealth effect. The decline in consumption then hits the business sector and leads to some increase in unemployment. If this loss in household comsumption and business output isnt offset by a significant boost of fiscal spending then it will lead to further consumption declines and further increases in production and unemployment and thus we spiral into recession and possibly even major financial crisis. Our exchange rate tanks due to a sharp fall in investment and this usually leads to an increase in net exports which gets us out of a recession. However, we have some of the largest net debt to gdp ratios in the developed world so if our exchange rate tanks then payments on our debt in US dollars skyrockets. There could be mass capital flight and serious solvency issues with our banks. So an exchange rate depreciation may not help this time round. If it doesnt we are screwed. The RBA will go full QE but this will further weaken the exchange rate and see further capital flight. QE has worked in the US, Europe and Japan because they are seen as safe haven currencies so investors arent going to flee those countries for fear of mass cuurency devaluation. That wont be the case with QE in Australia.

 

[btdg]

I can't see the Australian property market crashing.

So many 30-somethings (And I am one) with solid and stable incomes (ie middle class, government jobs) are sitting poised and ready, priced somewhat our of their 'dream home' range. In many cases, holding other property or with strong savings, etc.

Basically, there's a heap of latent demand if prices start to fall or even just remain stable.

The economy would have to fall apart first... to the extent that the urban middle class are getting smashed too... in which case we have bigger issues than property prices imo

 

[Taylor]

However, we have some of the largest net debt to gdp ratios in the developed world

I don't know about that our public debt isn't that big in comparison to the other nations I can find. We have a huge private debt ratio to GDP but private debt is in AUD so our currency inflating would actually help that.

 

[Seeds]

I don't know about that our public debt isn't that big in comparison to the other nations I can find. We have a huge private debt ratio to GDP but private debt is in AUD so our currency inflating would actually help that.

Im talking about net foreign debt which is the one that actually matters for external debt crisis. Journalists talk about public debt. But its irrelevant. Japan has public debt of 250 percent of GDP ( the highest ratio in the world) and they are seen as a safe haven because they have net external savings rather than debt. A fair portion of net foreign debt i gather would be in foreign currency as the aud isnt a safe haven currency and foreign lenders tend to prefer being paid back in USD, euros or Yen. All the private debt we have is borrowed from the banks and where do you think the banks get that money from to lend to us? They get it from borrowing overseas. That is what has caused the explosion in our net foreign debt. Banks borrowing from overseas to then lend to us for the property market.

 

[its free real estate]

I can't see the Australian property market crashing.

So many 30-somethings (And I am one) with solid and stable incomes (ie middle class, government jobs) are sitting poised and ready, priced somewhat our of their 'dream home' range. In many cases, holding other property or with strong savings, etc.

Basically, there's a heap of latent demand if prices start to fall or even just remain stable.

The economy would have to fall apart first... to the extent that the urban middle class are getting smashed too... in which case we have bigger issues than property prices imo

It doesn’t matter if the banks won’t lend you the money.

 

[Seeds]

I can't see the Australian property market crashing.

So many 30-somethings (And I am one) with solid and stable incomes (ie middle class, government jobs) are sitting poised and ready, priced somewhat our of their 'dream home' range. In many cases, holding other property or with strong savings, etc.

Basically, there's a heap of latent demand if prices start to fall or even just remain stable.

The economy would have to fall apart first... to the extent that the urban middle class are getting smashed too... in which case we have bigger issues than property prices imo

You may have cash for a deposit before the crackdown. But you wont anymore as lending criteria is tightening and deposit requirements will increase. For good reason too. They should never have been so poor.

 

[Pie eyed]

Might be a good election to lose.

Let the Labor party bear the brunt.

LOL.
As if even the halfwit Libs could put giant property bubble they created on Labor!

STOP THE BOATS!
STOP THE BOATS!


ROFL.

Just go and hang yourselves you idiots.

 

[CheapCharlie]

It doesn’t matter if the banks won’t lend you the money.

You may have cash for a deposit before the crackdown. But you wont anymore as lending criteria is tightening and deposit requirements will increase. For good reason too. They should never have been so poor.

This is already happening for people trying to refinance.

You can add in valuations from lenders coming in lower than the property people want to borrow for

 

[Taylor]

LOL.
As if even the halfwit Libs could put giant property bubble they created on Labor!

STOP THE BOATS!
STOP THE BOATS!


ROFL.

Just go and hang yourselves you idiots.

Has anyone calculated the increase in wealth that has happened as the property values have increased?

The overwhelming majority of people who have owned this property as it has risen in value have been Australian.

 

[Nuggs Bunny]

This is already happening for people trying to refinance.

You can add in valuations from lenders coming in lower than the property people want to borrow for

However, it's mostly only a concern for investors. People trying to purchase their sole property might find the bank takes longer to process their application and will certainly find the banks will scrutinize their expenses with a fine-toothed comb, but realistically the amount a first home buyer or a sole owner might be able to borrow hasn't changed drastically. Hence, the percentage of investors is dropping in the market while the first home buyer sales are remaining fairly steady.

 

[its free real estate]

However, it's mostly only a concern for investors. People trying to purchase their sole property might find the bank takes longer to process their application and will certainly find the banks will scrutinize their expenses with a fine-toothed comb, but realistically the amount a first home buyer or a sole owner might be able to borrow hasn't changed drastically. Hence, the percentage of investors is dropping in the market while the first home buyer sales are remaining fairly steady.

First home buyer sales are steady but at historic lows. Couldn’t really go much lower.

 

[btdg]

You may have cash for a deposit before the crackdown. But you wont anymore as lending criteria is tightening and deposit requirements will increase. For good reason too. They should never have been so poor.

I'm.confused. why will banks stop lending money to urban middle class professionals? The stereotypical 'smashed avocado' kids who have stable, good jobs (public service, etc). Banks still have to make money - that means they need more good loans.

That's my situation. We have a very moderate mortgage on a small house now. We could get an uncomfortable mortgage and upgrade, but choose not to. If house prices dropped 10% we would snap it up. If house prices are even flat for 2-3 years we will be able to comfortably do so.

I'd say almost every one of my friends is in some similar boat (some are renting but waiting to buy, etc). All very stable, professionally employed (mostly 2 incomes or 1 + maternity and back to 2 soon).

If lending criteria tighten it will be on LVRs. Or on credit rating. Or on low doc loans, etc. None if those are restraining factors for a lot of us. Its just pure prices (And prices growing faster than incomes + savings)

 

[Pie eyed]

I applaud the falling house prices and can only hope that the fools who lapped up every ******* word the halfwits on "Our House", "House and Garden", "the Block" (semi halfwits) and alleged "property reports" on the various News services thinly disguised in program advertising the last decade claimed to be "advice" all go ******* broke, belly up". lose their houses etc.

I will buy as many as I can.
My daughters will both profit.

 

[The Dice Man]

Yep. The only thing that could possibly stop it is a massive QE program. The Rba is gearing up.

Whatever happens the australian dollar is going to crash.

Brilliant. Do Aussie banks like Euros?

 

[its free real estate]

If lending criteria tighten it will be on LVRs. Or on credit rating. Or on low doc loans, etc. None if those are restraining factors for a lot of us. Its just pure prices (And prices growing faster than incomes + savings)

Unless you’re buying two-three houses for all the people who are removed from buying under those changing conditions, then prices will continue to fall.

 

[Nuggs Bunny]

First home buyer sales are steady but at historic lows. Couldn’t really go much lower.

They could stop buying homes altogether, but they aren't and they won't.

 

[Nuggs Bunny]

I applaud the falling house prices and can only hope that the fools who lapped up every ******* word the halfwits on "Our House", "House and Garden", "the Block" (semi halfwits) and alleged "property reports" on the various News services thinly disguised in program advertising the last decade claimed to be "advice" all go ******* broke, belly up". lose their houses etc.

I will buy as many as I can.
My daughters will both profit.

TBH if you're going to make it your mission to buy as many as you can then you're probably going to end up among the fools who go broke and belly up. All good to own 7 investment properties until you're underwater on 5, three of them are empty and you only earn enough to cover the rent on 1.

 

[Pie eyed]

Has anyone calculated the increase in wealth that has happened as the property values have increased?

The overwhelming majority of people who have owned this property as it has risen in value have been Australian.

This "value" is an apparition, sold to the stupid by the corrupt.
When the bank forecloses or you sell at a loss don't complain.



I will profit with glee.

I really enjoy being right about the dirty real estate campaigners.

 

[twotooto]

I applaud the falling house prices and can only hope that the fools who lapped up every ******* word the halfwits on "Our House", "House and Garden", "the Block" (semi halfwits) and alleged "property reports" on the various News services thinly disguised in program advertising the last decade claimed to be "advice" all go ******* broke, belly up". lose their houses etc.

I will buy as many as I can.
My daughters will both profit.

Lmfao, ease up Kerry. That's what the 'half wits' you're talking about said before they went balls deep and mortgaged themselves to the hilt. They're now on the way to Titsupsville so good luck with that!

 

[btdg]

Unless you’re buying two-three houses for all the people who are removed from buying under those changing conditions, then prices will continue to fall.

I should have probably added that I think there is similarly latent demand in every sector.

For apartments, there's plenty of migrants and renters who would love to buy but are currently priced out. Small houses - same Deal.

The big worry is something like a stagflation situation imo - a big recession alongside rising prices, where people start foreclosing, and particularly where the middle class (public servants, managers, etc) start getting hit. That's when the cheap end can't borrow, and the middle end lose both their jobs and their wealth at once... And interest rates can't go down cos of inflation, and prices are spiralling...

But like I said originally, in those circumstances we have much bigger problems...

I just can't see how a city that is adding 200k+ people each year, where there is a fair bit of latent demand because of high prices already, is going to have a 'crash'. I don't think we are going to see perpetual growth, and we might well have 5-10 years of flat prices, but I don't see a crash