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Mortgage Regulation Australian Style
Submitted by The Idiot Tax
Beauty is clearly in the eye of the beholder. On Saturday, up a rapey alleyway, in the inner-city Sydney suburb of Surrey Hills, first home buyer, Doi, with mother Gina by his side (and a little of Gina's money in his pocket), duked it out with six others at an auction to secure his first home. Doi said of his purchase "it's a beautiful little house." And more on that later. Sadly, like many first home buyers in Australia though, Doi won't be living in his first home. He'll be renovating it before renting it out.
The reason Doi won't suffer the indignity of opening his front door to the sounds of late night alleyway hand jobs is because he, like most first home buyers, likely can't afford to. Something sick and twisted has happened in major Australian cities - first home buyers have no incentive to live in their first home any longer. Because of incentives like negative gearing, an investor will likely put zero down, take an interest only mortgage because the rent still won't cover the costs and claim a tax deduction on the loss at the end of the financial year - the hope is the capital gains will eventually make up for the rental losses.
First home buyers have little chance to compete with this madness. So their response is join the party. Buy something, rent it out and stay at home with the folks. If that's not sick and twisted enough, Doi paid $840,000, $140,000 over the reserve, for his first home (the sick) and it looks like this (the twisted).
A beautiful little house, ain't it? Even a new coat of bright yellow paint to cover up the rust stains.
63 square metres of the Australian dream. 1 bedroom and an external laundry and bathroom to remind you of colonial times. The good news is, despite Sydney property prices tearing upwards 14% in 2013 and another 12% in 2014, after the Reserve Bank cut interest rates 1.25% in 2012 and another 0.5% in 2013, in February this year, the RBA saw fit to cut another 0.25% into this lunacy without any lending restrictions in place. But this is totally cool because in their words, "the Bank is working with other regulators to assess and contain economic risks that may arise from the housing market."
And what are those other regulators up to? APRA or the Australian Prudential Regulation Authority used all of their authority to write Australia's banks a letter.
APRA’s new mortgage standards focused on quality, not quantity of lending In its letter to the banks, APRA indicated that it will increase the level of supervisory oversight on mortgages given recent developments in the housing and mortgage markets. That said it does not propose to introduce across the board increases in capital requirements or caps on particular types of loans.
The financial terrorists at APRA must be pleased with themselves that they'd managed to write a letter to the banks about their lending standards by December 2014. After the Reserve Bank knocked 2% off interest rates starting in 2012. See if you can pick where the RBA started cutting interest rates and Australian property investors in Sydney and Melbourne (represented by NSW and Victoria on the chart) started getting horny with cheap money and ploughing it into Australia's two largest cities?
I know. It's a total shock that maniacs who borrow nearly 100% on interest only terms to lose rental money to speculate on housing capital gains would love low interest rates. And with the lowest mortgage rates in Australian history, coinciding with the sloppiest lending standards in Australian history, combining with the highest property prices in Australian history, added to the highest household debt to income ratio in Australian history, what would you expect the biggest idiot of a treasurer in Australian history to do?
Start talking about letting first home buyers raid their retirement accounts, so they can get over the angst of missing out on this lunacy and ensure they'll blow their retirement savings and push the housing market up even further.
...such changes may include using superannuation savings for things that Australians do not use them for now, he said, including using super to buy first homes. "I get a lot of people approaching me saying that young people should be able to use their superannuation to fund a deposit on a home, on their first home," Mr Hockey said. "I am concerned about rising house prices and the accessibility to homes and homeownership for younger Australians, but we've got a limited pool of savings. We need to have these conversations."
This is innovation Australian style from treasurer, Sloppy Joe Hockey. If it's not enough to dig up resources and sell them to China and then use that money to borrow more money to to bid up house prices no-where-else but Australia. Why diversify? When first home buyers are lucky enough to dodge this bullet (whether they understand it or not) the man who should be offering caution, sympathizes with them by suggesting they should be able to grab their retirement money and jump into the housing market when it's never been hotter.
But as Sloppy Joe says, "I get a lot of people approaching me saying that young people should be able to use their superannuation to fund a deposit on a home, on their first home". Note Sloppy says he gets a lot people saying that young people should be able to use their superannuation, instead of a lot of young people saying that they should be able to use their superannuation. Which is really the key because this dopey plan has been done before in Canada and who came up with it? It wasn't first home buyers, it was the Canadian Real Estate Association, in the midst of a recession and housing down turn. And those guys don't ask for money to flow to the real estate market to help first home buyer affordability.
If this ain't bad enough, Australia's China fueled boom is all but over. And a guy named Crispen Odey, who likes to have photos taken with his hands clasped together, thinks we're toast. Australia is heading for recession he says. He's dark on the banks, who keep lending to the maniacs who've been bidding up house prices. And he's short on Genworth who does some of their mortgage insurance. The downturn is already being felt in mining towns where formerly hot housing markets have turned to dust in the space of 4 years.
Will Doi feel a cool breeze at his new inner city shed? Well that's assured. If he wants a bath or needs to take a leak, he has to walk outside to do so, but that's someone else's problem. His tenant. Doi's lucky, if Sydney's looney housing market falls apart, he'll never suffer the indignity of foreclosure, eviction and moving back in with his mother.
Australia's bizarre obsession with real estate speculation meant he never had the opportunity to leave mother's house in the first place.
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<-- Holy mother of god!
<-- WTF!?
Raid your retirement savings to buy a home? BFD. You can do that with your 401k in the United States right now. OK, OK, it can't be spent on a rental property, only on your residence, but whatever. The NAR will get around to "fixing" that problem shortly, I'm sure.
If no one is going to volunteer to be the greater fool, then someone must be required to be the greater fool. Thus the chicanery by the realtors and accountants.
ZH is piling on the SOROS short???
From upchain, regarding raiding your retirement funds, seems like both pensions and retirement were part of the old business model.
@NoDebt the law is reversed in Australia - you can only use your super to buy investment property not your own home and you can't rent it to yourself or a relative even if it is owned in the name of your Superannuation fund.
thats the current law, but hockey is proposing to release super to primary residence
But for those overseas, if you think this looks precarious for aussie housing, know this: our bubble didnt burst back in 2008 with everyone else, it just paused for breath. I.E. - we're not talking about bursting a re-flated bubble, this sucker is stretched beyond all reasonable limits of average annual wages - Melb and Sydney are second only to Hong Kong in housing prices.
our mining boom has bust, our manufacturing run down similar to america, not so bad govt debt but terrible privately held debt levels
the only saving grace for 'the lucky country' will be lots of gold for the reset
Don't bet on it. I wrote my MP asking them to support a bid to repatriate our reserves from the UK and US vaults. The response I got was, "the government and opposition have full faith in the Reserve Board to manage our reserve assets and place full trust in the UK and US reserve banks to hold our gold in trust".
There is no shortage of volunteers in Australia, no chicanery necessary. Thanks to decades of the gov juicing the housing market it is conventional aussie wisdom that 'house prices never fall' (They have not since about the 80s or early 90s, we dodged the gfc). This is of course a stupendous bubble kept alive with aforementioned chicanery, mainly the negative gearing (aka gov subsidising rentiers) which would have an economically literate population seething. drbenway is worth reading on the subject and sums it up nicely here: http://drbenway.blogspot.com.au/2015/02/property-valuation-and-bubble-ec... :
I look forward to buying my first home once this bubble pops.
Welcome to America 2006. And here I thought you Aussies might be behind the times. Silly me.
Call me when you get to America 2015 and I'll buy you a tall one to drown your sorrows.
The baby boomers own, on average, 2.5 houses per person in Australia. I eagerly await the passing of the last of that vampiric generation, and will not buy property until it happens.
In the mid 80's My wife and I bought our first home. $67,000 Around 3 years gross pay. The same house now sells for around 6 years gross pay for either of my three working aged children. Inflation of house prices may best be measured in years of life not cash price. As to fools, if all housing is inflating, what are the alternatives for my children but to buy in at todays prices and give more of their lives to achieve the same results I achieved.
6 years? Is that for the same job? My parents bought their first home, on a teacher's salary, for 3 years gross pay. It just sold (sadly my parents no longer own it) a couple of weeks ago for a little over $900k. Show me a teacher earning $150k/year.
NoDebt you got that wrong. Raid other people's retirements to BTFD. That's the way it works to day.
Look at it like this - if you don't raid it to spend on your house; they will later raid it, in a vain attempt at holding up their house of cards. your house or theirs? and its gone either way. I don't think that it's coincidence that nearly all of the commonwealth countries have pumped up housing
My exact thought! WTF!
It's different here, Mate!
(actually it's deranged here, but no-one cares any more!! :-) )
$1240/Square foot
Unbelieveable
but handjobs in the alley....
you rent that, you'll be the one giving the handjobs and blowjobs
Looks like a nice color house for porky or yats to flee to.
What shit! The only rental properties I would own are only those that the renters can easily afford maid service and luxury automobiles and believe me, those ain't Section 8 housing units. Adding a house to the Section 8 rolls is like hiring a demolition contractor and that's NO exaggeration....
I have been a landlord! 1 single family home. 1 three apartment house. and 1 lake side cottage. Not much, but a side business.
Need I even start with the nightmares! Just leave it at this. I got out, and I will suffer a million versions of hell before I ever rent anything to anyone! You want a dim view of human nature? Be a lanlord for a few months!
Try a few decades. You'll stop using the 'human' description.
There's a reason they call it "sweat equity."
As a fellow landlord, it's nearly impossible to not develop racial prejudice. Not sure of the demographics where you are but here I find myself uncomfortable with thoughts that go through my own head.
+1 for "Adding a house to the Section 8 rolls is like hiring a demolition contractor and that's NO exaggeration...."
That biz model works only if you're a Slumlord, who lives close enough to keep an eye on both the loser Sec.8 tenants and the property management company you hired. Otherwise, between the two of them, you'll lose your shirt: Not only will you have to worry about a Return ON your investment, but the return OF your investment.
It may be radical and certainly un-PC, but if it were me, I'd send all Sec.8 tenants off to Camp "Arbeit": have them do FORCED labor for the domicile, food, education and health care. Of course it may also be true that a good many of these 'folks' would probably work willingly, if they had a job that paid a "living wage", and if they were not handicapped with illegitimate children, whose "presumed father" is doing time in jail. There is also the argument that it's cheaper to keep them on Welfare and on Sec. 8, than to keep them in jail also. Which is why I favor Camp Arbeit* for all Sec.8 beneficiaries: "Quid Pro Quo. This for That. You get nothing for nothing".
* Good anagrams for Camp Arbeit are: Camp Bare It, Camp Bear It
If you want marginally "more house for your money" try Western Sydney (the "cheap" end!) http://www.domain.com.au/search/buy/state/nsw/area/western-sydney/region//?searchterm=western+sydney%2c+nsw
But before buying remember this is very much "Bandit Country" with a lot of interracial violence (and getting worse by the minute!!)
"But before buying remember this is very much "Bandit Country" with a lot of interracial violence (and getting worse by the minute!!)"
Beirut in the making......
Kid you not!!
Before buying "there" it's a good idea to hang around Liverpool Hospital on Friday / Saturday evenings: You'll see your "friendly neighbours" continuing their civilised discourse (kept apart by the NSW Constabulary and Hospital Security!). Makes the London "rough East End" Hospitals (e.g. Homerton) look positively civilised by comparison!!)
The Canada of the south. Both soon to be Amurikka circa 2008.
Streuth, mate.
Get it right - "Strewth, Mate!" (with a Western Suburbs accent (see above - "Feral Central" :-) )
You forgot....Stone the flamin crows and starve the bleedin lizards...
Bankers are the same the world over ......
How do we maximise short term profits on our only product, debt (loans/mortgages)?
This is the Australian bankers answer.
Maximise short term commissions, actually.
If the stockholders had a clue, they would be firing the lot of them for these crap loans.
Bankers should be getting residuals on loan payments, and not commissions on loans. This would cause bankers to be bloody damned well certain the borrower can pay off the loan.
My friend used to work in pensions and got paid on commission.
The solution that worked for him, but not the pension industry was to keep churning his client base.
Getting clients to change pension plans to generate commission.
How do they come up with remuneration plans that are totally unproductive?
Another trick he came up with was to poach the client base of people who left the company.
Another group to churn and generate commission with no benefit to the pension industry whatsoever.
He did very well out of it but did make a rather catastrophic mistake .....
He told his boss the secret of his success ...... doh!.
US stockholders are insiders who pay themselves via rich valuations. Is Australia a free market? /sarc
"no one saw this coming...."
.........looks like Newfie painters have migrated to Oz......
Old time Oz districts, from colonial days, have a very unique architecture of brick building. It is like they came with British brick building tradition and did an OZ version a lot more wild. And yes, the fancy colorful paint is found in old colonial areas. Like Newfie "jelly Bean" houses. Scandianvia and Northern Russia also like the very colorful houses to make up for the bleak winters. Yellow, Red, Blue, etc. etc.
Where are all the anti-Semite ZH commenters to tell me this is "the tribe's" fault, Israel's fault, AIPAC's fault...?
What's a "ZH anti-semite commenter"??
Would it be one who criticizes both Israelis and Palestinians, Arabs, since they are all Semites?
Why do you confine your definition of Semite to Israelis, the tribe, and AIPAC? How do you justify the jews hijacking the term Semite to apply only to themselves?
How do you justify three Jewish FED chairmen in 35 years and counting, when if we had 3 Sicilian chairmen inf 35 years and counting, the media would be screaming Mafia controlled Government!!!?
How do you explain the fact Bobby Rubin, Larry Summers, and Alan Greenspan, Jews all, managed to place the american economy in the shitter, and have gone on to reap even more rewards for their abysmal and catastrophic failures?? Or that Ben Bernanke, a jew, has inflated the FED's balance sheet by buying 12 trillion dollars of Bonds from the Treasury who in turn sent 8 trillion of newly printed greenbacks to Lord Blankfein and Company? Greenspan, Shapiro, Gensler (CFTC), Lew, Geithner, Orszag, Kashkari, jews all.
IF your notion of an anti-semite is one who recognizes the outsized Jewish domination and control of Wall Stret, the Treasury, the FED, and every other key financial nexus in the world is nearly ALL Jewish, then maybe you ought to revise your own idea of what objectivity is.
And why are none of these jews in jail, or living under a box, cold, hungry, and drinking something strange out of a brown paper bag?
"And why are none of these jews in jail, or living under a box, cold, hungry, and drinking something strange out of a brown paper bag?"
Bacause they are the CHOSEN ones.
Probably because 2 million jews moved to america in the 1880s-1920s, their kids and grand kids and got an education and are now the most successful immigrants to the USA. They run the fed because they went to university and are learned scholars - whether right or wrong on the economy - not because they are Jews.
LOL!
True. That's hilarious. I remember when Bernanke was 'chosen' as FED head. 60 minutes did a story on him. They made him sound like a 'son of the south' because he was born in Ga. and raised in Dillon, SC. The only thing more far fetched than the idea that they all did it 'individually', thanks to their hard work, is the idea that Bernanke was ever a son of the south. That's effing hilarious. At best, he's just a useful idiot. Christians are their own worst enemy. Southern Christians really believe that chosen BS.
Well, the ones who say shit like that because religion I can understand because they are predisposed to believe things that don't make sense anyways. The less sense it makes the better, so nothing new there.
Then you've got the hasbara, paid agitators, running around with an agenda trying to spin this away with lies and charges of ignorance, racism, hatred, etc.
There's also a big group who chimes in with the racism and anti-semite nonsense because it's Politically Correct, and it makes them feel good, even though they are very likely to claim to hate the PC theory as it applies everywhere else.
Ask this last group if they support citizens of any other country holding political office in the US and they'll say "no that's not patriotic". Then they choose to ignore which country does this the most hands down. Bring this up with them and they seemingly go deaf and change the subject. I personally don't take any of them very seriously.
This would be wonderful if they hadn't fucked up the whole Mortgage Banking Business, AND are now living under a box for losing all their money, but no, the likes of a Jew like Bernanke and Geithner GAVE them all their losses in the trillions for openers, let all of them keep the many hundreds of billions they extracted illegally out of the economy with their bundling of, knowingly, non-performing and sub prime loans with the good stuff, creating toxic instruments. That's fraud and Yahweh knows what else.
U have no idea what the fuck you are talking about.
I (and many other ZHers, I suspect) have NO issue with anti-Zionist Jews or Israelis, or Palestinians who want to be left alone, so they can live in peace and do commerce.
It's the MFing globalist Zionist* sociopaths I have a problem with. They have the supreme arrogance and delusions of grandeur in seeking to control the rest of the world. They hijack Terms, define Arguments, and use culture and religion as Flags of Convenience, to cover their vile inner intentions.
I am not deceived by their crafty semantics and debating or PR ploys (Deflection & Redirection of an Argument, or adding Noise and Confusion to a Debate, Issue or Policy). Alas too many people are easily deceived and manipulated, or these scumbags would have been put in their place a long time ago.
* https://en.wikipedia.org/wiki/Revisionist_Zionism
Oh look, another joo-joo-cachoo religious nutjob.
Zerohedge is so full of QUALITY posters.
of which unfortunately you are one
I blame AIPAC for the evils AIPAC does, not for things they don't do. Does that bother you? Israel has spent money and used Mossad agents in West Ukraine to help organize and fund radical right wing nationalists, fascists and Nazis. So, explain your interest in being in Ukraine? You have a reason you are active there?
What do you mean anti-Semite? Palestinians are okay by me.
The extremist right-wing Israeli newspaper „Israel National News“ published an opinion piece on Tuesday in which it called for Israel to attack Germany and Iran with nuclear bombs. The article claims that only through the nuclear annihilation of Germany and Iran, with 20 or 30 nuclear bombs, can Israelis prevent destruction of the state.
„If Israel does not follow the way of the Torah, it will be almost completely destroyed by a severe punishment and only a few will survive“ writes Chen Ben-Eliyahu, the author of the piece, in Hebrew.
Israel must respond in kind in order to prevent this. “We must answer an existential threat with an existential threat”; he writes, “not with speeches to the US-Congress. We must make it clear to the Iranians that Israel will wipe out their nuclear program and Teheran and Isfahan as well.
If these organized and protected-species psychos actually followed the Torah (Books of Moses), as did Jesus, then they would follow the TEN COMMANDMENTS. Which includes: Thou Shall Not Kill, Thou Shall Not Covet...
As it is, these fit-for-Auschwitz scumbags, follow the Satanic text of the Babylonian TALMUD, which is not dictated or inspired by God, but is a collection of RABBINICAL* writings and traditions. It was written for the benefit and enhanced legitimacy of Rabbis, and used especially after the Roman destruction of the Temple in Jerusalem. It includes text/passages which view non-Members/Goyim on the exact same level as chattel, property or animals, and their physical or sexual abuse (at any age) is not wrong or sinful. These are the same sick fucks Jesus had a beef with and called out many times, when he referred to them as: Sons of the Devil, Scribes, Pharisees, Whitewashed Sepulchers, Murderers, Thieves...
* Rabbi is Hebrew for "Teacher".
Link?
To say the housing bubble is still out of control would be an understatement.
Or it's controlled demolition.
I lived in Sydney for 25 years. Surrey Hills is an inner city suburb, where prices are a premium. You can get a 3 bdrm house on a half acre in 'leafy' suburbs like St. Ives or Hornsby for the same price. They would be half an hour to an hour drive to the city center depending on gridlock.
I notice heavy bars on all the doors and windows of this $840,000 Surrey Hills palace. They're probably not there just for decoration.
Fond memories of OZ. Spent some time in Sydney back in 97. Buddy of mine worked for Sterling Pharm - had a company flat over in Kirribilli - view of the North Sydney Bridge and the Opera House. That doghole must be worth millions now.
10's of millions with that view. I knew dog holes with a view over the Thames in London in the 90's, now worth millions.
You cynics don't understand - it's a great location! He'll make money for sure.
And Doi will probably renovate up and back in to the block of land turning his 840k shit box into a great 1.5 million inner city property. As a house he wont have to deal with a theiving cunt trailer park strata manager as well saving around $100 a week.
This article forgot to mention the short 1 - 2 km stroll to the centre of the CBD.
Who woud live in such a suburb? Yuppies and double, income no kids, Gay couples. People with high paying jobs.
Good work Doi and make sure you negatively gear against your salary otherwise you might start paying 39% of your salary plus a further 6% if he bothered going to Uni on an 80k ish Salary.
Also how does the article writer know the property is leveraged at 100%? Its probably more like 70-80%, with only one borrower, as implied.
The biggest idiot Treasurer in Australia's history is actually none other than George W Bush's buddy John Howard whom presided over interest rates of 21.4% in April of 1982 at the blow off end of a decade of stagflation.
But yeah... Joe Hockey is a fucktard
Two thoughts occur to me:
1) What other investment is out there that does not offer the same or even greater dangers of extermination?
2) If we do run into a complete collapse, possession will be 10/10ths of the law. Which probably means that the renter gets a free house out of the deal.
I sm familiar with Sydney resl estate and I can tell you that it is being set up for a fall that makes Humpty Dumpty look lucky by comparison.
To make matters worse, property investors are given the advantage of having an income, claiming depreciation and also claiming the operating loss as a tax deduction which puts them at a huge advantage to first home buyers.
It is a frenzy that will inevitably cause a crash, a loss of competiteveness for Australia as it becomes too costly a place to do business and will also kill the economy as people have less and less to pend on other things.
Chinese money is coming in by the truck load and what this does is inflame the market because by overpaying for a handful of houses in an area they iimmeditely raise exectations of what everyone else should pay.
The correction will be deep, painful and sobering. It should take place by June 2016.
There will be a correction yes and then people will be able to pick up a bargain which they will because negatively geared Australian rental property is an asset class that has shown consistent returns over decades similar to ASX listed blue chip Equities with probably less volatility or risk of adverse selection, in the minds of many investors.
The underlying issues are population expansion, lack of housing stock and the fiscal / tax policies fueling the pricing.
This is in some ways like sub 2% Federal Reserve money finding its way into every shit box US company investment across the pink pages of the OTC looking for yeild.
Tick-Tock.................should be funny when it implodes !
"Because of incentives like negative gearing, an investor will likely put zero down, take an interest only mortgage because the rent still won't cover the costs and claim a tax deduction on the loss at the end of the financial year - the hope is the capital gains will eventually make up for the rental losses."
Jesus fucking christ! What a way to set yourself up for total bankruptcy. Just read that quote! This is housing bubble mania feed by Government. NO, people never fucking learn.
I know otherise smart well educated couples here in the USA who got crushed by 2008. They had these giant mortgages, and their whole bet was on continued rising house prices, otherwise they were fucked. And they indeed were fucked. Either take out a 15 or 30 year fixed, with 20% + down, or stay the fuck out of housing.
"Start talking about letting first home buyers raid their retirement accounts, so they can get over the angst of missing out on this"
I love it! Talk about financial illiteracy!
The only problem is that Australia has been doing this in a virtually an unbroken upward trajectory for over 30 years, so it is hard to break the pattern of thinking.
I am Australian I have also spent a fair bit of time oustide of Australia. I lived in Britain when property prices only went up until one day they went down.
But Australians don't want to hear this kind of shit. The Aussie dream is to own a house and then own a couple more houses to pay for their retirement.
If you want to laugh at their demise, check out this forum
http://australianpropertyforum.com
And I could almost forgive the madness of said crowds after watching the housing market rise with seemingly monotonic nature for decades, but the last well-publicized crash was less than 8 years ago.
These morons pretty much deserve to be crushed.
AWESOME!!!
Doi's biggest mistake was not buying 100m from Bondi Beach because the Aussie slutz and Euro trash pussy is unbelievable and the air is as clean as can be. Spend time in NYC or London on a desk, blow your nose at night cleaning out the black soot shit and then you will know why nothing beats Aussie beaches - half an hour commute to high paying careers. yeah... its expensive
The R/E price curve is inverse to the rate curve, and it's obvious to anyone who quits wanking long enough to look. Because there is a case for long-term suppression of rates, there is necessarily a case for flat R/E prices, but not for continued price appreciation. That which cannot happen will not happen, dear Aussie and Canadian fuckwits.
Why do I have so many deja vu moments with the year 2008?
Why does history repeat and "re-repeat" itself?
Because modern humans have the attention span of a fruitfly.
You pay extra in OZ for 2 front doors
"That's not a bubble. THIS is a BUBBLE!" - Croc Dundee
Is there a Sydney version of "Mansion or Crack House" online yet?
We keep hearing comments about how people are to get into the housing market like with fhog or accessing super. There’s another way: letting house prices fall. After all we are meant to be in a market economy aren't we?, where prices are meant to rise and fall freely. We don’t need schemes which only bid house prices up. Reversion to the mean (average house price long term is 3X median household income) is going to happen at some time. Particularly with Australia having the 2nd biggest housing bubble in the world (whocrashedthe economy.com). if you want to show compassion to young people and first home buyers then property prices have to fall. It’s best to happen quickly. Here’s what i would do:
1/ abolish negative gearing.
2/ rate housing debt the same or worse than business debt in the banking sector.
3/apply accounting principles to banks which are applied to business. Then we'd show that the banks are actually potential basket cases. CBA 28X leveraged anyone? (AFR 14-15/2/2015). This would expose the banks for over lending into the housing market and show every one that we are in the middle of one of the biggest ponzi schemes in the world.
4/ abolish fhog both state and federal.
5/ 15% tax on foreigners purchasing aussie real estate
If you took the baby boomers back 40 years in a time machine, they would all expect to get into the housing market at bargain basement prices. Why don’t we give a new generation the same chance? The 3 things in life which ground people are: owing a home, having a job and being in a relationship. The first 2 are proving very difficult for young people and if you’re a man then if you don’t have the first 2 then often the 3rd proves very difficult. The baby boomers constantly show that they don’t care about the more recent generations and whether they feel grounded or not. No wonder they are being radicalised when they can’t feel grounded in their own society. young people want to feel grounded and feel part of a group. They look around and see that the older generation doesn’t care about them.
Letting house prices fall would also lessen wage demands and make Australia more competitive.
Remember we are meant to be in a market economy where prices are allowed to rise and fall freely, allowing renewal and new entrants into market. It’s not meant to have policy and taxes biasing the market to move in only one direction.
yours sincerely,
Bill Ford.
Scariest thing about the Aussie bubble? It's not actually a bubble. It's the result of a generation of uncontrolled Third World immigration to Australia. Short of mass deportations of non-whites from Australia, forget about owning a family home on the east coast again.
Please explain.
You are a moron. Home prices everywhere are a function of finance costs and aggregate payment amounts. Immigration is permitted by your slavemasters because it suppresses wages. Immigration is a pro-business policy. No one expects immigrants to float the R/E market.
Come on over....and buy some real estate, its the lucky country, real esate can only ever go up, prices will be double what they are now in Sydney in 10 years, God bless Australia....and you can have it in any color you want if yellow is not your thing.
Only double? Why so bearish?
Is superannuation an Australian word for pussy and ass fuck?
That is what it is, but in Australia, the knob has been dipped in rough desert sand beforehand.
There will never be any meaningful changes in Australia to the capital gains tax or negative gearing because most of our Politicians are landlords and they have no intention in enacting any legislation that might damage themselves financially...no different to anywhere else in the world.
Wrong again. Governments everywhere, including in Aus, have been left with little choice but to adopt policies which support bank balance sheets. Politicians, I can assure you, only wish they could do something other than act on behalf of bank solvency. Once personal, corporate and fiscal solvency became utterly dependent on finance/debt, there was no turning back. Expect twenty years of flat R/E.
I am Australian and I have also spent a fair bit of time oustide of Australia. I lived in Britain when property prices only went up until one day they went down.
But Australians don't want to hear this kind of shit. The Aussie dream is to own a house and then own a couple more houses to pay for their retirement.
If you want to laugh at their demise, check out this forum
http://australianpropertyforum.com/forum/3210735
Sold up in 07, those $million houses look nice from my yacht now. Suckers.
At least Australia has nice beaches to throw up a grass shack in which to live after losing your leveraged house...
Keen was famously on the losing end of a bet on housing. Nothing like being right but WAY early. But serves him right for underestimating the power of the Banksters in league with the Govmint to (1) inflate asset prices - they can only go UP UP UP and (2) encourage fools to believe their will ALWAYS be a bid by a GREATER fool to take the property off your hands for a profit. Things that can't keep going forever will stop. Nobody knows when.
http://www.debtdeflation.com/blogs/2010/05/12/a-monkey-off-my-back/
Keen suffers from the curse of the Marxist, to be right about 12/3 recessions, but he's spot on as to the source of the problem with endogenous money theory.
The crap first home buyers have to go through to get into the property market. You are fucked if you do and fucked it you dont, the only bright side is, that if you go down - so does the rest of Australia. This is a god damn Ponzi scheme, everybody knows it, but if you want to make some money you have to be in the game. Grab your balls and sign the contract. Nobody makes any money by slaving away or bitching how bad an investment is.
On a more important note: Australia banks are also the four largest banks in New Zealand, so if Aussie banks takes a hit so does New Zealand.
Note that Australian banks get the vast bulk of their short term wholesale funding from overseas. If there is any trouble in the Australian housing market, it's going to morph into an insta-bankruptcy for them real fast (I know of course they will be bailed out, but it's going to involve major upheaval).
If you can only cash out your 'win' (Charlie Sheen variety) in worthless confetti, what's the point?
Fuck me!!!!!!!!!!!!! 840,000 for that "house".
The "housing" in that picture looks like the whorehouses I went to in Rio de Janerio in 1970! LOL
Why that's only $670k in American confettibux...
http://www.trulia.com/property/3191080928-10501-Nicolet-Way-Austin-TX-78717
That property is horrible. It has a walkscore of 6!. That means it is completely isolated. This Surry Hills place is in a location most people can only dream of, the lifestyle a person could have living there would be world class. If given the option between living in those 2 properties the Surry Hills place would be my first choice without a doubt. Nearly everybody I know would say the same thing, location trumps the house itself every time.
That property is horrible. It has a walkscore of 6!. That means it is completely isolated. This Surry Hills place is in a location most people can only dream of, the lifestyle a person could have living there would be world class. If given the option between living in those 2 properties the Surry Hills place would be my first choice without a doubt. Nearly everybody I know would say the same thing, location trumps the house itself every time.
I live in Melbourne and I can honestly say I live in a poor suburb......
the prices people are paying at auctions now are crazy...
and it is mostly Chinese people who win the auctions......
Australia is an easy place to live in....but Jesus it is run by dumb people.......and this problem goes WAY back.
I caught up with friends and inlaws in Syd on the weekend. My brother in law is in the process of looking for a house south of sydney. When i suggested to him that prices were only elevated because of bad govt policy and a banking system that needs to constantly expand its size (as well as low rates, chinese buyers, etc) he looked at me as if i had stabbed him. Then when i suggested he look into what the margin call could mean if the value of his house went down he had the same look. I also asked if he thought what low oil prices might do in the longer term and reminded him in the 70s they shot up overnite causing inflation shocks, therby effecting interest rates. After about ten minutes everyone looked at me and told me to get out. Later that day a mate was telling me how his house near the Parramatta river had gone from 350K to 1.3 million in 8 years. He was upset he had sold a second house too early. When i asked what an increase in interest rates might do he looked shocked. Both people have no idea values can down, as the market has been so long going up. At the end of the day i believe it all comes back to Fract Res Banking, allowing privately owned banks to create money is wrong and central banks setting of interest rates is the upmost interefernce in markets, plus all govt is compromised.
Good that we have non political Central Banks to manage our economies or the shit could get really bad!
The australian real estate market will have its BLACK SWAN day
When it does, I want to see all the arguements like "property never falls", "theres not enough supply it has to go up". i want to see what happens to the AUSTRALIAN ILLITERATE population who is just living on a credit binge
China aint there no more to siphon off the inflationary money printing.
The BLACK SWAN COMMETH, all that will remain is DEBT
REMEMBER, unlike the US , UK and CIVILISED countries, mortgage debt in this country MUST BE PAID. Banks have full recourse even after they sell your house, you must still pay the remaining debt.
Its like a MORTGAGE is really a PERSONAL LOAN which is fully secured on your LIFE.
This means the economy will be annilated for a decade atleast when it all becomes unwound as private debt is HHHUUGGEE
Peter
The australian real estate market will have its BLACK SWAN day
When it does, I want to see all the arguements like "property never falls", "theres not enough supply it has to go up". i want to see what happens to the AUSTRALIAN ILLITERATE population who is just living on a credit binge
China aint there no more to siphon off the inflationary money printing.
The BLACK SWAN COMMETH, all that will remain is DEBT
REMEMBER, unlike the US , UK and CIVILISED countries, mortgage debt in this country MUST BE PAID. Banks have full recourse even after they sell your house, you must still pay the remaining debt.
Its like a MORTGAGE is really a PERSONAL LOAN which is fully secured on your LIFE.
This means the economy will be annilated for a decade atleast when it all becomes unwound as private debt is HHHUUGGEE
Peter
Yes Yes its an awful bubble. Sure it is. Going to happen any day now. Waiting . . . .waiting . . . .
Bubble, its an easy concept for everyone to grasp and talk about. But really why would we see a decline in prices over the next few years?
1. Even with a so called "hard" landing in China the rich will always be rich and stash thier money in safe places like australian real estate. Safer than keeping your money in China thats for sure and only a boat or plane ride away.
2. Cashed up retirees looking for an investment, with interest rates at record low levels a rental yield, tax incentives etc all look good even if you have to borrow. They could care less about China & a poor economic outlook as long as the rent check funds thier lifestyle and or pays down the mortage.
3. Even with unemployment going higher the likelyhood of things going backwards are few due to the above reasons. Also from where i am standing people are likely to move out of our regional cities in order to find work in our Major cities thus pushing up rents and house prices even more.
The only thing i can see that will bring down Australias housing "bubble" is . . .
1. Higher interest rates, even if this does happen at some point it will be slow and steady.
2. War, it would have to be a major one, in that case who gives a FF about any of this.
3. Major knee-jerk changes in government policy like removing negative gearing or REAL changes to international investment in property.
This is my two cents, i hate debt and would never buy in to this shit BUT I'm not expert, care to comment experts?
.
The Australian population pozi scheme is also keeping the Australian property market rolling along nicely.
http://www.macrobusiness.com.au/2014/03/australias-population-ponzi-mode...
Keep in mind that Australia's population is approx. 24.5 million.
Treasurer Joe Hockey was an ex banker lawyer and his wife is a banker. PM Tony Abbott being set up for fall to make way for banker M Turnbull to be the new PM in Banks time of need to help the poor suffering banks survive housing pop. Negative gearing originally was on the torture rack, to make a comeback at your home curb soon.
Utterly amazing that they watched the US and parts of Europe blow up only a few years ago and then do eactly the same. The world is only now going head first down the toilet as a result of the measures to 'fix' the last smash and these tools are just starting ther own. Years of boom times in Australia where they should have built up a surplus and wealth fund and could have been relatively insulated from the coming storm, but no, it was all for nothing.
I rent my house in Brisbane for less than the interest on the mortgage to buy it would be, whilst the landlord pays the property tax, body corporate fees, insurance and maintenance. Oh well, there's one born every minute.
Geez! The real-estate situation in Australia is beyond surreal, beyond obscene! Lacking evidence, one would have to assume ZERO human beings on the entire planet would be stupid enough to sucker for fraud this obvious! Yet... there it is. And I thought the bubble in the USSA circa 2007 was absurd. As it was.
Someone here who pays attention to the stock non-market should post 5 or 10 ways to play the demise of this bubble, which appears far more egregious than even the Vancouver-area bubble.
One would think of mortgage insurers as a first idea, but... I don't want to bias anyone. I have fairly minimal wealth at this point (having blown 90% of my life savings on my place in the extreme boonies), but... this situation is so obvious and so out of whack, it might be interesting to risk a little in put options on a company that will crash along with this utterly artificial market. Ideas anyone?
BTW, based on the description, that place is nearly 100 times overpriced! How insane can human beings get? The place is probably worth less than the first monthly payment!