This page has been archived and commenting is disabled.

Aussie Central Bank Admits, Property Prices "Have Gone Crazy"

Tyler Durden's picture




 

With The Philly Fed admitting QE has been the driver of inequality in the USA and the Kiwis slashing rates unexpectedly, the fact that Reserve Bank of Australia Governor Glenn Stevens uttered the following is even more crucial. "I think it's a social problem," Stevens told the Economic Society of Australia, adding ominously, "I think some of what's happening is crazy," specifically pointing to Sydney property prices as an example. No matter where we look around the world, Central Bankers appear to be exercising their honesty glands about the impact of their policies. However Stevens can't help himself at the end, noting "we remain open to the possibility of further policy easing."

 

As Business Spectator reports, Sydney property prices have gone "crazy", but record low interest rates aren't entirely to blame, Reserve Bank boss Glenn Stevens says.

The RBA governor waded into the property debate on Wednesday, telling a business lunch that he finds Sydney's soaring prices concerning.

 

However the RBA remains open to cutting rates further and always took into account what was happening in property markets across the country - not just Sydney - when deciding whether to adjust the cash rate, he said.

 

"What is happening in housing in Sydney I find acutely concerning for a host of reasons, many of which are not to do with monetary policy," he told the Economic Society of Australia.

 

"I think it's a social problem.

 

"I think some of what's happening is crazy, but we have a national focus and so that just increases the complexity."

In other words - we know it's crazy what we are creating but we have no choice...

Treasury boss John Fraser last week said Sydney and wealthier parts of Melbourne were "unequivocally" in a housing bubble.

While Treasurer Joe Hockey has downplayed fears of a bubble, he has sparked a wave of controversy by telling frustrated first-time buyers that all they need is "a good job that pays good money" if they want to buy a home in Sydney.

In the meantime, the RBA remains open to cutting interest rates even further to help give the economy a boost.

"We remain open to the possibility of further policy easing, if that is, on balance, beneficial for sustainable growth," Mr Stevens said.

"I think it's quite some time before we even think about interest rates going up."

*  *  *
Or maybe not...

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Wed, 06/10/2015 - 22:41 | 6185084 Kreditanstalt
Kreditanstalt's picture

There's "NO INFLATION" they will still spout...

Wed, 06/10/2015 - 23:29 | 6185217 The Rolling Thunder
The Rolling Thunder's picture

Make 5000 bucks every month... Start doing online computer-based work through our website and start getting that much needed extra income every month... You'll get trained by us, no prior experience needed... Find out more about it on following address... www.extra-salary24.com

Thu, 06/11/2015 - 07:23 | 6185718 Captain Debtcrash
Captain Debtcrash's picture

We all have the same debt based monetary system, is it any wonder we see the same symptoms/bubbles. The question is, what will the bubbles look like when they throw another patch on this failed system by banning cash and implementing negative rates.

http://debtcrash.report/entry/ban-on-cash-negative-rates-and-super-bubbl...

Thu, 06/11/2015 - 08:40 | 6185879 clooney_art
clooney_art's picture

 

Unlike this country where a Mortgagee gets interest deduction on their income tax for their first home, a mortgagee in Australia gets interest rate deductions on their second, third investment homes, not their first home. So people park their money in extra homes and drive up the prices..

Sun, 06/14/2015 - 08:37 | 6185895 TwoShortPlanks
TwoShortPlanks's picture

Sorry for the shameless Blog post, but I did promise people I would let them know when the day came...and I always keep my promises.

http://twoshortplanksunplugged.blogspot.com.au/2015/06/second-company-es...

Wed, 06/10/2015 - 23:00 | 6185141 WTFUD
WTFUD's picture

These MF's are all in Denial . . occasionally getting pissed up and lowering their defenses.
The guilty remorse lasts right up until the phone call comes in from the nail-gun department , reminding said employee not to stray from the script.

Thu, 06/11/2015 - 03:05 | 6185517 Squid-puppets a...
Squid-puppets a-go-go's picture

i tossed in my aussie mortgage 2 years ago - 4 years into it and 30% equity established. now i rent again.

happy with my decision so far

if PM's leapfrog other assett classes I'll be laughing - but im already a little ahead due to the drop in the $Aussie vs the $US (even accounting for rent expenses)

I've thought house prices were overvalued even going into the 2008 bust on the metric of historic house price vs median wage. Its heaps worse now

 

Thu, 06/11/2015 - 03:10 | 6185522 shovel ready
shovel ready's picture

am in similar boat

we sold in melbourne just over a year ago and the family keeps showing us all kinds of new houses that we could buy now.... i think i'll just wait another year or two.... (at most i reckon) and get the same shit with a tidy discount...

Thu, 06/11/2015 - 04:01 | 6185560 Squid-puppets a...
Squid-puppets a-go-go's picture

i was in a similar boat but, dammit - capsised and now i cant locate my gold :(

Wed, 06/10/2015 - 23:05 | 6185157 Oh regional Indian
Oh regional Indian's picture

When OZ goes, it's going to go like a mofo...

Been there, lived there (Melbourne)...whacked out society at many levels.

That said, rents and prices EVEN IN 2000, were outrageous. Tiny Apartment on St. Kilda Road for $1,800 AUD.

When China sneezes, good and proper, Oz will implode...

Explosions on a box with taut strings...

https://www.youtube.com/watch?v=OsrCg7rwcqA

 

 

Wed, 06/10/2015 - 23:56 | 6185284 ozziindaus
ozziindaus's picture

Due to the Chinese whoring out Oz RE thru land banking, I think Oz will see one last big inhale and exhale whilst China implodes. It will be the pop that's heard around the world.

Thu, 06/11/2015 - 00:42 | 6185359 Oh regional Indian
Oh regional Indian's picture

You are clearly on the spot so to speak ozzi, interesting insight. Even higher means the fall will be that much worse...thud....

Thu, 06/11/2015 - 01:25 | 6185426 zebrakid
zebrakid's picture

Harry Dent has been calling for a 40% correction for the last 4 years. I guess he'll be right eventually, but I have nothing left to short with.

Thu, 06/11/2015 - 07:55 | 6185725 TwoShortPlanks
TwoShortPlanks's picture

I remember the days when Sydney had insane house prices. Then Perth started kicking ass. Then Melbourne came back into the race for biggest dick head gets the property keys. Now, Sydney obliterated the competition and went Fullest Retard. A 3x1 red brick dump-hole you wouldn't put Granny in, 20km out of Sydney CBD, in shitsville, sold for $960,000. Thank God I moved away from those nut-jobs.

For those who like a flutter, look no further than betting against anything Australian. Seriously, the economy was once Sheep, Cattle, Wheat and Mining. Then, progressively over 3 decades we forgot what Sheep, Cattle and Wheat looked like. Then Mining went Ape, and Ape-er when China turbocharged the printing presses and pumped steroids into the water supply. Australia went Monorail on Mining and completely let go of manufacturing. Then the Ore prices fell off a cliff and everyone's like, "what's with the economy?".

The worst thing of all is the dumbness. My God it's dumb down here. The population is as thick as my handle. Seriously, if it's on facebook, Twitter or this Gen Y retard news-ish show called 'The Project', well, it's FACT as far as the general population is concerned.

If you wanna flutter, then short the AUD, anything AU. I'm not kidding when I say that I have no idea as to how Australia will get itself out of the mess it's in....I mean, the papers were discussing how we could export our Barista knowledge....WTF?! Seriously, is that our plan?!

The thing that scares me the most though, is that there doesn't seem to be any intelligent life down here, I mean, where are the entrepreneurs creating next-gen stuff, where are the start-ups with great ideas and tenacity, where are the people who want to work hard and become gazillionaires in some industry other than mining or real estate? They're so few and far between. But there's an ocean of retards just wanting to do the absolute minimum but expecting obscene wages; they're everywhere.

Thu, 06/11/2015 - 08:19 | 6185828 Oh regional Indian
Oh regional Indian's picture

Excellent TSP.

And may I point the finger at alcohol...OZ is DROWNING in binge drinking lost souls.

That is what I saw when I was there. 

Thu, 06/11/2015 - 13:46 | 6187015 farmerunder
farmerunder's picture

great post, isnt leverage at the heart of the problem? if houses and cost of living not gotten so out of control couldnt we have held onto some of that manufacturing etc? there are many legislation problems that make it worse, as i see it this central bank manipulation and allowing banks to create debt is at the heart of it.

Thu, 06/11/2015 - 15:44 | 6187468 shovel ready
shovel ready's picture

Hi TSP!

in reply to 

"where are the entrepreneurs creating next-gen stuff, where are the start-ups with great ideas and tenacity, where are the people who want to work hard and become gazillionaires in some industry other than mining or real estate? "

I'm here! :) it is 5.30am - i get up and work 2 hours before i go to work. When I get home from work this afternoon, I will work until about Midnight tonight - though to be honest - it is a Friday, so I often knock off a little early on a Friday and watch a movie at about 10pm. I have been doing this, for this particular project for ~18 months now. (inc working weekends - of course).

I am building something of the highest quality that i am able, that I truly believe will help people. I am using it myself and it works well for me. I am looking forward to accepting the verdict of the market as measured in dollars.

It is lonely though.... this is not a common practice in the Australian culture. If I go to a BBQ I am fucked because I don't know a thing about football and 'business' conversation never seems to extend beyond people expressing their views on 'what the Government should be doing'.....

 

Thu, 06/11/2015 - 15:53 | 6187506 DavidAKZ
DavidAKZ's picture

You should try Adelaide :-(

Thu, 06/11/2015 - 03:21 | 6185530 shovel ready
shovel ready's picture

an interesting postulation!

other than macua et al no longer being the preferred choice of chinese money laundering and real estate having worked as a substitute for the last few years, i would be genuinely interested on what you think might drive the 'one last big inhale'?

thanks in advance for your thoughts.

Thu, 06/11/2015 - 10:25 | 6186212 ozziindaus
ozziindaus's picture

Yuan is in desperate search of yield and it's not finding it on the mainland.......with the exception of equities. This is only half the story though. The other half involves a combination of money laundering and distrust of the Chinese authority.

Once the deflationary whirlpool starts sucking everything down, more funds will find themselves expatriating china and likely into Canadian, American and Australian RE. The show however stops when the authorities illegalize outflows and demands repatriation of "their" money.

Wed, 06/10/2015 - 23:15 | 6185182 fremannx
fremannx's picture

The higher bond yields rise the more difficult it becomes for mortgage companies to make loans and the more difficult it becomes for those with adjustable rate mortgages to meet their obligations. It's just a matter of time before the housing industry collapses... again.

http://www.globaldeflationnews.com/inflation-vs-deflation-part-3how-the-...

Wed, 06/10/2015 - 23:51 | 6185274 TeraByte
TeraByte's picture

In banking the big fours´ exposure to mortgages is 60% of assets, but once housing prices turn into a long term normal, at least one of them is no more. "By us it is different" is a fractured fairy tale like the Fed daring to raise interest. This one of today´s battles against the inevitable.

Thu, 06/11/2015 - 03:59 | 6185557 Squid-puppets a...
Squid-puppets a-go-go's picture

If one is more guaranteed to survive than the others, i suspect itll be ANZ: Theyve had a large part in helping Chine set up its physical go;d exchange/market

Thu, 06/11/2015 - 00:15 | 6185315 NoWayJose
NoWayJose's picture

He's probably right about the bubble not being caused by low interest rates - after all, the Chinese are paying cash for their Sydney homes!

What I cannot understand is that both the Aussie and the Kiwi are sitting near 5 year lows against the US Dollar -- and yet both their central banks are calling their currencies as over-valued!

Thu, 06/11/2015 - 03:15 | 6185527 shovel ready
shovel ready's picture

our (Aust) exports are dying and our imports are surging... 5 years ago our commodity exporters were simultaneously fucking the chinese in the arse while giving them head

Thu, 06/11/2015 - 07:46 | 6185764 TwoShortPlanks
TwoShortPlanks's picture

I reckon we're fucked....20 year recession.

Fri, 06/12/2015 - 19:21 | 6191810 shovel ready
shovel ready's picture

i reckon so too.

IMHO -

the demographics are not good.

i think the austrians are probably right about credit.

i think the 'peak oilers' are substantially correct **from the perspective** that the cheap oil is gone (i cannot believe that you can double the cost of THE critical resource and not have negative consequences)

i think that whether you subscribe to anthropogenic climate change or not is irrelevant - the climate IS changing and rainfall patterns are and will continue to change - and AT THE VERY LEAST this will 'disrupt' production and food systems adapt/fail/move/change.

i could go on...

the point being that i completely agree - there are many negative challenges converging now/over the next 10-20 years that will make the next few decades unlike any in the 20th century.

'technology will save' might happen if we have some dramatic breakthrough - like a big win with the ITER fusion reactor - a real game changer etc. but that would still be 10 years before implementation...

 

 

Thu, 06/11/2015 - 04:00 | 6185558 huggy_in_london
huggy_in_london's picture

Well to help you understand, in pictures, pull up a longer chart on audusd.  

More specifically, when your export prices are going down like a £10 whore (and your imports are surging) you better hope your ccy devalues quickly else the shock to national income will be brutal.  

 

 

Thu, 06/11/2015 - 00:20 | 6185325 Phroneo
Phroneo's picture

Thank you for covering this. Our Government is truly evil and selfish. We don't need campaign bribes for this bubble to keep getting inflated. It's been covered pretty extensively how most of parliament and central bankers own investment properties. 

At least they give us useful advice like "Get a high paying job".

Thu, 06/11/2015 - 00:39 | 6185351 tarabel
tarabel's picture

 

 

Oh, if only I could wave my magic wand and give away his high paying job to someone who would deserve and appreciate it while he gets to downsize to an Aussie trailer park and work at a car wash.

Thu, 06/11/2015 - 03:59 | 6185556 Peter Pan
Peter Pan's picture

Real estate is a national sport in Australia with various TV shows dedicated to it as well.

The other inflammatory aspect is that Australian tax law allows losses from investment properties to be offset against other income. The thinking of course is that the capital gain will outpace the operating loss.

Added to all this was the ability to borrow on an  interest only basis which ensured that loans were never paid off. Not to mention the low deposits that were required until recently.

The party is still going on in most places but the punch is turning rancid unless they drop rates even further......and they are stupid enought to actually do it.

Thu, 06/11/2015 - 06:04 | 6185650 Bazza McKenzie
Bazza McKenzie's picture

In relation to property investments, Australian tax law essentially allows an individual to operate in essentially the same way as a company does, i.e. pooling all its revenue (personal income and investment income) and offsetting all expenses (including interest and maintenace/improvement expenses for investment properties) related to that income or production of capital gains (which are also taxed).

This allows Australians, in this regard, similar financial arrangements to a company without having to form a company with the costs and regulation entails. 

For some reaons I cannot fathom, some people believe individuals should not have similar financial opportunities to companies.  Strangely, the people who generally want individuals to be treated worse than companies are usually of a socialist disposition.

On the other hand, unlike the US, in Australia there is no tax deduction for interest on one's own home.

Thu, 06/11/2015 - 07:06 | 6185692 farmerunder
farmerunder's picture

Isnt that part of the affordability problem though, by allowing people to reduce their taxable income by neg gearing arent they driving up property prices in an already limited market? part of the problem is nat park on 3 sides and ocean on another. I take your point though, would it be fairer to stop all negative gearing/cross sunbsidisation (for both companies and individuals) so that asset prices not be raised by doing so.

Thu, 06/11/2015 - 04:48 | 6185589 TerraHertz
TerraHertz's picture

Actually what's happening is this: http://everist.org/no-rezone/

Australian Federal and State governments are pushing a wholesale population relocation scheme, in which large areas of cities will be rezoned for much higher density housing. The claimed justification is 'projected huge population increase' - but since ALL population increase in Australia is due to immigration, that's entirely a policy decision. In other words, bullshit.

In reality it's all about profits for politicians and developers, and also Agenda 21: force everyone into higher and higher density urban centers. All the better to eliminate them later.

Anyway, the rezonings in many areas of Sydney are pending. So now the government is trying to talk down real estate prices - because it's they and their crony developers who are about to be trying to buy tens of thousands of residential properties as soon as they are rezoned.

Everyone involved with this scam should be shot.

Oh, and I'm also noticing that the majority of people involved in pushing the rezoning/density increase seem to be Jewish. Interesting coincidence? Australia has long been at the top of the list of possible fall backs if Israel's existence in the Middle East is threatened. So perhaps that 'huge projected population increase' may be planned to all come from one place?

Thu, 06/11/2015 - 04:55 | 6185595 Squid-puppets a...
Squid-puppets a-go-go's picture

while im a general fan of the snark and cynicism you expound, aussie house prices should be talked down irrespective of rezoning motivations 

(after joe hockey manages to sell his ranch, yaknowwhaddimean :)#)   )

Thu, 06/11/2015 - 05:09 | 6185611 TerraHertz
TerraHertz's picture

I'm strongly in favor of much lower home prices. Go read my rant at http://everist.org/doc/base/devel_plan/plan_review.htm

But many things will have to change to fix that. For starters, getting rid of the central banks, fiat money created out of nothing and loaned at interest. Another step could be to make anyone with large investment property holdings ineligible to serve in public office.

Thu, 06/11/2015 - 05:02 | 6185600 TerraHertz
TerraHertz's picture

Further to my post about the rezonings - the actual implementation of the planned rezonings has been mysteriously quiet for months now. I was wondering what was happening about it. Now with the multiple government announcements in the last week or so about 'property market bubble, prices too high' etc, it would seem their plan is now GO. Hence the urgent need to knock the prices down a bit to aid buying by the politicians and developers, shortly before the rezonings.

Then later, the gates for overseas property investment will be opened wide again, ensuring prices inflate wildly, on top of the increase due to higher allowed building density.

My home is in an area that will be rezoned. I'm extremely pissed off about the whole thing.

Also relevant: http://everist.org/doc/base/title_deed/title_deed.htm

The Commonwealth Bank stole my land certificate of title document.

Thu, 06/11/2015 - 07:58 | 6185791 Equalizer
Equalizer's picture

Here in Australia we are currently having what can only be described as a "CLBO", which stands for Chinese Leveraged Buy Out, those pricks are buying every bloody property they can get there hands on, near me the Chinese government (using Chinese Australian citizens as a front) want to build a $500,000,000 Chinese theme park in the middle of nowhere, seriously, ......its beyond full retard.

http://www.dailytelegraph.com.au/newslocal/central-coast/latest-plans-for-chinese-theme-park-chappypie-china-time-unveiled-at-warnervale/story-fngr8h0p-1227012957705

https://www.facebook.com/chinesethemepark

Thu, 06/11/2015 - 09:34 | 6186026 AUD
AUD's picture

In November 2013 the RBA began a special program of buying shitty mortgage debt from the banks to create a 'capital buffer', that is, to bid up the price of shitty mortgage debt so it is as good as AAA rated.

Because of course anything on the balance sheet of the central bank is AAA.

Is it any wonder there's a fire under real estate?

Do NOT follow this link or you will be banned from the site!