US Think Tank Warns That Australia Is About 6 Weeks Away From Housing Collapse

Tyler Durden's picture

Over the past couple of months, we have written frequently about the impact of Chinese money laundering operations on home prices in a couple of large cities around the globe.  So far, the Vancouver market has seemingly been the hardest hit with homes prices collapsing over 20% in one month after the city passed a 15% property tax on foreign buyers on July 25, 2016 (see "As The Vancouver Housing Market Implodes, The "Smart Money" Is Rushing To Get Out Now"). 

Now, a U.S. based think tank, International Strategic Studies Association (ISSA), is warning that similar efforts to restrict Chinese investment in Australian real estate could send prices tumbling there as well.  In speaking with news.com.au, Greg Copley, President of ISSA, predicted that Australia has about 6 weeks before real estate prices start to collapse.

"We estimate that Australia has about six weeks or so to turn this situation around, otherwise there would be a massive hit on property valuations and the building trades."

 

"The urgency is, I believe, based on the fact that this is about how long it will take for the banks' policies to start switching off a lot of existing and planned contracts for Australian properties."

 

"The banks clearly believe Australian real estate values will decline, so they are attempting to avoid that risk. They’ve learned from the US collapse that seizing real estate collateral is a no-win scenario when the volume is great and the market slow."

 

“In so doing, they precipitate the market collapse but are less exposed to it.”

Real estate prices in Australia's largest housing markets have soared over the past couple of years fueled, in no small part, by demand from Chinese buyers looking for offshore locations to park cash.  The Sydney and Melbourne markets have been the largest beneficiaries of foreign capital with real estate prices up 53% and 51%, respectively, since 2012.  That said, based on data from the Australian Bureau of Statistics it looks like home prices in Australia have already started their descent.

Australian Home Prices

 

Back in the spring, Australian banks began cracking down on foreign purchasers of residential properties due to concerns of increasing fraud and money laundering activites.  New rules enacted required borrowers to be Australian citizens and/or legal residents with a valid visa.  Per ISSA, these new restrictions on lending will likely result in many foreign buyers being forced to default on new residential properties.  He argues that many foreign buyers placed down payments on properties under the old banking regulations but now won't be able to secure financing to close once the properties are actually completed.

Efforts to restrict lending, came in addition to taxes imposed by many Australian cities after foreign demand was found to be pricing local buyers out of many residential markets and killing the “Great Australian Dream” of owning property.  In fact, Sydney prices have risen to record levels and currently rank second only to Hong Kong in terms of major cities with the world’s least-affordable housing. 

With Vancouver and Australia now cracking down on Chinese money laundering operations the only question that remains is where the next bubble will spring up to take it's place?

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logicalman's picture

Back in the day, a house was somewhere to live, not a financial instrument.

NoDebt's picture

Yeah, and back in the day a man with a strong back could earn an honest living to support his family.  

'All In The Family' was the #1 TV show back in those days.  Things were still reasonably OK when 'M*A*S*H' was on the air.  By the time 'Night Court' was popular, things were looking a little weird and uncomfortable.  When 'Cheers' got popular things were definitely amiss but anybody could borrow money to supplement their income, so we just went with it.  When it was the 'Seinfeld' era we were laughing at our own irrelevance and powerlessness.  The sky had not fallen yet but you could intuitively feel it was close.

Nobody's laughing any more, of course.  Which is why there are no more hit sitcoms.

Debate me on this at your peril.

 

LetThemEatRand's picture

It was especially prescient that they called Sally Struthers' husband "Meat Head," in light of the fact that she later ate him.

oops's picture

I saw that headline 6 months ago. ;-)

bleu's picture
bleu (not verified) oops Sep 12, 2016 10:46 PM

No matter. The world's in for a rough ride for the Greatest Injustice of the 20th Century that is still ongoing. http://wp.me/p4OZ4v-19

Son of Loki's picture

"Send prices tumbling" means reversion to the mean where house prices begin to match the real economy, wages, etc.

Deathrips's picture

Talk about closing the gate months after the horse left the barn...and gated field...and country.

a dingo ate my mortgate

RIPS

CheapBastard's picture

Australai's problams can be solved by importing more immigrants:

 

African Rioting Tears through Melbourne

“Hundreds” of African invaders engaged in a widespread orgy of violence over the Christmas weekend in Melbourne, the capital and most populous city in the Australian state of Victoria.

According to local media reports—all of which deliberately failed to report on the race of the rioters—the incidents took place outside a train station in Melbourne’s southeast and outside a Carlton nightclub on Queensberry Street, North Melbourne.

http://newobserveronline.com/african-rioting-tears-through-melbourne/

 

And here the Africans rioting and beating up the white crackas in Perth on YooToob:

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

https://www.youtube.com/watch?v=r4DD04d8ZpQ

Escrava Isaura's picture

Ohh boy.

We don’t need, and we don’t want deflation.

Deflation is devastating, because people lose jobs, savings, and hope.

The crops go un-harvested. Production go unsold.

We want, we need debt free money injected soon. More likely tomorrow morning.

The nostalgic view of the past needs to go, because there’s no more growth. The past is not coming back. With Trump or without Trump.

 

 

Squid-puppets a-go-go's picture

match the real economy? then they got a looooooong way to go down. i started work in 1990 as a kitchen hand earning $12.50 an hour - the average huse price in melb/sydney would have been about $250 000.  That same job today would earn me...... $12.50 an hour. But median house price is about $600 000

 

keep the bastards honest's picture

squid, agree re the pay exactly. House prices are even  worse,

went to bid on a 1.5 bedroom  1918 timber ugly hovel... wood to ground and worry re what was underneath.. but  accessible to work in the city.  Heritage overlay so cant knock it down. Went for $ 1,634,000.

People are desperate, local young uns cant aford to have a kid let alone kids. Chinese have filled good schools and booked out for the future. Some areas are full chinese/indian. 

Soon Melbourne will be underwater. Keep killing those trees and the earth gets hotter and the seas rise.

Dugald's picture

 

You are right, nothing but yadder yadder......

auricle's picture

the big short...mate.

slipreedip's picture

I dont think that debating you is necessary.
The fact that the keystone for your argument is referenced to television situational comedies tells everyone all they need to know about your intellectual credentials.

NoDebt's picture

I never claimed to be a smart guy.  Just an observant one with a very low tolerance for bullshit.  And one can infer a lot about the state of the nation and where it is intentionally being directed from the pablum that is puked out of our "entertainment" capitol.

Son of Loki's picture

Many of those "Chinese students" have a strong chance of losing some money on their multimillion dollar houses.

Dugald's picture

 

From your mouth to God's ears......

beemasters's picture

"Nobody's laughing any more, of course. Which is why there are no more hit sitcoms."

I thought the reality show, "The Clintons" has been pretty hillaryous. But that's just me.

Bay of Pigs's picture

Tell that dummie to go get his fuckan shine box.

August's picture

Just don't tell me that the world hasn't gone to shit ever since they cancelled Howdy Doody.

Ponk's picture

Are wyoo pwetending to be smart again? It's actually quite difficult to use big words correctly if you're a moron. "is referenced" clumsy passive, "situational comedy", not using abbreviations doesn't make you sound smarter, it makes you sound like a gape-rectum. Your inept prose tells us all we need to know about your intellectual faculties.

keep the bastards honest's picture

agreed slipreed    and re the above Harvard Study, fits with the TV shows paid fantasy:

Harvard gets paid to say what the money wants:

Sweet deal? Sugar industry blamed fat in fake studies – study RT.com

 

poland spring's picture

I think it was The Simpsons...

Archive_file's picture

There's a reason vampires and zombies are all the rage on tv now.

NoDebt's picture

Very true.  "Zombies" as we know them in popular context (mindless, unstoppable hoards of flesh-eating creatures that spread their disease to everyone they bite) are actually an analogy for COMMUNISTS/SOCIALISTS, since as far back as the 30s/40s in film and literature.  

That you and I (and many others) intuitively feel that connection is ABSOLUTELY NOT by accident.  Such is the power of a well crafted metaphor.

Remember, my friend, almost everything you think is new is actually old.  Truly new, innovative ideas the world has never encounterd come along only very very rarely.

Squid-puppets a-go-go's picture

and then you have the popularity of Vampiretainment.  Let's see, where do we find alluring but predatory behaviour? What system of economics might have some resemblance to that?....

w a l k - a w a y's picture

 "Truly new, innovative ideas the world has never encounterd come along only very very rarely."

Try this on for size.

Until humanity evolves to from Primitive Unconscious Procreation to Civilized Conscious Procreation nothing fundamental will change.

In the reproduction department, human "civilization" is no different from a bunch of monkeys (or any other animal).

"Parental conditioning is the greatest slavery in the world. ... because the child is the father of the man. If the child is brought up in a wrong way then the whole of humanity goes wrong. The child is the seed: if the seed itself is poisoned and corrupted by well-intentioned people, well-wishing people, then there is no hope for a free human individual." -  Osho, the book of children  [chapter 3 - Conditioning]

Ponk's picture

I disagree with this. Zombies are most frequently a metaphor for mindless consumerism or brain-washed TV watchers, and vampires for financial capitalism. I can't think of any examples where zombies function as a metaphor for communism, although I might be overlooking something, same with vampires. Got any examples?

Frito's picture

You'll know the gig is up when they start playing "The Road" on a loop :-)

dojufitz's picture

Lol......comment of the year!

ItsyBitsy90's picture

Well the sky started to fall a bit in WKRP in Cincinnati - - - when Les Nessman made it rain live turkeys because he thought they could fly? 

fxrxexexdxoxmx's picture

I swear I thought turkeys could fly.

WernerHeisenberg's picture

Selling housing has become the existential national security tool of AUS/NZ in a manner most Americans could not fathom.  AUS/NZ natives have lived beyond their means for nearly 30 years without having a reserve currency.  How?  By selling the land under their feet at increasingly inflated prices.  Limits on Asian money laundering are a suicide pact.  Any significant hiccup in house prices and the banks would fail, the all important welfare states would collapse.  There is no happy ending to this one.  Both countries could become like Greece overnight, NZ could even get like Venezuela at the end, all of the elements for that are in place.  Homelessness has already exploded in NZ, what will happen if and when the housing Ponzi shuts down would be epic.

New World Chaos's picture

4 burquas on the street last weekend in Auckland.  That's unprecedented.  Not long ago, they were never seen.  Heaps of bums too.  Want to meet in real life to have a winge about it?

Son of Loki's picture

Australian banks will not fail. The gubmint will threaten "systemic collpase of the financial system" and drag out the Kangaroo version of a trembling Hank Paulson who will claim if there's no Bailout, everyone and everything will perish.

 

And the multi-trillion dollar bailout package will come making bankers richer there then Croesus and moar Mainlanders will flood in with their Loot ... while the Australian middle class sinks lower, just as in the USA.

Squid-puppets a-go-go's picture

former PM Toy Abbott signed aussies up to bail in legislation at the G20 in brisbane, 2014

3Wishes's picture

Indeed the concept of "Printing ones own money for the benefit of the nation is deemed Loony tunes" BUT borrowing and paying interest to the US FED is deemed as sane !?

JohnGaltUk's picture

I was born in New Zealand but now live in the UK but follow the NZ markets.

One word for property prices in NZ, "insane". New Zealand houses are nothing more than glorified garden sheds!!

You are very right, Austrailian banks are in severe danger.

keep the bastards honest's picture

Werner it maybe a national pastime BUT that means scumbags like developers eg HIgh Rise Harry Triguboff and his media mates, negative gearing (house losses against personal  income) loved by the rich and politicians, reale estate agents (offices in Beiging, Shanghai etc) Banks ...

BUT does not include most of the population. Most of whom a suffering terribly. Aus Govt stopped any correction during the GFC.

The FED bailed out the  the Big Four Banks and the RBA.

 

 

zagzigga's picture

I read an article today that the German people buy homes to live in and pass on to their children, not to speculate or sell them for a profit. And the government also makes sure the housing supply keeps increasing together with demand to keep prices in check. That's the housing model the US needs. It is a shame that the US govt in collusion with the Fed supports incessant speculation which makes housing unaffordable for most working Americans.

Wile-E-Coyote's picture

I was on a train in Berlin travelling out to the suburbs and I was shocked to see areas of housing that looked like ramshackle sheds in heavily wooded areas. I wanted to ask someone what this place was but I had on one to ask. It went on for miles.

zagzigga's picture

I read an article today that the German people buy homes to live in and pass on to their children, not to speculate or sell them for a profit. And the government also makes sure the housing supply keeps increasing together with demand to keep prices in check. That's the housing model the US needs. It is a shame that the US govt in collusion with the Fed supports incessant speculation which makes housing unaffordable for most working Americans.

ali-ali-al-qomfri's picture

Germans also build with longevity in mind.So you could hand it down.

American homes are built with tootpicks and pressed rock.

Even a 25 year roof doesn't last but 10 years.

 

AnngeloJamaica's picture

That seems to be the problemo with a think tank.

with all these think tanks around and academia with their heads up my ass no wonder this world is a Harvard shit pile.  

keep the bastards honest's picture

Anngelo... think tank as reported in Australian news. was concerned about Aus buying 52 billion of  USA submarines. 

Amicus Curiae's picture

yeah

so?

we bought french instead..

but we DID buy way many of your shitty noflyum warplanes that dont fly dont work n wont even be ready

or of use by the time uSSa drags us into an asian war

unless we also find a Trump to stop the insanity

 

re house land in aus

oh yeah

land bought for 35k next to mine

jerkoff trying to sell for 68K

not done a thing bushblock NOT ok for home w out huge consent approval etc etc

between OS investors..

and the Neg gearing to allow the better off to buy many homes to rnt out at obscene prices and  block others from owning at a fair price?

yeah

OUR GOVT has fucked us over right royally

and the tURD in power is an ex goldbags sux vermin

Mr Poopra's picture

Housing is already in collapse, and with no bailout this time.  Will be hilarious when Trump tells the banks to go fuck themselves.