By: lasty49
5/12/2008
11:43 am Yahoo! Profile:
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Deadly,
Thanks for your input.
Lets just say that if rates went back up my asset should have increased as inflation would have taken hold.In other words the economy is back to normal.
I could rent it out. Sell it or Keep it.
You are missing the point however.
The exercise was to point out how cheap it was to purchase a property with Keens assumptions.
You tell me where in Australia could you rent a 3 bedroom house for $500 a month ?
You would have the stubborn renters who had never a desire of ever owning a property taking a serious look. |
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By: deadly_trojan
5/12/2008
10:34 am |
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By: ecchi.gaijin
5/12/2008
10:33 am Yahoo! Profile:
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| PS. In J@pan there is death tax which deters people from owning larger value assets. |
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By: ecchi.gaijin
5/12/2008
10:30 am Yahoo! Profile:
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"Lasty and echhi,
Think I will trust Steves take on this over your call. I also think your assuming "
What call exactly have I made? I see a lot more assumptions from people posting on here than I have made.
I quite often see people referring to others having made predictions of maintained growth in the property market but I don't recall seeing many ACTUAL claims to that effect. Most people are saying the downside predictions are extreme, not that they will be non existent.
"Well, in ja pan an interest rates are near zero and rental returns high, so why doesnt everyone buy a place?"
People don't buy property in J@pan because it isn't part of their culture the way it is here. Paying high rent, long distance travel to work, working rediculously long hours are part of their culture, perhaps if you understood a few more things than you think you do you might not have asked such a naive question. |
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By: old_spacer
5/12/2008
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| Sorry lasty. I saw it all coming and Keen is right. We are all perfectly scroomed (screwed and doomed). Quoting Gerald Henderson, the apologist for the status quo who saw nothing coming is a perfect joke. Sorry. |
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By: iconoclasmos
5/12/2008
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All of this information provides a nice "rosy" picture for the Australian housing market under circumstances where there is continued and vibrant economic growth. However, under current conditions, this is definitely not the environment we are finding ourselves in.
Only if one has a superficial understanding of what is taking place in world capital markets, since October 2007, and more specifically the entirely dysfunctional debt market rather than the schizophrenic equity market, can one believe that all bodes well for access to credit into the future.
The commercial paper market, as part of the global money market, is dysfunctional and has completely seized up; central banks around the world are the only lenders that are propping up these zombie markets.
Moreover, this directly implies that financing via the commercial paper market, being the source of funding for credit card receivables, car loans, commercial loans, renovation loans, personal loans, et cetera is going to be very expensive, and pretty much inaccessible to most, save those with outstanding credit. This segment of the Australian population is becoming ever more minuscule.
The spreads for even "AAA" corporate bonds, as compared to their zero risk equivalent Government debt securities of equivalent maturity are extremely expensive. This will put a stop to any source of cheap credit for the corporate sector. Bye bye all these leveraged buy outs that should never have happened in the first place. Moreover, this will precipitate further corporate collapses, likely GM will go bankrupt. This does not bode well for the Adelaide Holden plant, more job losses.
Australian banks raise about half their cash from local deposits, a quarter from local bonds and the remainder from the global debt market. Banks are no longer able to access the latter two sources of funding, as they once did, neither in quantity nor in cost.
[cont.] |
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By: iconoclasmos
5/12/2008
12:53 am Yahoo! Profile:
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[cont.]
One just has to look at all the local mortgage funds that have been forced to freeze their redemptions and close off their funds, whilst the global debt market is severely risk averse to MBS funding. The rebalancing of capital to bank deposits, due to a fleet to saftey, is by no means going to offset this funding gap.
The 2nd tier banks, BoQ, Bendigo et al., with their current BBB+ ratings, will be priced out of the market reducing further credit availability.
With the ANZ and NAB recent attempt to recaplitalise, via the allocation of preference shares, sends out a strong signal questioning the quality of their balance sheets and their ability, looking forward, to willingly and confidently lend to an economy that is rapidly weakening.
The mortgage securitisation market is dysfunctional, and to all intense and purposes, is shutdown; the Government being the buyer of last and only resort of these securities.
The recent $8 billion announcement to support this market is a drop in the ocean in comparison to the amount of securitisation only one year ago of approx. $200 billion.
The no-doc and low-doc loans market has been decimated.
And with all this baloney that Australian banks are one of the safest and that we have a strong regulatory frame work overseen by APRA. Where was APRA when HIH went under?
We will see in time, if Australia's banks are prudentially managed and we will see if the bureaucrats are worth what they get paid.
This should send a *very* strong signal to all that we are heading into significant credit restrictions with credit rationing being the result.
Moreover, this credit rationing will be so broad that no part of the local economy will be spared the impact of this, when it really begins to feed it's way through next year, is going to be a real d oozy! |
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By: iconoclasmos
5/12/2008
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[cont.]
Personal consumption, corporates capital expenditure and borrowing, housing, car, renovation, personal finance credit, personal retirement income, are all going to be significantly impacted on the negative side.
Low interest rates, won't matter to someone who is about to loose their job or going to inspire someone to take on a large debt, and neither will the lending institutions be willing to lend without the debt being subordinated with a hefty haircut.
The $10 billion stimulus will be a drop in the ocean, given that 25% of GDP was attributed to debt. The stimulus package is only 1%. This hasn't taken into account the certain collapse in export revenue that has suddenly come to a shuddering halt. Pretty big gap left, hey!
That's, after all, why its called a credit crisis.
So the over inflated house prices that have existed during this housing bubble in Australia, is going to implode big time.
I think Steve Keen might actually be conservative with the 40% price fall from peak to trough. |
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By: titfortat50
4/12/2008
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Lasty and echhi,
Think I will trust Steves take on this over your call. I also think your assuming a limitless supply of cash and that there would be finance available and willing buyers with jobs etc I am no economist but then again neither are you from what I have read.
Can you show us the model for your analysis it seems a bit simplistic to me?
If I was told in 2007 that fuel, the All Ords, RioTinto the Australian Dollar and Interest Rates among others where to drop by 1 to 2 thirds in value, I would have told them they were dreamin.. but it has happened.. along with massive financial devestation in the U S A.
If something seems profound or unbelievable, that on its own, doesnt make it less possible.
Regarding your example.. Well, in ja pan an interest rates are near zero and rental returns high, so why doesnt everyone buy a place? Because property has lost value for almost 17 years straight leaving many to paying off debt on something now worth a fraction in value. among other reasons. |
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By: perceptions_now
4/12/2008
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lasty,
As usual, in hindsight, we will all be wise.
In the interim, we are in unchartered waters and the perfect storm IS headed our way.
There are a number of once in history events, now in play and whilst the final outcome is not guaranteed, the little d is a certainty and the big D is a big possible.
What are the once in history events -
Population (Total & Aging)
Peak Oil
Climate Change
Good Luck & watch the Debt!
http://seekingalpha.com/article/108387-the-perfect -storm-semi-annual-economic-review?source=email |
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By: pon.star
4/12/2008
5:04 pm |
Message deleted. |
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By: pon.star
4/12/2008
4:06 pm |
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By: mentawaisurf
4/12/2008
3:54 pm Yahoo! Profile:
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Robert Shiller, Professor of Economics at Yale University, was on 60 minutes about a year ago describing his forecast for US housing (a drop in value of about 40% over coming years).
Like Roubini & Keen he was likewise ridiculed by his peers and labelled an alarmist. Since then his outlook appears right on target.
Some of you may remember when he was asked if the same would happen to the Australian housing market, when to the surprise of the interviewer he announced - 'from what i know of the housing market in Australia, that seems highly likely'.
Given our record level of debt, a housing bubble that grew larger than the US, rising unemployment, increasing housing supply (forced sales) and waning demand (fewer people willing or able to buy), tighter lending standards and the worst global credit contraction in a generation - Shiller, Roubini & Keen's outlook seems more than likely, call me an alarmist too if you must, but it now seems inevitable. |
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By: lasty49
4/12/2008
3:37 pm Yahoo! Profile:
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Perceptions,
Have a read of this and tell me Keen isnt extreme.
Even Roubini doesnt go that far.
http://www.smh.com.au/news/opinion/gerard-henderso n/doomsayer-gets-instant-fame/2008/10/20/122435114 9788.html
Now thats extreme. |
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By: perceptions_now
4/12/2008
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"When the alarmist gets extreme..He is subject to being ridiculed."
lasty,
What is extreme?
Keen & Roubini have some similarities in their predictions.
The US is already at a 1% rate and the suggestion is 0% for next year.
Many US residential properties have already fallen 30% and a further 20% is predicted, with some areas already off 50% and in some areas, they are not selling at any price.
Yes, I know Australia is different and is better placed than the US.
But, Yes, we will also have some substantial falls in rates & housing prices.
Oh, and Roubini was regarded as a nut job, his standing is now a fair bit higher.
Only time will tell, where Australia goes, we all make up our own mind and then wear the consequences. |
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By: lasty49
4/12/2008
11:51 am Yahoo! Profile:
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Neutral.person
Did Keen say house prices will collapse by 40%?
Did Keen say Aust Int rates will go to zero by 2010?
Can I sense a follower of Keen wishing he didnt go out on such an extreme tangent?
Sure alarming people is fine.. You get a following..
When the alarmist gets extreme..He is subject to being ridiculed. |
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By: ecchi.gaijin
4/12/2008
11:18 am Yahoo! Profile:
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Neutral, there is a lot of logic to what Lasty is saying.
The "Australian dream" has always been to own your own home and more recently has been to also own rental properties. In that sort of cultural climate what do you think will happen once property prices drop by 40% and interest rates drop to 2%? Sure there will be people effected by unemployment and other economic circumstances that will make a mortgage unattainable but those sort of figures with our "Australian dream" ???????? |
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By: kennedys.home
4/12/2008
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Steve Keen is obviously an intelligent man. However I think he may be suffering from a bit of analysis paralysis. Okay he is educated, a Professor. I sat & listened to him on the sky business channel last night with a complete open mind. I dont know if its the eternal optimist in me or the fact that the debate was pretty much equal with both sides having really valid points.
I guess we will see. |
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By: neutral.person
3/12/2008
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Hello Lasty!
You should be more careful before you post nonsense. Im sure if you read keen's blog aprior you would not have posted your nonsensical argument.
Once again Lasty goes on desperately trying to put keen down and quote references to irrational articles whose columinst keep talking from their aXXS. Lasty i reckon your really desperate.
The US has now officially acknowledged a recession and are now begining to talk about depression. The economic outlook for us has been released today a 0.1% growth is not at all promising infact we are not very far off from going into negative territory.
Your phony models about justifying house prices based on wages, falling interest rates and endorsement of high debt just shows how unintelligent you are.
I encourage you to visit and participate in the blogs of Steve Keen. You will find out that he is more into the macro economic aspects of this collapse and his foundation are very strong and he makes solid sense rather then focusing on the real estate part of it like yourself, glen stevens and others. He is very articulate and his models seem to be a good fit with the current circumstances and he is again and again proving to be correct and on the contrary everyone else are looking like jack asses.
So before directly plaqurising some dumb columinist article I encourage you to thoroughly research the underlying truth. Otherwise, you make yourself look like a dumb wit.
cheers. |
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By: briaaan2003
3/12/2008
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| hey kennedy!!! wheres my doughnut???? im hungry!!! |
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By: kennedys.home
3/12/2008
7:27 pm Yahoo! Profile:
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Steve Keen plus other experts on the opposite side of the fence; tonight - WED 8:30-9:30
FOXTEL SKY BUSINESS CHANNEL
MONEY MAKERS PROGRAM
Should be intersting to watch |
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By: pon.star
3/12/2008
5:47 pm |
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By: lasty49
3/12/2008
4:48 pm Yahoo! Profile:
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Steve Keen is predicting housing prices to fall 40% and interest rates to go to zero.
So if say the average house price is $450k then property has to fall to $270k.
Then he predicts by 2010 interest rates will be zero.
So the average bank loan will be 2% above the RBA so we can now borrow $270k @ 2% which is $5400 interest per annum.
That equates to $450 per month repayment.
Well the generous Australian welfare system pays $449.50 per fornight for a single person.
I dont know what you are teaching these kids at UNI professor but BS comes second to facts. |
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