By: jennyxuanwu
27/10/2009
1:13 pm Yahoo! Profile:
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hello lasty
The diffrence between here in Australia
and Hong Kong is: it is easier for the people, after having lost everything in the sharemarket and property investment(overly stretched, trying to find tall buildings and jump off. Whereas in Australia here there are only tall buildings on the Gold Coast and in some major big cities
Check out what had happened in HONG KONG afer 1997 when Southeast Asia finacial crisis happen, would you? |
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By: lasty49
27/10/2009
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Menta,
You give Hong Kong as an example.
May I suggest you check out their property prices and rents.
http://www.atimes.com/atimes/China/KJ23Ad02.html
You can make them put down 80pct deposit but it doesnt deter the price.
When you have the cash rich buying up prime locations banks dont come into play.Credit isnt required.
What does come into play is space availability.
Australia has plenty of it but lacks transport. |
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By: jaymarcel
27/10/2009
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| Hi Ang, I'd like to disagree, housing is affordable, that is why house prices are still increasing as you say, for as long as unemployment figures stay low I don't think much is going to change, interest rates are a risk but not until they go above 9%, with these in mind there is no problem with debt on assets that have a likelihood of going up in price & provide a place to live but debt on a car, a big tv or even furniture then there is a big risk. |
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By: ecchi.gaijin
27/10/2009
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| Sorry, there is a third but highly unlikely scenario. Let consumers learn the hard way and we might go back to the "older" days of people only borrowing what THEY know they can afford. |
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By: ecchi.gaijin
27/10/2009
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"any thoughts about what the govt, RBA, banks and housing industry should do (differently) to keep real estate prices stable and affordable?"
Ang, basically 2 ways to do this. Either let the banks learn their lesson the hard way, or regulate them. Easy credit is what allows the supply/demand equation to be demand driven to the point of unsustainability. Either the banks themselves or the government need to tighten the reins. |
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By: mentawaisurf
27/10/2009
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Banking deregulation (leading to a chase for market share and laxer credit revues), negative gearing, capital gains tax exemptions, FHOGs, loose monetary policy and especially 90-100% LVR mortgages helped fuel the housing and debt bubble that, coupled with property spruiking from all and sundry vested interests and the media, helped create the great investment mania of the last decade.
We should have learnt from the pain of the burst bubble in the early 1990s. Some countries did. Hong Kong has managed to sidestep the troubles affecting mortgage markets world-wide, thanks to a 30 per cent down-payment requirement on all property that has been in place since 1991.
It's too late for us now. We must have our bust and take our medicine so that ultimately we can achieve affordable housing again. Then a house will be somewhere to call home and not an investment to leverage into further speculation or use as an ATM. Only then, once the dust has settled, can we rebuild in a sensible and sustainable manner. |
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By: ecchi.gaijin
27/10/2009
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Menta, too gutless to put your balls on the line by answering a question yourself? I mean it was a REALLY simple question, how abut YOU answer it (not someone else in another of your moronic links to deflect from your incompetence).
As for "property values plummeted over the next 3-5 years and then took some 10 years to recover"
For someone whoe is so well read, you sure get your facts wrong, perhaps that is why you stick to quoting other people's opinions?
Graph 3.1 on page 31 of Ang's link
http://ifile.it/y9rafhx/report.pdf
You call that plummeting? |
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By: akdoc1
27/10/2009
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ang house prices are emotive but there is a strong link to credit but there is no logic behind them. In 1974 the next door neighbour sold their house for 400,000 pounds 6 months later I sold my identical house for 800,000 pounds. Any changes in the economy were negative, wages had fallen and the only positives for rises was the pound had lost 18% of its value while going decimal and credit was easier to get.
The easy answer to your question is stiffer credit regulations.
The volatility in housing prices only occured after the average Joe could access mortgages. Before then when most people rented from big business or government, house prices varried very little and dropped with age like any normal asset. Builders had little muscle against the large landlords so wages and prices were low in the building industry and government used their own builders not contractors.
The entrance of the average Joe into the housing market seen landlords starting to flogg off their old building well above their asset values. Landlord builders stopped building rentals and started to sell direct to the average Joe which seen prices and wages in the housing industy rise.
The average Joe has no muscle in the housing market until it becomes deppressed, when depending on the financial position of the seller prices can be knocked down and prices usually just follow emotive market trends dependant on available credit. |
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By: lasty49
27/10/2009
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ang,
Yes love.
I had a feel about this on friday as I mentioned. |
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By: lasty49
27/10/2009
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Ang,
We it does come down to a simple supply and demand principle.
People want to live close to the cities.
Australia in general needs to spend billions on a rapid transport system to alieviate the pressure on cramped housing which demand high land prices.
Unfortunately govts both local and federal have no foresight and would rather feather their own nests. |
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By: ang101000
27/10/2009
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Lasty,
on a separate note; are you expecting a correction this week?
I don't expect more than a one line comment... |
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By: ang101000
26/10/2009
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Menta, Lasty, Al, Pete, and All,
It seems that we all agree:
1) housing is not affordable
2) house prices are increasing faster than wages
3) interest rates are volatile
4) debt levels are unsustainable.
There is clear need to change the existing system, which is highly cyclical (speculative bubbles and economic troughs) and overly reliant on high debt levels.
Lets change focus, here is a question for the resident experts;
Given that housing is a social (and emotional) issue, any thoughts about what the govt, RBA, banks and housing industry should do (differently) to keep real estate prices stable and affordable?
Please don't simplify the issue to a basic market equation of supply/demand and price equilibrium. |
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By: lasty49
26/10/2009
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Menta
let's just take a look at how Australian banks make their profit.
You can be assured that given the cost of funding they shouldn't increase their bottom line given bad debts etc.
It's all about non risk for them which normally results in commission or fees.
You shouldn't have to wait too long first results come out Wednesday |
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By: mentawaisurf
26/10/2009
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Pete, as I'm sure you're already well aware, 20 years ago was at the very peak of our last great housing bubble. Combined with historically high interest rates during that period it's no wonder mortgage holders couldn't meet their repayments and property values plummeted over the next 3-5 years and then took some 10 years to recover. Comparing that period to today is both relevant and prophetic. Of even more relevance, how about the huge run-up in house prices and debt over the last 10 years. Now that makes for a much more interesting comparison (I can even run the figures for you if you wish)?
I would have thought it was pretty obvious by now what is going to cause our housing bubble to burst. But for a more detailed explanation, Kris Sayce once again hits the nail on the head.
Lasty, so much for our so-called 'prudent and well regulated banks'. What a joke;
The 'Smoking Gun' Behind the Property Bubble
by Kris Sayce on October 26, 2009
http://www.moneymorning.com.au/20091026/the-smokin g-gun-behind-the-property-bubble.html |
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By: lasty49
26/10/2009
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Menta,
Australian banks have a captive audience.
They are risk adverse compared to their foreign bankers.They love to charge a fee or ten.
On average Australians pay nearly $200 more in fees than countries like the UK which has a similar banking system.
Ontop of that they own Superannuation companies,fund managements and financial planning arms.
They buy up competition, thumb their noses at the govt and rule the roost.
Foreign banks have come and gone trying to get a patch on their turf.
They cant compete in their backyard. |
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By: ecchi.gaijin
26/10/2009
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Menta, forget about keen is telling you to say and try thinking for yourself for once.
Ang gave graphs which showed that 20 year ago housing was just as unafordable as it is today. 20 years the bubble has been maintained.
What is going to CAUSE the bubble to burst? |
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By: mentawaisurf
26/10/2009
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| Lasty, Keen's main issue is Australia's record level of household debt and our ability to not only maintain the debt but to take on more. Banks know the only thing preventing a systemic debt deleveraging and asset deflation is our ability to continue to expand our level of debt to keep the ponzi going. Given we're already experiencing debt overload, the bubble cannot sustain - regardless of government meddling and artificial stimulus. |
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By: lasty49
26/10/2009
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Menta,
Im sure there will come a time when the market tops out but when house prices decrease Australians who can service their debts will still need to repay despite their home price falling.
Unlike the US where when the going gets tough they can walk away from their debts then.. plead insane, sue the bank, go to housing rehab and appear on Oprah with a book launch. "How to be rich without a care in the world". |
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By: davidjtroy
26/10/2009
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"The idea that government and corrupt banks can keep an asset price or market inflated forever is not only misguided - it is just plain wrong"
The day you can answer what will cause housing prices to drop is the day you will be one step closer to actually being right. |
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By: mentawaisurf
26/10/2009
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Australia's big-4 banks have been hastily chasing market share and loading up on residential mortgages like never before (now at 60+% of their book value on an incredible market-share of 85% of all Australian mortgages).
For debt levels to increase, and maintain the ponzi, banks have to do it one of two main ways: either they reduce their lending standards or they allow borrowers to increase their leverage. Either way, it's setting the market up to implode. And with both happening then it just makes the implosion even worse.
And our banks are ably supported by our government who have 'intervened' in the market to try and keep our housing bubble inflated by any and all means (even if dangerous and short-sighted). The FHOG bribe and low interest rates merely lured into the market the last and most marginal borrowers which will only cause a more severe collpase with the most collateral damage possible. In any market where there is manipulation and distortion of that market by government, it inevitably leads to a correction in prices.
The idea that government and corrupt banks can keep an asset price or market inflated forever is not only misguided - it is just plain wrong. |
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By: ecchi.gaijin
26/10/2009
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Any approach the governemnt takes will have similar consequences, it's all a matter of timing. ASSUMING they fix the inderlying problem.
Bail out the companies in trouble and you spread the problem out of more people (taxpayers) to pay back over a longer period of time. This allows a stabilised economy with a higher but longer low.
Let the problem companies fall on their face and you get higher unemployment etc causing a lower yet shorter low to the economy.
Which would you prefer, more unemployed or higher taxes? Because those are basically your choices. |
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By: mentawaisurf
26/10/2009
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Wayne Swan is further expanding government intervention in the Australian housing market. It began last September when he bought $4 billion of residential mortgage backed securities (RMBS). At the time he called it a "temporary initiative" to encourage competition in the mortgage market. He soon added another $4 billion and, in addition, guaranteed big banks wholesale funding. Swan again recently intervened, at the request of a worried RBA given almost the entire $8 billion program had been blown within a year, and announced yet another $8 billion of taxpayers money at risk in Australia's RMBS market. It's a shame Australia has not learnt anything from the US government's meddling in private-sector mortgages.
Australia's big-4 banks have the highest ratio of residential mortgages on their books of all our fellow G20 banking sectors. Many still naively believe that makes them safer. In fact it makes them much riskier as they are terminally exposed to an over-due housing correction in this country. And thanks to our government's 'intervention' at attempting to keep our over-inflated housing bubble from collapsing - now we are all on the hook. |
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By: ang101000
25/10/2009
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Hi Lasty,
'Govts guaranteeing banks seems hard to take.'
I decided to play the one arm economist (: You know; on one hand _ it is hard to applaud the govts decision to underwrite the banks' overseas borrowing, on the other hand _ we all know; it had no choice (given Aus debt levels & all G20 govts have done the same, imagine the capital flight to safety if not..).
In order to keep the economy functioning, the banks need capital (yes Basel 2) and should not be overexposed to 'very risky assets' or unsustainable lending. They, after all, are in the business of providing a vital utility to society and organizations.
Most economists would agree, govt should not offer blanket guarantees to any private industry or company. We all know, the banks payed for that guarantee (although big banks payed less than small, regional Institutions).
Furthermore, given the limited competition and heavy concentration of retail banking in Aus, mergers should not be allowed. Banking is a high capital and high barrier of entry enterprise (due to the treasurers license requirements), the 'too big to fall' four may further restrict new market entries. It could be argued that limited competition benefited the big banks, and to a lesser degree, their customers.
Although many agree (and signed petition to request action) on the need for banking reforms, the govts (treasurer) view is that the system is sound, sustainable and profitable for shareholders. There don't seem to be a need for microcredit (expl Kiva) type lending or more specialized venture capital industry lending in Aus. |
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By: lasty49
25/10/2009
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Govts guaranteeing banks seems hard to take.
What about ratepayers bailing out councils who were out of their depth in their investment decisions ? |
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By: firefly_au
24/10/2009
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Hi All :)
After reading Menta's post earlier I did a little further research on the ASX historical PE ratios from what I found I believe the historical long term average is around 16.5 does anyone have a different figure in mind.
Now at the darkest hour in March these PE ratios fell to at least 10 based on the capital price and forecast earnings. At this ratio Equities were very good value and you could buy almost anything and do well in a recovery!
Since then many companies have been under forecasting their earnings and based even on that the Market average PE at current capital prices are still only around 14.5. Also we are still in a very low interest rate environment which while it lasts would support higher then historical PE ratios.
Great care needs to be taken with market valuations, as measured by average price earnings (PE) ratios. At the peak of the bull market, too many commentators said the market PE - then about 15 or so - was just above historical averages. They didn't realise the average PE was too low because earnings forecasts were too high.
And the downside risk now is that forecasts are still too high and actual earnings too unstable to rely on PE ratios. Let's assume average earnings forecasts are still 30 per cent too high - if so that would put the average PE ratio now of about 14.5 closer to 18.85 - Above its historical average.
Now lets assume companies have returned Q1 earnings well above their forecast and that their forecasts are 30% too low then their PE ratios are actually 10.15 and they still represent excellent value value. given the low interest rates and historical PE ratios.
IMHO It all comes down to is the GFC over or not? Your view on this will be heavily coloured by your expectation of the times ahead so good luck!
BYE :) |
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