By: firefly_au
13/10/2009
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Hi Ang:)
Thanks for your detailed and thoughtful reply - oh and thanks for explaining about Paul and the "he he :)" was just my silly way of trying to convey that I mean no harm while asking what may be a personal question I was not intending to infer anything else - so I am sorry if I gave that impression :)
BYE :) |
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By: ang101000
12/10/2009
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Menta,
I expect from you a bit more reasoning and a balanced approach to investment issues (even if it involves housing and Professor Keen).
'In the April edition of his Debt Watch bulletin, Keene referred to ABS figures that showed there were 800,000 unoccupied dwellings on census night in 2006. Over the long term, more houses are being built than are being filled by a growing population.'
Calculate from the total population numbers and total existing dwellings;
1) the percentage of people on vacation (not home on the census night)
2) the properties on sale on the market (therefore empty)
3) the properties under contract exchange (therefore empty)
4) properties that are rented and perhaps empty for only few weeks (like mine in Canberra for 10 days due to painting)
5) properties under renovation (therefore empty)
6) holiday homes (only occupied on certain times per year)
7) properties that are still under construction (interior not finished)
etc, etc, 800,000 is not a huge number considering that people on vacation in Australia for say 2 weeks at time would account for about 400,000.
In regards to the taxation issues such as negative gearing, land tax, etc; see page 59 and onwards 'The Senate Select Committee on Housing Affordability in Australia' report. The link
http://ifile.it/y9rafhx
Sorry, many can spot a false argument and I can't let it go either. |
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By: ang101000
12/10/2009
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Hi Firefly,
'You may be correct about the sustainability and risk profile of Australia's investment regime!
I just have one question for you - What do we invest in if not property or equities?'
I think, we are the survivors in an orchestrated Ponzi Scheme. We should aim to create a long term sustainable environment built on productive enterprise, the type that produces real 'things'.
See the cost of living on easy credit, the idiocy of diverting most of Aust capital into mortgage debt:
http://en.wikipedia.org/wiki/List_of_countries_by_ current_account_balance
The top of the list - countries that actually produce more than they consume, either through manufacturing, via sovereign ownership of resources or just plain good business acumen.
At the bottom of the list are the debtor countries that consume more than they produce.
The US has the largest CAB of -$731B. Given that US has x 15 times the population of Aus, in comparative terms Aus has a larger effective CAB equivalent to -$845B.
I wonder about our future...
'Just one more question - who is Paul ? he he :)'
Paul and I have worked together on many successful projects, he is a excellent economist, better still; he has a brilliant mind. Oh, there is no 'he he :)' |
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By: lasty49
12/10/2009
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Menta
when data is starting to point signs of recovery not just here but in other countries one shouldn't dismiss it unless your not telling me something I'm not aware of.
And yes I've seen what the bears are throwing around as an excuse but still the uptrend remains intact despite several attempts by them to sell.
Until there is disturbing news and this uptrend is broken I will be in hibernation but I'm not in the business to wear a fur coat or a set of horns I'm here to enjoy the profits whether it goes up or down |
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By: mentawaisurf
12/10/2009
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Lasty, there is no inflation, just a great deal of inflationary expectations already priced into markets. Hence the interest rate rise by our RBA as they merely follow the market (ie. due to increased treasury yields during this bear market rally in stocks).
"No recession, No zero interest rates, No house price falls, No unemployment at 15-20%".
Lasty, it is dangerously premature to be calling that the worst is over or that recovery is imminent (as many of our so-called experts are already doing and markets are already pricing in).
As the bear market resumes and deflation intensifies in coming months then these 'experts', together with our RBA, will be forced into yet another back-flip as they once again chase the market down and down (while they yet again proclaim that "no one saw it coming".)
Keen called the initial phase of the GFC correct, when few others did, and his longer-term forecast is likely to be spot on too. |
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By: akdoc1
12/10/2009
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| What is the criteria for unoccupied dwellings? I have a bush block where the previous owner lived in a one roomed shack. The letter box still gets filled with junk mail but as a dwelling which it previously was forget it. Local council would never let any one live there permantly and there are probably lots of these old dwelling still counted as well. You also have farmers with unoccupied dwellings some times they can have 3 or more that were used for workers. Yes Keen is right there is thousands of empty dwellings Menta but as Lasty said position is the important point that will effect prices. |
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By: firefly_au
12/10/2009
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Hello Ang :)
You may be correct about the sustainability and risk profile of Australia's investment regime!
I just have one question for you - What do we invest in if not property or equities?
Nothing else seems to be worth the effort given our current tax regime so are you suggesting some radical changes to our tax laws to enable the change in risk profile for all Australians?
Just one more question - who is Paul ? he he :)
BYE :) |
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By: lasty49
12/10/2009
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Menta,
Have you seen the holiday property market? Its offered along with luxury boats,planes and cars.
The only thing that will make this market collapse is debt serviceability. ie massive unemployment or interest rates going through the roof.
The only reason why interest rates are going through the roof is because inflation has kicked in.
Now Keen got the heads up from the US and UK that the property market wasnt looking rosey over there.
His prediction was for a similar fate here however he missed the mark.
No recession, No zero interest rates,No house price falls, No unemployment at 15-20%.
So Menta, your oracle has been off course.He had the greatest chance of getting it right with a bit of "inside knowledge".
Why then do you believe he can get a 5-10 year projection correct when he failed with all that info?
Thats a big call with no real substance to support it as there are too many probables.
The way this govt are letting in asylum seekers in 5 years there wont be enough land left ;-) |
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By: mentawaisurf
12/10/2009
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| Lasty, a wave of mortgage defaults and forced sales will be led by the heavily indebted FHB market (as indicated below) followed by a broad market sector decline of overleveraged mortgage holders. This would also lead to a surge of investment and holiday properties flooding the market as investors rush to try and beat the housing market collapse. Government will be unable to steam the flow as incentives would no longer have the desired affect with buyers unwilling to borrow to purchase into a falling market while banks would become increasingly reluctant to lend against falling asset values. As a result, Australia's median housing prices would likely fall as much as Keen projected over the time frame he forecasted (ie. about 40% over 5-10 years from 2007). |
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By: lasty49
12/10/2009
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"And yet the best locations (city waterfront, high-end CBD etc.) have led the market with the biggest falls."
Different markets Menta.
Keen's bet was on the Median Australian City house price. |
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By: mentawaisurf
12/10/2009
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And yet the best locations (city waterfront, high-end CBD etc.) have led the market with the biggest falls. The only reason that the lower-end market did not follow was due to the FHOG bribe which, together with the "now is the time to buy" rhetoric of vested interest groups, helped lure the buyer of last resort into an over-inflated housing market at the worst possible time.
However, the 'bribe' is now phasing out and all the talk of rising interest rates will deter these marginal borrowers from continuing to enter the housing market in record numbers (which has largely been keeping that very market inflated). |
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By: lasty49
12/10/2009
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Menta
Location Location Location.
In areas where there is employment there is a shortage.
Im sure you will find the ir is a supply in rural towns or holiday areas.
Unfortunately Australia's transport system isnt supportive of these satelite townships.
Supply and demands rules.
Now Keen once again appears to use data that doesnt take into these variables.
Unless he has filtered as where the "oversupply" is then using census data is pointless.
Dont you agree? |
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By: mentawaisurf
12/10/2009
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This is a crucial issue because the property bulls claim the main reason that housing prices in Australia will continue to rise is because of a supposed housing shortage.
Another key factor is that Australia has one of the highest levels of investment property ownership in the world, and investor loans constitute a significant proportion of the mortgage market.
So vested interests, who must keep this ponzi scheme growing for their own personal benefit and from fear of collapse, now allege that overleveraged borrowers in residential property investments will simply be able to pass the interest rate rise on to tenants as higher rent.
However, as the debt burden rises and the trend back to shared living, rental pooling and extended family living resumes, we'll see rents follow the housing market on its historic decline over coming years (just as is happening now in the US).
Dropping Rents Will Drag House Prices Down with Them;
http://finance.yahoo.com/tech-ticker/article/34960 6/Dropping-Rents-Will-Drag-House-Prices-Down-with- Them?tickers=%5Edji,%5Egspc,hd,l,kbh |
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By: jaymarcel
12/10/2009
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"Most 'investors' build houses not for the rental income, but for capital gains"
That is the most ridiculous thing I've ever heard, the risk is far too big to only buy new property for the capital gains & not the rental income.
If this was the case then they would have all put these properties on the market when the new FHBG came in as this would have been the optimum time for any over pricing in the lower end of the market to happen & the most people to be looking to buy in the lower priced housing market.
These guys are so keen to cause a housing crash they will come up with any crazy story, they need to accept that property is back on the rise & they will eventually have to buy back in at some point unless they would like to rent into their old age, which is coming up soon for steve keen. |
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By: mentawaisurf
12/10/2009
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Steve Keene, associate professor of economics and finance at the University of Western Sydney, cited evidence that there is no real shortage of housing in Australia, but rather a massive oversupply.
In the April edition of his Debt Watch bulletin, Keene referred to ABS figures that showed there were 800,000 unoccupied dwellings on census night in 2006. Over the long term, more houses are being built than are being filled by a growing population.
Keene said: "Over the period 1985-2009, an average of 1 residential dwelling was built per 1.75 new Australians, and only in the last 3 months has the rate of new building fallen behind population growth."
He concluded that there are around 1 million unoccupied dwellings in Australia.
"Far from having an undersupply of housing, Australia may well have a substantial oversupply. It's just that no one is living in many of them."
So, if the housing stock is continuing to rise at a faster rate than population growth and there is already a surplus of houses, why are house prices continuing to increase?
The answer Keene gives undermines the RBA's second assumption.
"A very likely cause of this large stock of unoccupied homes is Australia's system of negative gearing", he said. "Most 'investors' build houses not for the rental income, but for capital gains".
Housing speculators, whose only goal is to make a profit from the buying and selling of houses, push up the price of housing while the market is strong. However: "If prices start to fall substantially, then many owners who have kept their properties off the market may be motivated to bring them out of mothballs.
"The "undersupply' of both rental properties and houses for sale could thus evaporate, and rather than supply issues putting a floor beneath house prices, they could well pull the rug out from underneath them instead."
http://www.greenleft.org.au/2009/806/41443 |
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By: ang101000
12/10/2009
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correction
last line should finish with 'in the long term' (sorry, due to world limit it has been cut off)
Thank you Paul for being a good friend and the most influential person to shape my economic interest and views.
AJ |
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By: ang101000
12/10/2009
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Hi Jay,
I have also wrote, I will not be posting more documents and comments on this or any other site(s).
I will return in December for the share market finish for the year 2009. So this is my last comment.
In regards to housing; I have argued on the basis of available data:
1) house prices are trading higher than the historical average (Keen is correct 4 v 8.6).
2) average wage increases have not kept up with with the increases in average property price increases (for a number of years).
3) there is a shortage of housing in the desirable areas (1st home buyer market, below $1 million value as both investors and average income earners compete)
4) there is an oversupply in areas where (outskirts of the town expl Sydney) where there is no infrastructure, services, jobs to support the emerging development.
5) due to the above factors there is a problem of housing affordability.
6) Furthermore I pointed to the (only) marked price increases during the year (from 2008, after GFC) have been limited to 'speculative assets" (housing and share market) none of which is reflected in the CPI figures (as shown on the RBA website inflation figures) (there are those who argue that land-price increases should be included in the CPI measure but they are not)
6) I have provided some documents but not all to support my view (it has been a complain that I put too many and too long documents). Due to limited source release, I did not dwell on my main concern in regards to peoples investments and wealth;
7) During the GFC Australians suffered huge losses of wealth (4th place in the developed world, this was due to the high percentage of investment in shares per capita ie compulsory super).
8) Given that most of our wealth is invested in speculative assets (housing and share) we carry too much risk of price volatility and market risk (speculative asset prices tend to converge). I have yet to be convinced that this risk/return profile is sustainable and beneficial in ... |
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By: jaymarcel
12/10/2009
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Hi Akdoc just reply to your fri 10:33am entry, I was just trying to highlight that with the tighter lending the only FHB allowed to borrow are the ones with a deposit & good job to convince the bank they can still afford the repayments once interest rates rise back to the norm.
You talk of increased interest rates forcing sales, I have covered the FHB in the above statement, all the other mortgage holders had the same mortgage when rates were 9% two years ago so no problems there.
We all just need to remember Keens statement was very good marketing to sell a book & I would like to have a year attached to his statement for it to be taken seriously. |
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By: jaymarcel
12/10/2009
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Hi Ang, your statement on thurs 4:41pm makes comment about OECD Indexs of house prices to annual income and house prices to rents are likely to cause the property prices to fall, the alternative to this is wages & rental prices go up.
With the under population of australia in relation to jobs & the under supply of housing this alternative is more likely when normal conditions return as we are slowly now re-entering. |
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By: rstuarts2000
11/10/2009
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| Ang, I have been following this thread since its beginning. The quality of the thread has been highly variable, at present the level of discussion is at a much higher standard than usual. Not a good thing if you leave, keep up excellent posts and sources of reading material. |
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By: firefly_au
10/10/2009
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Angie Hello again:)
I don't mind reading the whole report..
It gives me something more productive and educational to do in the evening than reading Womans day, new Idea or watching TV.
Please don't give up the game unless you really need too! IMO your views are high standard even when I don't agree with all you post and I have basically just been lurking and following the cut and thrust of the exchange.
That post of yours about "The free market that never was" is a bit dark in its mood! So I hope you are not having a down day he he :)
I also agree with your assertion that pure theoretical free market capitalism has never existed and never will! The route of the problem is information is not universally available to all and since information (knowledge) is power there is never a level playing field as a result of this fact. In variably persons in the powerful positions (CEOs, Union leaders, Governments and the super wealthy) take advantage of this imbalance and attempts at open fair and free capitalist markets are not immune from this abuse.
Got to go now so I will leave it there for now .....
BYE :) |
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By: almurrie1@y7mail.com
10/10/2009
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oops 830,000
Al |
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By: almurrie1@y7mail.com
10/10/2009
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As well as the "incomplete truth" many other variables can cause this.
eg
By Bob Wilson, 24th June 2008
given that rental premises can have four or five changes of tenant in the course of a year, the home may have been "between tenants" when the Census collector called.
But that still leaves a lot of properties that are genuinely tenantless. There are several plausible explanations for this:
1. Some large corporations and not-for-profit org's maintain houses and apartments for use by staff and visitors which are not part of the rental pool.
2. An indeterminate number of "unoccupied dwellings" are in the hands of mortgagees (in which case they would probably stay unoccupied until sold).
3. There are several locations with a large number of holiday homes. Owners might choose to keep these homes out of the rental pool, preferring instead to spend their holidays there or give the keys to family and friends at various times of the year. The Gold Coast and Sunshine Coast alone reported 40,354 unoccupied dwellings - Cairns and Townsville together accounted for another 9,321 dwellings where junk mail piles up in the letter boxes.
4. Every year about 1,200 vacant houses fall into the hands of the Public Trustee of NSW because of the death or disability of the owner. We note the State Trustee of Victoria's annual report says it sold 282 properties worth over $95 million last year. The State Trustee also manages a suite of rental properties - 320 at last count - so perhaps it depends how pro-active the trustee is in moving housing stock or at least getting a return from what might otherwise be vacant housing. |
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By: almurrie1@y7mail.com
10/10/2009
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Keene's been going on again about the investors who may bring their places out of mothballs and cites the 2001 census stats of 80,000 to estimate there may be 2 million homes unoccupied in 2009.
There are a few good reasons to discount this as more pie in the sky scaremongering. |
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By: ang101000
10/10/2009
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For a 'different' take on markets, economy and social issues read 'The free market that never was'(about 2 pages) written by Bob Ellis (2008).
Here is a quote from it about GFC
'It's as big a shift in the way we think as what accompanied the fall of the Berlin Wall. Like that huge event it showed the rules we lived by till then were wrong, because so many people wanted to escape those rules. It showed the CEOs we rewarded in millions per year for being smart were idiots, because they didn't see it coming. That when house payments get too high, a black engulfing cloud of unending debt swallows up the world. That when you send a million jobs overseas, and simultaneously double the price of houses at home, there isn't enough money to buy the houses, and catastrophe follows. They couldn't add, they couldn't subtract or multiply or divide, and they didn't see it coming. Halving wages while doubling house prices is good economics; discuss. It's also good arithmetic; discuss.
It also showed free market capitalism, as I've always contended, never actually existed. It showed free market capitalism was a prefabricated mirage based on shonky valuations of unexamined property, and loans against those valuations, and government contracts for Star Wars rockets and WMD that were never used, and millions of truckloads of fast food that were never delivered in Iraq where things were too confused for such a swindle to be detected. And the corporate theft of the billions we paid to the CEOs of private armies like Blackwater, who killed and imprisoned people at a price more cut-rate than the army, and couldn't be prosecuted because their terms of employment absolved them from punishment for murder. And the tens of millions we paid for failure to dumb-bum CEOs, who left their jobs when they failed at their jobs and went ski-ing and sailing or high-rolling on the millions we paid them for going away.'
link
http://www.abc.net.au/unleashed/stories/s2375624.h tm |
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