It's the economy, stupid!

 
  don_dunstan Minister for Railways

Location: Adelaide proud
However this time a few differences
- Perth started it correction 2-3 years ago and mostly done...
RTT_Rules
No - Perth has not stopped falling - it is still falling by a large number (another 0.6% in the last month alone, that's a terrible 7% annualised fall still happening).

And as for Sydney and Melbourne being a slump that was "needed", you still don't appreciate the ultra-slim margins by which many leveraged property investors are holding on. And Sydney has fallen by 6% in the last 12 months, you are under-estimating the scale of the falls - many people might be presently hanging on with 90% LVR's - all it will take is another six months of falls and those people will be under-water in negative equity.

Don't listen to Ross Greenwood or any of the other "experts", the banks are in a helluva lot of merde as their plummeting share prices have been spelling trouble ahead - the stock market knows full well that there's bugger all contingency funding. Don't believe me? Keep watching - this thing is unravelling as I type.

This will help you quote accurate figures in the future.

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  don_dunstan Minister for Railways

Location: Adelaide proud
The bad news on the housing front just doesn't stop - Roy Morgan says that the number of Australians with negative equity in their homes has increased quite markedly - from Broker News:

Roy Morgan’s Single Source Survey is based on more than 50,000 Australians each year, including more than 10,000 owner occupier home owners.

Its findings showed that around 386,000 home owners across the country had little or no equity in their homes.

The research group establishes the level of equity to assess households’ financial positions and potential risk.

Roy Morgan said, on average, the value of properties in Australia subject to a mortgage is well in excess of the amount outstanding but there are problem areas.

The state at highest risk is WA where 16.5% (90,000) of mortgage customers’ have no real equity in their home. This is an increase of 2.5% in the last 12 months.

That's a very high number of Western Australians who are paying their mortgages into homes that are worth less than the amount of money owed.
  Carnot Chief Commissioner

The bad news on the housing front just doesn't stop - Roy Morgan says that the number of Australians with negative equity in their homes has increased quite markedly - from Broker News:

Roy Morgan’s Single Source Survey is based on more than 50,000 Australians each year, including more than 10,000 owner occupier home owners.

Its findings showed that around 386,000 home owners across the country had little or no equity in their homes.

The research group establishes the level of equity to assess households’ financial positions and potential risk.

Roy Morgan said, on average, the value of properties in Australia subject to a mortgage is well in excess of the amount outstanding but there are problem areas.

The state at highest risk is WA where 16.5% (90,000) of mortgage customers’ have no real equity in their home. This is an increase of 2.5% in the last 12 months.

That's a very high number of Western Australians who are paying their mortgages into homes that are worth less than the amount of money owed.
don_dunstan
That's a lot of people who are 'underwater'.  If the economy tanks (and I am seeing warning signs in our high petrol prices which often precipitates this) then it'll likely be a hard crash landing....
  GS4 Train Controller

You only have as large a mortgage as you allow yourself to take on. Nobody forces anyone into taking on any mortgage. House prices will only rise to the level that buyers are prepared to pay. Many houses on the market here, because the asking prices are too high.
Yeah but say that to someone who has grown up in Melbourne or Sydney - they feel the need to put their roots down where they are from. A million-dollar median house price in those places means that's what you're up for.
Again, nobody is forcing anyone to do anything...
Graham4405
Dead right !  

I have never passed a bank and seen them forcing someone in to take out a huge house loan.  

It seems to be normal today to replace a car (perfectly good at that) with a new $60,000 one because the owners were "bored" with the old one. They just add it to the home loan , , seen it so many times.  Sad
  don_dunstan Minister for Railways

Location: Adelaide proud
Again, nobody is forcing anyone to do anything...
Dead right !  

I have never passed a bank and seen them forcing someone in to take out a huge house loan.  

It seems to be normal today to replace a car (perfectly good at that) with a new $60,000 one because the owners were "bored" with the old one. They just add it to the home loan , , seen it so many times.  Sad
GS4
You're both right, no-one is being forced in a country like Australia - free markets and all. I have sympathy for people trying to live in Sydney and Melbourne though because that's where most of the good jobs are to be had in this country and yet the cost of living in those places in phenomenal, unacceptable really if you're on an average wage. Unless you're prepared to commute long distances by either car or public transport and neither of those options are fun in Melbourne, I should know having done both options myself in the past.

And GS4 you're right about people's totally disposable attitude to everything - people buy new cars because they don't want to be seen with last weeks' model. If the AU$ tanks badly then new cars will become un-affordable and we'll go back to being a more modest society... there's still thousands of Magnas cruising around Adelaide, maybe we'll keep them going forever like Cuba as a tourist attraction.
  don_dunstan Minister for Railways

Location: Adelaide proud
Dead right !  

I have never passed a bank and seen them forcing someone in to take out a huge house loan.  

It seems to be normal today to replace a car (perfectly good at that) with a new $60,000 one because the owners were "bored" with the old one. They just add it to the home loan , , seen it so many times.  Sad
GS4
Some of the places that have been suffering in NSW with the recent property slump are not posh areas those, they're former working class places like Penrith with already crazy median prices @ $705,000 for a free-standing house - however they've lost 4.7% in the last 12 months so it's probably not fun to be an owner there.
  RTT_Rules Dr Beeching

Location: Dubai UAE
However this time a few differences
- Perth started it correction 2-3 years ago and mostly done...
No - Perth has not stopped falling - it is still falling by a large number (another 0.6% in the last month alone, that's a terrible 7% annualised fall still happening).

And as for Sydney and Melbourne being a slump that was "needed", you still don't appreciate the ultra-slim margins by which many leveraged property investors are holding on. And Sydney has fallen by 6% in the last 12 months, you are under-estimating the scale of the falls - many people might be presently hanging on with 90% LVR's - all it will take is another six months of falls and those people will be under-water in negative equity.

Don't listen to Ross Greenwood or any of the other "experts", the banks are in a helluva lot of merde as their plummeting share prices have been spelling trouble ahead - the stock market knows full well that there's bugger all contingency funding. Don't believe me? Keep watching - this thing is unravelling as I type.

This will help you quote accurate figures in the future.
don_dunstan
Perth - Terrible, not really. WA went through a major mining project boom that has now passed. Correction is also "needed" to remove the excessive price rise, mostly done, maybe more so. Probably not much more in it, just need population to grow into their housing market. Same happened to Gladstone Qld. They survived, so will Perth.

Listing to Ross Greenwood, they rattled off the states, the numbers on these ultra-slim margins are not that great. Most provided they sustain their income will ride it out, being under water in negative equity is not the end of the world, happened to me in Tassie in late 90's. Bought a house at $56k, paid it down to $38k, went to borrow some back to buy a block, was told its worth $36k 3 years after I bought it. We survived and I still bought that block and still own it, its price has also gone up 400$ at one point within 10 years of buying it, now back to 250% post boom. Sold that Tassie house at a 33% loss, lesson learned! As I said before, same here also in Dubai and obviously WA and CQ.

Ross Greenwood and industry guess list obviously has one view, people here have their own view, some are not aligned. I know who I trust more, but keeping both eyes open at same time.
  RTT_Rules Dr Beeching

Location: Dubai UAE
I hear what you're saying but I'm not sure if the alternatives to cutting interest rates are politically palatable - for example, restricting capital inflows would simply not be allowed because it's anti free-market thinking and it would diverge too far from the current thinking that completely unfettered movements are essential. Our former Goldman-Sachs Prime Minister would be extremely unlikely to employ any kind of tactic like this.

The problem is (as discussed before on other threads) we're seen as an extremely safe haven for money internationally because of our history of stability and security, our very strong rule of law and our overall desirability as an investment. Conversely these factors are starting to kill of the very things that make us so desirable - namely the fact that industry and business are having a hard time competing with much lower cost neighbours in many areas.

I don't necessarily think that cutting interest rates is the best thing to do but something has to be done to keep downward pressure on the AU$ or next thing it will be US$0.80+ again... it's going to kill the green shoots of our export revival if we let it keep appreciating. It's unfortunate that self-funded retirees will suffer as a result but no solution is ever going to be perfect, there's always going to be someone who loses out.
don_dunstan
They said cutting interest rates won't happen because
- Minimal impact considering how low they are now
- Reduction in housing prices by 10% not a bad thing for the long-term economy, some will take a hit, but not most
- economy out side housing is doing ok
- USA Central bank will raise, basically offsetting anything we do here including keeping the dollar down
- RBA has been working with banks for 2-3 years to progressively limit lending
- Investor contribution to current property sales already very low, home occupiers are re-entering the market
- Poor rate of returns on housing discouraging investors and lower interest rates won't change this.
  RTT_Rules Dr Beeching

Location: Dubai UAE
Again, nobody is forcing anyone to do anything...
Dead right !  

I have never passed a bank and seen them forcing someone in to take out a huge house loan.  

It seems to be normal today to replace a car (perfectly good at that) with a new $60,000 one because the owners were "bored" with the old one. They just add it to the home loan , , seen it so many times.  Sad
You're both right, no-one is being forced in a country like Australia - free markets and all. I have sympathy for people trying to live in Sydney and Melbourne though because that's where most of the good jobs are to be had in this country and yet the cost of living in those places in phenomenal, unacceptable really if you're on an average wage. Unless you're prepared to commute long distances by either car or public transport and neither of those options are fun in Melbourne, I should know having done both options myself in the past.

And GS4 you're right about people's totally disposable attitude to everything - people buy new cars because they don't want to be seen with last weeks' model. If the AU$ tanks badly then new cars will become un-affordable and we'll go back to being a more modest society... there's still thousands of Magnas cruising around Adelaide, maybe we'll keep them going forever like Cuba as a tourist attraction.
don_dunstan
Agree,
You hear people tell you how much they are struggling, then a week later there is a new toy in the driveway or on a trailer or TV. Yes I know there are genuine people really struggling, but growing up in middle class 1980's, people with new cars were company cars and the odd well off family. Now days.....The 2nd car market, used car dealerships, wreckers and others basically collapsed in the mid 2000's because the 2nd car price dived.

When the median Sydney housing price hit $1M 18mths ago, why were people buying property at this price and who was doing with ~90% finance? Rent returns are so low the renters had the better deal.

The people who bought their Sydney median house at a price of $800-900k or lower will be fine. Owner occupiers don't tend to move much so no issue for them.

Some of the others however, it will be one of those life lessons.

Investors, you bought a median house at $1M on the back of a 3 year boom where all the warning signs and warnings were there with RoR of 2-3%? Probably best to not call yourself an investor. Harsh I know!
  nswtrains Chief Commissioner

Again, nobody is forcing anyone to do anything...
Dead right !  

I have never passed a bank and seen them forcing someone in to take out a huge house loan.  

It seems to be normal today to replace a car (perfectly good at that) with a new $60,000 one because the owners were "bored" with the old one. They just add it to the home loan , , seen it so many times.  Sad
You're both right, no-one is being forced in a country like Australia - free markets and all. I have sympathy for people trying to live in Sydney and Melbourne though because that's where most of the good jobs are to be had in this country and yet the cost of living in those places in phenomenal, unacceptable really if you're on an average wage. Unless you're prepared to commute long distances by either car or public transport and neither of those options are fun in Melbourne, I should know having done both options myself in the past.

And GS4 you're right about people's totally disposable attitude to everything - people buy new cars because they don't want to be seen with last weeks' model. If the AU$ tanks badly then new cars will become un-affordable and we'll go back to being a more modest society... there's still thousands of Magnas cruising around Adelaide, maybe we'll keep them going forever like Cuba as a tourist attraction.
Agree,
You hear people tell you how much they are struggling, then a week later there is a new toy in the driveway or on a trailer or TV. Yes I know there are genuine people really struggling, but growing up in middle class 1980's, people with new cars were company cars and the odd well off family. Now days.....The 2nd car market, used car dealerships, wreckers and others basically collapsed in the mid 2000's because the 2nd car price dived.

When the median Sydney housing price hit $1M 18mths ago, why were people buying property at this price and who was doing with ~90% finance? Rent returns are so low the renters had the better deal.

The people who bought their Sydney median house at a price of $800-900k or lower will be fine. Owner occupiers don't tend to move much so no issue for them.

Some of the others however, it will be one of those life lessons.

Investors, you bought a median house at $1M on the back of a 3 year boom where all the warning signs and warnings were there with RoR of 2-3%? Probably best to not call yourself an investor. Harsh I know!
RTT_Rules
Anybody who purchases a semi-disposable item like a new car by adding it to mortgage over a long term asset like a home is completely mad and deserve what they get. Trouble is a lot of burglar type lenders sucker in people by constantly lending more. A guy I work with had a perfectly serviceable vehicle but got it in his head to purchase another second hand car. I begged him if he really was set on the car to purchase a new lower priced car such as a Hyundai for around $15K which includes decent warranty etc. But no, he ended up with a re-badged Daewoo Cruz (biggest heaps of crap ever foisted on the public) for around $20K. But that was not the end, the lender provided further finance for a flat screen telly plus sound system. You just cannot help some people but the parasite lenders are another issue.

And no, this guy rents and wants to retire soon and is asset poor.
  don_dunstan Minister for Railways

Location: Adelaide proud
Perth - Terrible, not really. WA went through a major mining project boom that has now passed. Correction is also "needed" to remove the excessive price rise, mostly done, maybe more so. Probably not much more in it, just need population to grow into their housing market. Same happened to Gladstone Qld. They survived, so will Perth.
RTT_Rules
I'm not saying what's happening there is completely a bad thing - it becomes more competitive with the east coast the longer prices stay depressed. It's not recovering any time soon though so if you bought in the last four years (especially) then you've possibly got issues with your capital growth (ie nil).

The other stuff you said is completely true - it's not a one-way street, people tend to forget because we have a lot of relatively young people who've never seen a genuine recession now and they don't know what to expect. If you are prepared and cashflow positive then you should survive but just don't count on real-estate capital growth for a long time...
  Carnot Chief Commissioner

I've been watching with some interest the demise of Sears in the United States. Basically a case study in hedge funds and private equity firms destroying companies and jobs while skimming off $$ millions as the ship sinks:

https://www.huffingtonpost.com/entry/opinion-sears-bankruptcy-hedge-funds_us_5bc4b346e4b0bd9ed55c8a58

I understand we have quite a few large well known businesses in Australia owned by such predatory scoundrels.
  Graham4405 Minister for Railways

Location: Dalby Qld
Anybody who purchases a semi-disposable item like a new car by adding it to mortgage over a long term asset like a home is completely mad and deserve what they get.
nswtrains

This can work well for you IF you treat the addition to your mortgage as you would a car loan and repay it over 3-5 years say. The mortgage interest rate will always be less than that on a car or personal loan typically used to purchase a car.
  Groundrelay Chief Commissioner

Location: Surrounded by Trolls!
I've been watching with some interest the demise of Sears in the United States. Basically a case study in hedge funds and private equity firms destroying companies and jobs while skimming off $$ millions as the ship sinks:

https://www.huffingtonpost.com/entry/opinion-sears-bankruptcy-hedge-funds_us_5bc4b346e4b0bd9ed55c8a58

I understand we have quite a few large well known businesses in Australia owned by such predatory scoundrels.
Carnot

Blue Horseshoe loves Anacott Steel Wink
  RTT_Rules Dr Beeching

Location: Dubai UAE
Perth - Terrible, not really. WA went through a major mining project boom that has now passed. Correction is also "needed" to remove the excessive price rise, mostly done, maybe more so. Probably not much more in it, just need population to grow into their housing market. Same happened to Gladstone Qld. They survived, so will Perth.
I'm not saying what's happening there is completely a bad thing - it becomes more competitive with the east coast the longer prices stay depressed. It's not recovering any time soon though so if you bought in the last four years (especially) then you've possibly got issues with your capital growth (ie nil).

The other stuff you said is completely true - it's not a one-way street, people tend to forget because we have a lot of relatively young people who've never seen a genuine recession now and they don't know what to expect. If you are prepared and cashflow positive then you should survive but just don't count on real-estate capital growth for a long time...
don_dunstan
Listening to Ross Greenwood interview yesterday

- Aust housing prices in major centres like Sydney and Mel to drop for around 2 year, ie wait for population to catch up due to over supply, affordability and the current price being unrealistic and providing next to no return on capital.

- Up to 20% reduction in price expected

- Investors have basically left the market.

- First home buyers and others are re-entering the market

- Long term owner occupiers who bought during the peak should have nothing to worry about provided their ability to repay their mortgage if have a highly geared one is not interrupted. ie prices will recover. In a few years time they maybe back to square one.

- If you sold a house to buy a house, nothing really to worry about unless you have borrowed heavily. The loss you'll get on the 2nd property would have happened to your original property.
  RTT_Rules Dr Beeching

Location: Dubai UAE
https://www.abc.net.au/news/2018-10-23/house-prices-falling-as-interest-rates-wage-growth-move/10418278
I love this part

"Gravity has caught up with that stupidity" of rapid house price growth, according to Deloitte.
  don_dunstan Minister for Railways

Location: Adelaide proud
https://www.abc.net.au/news/2018-10-23/house-prices-falling-as-interest-rates-wage-growth-move/10418278
I love this part

"Gravity has caught up with that stupidity" of rapid house price growth, according to Deloitte.
RTT_Rules
It's not as bad as they're saying in that report but the problem is that heavily leveraged people are very exposed.

Meanwhile the ASX has tumbled two percent on opening this morning taking its cue from weakening global markets; seems like the end of the bull run that marked Trump's ascendancy.
  Groundrelay Chief Commissioner

Location: Surrounded by Trolls!
seems like the end of the bull run that marked Trump's ascendancy.
don_dunstan
Reckon the guy with the matches will do quite well even though his assets are "at arms-length".
  bingley hall Minister for Railways

Location: Last train to Skaville
seems like the end of the bull run that marked Trump's ascendancy.
Reckon the guy with the matches will do quite well even though his assets are "at arms-length".
Groundrelay

It's all that black guy's fault Razz
  don_dunstan Minister for Railways

Location: Adelaide proud
seems like the end of the bull run that marked Trump's ascendancy.
Reckon the guy with the matches will do quite well even though his assets are "at arms-length".
Groundrelay
Well it's interesting to note that AMP's share price is a fraction of what it used to be and it plunged something like 20% today. Twenty years after they de-mutualised it's a shadow of its former self, wouldn't be surprised if they don't survive the coming financial crisis.
  don_dunstan Minister for Railways

Location: Adelaide proud
AMP plunges another five percent today to touch record lows of $2.38 - the ASX also failed to gain after a rally this morning and the AU$ is almost below the key psychological barrier of US$0.70.
  don_dunstan Minister for Railways

Location: Adelaide proud
Melbourne's auction scene described as a 'bloodbath' on the same weekend as the Block apartments went to auction. From the Financial Review:

“It’s a bloodbath,” said Emma Bloom, a buyers’ agent for Morrell and Koren. “There’s a big increase in the number of auctions where there is only one bidder, passed in without a bid, or being sold below expectations”.

A credit squeeze, rising rates and falling sentiment are contributing to clearance rates slipping below 50 per cent in Melbourne, the lowest in eight years and down more than 70 per cent for the same weekend last year.

It's all been a big experiment - let's see if Sydney and Melbourne can sustain some of the priciest real estate in the world... oops, no. Oh well, there goes the banking system...
  don_dunstan Minister for Railways

Location: Adelaide proud
The Financial Review reports that Sydney's auction market is even worse than it looks with clearances plummeting:

Sydney's auction market has recorded its worst result in more than a decade, with just 39.4 per cent of homes selling under the hammer the weekend before last.

It took longer than usual for the revised auction results to provide an accurate reading of the market, with many real estate agents initially withholding their poor results.

It's getting to a point where the bad news is being deliberately kept from the punters because the industry doesn't want a panic. But frankly that's just going to make it worse.
  Radioman Chief Train Controller

AMP plunges another five percent today to touch record lows of $2.38 - the ASX also failed to gain after a rally this morning and the AU$ is almost below the key psychological barrier of US$0.70.
don_dunstan
Hello All,

as AMP ( formerly Australian Mutual Provident Society , ie Insurance ) has now sold its Insurance arm , it imminent demise is , I suspect , about to begin .

First , so called Wealth (mis ) Management goes , then we off load Insurance , so what is now left ? And is it worth holding , or better off to sell up , clear debt , pay big bonuses , and then return the remnants to the shareholders .

Regards, Radioman.

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