10 years since GFC

10 years since the GFC. Here’s an article about are some people who called it and what they think will happen next. I got to the bottom and that part said Italy could cause a Eurozone crisis.... that could be something to take heed of.
They Called the Last Financial Crisis. Here’s What They See Causing the Next One — Barron's

I know Australia went through the GFC relatively unscathed (apart from a major pullback in the stock market that can be described as actually getting us back to historical norms), and we were lucky that Australia’s banks were solid and our general economy was strong. Now in the past couple of years, APRA has been derisking our housing market’s exposure to investor speculation, which is a good thing. I think our housing market will slow further, major city property could become a bit cheaper (maybe Perth/Adelaide/Brisbane might not get to have a boom) but those cities will remain steady on their current paths.

I don’t know though, I’m not an economist (though Economics could be considered an art not a science).

I think with everything right now, there isn’t too much point in overleveraging.

If you are doing active property investing (not just buy and hold) then sure, fine.
Plain buy and hold, I’m not sure there’s going to be any boom in the next 5 years or so.

I could be wrong, but I can’t see any real driver for a property boom to occur.

I think the stock market will continue to hum along, business will still deliver.

 

Reminded me of this quote...
"An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today. "
--Evan Esar

 

What was your view during the gfc? Did you see the drivers for the boom?

 

Our saviour was China. They were on a massive expansion drive sucking in our mineral exports. When other major world economies were in negative growth, China was at 6-8% pa.

They aren't tied to the USD and have a tightly regulated economy. Even when they tightened the reigns (pulled a few levers, restricted the outflow of capital into Aust development sites) our exposure to China was still greater than pre-GFC days.

 

On Monday, September 15, 2008, Lehman Brothers (Too Big To Fail), founded in 1844, shocked the world by filing for Chapter 11 bankruptcy protection.

 

I have to agree with SNM. China saved us. Plus Australia had a budget surplus, not debt. Kevin Rudd could splash out and give $900 to everybody to spend. Also the Government backing the bank deposits of every day people meant that people didn't pull all their money from our banking system.

Also extremely importantly, as our home lending is all recourse loans, (the banks will come after you if you default) intrinsically this meant we had a much safer financial system than the US. No banking meltdown.

With the Government then implementing first home buyer grants, this started a boom in Sydney's low-mid end (Sydney's housing market had been going nowhere since 2004)

The GFC had a direct effect on me in that I was working for Amex and was made redundant from my role. It happened a month after we bought our first freestanding house! But it was all ok since I got a nice redundancy payout and had no issues getting another job immediately, and I ended up working for NRMA Motoring and Services for the next 4 years. Another Amex employee though was out of work for something like 8 months. He had a different kind of role but it would have been very hard for him being out of work like that suddenly.

If it was to happen again, the question would be can we get through it as well as we did the previous one?

If our Asia Pacific neighbours can bear it, I think probably so. And out banking system is strong.

I don't think the FHB market in Sydney and Melbourne can respond like they did in 2009, (affordability problems) but the other states possibly could.

Note, my 2 cents only and just an opinion.

 

Did very little economically but was more a mental effect. Very low risk of our banks failing as we had done the painful exercises years earlier.

 

In percentage terms china was our biggest saviour, but credit was also still available to Australia whilst all other countries excluding Canada turned off the taps.

 

With the interest rate falling by 50% profitability rocketed

 

Absolute blessing for investors and home mortgage holders!

The problem is, 10 years on rates are still about the lowest ever and the RBA wouldn't want them to drop any further. We don't really have lowering interest rates as an economy stimulus available left in our arsenal. So the economy better not languish otherwise the RBA can't do anything much to stimulate our economy. It's been at these emergency rates for years on end. The problem is, to raise them could cause so much damage. Since the GFC many Sydneysiders have taken out PPOR home loans 500k and greater and to raise them could be disastrous for these people. I'm thinking the first home owners could particularly get really stressed as their loans can be very large and they haven't experienced a higher interest rate environment.

 

The problem with low interest rate is that we cannot buy investment properties with 10% to 14% net yields anymore