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7:30 report on ramifications of bursting housing bubble

Discussion in 'Property Market Economics' started by MGF, 16th Oct, 2015.

  1. MGF

    MGF Well-Known Member

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    http://www.abc.net.au/7.30/content/2015/s4332691.htm

    Some key quotes:

    ATYAJIT DAS, FINANCIAL ANALYST: Australians have been playing this Ponzi game of housing where I buy a house and the value goes up and what happens is then I make money by selling it to somebody else and the whole game depends on the buyer always being able to borrow ever larger sums of money and that all depends on incomes and employment, and that side of the economy, the real economy, is looking extremely weak.
    ***

    ROBERT SIMEON: Whenever you've had rapid price growth, it's inevitable there's gonna be a correction. That's just the way it is. I mean, the market's always sort themselves out and find a new plateau. Some markets won't be touched. Other markets, it'll be quite horrendous.
    ***

    CONOR DUFFY: David Moyle owns a house and a townhouse. He can't sell either because they're now worth less than the mortgage.

    DAVID MOYLE, HOMEOWNER: If the interest rates were to go up significantly, yes, a lot of families will go under. I have allowed myself four years to ride it out and if I can't - if the property market doesn't increase or get better in the next four years, then for me, the harsh reality is I'll take a sizeable loss and I'll have to start again.

    CONOR DUFFY: The one-time rapid growth and lifestyle lured him to invest. He never saw the downside coming.

    DAVID MOYLE: I would be lying if I'm not sitting back at night-time kind of wondering what the future holds. As I said, you know, if I was 20 years younger, I would've probably said, "Well I got 20 years to work it off." I'm now turning close to 50.
     
  2. Bullion Baron

    Bullion Baron Well-Known Member

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    "Australians have been playing this Ponzi game of housing where I buy a house and the value goes up and what happens is then I make money by selling it to somebody else..."

    That is how capital gains on any asset are made.

    Australian property may be overvalued, expensive, have poor levels of affordability, but it is not a Ponzi...

     
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  3. EN710

    EN710 Well-Known Member

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    They need their definition of Ponzi checked.
    upload_2015-10-16_10-6-9.png

    And

    "The only time you know there's bubble is when it burst."

    now I need to unfollow this thread o_O
     
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  4. srirang

    srirang Well-Known Member

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    The chief economists of most banks are already predicting 2 further RBA rate cuts. My take is that the banks are increasing rates now prior to that happening so when (if?) the rate cuts come, they can then pass on the rate cuts and be only slightly worse off.
     
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  5. srirang

    srirang Well-Known Member

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    Completely agree. This is ABC stooping down to commercial TV levels and sensationalising the situation and blowing it out of proportion. Markets go up, stay flat or down, it is what they do.
     
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  6. Bayview

    Bayview Well-Known Member

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    Completely not true.

    Here's an example;

    My previous PPoR (to the one we just sold) was sold by us for $850k.

    The new owners sold it a little more than a year later for $800k.

    They didn't have to sell, but their lives changed; a different job in a different location, too far from family and so forth.

    The market had stopped by the time they wanted to sell. So, they had to cop a loss to move on.

    The new owners have since spent another $150k at least on pool and extensions, landscaping, etc..

    Not everyone sells and makes loads of money that the next buyer has to borrow a small Country GDP for.

    There will always be another buyer - unless we introduce no population growth and/or immigration.

    The ever-larger sums of money are tied to incomes and inflation and demand...
     
    Last edited: 16th Oct, 2015
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  7. MGF

    MGF Well-Known Member

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    I think the analyst is talking about the market as a whole and not you personally.

    Broadly they're saying credit expansion has been the prime driver of the price rises.
     
  8. Bayview

    Bayview Well-Known Member

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    No; the expansion of price rises has been due to demand....the credit is just a buy-product of the demand.

    Try borrowing $800k from a Bank to buy a house you absolutely love, if the recent comparable sales are only $700k....

    If no-one wants to buy houses; you can't give money away either.

    Sydney back in the early/mid 2000's for example....no-one wanted to buy.
     
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  9. MGF

    MGF Well-Known Member

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    I'm not arguing with you about why it rose. I'm saying this is what the analyst is claiming.
     
  10. EN710

    EN710 Well-Known Member

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    I still don't get their claim tho

    I sell custom pet painting on canvas, overtime the value goes up
    what happens is then I make money by selling it to somebody who pay above the cost of my materials and time
    the whole game depends on the buyer always being able to pay a larger sums of money (including borrowing them) and that all depends on incomes and employment :confused:

    P.S. I succumb to temptation. Time to unfollow this thread, again.
     
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  11. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

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    If you haven't noticed, the media's objective is not to report facts, or news. It's to gain viewers/readers who = $.

    7:30 did a piece of "negative gearing" a while ago. I was interviewed. There was a very clear agenda and it wasn't to create an unbiased, accurate piece.

    Could have done with some serious fact checking too. Linda Scott, the woman who instigated the piece (good PR people, she got a lot of coverage on the issue in short order including 7:30 and news print) finished the piece off with an erroneous statement:

    LINDA SCOTT: Given the pressures on the federal budget, I think Australians understand that it's unfair that the taxpayer should be subsidising investors' losses on their mortgages.

    DAVID MARK: For now though and possibly for many years to come, investors like Steven Ryan will continue to use any means they can to buy more property.

    Tax payers subsidising investors' losses? Um, no. Unless she means the investor who has made the losses receiving some of their own tax back.
     
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  12. MGF

    MGF Well-Known Member

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    I guess the summary of their general position is this:

    Houses used to be places to live that mostly didn't move much in price above inflation. ROI on rents were 4-5% and capital gains only were made in areas of desirability.

    At some point the tax benefits of investing in property outstripped any other investment. This started a flow of money into housing which caused prices to rise.

    As a result people started borrowing more money, some to invest, others just to buy a home. This credit expansion helped push up prices which in turn made the return on investment even larger which in turn spurred more people entering the market with high sums of money.

    Banks over this time lent more and more, changed their risk profiles to lend more and this pushed it even higher.

    They are saying that essentially those mortgages must be based on wages and wages are flat in the economy and the real economy is looking pretty bad. So the cycle they claim has been occurring can't really continue because people are unable to borrow larger and larger sums of money.

    I think their explanation is pretty poorly worded myself. Very unclear.
     
  13. MGF

    MGF Well-Known Member

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    I know it's not the general position held on this forum but there are people who see tax breaks, tax discounts as no different from subsidy.

    People argue about it all the time. The Government decides not to tax me on a loss I've made vs. The Government does tax me but then gives me part of the tax back in cash.

    Overall the financial position is not different - it's just the framework of how it's presented.

    You may disagree but for plenty of people they see it as a subsidy given the money ends up in the investor's pocket.
     
  14. MGF

    MGF Well-Known Member

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    Personally don't enjoy clips like this - understand it's television, fast cuts, limited information, time restricted and all that but it takes a serious topic and blurs it into random talking heads.
     
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  15. Bayview

    Bayview Well-Known Member

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    Operative word being ABC - saturated with lefty, tree-hugging, hand-wringing, Capitalist Hating, socialists....balanced reporting at it's best (not).
     
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  16. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

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    People can see things however they want but they can not change the definition of the term "subsidy" :)

    However, the quote above from Linda Scott is not about terminology. It's about the absolutely misleading and false statement/inference that tax payers OTHER THAN the investor making losses, are subsidising the losses of said investor.

    It's not a stretch to imagine most viewers unfamiliar with the intricacies of investing/taxation who saw that got the impression it was a true statement.

    Those kind of things can sway, or form, opinions.
     
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  17. mja

    mja Well-Known Member

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  18. THX

    THX Well-Known Member

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    [​IMG]

    Correction: They found Steven.
     
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  19. wylie

    wylie Moderator Staff Member

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    @Steven Ryan - were you aware of the slant they planned on taking with this story? I'm interested to know how they approached you and whether you thought the story would be different to how it was edited and presented? (I guess so.)
     
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  20. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

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    @wylie, they posted on SS:

    [​IMG]

    Didn't know what to expect initially but the agenda was pretty clear when we spoke off-camera before the interview so I knew what would be coming when it aired.

    During the interview process I was asked the same questions over and over to try and get a "better answer" for the story. It's pretty awkward re-answering the same question as you lose spontaneity and your answers naturally vary.
     
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