Banks have treated our housing market like a Ponzi scheme, and it's about to bust

C'mon guys don't quit now. Only 39 more posts to the magical 1000.

Here is another article from smh today, how negative gearing killed the Australian dream.
The pressure against NG is really picking up steam now from media and pollies.
http://www.smh.com.au/federal-polit...-owners-now-were-renting-20151016-gkb7gr.html
(delete smh cookies if you cant read it, that's what I do because I am a cheapskate)

 

I suspect that there's some pressure against negative gearing from within the Australian public service. The RBA has been issuing briefings against it for the last few months, largely due to concerns that it's increasing the fragility of the financial system by encouraging investors to take on debt.

Plus it's costing the government $5 billion a year, when there's an $18 billion deficit. You do the maths...

Secondly, there's probably a cut-off somewhere around the age of forty between people who've benefitted from the property boom over the last fifteen to twenty years, and those who've lost out.

I reckon that a lot of journalists fall into the younger age group. Negative gearing has become somewhat symbolic of the housing crisis, and so it's something that's being focused on, along with illegal foreign buyers.

Lastly the Greens are campaigning against negative gearing. That probably puts some heat into the debate.

 

Really, but it could go on more than 1000, let me slit my wrist

 

It it gets to 50 pages, I'm out. Or if people start posting useful information, I will still follow... lol

If anyone has made it this far... well done! Here's something to ruminate on. It has been claimed in this thread and other threads that there is no evidence for the Australian property cycle and no research has been done in this area. Well, this guy did his PhD on house prices in Australia and charted the Australian Property Cycle from 1880 to 2010. It must have been hard to do a PhD on something that doesn't exist.

In 2007, Stapledon completed his PhD on the history of the residential property market. Here is some of what he said:

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1711224

And here is something really interesting. LF Economics is made up of a duo: Lindsay David and Philip Soos. Lindsay David wrote the ponzi article that started this thread. At the time this article was written, Philip Soos was a research Masters candidate at the School of Management and Marketing, Faculty of Business and Law at Deakin University. In a 2013 paper he said:

https://www.prosper.org.au/2013/06/12/a-sore-lesson-from-housing-history/#sthash.FFOmlkrd.dpuf

There is also a two part book about the non-existent Australian Property Cycle:

http://macroplan.com.au/understanding-property-cycles-structural-change/

I hope I never have to read another claim that there is no evidence for the Australian Property Market. There is plenty of evidence.

 

Wow, interesting, long, read. Cheers. There's actually a better thread on whirlpool under homes O.P, what will make the bubble pop. You will like it, many economists actually on it, and people that back up with evidence when stating information.


I think I read in hear earlier on, or another post similar to this, regarding someone from Ireland that lived through the crash. I think he/she stated that rents went up, do rents go up if the economy tanks? This confused me.

 

It's funny how vested people get get on these topics

 

This thread could have been about 49 pages shorter if we had bothered to find out about the author of this article in the first place. I didn't know any of this....

It seems that it is only recently that Lindsay David, co-founder of LF Economics has claimed that Australia is in the midst of the “largest housing bubble on record” (1). I actually thought this guy had been around for years but it seems he has only been publishing books and articles on the Great Australian Property Bubble since 2014 (2)(3). Since the OP takes him so serioues, I thought he must have some kind of background in economics. Apparently, Lindsay holds an MBA from IMD Business School (4), whatever that means. And yet, he has written a book, Australia: Boom to Bust (5), claiming that the Australian banking system is too big to save.

Despite a complete lack of training in economics, he sure has been getting a lot of media attention, with articles claiming he, and Philip Soos (co-founder of LF Economics) are economists or "housing economists". Recent articles include:
Economists claim Australia in midst of largest housing bubble on record (6)
Australia in for a property "bloodbath" economists predict (7)
Banks have treated our housing market like a Ponzi scheme, and it's about to bust (8)
etc.

For the record, Philip Soos is not an economist or "housing economist" either. He has an IT degree and MBA and is currently a uni student! (9). Although that doesn't stop the media from referring to him as an "economist" (10). It's interesting he is described as a "researcher at Deakin University’s School of International and Political Studies". He has a much longer history of publishing about the "housing bubble" with articles dating back to 2011!
Debunking the myths peddled by Australia’s property bubble ‘deniers’ (11)

So basically, much of this bubble speculation and the dire warnings of a housing market bloodbath collapse are brought to you by an author with no background in economics and a uni student. Well, I'm convinced

There is a funny article about the whole mess (12):

That expert economist hogging headlines in Vancouver and Australia? Not 'technically' an economist

Philip Soos, cited as a Deakin University researcher and economist, is actually an IT grad and masters student passing off the university's address as his personal contact.​

Call me cynical, but these two appear to have a set up a business to cash in on the boom. LF Economics was founded by Lindsay David and Philip Soos and provides services and datasets relating to the risk profile of the Australian real estate and financial services sectors (13). The amazing thing is that the Ultimate Chart Pack is $3,199 USD! (14) Talk about cashing in on the doom and gloom.

Basically, an author and a uni student decided to cash in on a housing boom by calling it a "housing bubble". Next time you see a d&g article with either of these names attached, just remember who they are.

(1) http://www.news.com.au/finance/real...bubble-on-record/story-fncq3era-1227410053643
(2) http://www.amazon.com/Australia-Aus...WCS_1_1?s=books&ie=UTF8&qid=1445571487&sr=1-1
(3) http://www.lfeconomics.com/news.html
(4) http://blog.australiaboomtobust.com/about-us/
(5) http://www.amazon.com/Australia-Aus...swatch_0?_encoding=UTF8&sr=8-1&qid=1413381017
(6) http://www.news.com.au/finance/real...bubble-on-record/story-fncq3era-1227410053643
(7) http://www.yourinvestmentpropertyma...erty-bloodbath-economists-predict-201864.aspx
(8) http://www.theguardian.com/commenti...ket-like-a-ponzi-scheme-and-its-about-to-bust
(9) http://www.onlineopinion.com.au/author.asp?id=7012
(10) http://www.propertyobserver.com.au/...h-a-property-bubble-q-a-with-philip-soos.html
(11) https://theconversation.com/debunking-the-myths-peddled-by-australias-property-bubble-deniers-4488
(12) http://www.scmp.com/comment/blogs/a...eadlines-vancouver-and-australia-not?page=all
(13) http://www.lfeconomics.com/
(14) https://gumroad.com/l/lfchartpack#

 

It will pop if we have a downturn in the economy. Is Australia different? We have the highest immigration rate in the Western world and a safe wealthy lifestyle which keeps demand high. Would need to be a pretty bad economy to trash it.

 

Banks have treated our housing market like a Ponzi scheme, and it's about to bust

http://www.theguardian.com/commenti...ket-like-a-ponzi-scheme-and-its-about-to-bust

Thread started 18 months ago. Imminent collapse of the housing market. The author must have a different definition of imminent.

 

He's been banging on about this for more than 6 years now.

One day one of these muppets will be right and we'll hear no end of it

 

The reason I keep harping on about it is because 6 years ago, potential buyers took people like this seriously, and instead of buying they decided to wait for this almighty crash that never happened (yet). Take Sydney for example. Someone may have been able to buy in 2011/2012. How much money would they have made if they did buy then? Conversely, another person in 2011/2012 has believed the hype and held off buying until "the crash". How much money have they lost? Will they be able to afford to buy after the correction? It seems like some of the people suckered in by this nonsense have lost years and some may never recover financially. This upsets me.

 

Anyone feeling mortgage stress yet?

The banks keep on increasing our loan rates and it annoys me.
I'm thinking that people with big loans will soon be starting to feel the pain.

Anyone else think the same?
Is at last a correction coming to Sydney and Melboune?

 

Nope. About 4 years ago my average interest rate was over 9%, I had more loans and less income. I am laughing at 4% now.

I agree it's not fun to have interest rates go up but you need to get used to it. I think the trend is up, not down.

No doubt. Some won't survive. Others have prepared and have buffers in place. I started my prep for higher interest rates 18 months ago. My portfolio has been restructured, loans restructured, buffers in place.

 

Wonder how high rates need to go before struggle street appears. Still don't think 100bpt will do much

 

It's a tier system depending on cashflow and debt levels. Some are barely making ends meet now, so 0.5% will see them struggle. For others, it's 1%, 2%, 3% etc. The higher you go the more who hurt. For seasoned investors who are used to 9% and have seen 17%, this will be a huge opportunity.

 

So how come 18 months ago there was all this hype in the media and forums about the "imminent" housing crash and now, when Sydney and Melbourne are getting a bit peaky, there is deathly silence?

 

More concerned on how much interest rates rise before market sentiment changes

 

Me too. I reckon 1.5++% to slow down the market.

 

In Sydney and Melbourne? Sydney first, then Melbourne.

I agree with you that 1% won't make much difference. More than that might affect sentiment.