House prices could drop 20pc in crunch

House prices could drop 20pc in crunch - AFR, 2nd August 2018.

Sydney and Melbourne house prices could fall by up to 20 per cent as banks tighten the lending screws, an independent equity analyst has warned.

It's getting worse!

Endeavour Equity Strategy said in a detailed 30-page report that more evidence had emerged to support its claims that about 40 per cent of all mortgages were "non-prime"

 

Short the banks!

 

It would be worth considering, especially Westpac. Their name keeps getting mentioned, whether its LAF fraud, HEM fraud. You have to wonder just how risky the Westpac mortgage book is? Generally as the market falls, it's the fraudulent loans that default.

 

its just part of the cycle every boom has its bust, slow down, downturn
but obviously, some believe boom do last forever

But like all asset we can not be all winners, some win lot, some win little, other lose a bit, some goes bust and bankrupt just make sure you are part of the winning group

 

I would be interested to read the evidence to support this claim.

Last I was reading about defaults I was quite interested that 'low-doc' loans have a lower default rate than 'full-doc' loans. This is interesting because low-doc loans are considered 'sub-prime' and sub-prime is supposed to be so bad.

 

Given low docs are used for the self employed among others, maybe business owners are better at budgeting? And ultimately more honest with themselves, and therefore the lenders?

 

What HEM fails to account for is that people get very emotional about owning their own home and will do almost anything to save (keep) it. So entertainment of $300 pm might well become $15 if it means being able to pay the mortgage. Other discretionary spending can also be cut. THere are plenty of ways to cut food cost as well.

 

I have very detailed records of my actual expenditure, which is about 1/3 of the HEM for my income.

 

Imagine what that does do the non RE economy?

With high RE prices new ppor owners end up devoting larger and larger share of disposable incomes to meet repayments, spending less and less on other bits.

I wonder if reduced discretionary spending is becoming a factor for our low inflation rates?

 

This is surely an enjoyable period of life for the duration of the mortgage! And agree with above that this is how to kill productivity of a country.

 

I think reduced discretionary spending has been an issue for some time. Australians did not save a record amount of cash and deposits by spending. At the same time those savings have accumulated, the economy has been languishing.

 

I agree that some people will do anything to keep their home. My observation of the current culture is mass complacency. Most people will not make drastic sacrifices to achieve their goal. They will charge the credit card, borrow off family, and then let the bank take the house.

 

Stocks is up 10% but new listings are down 10% (yoy). Does that mean a build up of supply is accumulating behind the scenes?

 

@Pete Arendt The headlines are getting worse.

The situation is the same as it was last month. Go back to sleep. Another media doom and gloom beat up which is probably causing risk to the economy by pre-empting reduced household discretionary spending.

 

Any article, report, commentary etc that refers to or implies that there is only 1 or 2 markets in Australia - I stop reading straight away as (to me) it's all nonsense.

 

I'd find it peculiar if for say DJIA drops or S&P500 drops predictions there would be a person arguing that AAPL or GOOG won't drop and therefore analysis of the index as being in bear territory is not valid.

Now, extrapolate that to properties ... If a stock/property EPS/yeild growth projections justify current P/E ratio then I suppose it is a defensive holding. In the end all and any asset class is valued by earnings, and capital growth expectations are always driven by earning growth expectations. At least in rational investor world. For example banking on AMZN capital growth is based on expectations of their revenue/earnings growth, not on expectations that there is a limited amount of AMZN shares (there is).

 

It true for some people but most people that taken on this risk, ie cant afford P+I and just go IO
won't have much spending to cut.

crashed and down turn usually caused by speculators, people who buy anything and people who buy stuff they can't afford.

Aussies are some what attached to their houses but human money behaviour and psychology is built into human DNA don't change that much doesn't matter where you live

There will be a down turn after a boom the question is of when and how long.

 

The real estate world and the share market world are two completely different beasts for me in terms of human psychology, how they operate, how value is identified and how wealth is created .

Chalk and cheese for me. For a zillion reasons .

 

Dear Boat Arrival
I don't know where you used to live, but I suspect it is a place where home ownership must not be the norm. Why do I think this? Because you seem to be relating home ownership in everyday Australia to trading shares on the stock market. Perhaps in your experience home ownership is as removed from reality as valuing stocks, but not in this world. I have never met anyone discussing the P/E ratio or earning growth expectations of their home.

@Leo2413 , @kierank Team, Have you?