Its the Economy, Stupid: Why Australia won't have a Housing Crash

Its all about the froth,
I am more like 100% cacao mocha with no 'Forth' and extra extra hot

 

MB's point was that the Economist article only mentions the positive side - there is nothing wrong with them highlighting the negatives. They also quoted the so called positives in the Economist article so there is no need for MB to reiterate them. Here's another critic of the Economist article by a former special advider to the NZ Reserve Bank:

No Economist, Australia is not even close to the best economy - MacroBusiness

As to them being wrong they have never said 'property will crash this year'. And 5 years is not long for a bubble to keep inflating. With the regulators stepping in with macro prudential regulations obviously they think there is cause for concern. And property prices are indeed falling. So they are being proven right more than wrong.

PS: MB sell investment products/ fund management. The blog is just a small part of what they do. There are others in the same business who are continually upbeat on the economy and RE in their blogs (eg the Switzer Report). Who do you think is showing the most vested interest?

 

@scienceman, they have been preaching doom and gloom since the inception of their blog and they have put a few dates on the crash many times. Google search their blog and you'll find many posts in regards to dates.

Everyone has a vested interest no arguments there but don't you think that the other business that were upbeat about RE/economy have been more accurate than MB who has been perma bears on RE since day one?

Yes MB's predictions might be coming to fruition now but only 5 or so years late which again, is an opportunity cost and a very costly one too.

 

I don't agree. I took on more debt this year and will take on more debt in 2 to 3 years. This sales pitch slogan might apply to a few over leveraged investors but what about the rest of us? Business as usual. What about new investors? Are they to deleverage too?

 

It's more about the rosy assessment of our economy/ prosperity that I am posting about here, but as to RE show me where they have mentioned dates. I don't recall them saying RE could not keep going up for a few years, so you can't really place an opportunity cost at their feet. Anyway it's mainstream now to be bearish on RE and also the systemic risk of the debt levels fuelling it's valuations. So rather than being wrong they just showed more foresight I would say.

PS: further to opportunity there are other ways to make money besides RE.

 

By some measures the economy of Norway has been shown to be governed better than Australia. Why just compare Norway and Australia as I am sure that by some other measures it should be shown that Singapore has been governed better than Australia. Maybe by other measures not defined yet I am sure Australia should be shown to be better governed than any other nation.

IMO, by many measures Australia would be in the top 10 best governed countries. It is certainly in the league of the top 10 wealthiest countries in a world of 195 countries, ie 5%.

 

One has to be leveraged to deleverage.

 

Sydney auction market weakest in a decade

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.

Trying to hide bad results like that will in all likelihood only increase the panic.

 

So should an investor who is leveraged but not overleveraged still deleverage? Why? How will it benefit the investor?

It's easy to jump on a property forum and start throwing slogans around but what does it actually mean? Have you actually thought about it and what it might mean for real property investors? I ask because for many investors it is very bad advice.

 

Great Post!
Deleverage seems to be the buzz word around here at the moment.
I have loads of equity and plenty of servicing.
Should I be deleveraging? OR should I be leveraging ready for the opportunity.

I’ll tell you which option I just chose and it ain’t the buzz word. Settlement tomorrow and then I’ll wait patiently

 

.

It's not my term @euro73 coined it,
To me it means if one has hit the debt wall or really close to it means you are leveraged (over/ high use whatever term you like), the old ways of piggy backing on built up equity for your next purchase is long gone due to total debt cap.

Credit tightening is the new normal and in an environment where credit is scarcer then ever growth will be harder and harder to come.

International bond yieds are rising across the globe creating pressure on funding rates locally.

So in an environment where growth is falling/slowing and holding costs are on the rise leverage plays opposite role of what it does in rising market.

Of course its just my view and not to be taken seriously. There would be lot of exceptions to whom none of caveats are applicable.

 

I am frothing about all the froth in this thread .

 

Is that the only way to borrow to purchase? What other options might be available to investors in the new credit environment?

I don't agree. I have taken on more debt in the falling Perth market than I ever took on in any rising market. Leverage in a falling market is fantastic for investors who know what they are doing.

The decade to deleverage started in 2015. Between 2015 and 2025 we are likely to see some fantastic opportunities to make profitable deals. It's the decade to leverage up. I'll take on more debt as long as that debt is working for me.

 

Join the club. Leverage up!

 

Australians face $700b wealth wipe-out as debt levels rated riskiest in the world: Morgan Stanley

 

Provided you have the necessary borrowing capacity to access it

 

$700b off $7 trillion? That's not even a decent hair cut

 

Should that eventuate, what a sale. Can you imagine the stampede! Wish I had cash to buy

Waiting.... still waiting


Edit: corrected percentages

 

Agreed - I was more concerned about the measures they're using and Australia's debt ratios.