Let's hurt those evil investors

Indeed! Property Greed caused the GFC. Short memory.

 

Interest

Sorry I don't buy it. I can see that you're trying to project yourself as being level headed and sincerely concerned about the greater good (as per the quoted comment, which I don't think anyone would disagree with), but I can see through the veneer - there's enough vitriol seeping through your other comments to make me think you're bitter about something. You've missed out, you've seen your friends rise to great heights, or something. I don't know what it is but you're upset, and not just about speculators / investors.

 

https://en.m.wikipedia.org/wiki/Financial_crisis_of_2007–08
Short memory.

Again, this is NOT about ME. So let's not discuss ME.

There's a reason why the people at the RBA and APRA are worried. They learned the lesson from the USA and elsewhere. With the Australian economy struggling to grow, there is a huge risk at stake.

The bursting of the U.S. (United States) housing bubble, which peaked in 2004,[5] caused the values of securities tied to U.S. real estate pricing to plummet, damaging financial institutions globally.[6][7]The financial crisis was triggered by a complex interplay of policies that encouraged home ownership, providing easier access to loans for (lending) borrowers, overvaluation of bundled subprime mortgages based on the theory that housing prices would continue to escalate, questionable trading practices on behalf of both buyers and sellers, compensation structures that prioritize short-term deal flow over long-term value creation, and a lack of adequate capital holdings from banks and insurance companies to back the financial commitments they were making.[8][9][10][11]Questions regarding bank solvency, declines in credit availability and damaged investor confidence had an impact on global stock markets, where securities suffered large losses during 2008 and early 2009. Economies worldwide slowed during this period, as credit tightened and international trade declined.[12]Governments and central banks responded with unprecedented fiscal stimulus, monetary policyexpansion and institutional bailouts.[13] In the U.S., Congress passed the American Recovery and Reinvestment Act of 2009.

 

Do you think the banks will pass-on another rate cut though? I have a feeling they will just hide behind APRA and say, "sorry we can't pass on anything because of these guys" *pointing to APRA*.

 

That's true. Private debt in Australia is at record levels and most of it is tied up to housing, which will end in tears for people who can't service their debts.

Unemployment /workforce participation remains at 6% and is worsening in some states.
Inflation will be rising with the falling dollar.
Mining expansion is over and business confidence is fairly poor.

The following graphs show lending to housing investors is increasing as a proportion of total lending to persons in Australia, while lending to owner-occupiers has remained more or less unchanged in terms of the proportion of total lending since the early 1990s.



The RBA aims to maintain trend real GDP growth with stable inflation and avoid damaging asset price bubbles (such as residential property prices). The dilemma facing the RBA is that if it cuts rates to stimulate spending (and growth) it risks setting off inflation and asset price speculation.If it maintains rates higher than the real economy might require (according to the central bank’s logic) to stifle asset price speculation, it runs the danger of increasing unemployment. That's why APRA has stepped in.

 

Like Lloyd in dumb and dumber when Harry throws the salt shaker at C-Bass.

 

Im finding this graph quite concerning.

 

In the long run, property prices should increase and that's normal. But for it to increase a lot in a short period of time, it creates risks that bank regulators make nervous.

 

Interesting . So it wasn't the property market that caused the problem ....

It was how the financial market repackaged debt that turned what would have been just another normal property cycle to become a global crisis .

Maybe you should put the blame where it belongs rather than blaming the property market ....

Financial markets , back room boffins ... OMG .... The American capitalist system at work without any suitable oversight / regulation ..

Cliff

 

Over history , this is the normal economic cycle . Things don't go up in a nice straight line . Reason ??

The underlying driver behind all that happens in any market is human emotion and that is never a straight line and never will be .

Cliff

 

Umm. That's what the Aussie regulators are trying to do. Avoid a US style crisis. And if you're not aware, Oz lenders also repackage loans in the securitisation market. Who know what's lurking within these AAA-rated residential mortgage backed securities issued by the Australian banks.

 

I personally think they would pass the cuts to the owner-occupied loans only.

At least this is not going to provoke as much outrage on the media about banks driving up living cost.

 

Sorry , was rushing when I replied and didn't read it correctly .

Cliff

 

There's no point passing on the rate cuts to IP loans because the banks would not be competing each other for custom within the 10% limit on IP loan growth imposed by APRA. Even the smaller lenders are bound by these so don't expet them to try to poach customers from each other.

The new customer battleground is going to be owner occupier loans. APRA hasn't put a "limit" on PPoR loans growth.

 

Ah , so now the Aussie banking system is suspect ....

Be interesting to see how many other negatives you're able to spin in your time here .

I'm already seeing a pattern here . As I said , I like 2340 as he enters the spirit of debate and addresses issues as a whole

You on the other hand , cherry pick quotes that you feel you can undermine and ignore the broader scope of arguments against you often going off at tangents when you can't find something to undermine ....

The pattern of a troll.

Cliff

 

Or it could increase quickly, with long periods of stagnation, as has been the case for a very long time now? Why does the housing sector have to follow a different pattern? Why should it be a steady growth? This is the nature of this particular beast. Every investment class has different characteristics. You can't compare the recklessness of what happened in the US with what's going on here. It's a straw man argument at best.

 

I see. Ad hominem is your expertise.

Why don't you discuss the issue instead of ME?

There's a reason why RBA and APRA are taking action. And don't blame my 'negativity' for that.

So you think rainbows and lollipops and unicorns?

 

You have the same people who have been praising the mining boom without regard to the consequences of a bust or a plateau.

When prices stagnate or fall after a sudden surge in prices, it creates a signal for suppliers of new housing that there's no incentive to invest in housing construction, which is needed to cope with population growth. A more manageable steady growth is more consistent with financial stability. If house prices move faster than the underlying economic growth, it sucks capital from the rest of the economy instead of plowing money into productive businesses.

There's a reason why the RBA and APRA are doing this macropru action. A sudden stagnation and decline after a massive price increase can result in recession.

 

Naa. Mooching off society by retiring on the pension is old school. Now if you want to mooch off society, you get a job and salary sacrifice into super.

It's a brilliant scheme isn't it? A scheme to save the government money, by replacing pensions with super but the super scheme ends up costing more than the pension. Could only be dreamed up by a politician.

http://www.abc.net.au/7.30/content/2015/s4239447.htm

 

But we don't live in a text book. Forget your academics. On the one hand there is what you would like the world to be, then on the other hand there is what the world actually is. YES, steady growth is preferable. I am not arguing this point. I am with you. But it's not like that, no matter how much you hope and pray.

Big jumps followed by periods of stagnation is the real world, love it or hate it. And it's been this way since before the mining boom - it's not like this is a characteristic unique to the mining boom era. It's not like it was a consistent, steady increase before the mining boom. This is just the way housing is. As I said, why would you expect the housing cycle to exactly resemble every other investment class?

Poor people sit on the sidelines complaining about how the world should be. And they are "right" - there's nothing wrong about being idealistic. But rich people accept the world for what it is and do the best they can with the cards they are dealt.