Lindsay David predicts real estate bubble will pop end of 2017

I just hopped onto LF twitter who has around 3000 followers. Few regulars would always comment in response to his tweets...loyal supporters.

 

Are they still true believers in a catastrophic housing market collapse?

It's a bit sad really. mgf, who started the thread I linked to earlier, refused to by a home for his family because he was convinced the housing market was about to collapse. That thread was started in 2015 and if you look at the growth in Sydney or Melbourne prices between now and then, its a lot of capital gain foregone.

 

The OP sticks to the convictions held, so be it. Good or bad decision, only hindsight can tell.

 

so where is that prediction about 2017 crash? Can you please post a few sentences from the book just before quoted (by news.com.au) "It’s going to be a disaster. By the end of 2017 the housing market will crash..." Just to confirm the context of that phrase wasn't conditional.

I read a few reviews of his book and it looked like the context was conditional - "if blah-blah-blah, then.... ". If so, that's not really a prediction.

even a (news.com.au) sentence just before that qoute:

"According to Mr David, 2017 is when it will all start to unravel, and it will start in the West. If the Perth market crashes, that will begin to affect the banking system’s ability to lend." It doesn't sound as prediction and is not in line with next "It’s going to be a disaster. By the end of 2017... "

 

I don't think that quote is from the book. @Barny would be able to confirm.

The newspaper article author does not say where the quote is from but it could be from an interview, blog post or senate submission.

Either way, I find your idea very interesting. It is possible that Lindsay David has developed a business model where he is selling doom and gloom (Australia: Boom to Bust Blog - By Lindsay David, Home - LF Economics - Lindsay David and Philip Soos) but has never actually stated that the Australian Property Market will collapse (although he has strongly implied this).

Take this Senate Submission for example:

Australian economic history and recent international events illustrate collapsing housing bubbles can quickly increase the number of unsold properties (stale stock), shattering the pervasive myth of a deleterious dwelling shortage. Should this occur alongside rising unemployment and underemployment, reduced aggregate demand and falling net overseas migration, the combination of declining population growth and an oversupply of investment properties would place further downwards pressure on rental prices. Falling housing and rental prices, including sales, would be a doomsday trifecta for investors as they suffer losses in both capital prices and net rental incomes.

This calamitous outcome is especially likely in Melbourne where rents have not increased in real terms since 2010. Melbourne is primed to become the epicentre of a legendary housing market crash due to the combination of a staggering boom in real housing prices (178 per cent). Perth is also in a serious predicament following price stagnation and substantial net income losses since the market peaked in 2007Q1. On average, investors purchasing after the peak have lost in terms of both prices and rental income. Other capital cities will experience a downturn, though not as large in percentage terms as Melbourne or Perth.
​

and later:

A bloodbath in the housing market, however, appears a near certainty due to the magnitude of falls required for housing prices to again reflect economic fundamentals. The largest residential land market bubble on record is truly incomparable and dwarfs earlier speculative episodes in the commercial and industrial land market.​

http://blog.australiaboomtobust.com/wp-content/uploads/2015/06/LF-Economics-Submission.pdf

It's just like you said, it's all conditional. Although this time he is on the record for saying "A bloodbath in the housing market, however, appears a near certainty". That said, I agree that is not the same as saying that it will collapse.

Although he is widely reported, I am having a lot of trouble locating primary sources for what he is reported to have said. For example, this article cites The Big Rort by Lindsay David.

"Entitled The Big Rort, the report argues that the banks’ use of combined loan-to-value ratios makes it easy for investors to accumulate 'multiple properties in a relatively short period of time despite high house prices relative to income.'"
​

New report exposes ‘white-collar criminality’ in the mortgage market

Other articles mention the same report by it's full name: The Big Rort: A Mortgage Market Built on Deceit and Fraud

Australia’s financial regulators have been condemned as contributing to a “precarious situation” in which the housing market is “holding the rest of the economy to ransom”.

Lindsay David, founder of LF Economics, said in The Big Rort: A Mortgage Market Built on Deceit and Fraud that the Australian economy is “creaking under the weight” of historically high household debt and warned that a “fair proportion” will “never be repaid”.​

Regulators have 'critical role in allowing fraud to flourish' - Mortgage Business

I have not been able to track down The Big Rort: A Mortgage Market Built on Deceit and Fraud. It would be interesting to read.

 

I trust this finally puts an end to those boring "tick, tock" posts?

 

Depends on what he predicts next.

 

Tick tock....

 

Does it? The last wave of "tick, tocks" didn't seem to require any actual predictions...

 

We will see, won't we?

 

All doomers like Lindsay David, just cannot contain themselves with their graphs of comparative national debt and financial crises, to announce with certainty what would happen to Australia. Their standard fall back response to criticism is 'reversion to the mean' and put down of 'this time it is different'.

Somehow their theories are just not robust enough to size up the situation in Australia. I remember raising the factor of migration when the argument was raised that the growth of house prices cannot exceed domestic wage growth.

Many doomers fail to acquaint themselves with the global trends, especially migration. Australia benefits significantly from growth due to migration. Australia is the number one country for net inflow of millionaires. Australia is now the No.1 destination for the world's millionaire migrants

Now, if the real estate and environment of Australia are highly valued the world over my hope is that our core prosperity will not be imperiled by our government in 2018.

 

This is very true however like when the gfc hit. Not many expected it to happen.

Just those that got it right we're the ones who everyday are saying the marker will crash soon.

If you keep on making the same prediction day in day out. You'll get it right one day....

 

Bienvenue à 2018 ​

 

I think you gotta ask yourself if the prices make sense. Does a million dollars for a house in a low income area make sense? And vice versa, does 450k for a house in a upper middle class area (like Hillarys, WA) make sense?

 

No, prices don't make sense to me. But that doesn't mean that the property market will collapse. Prices didn't make sense to me in Sydney in 2003. Prices peaked at record highs for the time. The property market didn't collapse because prices didn't make sense. Sydney did have a huge slowdown though that pretty much lasted 10 years. So, why is this time different? Why will there be a property market collapse this time instead of a huge slowdown? I'm not buying it.

 

Prices don't need to 'make sense' to individuals. There is clearly enough ppl bringing in the demand and supply can't keep up in high demand areas in Australia. You can't compare syd/melb with Perth, Darwin etc
. The demand fundamentals for ppl wanting to live there is totally different. When all is said and done, Australia is a dam fantastic place to live with limited 'in demand' land across the country. Prices were always going to be strong and grow over time imo.

 

A lot of the demand is artificial, similar to the demand of bitcoin, mostly propped up by investor speculation. The difference is that the property market is being upheld up by the banks, government and media so it's going to be a lot stronger than something like bitcoin.

 

Time will tell. Let's see what happens say 3 years from now.

 

I thought everyone already knew this. Half of property is purchased by investors. Whether prices will nose dive or not is another story.

 

Are investors still buying half of properties? Certainly not in Perth. I know for a while they were in Sydney but that was an anomaly I think. With APRA putting limits on investment loans, my understanding is the markets are returning to normal, which is approximately 30% investor and 70% owner occupier as a long term trend.