Sydney's housing bubble deflates as loans revisit GFC declines

You must be partaking the same drugs John McGrath is as he made the same claim this week.

BS this is APRA induced.

Wholesale lending costs for banks is increasing regardless of what the RBA is doing (eg doesn't matter that its rate is 1.5%).

The Federal Reserve is whats making borrowing more expensive in Australia....not the RBA and as someone living in the USA I can guarantee another 0.25% in 2 months and then a final 0.25% in December.

Your banker knows it....soon you will too.

 

It was also one of the few times in the last 40 years that the government was actually rolling in cash .
The timing was almost perfect
They could spend billions of dollars keeping people employed in the short term until things settled down a bit, and the markets realized that Australia could sail through it relatively unscathed .
Although there was some pretty big currency devaluations for a brief period.
The Aud-JPY dropped from the high 80s to almost the high 50 at its low point , before slowly regaining in strengh , not sure how it compared to the USD , but a commodity currency like the AUD can take some big losses if major economies really stumble.

 

Thank you for that. I enjoyed reading it. I'm a child of the 80s and the fashion is something I have not forgotten!
I've only done limited reading on the 87 Crash. I believe Paul Keating has been critical of the RBA taking too long to act. He also acknowledges that deregulation in 1984 fuelled the debt binge that was part of the crash.
The RBA's slow action + debt binge, sounds scary.

 

Only half read this, but thought you might enjoy:
'Skid-marks on the pathway of progress': The crash that killed the entrepreneur

 

Makes one wonder how long AUS 10 Yr Bond Yields will yield less than the US equivalents for, which hasn't been seen for about 18 years, given your view on the Fed's intent.

Let's hope it doesn't resemble something like:-

 

It will likely end in some sort of downturn if not recession for us.

Trump just announced another round of tariffs which China will not be able to retaliate to. Tariffs will cause sudden inflation in USA and further faster rate hikes which will filter down under.

Chinese export numbers just started going down as well, likely due to the metal tariffs started before.

The us/au bond yield inversion is definitely something to watch for, many funds will be pulling out soon if not already.

 

Rubbish. Chinese steel was one of aspects but cannot be credited with over 26 years of economic expansion. Such a simplified view of economy wouldn’t even benefit a chook farm.

Australia sailed through GFC because of very prudent government policies. An innovative and rather adaptable workforce. Growing population and many other variables.

 

To be fair. The conversation did go-

“You: when has a housing correction caused a recession
Me: 2008
You: marcus, why do you keep changing your point”

That’s why we were giggling.

 

We got through the GFC because the we had been riding on the back of the chinese juggernaut, that saw massive expansion in China.
Gold also reached its low point around 2000 and was going up and up , and there was also billions of dollars from other commodities that had slowly been rising.
Very rarely in history do you see all the commodities rising at the same time ,with billions of dollars of unplanned revenue pouring into treasury.
The timing of the GFC was perfect for Australia as federal debt was non existent , and we could throw billions of dollars to keep people working and not see lots of people defaulting on home loans.

 

Are you saying this current correction is caused by wholesale funding cost going up?

I just want to confirm .

 

no wholesale funding cost increasing squeeze aussie banks profit margin so they will have to raise rates this year

 

Found this in marmot's article:

So a rough approximation that about 10% of loans taken out 2014-16 were more than 6 times DIR and then a portion of these in Crazy Territory. Some of them won't make it, granted. Could we assume that at least 25% are fixed (please refer @hobartchic 's post) - possibly more because the window for best ever fixed rates almost perfectly co-incides with the crazy lending period?
If someone can do better with a source of data, they are most welcome to do so. Nothing beats good, clean facts.

 

So if my DIR is around 3.25 does that mean I may have some opportunity to borrow again? I was planning to have 2019 off from property investing and start looking again in 2020. My idea at the time I decided that was perhaps the banks would not give me a loan at an 80% LVR but maybe they would at a 50% LVR.

Now, after all the stuff about DIRs has been announced I am thinking maybe I can get a loan. By that point my DIR will be under 3, so I might have a chance? Who knows?

That's a good one!

 

I'm sure the same brokers who were setting up loans @12-15+ DIR will be only too happy to point out your short-comings here.
I say well done. If you don't get a loan this year, try again later. Lenders should be drooling for clients like you.
Otherwise, stick the extra cash under the mattress.

 

I won't be buying before 2020. I will be looking then but I only buy if the time is right or if the deal is right.

https://www.canstar.com.au/home-loans/mortgage-offset-accounts

 

Anyone who thinks Australia sailed through the GFC and their government was prudent needs their head checked to see if their brain rolled out of their ear hole.

The Australian government sits in the head offices of the owners of the banks. The Australian government does exactly what the banks tell them to do.

2008 Australia has about 5 billion dollars in real surplus after paying down 96 billion dollars debt by selling huge amounts of government assets.

2018 Australia has about 550 billion dollars of real government debt wiping out the decades spent selling off stuff the taxpayer funded.

Australian private debt sky rocketed from 2004 to 2018 nearly all of it went on driving the price of unproductive real estate into the most expensive in the world and on credit cards.

If in 2003 Australia had a variant of the Glass Steegal banking laws in place, plus 20% deposit requirements, investors would be earning high rental yields, houses would be REALLY affordable, we would have hundreds of tech start ups, and the place would look like Dubai. The government would be rolling in money by now and we could have watched the rest of the world economy crash, while we invested in a proper schooling sporting system for our youth and free university education and tafe for deserving candidates who study hard.

Where is this Australia that sailed through the GFC?

Cheap credit has resulted in over population, and debt slavery for generations. Bankrupt governments and states and councils. From this nothing good will come.

 

I absolutely hate Dubai. One of the worst places on this planet. Had a massive property crash too. Soulless, purposeless concrete jungle. A lot of underpayed working for the privileged few.

Oh and your amazing Dubai had to be bailed out. As in please give me money. Please. I’ll even rename my masterpiece from Burj Dubai to Burj Khalifa. Maybe your brain needs checking?

Glad that Australia is nowhere near that place. A country that has a much more diversified base and a much more innovative workforce.

Countries have savings to sail through hard times. So Australia did sail through and savings did help. So what? The country didn’t use nearly as much tools as other countries. No QE, No major asset purchase.

 

Best post I have read on here for a long time,....... not to mention the secret bail out of Australian banks by the US fed, that only came out due to Obamas FOI tweak.

Australia has enormous untapped potential, continually stymied by short sighted political expedience and policy, playing to the instant gratification of of 'fiscal rent seeking'.
abetted by the extraordinary short tenure and mandate the politicians are given here.

 

Agreed....the Gulf states are one of the most soul less places in the world.

The people who are in power are dictators and no better than Saddam Hussein.....