The Australian housing bust: Why this time is different

The LT3000 Blog: The Australian housing bust: Why this time is different

 

A good summary

 

Australian economy’s retained AAA ranking today. Housing is the safest investment class in the long term based on over 200 years of data.

If Australian housing isn’t safe, then nothing really is. The only plausible thing left then is to become a monk or build an apocalypse shelter.

How are these writers any different to anti-vaccine activists??

 

Too risky. May go down 40%.

 

Sadly it’a easy to play on fears. Quick attention whatever rubbish you have to say!

Google Steve Keen!!

 

Ahhhh... the Druitt is going to be hit by a salami! Better move to "high" ground

 

Lol everything he said it true. And please define safest based on 200 years of data? What do you mean 'safe'? If you are talking about annual growth rate, I can find lots of things that have had better returns over the past 200 years. Lol Australian property's run of amazing returns have actually been a relatively recent phenomenal.


I dont agree with the extent of the fall he predicted. But I do recognise that anything can happen. Right now, employment is doing well in Aus, which is holding things up. But what if that changes. Is that my central scenario, no. But I do recognise the possibility of it happening.

As to S&P, you clearly only read headlines. S&P put Aus on negative outlook early based on
1. unlikely that our budget will be in surplus
2. our housing prices are unsustainable


Today, they but outlook back to stable based on
1. budget is likely to be in surplus by 2020
2. our housing markets has been going down

Please be remembered that we will have an election soon, so politicians will go all out buying votes........in that kind of scenario, will it be reasonable to assume budget will be in surplus in 2020.

In case you haven't noticed, their analysis is static and not dynamic. So unless and until AUS really got into trouble, S&P's rating will always be great. And it has been based on the fact that housing market has been going down .......let's see what S&P will say if we have another increase in house prices

 

Which week 200 years ago will make it more subjective - pick the wrong week and you would have missed all that growth.

 

A good summary of all the negatives

 

Was hoping someone would start a thread on restoration of AAA rather than another bomb-shelter thread.

 

Article was about what's different from previous downturns, hence why it would focus on headwinds for growth.
What are the positives that differ from the past? Low interest rates?

 

Their reasoning being
1 we will be in surplus by 2020
2 house prices are going down

 

There was a couple of reports a few weeks back that something like 60% of total bank loans (in dollars ) was for residential mortgages.?.
The article went on to say that this was to high and posed a risk to the banks if there was a downturn in house prices.
Add very low wage growth and rising interest rates its puts more pressure on households.
Not sure if it was in the AFR or the Australian ???..

 

I think it was in a Martin North video recently, but i find it' sometimes difficult to figure out where he's obtaining some of his stats.

 

62% of the banks loan book is residential mortgages. An unprecedented lob sided weightingfor any economy. RBA credit aggregate data is released every month.

 

Moody's move shines light on Australia's home loan risks

yep, no wonder there exists the other thread about what other way AU is going to generate wealth. If 60% of credit is to resi housing it does speak about low levels or low profitability of other type of economic activity in AU.

 

Just a quote from the article that compares AU to other developed economies:

Over 60 per cent of the Australian banking system's loan book is in residential property, nearly 20 per centage points more than second-placed Norway and more than double the US ratio, according to data from the International Monetary Fund. In Hong Kong's frothy housing market, the ratio stands at only 14 per cent.

The exposure to housing reflects the lack of other lending opportunities for Australian banks, and the large profits they have made from home loans, according to TS Lim, head of research at Bell Potter Securities Ltd. "In Australia there are very few sectors apart from resources and mortgages -- and the former has also shrunk since the financial crisis," Lim said by email.