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"The Crash" has been called... end of 2017.

Discussion in 'Property Market Economics' started by Perthguy, 23rd Oct, 2015.

  1. Perthguy

    Perthguy Well-Known Member

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    It seems that it is only recently that Lindsay David, co-founder of LF Economics has claimed that Australia is in the midst of the “largest housing bubble on record” (1). I actually thought this guy had been around for years but it seems he has only been publishing books and articles on the Great Australian Property Bubble since 2014 (2)(3). Since some of the permabear/trolls on this forum take him so seriously, I thought he must have some kind of background in economics. Apparently, Lindsay holds an MBA from IMD Business School (4), whatever that means. And yet, he has written a book, Australia: Boom to Bust (5), claiming that the Australian banking system is too big to save.

    Despite a complete lack of training in economics, he sure has been getting a lot of media attention, with articles claiming he, and Philip Soos (co-founder of LF Economics) are economists or "housing economists". Recent articles include:
    Economists claim Australia in midst of largest housing bubble on record (6)
    Australia in for a property "bloodbath" economists predict (7)
    Banks have treated our housing market like a Ponzi scheme, and it's about to bust (8)
    etc.

    For the record, Philip Soos is not an economist or "housing economist" either. He has an IT degree and MBA and is currently a uni student! (9). Although that doesn't stop the media from referring to him as an "economist" (10). It's interesting he is described as a "researcher at Deakin University’s School of International and Political Studies". He has a much longer history of publishing about the "housing bubble" with articles dating back to 2011!
    Debunking the myths peddled by Australia’s property bubble ‘deniers’ (11)

    So basically, much of this bubble speculation and the dire warnings of a housing market bloodbath collapse are brought to you by an author with no history in economics and a uni student. Well, I'm convinced ;)

    There is a funny article about the whole mess (12):
    That expert economist hogging headlines in Vancouver and Australia? Not 'technically' an economist
    Philip Soos, cited as a Deakin University researcher and economist, is actually an IT grad and masters student passing off the university's address as his personal contact.​
    Given all of that, Lindsay David has called "the crash" to occur at the end of 2017 (13).

    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’s going to be a disaster. By the end of 2017 the housing market will crash, and at least one of the big four banks will either be bailed out, go bust or be nationalised,” he said.​

    Call me cynical, but these two appear to have a set up a business to cash in on the boom. LF Economics was founded by Lindsay David and Philip Soos and provides services and datasets relating to the risk profile of the Australian real estate and financial services sectors (14). The amazing thing is that the Ultimate Chart Pack is $3,199 USD! (15) :eek: Talk about cashing in on the doom and gloom.

    Basically, an author and a uni student decided to cash in on a housing boom by calling it a "housing bubble". Next time you see a d&g article with either of these names attached, just remember who they are.

    (1) http://www.news.com.au/finance/real...bubble-on-record/story-fncq3era-1227410053643
    (2) http://www.amazon.com/Australia-Aus...WCS_1_1?s=books&ie=UTF8&qid=1445571487&sr=1-1
    (3) http://www.lfeconomics.com/news.html
    (4) http://blog.australiaboomtobust.com/about-us/
    (5) http://www.amazon.com/Australia-Aus...swatch_0?_encoding=UTF8&sr=8-1&qid=1413381017
    (6) http://www.news.com.au/finance/real...bubble-on-record/story-fncq3era-1227410053643
    (7) http://www.yourinvestmentpropertyma...erty-bloodbath-economists-predict-201864.aspx
    (8) http://www.theguardian.com/commenti...ket-like-a-ponzi-scheme-and-its-about-to-bust
    (9) http://www.onlineopinion.com.au/author.asp?id=7012
    (10) http://www.propertyobserver.com.au/...h-a-property-bubble-q-a-with-philip-soos.html
    (11) https://theconversation.com/debunking-the-myths-peddled-by-australias-property-bubble-deniers-4488
    (12) http://www.scmp.com/comment/blogs/a...eadlines-vancouver-and-australia-not?page=all
    (13) http://www.news.com.au/finance/real...bble-pop-in-2017/story-fndban6l-1227365483287
    (14) http://www.lfeconomics.com/
    (15) https://gumroad.com/l/lfchartpack#
     
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  2. Biz

    Biz Well-Known Member

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    Where were these guys in the early 2000's. That boom was bigger than this one.
     
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  3. Bullion Baron

    Bullion Baron Well-Known Member

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    I don't agree with all Lindsay's comments & conclusions (in blog posts and media articles), but I think attacking him based on credentials is a thin argument.

    I would attribute more 'cred' to real life experience / thorough data research of recent events than I would to some cookie cutter economics degree.

    Just as I would attribute more cred to a property investor who was on the ground researching and crunching real numbers than one who has a property related degree or certificate.

    Yes, but debt was lower, prices lower as multiple of incomes and Australia was less reliant on the commodity/mining sector.
     
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  4. Perthguy

    Perthguy Well-Known Member

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    One was travelling in Europe (lucky!) and the other was at uni studying IT.

    Hey, in the 2000's, I was studying IT at uni too. Maybe I should become a leading economist as well. :D
     
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  5. Biz

    Biz Well-Known Member

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    The level of debt may have been lower as a percentage but it wouldn't have been much. I'll get my body ready for the graph I know you're going to throw at me. :p Overall the price of other parts of the household budget would have fallen though so it's all swings and roundabouts. Spend less on car/furniture more on house blah blah. You know the usual argument.

    Less reliant on mining? Can't remember specifics tbh what else were we doing back then? I remember getting paid a packet out of school in the IT game for doing bugger all. :D
     
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  6. Perthguy

    Perthguy Well-Known Member

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    Fair comment. I wouldn't trust someone with a cookie cutter economics degree and no life experience either. My point is more that he doesn't appear to have a background in economics and yet he is held up by the media as being a "leading economist". On what basis?

    It just seem odd to me that a person who is calling the biggest crash in Australian property history doesn't appear to have any background in this area and started publishing about the subject last year. Where does his credibility come from?
     
  7. Perthguy

    Perthguy Well-Known Member

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    Housing Industry Association Chief Economist Harley Dale says its scaremongering.

    "I don't think scaremongering headline seeking rhetoric is particularly helpful to the overall debate of conversation about housing prices there is certainly no indication out that there that we've got some kind of impending crash coming upon us in the housing market."

    http://www.sbs.com.au/news/article/2015/06/23/housing-bubble-or-scaremongering

    Maybe he is just promoting his book with his scaremongering headlines. Anyway, it's not too far away before we find out if we were in the biggest property bubble of all time or simply another property cycle.
     
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  8. Barny

    Barny Well-Known Member

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    Philip soos and Lindsay David are milking it big time. Me personally I wouldn't listen to Philip soos, but I'm going to purchase Lindsay David's book and have a read and see what he thinks as many have spoken about his predictions.
    The media are promoting anyone with anything to say that is negative at the moment. Just like they did when property was booming. Agency's like domain make money when people list their properties on the way up(booming market so more buyers list to sell) and now, on the way down(scare tactics so people list to sell). When property is doing nothing, media doesn't mention property on the front page or make headlines.
    Who owns domain and other realestate sites? Media.


    It's important to listen to what everyone has to say, then make your own mind up.
     
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  9. HomePage

    HomePage Well-Known Member

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    Likewise, some here who argue against a big crash do so with the same lack of economic qualifications. Sure these anti-crashers may have experience from skin in the game over the last couple of decades but when all they've ever seen is an ever rising tide of property values, it's hard for them to be objective about the possibility of a falling or, heaven forbid, a tumbling one.
     
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  10. Perthguy

    Perthguy Well-Known Member

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    It should be a good read. Just apply your analytical skills, consider he is writing from a particular agenda and think about what he is not saying as well as what he is saying. Hey, maybe you should do a book report after. It could be very useful to posters on this forum.
     
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  11. larrylarry

    larrylarry Well-Known Member

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    There are just over 3000 forumites here. There are still multitudes of investors in the game. Wonder what they are thinking now with the doom and gloom reporting. Holding pattern? Sell? Buy more?
     
  12. Perthguy

    Perthguy Well-Known Member

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    Agreed. I don't pay any attention to the permabulls either. It's interesting when you have a look at the people behind the stories. For example, Mark Hewitt says Australia has never really seen a housing bubble like those experienced in the US and some part of Europe following the GFC. Well, Mark Hewitt is General Manager of Sales and Operations for Australian Finance Group. Of course he is going to say that Australia is not a in a property bubble. Although I do agree that:

    “People are getting the potential for a slight price correction or a slowdown in growth mixed up with a burst property bubble,”

    http://www.realestate.com.au/blog/qa-is-australia-in-a-housing-bubble/
     
  13. Perthguy

    Perthguy Well-Known Member

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    Maybe looking for opportunities? Personally, I am selling Melbourne and moving my equity to the Perth market.
     
  14. Barny

    Barny Well-Known Member

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    Hey perthguy, you know by now that I'm trying to piece things together. Im putting in research to better understand why they are predicting crashes, what happens in crashes, what would happen if Australia did crash. But unfortunately, people on this site except some, do not like hearing any negativity in relation to property going bust, depression, even though I'm only researching, and not predicting or even indicating it, I'm getting shot down. So I will write to you and share the info once done, but I don't want to cause issues here, as its not my intention.
     
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  15. 2FAST4U

    2FAST4U Well-Known Member

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    @Barny I sent you a PM.

    Besides the usual forces- interest rates, less migration, unemployment etc. the Government could make houses more affordable by building more houses backas they did post WWII.

    "Between 1947 and 1961, the housing stock increased by 50% -compared with a 41% increase in Australia’s population over this period. The Commonwealth and State Governments directly contributed 221,700, or 24% of the total increase in the housing stock over this period, through programs financed under the Commonwealth-State Housing Agreements, or under the War and Defence Service Homes Schemes. During this period, the home ownership rate increased from 53.4% to 70.3% -the largest increase in home ownership in Australia’s history.

    Between 1961 and 1976, the housing stock increased by a further 46% -again outstripping the 33% increase in Australia’s population over this period. During this period, the Commonwealth and State Governments directly added a further 299,000 dwellings to the housing stock, equivalent to 23% of the increase in the total housing stock over this period. During this period, the home ownership rate fluctuated between 68% and 71%, but remained at a high level by international standards.

    In other words, during this period, Federal and State Government housing policies were principally directed towards increasing the supply of housing, and at increasing or maintaining home ownership rates. And these policies actually achieved those objectives".

    More housing commission houses= more supply. Tenants can either purchase the house or they live in a house for life with cheap rent= less demand for private housing= lower yields= less sense of investment= lower price.
     
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  16. willair

    willair Well-Known Member Premium Member

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    All you can do is look back at historical information,and most of those statement all are easy testable,but in all my investing the only market that ever goes down 30% plus in any given three month period is the equities markets,property on a whole Australia wide for everywhere to implode at once all in the same time frame is never going to happen..
     
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  17. Perthguy

    Perthguy Well-Known Member

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    I think that is important to understand the upsides of markets (they don't keep rising forever) and the downsides of markets (they can take a long time to recover).

    I would start with A History of Housing Prices in Australia 1880-2010 by Nigel Stapledon, which is basically a PhD paper on property cycles in Australia. The only issue I have with his analysis is that in 2010, the peak of the boom, he called a property Bubble in Australia. This call was based on an incomplete dataset. I think if you fill in the blanks, property cycles continued as normal. Still, it's a great read:

    http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1711224

    In terms of 'being shot down', don't take it personally. Some people might take your posts the wrong way. Don't take it to heart. It's not personal. Keep thinking and asking questions. Some things to think about:
    - what has caused booms in the past?
    - how long do booms typically last?
    - what causes a boom to end?
    - what happens after the boom, do prices stagnate or decrease?
    - how long for?
    - are all capital cities the same or are they in different cycles?

    I think it is important to understand this because (for example) a downturn in Sydney and Melbourne could present opportunities in Brisbane and Perth.

    There is heaps more research here: http://www.australianpropertyportal.com/Research
     
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  18. larrylarry

    larrylarry Well-Known Member

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    @Barny I don't think anyone is trying to shoot down anyone. Even if they did, you stand by your own conviction. There are those who are easily swayed by media news and there are those who believe they are able to weather the storms based on experience. I don't think anyone here including myself is saying property will not fall in value but by how much. That's how I'm reading it. At the end of the day, it's my money that I'm using and to hold, buy, sell. I also think everyone wants each other to be successful here and each has to embark his or her own journey.
     
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  19. Barny

    Barny Well-Known Member

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    Cheers mate, good info.

    Thanks everyone.
     
  20. Perthguy

    Perthguy Well-Known Member

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    There is a good table on the property cycles in Australia from 1887 to 1996. It shows exactly what you are saying that property, overall, doesn't drop by 30% (except in 1891).
    [​IMG]

    I would love too see this updated to show the full property cycle 10, 11 and 12? It would be interesting to see. That said, the "Australian Property Market" is a bit of a myth really. I mean look at Melbourne booming and Perth busting at the same time. I don't think it really that useful to know if the "Australian Property Market" is going up or down. It will depend on where you want to buy. And just because the Melbourne market is going up doesn't mean you should buy an OTP apartment in the Melbourne CBD. Some parts of the Melbourne market a strong and some might be a really bad buy.