This Housing Downturn is Over

That's on the back of Chinese expansion and demand for all the stuff we were digging and producing combined with constantly expanding population.

Chinese gdp used to grow double digits past couple decades. Now might sink below 6% soon. I believe that's the main big macro headwind hitting us. Unless we can find another big nation to sell to, no way local ecoNomy or property market will grow as much.

 

1) Australia's population growth rate is roughly where it has been on-average for the past 20 years. No changes there.

2) Chinese economy ONLY did 3 years of "double digit" growth in the past 20 years. It is not 'sinking' to 6%. It is at 7% and likely to average at that level for the coming 3-5 years based on IMF reports and then start tracking higher. Sky is not falling in China.

3) Australia achieved highest 'ever' mining export (in dollar value) this year ($278b).

Glass is so half full...

 

Also, for a bit of context before the "but... look at Japan & Europe's real estate values..." statements are made:

- Australia's population growth rate (for last year and on average for the past 2 decades) is almost 9 times higher (NINE TIMES HIGHER) than European Union's population growth rate i.e 0.19% vs 1.7%.

- Japan's population growth rate for the past decade is in negative.

 

Japanese wished they took Australia under the rising sun in WWII.
But it didn't happen. That will go down in history. Imagine what they could do with a land mass like Australia?
Checking the stats - Current Japanese population is 128 million people.

 

Agreed.

Actually China's annual growth rate was above 10% in 2003, 2004, 2005, 2006, 2007 and 2010. Every year from 1991 to 2014 had growht of 7.3% or higher. And you're right China GDP growth isn't sinking to 6%, it already has sunk to 6% as was announced today!

China Economic Growth Slows Even More in the Third Quarter

And I'm not sure which IMF forecasts you're looking at because their forecast for China's growth in 2020 was just downgraded to 5.8%.

‘Precarious’ global outlook sees IMF again cut China’s 2019 growth rate

I think it's too early to say the sky is falling but they're clearly dropping away from the insane growth levels they had from 1991-2014.

Yes and that insanely good result, helped by massively high iron-ore prices that have already reverted 40% since their peak, led to us having a per capita recession over that period. How good do you reckon the rest of the economy is going?

It might be half full of something...

 

I think you missed one:

- Ireland's population growth rate was higher than Australia's (~2%) from 2000-2009.

 

Correct - and then it dropped like a stone to 0.4%-0.5% a couple of years after 2008/09.

Also remember, unemployment was sitting at 15% during the property crash.

Prior to the crash, the supply outstripped demand by a significant margin and precipitated the crash.

I would bet our property values would sink too if our unemployment rate reaches 15%, our population growth rate declines significantly and the supply of new dwellings keep at historical-high level, none of which is happening...

Add in the accelerating capital flight from Hong Kong to Aus and we have quite a bit of juice left.

 

As of Feb 2008 Ireland's unemployment rate hit a low of 5.3%. Population growth was going at over 2%. Construction was still strong but had slowed somewhat since the construction peak of 2006 and approvals were plummeting. House prices, especially in Dublin, had dropped close to 10% over the previous 18 months or so but ticked up again slightly in May 2008 on very low sales numbers. The property downturn was over.

Sound at all familiar?

 

https://www.smh.com.au/business/the...ng-at-double-digit-rates-20191018-p531z3.html

"...Sydney and Melbourne house prices will be growing at more than 12 per cent per annum by the middle of next year, one of the nation's largest banks has forecast as the Reserve Bank talks up the chances of the economy recovering in 2020..."

"The change in sentiment was driven by the combination of lower rates, easier access to credit, and increased certainty around housing taxation. Together, these factors have helped to shift sentiment from one of pervasive negativity to broad optimism."

So now ANZ will be labelled as 'vested interest' and wrong too and so is RBA, ANZ, Mirvac and Stockland and the list keeps growing each day .. Only about a few months ago when these very economists of the banks and RBA were painting doom and gloom, the bear-mafia was happily quoting these sources and of the impending even more severe gloom.

Glass half full guys- Sentiment has turned and so has worm. The recovery is in full swing...With each passing day, the data and news flow and the associated noise will keep getting stronger and so will property values...

 

The Lowy family transition has been in the planning for years and is due to age....not the nature of the economy.

 

China's GDP growth slows to 27-year low | DW | 18.10.2019

 

Shane Oliver on Twitter

China real GDP growth lowest in decades...but given huge increase in the size of the Chinese economy the real volume increase in the size of the economy is running around record levels (which eg explains still elevated commodity demand)

 

Great comment around the perspective....and as he says "Glass Half Empty" graph vs "Glass Half Full" graph.

Many forget that growth at 6% today is greater than the 10-11% growth rates of the 2000-2010 period. The Chinese economy is now $US11 trillion at nominal exchange rates & $US20 trillion on a PPP basis. It was only $US4-5 trillion in 2007 (the size of Germany).

In other words, the 11% growth in 2007 (of a $4T economy) will equate to 4.5% growth today (of an $11T economy) when it comes to net increase in consumption... so in net terms Chinese are consuming a lot more today at c6% growth than in 2010 at 10% growth..

 

I was just responding to factual inaccuracies of the post I was quoting. In terms of what it actually means yes 6% growth is damn impressive and if it can stay there then things like commodity prices aren't likely to fall much from their highs. The problem is most forward indicators in China are suggesting a significant slowdown in growth. Whether that means slowing down to 5.5% growth and still being a big economic driver or 2.5% growth and Australia's exports (1/3 of which go to China or Hong Kong) being smashed is the big question.

 

I think there is still lots of fuel left for growth in Chinese economy given that is still has income less than $10k pa per capita with a relatively highly educated and competive population and in the middle of technology revolution. The Chinese growth story is not done yet until it reaches similar income to that of other developed Asian city states and countries( which I strongly believe it is capable of )

 

Or the family was just smart enough to know that Australian retail is going snoozey.

 

a lot of that growth has been based on debt which gives diminishing returns. You can only pile on so much debt before the whole system collapses. It will be fun to watch when that happens.

The reason why the per capita income is low is because much of the population is uneducated and labor is cheap as factory workers used to be farmers that came to the factories to work.

Technology revolution? Without proper Intellectual property laws and regulation (which is one of the main items in the trade war.) they are still a long ways off. Inventions are copied and mass produced. Let's not even start to talk about "innovative" tech companies like Huawei/Ali Baba lol...

 

Don't know where you get most of your facts from but hoping they are not copied straight from a fringe political party's 1982 election manifesto...

Chinese debt to GDP ratio of 54% is far less than that of US' 109%, Japan's 234%, UK/ France/ Spain/ Belgium/ Portugal/ Singapore/ Brazil of around 90% and has much more room than most western economies and when the whole system collapses, the Americans, Europeans and Japanese will feel it a lot earlier than we would!
http://worldpopulationreview.com/countries/countries-by-national-debt/

Chinese literacy rate is 97% - It's probably a drop in the ocean compared to 100%??
China: Literacy rate | Statista

Almost all factory workers in every nation that industrialised and developed came from working in fields originally. China is no different and whilst this notion might have been somewhat truer in 1980s and 90s, if you visit vast majority of cities in China, you would see highly sophisticated and modern infrastructure base that is accelerating at faster rate than any other nation on the planet and in much better shape than most of US' cities.
China Beats U.S. as Richest Infrastructure Nation

Yeah.. Alibaba ?? that puny little tech company built by that funny looking guy has a larger market capitalisation (US$440b) than BHP ($164b), Rio Tinto ($87b), Telstra ($42.28b), ANZ ($77b), Qantas ($10b) & Westpac ($100b)..all put together! And before we say its all a Chinese conspiracy to make their own company look a lot bigger... Ali Baba is listed on NYSE!

Huawei is not a public company so hard to determine its market cap but it generates more revenue per annum (US$ 105b) than Emirates ($13b), BHP ($43b), Rio Tinto ($40b), CSL ($6b) and Optus ($6b) combined!

 

All a big chinese conspiracy theory mate.
The yellow peril fear is still thriving and alive today in 2019.
What a fantastic society we are living in.

Boogie man - boo boo boo

 

You're right that Chinese government debt doesn't look bad. But Chinese corporate debt is astronomical at almost 150% of GDP compared to say the US at about 75% of GDP. And the government has direct ownership in every Chinese company so they're direct guarantors of that debt which isn't the case in the US. Even worse is that most of that debt is denominated in $US which the Chinese government doesn't control. They've already had a couple of regional banks go belly up and need a bailout in the last year so it's clearly not all rosy in China.