Dollar down means your stacks value goes up. Quote. "Interestingly the Shanghai Composite Index and the Australian dollar are showing a six month correlation of 89%. Sydney looks like Shanghai south, but the Chinese authorities are slowing their economy and Chanos says this will turn into a sharp slide. In Australia the party seems as exciting as ever and everyone is still dancing (see Chuck Prince). Housing prices the highest in the world are still climbing. In the capital cities prices are up over 50% since 2004 and the average house is valued at nearly 8 times the average income. With borrowing rates now averaging over 7%, this means about 60 percent of pre-tax earnings would have to go toward the mortgage of a new house. No wonder the delinquency rate is up to 2.8% in Western Australia and climbing throughout the country even while the party is going on. With about 75 basis points priced into the forward curve this year, the situation will get tighter for the average Joe. Commodity prices made a new two year high today and the government just told us that mining taxes are still in good shape. I hope so, but we don't bet on hope. The Aussie was over USD 1.0000 today and we think it is a great sell here." http://www.creditcrunch.co.uk/forum...global-reliquification-by-shorting-australia/.
Our Banks are getting desparate to keep our bubble up. Steve Keen's Debtwatch site had an article on how the Wespac & St George banks are allowing rent repayments be classed as "evidence of saving" to raise the LVR.
I think that everybody would do well to look at history and see how small countries similar to Australia have been seduced by housing booms, only to have international banks pull the plug on lendings and subsequently crashing their economies and impoverishing their populations. Australia's arrogance in this regard is very similar to Ireland, Iceland, etc all the way back to Argentina. Of course we're too strong economically, we have a big quarry that will save us if the world goes bottom up, Australian's are different, we're smarter and this is the lucky country. Check out the housing investor forum - the other SS. There is a person on there who describes talking to a relative in LA about how the housing boom is a safe harbour and saviour - her reply. 'Do you realise how stupid you sound'. Alex Jones is often a paranoid ratbag in my own opinion, but he has many accurate observations - forget his conclusions if you wish but look at the content he links together and consider Australia's position in the context of other countries' economic collapses - all led by housing booms that failed when the credit was pulled out. hhttp://www.youtube.com/watch?v=QrC9pp1SHF4 You do not need a conspiracy to have a sequence of coincidences or actions to create a consequence greater than their individual parts ever could. Australia is a very easy plum to pick so we'll be fine for quite a while but keep in mind what Mr Jones has pointed out when considering your future plans. If Abbot is replaced by former Goldman Sachs employee Malcolm Turnbull http://en.wikipedia.org/wiki/Malcolm_Turnbull then start to worry.
This is true, banks want people to borrow. If people don't borrow then the money supply isn't expanding. When money suppy contracts, then theres going to be all sorts of problems. The Australian RE market will correct soon, I believe in the order of 10-20% depending on location. Slam
A builder explained to me today that Australia does not have a housing bubble, and people want to come here because there are no terrorists. I explained why we do have a bubble, and he got quite upset. He asked me when am I going to invest in property, and I said when the market crashes, and that got him very angry. I gave up on other points, and terminated the conversation. Banks have 50% of the loan book sourced from foreign sources so within a year we will see at least 2% more on a normal mortgages. If we don't it will be a miracle, and I'll be happy to be wrong.
Mate, Sydney got the MOST unaffordable housing in the WORLD!... relative to the average income. You know what they say, the higher they go the harder they crash...! Check out these articles http://www.dailyreckoning.com.au/australian-housing-market-4/2008/01/21/ http://www.smh.com.au/news/national/housing-bubble-yet-to-burst/2009/01/25/1232818248039.html Dan Denning is btw a good bloke, he was one the speaker in the Gold Symposium 2010 Sydney. He is a gold bug too.
I don't think a 'housing crash' is in anyone's interest - and I agree on 10-20% price drops depending on location and probably to 30 percent for houses over a million.
While the notion of a housing crash for my own personal gain is financially entertaining, the relative stability of my current occupation is fairly dependant on a steady construction industry. I narrowly escaped a rent increase of 17% this year, which would've equated to a 43% increase in the 3 years I've been here. Not a bad return for a house that was purchased for a tad over my current wage.
Down with it I say. I've got property but am not over leveraged or dependant on capital growth. That said the capital growth to now has been quite nice but since I'm not planning to sell it is really irrelevant. Although I did do the dumb thing and use equity to finance a new car... and a year of 5 star o/s holidays but lesson learnt and 3 years of hard, dirty work has finally restored the balance..... never again! One of those life experiences where I learnt the hard lesson of my mistakes by myself. Something I will be sure to provide guidance on to my son, hopefully by that time he will listen to his old man. Anyway, I would love to see a major US style correction. A major devaluation of Aussie property prices would suit me just fine. I would love to see over leveraged mortgage holders forced to sell, driving down the property prices. I know not very compassionate on this Christmas eve but..... the truth none the less.
I imagine it is in the interests of the big4 to have a housing price crash. In my limited understanding, when the bubble bursts, it's the banks who pick up the assets, without ever having actually loaned any real money out. If they create the loans out of thin air, then surely it doesn't hurt them when you default. They just get to pickup an asset that cost them nothing. But i'm sure there's more layers to it than that. I'm sitting here, with my 8 y.o. son on Christmas morning, with Santa's presents all sitting under the tree, waiting for the rest of the "hungover" household to wake up. 2 headache pills later and i'll be rearing to rip open those presents. Have a nice Christmas day all ...
It depends if the bank is still solvent, or if they need to repay their loans to foreigners. Remember they consistently talk about financing money from overseas institutions. One thing that has come to my mind, by borrowing overseas in combination of using the fractional reserve system. For every 1billion they borrow, 10billion can be created in the local economy. What this means is that if they have locked in the interest rates with the foreign banks at 5%, they can loan out 10billion at 7%. Effectively making 70% (of the 1billion) and paying 5% of the billion they borrow. Assuming everyone pays back their loans and the cycle continues. No wonder they are at record profits. Damn these scum bankers, so much for the its harder to get financing clause and we need to jack up the interest rates. I actually think its a good idea that people are waking up, the more that people move away from the current monetary system the better. Its all be setup to make us slaves. Thank god my mortgage (IP) is cashflow positive. Slam
Keep in mind that part of the Duck/Dullard bank punishment package allows the banks to plunder our Super funds for cheaper funds, so they will be reducing their dependance on o'seas funds. Perhaps the government could punish us so "badly" too.
It probably is, the banks can then repossess all of houses under their book. When the dust settled they'll be property cartel! Besides they were lending money that is not theirs anyway. All borrowed money which they don't have to return ever!
