Yarpos : A while back ( I believe in this thread, could be another one also ) I warned people about ANZ. If any bank is overexposed to all the crap of USA and bad debt, it's ANZ. Be very very wary about them, and don't keep more than 20.000$ AUD on their bank accounts. A bank run on ANZ is imminent, we all know it, it's just a matter of time.
As for Australia : Australia is in for a bigger crash than USA has been in. This also is just a matter of time.
Like I have said many times before, the real troubles won't begin before september 2008. That is in 1 month from now. I'm not saying doom is coming, I'm just saying VERY bad times are coming for people that have debts or are otherwise leveraged ( 80% of the australians ). If you have savings, invest in gold or other non-devaluating assets. Stay clear of stocks and above all, stay clear of property.September 2008 : That's when trouble starts for Australia.
ItalianDragon wrote:I would not blame too much the normal public when NOT EVEN the ANZ TOP MANAGERS could see the downturn coming as explained in this article by the ANZ Chief Mike Smith:ANZ tips defaults to rise
So what are you saying, they couldn't see it before but now they bought themselves a crystal ball and can accurately predict the future?
Hey Scamp… why do you specifically say September?
Squirrel wrote:Hey Scamp… why do you specifically say September?reports from the banks say that that is the month that the first of a lot of mortgages will reset from fixed rates to variable rates. That's 6% to 10%. That's about double repayments , every month from September 2008 on.
The reset will take until about July 2009, with about 30.000 mortgages resetting every month. September is the first of those months.Scamp wrote:Erik,You realize that the real-estate in Japan has been crashing for decades already ?
Are you ready to invest your money into something that will keep going down every year , costs you a LOT of money per month ( negative gearing ) and on top of that have 10% inflation ?Everything looked similar in Japan 20 years ago to Australia now. And their housing market has been crashing lower, and lower… and lower every year, without exception. I think a house there is worth 10% of what it was worth in the height of their bubble.
Hi Scamp
I have a client who has just fronted up with a big fat tax problem by investing in property in Japan – nice problem to have of course.
The bottom line is where there are people accumulating wealth there are others with dwindling wealth and the ones that just outright spend every cent they earn. Financial literacy in Australia is not great by any stretch of the imagination. We live in a capitalist society which means there will be the "have less's" the "have some's" and the "have more's", money and wealth just circulates. In the end money can't buy happiness. Once certain "rewards" become the norm they are no longer rewards. For most in Australia, they have enough food and they have accomodation – so then they want more – the aspirational side of humans. The issue is of course that this aspiration can get out of hand and the lack of financial literacy compounds that.
The bastard problem for some at the moment that understand the system is that whilst property can build wealth most need borrowed funds to assist – borrowed funds are costing more and therefore buying isn't as easy even if property prices drop – then you have the issue where property prices drop the "equity" people have drops and further compounds the issue.
Heavy gearing is great in the positive market and booming economy – when it goes south as it does because us mere mortals can't hack being happy and positive ALL the time shit hits the fan. See the news about the 680 Starbucks staff that just lost their jobs – this will help magnify the issues.
Fixed loan resets have to effect the rest of the economy as want has to be paid in increased repayments isn;t getting spent elsewhere!
We are in for a very interesting time for the next 12 months or so.
You must be revelling in the number of responses you got to your statement – you don't happen to be on the websites payroll do you??!!
Let those you want to be on a downer do it, let those who want to get on with life do it. Today is the new normal, yesterday is history.
What about the BHP boss . Only 45 and running that place , pretty amazing really .
Is that guy sharp or what , one of these rare people where it wouldn't matter if he was standing on his head , the intelligence , the strategy all over that guy is just staring you in the face !
If I could have one thing changed I'd order a super brain !Cheers
Hi Scamp.
Now I don't wanna be any more of a downer than what I have sounded already and that wasn't my intension . I actually believe that people will be able to set themselves up for life with property again , if they wait 18mths or more myself , I'm waiting for then to buy my daughters house . She's 7 that one so the way I see it she'll have good income from it by the the time she goes to Uni and 5 yrs after that there'll be the mother of all booms and she'll be a millionaire at 25 .But this September stuff – stocks – gold , where are you coming from on it , want to go into it a bit more .
I can't decide if the next few mths will be the best bargain buying in 20 yrs or to stay the hell out .
Gold , dunno . now that oils down gold should recover but I'm still funny about gold !
And with your Austarlia will be hit worst , you talking in what areas just property or in what ways other . Jjust wondering the why's of the analysis from someone viewing from the outside .Cheers
In teresting Scamp, I did not know about the 30,000 mortgages rate shift each month, that`s probably why Mr Smith (ANZ) is predicting a big increase in defaults.
This will certainly push prices down much quicker.
Hang on , missed that 30,000 per mth reset thing – is this fact , do we have the report . That in no uncertain terms would be a very serious situation .
There are lots of money people here how is it no one has brought this up ?
Wouldn't the banks realize they'd only be cutting their own throats and space it out more sensibly ?So is this the straw your talking about with the stock market too or is there more ?
Cheers – I think !
Mister wrote:What about the BHP boss . Only 45 and running that place , pretty amazing really .Is that guy sharp or what , one of these rare people where it wouldn't matter if he was standing on his head , the intelligence , the strategy all over that guy is just staring you in the face !
If I could have one thing changed I'd order a super brain !Having a super brain has it's downsides too. It's definately better to be average and mingle with the crowds.
Mister wrote:Hang on , missed that 30,000 per mth reset thing – is this fact , do we have the report . That in no uncertain terms would be a very serious situation .
There are lots of money people here how is it no one has brought this up ?
Wouldn't the banks realize they'd only be cutting their own throats and space it out more sensibly ?So is this the straw your talking about with the stock market too or is there more ?
Cheers – I think !
well there isn't just 1 straw. That's the whole problem. If there was 1 straw the problem would have been fixed by the government or RBA already. First, it's global. Second, unemployment and recession is a result of the housing crash, not the other way around. This has been proven in UK / USA / France / Spain etc.
Many companies are depending on the strong housing market. Banks, mortgage brokers, real estate agents, building companies are the obvious ones. But there are a lot more. Think of your baker, your grocer, that small IT company accross the road, all the small shop / company owners basically. Many of them used equity to finance their shops or businesses. If their equity disappears or goes negative, I could see a few tumble.A fellow forumite on this forum ( I believe he's an accountant ) reported that a cash flow positive company has gone bankrupt because of their profits going directly into their house repayments. I see this happening more and more as the interest rates reset.
Then there's the limited credit availability, new laws upcoming for more liquid money in banks which will drive up available credit prices more. This will be reflected in the interest rates, which is why I am quite sure the interest rates will keep going up to at least 12%. The RBA has been factored out. If banks offer 8.7% savings accounts, and they need 2.5% on top of that, then I see 11,2% interest rates already. The bank employees you see, don't work for free. So, we'll see some sacking in banks soon, coupled with higher interest rates.
There's the high oil price, the high food price. If RBA lowers the rates, the AUD dollar will plunge and export will be hurt, on top of that even more credit will disappear from Australia as investors flee to 'safe' Europe.
People are overleveraged to the max. They have 40-year mortgages ( that's about your WHOLE working life expectancy ) so it can't get any more. ( there's some silly 100-year mortgages in Japan, but that's just silly.
Most family income where there are 2 incomes own million-dollar houses and thus are also leveraged to the max. They are paying back almost everything they earn into their house. Now you see the problem. When the small companies go down because of negative equity and higher interest, these people have to foreclose their homes, next come the bigger companies, who will make losses because the economy is starting to go down.Basically, just have a look at what happens in the UK and USA. I have no idea why Australia thinks they will be spared. Every problem the USA has , Australia has either double, or triple the problem size. The crash in Australia ( both housing / economical ) is going to be much worse than the USA for the simple reason that Australian houseprices are 6 to 10 times average wages, and in other countries are 3 to 4 times average wages.
There's a reason that houseprices are historically 3-4 times average wages. The reason is :
If you spend 40 years of your life repaying for your house, that means that 40 years long, you have been stealing your own future money from yourself, and thus can spend less. This has direct effect on the economy ( although noone has yet studied this ) it's quite easy to predict what will happen : Society have already spent the money of the next 40 upcoming years. The solution that USA came up with was easy : Just print more money all the time.The problem, ofcourse, then gets worse. More money = more debt = needs more money = more debt = needs more money = … etc
We've come to the breaking point. More money is not an option anymore. ( where will the joke end… like Zimbabwe ? With 10.000.000.000.000.000 bills ? ). So you see, no more money = less debt = less credit available = no more buyers because debt has gone = more houses on the market = more stressed sellers = lower houseprices.
It's unavoidable.
You can imagine a locomotive with a spring attached to the wagons. In order for the wagons not to crash into the locomotive, the locomotive has to go ever faster. If it slows down, the whole train will crash.
That locomotive is now running at it's maximum speed. And the wagons are incoming with massive speed from behind. The only option is to go faster faster ( more money more money ). But we're at maximum speed. It just won't go faster.Brace for the crash.
You gotto love a bear don't you? Lets get this crash over and done with so the bulls can rule again!!
I would love for some of the houses I'm looking at as a PPOR to drop by 50%. What a bargain that would be! Unfortunately these are the homes in well located areas which the retired baby boomers are in and who flatly refuse to move because they have cashed up super and $0 mortgage. Very contented to live in a mansion and have their grandkids come over to play instead. Facing such supply constraints, how else do I expect to buy these homes but pay 10x median salaries? Off course these days no family can survive on just one median salary living in any Aust capital city.
As for IPs, if your rent and tax refunds are keeping pace with the interest rate increases, then why would you need to sell?
asdf : Like I explained already : Rents are heading down, not up. Houses can't sell….. sellers think.. oh my god I can't sell.. might as well rent it out while I try and sell… more rentals up at discounted prices… oh.. wait… rent is heading south. Quite easily predictable. You can ignore it, but that won't make it disappear.
Scamp wrote:asdf : Like I explained already : Rents are heading down, not up. Houses can't sell….. sellers think.. oh my god I can't sell.. might as well rent it out while I try and sell… more rentals up at discounted prices… oh.. wait… rent is heading south. Quite easily predictable. You can ignore it, but that won't make it disappear.and where do these sellers then live? a % may be able to live with family, but many wont for a variety of reasons like wrong location, poor relationship, no family etc. Setting aside immigration at 200k per year now.
Thanks for going to all that trouble scamp.
I've said for years these house prices and our cost of living are unhealthy but when people push me on it I find it hard to actually explain just why but you know it is and can't go on .
As someone said here earlier though , who says house prices have to be 3 or 4 x the av wage ? Well, the economy and everyday people can't sustain with it consistently much higher than that i would have thought that's all .
But considering what you are saying is actually unfolding every night on the news here now – there you have it .
There's been 6 or 7 major companies in trouble or shutting up shop completely just this week alone , humm.
Asdf – they say those luxury highly priced joints will be the first ones to tumble so you might just get your hands on one yet !
We are renting now as we sold our last place and holding off . There's been 3 I've been eyeing off alone that have dropped 30% been on market 2 yrs and still haven't sold . So we figure we've paid our mortgage down 30% in just 7 mths by doing nothing already . I hope to hold out for at least late this year but the renting is really giving me the sh'ts .
I wasn't sure even with some of those though , if my theory was right and would pay as there have been others that have sold even in the last few weeks for outrageous prices , sometimes people are just forking it out seems no questions asked so will have to hope for best.
They also say coastal holiday areas will cop it worst , which is where I am and waiting on . Not suure why though , maybe people needing to dump that holiday house is the theory . Well I'm waiting people – feel free to begin dumping now !
Aaah this is depressing , I'm going back to la la land.Cheers.
PS. Scamp , , stock market . I read my 10 best market reports everyday day and no one still really seems to have a clue in the end .. When are you suggesting will be the exacto monto time to sell up ?
And gold – I am a bit funny about – don't forget gold did dump and then did nothing for a long time . not sure !What would you do if you were in my position?
I have a $50k deposit and earn $50k + Super a year and am 21 years old
I qualify for the Keystart homeloan where they put in 30% of total price of the home with no interest and you can buy the 30% back at your own leisure. I put in the 50K and borrow the rest. With the Keystart loan I can purchase a property up to $360k
In 6 months time I will get a guaranteed payrise taking me over the maximum wage for the Keystart home loan thus forcing me to loan out the full amount for the house minus my deposit.
So buy between now and 6 months time and only have to purchase 70% of the house
Or wait for the so called property fall and buy then?
howardcm wrote:What would you do if you were in my position?I have a $50k deposit and earn $50k + Super a year and am 21 years old
I qualify for the Keystart homeloan where they put in 30% of total price of the home with no interest and you can buy the 30% back at your own leisure. I put in the 50K and borrow the rest. With the Keystart loan I can purchase a property up to $360k
In 6 months time I will get a guaranteed payrise taking me over the maximum wage for the Keystart home loan thus forcing me to loan out the full amount for the house minus my deposit.
So buy between now and 6 months time and only have to purchase 70% of the house
Or wait for the so called property fall and buy then?
Tell your boss to wait with the payrise and give you a bonus at the end of next year instead ( just have him sign it on paper to be sure ). That solves your problem. There's no reason to buy anything now. One after the other, the major building companies are falling, and their land banks will be dumped on the market. That means more and cheaper land, which means cheaper houses. Houseprices won't rise for at least the next year ( probably they won't rise in the next 10 years from now , in real terms , so they will rise max 5% which is CPI ).
Mister : I have no idea on stocks. Most of the stocks seem to be going downwards. If you feel like a gamble , you can put a short on Manpower or on some building companies. But remember : This is a big gamble. I'm not much of a gambler myself, so I invest in gold instead.
Why will gold price go up ? Because Australia has been printing record amounts of money the last few years, which means there's more money than gold, which will push gold prices up. Well, that's how I think about it anyway. Gold also is a safe haven for people who don't want to take too many risks in a recession. Usually wars and recessions push goldprices up. With a global recession, a lot of people will start buying gold.
But remember that gold is at an all time high price now. Even though, I still think it will go up.
I actually have an outstanding bet with someone on this forum that gold would cost 1200US$ by March 2009.it's about 900US$ now : http://www.goldprice.net/gold_price_links.php
I just sold one of my investment property within two months and made a good profit. I have another property for rent and I thought of selling it at the end of the year. ( it will be 12 months then) I borrow 60% of the purchase price, with all the price falling I am safe to keep this property??? I need to wait 12 months so I wont pay too mush tax on capital gains.. any suggestions
emu1208 wrote:I just sold one of my investment property within two months and made a good profit. I have another property for rent and I thought of selling it at the end of the year. ( it will be 12 months then) I borrow 60% of the purchase price, with all the price falling I am safe to keep this property??? I need to wait 12 months so I wont pay too mush tax on capital gains.. any suggestionsreally its up to you….does your fear of falling prices overide your apparent need to minimise tax? Will you really get any sense of assurance from a bunch of mainly anonymous people on an internet forum?
What is most interesting about this thread is that, over the past two months, the doom and gloomers have been more prophetic than the defensive property investors. I tend to agree with the basic analysis; current property prices are unsustainable – across the board.
As a culture we have been too driven by greed and it is coming around to bite us. We will all suffer and the amount of suffering will be directly proportional to the debt. The extent of the Australian situation was fueled, though probably not exclusively, by the capital chasing attitude of the Boomers and the inflationary nature of the 1st home buyers grant.
What worries me, that no one seems to have considered, are the social consequences of all of this. Just say we crash as bad as America in the 30's – which I believe is possible – what situation does this leave us in?
So the Boomer's investments become worthless on average and they crowd into understaffed retirement homes to await smelly deaths? What of the families cast onto the streets? Rent may go down but they will still have massive bank debt and interest rates will sour even higher… is it possible that they reach over 20%?
As a country we have cut back on social services consistently over the past 10-15 years and morally devaluated those jobs even more. We have no cops and those we do are too afraid of civil rights to act (likewise nurses, teachers etc). The levels of moral discipline in society are far less now than they were in the 30's, so my question is this.
When this badly stacked deck of cards falls, what is there to stop the desperate from taking advantage of the weak? What is there to stop theft from becoming commonplace, robbery from becoming a necessity and human life from loosing its value? We joke about our dollar becoming as worthless as the Zimbabwe dollar but can any of us truly comprehend what it is like to live there?
Oh and a some financial questions – does anyone have any actual stats on:
1) average clearance prices of residential property over the past month or two?
2) the percentage of residential property owned in this country vs that still under finance?
3) the percenage of property investors that have borrowed more than they own?
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