Australian Property Bubble: 7. (PART 1) Know your SQM data

[samlau121]

Too keep house prices stable, there has to be another group of buyers who are willing to take the risk and the banks willing to lend large amounts. All the first home buyers are sucked in already. who will be the next group to come in to support prices? No one. When prices fall say 10% its gonna put alot of people in negative equity which will the the first stage of the crash.

2012 ...

[EndTheResistance]

2012 will be a panic year as people expect something to happen and it will. The bubble will burst violently. That is clear to see. Here in sydney the amount of financial and retail jobs is staggering. These jobs can go in as little as a couple of months. Expect bigger losses and financial panics than you can ever imagine.

[boobtubereborn]

i expect some sort of lag effect (cognitive dissonance) and a fat tail event risk. ie i think people will hold on for 2-4 years from about now hoping prices recover when it becomes apparent they will not (i think property will fall in this country for a decade or more) many will head for door (minsky moment?). i could be wrong on this considering the surge in listings in last 12 months and overseas borrowing costs ala europe may also trigger the pig to move faster for through the python.

[AussiePropertyBubble]

@boobtubereborn Re 2-4 years, yes. Australians love their properties. It makes sense that you would hold onto something at least until it dropped back to its original value, the 'im still up' mind set. In this sense buyers in the last 5 years would rather persevere with payments, and even 'fall on hard times'/dig into super (govt will oblige..). But if property stays flat/drops more and people figure out the upgrading bonanza is over, why pay mortgage on what you can rent at half price? (cont..)

[boobtubereborn]

ps australian pseudo subprime

1. FHOG boost (no deposit component of oz pseudo subprime)

2. Record low interest rates (teaser rate/adjustable rate component of oz pseudo subprime)

3. loosened lending criteria (NINJA component of oz pseudo subprime)

[AussiePropertyBubble]

@boobtubereborn And this sort of creates a negative feedback loop for the upgrading process. Why get a loan and risk negative equity if i cant upgrade/property market seems to have capped/keep falling? Re congative dissonance, yes, the wiki example of Aesop's fable 'the fox and the grapes' is great. FHByers understand the 'grapes' are out of reach. They convince themselves a house is not the path to the prosperity it once was.. the market needs FHByers to keep reaching for the grapes (cont..)

[boobtubereborn]

i prefer to be more conservative on the amount of property used for spec purposes (NGers). ie 1.7 million NGers assume they are all couples just to be safe therefore 850,000 properties are potentially available for liquidation (10%) of total stock. it was only 3% of sub prime loans that went pear shaped in US. just nitpicking though. great job

[AussiePropertyBubble]

@boobtubereborn ..keep the debt cycle going. I believe there is real potential for a -ve feed back loop when prices fall again. FHBuyers become averse to debt with the same vigour they'd once took it on during the boom. (Ditto -ve geared investors) Without govt interferrence perhaps the curve will fall with the same gradient it rose? Yes agree estimate is generous, but as you mention even 10% is heaps!

[boobtubereborn]

another great job! 

[AussiePropertyBubble]

@boobtubereborn Think were on the same page.. thanks for feedback and I agree on comments!