Australian Property Bubble: 8.Tampering with the Ecosystem

[AussiePropertyBubble]

This is an interesting article that supports the idea of a stagnant upgrading ladder

google LennoxHerald -Property ladder 'has bottleneck'

"people being unable to move up the ladder could have a "knock-on effect across the whole of the housing market".

"It is vital that this group of home movers receive more support and attention as they play an intrinsic role in getting the housing market moving again."

[AussiePropertyBubble]

"To achieve a sustainable housing market in Scotland we need to see movement throughout the market. If second steppers get stuck on the first rung, movement at the bottom half of the ladder comes to a standstill & this bottleneck will not only restrict the supply of starter properties but will have a knock-on effect across the whole of the housing market."

The main problems buying a second home were a lack of offers from first-time buyers (40%) & a shortage of affordable homes (31%).

[blahdeblah07]

Well made mate...

[AussiePropertyBubble]

Hmm Yes i think the whole idea of globalisation & 'interconnected' global trade is much more volatile than having a good ol fashioned 'local' economy, but times have changed & we have to live with this volatility (no excuse 4 policies that favour the former). RE china, take the more than 80% of 'made in china' stuff in your house, multiply by the western world & divide by recession. There's now way chinas demand can 'make up' 4 this, particularly given the global expansion of credit since 2000!

[TheJuroz]

A great cartoon! type in:

The American Dream Film-Full Length

[Tomta20012]

Dude You are forgetting the elephant in the room China!

Some where in the future china has civil unrest over inflation, It fights inflation then BOOM the western product subsidy is gone, we have to make our own fucking trinkets!

That would be really bad news, big inflation???

What do u reckon?

[DragonFeast90]

grow and sell drugs.. easy

[murdamcloud]

Good work again APB. Quick bit of hearsay from someone I know who is a manager at the ATO; the govt are thinking of changing the negative gearing rules. I don't 'know' what the effect of it will be but I can imagine it will force investors to flood the market. As will the upcoming credit destruction period. I don't like predicting the future but there is a serious squeeze coming (possibly unlike anything we've seen). I can't seem to get anyone to appreciate the magnitude of what is approaching.

[AussiePropertyBubble]

@murdamcloud Thanks for this post, ive been thinking a lot about this one since vie read it. If this proves true, continued poaching the youngest and weakest of our society shows an exhausted and desperate government that is not able to innovate away from the tired tactic of selling out its youngest generations.

[AussiePropertyBubble]

@AussiePropertyBubble If investors are further incetivised by the government to enter the market, This will act as a tax on renting (for possible FHBuyers), sustain levels borrowing (by investors) and possibly sustain construction of apartments for aforementioned purpose.

[AussiePropertyBubble]

@AussiePropertyBubble But it will be, and CANNOT BE ANYTHING OTHER than another step closer to the destination, down the terminal track of a 'housing market based on investment'. It doesn't address the problem of stagnant upgrading, and as such there will be no improvement to house values (If houses prices remain flat, people will eventually want out).

[AussiePropertyBubble]

@AussiePropertyBubble It wont result in significant capital gain but rather rely purely on the harder earnt rental yield.. (Speculators have much prefer to sit with empty units). Im of the opinion a cash grab for the less experienced would always work better than a percentage write down for the veterans..

Thanks so much for the post, it is has become inspiration for a new video.

[murdamcloud]

@AussiePropertyBubble Sorry mate, I just read your post and maybe I didn't express myself properly-the rumour from my friend was that the breaks from negative gearing laws will be reduced/removed in order for the gov to claw back tax and so forcing investors to sell up. Does that sound right? Is that how you understood what I said? Cheers

[AussiePropertyBubble]

@murdamcloud Hey, phew.. man i was getting a bit hot under the collar then! Ok, i see what the rumours about.. It wouldn't surprise me thought, for the govt to incetivise investing further.. this would punishing renters further for not buying into the market and force more buying.. im of the opinion they will have to do something, id be very suprised if they 'hands off' let it fall. its still given me some thought for next vid.. cheers!

[Andrewskji]

Very good video, it's good that there are people like you out there to spread the word.

[AussiePropertyBubble]

@Andrewskji Thanks, but its YOU guys who spread the word, the videos are my opinion, but its one thats shared by many.. so thank you for forwarding to friends etc so that they too may consider this opinion.. Thanks again for watching!

[imheun]

yeh boi! just watched the all the vids keep them coming

[AussiePropertyBubble]

@imheun Well done that would have taken ages! will do..

[nerdbustermd]

I love your videos. You explain many different concepts in a very simple way. I only wish many of my friends would take my advice and do some research before rushing to buy. Keep em coming APB. Can't get enough of these.

[AussiePropertyBubble]

@nerdbustermd Cheers, the property market is terribly complicated, thats why its criminal that the govt acts with such impunity towards first home buyers, the most vulnerable, the ones that understand least about the market. thats why affordability has gotten worse over the years, because the problem keeps getting pushed onto the entrants in the market. But this process is terminal. The only problem is, i believe, when it comes undone its going to take a lot of jobs with it.. (including mine!)

[novicemilk]

One question that still alludes me is that some taxes are based on your land value. In a property crash or deflation, will these stupid government people actually re-evaluate the price down.

[AussiePropertyBubble]

@novicemilk True.. hence vested interest in stimulating prices up.. hence prices CAN crash. its not like they just 'go down' nice and easy like, its a volatile mix of confidence, turnover & perception. Thats why property markets the world over have crashed, for a range of reasons.. But they were all over priced & when the mentality turned, they all showed their true nature; a market is entirely a human behavioural phenomenon. A market is a group of individuals working in their own self interest.

[AussiePropertyBubble]

yeah! compare that to now for a block of land at $300K and a decent fridge at $1000 thats 100x more fridges than the good old days! i wonder if they did fridge and land packages :)

[gbvb79]

Great video, thanks for posting. The old couples refrigerator cost a "third of the value of the land"... if that's not a wake up call, I don't know what is...

[scottclements78]

Great video mate.

[AussiePropertyBubble]

@scottclements78 Cheers! more to come..

[CarlosMontoya169]

But but but property always goes up!!!

Nice work on the videos as always. I donated towards Keen's research because of your work.

[AussiePropertyBubble]

@CarlosMontoya169 Legend!

[Mollarooza]

good job it must have taken you a while to make these videos, Im in this situation and it makes me depressed, being locked out of housing because of the bubble

[AussiePropertyBubble]

@Mollarooza Thanks, yeah but the time is worth consolidating the information people already know, just using pretty pictures!

Its a travesty that the system holds people to ransom over security of tenure. but the music just has to stop at some stage, this year, next year? No one knows but its certainly struggling. It will be brutal for those highly leveraged, but valuable lessons are hard learnt and there has to be a return to borrowing within ones means aka. house prices 3-4 x income etc.

[EYEmusique]

Great Vid - thank-you for your efforts.

[AussiePropertyBubble]

@EYEmusique No worries! thanks for watching

[tonismith6978]

Listen people this man is honest and smart - dont listen to our governments that we are in a boom, Soon this thing will pop.

55 x 3 house should be around 165K in average area in sydney.

[AussiePropertyBubble]

@tonismith6978 Thanks! Dont forget the idea that it may not be prices that fall, but rather rents (or similarly value for rental dollar that rises 'rent a better place'). ultimately its not the property but the prosperity that matters and after all, a house is just a place to live..

[SLVBULL]

According to latest article from Jordan Wirsz an American property analysis believes residential property in Australia will fall by 60% within 5 years

[AussiePropertyBubble]

@SLVBULL Yeah, Harry Dent said 5 years as well. Ive read in places that the bubble would take 5 years to deflate to halve the rise since 2000, essentially 2004/5 prices, which i tend to agree. i also agree with Steve keens concept of the debt accelerator, that people become averse to borrowing at the same rate they took it up during the boom times, the acceleration stays the same in magnitude reverses direction.. Cheers!

[EndTheResistance]

The rich are just suckering in more and more young people to get slaughtered. I try to wake them up, point them to your videos, but they don't listen! Like zombies with the mantra "buy property......own house.......buy property.......BRAINS!!!! God help them. I will give them a fair price when I end up buying their house at an 80% reduction.

[AussiePropertyBubble]

@EndTheResistance Thats how they keep the whole thing going! Over the last 10 years (at least) Of the govt, the banks and mortgage holders neither lost out from rising prices. its Affordability and higher debt to get into the market that got worse and worse, in other words the problem got pushed onto new buyers, the youngest people, that understood least how the process worked, and them who wear the worst of an inevitable fall out.. thanks for referring the vids!

[nichaeloz]

@EndTheResistance I totally agree. There is a continuing the legacy of the post WW11 mortgage change when an average working person could take out a 20+ years mortgage as opposed to the maximum 8 years prior.

We are now in the 3rd and entering the 4th generation of property buyers that have never seen a major downtown in property in over 60 years. If you take a mortgage now you unconsciously believe the next 20 years will be like the last 20. Therein lays the trap.

[Brunswick1717]

Get interests rates down .. yeah if we did not borrow 60% from offshore this would not be an issue. We will see mortgage rates rise as the cost of money offshore rises above our RBA's cost of money. This will be a messy situation.

Well done APB great vodcast.

[AussiePropertyBubble]

@Brunswick1717 Cheers, yes our majority variable interest rate loans work 'well' in putting off the problem (i.e. lowering them) but quite likely not so well if the cost of debt money goes up due to restrictions off shore.. Re rates, RBA to go down, commercial to go up? Cheers again.

[aacosta1975]

Nice work, keep it up!

[AussiePropertyBubble]

@aacosta1975 Cheers thanks for watching, its a bit of a marathon this one! Will do.

[arieksk]

Bravo !! well made.. I am a registered CPV valuer and hold master degree in property development.. you have hit the nail in the head.. I have been saying this since the 2008 financial crisis, and people used to hate me saying the truth.. please keep up the good work... we need to wake up from this Ponzi scheme.

[AussiePropertyBubble]

@arieksk Cheers! its always good to hear people in the industry that do not dismiss the possibility of a bubble/actively discuss the problems developing. Property, for most people is their wealth so varying degrees of denial are expected. Id say those in the industry who at acknowledge/discuss some of the issues in this video are going develop better client relationships in the long run.. Thanks for sitting through the full half hour! :)