Yet Another Property Doomsday Prediction? (at least The Source Is Trustworthy this time)

ALesha77 on 09/02/2022 - 14:57

David Rosenberg has been vocal recently about the bubbly property markets in Canada, New Zealand and Australia. AU for some reasons got only bronze in the race to the climatic top but was mentioned as a solid runner-up for correction risk.

https://financialpost.com/investing/global-recovery-unhealth…

For those who don't know, "Rosie" is a well-known and well-respected macro-thinker who earned his star reputation prior and during 2008 meltdown as a Chief Economist at Merrill. He is the probably the only one who Blomberg and CNBC hosts listen to without interruptions and mocking about when he speaks dooms-day scenarios.

I wonder if there are any property investors in this thread with more than 3 investment properties and if you have bough anything within the last 6-12 month? Do you plan to reduce your exposure? Any hedges on?

Financial

Comments

  • MS Paint on 09/02/2022 - 15:05
    +22

    any property investors in this thread with more than 3 investment properties

    I thought everyone here had 3 investment properties at a minimum.

    Yep. I was right.

    Conditions of ozbargain membership:
    1. Drive a Camry purchased with cash and 25% discount
    2. Dashcam on said Camry
    3. Amazon prime membership
    4. Minimum of 3 investment properties
    5. Eneloop powered electric toothbrush
    6. Bikies on speed dial

    • Ocker on 09/02/2022 - 15:14
      +16

      The great Aussie dream was once to own your own house - now it is to own someone else's house.

      • Archi on 09/02/2022 - 16:41
        +5

        now it is to own pay off someone else's house

        FIFY

    • ALesha77 on 09/02/2022 - 15:24

      Bugger, it appears that I am not a proper membership material then… o:
      Nah, don't care…

    • MrBear on 10/02/2022 - 16:25

      Is speed dial still a thing? It's just contacts in your phone now…

      • MS Paint on 10/02/2022 - 16:27
        +2

        Nokia 3310 still uses speed dial

  • Drakesy on 09/02/2022 - 15:08
    +13

    Unfortunately i feel the economy is too geared to support the construction and housing industry (it's pretty much all we invest in anyway) to allow it to pop.
    The government will put in too many controls
    The RBA will abstain from raising interest rates to where they really need to be at the cost of high inflation
    Domain, Realestate.com.au and Newscorp will continue to spruik ridiculous sales that went millions over reserve (when 60% of investment properties actually make a loss), but that's ok because the government's negative gearing socialises any losses…

    And unfortunately at the end of the day it won't necessarily be investors that are burnt.
    It'll be the young families who are scraping by, now trapped in a property worth less than their mortgage with no opportunity to refinance due to increased servicing costs.

    The investors who have caused the huge price growth will be getting out (if they're smart) over the next 2 years as affordability limits take hold and selling to FOMO first home owners.

    • ALesha77 on 09/02/2022 - 15:38
      +1

      Agree, all I see is "mud-selling" mentality of people who don't want (or being paid) to think beyond the next election cycle.

      But all these crutches are not holding the top-heavy market anymore.
      We need a more and more levered new entrants who will be paying through all their lives for a concrete box.
      2% deposit with government guarantee, really? This is literally 50 times leverage - the only other place you will find this kind of leverage is in the forex bucket-shops.

      This is nuts!
      Truly people - I don't know WHO will come to next election with a simple program to de-lever this zombie economy, but I will VOTE for that guy (or gal)!

      • MrBear on 10/02/2022 - 16:26

        paying through all their lives for a concrete box

        I think you mean brick veneer.

    • HeWhoKnows on 10/02/2022 - 08:13
      +1

      No prediction is creditable as they all rely on crystal balls
      These have been going on for years and years

      You can be confident the government and RBA will pull out all stops to prevent a property crash and they have plenty of ammunition to do that.

      It is worth noting that borrowers have been assessed at +2.75% to +3% above loan rate so rates have to go up by at least that amount to cause any forced sales.

      The govt has fiscal policy up their sleeve too.

      The moron prediction experts fail to take such important things into their calculations and rely only on raw income to property value ratios.

    • 2esc on 10/02/2022 - 09:45
      +1

      Build, build build seems to be the mantra it's the only way they can think of financial growth.

  • Big Lenny on 09/02/2022 - 15:17
    +3

    property in syd aint going down anytime soon

    the pollies throw everything except the kitchen sink to prop up this house of cards. they all have investments themselves, so why let it fail?

    best time to buy? now. if you have the money, dont sit back waiting for a 10% dip which will never come, with that time wasted, the ship has sailed and the disparity between your dream home and income grows further apart

    • Drakesy on 09/02/2022 - 15:21
      +3

      It came in Perth ;) 30% in fact.

      Can't just say Property only ever increases.

      • WT on 10/02/2022 - 14:02

        perth dropped a few years ago since the mining bubble burst. Unless youre talking about something different…

        • Drakesy on 10/02/2022 - 15:00
          +1

          Yep that's what i was alluding to.

          The investor fire was quickly extinguished.

    • ALesha77 on 09/02/2022 - 15:27

      Well, if you were following some of the headlines through the past 6-8 months then you would have noticed that quiet a few of our "humble servants" have sold their multi-million dollar (speaking of humble) mansions and investments.

      Not sure they are still holding the bag…

  • dogboy on 09/02/2022 - 15:27
    +3

    When the politicians all have large property portfolios on both sides, do you think they are going to let it crash?

  • SF3 on 09/02/2022 - 15:33
    +3

    at least The Source Is Trustworthy this time

    facepalm…

    • ALesha77 on 09/02/2022 - 15:39

      You can also bang the head against the wall while you at it.

      Thoughts through proper words?

  • MrHyde on 09/02/2022 - 15:39
    +3

    As an investor with multiple properties - the chance of a property crash does not scare me or worry me one bit. I am well within my risk appetite. The rental returns from my property are good enough to almost cover most of my holding costs. The rest I can easily cover with the income from the daily grind.

    Even if property crashes by 50%; it does not impact me as I was not going to sell anyway. Property value is just paper losses/profits. If I have no reason to be forced to sell; the property price does not affect me. The only time I will start to get worried is if rents go down - even through Covid; the rent did not go down for my portfolio (although I do know many markets rent did collapse and that would have impacted many investors.

    • ALesha77 on 09/02/2022 - 15:44

      Fair point as cashflow is your everything with this amount of debt.
      What about re-payments and interest rates?
      RBA is screaming and kicking but the banks will increase the rates anyway (they got to roll-over in the open market - read as US rates will apply)
      Probably need to put a cushion of an extra 150-200 basis points on your mortgage, no?

      • MrHyde on 09/02/2022 - 15:56
        +1

        Yes, definitely need a cushion with interest rates. We've had them too good for a while. Personally, I can easily manage interest rates of 5-6% and it still won't change my holdings.

        Re-payments are primarily covered by the rental income plus a little bit more that is my holding cost. As interest rates go up; the amount I need to contribute goes up - but its not really as high as people think it is.

        • ALesha77 on 10/02/2022 - 16:27

          Good to hear, looks like you have a good position.
          I am, however impressed with your unfazed reaction to a possible 50% drawdown in equity - it is either a good diversification and balls of steel or very poor risk management. Most investors with proper risk management would be running away after a 10-15% correction in an asset class. Unless you have another multimillion bucket invested in an uncorrelated asset.

          • MrHyde on 10/02/2022 - 16:50
            +1

            @ALesha77: It comes down to property being a long-term investment. I'm not looking to sell and get out if prices drop 10-15%. That would be the worst time to sell… why change paper loss in actual loss? In fact, I'd be looking to buy more property.

            What I'm looking at is what will the potential value be in another 15, 20, 25 years when I retire.

          • baker bob on 10/02/2022 - 20:17
            +1

            @ALesha77: You talk as if people are day trading houses. You got a few people have watched the block and think they can do that until most get burnt on the first Reno. Most others buy and don't care where the market goes in the short term

    • plmko on 09/02/2022 - 18:18
      +2

      Rental yield is a factor of property prices. Therefore rent has to fall if there were ever a property 'crash'.

      • ALesha77 on 10/02/2022 - 16:29

        Eerr, I would disagree for a whole asset class factor but it certainly is for a specific investment group.
        Top-heavy market usually have other crash-factors apart from a pure cash-flow.

      • sangohan on 11/02/2022 - 17:11

        Rental yield is a factor of property prices.

        the price is just for calculating yield - the price doesn't control the rental price much, if at all. If you look at the price of syd property, the rental yield has continued to drop as prices rise.

        The reason is that rental prices are more sensitive to the rental demand, which is only partially affected by the rise in real estate prices. It's more affected by people movements (such as immigration), and wages.

        There's no reason to believe that a property price crash would somehow cause rental income to drop, just as there's no evidence that property price rises causes rental income to grow!

  • rektrading on 09/02/2022 - 15:52

    If I got a Satoshi for every time some brofessor predicted a doomsday fubar Uber rekt crash then I have 100,000,000 Satoshi.

  • rektrading on 09/02/2022 - 15:56
    +2

    All these boomer brofessors are stuck in the 80s trying to keep themselves relevant in the 21st by predicting doom and gloom crashes every week.

    • ALesha77 on 09/02/2022 - 16:12

      Cool, bro.
      Never mind that those "brofessors" are actually running the world through trillions of investment funds.
      Metaverse, bro, you could still trade that doge coin from your mum's garage, right?

      • rektrading on 09/02/2022 - 16:57

        Three of the richest people in the world are a car salesman, a used book salesman and handbag salesman. There are no economists in this bunch.

        Let's see how good of an investor this David Rosenberg is.

        https://www.bloomberg.com/profile/person/1763828

        'Follow the bubble': Famed investor David Rosenberg breaks down the unique way he thinks the next US recession will unfold
        CHRISTOPHER COMPETIELLOAUG 3, 2019, 15:35 IST
        https://www.businessinsider.in/follow-the-bubble-famed-inves…

        TRADING NATION
        Long-time bear David Rosenberg doesn’t hate stocks right now. Here’s why
        PUBLISHED THU, APR 30 20209:07 PM EDT

        ‘Turn bullish in a heartbeat’
        He adds there’s one vital factor that would push him squarely into the bull camp.

        “This big bear would turn bullish in a heartbeat if a vaccine were right around the corner,” Rosenberg said. “We get a vaccine, it’s a total game changer.”

        David Rosenberg has no disclosures.
        https://www.cnbc.com/2020/04/30/long-time-bear-david-rosenbe…

        This brofessor is a permabear looking for a payday shorting.

        Furthermore, he made the easily-disproven claim that bitcoin’s code does not limit the supply to 21 million coins, believing that “there’s really nothing in the protocol to suggest that the supply of bitcoin can’t go up once we hit that limit.”

        When asked on Thursday about how he sees 2021 playing out for bitcoin, Rosenberg said:

        I’ll just plead ignorance on bitcoin. I just happen to understand gold a lot more.
        https://fintechs.fi/2021/01/04/economist-david-rosenberg-ple…

        He should stick to his circle of competence.

        I've said this before and I'll say this again. Price predictions are like a-holes, everyone has one.

        • TheBilly on 09/02/2022 - 21:45

          This turkeys business model is pitching book sales and media attendances.

        • ALesha77 on 10/02/2022 - 00:39

          Soo, you pulled that out and I am trying to understand where the catch is?

          In late 2019 there were all signs of incoming recession and Covid was a good excuse to print the way out of it.
          Quiet a few funds were mostly in cash in late 2019 and Dalio's fund was long a massive amount of puts on the SPX.

          In April 2020 we started cautiously crawling back-up in all US indices and even I (as retail dumb money) was long a few stocks at that point in time.
          If you cater to look at the charts, 19-21 of March 2020 was the all time bottom for all US indices and most world indices.

          So Rosie was spot on at both cases and he does not like or understand bitcoin - so what?

          • rektrading on 10/02/2022 - 00:56

            @ALesha77: Permabears are the worse investors of all time. All they do is sit on the sideline shouting crash for years and years. They get it right once, write a book about it and spend the remainder of their life hoping for another crash so that they can sell another book. It's sad.

            The truly successful investors buidl, buys assets and buidl some more. They don't care about a crash here or there because the market always goes up to the right.

            I tried looking for David Rosenberg's net worth. It doesn't exist. He is either very good at hiding his net worth or it's so tiny that it isn't worth publishing it online.

            David Rosenberg, Peter Schiff and Michael Burry all belong in the same 🐻 meat club.

            Found his net worth.
            https://ibb.co/RYn1TgG

            • ALesha77 on 10/02/2022 - 16:34

              @rektrading: Wow, you should write a book about asset allocation. Just mocking you, don't bother.

              3 gentlemen that you have mentioned are times more educated and professional in their approach compared to "buidl, buys assets and buidl some more".

              Also you need to work on you google skills - here is something to ponder on about Rosie's wealth
              https://www.theglobeandmail.com/report-on-business/streetwis…

              • rektrading on 10/02/2022 - 16:36

                @ALesha77: Thanks for the link.

                That article is older than my sour milk. It's also not his net worth.

                PUBLISHED NOVEMBER 26, 2013
                This article was published more than 8 years ago. Some information may no longer be current.

    • Shleepy on 09/02/2022 - 16:27
      +2

      As they say: "as an economist, I have successfully predicted eight out of the last two recessions"; and "even a stopped clock is right twice a day". But alas, it is still right twice a day.

  • pharkurnell on 09/02/2022 - 16:10
    +1

    Yawn…..

  • TheBilly on 09/02/2022 - 16:35
    +2

    A few points to consider before anybody wastes their time reading the article.

    For those who don't know, "Rosie" is a well-known and well-respected macro-thinker who earned his star reputation prior and during 2008 meltdown as a Chief Economist at Merrill.

    On Sunday, September 14, 2008, Bank of America announced it was in talks to purchase Merrill Lynch for $38.25 billion in stock. Later that day, Merrill Lynch was sold to Bank of America for 0.8595 shares of Bank of America common stock for each Merrill Lynch common share, or about US$50 billion or $29 per share.

    So they went all but bankrupt while he was there, so I don't think he was a very good macro thinker.

    I wonder if there are any property investors in this thread with more than 3 investment properties and if you have bough anything within the last 6-12 month? Do you plan to reduce your exposure? Any hedges on?

    If you own a $1 million property in Sydney and it drop 30% it's still worth $700k. A 30% drop is absolutely HUGE but the house is still worth $700k. So this is hardly doomsday, it is just a bad negative equity position.

    Most home investment loan serviceability calculations are done at an interest rate of 7%.

    If you have a $700k mortgage at a 2% interest rate your repayment is about $2,600 per month. If you have a $700k mortgage at a 4% interest rate your repayment is about $3300 per month. That is a different of $700 per month which in all honesty if you have a $700k mortgage already, is a not a doomsday increase. Secondly for the banks to raise the rates by 2% in itself is monumental so its unlikely to happen. But if it did the impact is $700 per month.

    I think the property market is going to stop growing but that is about it. It is not a doomsday situation.

    Thanks for wasting my time on something that is not very serious.

    • Drakesy on 09/02/2022 - 19:34

      $8400 is about 10% of the Average full time worker
      Throw in a kid and all of a sudden $8400 now looks a fair bit more when you go down to a single income.

      This is why our economy won't come out of its hole for a while because people are
      1. Too busy trying to save a deposit, taking away from their disposable income.
      2. Too busy trying to pay off their ridiculously high $1 million mortgages before interest rates start to bite

      We were in a recession prior to covid, $1 trillion in debt later and we're headed back there. Unfortunately you can't throw money at a recession and expect it to go away as the government might have thought.

      • rektrading on 09/02/2022 - 19:40

        People prioritising saving is better than spending their savings on cheap imported junk.

        Buy hard assets is the path to financial freedom.

      • TheBilly on 09/02/2022 - 21:43

        I agree $8400 is a lot of money. But it’s very easy to plan for. The person who manages to save $140k to buy the property in the first place is cluey enough to work around it. I can list 3-4 different ways to deal with a $8400 a year hit to the finances.

        The thing is though most people will find a way and the only way the economy is going to completely fall apart in a doomsday type economic collapse like OP puts it is if a majority of people do not find a way to deal with it, which is very unlikely.

    • ALesha77 on 10/02/2022 - 00:17
      +1

      Hilarious!
      Loved the logic - researched a bank instead of a person and suggested that a multi-property investor would have 700K in loans and then complained that his time wasted…. :)

      Firstly, 2008 was the time when all credit was re-priced and many banks were purchased for their liquidity issues not solvency. Also Rosie was a Chief Economist, not the CEO - this is when he got his scars from and he lived through the debacle unlike millennial property investors who never saw a rate hike in their working lives.

      Secondly, try a few million in the mortgage and re-do the math. 700K is the median price of a 3 bedroom apartment in Sydney.

      Thirdly, we will see about the rates here but in US we are pricing in 7 x .25% hikes - do the math, you seem to like that. Unlikely 2% will easily add up.

      • TheBilly on 10/02/2022 - 08:53
        +1

        Loved the logic - researched a bank instead of a person

        Well if he is such a genius the banks he works for wouldn't have made such poor decisions. Go and buy his book and make him more money why don't you.

        • ALesha77 on 10/02/2022 - 16:38

          Again, you could have done a better research, and certainly could learn a lot from what Rosie shares with you.

          https://moneyinc.com/david-rosenberg/
          (check point #5)

          • rektrading on 10/02/2022 - 17:09

            @ALesha77: It sounds like someone is in ❤️ with David Rosenberg calling him Rosie.

            Feelings don't belong in trading. Emotional traders get rekt.

  • DingoBilly on 09/02/2022 - 16:35
    +1

    Lol, I've heard this for AT LEAST 10 years straight.

    So many "professionals" have called the end of the housing boom and it's never corrected.

    • plmko on 09/02/2022 - 18:20

      That's because the last 10 years was the greatest bull run in history LOL

    • ALesha77 on 10/02/2022 - 00:21

      And it was an incredible bull market for bonds with rates at zero level now.
      The market is priced for perfection, but the monetary policy is tightening and RBA cut off the liquidity tap.
      There will be no saver of last resort unlike there was in the past.

  • TheBilly on 09/02/2022 - 16:38
    +2

    I wonder if there are any property investors in this thread with more than 3 investment properties and if you have bough anything within the last 6-12 month? Do you plan to reduce your exposure? Any hedges on?

    I'm going to waste my time a little bit more.

    If you purchased a property at the tippy top of every mini boom for the last 30 years when everyone is talking about the market crashing… You will be a very wealthy person today.

    If you invest in property with a long enough time frame, none of this doom and gloom has any effect.

    • ALesha77 on 10/02/2022 - 00:25

      For God's sake save you time.
      I have listened enough to 100-years investment strategies in the share market.

      You have to count in the business cycle - that is what I am talking about.
      And the cycle is turning.

      • TheBilly on 10/02/2022 - 08:42

        I have listened enough to 100-years investment strategies in the share market.

        I have invested enough through a few cycles and all I can tell you is your accumulated information is useless. The simple fact is if you invest with a long enough time horizon and purchase every asset class at the top of the cycle. With enough cycles you WILL make money guaranteed. The only difference is now - how do you maximise that profit. By purchasing at the bottom of the cycles.

        • ALesha77 on 10/02/2022 - 16:41

          Mmm, nice thought.

          And is that knowledge about cycle the reason for recommending to buy property at the very bottom of the interest rates (when they are about to go up) and when the monetary and fiscal policies have steamed out and started turning? You reckon this is the bottom of the property market?

          • TheBilly on 10/02/2022 - 16:57
            +1

            @ALesha77:

            The simple fact is if you invest with a long enough time horizon and purchase every asset class at the top of the cycle

            Buy a property right now and tell me in 30 years you don't make money.

            And is that knowledge about cycle the reason for recommending to buy property at the very bottom of the interest rates (when they are about to go up) and when the monetary and fiscal policies have steamed out and started turning?

            I purchase property when the numbers stack up to my investment profile, I'll purchase at any point of the cycle because I invest and hold for the long term so it does not phase me.

  • Ghost47 on 09/02/2022 - 17:22

    If rates rise landlords will just convert their long term rentals to Airbnbs lol. Housing can only go up.

    • BigBirdy on 10/02/2022 - 09:54

      If rates rise, and the Airbnb business collapses, landlords can just convert their properties into firewood. Housing can only go up (flames or otherwise)

      • SlickMick on 10/02/2022 - 10:18
        +1

        If there's no money in housing I'll grow macadamias or something. It's not the house that holds the value, it's the dirt underneath.

        • sangohan on 11/02/2022 - 17:16

          now say that when there's a nuclear war.

    • ALesha77 on 10/02/2022 - 16:42

      That would be too much Airbnb for Airbnb's liking, they would ban Aussie landlords

  • zoombie on 09/02/2022 - 17:42
    +2

    Will house prices crash? Unlikely. You have to look at the factors that drive up house prices in Australia in the past 15-20 yrs and see if any of those factors have changed.

    1) High immigration growth - nope. Both Josh and Dom has come out and say they want to turbo charge immigration after the pandemic is over.

    2) Favourable tax incentives for real estate - nope. Last 2 elections, Labor want to make some minor changes, they were rejected. This time, the issue is muted.

    3) Lending standard - nope. Last time house prices went down was in 2018. This was after the royal commission on banking, the banks start to behave themselves. But not long after this, Joshy want the lending standard to relax again.

    4) Low interest rate - yes. Inflation is rising, both here and overseas. The RBA might be reluctant to raise it but I believe the banks do get their funding from overseas so they might raise it before the RBA does.

    5) Responsible planning - the federal government sit down with state and local governments to work out a roadmap on how to best managed the high immigration rate thus ensuring enough houses are being built and the infrastructure is up to date. 😂🤣

    The only factor that will change in the next few yrs is higher interest rate, this will no doubt put a brake on the growth rate but is it enough to cause a crash? I doubt it.

    There are of course other factors that are unaccounted for like worsening trade wars with China, corona virus 3.0, Putin decide to nuke Ukraine etc…But no what the economic situation is, governments around the world these days will just print more money so even if we have a recession, it will be short lived. 🙈

    • ALesha77 on 10/02/2022 - 17:00

      As I mentioned below
      Rates going down (since 2000) and easy money are the ONLY reason for assets to go up (not the shortage of land, immigration or other "fundamental" reasons) for ridiculous prices.
      There is simple math and TINA behind that.

      And those two conditions are changing.

      • zoombie on 11/02/2022 - 12:02

        So your reasoning is that if there are 10 houses available for every buyer, the buyer will pay an over the top price because money is cheap? That makes sense lol.

  • WreckTangle on 09/02/2022 - 18:36
    +3

    There needs to be a property crash for the good of our children

  • datafellows on 09/02/2022 - 18:48
    +1

    Aussie median income in the year 2000 was ~$34,000, 2021 it was ~$62,000.

    Median house prices were ~$312,000 during 2000 and 2021 ~1 million.

    Based on this I would say prices are high, but not necessarily in a bubble territory. Specially when our population increases year after year.

    • ALesha77 on 10/02/2022 - 16:46

      Again, you compare a cycle where rates were only going down, bonds going up and every step was about easing monetary policy.
      Also you don't account for inflation that would eat away the house purchasing power from that income (goods and services also increased in price which has eaten away a larger portion of that income)

  • Rob-4x4 on 10/02/2022 - 08:36

    At the moment

    • Record house prices
    • Record mortgages with corresponding increases in rent driving up cost of living
    • Record low wage increases
    • transport costs rising driven by nearly record high fuel costs..

    Similar conditions to what was in the US just before the Global Financial Crisis of 2007-2008 …
    Will make it interesting for the reserve bank to increase interest rates without causing a meltdown …

    • freefall101 on 10/02/2022 - 14:50

      The US was a very different beast though. There’s no more dodgy bundling up of bad debt to create good debt but more to the point is US law allowing people to walk from properties and loans. As housing prices went down people just walked when the loan was worth more than the house. Can’t do that in Australia.

      There’ll be a correction but a collapse of more than it has gone up in the past 2 years is unlikely.

      • ALesha77 on 10/02/2022 - 16:49

        Wrong.

        Yes, you can do that in Australia.
        What you CANNOT do is to call yourself bankrupt and don't give a rat's ass about anything (which is NOT that easy in the US either).
        But you can still walk away from your loan and let bank deal with aftermath and try chasing you for what you owe after foreclosure.

        • freefall101 on 10/02/2022 - 17:37
          +1

          Not wrong, you just didn't understand what I said.

          But you can still walk away from your loan and let bank deal with aftermath and try chasing you for what you owe after foreclosure.

          That is not walking away, you're still legally liable for what you owe. And it's not particularly difficult for the banks to chase that down if it's a significant amount. Also, good luck getting another home loan with a massive home loan debt outstanding.

          In the US, there's strict limitations on what they can then collect after foreclosure. Many states have non-recourse laws (including Texas and California, which make up over 20% of the US population alone), they're simply not allowed to go for any more money, they take the house and that is it - they cannot chase you down and they have to wear the debt. Most other states have strict limitations on what they can go after. People could actually walk away, debt free, and go buy another house for much less. That's why it went to hell in a handbasket, plenty of people could afford their debt but why would you if you can move into a better house with a smaller loan?

          At its peak something like 25% of loans were higher than the value of the property and all that risk sat with the banks. That's why so many big lenders folded. In Australia where we've had 20% down and LMI as the norm for years and the concept of a strategic default simply won't happen in Australia.

          A lot of people predicted the US collapse, because it was a tinderbox waiting to go up. Australia has significantly different fundamentals. Not saying it won't collapse, I'm not going to be like these gurus who claim to predict the future, but any claims we're like the US was in 2008 is baloney.

          • MrMarket on 11/02/2022 - 18:00

            @freefall101: The key test for Australia, how the banks will manage bad debt and people cant afford to pay when rate start to rise
            if they cant contain it, there will be fall out and it will rippled through the financial market.

            I was in the thick of it in 2008 market collapse, #@$#@$ it red every where and every thing get sold down, some business cant access capital because no body trust anyone, who said you going to pay me back if I lend you the money.

            overnight money market lending freeze, these are short term lending market that keep most business afloat for cash flow, no one can access capital, @#$@#$@#$, when that news got out SELL SELL everyone want to get out cos no one know which business will survive which one will fold. Macquarie bank would have been in serious trouble if government didn't help them during this time in an 11h secret deal, freedom of information now reveal, Macbank rely on debt market and there is no debt market, debt market hell freeze activated

            banks start to recall some commercial properties lending, some people got liquidate because they cant refinance.

            Then a world wide co-ordinated effort by all governments step in to pump liquidity back into the system so people can access capital again and they provide assurance to lenders if your borrower don't replay we pay you back.
            then market start to ease up but by then it is too late for a lot of people, and we on this easy money journey ever since

            it all forgotten now but we probably build up for the next one, everything goes in cycle so
            be conservative and prudent is your best strategy to deal with ever comes your way

      • MrMarket on 11/02/2022 - 17:40

        Only 10 states in the US has non-recourse
        https://www.cga.ct.gov/2010/rpt/2010-r-0327.htm

        The people walking away stuff is widely report in the media but that not the cause of it, the cause of it
        are swap contracts, debt package up, get trades on open market and when the whole thing implodes, they just all write it off
        who ever left holding the parcel get sent to the wall and dies, Lehman Brothers, Bear Stearns.

        these are investment banks big boys that play with these debt package and got burned, normal banks that not involve in this toxic play are ok

  • Dorge on 10/02/2022 - 10:42
    +2

    People forget in the 80s mortgage interest rates topped out at 18.45%. The main cause being rising oil prices, Govern't overspending and rising wages causing massive inflation. All this seems to be history repeating atm, especially in the US.

    When the US increases their interest rates there it not much Australia can do, we have to match or our dollar tanks. Out of the RBA's control.
    Australia's a small fish in a big pond.

    Looking back at some 50yr historical graphs interest rates are typically average the 5-8% range.

    Currently in the process of listing an investment property just to lock in profits. Although i doubt properties will drop too much here compared to offer countries with immigration returning and the cost to build increasing.

    But in this new age on quantitative easing I don't think anyone knows what's going to happen.

    • ALesha77 on 10/02/2022 - 16:58

      Rates going down and easy money are the ONLY reason for assets to go up (not the shortage of land, immigration or other "fundamental" reasons) for ridiculous prices.
      There is simple math and TINA behind that.

      We have financialized the human shelter and will pay dearly for that as a society - one way or another.
      That is probably what pisses me off the most.
      I would not care about the price of an asset class at all, I would just trade it. But this one has a direct impact on people lives and our government hypocrisy just beyond this world.

      • sangohan on 11/02/2022 - 17:26

        a direct impact on people lives

        people (and corps) trade daily necessities all the time - water, electricity, wheat, you name it. Why has those not "affected people's lives" and yet, somehow houses do?

        Shelter is the cost of rent - not the cost of purchasing the asset. There's no requirement to buy a property for someone to stay alive, there's just the requirement of a roof over their heads. Trading makes this requirement easier to produce, as more liquidity means the prices are closer to the "true" price of providing such commodity.

  • cfuse on 11/02/2022 - 21:20
    +1

    This stuff is about as reliable as Mystic Meg.

    Nobody can predict the future. In the unlikely event they could, and it was the economic future, then they wouldn't be telling any of us because they've be too busy making sure bets.

  • HangryCakeStore on 12/02/2022 - 20:57

    Seeing all the crazy news. Would potential future wars with power countries burst this property bubble?

    • rektrading on 12/02/2022 - 22:53

      Australia will be fine. Putin isn't interested in Australia. Dirt in the middle of nowhere.

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