An Unproductive Asset
The Age reports from Australia. “Melbourne’s auction market is white hot. There have been few weekends in property to match the one just gone. The resulting $1 billion in total sales will no doubt be further evidence for some observers that Australia’s market is headed for a US-style price crash. Others will see the property bandwagon as only just gaining pace. Get aboard now or be left behind eating dust. Buyers’ advocate Mal James said there was a top-end buyer for almost everything on sale this weekend, with about two buyers at each auction who wanted to buy but could not. ‘On this fact alone prices will continue to rise in the foreseeable future,’ he said.”
“‘The first sign of a rebound is when first home buyers come back because affordability has returned’ said Matthew Armstrong, of Properly Planners Australia. ‘Once confidence in the economy returns, so do investors and that’s when property prices really begin to take off.’”
From ABC News in Australia. “There was a 22.2 per cent jump in building approvals for January over December, mostly driven by unit dwellings. Robert Harding of the HIA says the market is on the right track in South Australia. ‘It does indicate that investors are back into the market and, of course, if people are going to start investing in real estate, then often they do start with unit developments and have probably overtaken first home buyers now as the main focus of the industry.’”
The Sydney Morning Herald in Australia. “Housing commentators have warned more rate rises are likely to come, after the central bank increased the cash rate. Loan Market executive chairman Sam White said the rise in the cash rate was no surprise and had been factored in by most mortgage holders.”
“‘These rises have really put a lot of pressure on Australian families and we’ve seen that already start to influence how they’re looking at spending their money,’ Mr White said.”
From the Star. “After a bleak past two years for Vietnam’s real estate market, industry players are hoping things will start to look up this year. ‘Demand for property, including suburban and modern housing, has picked up quite strongly due to a rapidly expanding urban middle-class. Even second-home vacation dwellings are seeing good take-up and this shows the kind of appetite that still prevails in Vietnam,’ says SP Setia Bhd CEO Tan Sri Liew Kee Sin.”
“According to a recent report by CBRE Vietnam, real estate is making a big comeback as there is strong interest from investors. ‘As their lifestyle changes, the Vietnamese are looking to purchase second homes away from the city. The market is still relatively untapped with demand higher than supply. This segment of the ‘new money’ population that are seeking better quality products such as second homes and luxury homes is growing exponentially as the people’s purchasing power rises,’ the report says.”
“Savills Vietnam, in its latest market update, says…a number of apartments in Ho Chi Minh City and Hanoi, and holiday homes in Danang worth US$1mil to US$5mil, have been bought by Vietnamese.”
“Singapore’s property sector, as with Hong Kong’s and China’s, have piqued quite a bit of interest among Asians themselves and watched with envy in the West. Property prices in this part of the world have remained excitingly buoyant by contrast, so much so that the Singapore government has recently imposed a levy on people selling residential properties within a year from the date of purchase.”
“The city-state also lowered the loan-to-value limit to 80% from 90% for all housing loans provided by financial institutions. The measures are ‘aimed at pre-empting the formation of a property bubble,’ Adrian Chua, an analyst at DBS Group Holdings Ltd writes in a note. ‘The earlier-than-expected introduction of measures signals that more could come should prices and volumes not revert back to sustainable levels.’”
“The Urban Redevelopment Authority’s property price index surged 15.8% in the third quarter. China’s property market is no less exciting. Having grown by leaps and bounds, it will probably go through a ‘more meaningful correction’ this year because the price gains in 2009 aren’t sustainable, Christopher Lee, corporate ratings director at Standard & Poor’s, says.”
From Kelowna.com in Canada. “There’s really only two ways to make money in real estate. Buy and hold until the price goes up or subdivide, that is, cut a lot in two and sell each piece for a bit more than half of the original price. High-rises are this principle taken to the surreal extreme. Find a piece of property, jump through the bureaucratic hoops, and start subdividing the sky. The higher you can go, the more money you will make, because now you can not only sell a piece of the sky, but the view from it as well.”
“Peter Chataway, a local building designer and community activist…sees a sterile bank of condo high-rises sitting mainly empty while their wealthy absentee owners live somewhere else. ‘It’s an economic ghetto where most of the units will not even be occupied on a regular basis,’ he says. ‘Development here in Kelowna is already investment driven, not use-driven. You want property to be used, not just bought.’”
The Times Colonist in Canada. “Greater Victoria real estate sales jumped by 45.5 per cent in February from the previous month as buyers blasted back into the market before a rise in borrowing costs and more stringent mortgage rules are imposed. Tighter regulations for borrowers wanting a mortgage backed by the Canada Mortgage and Housing Corp. come into effect April 19. The maximum amount buyers can borrow to refinance mortgages is moving to 90 per cent of the value of the home, from 95 per cent.”
“Also, investors who want a government-insured mortgage to buy a home that they will not live in will need a down payment of 20 per cent, an increase from five per cent. B.C. buyers may also be trying to beat a new harmonized sales tax in July. The HST rebate on new homes will apply to properties selling for up to $525,000. Also looming is the possibility of higher mortgage rates expected at about the same time.”
“The average price for a single-family home in Greater Victoria slipped to $620,833 last month from $644,678 in January. February’s median price was $560,950. Condominiums sold for an average price of $304,163 in February, down from $313 337 in January. The median was $285,000.”
From Business Week. “As Spain’s economy faltered over the past year, outsiders marveled at the strength of financial giants Banco Santander and BBVA. The pain has hit a separate category of bank: the cajas, nonprofit institutions that make roughly half of all loans in the country. These banks—similar to savings and loan associations in the U.S.—eagerly served up credit as the housing bubble inflated over the past decade. Last September they had some $330 billion in loans to developers on their books, up from $50 billion in 2000, the central bank estimates. Today, nearly half of the cajas’ $1.8 trillion in assets are mortgages or other real estate loans. With home prices plunging, the 45 cajas are suffering.”
“Smaller cajas rarely publish financial reports, so it’s hard to know exactly how they’re faring. But Mauro Guillén, a professor at the University of Pennsylvania’s Wharton School, says the biggest problems are in southern Spain, where billions were plowed into seaside resort hotels and condominiums. ‘Many got caught up in the real estate gold rush,’ Guillén says.”
“”To raise cash, the cajas are scrambling to sell properties they have seized as collateral, which could further pummel housing prices. ‘Everyone is trying to offload assets,’ says Robert Tornabell, former dean of ESADE Business School in Barcelona. ‘It’s a war out there.’”
From Reuters. “Spain’s already lengthy jobless queues grew longer in February. The number of people registered as jobless in Spain rose by 2 per cent compared to January, sending unemployment up to 4.13 million, Labour Ministry figures showed today. Since February last year, the number of jobless has risen by almost 20 per cent.”
“While the ongoing economic crisis continues to add to the nation’s unemployment lines, seasonal effects also played a significant part, an economist at Spanish savings banks consultancy FUNCAS said. ‘These figures were much worse than we’d expected … but illustrate a seasonal effect in Spain that leads to higher job losses in the first months of the year than seen in the spring and summer time,’ said economist Angel Laborda.”
“Yesterday, the government presented plans to create 350,000 jobs in the beleaguered construction industry by cutting value-added tax on home improvement work. The government has said construction would continue to play a key part in Spain’s economy though concedes the model must move away from the rampant speculative building that helped fuel the decade-long boom that preceded the slump.”
Property Showrooms. “The Spanish property market will provide investors with some ‘fantastic opportunities’ later this year, it has been claimed. According to Mark Stucklin, head of spanishpropertyinsight, the weak economy could mean buyers are able to make a shrewd investment purchase in the popular European destination. He explained: ‘In this year and next year, there are going to be some fantastic opportunities to buy really great quality property at a great price - taking advantage of this depressed market. That is what the canny buyers will be doing.’”
“Mr Stucklin recommended buyers stick to prime locations when it came to buying property, taking advantage of prices which ‘are basically back to where they were eight to ten years ago.’”
The MENAFN Press. “The world’s housing markets are (mostly) recovering, according to the Global Property Guide’s latest survey of residential property time-series. During the last quarter of 2009, house prices rose in 22 countries, of the 34 countries for which quarterly house-price statistics are available, and fell in only 11 countries. However, if we look at year-on-year figures, 2009 has not been a happy year. During 2009, 18 countries’ housing markets experienced price declines, while only 16 countries experienced house price increases.”
“Hard-hit Lithuania and Ireland’s housing markets fell sharply during 2009 (-29.29% in Lithuania, and -11.09% in Ireland), and during 2008 (-19.22% in Lithuania, and -11.89% in Ireland). The last quarter offered no respite to either country (-5.83 in Q4 in Ireland, and -4.87% in Q4 in Lithuania). Ireland’s latest quarterly drop of -5.83% is the worst since the Irish time-series began.”
“Back in the boom years, Ireland enjoyed steep house price appreciations, peaking at 26% during the year to Q1 1999. Now there is still no sign of respite. The economy shrank 7.4% y-o-y to Q3 2009. Irish unemployment increased to 11.6% in 2009, from 6.4% in 2008.”
‘Bulgaria’s housing market was badly hit during 2009 (-26.36%), and its house-price decline continued during Q4 (-2.26% on the quarter). Slovakia is another country which experienced a steep decline during the year 2009 (-12.70%), and whose housing markets were still heading down in Q4 (-2.09%).”
“Spain is a similar case, added to which Spanish statistics are widely believed to understate its house-price declines. By end-2009, Spanish houses were back to their 2004 values. House prices fell 6.42% during 2009 and 1.62% during the last quarter. Portugal’s recovery in mid 2009 proved to be short-lived. House prices were up by a meagre 0.91% in 2009. But over the last quarter of the year, house prices were down by 1.06%. Portugal, like Italy and Germany, is something of a special case, because these countries entirely missed the housing boom that swept through the world.”
“In Kiev, Ukraine, house prices fell 30.22% during the year and 3.67% during Q4 2009. Kiev had enormous increases during the boom years, peaking at 75% y-o-y to Q3 2005. Figures for Ukraine are in nominal terms. Russia’s housing market has been in crisis since Q4 2008. Over the year to Q3 2009 (the latest quarter for which data is available data), house prices in Russia dropped by 19.97%./;
“House prices in Greece (data is for cities outside Athens) declined by 1.39% y-o-y to Q3 2009 (the latest quarter for which data is available.”
“The biggest price-declines in the world during this crisis have taken place in Riga, Latvia (down 50.22% in 2009, after a fall of 36.98% in 2008), and in Dubai, UAE (down 43.29% in 2009, after a surge of 42.66% in 2008).”
“Much of Latin America is experiencing a house price boom, but, with the partial exception of Colombia and Argentina, Latin American countries publish no house-price data. Israel’s house prices have been rising strongly ever since Q4 2008. During 2009, prices rose 15.52%, the highest increase in 10 years. Israel ranked third in this quarter’s survey. Lebanon is also enjoying a house price boom, though it has not yet published figures for 2009.”
From Finfacts. “UK housing market at a delicate tipping point: Davy analyst, Flor O’Donoghue, commented: ‘UK housing market bears, most definitely not an endangered species but in hiding for much of 2009 as the market showed unexpected resilience, have been given better ammunition since the start of the year. Whether the most negative sceptics will be proved correct remains to be seen, but there is little doubt that the UK housing market, at the very least, has had a sluggish start to the year.’”
“‘While the UK housing market is unquestionably in a better position than this time last year (not that difficult it must be said), there is no doubt that hard-fought momentum has been lost. Bad weather, wavering consumer confidence and the imminent General Election (and increasing uncertainty about the outcome) have all been unhelpful. But what is likely to have really distorted the market was the termination of a temporary extension of the removal of stamp duty on house purchases up to £175,000. This relief lasted until the end of December, when the stamp duty threshold reverted to £125,000.’”
“‘Unsurprisingly, this deadline probably prompted a front loading of activity towards the end of 2009 to avail of the temporary relief. Hence the apparent robust housing market figures for December were almost certainly artificially flattered with some inevitable payback in January. Evidence of this was January’s Bank of England mortgage approval figures, which were 48,200 seasonally adjusted, down 17% on December and the weakest month since last May.’”
“The Bank of England data are not alone: UK housing transactions slipped in January and house prices, according to Nationwide, fell for the first time in ten months. For those exposed to the UK housing market, what is worrying is the loss of momentum. As we see it, this risks a negative feedback loop, where disappointing housing figures ultimately become self-fulfilling.”
South Wales Argus. “The following is the letter sent by the four Islwyn councillors to the Prime Minister. ‘Your government did absolutely nothing to contain asset based inflation of 10% year on year and indeed at the time seemed pleased that it was occurring.’”
“‘The asset bubble has not only taken UK plc to the verge of insolvency, it has resulted in many young people in the communities we represent who earn £12,000 unable to buy a home. This accompanied to the fact the Labour Party has prevented Local Authorities from building council housing has made the housing situation young people face in this country far worse than it need be.’”
“‘The asset based inflation which brought the UK banking system to its knees, we believe should have been prevented by government regulation. However, when the banking crisis began, we agree that your government had Little choice but to re-capitalise the banks. However, we do object to banks which we are majority shareholders in, lending our money to foreign companies to buy much loved British companies, who then go about making British workers redundant.’”
“‘What is the point in having a Labour government, who just watches from the sidelines whilst such practices occur? Why does your government do nothing about billionaire bonuses being paid to brokers in a bank that we own and a bank that will not lend to small businesses in Islwyn?’”
From Irish Central. “Ireland threw money away like a drunk in a bar room during the economic boom, according to a new survey. Okay, that’s not quite what they said, but they should have. A damning new report from Davy Stockbrokers says Ireland wasted the boom years blowing money on the housing bubble.”
“The Davys report says Ireland failed to invest in even basic services like roads, rail, school, hospitals and telecommunications between 2000 and 2008. The lack of investment has put Ireland way down the European ranks for the basic building blocks of a country. Even tiny Finland and Belgium are better off than Ireland.”
“The report says that 63 percent of net investment in capital stock went on housing which Davys calls an ‘unproductive asset.’”
“Far more productive are the country’s young people; although they, like my generation, are leaving the country in droves. Davys should have added another line to its report. The Irish Government blew the boom and they blew the future for hundreds and thousands of our young people. It’s one thing emigrating (as I did) with $300 in your pocket. It’s quite another emigrating with a $300,000 mortgage to feed.”
“Far more productive are the country’s young people; although they, like my generation, are leaving the country in droves. Davys should have added another line to its report. The Irish Government blew the boom and they blew the future for hundreds and thousands of our young people. ”
As did the U.S. government. Where do my kids go? Canada?
I read an article a couple of years ago about the children and grand children of holocaust survivors reclaiming German citizenship so that they could live and work in the EU.
Isn’t it interesting that all these formerly backwater countries whose kids we’ve educated at our universities suddenly are buying $400,000 condos in merdeholes like Ho Chi Mihn city, etc.? Not to mention the folks who loved what happened at 9 11? Or our buddies up north who have a whopping 19,000 “kinda” man army?
Meanwhile, we’re going nipzup.
What’s it gonna take to get J6P off his barcolounger and take the sucker back?
Sounds like Ireland has a California problem. I cannot overstate the number of lovely young families I knew with at least one highly qualified adult member of the labor force who rented here for a while, only to throw in the towel and move somewhere else when they concluded they would never be able to afford to purchase a home.
Raises hand.
Actually, we had a tiny crapshack in Escondido when we bailed before the bubble. It wouldn’t have mattered that our crapshack appreciated because the “next” house we would have liked to trade up to appreciated even more, moving even further out of our reach. As a friend of mine described it, the ladder was not only getting taller, but the gaps between the rungs were wider as well.
Had I known the bubble was coming we would have stayed put, sold at the peak and THEN left Caliland. But hindsight is 20/20 I guess.
WT,
I still think, rightly or wrongly, that most of
this BS will shake out well before our kids
are our age. At some point our lenders will make
a decision for us that we seem unable to make
on our own.
So much for “They aren’t building anymore LAND!!”
“There’s longstanding nuisance houses, been around seven, eight, nine years. We will go in without a permit and demolish them without permission,” said George. “If you, as an owner, are going to leave something like that to fester in my neighbourhood, obviously you either don’t care or aren’t in a position to take responsibility for your property, so we’re going to take care of it for you.” Blight Busters has torn down more than 200 houses, including recently an entire block of abandoned housing in Old Redford. “We need to right-size this community, which means removing whole blocks, and building farms, larger gardens, putting in windmills. We want to downsize – right-size – Detroit,” George said.
“The Davys report says Ireland failed to invest in even basic services like roads, rail, school, hospitals and telecommunications between 2000 and 2008. The lack of investment has put Ireland way down the European ranks for the basic building blocks of a country. Even tiny Finland and Belgium are better off than Ireland.”
I thought the free market was supposed to take care of that? Funny how the narrative in Europe could be so different from North America, given the same data.
The Finns are the real inventors of the internet (sorry igore) and ludifisk. The semi-frog’s (belgium) claim to fame is the famous detective Hercule Peroit.
Having both Swedish and Norwegian grandparents, I can attest that it was not the Finns who invented lutefisk. It came to Norway by way of the Netherlands. However, it’s not an invention to be proud of. It was served at holidays and smelled so bad you couldn’t even sit at the same table. A Lena and Ole joke:
“”Well, we tried the lutefisk trick and the raccoons went away, but now we’ve got a family of Norwegians living under our house!”
For students of the housing mania, this is an interesting time. Check out these differences of opinion:
‘I clearly defeated Steve Keen in our debate in Melbourne, according to both electronic scoring and journalists who attended. He has no alternative model of the world. And his analysis is often crudely simplistic and applied to areas that he knows nothing about. Housing is a classic example. His entire analysis of the housing market is based on a relationship between two variables that have no real relationship: the stock of outstanding mortgage debt and the annual flow of public and private economic expenditure (ie, GDP).’
‘He never once analysed the default rates associated with debt. If he did, he would have found that they are a fraction of most of our international peers notwithstanding the much higher interest rates Australian borrowers face. He never once examined debt serviceability ratios. Had he done so, he would have seen that they remain on par with the long-term average over the last 20-30 years (ie, around 33% of disposable income).’
‘Keen can therefore provide no explanation of the link between mortgage debt levels, serviceability ratios, default rates, distressed sales and house prices. Steve’s claims are literally as crude as this: we have had a big increase in mortgage debt relative to GDP (ignoring the cost of that debt has plummeted while long-term serviceability has remained constant), hence debt levels must fall (forgetting our incredibly low default rates or that unemployment has now fallen to 5.3%), and thus house prices must also decline (ignoring that one-third of all homes have zero mortgage debt held against them).’
‘Put differently, Keen provides no credible explanation of the relationship between mortgage debt and house prices. The media needs to understand that he is simply not qualified to talk about either of these variables until such a time as he does outline a model that deals with them.’
‘Last week I took part in a debate entitled “The Great Residential Housing Debate - the next Bubble or a legitimate Boom?”; I put the Bubble case. ‘Declaring victory at half-time’ is a syndrome which afflicts the entire debate over our current economic situation: optimists are of the opinion that the crisis is all over now, while pessimists think it’s only just begun.’
‘Once debt becomes a significant fraction of GDP, and its growth rate substantially exceeds that of GDP, the economy will suffer a recession even if the debt to GDP ratio merely stabilises.’
‘A debt-dependent economy has no choice but to record rising levels of debt to GDP every year to avoid a recession. Unfortunately, this makes a debt-servicing crisis inevitable at some point, especially when a large fraction of the increase in debt is financing Ponzi-speculation on asset prices, since this adds to debt without increasing society’s capacity to finance that debt.’
‘The First Home Vendors Boost…enticed Australians back into mortgage debt in droves (both First Home Buyers who actually received the Boost, and the Vendors who sold to them who took levered the extra $15-40k The Boost added to the sale price into another $100-20k for their next house purchase). This policy gave us the fastest turnaround in debt levels in our post-WWII economic history.’
‘Just like the “hair of the dog” approach to getting over a hangover, it works once or twice, but not forever: the ultimate destination is DA: “Debtors Anonymous”. Australia has merely delayed its entry into the club.’
‘Just like the “hair of the dog” approach to getting over a hangover, it works once or twice, but not forever: the ultimate destination is DA: “Debtors Anonymous”. Australia has merely delayed its entry into the club.’
The 12 Steps to Financial Serenity
* Step 1 - We admitted we were powerless over our addiction - that our lives had become unmanageable
* Step 2 - Came to believe that a Power greater than ourselves could restore us to sanity
* Step 3 - Made a decision to turn our will and our lives over to the care of Gollum as we understood Gollum
* Step 4 - Made a searching and fearless financial inventory of ourselves
* Step 5 - Admitted to Gollum, to ourselves and to another human being the exact nature of our wrongs
* Step 6 - Were entirely ready to have Gollum remove all these debts off our household balance sheet
* Step 7 - Humbly asked Gollum to remove our short sale
* Step 8 - Made a list of all persons we had harmed financially, and became willing to repay our debts to them all
* Step 9 - Made direct repayment to such people wherever possible, except when to do so would financially injure them or others
* Step 10 - Continued to make personal savings and when we were broke promptly admitted it
* Step 11 - Sought through prayer and meditation to improve our conscious contact with Gollum as we understood Gollum, praying only for knowledge of Gollum’s will for us and the power to carry that out
* Step 12 - Having had a financial awakening as the result of these steps, we tried to carry this message to other debtaholics, and to practice these principles in all our affairs
My name is Bilbo W.?
Feed those crocodiles baby…feed those Crocs.
“Blimey, the house bit me, right on the butt”
Gollum grant me the serenity to pay the debts I can pay, the courage to walk away from the debts I cannot pay, and the wisdom to know the difference.
Seems to me that part of the answer is a 5.3% unemployment rate…Remember our housing market when our unemployment rate was that low ??
Even that won’t help much. Once unemployment comes down to that level (which may take 3 - 5 years, according to many forecasts), the Fed will have to start raising interest rates.
Correlation != Causation. It’s a lot easier to get a low unemployment rate if half your country is employed in building, selling, or financing houses. Low unemployment would help, but we’ll never employ them all that way again in our lifetimes.
Perhaps we should think about making some of the stuff we currently import?
Amen. Amen. Amen. Yes correlation != Causation
Carl I think you hit the nail on the head. Making stuff naturally requires employment. As much as it pains me to say this, perhaps tariffs are required to maintain our standard of living.
The playing field is not level. Environment/Union etc are not the same in the US as Chindia. How do we fix this?
“His entire analysis of the housing market is based on a relationship between two variables that have no real relationship: the stock of outstanding mortgage debt and the annual flow of public and private economic expenditure (ie, GDP).’”
Remark: This statement should alarm the Australians. The relation is rather simple: mortgage debt will limit expenditure and investment in other areas of the economy. I refer to Greenspan publicly worrying over the decline in refinancing so that money to buy stuff was not available. This was during Congressional testimony.
‘He never once examined debt serviceability ratios. Had he done so, he would have seen that they remain on par with the long-term average over the last 20-30 years (ie, around 33% of disposable income).’
Remark: This means that Australians income is rising to service that debt. They have inflation. If not, then there will be a reckoning. There is no other choice.
‘Keen can therefore provide no explanation of the link between mortgage debt levels, serviceability ratios, default rates, distressed sales and house prices. Steve’s claims are literally as crude as this: we have had a big increase in mortgage debt relative to GDP (ignoring the cost of that debt has plummeted while long-term serviceability has remained constant), hence debt levels must fall (forgetting our incredibly low default rates or that unemployment has now fallen to 5.3%), and thus house prices must also decline (ignoring that one-third of all homes have zero mortgage debt held against them).’
Remark: This is the same blather that David Lereah was holding forth during the boom. Note that simple, forthright explanations are not necessarily “crude”. Maybe they only need to be simple.
‘Once debt becomes a significant fraction of GDP, and its growth rate substantially exceeds that of GDP, the economy will suffer a recession even if the debt to GDP ratio merely stabilises.’
Remark: It won’t stabilize. Remember the “engineering a soft landing for themselves” stuff that Lereah was going on about? Prices crash. Enter Goldman, Bernanke, Giethner.
‘The First Home Vendors Boost…enticed Australians back into mortgage debt in droves (both First Home Buyers who actually received the Boost, and the Vendors who sold to them who took levered the extra $15-40k The Boost added to the sale price into another $100-20k for their next house purchase). This policy gave us the fastest turnaround in debt levels in our post-WWII economic history.’
Remark: OMG! I don’t believe they did that!
Roidy
The Ozzies should memorize every utube of Peter Schiff debating the Realtards in 2005-2008.
…but maybe it’s actually different in OZ.
“Just like the ‘hair of the dog’ approach to getting over a hangover, it works once or twice, but not forever.”
_______________________________
When I visited Australia, the touted hangover cure was something called “Berroca,” consisting of a vitamin tablet that fizzed in liquid much like Alka-Seltzer. I found that it worked, but on the other hand I had just concluded such a staggering night on the town in Perth that I would have attributed medicinal qualities to almost anything.
I await the day when economists reach consensus that tomorrow’s economy will not be sufficient to service today’s debt, whether public or private, in Australia or anywhere else.
Berroca = potent stuff. Even if to speed the emptying of my stomach quicker, back out through the in-port! That stuff stayed inside me about 10 mins before the eruption happened.
Berroca… for those times when a technicolor belch can’t come soon enough.
Who needs that? Over the years all I had to do was position myself in the proper room of the house and literally raise a finger in front of my face (yes, without inserting it) to bring relief.
I’m ignorant, educate me.
Is there a financial Berroca we can apply here? If so, it sounds like a plan.
“I await the day when economists reach consensus that tomorrow’s economy will not be sufficient to service today’s debt, whether public or private, in Australia or anywhere else.”
That’s the point when a technology called the printing press can come in handy.
‘Put differently, Keen provides no credible explanation of the relationship between mortgage debt and house prices. The media needs to understand that he is simply not qualified to talk about either of these variables until such a time as he does outline a model that deals with them.’
That sounds to me like academic economist crazy talk.
I would have loved to have been a fly on the wall watching this jackass get up on a soapbox to thump on his chest.
Christopher Joye Suggests Mortgage Repayments Comprise 10% of Household Disposable Income
It seems that property bandit Christopher Joye can’t help but make a fool of himself while feeding misinformation on property to his readers.
Yesterday, by all accounts, El Joye was debating Steve Keen at the Perennial Investment Partners conference in Melbourne.
As Joye loudly and proudly pointed out on his Business Spectator blog yesterday afternoon:
“Update: Christopher Joye won his debate with Steve Keen in an electronically scored result in front of an audience of 500 investors at the Park Hyatt in Melbourne.”
We think the words, ‘three year-old,’ and ‘child’ spring to mind - “Tell them I won, tell them I won…“
Pass the bubbly! The global housing bubble looks set to live on forever!!!
“Get aboard now or be left behind eating dust. Buyers’ advocate Mal James said there was a top-end buyer for almost everything on sale this weekend, with about two buyers at each auction who wanted to buy but could not. ‘On this fact alone prices will continue to rise in the foreseeable future,’ he said.”
He gives a whole new meaning to Australia and being “down under”
gulp!…gulp!
Pbear…How close are you to Pacific Beach ??
Far enough away so I would have to look it up on a map to figure out where it is…
Okay Thanks…
Sad, but true. They would sooner destroy every economy on the planet vs. ending the Bubble.
Meanwhile, here in Maryland, they are building new townhouses squeezed between the railway and the airport (so you can enjoy the noise of both) with prices starting in the $300,000’s… what an insane world…
Hey, a year or two ago the same places would have started in the mid 400’s. Stupid is an improvement over impossibly stupid. It just isn’t enough of an improvement.
Polly:
How very true - nice to talk to somebody else who understand the local madness!
I guess when it comes to housing in this state, I just need to lower my expectations! “Less stupid” is the new black, or something like that!
Reminds me of doing time in El Segundo, CA.
Do you live under LAX, near the Hyperion sewage plant, or next to the refinery?
Interesting that “the world’s housing markets are recovering” while the world’s employment and wages aren’t. And it looks like the developed world has decided that it needs the private sector to build more unaffordable houses no matter what.
..or popcorn, eh Neil?
I was looking at South Asia and one place that seems to be in massive bubble is India. The avg. household income is $3,000 as compared to $36,000 in the US, but the home prices are almost same as NY city in major metropolitan cities like Delhi, Bombay etc.
A very low priced apartment of 2-3 bedrooms in Delhi is at least $200K and the price could easily go in millions of dollars based on location in Delhi. Same with Bombay, average prices are close to $400K for filthy apartments with no infrastructure and basic amenities like water and electricity or roads.
Same is the case in China. The prices for apartments in Shanghai, Beijing and Hong Kong are more than NY city.
If there is real growth there, why do their Govts. keep inducing stimulus in their economy. And why are the interest rates so low as per historic averages in India.
Maybe it is all like here. The Govts., there want to keep the housing propped up to win re-election. Or there is a massive collusion of builders/bankers and Govt.
These markets with these prices are not emerging anymore but “emerged” markets. Are their stocks also in a bubble unlike housing?
I’d guess there is no expectation at all that people who have the median income will participate in the housing market.
In the US, participation in ownership of residential real estate is between 60 and 70 percent. What is it in India?
By the way, that doesn’t mean they don’t have a bubble. It just means you need a lot more facts to prove it than the average income and what an apartment costs in the big cities.
Median income would also be a much more useful data-point; the average is skewed strongly to the downside there due to the distribution–e.g. the huge population of poor.
I can’t believe, after all that’s happened over the past few years, that I still can read a sentence about Canada or anywhere that contains this phrase: “investors who want a government-insured mortgage to buy a home that they will not live in.” What’s the matter with us?
“Far more productive are the country’s young people; although they, like my generation, are leaving the country in droves. Davys should have added another line to its report. The Irish Government blew the boom and they blew the future for hundreds and thousands of our young people. It’s one thing emigrating (as I did) with $300 in your pocket. It’s quite another emigrating with a $300,000 mortgage to feed.”
Who would of thought all those past Irish peasants on the coffin ships had an advantage over today’s Irish emigrants!
It’s one thing emigrating (as I did) with $300 in your pocket. It’s quite another emigrating with a $300,000 mortgage to feed…
Wait until America’s young people find out that the only way to get rid of hundreds of thousands of dollars in student loan debt is to leave the US…
Bob:
Or wait patiently for the next bubble and pay off the student loans with Heloc $$$ then declare BK….Or make yourself “disabled” by ingesting tons of drugs
————————
Wait until America’s young people find out that the only way to get rid of hundreds of thousands of dollars in student loan debt is to leave the US…
“Or make yourself “disabled” by ingesting tons of drugs”
Does anybody remember the Simpsons episode where
Homer tries to eat his way into a disability?
Very funny.
I screwed up… I ingested all the drugs AND paid off my loans.
Dont forget the billions of $$$ going to India in outsourcing that is creating a new middle class. The median income does not matter because it accounts for 1.2 billion people who mostly live in villages or slums. The few hundred thousnad that are beniffiting in each city due to the huge influx of $ income due to outsourcing from teh US and Imports from the us are causing these price rises and they pay most of it in Cash. Trust me there is no bubble to burst in New Delhi except in aparments in Gurgaon, Noida. The key parts of New Delhi are all paid for. I know a hundred families in new Delhi and not one even has a mortgage. The homes are passed from one generation to the next. When teh economy gets bad transactions just slow down to zero and no one sells as they have no where to go.
A bubble is a bubble is a bubble. Does not matter how and why we justify the reasons it is not a bubble. They all share the same overall qualities and the ALL ALL ALL end the same.
House prices at an all time high here. And what houses they are! Projections are that the government of our little island state will have to pay $23 billion to repair “leaky homes”, homes with water damage due to substandard Kiwi construction. Note, this is the equivalent to a $2 trillion burden on the US economy. Yet the internet and phone service here is dodgy, and state highway 1 has one lane bridges. Generation X has already left, Generation Y is leaving. What is left behind is retirees, people on welfare, gangsters, and property speculators. What a paradise!
Thanks for the input NZR. I’ve had many posters from your country mention the poor condition of the houses.
Long time readers will recall that back in 2005 most of my bursting bubble posts would be on the UK, AUS and NZ. I wanted to put this together this morning because, in the big scheme of things, what is happening globally is more important than watching Vegas fall apart, etc. Hang in there and I’ll make an effort to follow NZ more closely in the future.
To where are young New Zealanders emigrating, other than Australia? One of my more impetuous relatives just announced that he is quitting his job and moving to New Zealand. I knew someone else who did that, nearly twenty years ago, and he never returned to the United States; he achieved a considerable degree of commercial success and now lives in Auckland off Parnell Road. But with the current economic situation I can’t give my opinion on whether my relative’s decision is brave, adventurous, foolish, or all three.
But, but your sheep are good looking and the trout fishing is nice.
Hey I just immigrated to Australia from the U.S. 3 months ago. Suffice it to say that the insanity continues and when the bubble bursts here, chaos… I mean literal civil chaos… could ensue.
People are stressed out. Young people are angry. The government relaxed foreign ownership laws (pertaining to real estate) a few months ago. Australian citizens are very angry that they are being priced out of their own country by foreigners who are outbidding them for properties.
Mark my words, it’s gonna get real ugly here. My guess is sometime in the next 12 months. I would not be surprised if all the banks here failed, and the RBA goes to a ZIRP/QE policy, which should send the Aussie dollar to .40 or even less.
As for me and my family, we’re living a simple life, laying low, and hoping when this whole mess ends, we’ll finally be able to buy a house down here.
“Australian citizens are very angry that they are being priced out of their own country by foreigners who are outbidding them for properties.”
Sounds like Australia is turning into California.
Actually I think Australia is turning into Oregon and Idaho, which were attacked by California equity locusts.
+1 And Arizona, and Nevada, and Colorado, and New Mexico, and Montana, and probably to some extent Texas.
If I wanted to live near this many Californians, I’d move to friggin California.
“…hoping when this whole mess ends, we’ll finally be able to buy a house down here.”
Are you suggesting the AU central bank is not waging a War on Savers, or is it just that you don’t expect them to win it?
Sorry it took so long to respond.
My opinion is that Australia’s RBA (central bank) is raising interest rates in a bid to save the Australian dollar when the inevitable day of reckoning comes. In other words, they’ll have wiggle room when they have to resume a policy of lower interest rates.
Obviously, if it doesn’t work, they will have a sovreign default here and the Aussie dollar will be virtually worthless on the FOREX market.
For Australians to be stressed out is truly unusual.
Where do you live, if you don’t mind me asking? I’ve been to all the major cities except Canberra and Darwin. It saddened me to read the Melbourne piece at the top of the post, because Melbourne is one of my all-time favorite places.
Sorry it took so long to respond.
I live in Brisbane.
The scene here reminds me of the U.S. in 2005. Virtually nobody believes that house prices will drop. Meanwhile, people are up to their eyeballs in debt, stressed out over whether they’ll keep up with their payments. Pops is working 70 hours a week to keep up; the wife is working full-time as well, and the kids are neglected, bored, and restless. So much for the “Land of the Long Weekend”, as Australia was once known as.
One difference though: Gen. Y is starting to realize how hopeless things are for them in the current environment, and the resentment toward baby boomers is rising quickly.
Back then, I took a road trip from Brisbane to the Surfers Paradise beach area. I don’t think I’d ever seen so many tall buildings outside of Manhattan or Vancouver, or in pictures of Hong Kong. The structures actually shaded the beach at times, which is as counterproductive a development plan as can be imagined. Those condos looked almost perfect for speculative activity.
well, they don’t have many guns…
“‘The first sign of a rebound is when first home buyers come back because affordability has returned’ said Matthew Armstrong, of Properly Planners Australia. ‘Once confidence in the economy returns, so do investors and that’s when property prices really begin to take off.’”
At least this bozo’s logic would imply that the housing tax credit in the US and artificial price supports cut against finding a bottom and rebound any time soon. I don’t understand the point, however, that once home prices fall to affordable levels prices will really being to “take off” as more entrants including investors enter the market. Didn’t we just go through this? Does he think it will be an exact repeat? Without loan products that allow investors with bad credit and no skin in the game to buy homes in nonrecourse states, will investors really be chasing homes as they rise above affordable levels? If they are unaffordable, how will rent cover their payments? Sounds like a pretty dumb investment plan.
‘…once home prices fall to affordable levels prices will really being to “take off” as more entrants including investors enter the market.’
Possible reasons to believe ‘this point’:
1. Never took a college economics course.
2. Brain is stuck in bubble-era thinking.
3. Perception of signals from high-level government agencies that hair-of-the-dog housing market stimulus is underway, and conviction that such measures will prove sustainable going forward.
4. Abysmal ignorance of the long history of collapsing asset bubbles.
Reading and rereading this post drives home some points I often ponder:
1. A large portion of the developed world’s population is completely in the dark about the housing bubble.
2. Given point 1., it is not hard to make the case that at a societal level, we have not yet left the denial phase of the housing bubble stages of grief (that despite a large decline in housing market values in most local real estate markets formerly referred to as “a bit frothy”).
How long can the denial phase of the housing bubble stages of grief continue, and what will happen when it ends?
“1. A large portion of the developed world’s population is completely in the dark about the housing bubble.”
Maybe those who haven’t taken the bait, yet.
A friend’s sister’s boyfriend developed aids from sharing needles, and the friend’s sister was worried that she might have it too, but she didn’t want to get tested because she didn’t want to know if she was doomed. And no, I didn’t date her.
Some Fed governors are beginning to openly acknowledge the futility of trying to repair the economy by reflating the housing bubble.
Real Regulatory Reform
Jeffrey Lacker
March 1, 2010
Remarks by Jeffrey Lacker, President, Federal Reserve Bank of Richmond
Institute of International Bankers, Annual Washington Conference
Washington, D.C.
…
In contrast to the attention devoted to rearranging bank regulatory agencies, it is striking that most reform proposals ignore the two failed government-sponsored enterprises that are now in U.S. Treasury conservatorship. For the better part of two decades, the GSEs that securitize and guarantee the bulk of U.S. mortgage debt grew their businesses under an ambiguous regime that led most market participants to view them as implicitly guaranteed. Housing finance cannot achieve a sustainable configuration without a final determination of the status of these companies and of whether and how we deliver government subsidies to mortgage finance. I have said elsewhere that it would be a mistake to try to build this expansion on another housing boom and that over time we should wean our economy off dependence on housing subsidies. Too many houses were built over the last decade, and what we’ve been through the last three years should teach us that subsidizing household mortgage debt was a dangerous policy that was carried too far. But whatever society decides about the bias toward housing, real regulatory reform would be incomplete without addressing the fate of the government-sponsored housing finance enterprises.
…
Too many houses were built over the last decade, and what we’ve been through the last three years should teach us that subsidizing household mortgage debt was a dangerous policy that was carried too far. But whatever society decides about the bias toward housing, real regulatory reform would be incomplete without addressing the fate of the government-sponsored housing finance enterprises.
Nail. Hammer. Direct hit.