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Housing Bubble thread.

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I could be wrong but isn't America's loan system different or was different to ours?

 

In that if things go belly up the can just walk away from the debt/loan and go rent if they want?

 

Therefore it's very easy for things to go off the cliff?

 

 

Yes that's correct but it doesn't really change the outcome of a housing bubble. If folks walk away from their home and don't repay 'in theory' the banks can still go after the borrowers for the outstanding amount owed at the point of walking, plus any shortfall the bank incurs by selling the property cheaper.

 

The end result is still that a house goes on to the market at a much cheaper price than was originally sold. The fact that the bank can chase the previous owners for money (which they don't have) is largely irrelevant. The significant factor is people being mortgaged to the hilt on properties that are over valued and saddled with loans they can't afford.

 

The thing that largely saved the more desirable regions of metro Australia from this fate is that the banks are more highly regulated on the whole 'sub prime, loan packaging, pass the parcel' BS that was the downfall of the US/EU banks. The only thing the restriction of not being able to walk away from a debt ridden house in Oz would facilitate is a stronger desire to downsize, or cash out and rent but that can only happen through so many cycles before brown stuff hits the fan IMO.

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Bloody hell. And don't their interest rates work differently, in that they don't fluctuate like ours. Could have sworn I heard they get the rate they purchased at for the term?

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There are some differences between Aus and U.S., but the fundamental debt issues are the same.

 

Despite media/political obsession the government debt , it is personla debt (primarily mortgage debt) which are the biggest concern for the Australian economy. Personal debt is about TEN TIMES government debt, as a ratio of GDP.

 

https://independentaustralia.net/_lib/slir/w600-h900/https://independentaustralia.net/i/article/img/article-7010-hero.jpg

 

http://www.theguardian.com/commentisfree/2014/sep/09/australian-private-debt-is-the-big-issue-not-government-debt

 

http://www.smh.com.au/business/the-economy/australian-households-awash-with-debt-barclays-20150315-1lzyz4.html

Edited by TryTriB4Forty

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Big difference would be if the sub-prime hit here, there would be alot more personal bankruptcies being processed than the US. The only difference is the US enables the lendee to hand the keys back as full and final settlement of the debt, Australia doesn't so Ma and Pa homeowner would more than likely hand the keys back and declare bankruptcy.

 

The thing I'm not sure about in this Armageddon scenario, is if a person declares bankruptcy, can their super be taken to cover the outstanding debts? If so, that would compound the situation significantly, as the share market would be hit very hard then as well.

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Big difference would be if the sub-prime hit here, there would be alot more personal bankruptcies being processed than the US. The only difference is the US enables the lendee to hand the keys back as full and final settlement of the debt, Australia doesn't so Ma and Pa homeowner would more than likely hand the keys back and declare bankruptcy.

 

The thing I'm not sure about in this Armageddon scenario, is if a person declares bankruptcy, can their super be taken to cover the outstanding debts? If so, that would compound the situation significantly, as the share market would be hit very hard then as well.

 

I don't really think there will be any armageddon type situation like in the US. But there is already some significant impact in places like the Hunter. Young blokes (and gals) on big money in the mines who bought big houses and now can't afford the mortgage after losing their jobs in a declining mining industry.

 

260 bankruptcies in the Hunter last year. not sure if thats a lot or not to be honest. But its 5 families a week.

 

I actually know someone that walked away from their mortgage in the UK. An Aussie girl married to an American. Lots their jobs, could find no other work and (in the middle of the downturn) fond themselves with a house woth half what their mortgage was. They are now back in Australia and have given up on goin back to the States to live - they said once they have walked away from a mortgage they would be unlikely to ever borrow money again for anything in the US ...

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There are some differences between Aus and U.S., but the fundamental debt issues are the same.

 

Despite media/political obsession the government debt , it is personla debt (primarily mortgage debt) which are the biggest concern for the Australian economy. Personal debt is about TEN TIMES government debt, as a ratio of GDP.

 

https://independentaustralia.net/_lib/slir/w600-h900/https://independentaustralia.net/i/article/img/article-7010-hero.jpg

 

http://www.theguardian.com/commentisfree/2014/sep/09/australian-private-debt-is-the-big-issue-not-government-debt

 

http://www.smh.com.au/business/the-economy/australian-households-awash-with-debt-barclays-20150315-1lzyz4.html

 

Mate, you are a glass half empty sort of guy. For every article in a paper that says there is a massive crash coming we can find another to say it ain't so.

 

History shows that in markets such as Sydney and Melbourne there is no bubble and no crash. There is growth and then a bit of flat lining. There is no end of the world tomorrow. Unless you live in Greece :-)

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For every article in a paper that says there is a massive crash coming we can find another to say it ain't so.

 

History shows that in markets such as Sydney and Melbourne there is no bubble and no crash. There is growth and then a bit of flat lining. There is no end of the world tomorrow. Unless you live in Greece :-)

 

Agree. I was at an auction last weekend where 5 people were bidding for this one place. It's winter in melbourne and it's usually slow. Not at the moment.

 

Even if there was a crash or correction it's not going to be $400k on an 800K house. It will be 0-50k at worst.

 

We will see less places being sold before we see a crash and then there will be a slow and slight correct.

 

I'd rather my money in a house than the stockmarket or super thats for sure.

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I actually know someone that walked away from their mortgage in the UK. An Aussie girl married to an American. Lots their jobs, could find no other work and (in the middle of the downturn) fond themselves with a house woth half what their mortgage was. They are now back in Australia and have given up on goin back to the States to live - they said once they have walked away from a mortgage they would be unlikely to ever borrow money again for anything in the US ...

Did you mean in the U.S. ? because you cant walk away from your mortgage in the UK like you can in the U.S. The bank will any and outstanding payments to to debt of the repossessed house and pursue accordingly.

Edited by FatPom

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I don't get out much, but I had to fly domestically for work this week and parked my beat up old Ford, with 374,000kms on it(almost the distance it to the moon!), in the air port car park for a few days after driving through the city.

 

It is not just houses, there are heaps of luxury cars, worth well over 50k and closer to 70k around town. I just read an article said more Mercedes C class were sold in the first 4 months of this year than Falcons and Aurions combined.

 

Man y'all city folk must be rich!

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60 minutes has a segment on the great housing bubble. Lets see what they say.

I reckon they will use mining towns in Qld and WA where the downturn is seeing people leave, and house prices halve.....

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Look at us all standing on the tracks. There's a train coming but it's OK because nobody else is moving. The train can't hit everybody right?

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What are peoples views on a crash.

 

I watched the 60 mins thing - a bit silly to use examples of a mining town .... we all know what happens with 10,000 people leave a town that only had a total population 0f 15,000 ....

 

But will the big capital cities hold out??? Australias population still growing strongly, putting ever increasing supply pressure on places to live.

 

I take the views of the guy last night who was saying house prices are ludicrous when compared against the average wage......

 

I think it was silly of him to use the "50% of mortgages are interest only" as a reason that its all going wrong. Many people who borrow for an investment property will have investment places on interest only, because you can claim the interest payments as a tax write-off ...

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Well in Sydney the early signs in 2016 so far it seems the trend of falling clearance rates has been reversed:

 

Screen%20Shot%202016-02-22%20at%2010.34.

 

It's early days still and of course there are many factors that go into that, available supply is obviously down (but is going back up), vendor expectations moderated and so on.

 

Results in my area this weekend were encouraging for me as a vendor. Will find out this coming weekend when our auction is scheduled. End of the day it still requires enough buyers on the day that really want the joint and have the budget they are willing to use.

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Alex out of curiosity and provided you don't consider this information sensitive, is your agent advising to go to auction?

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Alex out of curiosity and provided you don't consider this information sensitive, is your agent advising to go to auction?

 

Auction is our decision as we preferred to put a known time line on the process, however we are not ruling out considering prior offers. Of course there is no guarantee of a sale on auction day.

 

Majority of residential property where I live is sold via auction, it's normal (e.g. in my suburb there are 15 residential properties currently on the market, 13 of them via auction). The further away from the city you go, the mix between auction and private treaty evens out somewhat and eventually private treaty dominates. At least that's my lay observation.

 

e.g. I just looked at the western suburb of St Clair. I flipped through first 30 properties listed on the market - all via private treaty, with no auctions.

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I flipped through first 30 properties listed on the market - all via private treaty, with no auctions.

Are these houses being sold to native American Indians?

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First experience at auction last Saturday got out bid by 50k the gu was raining in 50 k jumps blew me out of the water in 3 min.

 

But pissed off as the agent I feel mislead us. the estimated sale price she gave us turned out to be 100k less than the reserve price. So realistically we never even stood a chance. But I feel they used us to drive up the price as there was only one other guy who active bid. Very annoying as I interrupted a business trip to Melbourne to fly back for this auction when the reserve price was actually at my upper limit.

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First experience at auction last Saturday got out bid by 50k the gu was raining in 50 k jumps blew me out of the water in 3 min.

 

But pissed off as the agent I feel mislead us. the estimated sale price she gave us turned out to be 100k less than the reserve price. So realistically we never even stood a chance. But I feel they used us to drive up the price as there was only one other guy who active bid. Very annoying as I interrupted a business trip to Melbourne to fly back for this auction when the reserve price was actually at my upper limit.

 

It's all a big game for smarmy RE agents, they'll play you like a stradivarius and sleep like a baby at night.

 

I treat it all the same way now - just too stressful to get caught up in their bull. There's all sorts of jigery pokery going on with the RE agents down the coast 'trying' (I use that term very loosely) to sell our place. Seeing if they can get a good deal for their mates mostly. Bloke I know who is into commercial real estate reckons we should just sell privately and dodge the games.

 

When Mrs T and her sister sold an Aunts house in Lane Cove, they got a couple of agents in who both said "about $800K, but we'll take it to auction". The girls got talking to the neighbour who said a relative might be interested and hey presto they sold it for $1.2M privately within a week. Money for jam, just like an REs commission :sleep1:

Edited by ComfortablyNumb

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One of them is known as Moony's. At the end of a cul de sac, by a creek with a wicked single track MTB trailhead in their driveway, leads to some nicely maintained built environment riding down to the pipeline. If Goodcatch has got it, he has some nice riding at his back door.

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New record in yarraville on the weekend down here too.

 

Also 95% clearance in Newport and 5 100% clearance in other close suburbs.

 

Bubble won't burst. I'm still backing it will low but not go backwards.

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I could be wrong but isn't America's loan system different or was different to ours?

Â

In that if things go belly up the can just walk away from the debt/loan and go rent if they want?

Â

Therefore it's very easy for things to go off the cliff?

Correct. That's what fueled the U.S. GFC

 

FM

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some bad shit going to happen soon, Just think of the income that is required to pay for a 1.3mill house. So must be very close to the edge on that sort of Borrowing.

 

even if you borrow say $800,000 that 40k in interest per year plus capital repayments. So lets say that 60,000 in loan repayments,, so that 100k minimum income before you even put food on the table etc.

 

Very scary when you look at that way.

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some bad shit going to happen soon, Just think of the income that is required to pay for a 1.3mill house. So must be very close to the edge on that sort of Borrowing.

 

even if you borrow say $800,000 that 40k in interest per year plus capital repayments. So lets say that 60,000 in loan repayments,, so that 100k minimum income before you even put food on the table etc.

 

Very scary when you look at that way.

 

 

Most people upgrading to a 1.3 million house bought a joint for 200-300 10 years ago+ and just sold it for 850-950 or more.

 

All housing in Sydney is unaffordable on one income. Has been for, oh, 20 years or more. Twice the average income is something like 120,000 isn't it?

 

A lot of the price pressure in our area is out of area buyers (Eastern Suburbs) who can buy 3-5 beds 2 baths with a yard and outdoor entertaining area for the same price as a unit close to the CBD. They may have had 2 properties as a couple or just held one for 10 years and have plenty of equity.

Edited by Parkside

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Yeah, few people I know down graded to the shire from the eastern suburbs. Couldn't cope with being out in the sticks so have moved back. A lot more bang for the buck but travel kills when not use to it or you know you don't have to do it.

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Bought another 3 hours today. Bargain for one. Other 2 fair price.

 

Certainly not falling yet.

 

And 4% up on last year same weekend.

 

An auction clearance rate of 74% was recorded this weekend compared to 76% last weekend and 70% this weekend last year.

There were 1018 auctions reported to the REIV today, with 754 selling and 264 being passed in, 138 of those on a vendor bid.

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Hang on so they are predicting that in 11 months time the price of housing will fall 7.5%


So a few questions on that.


1. IF they are wrong will they walk away from their careers admitting they don't know shit?

2. What will be the increase between now and then. Will my suburb go up 7.5%? So basically I will be at the same price point now as I will be then?

3. Where will prices fall 7.5% QLD Perth NSW Vic Everywhere or just the markets outside of Sydney and Melbourne? Derr fred. We know that now.

4. Population growth is going backwards? But population is still increasing. It just won't be at the current rate. So demand is still there.

5. CBA will never go broke. The Government will bail them out and the Comm Bank and ANZ NAB all know it.

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1. IF they are wrong will they walk away from their careers admitting they don't know shit?

 

There's a lot of experts in many fields that could be aimed at...

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I still think the increasing % has to stall but we aren't going to see a crash in housing like the states in the next 6 weeks.

 

Anyway lets revisit this article at the end of October. ie in 6 weeks.

 

I also think the Telegraph and the HeraldSun are shit papers with reporters that just copy articles from other sources and don't actually go out and do their own reporting unless it's about league or afl.

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Only if interest rates go up.

 

Our area has gone up about 30% in the last 12 months. We bought our place 18 months ago and there's no way I could afford it now. Place down the road bought for $720 sold 12 months later at Auction for $910 with no work done.

but your area has gone up 'cause you moved there pal. People are doing location shots with #CerveloRog in the foreground and Manly beach in the background ;)

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Debt free for the first time in 30yrs, negative gear free, cashed up, noticed the Unisuper fund is returning 16.5% :shock: and can't wait for those 17% interest rates.....that way we'll be able to afford the deposit on a catbox in Sydney for our girls :shocking:

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You have to also remember that there are about 10 different area's for real estate in our country.

 

Sydney and Melbourne is having crazy growth still. But the average wages in those areas is higher than in perth, adel, darwin etc....

 

So whilst we might see a slowing or correction in some citys and locations, we won;t see them in others for some time yet.

 

I do agree that people have massive debt but I am seeing in the Melbourne Market less and less properties for sale hence higher prices but more and more doing renovations.

 

In my street alone over the weekend there were 7 Waste bins removing home demo. This is in a normal 1 block long stretch. In my suburb over the weekend there was only 1 house for sale. 12 months ago that would have been 5-6.

 

Whilst they talk correction, I don't see the prices falling at all but maybe just slowing or leveling out. ie house worth 1.1 today and in 12 months time it's still worth 1.1mill.

 

BUT

 

in the country I see it differently. Less jobs. loss of jobs. houses will fall there. If and when a correction occurs.

 

Even in America when everything went to shit, NYC prices didn't fall at all. they just stalled but are back booming now. Same in San Fan.

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People are still building stupidly big houses. The people across the road from us built 600sqm, and have no intention of kids. Next door to them are building over 800sqm and have 1 kid. This is another reason prices and debt are increasing.

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in the country I see it differently. Less jobs. loss of jobs. houses will fall there. If and when a correction occurs.

 

 

Depends, I'm making the move to the country end of the year as I can do my job mostly remotely and with NBN already up and working in the area I'm moving to it's a no brainer. My wife also has plenty of job opportunities as well (Age Care Nurse). If the market remains level until then, we're looking at buying 5+ acres with bigger house (due to likelihood in next 5 years of having one or two parents move in with us) and reducing mortgage to nothing higher than five figures after including moving costs. Once mortgage is gone, or if an opportunity presents itself, I'll be taking on a local job and avoiding all of the commute. (We are still debating whether to keep the house we have (which would be positive cash flow at current rental prices and mortgage) or to sell and go the mortgage free route, but leaning towards mortgage free.)

 

Think more people are going to realise better lifestyle opportunities in regional areas with less mortgage so we could see a decentralisation of the population over the next 10 - 20 years. Prices may level out, however $1M+ mortgages (and rates that go with those values) are not sustainable and proximity to traditional office jobs is the only thing keeping people in them. Sooner govts wake up to this and get working on policies to promote it, the better off we all will be.

 

The first corrections already occuring are in the overpriced areas where the mining boom has left town leaving a glut of investment properties that people paid way to much for. Apartments in inner cities will be next in my view looking at the deposits required to purchase now

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