10 March 2011

Can our leaders save the property market again?

In my last post, "The crash has begun", I posed the question to myself:

"If the government and RBA managed to save us from a crash in 2008, what’s to say they can’t do it again?"

Well that question assumes that the government and RBA did save us from a house-price crash.  I don't believe they did.  So in fact it was a trick question ... to myself.  But I didn't fall for it.

As previously mentioned, the “bull trap” and “return to normal” phase usually follows the first dip, so the only credit (blame) I give to the government is for amplifying the false rebound and delaying (not avoiding) the inevitable crash.

However, even if you believe that the government and RBA prevented the crash last time round, there are few reasons why it won’t work a second time:

Boost the First Home Owner Grant
The boost to the First Home Owner Grant encouraged a record 190,000 first-home owners to take the property plunge in 2009, before they otherwise would (or could) have. If those buyers were required to save a decent deposit themselves, their purchase may have been delayed by several years.  So even if the government re-introduced the bribes, not nearly enough time has passed to accumulate enough new potential first-home owners to prop the market up again.

In addition, as I explained in "Will property prices plateau?" house prices cannot simply flat line after a boom. So to avoid a crash, prices need to keep rising.  A one-off boost to the grant can only boost house prices by so much (specifically by the grant amount plus leverage).  Therefore, if relying on government stimulus to achieve house price rises beyond this, the First Home Owner Grant would need to be continually increased.

Boosting the grant was always bad policy - it encouraged the most financially vulnerable section of the community to enter the property market at the top of the biggest asset boom in Australia's history.  Even the government would be clever enough to realise they cannot continue to increase the amount of handouts indefinitely.

Slash interest rates
The RBA could slash official interest rates again in an attempt to encourage people to borrow. Granted people have short memories, but they are not that short. Many will remember that not too long after interest rates were slashed, that they were pushed up again (plus a few bonus increases from the banks). Therefore, people will be acutely aware of the risk that any cuts could be short-lived.

However, even if rates were to stay low, as we’ve seen in America and Japan, nearly 0% official interest rates does little to draw buyers out of the woodwork while prices are plummeting.

Turn sentiment around
Markets are driven by sentiment. Last time the Government and RBA acted, they did so pre-emptively – thanks to the GFC.  They "stimulated" us before any real downturn in sentiment had even kicked in. But it is rare for such an obvious warning bell to be given. And so when sentiment turns south during the upcoming “fear” and “capitulation” phases, by the time our government realises it, just like all governments around the world, they will be powerless to stop it. 

The realisation that it is not different here, and that house prices do not always go up, will be a shock to many Australians. Potential home owners will have to re-evaluate the assumptions that go into the rent vs. buy decision. Negatively geared investors will re-evaluate the logic behind buying a loss-making investment.  When greed turns to fear, no amount of government bribes, stimulus payments or offers of cheap and easy money will be able to convince people to board the Titanic.

Comments welcome.



  1. Andy, you say... "house prices cannot simply flat line after a boom. So to avoid a crash, prices need to keep rising".

    The last house price boom in Sydney ended in 2003. Prices then dropped by about 5-10%, and then flatlined for about five years. There was no crash.

    At a national level, the house price to income ratio has flatlined for the past 8 years or so.

    Cheers, Shadow.

  2. Hi Shadow, this might be a technicality, but I think what might have felt like a flat lining of prices in Sydney was actually small rises and falls in the battle of bulls vs. bears. Eventually, the bulls won and the boom continued - see graph

    At a national level, you refer to house price to income ratio flat lining. I was referring to house prices. But even if we look at the ratio, I don’t see a flat line in sight - see graph


  3. Slashing interest rates is not an option. The Australian economy cant sustain the ultra high level of debt needed to maintain the ultra high house prices. So banks have to go to overseas investors to source funding for this debt. These overseas investors require higher and higher interest for their investment as their perception of risky investment increases (And in competition with other less risky higher interest investment opportunities). The RBA can do all it wants, but interest rates HAVE to go up and up and up. Lets see what happens to house prices then...

  4. Nothing is so black and white, especially the housing market in Australia.

    I would proffer that Australian's ARE different. The level of loyalty to the "Australian Dream" is much more intense than any other country on earth. "You can have my property for a bargain price over my dead body". Australians will work themselves to death, rather than lose their house. Look at our foreclosure rates - still amongst the lowest anywhere. Don't underestimate this, it's probably the largest contributor to property market economics.

    Additionally, just go back a decade, when buying a property was only marginally more expensive than renting. This didn't stop people from buying property. Nobody was waiting for gains or falls - people just bought when their personal circumstances, and will to own, met.

    My prediction would be, at the rate rents are increasing, it will only take a few more years of flat, or slightly negative growth, to put the Australian property market where it was a decade or so ago.

    Many properties are yielding 6% - in every capital city in Australia. Older units in "trendy" inner city locations are prime for this sort of yield. Cut to a few years down the track, the same properties, with say, a 10% fall in the market, are suddenly yielding 8%. 2 years after that, and with ever more rent increases, the owners are now receiving 9 or even 10% on their initial investment.

    After just a 10% drop, the general public are fearful, and not buying. The smart money moves back in, and the cycle begins again.

    For those expecting a 20% drop in property, I must tell you - do the maths. As a youngish, self made millionaire, who is neither bullish nor bearish on Australian property, the numbers are just too good to be true.

    Combine these numbers, with the rabid, tenacious, even pathological need for Australian's to own their own roof over their head - and you really are dreaming if you expect any kind of significant decline.

    But deep down, you guys all know this.

    My tip : it makes no sense to be analytical about this, when 99.9% of market entrants are simply doing it for completely emotional, and non analytical, reasons.

    There is nothing on the horizon that will precipitate large falls, nor gains, in Australian property prices.

    Nothing to see hear, move along people.


  5. Anonymous said..."Nothing to see here, move along people". That's the kind of statement a person makes when they don't want people to see something. I would guess that Anonymous is a spruiker. He gives no facts and makes a whole lot of wide speculation.
    What I'd like to know is how Anonymous thinks that people can afford higher rents and mortgages when people are barely affording it now. Why does he think retail is doing so badly in the middle of a boom?

  6. I think Anonymous, besides the clear indicators of having a vested interest, is over estimating the "Australian Dream" factor. I'm from Ireland myself, where centuries of British occupation and people being forced off their land left a deeply ingrained craving for property ownership in the national psyche. The info is 8 years out of date but take a look at this chart listing the rate of home ownership by country:
    Everyone likes to believe they are different, and I remember this argument being touted in Ireland before the bubble burst, but the reality is that Australians are NOT different in this regard.
    Unlike property prices which are distorted by government manipulation and oversupply of cheap credit, rents are determined by the MARKET and limited by actual income rather than debt, interest rates and government middle class welfare. Landlords/Investors do not discount rents out of the goodness of their heart because negative gearing allows them to. They price according to what the market will tolerate. If rents take a hike, expect lots of current renters to move back in with mum and dad or into shared rental.

    Speaking as an immigrant (supposedly the folks who are expected to keep pushing up the demand side of the market) with plenty of savings and a good income the last thing I would do would be to waste it on a ridiculously overpriced property. Not having been brainwashed by years of MSM and agent spruiking, it's plain to see what a joke the current property market in this country is.

  7. I think anonymous spruiker just described a bubble, the bubble mentality and the fact that those in the middle of one can't see it for what it is.

    What's that I hear in the distance. In Europe, America, the Middle East? The sound of social, political and economic unrest, for ages to come. But hey ,Australia is different, it has kangaroos!

  8. Australians love their houses more than people in other countries! How often do we need to hear this bullshit?!

    Also, rents cannot and do not consistenly grow more than incomes do. House prices have grown by more than incomes, but that's due to increased leverage. Renters don't and won't borrow the money needed to rent. But there is a limit to how much people will indebt themselves to buy a property. We may be at that limit already.

  9. Andy, sure Sydney prices moved up and down slightly between 2003 and 2008 (obviously prices don't remain absolutely static). But by 2008, prices in Sydney were pretty much back where they were in 2003. It was an example of prices plateauing for five years, without crashing.

    The chart you posted is for Melbourne. At a national level, the house price to income ratio has been steady for the past seven years. When I say 'steady' I don't mean absolutely static with no change at all - I mean the changes were minor and resulted in no substantial change at by end of the period. Refer to my charts linked below...

    The Economist - Australian House Price Charts

    Note the 'House Price vs Income 1987-2008' chart. Note the flat bit at the end - virtually no change in the national house price to income ratio since 2003. You can pull the same data yourself from The Economist interactive house price tool, and there are several RBA charts showing the same thing.

    When talking about house price growth, you really need to refer to it in the context of income growth, CPI growth, rent growth etc. Simply saying that house prices doubled doesn't mean much if incomes also doubled, for example.


  10. Oh you idiots.

    Can't see the trees for the forest.

    Think about it logically.

    You guys are exactly like the people who wouldn't buy shares at the bottom, two years ago. The amount of my friends I tried to tell "buy now, it's the opportunity of a lifetime!".

    In any case - be LOGICAL.


    PS - It's not black and white. Not anyone who is completely 100% bearish is a spruiker. Not anything that explains why the market hasn't significantly dropped is "bullshit".

    You guys know the truth, you can feel it.

    We're different here.

    The lucky country.

  11. Realistic is the adjective of cynics. Wherever you encounter skeptics, naysayers, and charlatans, you will always encounter this word.

    I'm not saying it's a bad word, that there's no logic to it, or that it's completely irrelevant. I'm just saying... who cares whether something is realistic or not? You might as well leave this word to the cynics -- let them have it. Let them own it. It won't do you any good anyway.

    Realistic is used to do two things simultaneously: one, to criticize. Two, to justify.

    First, the criticism. The message is: Who are you to think you could possibly follow a dream? How silly of you. Underneath this criticism lies the cynic's justification of his own self-righteousness. To be around someone intent on following a path regardless of whether it is realistic or not can be deeply unsettling. Therefore, the experienced cynic will seek to deploy the shield of realistic to ensure he or she is not further troubled.

    Second, the justification. The message is: My way is superior, no one could live like that, we can't all do what we want all the time, blah blah blah.

    But let there be no mistake: language is powerful. The words you use matter, so be deliberate. In one of his many recent TV interviews, someone asked Charlie Sheen if he wasn't being a bit grandiose. His response:
    "Of course I'm grandiose. I have a grandiose life and I'm embracing it. It doesn't fit into their model, and their model sucks."
    Now, say what you will about Charlie Sheen -- but that's not the point. The point is that you too can live a grandiose life. Hopefully your version of this life involves more than hookers and cocaine, but what he says is true. Their model sucks! You'll never really fit in.


    Look around you at the world. Look at what troubles you. Look at what is not right. You could look at these things and reflect, as many people do: "It is what it is." This is a popular expression among cynics, along with "Welcome to the Real World."

    Or you could reflect: "Hmmm. What could be done to change this?" Summoning the courage to answer this question is what separates you from the cynics.

    How about when you succeed -- then what? Alas, in the eyes of cynics, success is a hard sell. They'll say you're the exception, or that you didn't follow the right rules to achieve the success. They'll find a reason why your success is an outlier, and therefore not applicable to their model. But that's OK, because their model sucks.

    This is why you must not work for the approval of cynics; you must have a higher motivation that is yours alone. You must work for what is noble and right, and for what is true to your own self.

    Because you, not being a cynic or a naysayer or a charlatan, have already tipped the odds in your favor simply by daring to believe in something. You'll get your way in the end, and then people will say... "That's nice, but it's just not realistic."

    Then you'll continue to live your unrealistic, grandiose life.

  12. drum - the expression is:

    Can't see the forest for the trees.

    Most will see a perverted irony in the fact that you got that backwards, given the context.

  13. The Mainlander @ 8:24 PM – thanks for the feedback.

  14. Shadow @ 11:19 AM - good pick up, I didn’t notice that chart was just of Melbourne (even though it said so in the heading).

    At the risk of starting a graph showdown, what do you make of this one? It’s a bit old, but shows house prices dramatically escaping construction costs, household income and rents – click here

  15. Anonymous @ 11:53 AM – I can’t work out why you are complaining about people using the word “realistic”. You are the only one to have used this word in this post??

  16. The crash has already started. look at the no of listings all over sydney.

  17. Andy, yes, as your chart shows, there was a national boom that ended in 2003. National prices have generally plateaued since then in real terms or income adjusted terms. That's if you look at the national level. If we look at the State level, obviously some cities boomed after 2003, while other such as Sydney declined in real terms. Sydney fell approximately 20% in inflation adjusted terms between 2003 and 2008, more than 20% when adjusted for income, and even more again when adjusted for disposable household income.

  18. Ryan - thats the point. A little difficult to comprehend, I know.

  19. Lots of predictions of falling / plateau / continued rising prices. What I'm not seeing a lot of is predictions of HOW FAR things will fall, and HOW LONG this cycle / recovery is likely to take (and of course EVIDENCE supporting the percentages/amounts listed).

    Does anyone have any decent evidence to predict how much prices are likely to fall (or perhaps a range with a confidence level, if you want to get really statistical)?

  20. Shadow @ 2:24 – you said National prices have plateaued since 2003 in real terms. Are you serious?

    This graph shows national house prices - in real terms - soaring! See graph

  21. Anonymous Drum

    I think you're the one who is dreaming!

  22. Drum/PF - you're an utter ahole!!

  23. Shadow - you're clearly delusional and your blog is an absolute joke ...

  24. David.
    All asset classes - including property - cycle between periods of over valuation and period of undervaluation.
    We have now entered a period of the property cycle where vslues are decreasing. This will continue for years into the future.

  25. Andy - sorry, I meant in income adjusted terms.

    JB - why do so many bears resort to personal abuse when they lose the argument?

  26. Has the wait been worth it?11/3/11 9:06 PM

    Time will tell.

  27. 'Has the wait been worth it' - your name is longer than your comment.

  28. Shadow, what's your point? Are you saying that we haven't even had a property boom in Australia? Or that we have had one, but it will be never-ending? Or something different?

  29. There is no property bubble here in Australia... If you do think there is one, you mustnt know what a bubble is. The last few major economic bubbles with devastating effects I can recall would include:
    US Credit bubble 06/07
    Internet stock bubble 98/99
    Stock market bubble 1987
    Irrational exuberance were the main causes of these bubbles followed by a POP! The Australian Property market or its drivers doesnt even come close to any of these.
    Dont kid yourselves people... If you miss the dip once the next 2 - 3 interest rate rises kick in, you'll be forced to buy high or have to wait several more years for the next entry point. Goodluck.

  30. Andy, we've had lots of booms over the past 60 years or so. Different cities boom at different times. Sydney's last boom ended in 2003. Then Perth had a big one. Melbourne had one last year. Booms don't last forever, but prices don't tend to crash in Australia after our booms. Prices tend to dip slightly and then plateau for a while until wages catch up a bit. Then prices start rising again. You say in your blog... "house prices cannot simply flat line after a boom. So to avoid a crash, prices need to keep rising". But that's not what tends to happen here. We've had lots of booms over the years, but not very many crashes. House prices can and frequently do boom without crashing afterwards.

  31. Common Sense12/3/11 10:08 PM

    If only everyone hold their bullets for one month and let the market speaks for itself.
    Price is sliding for now and its understandable for bulls to panic. These day so call bulls are only on the surface. Bulls are trying to sell their hot-rods in the day and busy spruiking at night.
    As a bear read their post and laugh at last.
    As a bull - keep posting. Finding no way out from your debt I know you can't sleep at night.

  32. The premise that if house prices drop a bit it will be seen as a buying opportunity is confusing cause and effect. Property prices drop because no-one is buying at the original price, and that is largely because no-one can handle the debt required to buy at the current price.

    When prices drop further, affordability actually drops and no-one gets back into the market. This is because a substantial drop in prices leaves the banks with a whole lot of negative equity, they demand higher deposits as sureity against further drops. Lending stops, so no-one buys. Which, of course, causes prices to drop further.

    That is before you get the effect of lending on credit cards, for business and as a draw-down against increasing property valuations reduces the amount of overall demand in the economy. Retail suffers, tax revenues shrink, jobs are lost. And so all those dreamers who would't sell their properties for less than 'full' value suddenly have no choice - and they sell. Which drops prices further.

    Rents will not save the day. I frankly disbelieve anyone getting 6% on a property. I know the rental market of Canberra backwards, and no one is even asking more than 3-4% let alone getting it.

    But more to the point, increasing rents beyond peoples cash income leads to homelessness not increased payments to landlords. You can't borrow money for rent so, unlike prices, it is constrained by actual earnings. They are not going up and so neither are rents. The rate of significant increases in rents actually paid - as opposed to those asked for vacant properties - is pretty flat.

    The fundemental problem with the bull argument is that they believe that people can pay increasing prices without any increase in access to money. This is not illogical so much as self-evidently impossible. So the question the bulls have to answer is 'where is the money coming from?'. To which the answer just seems to be "Australians want houses more than anyone else so the money will just appear". That is just wishful thinking.

  33. Altakoi, a small amount of research, and you will find many older (50's/60's) one bedroom units selling for 250k, renting out for 300 per week. Maybe not in Canberra.

    That's a 6% gross yield. If you don't believe that, it shows what little knowledge you have of the property market.

    This has nothing to do with being a bull or a bear. Anyone making an opinion either way, should know the facts.

    There are many areas in Australia where opportunities, today, where 10% yields are being achieved.

    The rest of your post is equally as flawed.

  34. Where are 10% yields being achieved Anonymouse (13/3/11 3:57 AM) ? I would love to know.

  35. Shadow

    Apologies - i should not have made it personal.
    However, i find it immensely frustrating that your arguments are so blantantly false and infantile in many respects.
    Anybody with even some remnant of intelligence can see your arguments to be pure bullsh1t!

  36. Oh come on, Anonymous. Clearly any statement about returns must reflect the general state of the market not a few exceptional picks you might be able to find. According to the tax receipts, 70% of investors are actually claiming a loss. So either they are all committing tax fraud, or they are not making any positive return at all.

    As for "the rest of your post is equally flawed". You should blush! I mean at least try to have an argument rather than a 'tude.

    But thats the whole point about the bull position on property isn't it? Its all attitude, no substance.

    As for what I actually said; its not mine, its just my lay understanding of what a few reputable economists have said. The "money will appear forever" school of economics has few expert proponents left - they mostly lived in the US, the UK, Ireland, Spain, Portugal, Greece or places where this proposition has failed to influence reality.

  37. Anonymous
    thanks for the advice but no thanks - i think i'll take my chances!
    You really are comical with your view that Australian property is not in a bubble.
    Its probably one of the finest examples of a bubble anywhere that has been created soley through government manipulation/theft via tax incentives, artificial supply strangulation, and of course the unsustainable credit bubble created by Australia's mortgage insane banks.

    Well unfortunately for the banks and for short sighted people like Shadow and Anonsensemous, the requirement to sustain this textbook bubble of having credit continue to grow is mathematically impossible.
    why - because the average earnings per household is already maxed out. Despite what Shadow might believe, two wage earners per household is already unsustainable for reasons very basic to human nature. Yet you believe that we could sustain these stupid prices by simply increasing the number of wage earners per household to 3, 4, 5 ... up to infinity.
    This is utter cr@p because humans were designed to live in a family unit comprising ONE breadwinner... and for short periods of time two breadwinners, but this is not sustainable over the mortgage period of 30 years.

    Tbis is all common sense - the credit growth which has fuelled the housing bubble has reached a ceiling - there is nowhere to go but DOWN!!

    But common sense is something sorely lacking in housing permabulls. Shadow and Anonsemous epitimise this fact ....

  38. Altakoi

    Well done mate! you have stated very eloquently that which i and others here KNOW to be true but find difficult to express so eloquently as yourself.

    The logic is there - unlike the complete lack of logic (BS) uttered by Shadow and Anonsensemous...

  39. When the big falls come, the investors will be running for the hills, exacerbating the downturn. People will be losing their jobs, not looking for a buying opportunity.

    The private debt will go onto the public balance sheet. The banks with their huge residential loan book will need to be bailed out. Grants, etc. will be politically untenable, as well as stamp duty cuts. Interest rate cuts are impossible because of overseas funds, not to mention the complete lack of merit for current inflation metrics. Even if interest rates haven't gone up in the last few months, people still have less money to spend.

    The bear market will not last forever, but it is going to roar. It has paid off to be a bull in Australian property, but the smart bulls are getting out of the market.

    All that's left are pigs.

  40. ahhhhhh!!!!13/3/11 12:10 PM

    Any person that wants the prices of an essential item for living to rise is an absolute scumbag. Next time fuel, grocery, energy, etc, prices rise you should also be celebrating how good these higher prices are and how good it is for the community. If you don't you're just a hypocritical prick.

    I don't care what charts and figures either side comes up with, it's the people on the street that matter and in my circle (Gen Y) none of them want to buy a house at this time. In fact the only people my age that I know who have bought a house, bought during the FHB boost, and of my 30 or so Gen Y friends only 2 of them took this offer.

    So screw you, you pro higher living cost bastards, no ones buying.

  41. Common Sense13/3/11 12:17 PM

    It was about two years ago when I started to come across ordinary people who call themselves a developer. When I say ordinary I mean people who look illiterate, unfit (fat), unshaven and shaggy.
    Common sense should trigger the alarm.
    Only ordinary people fail to cut and run.
    Their life about to be destroy by their own greed. Price to pay when fail to use some common sense.
    Once destroy the world will be back to normal again, house will be meant for living and not for flipping again.
    To those who face destruction we call this:

    Game over!

  42. Have to laugh at the cherry picking by the bulls on here. For their information, it is SENTIMENT that will kill this fools market, and all the bulls..t statistical arguments will not matter and certainly won't save you. Too higher prices driven by cheap easy money, too much debt, too much greed, all depending on fools being convinced to pay more and more for the same pile of bricks. The bulls ought to have a think about the 1987-1991 boom bust cycle and what happened in the 1980's. Just because you were too young to experience it doesn't mean that it has no relevance to you. You are deluded to think this market will continue to rise forever. You are doing nothing more than falling into the same trap that others did in the 1980's and 1990's. When people think that prices might fall, GUESS WHAT? THEY STOP BUYING AND POP GOES THE BUBBLE. BEWARE OF THE GROWING NEGATIVE SENTIMENT!

  43. Shadow, you said after a boom, "prices tend to dip slightly" and then "plateau". Don't think so. I think you are refering to your living memory of this boom only. Sounds to me you were not around buying property in the "80's and "90's. In 1987 a boom started affectively doubling house prices by late 1988 early 1990. By 1991, they had come bach approx. 25%. Houses remained hard to sell until 1997. You refer to the last boom in Sydney ending in 2003. No. This present boom started in 1997-98 and despite a few starts and stalls has continued on its merry way until now. Your analysis tends to suggest this "1997 to the present" period contains a number of booms and plateaus. Sorry, this is a complete fallacy. Prices have TRIPLED since 1997. Too much greed, too much debt. Beware the big correction, it is coming to a town near you.

  44. JB - You are a complete and utter moron!

  45. JB talks about "maths", but is scared to admit that prices modestly gaining for the foreseeable future, are more than mathematically possible - the gains are incredibly predictable.

    It's awesome when chumps like JB think a bit of talk on a shitty little blog will derail the property market.

    Keep renting buddy, I have a house for you, sucker!!!

    (or save your money, and let the government take 25 - 40% of the interest in tax haha and then inflation will eat away the rest)

    (or maybe the stock market - no he's too scared for that)

    (or maybe Gold - nah that's gotta be a bubble)

    Keep suckin your thumb at mums house JB.

  46. Hi Fred,

    Here's a chart of Sydney house prices since 1979...

    Sydney House Prices 1979-2011

    Can you point out the 25% fall... I can't see it. Or can you point us to some alternative data showing this big 25% fall?



  47. Fred Bear - Shadow is mainly referring to the Sydney market, which did stall in 2003, and it plateaud for some years.

    We have always had booms and busts in real estate, and that cycle will continue, but the trend upward won't alter.

    Have a look at Nigel Stapletons work, and take note of the last 60 years. lots of stutters, but there is no denying the trend.

  48. Anonymous / alias Peter Fraser

    If ever there's a chump around here then its definately you.

    You have your argument @arse about face as per usual. I think what you meant to say is that it's chunmps like you posting bullsh1t on blogs all over that will make abosulately szero nought nudder nothing f..all difference to the collapse of Australian property that has already begun...

    aah - i love it!!
    VIVA bubble prick VIVA!!
    and may the property bulls/pricks enjoy the downward spircal lol

  49. JB - I am not anonymous. I have never posted anywhere as anonymous.

    The paranoia at MMR has rubbed off on you.


    I see that they couldn't be bothered answering your question.

    I'll give you a different link today, it may raise your spirits a little.

  50. JB - did you sell your house?

  51. Hi JB, you seem angry, what does "abosulately szero nought nudder nothing f..all" actually mean?

  52. Peter Fraser14/3/11 10:09 AM

    Shadow - JB belongs to this group of pseudo intellectuals.


    It is high comedy.

  53. Shadow
    You're seeing it all around you at this very moment - property prices dropping everywhere without respite, and ignoramuses like yourself posting infantile BS to the contrary is having no effect whatsoever in stalling the carnage ...

  54. Shadow, That chart runs over a 22 year period and extends about 8 centimetres, hence the scale is so small that any impediments are likely to be flattened out or simply not shown. If you want that sort of argument to be in any way credible go and find a chart that is scaled like the one next to it that relates to the period 1988 to 1992. Also, there is no doubt that graph has been "seasonally adjusted" "rounded up" "adjusted for out of line sales" and every other form of fiddling designed to paint a rosy picture.

    Anyway, you have confirmed, by producing this graph instead of expressing your experience from this era, that you were not around buying and selling in that 1988-91 period. I was selling houses at that stage IN SYDNEY. I can inform you with much certaintly that prices did fall around 25%. We were selling 3br brick houses in Dundas for around $200,000 to $210,000 in 1989. By 1991 asking price on average for the same home was $159,950 and selling for around $150,000 if you could find someone game enough to buy. I lived it, and I don't need silly graphs to tell me I didn't. I saw plenty of young couples in negative equity territory, and certainly didn't ever want to see it again.

    Anyhow, sure enough, due to greed, easy money at cheap interest rates, goverment handouts, media hype and get rich quick "property investment systems spruikers" etc, we indeed have the same situation again. Simply should not have been allowed to happen.

    Sorry to say, it feels much the same now as 1991, people are uncertain about the future and are showing a new reluctance to buy at these prices amid concerns of a housing bubble.

    And that is my point Peter Fraser. I am not talking about trends over 60 years, I am talking about NOW. NOW is were this discussion is relevant, NOW is were there are a lot of people worried about a housing bubble and NOW is were we have a stack of people vulnrable to the bursting of this bubble.

    Congatulations, Peter Fraser, if you are able to hold what you have throughout a period of rising interest rates and falling asset values, then your 60 year scenario carries. I'm am afraid, however that won't be the case for many.

  55. JB - I see that Nick still thinks I am Drew, and all of the authorities are following our conversations on this blog and elswhere.

    refer post 8 by Nick - http://groups.google.com/group/money-morning-refugees/browse_thread/thread/7fb3f4b57ada954d

    Now do you understand what a complete fruitcake he is, and you hang on his every word. Mate you have been duped by a complete lunatic. He should be locked up for his own safety.

    Get out while you still can....

  56. Housing prices are up 40% in my suburb, since last year.

    Data is freely available, look it up yourselves.

    In any case, I know JB from many forums.

    Thinks he can determine alter the course of history on a blog. He has sold his house, and is now thinking there will be a drop, so he can stop te dead money leaving his pockets.

    Suck shit JB!Your money in the bank? Taxed! Need to buy again? More tax on stamp duty!

    You got it wrong buddy! haha

    You can't beat just living a simple life, putting your own roof, over your own head.

  57. Wow - JB sold his house at the bottom of the market on the Gold Coast and put all his chips on Silver.

    Really scary stuff. Surely not...

  58. lol Aholeanonymous and PF!!
    thanks for the great belly laugh ...
    If you think this is the bottom of the market then i'm afraid you're going to be sadly disappointed. You aint seen nothing yet

  59. JB - so you didn't sell and roll the dice on Silver, that's a relief.

    Best of luck..

  60. i couldn't sell simply because the market is that bad!

    And it's getting worse week after week...
    This is a sign of things to come for the rest of the country as well.

    Pretty soon the only people who will manage to sell their homes are those who are willing to accept massive price drops on what they thought their houses were worth.

    As in prices are now approaching levels they were in 2007 and will be going backwards from there on.

  61. Peter Fraser14/3/11 3:35 PM

    JB - yes the Gold Coast has been hit really hard, and they have a massive oversupply of units, and that affects every type of home.

    I think that the Gold Coast will drop more, but is close to the bottom. The recovery will take years. Sorry about that, but I can't sugar coat it.

    I truly hope your silver venture works out for you.

  62. JB, you're a classic "big hat no cattle".

    This blog is for kids.

  63. SafetyBear14/3/11 4:50 PM

    And Anonymous, you're a classic "Troll" pal.

    The writing is on the wall for housing in this country for the same reasons as the USA, Ireland, Japan and many, many others. People got suckered into believing that an asset gains in value above the rate of wage increases forever. This has been allowed to make fools of people here in Australia who have no first hand experience of a real recession and thus enjoy the sunshine and icing sugar being pumped up their ignorant arses by a compliant media and Real Estate sector.

    You probably think buying a few years ago and having equity makes you a genius. Equity just makes you a greater fool waiting to happen.

    You did remember to get out, didn't you?

  64. "At a national level, the house price to income ratio has flatlined for the past 8 years or so."

    Shadow, thats absolute crock and you know it. Show us the figures if you can be bothered to fudge some up.

  65. Great to see some hearty debate on this “shitty little blog” as Anonymous describes it (that isn’t you is it mum??).

    Anyway, let’s all try to keep it civil from now and avoid any personal attacks.


  66. Shadow, Fred Bear is absolutely correct about house prices falling by at least 25% in the early 90s after a huge boom (nowhere near as big as the present boom) in the late 80s. In the more expensive suburbs of Melbourne prices halved in the early 90s from what they had been in the late 80s. The reason it doesn't show up on the graph, is that overall, and especially in the cheaper areas, prices hardly moved.

  67. Common Sense14/3/11 6:40 PM

    'You got it wrong buddy! haha'

    This is childish shit.

    You are not a teen in an adult blog.

  68. Nah... JB wouldnt have a property on the Gold Coast... He wishes... Stop lieing JB... He's the kind of guy that would have a WRX parked in mums driveway on the Gold Coast and thinks he's made a good investment... Oh he's angry... Very angry, thinking he deserved more, been more or had more in life... But he doesnt deserve more. He deserves what he's got...

    Suckin' his thumb at mums while softly crying himself to sleep... How pathetic...

  69. lol @ Anonymous

    No wonder your views on property are so moronic ... you're a complete and utter simpleton!

  70. Peter Fraser14/3/11 8:46 PM

    MD - I agree with you. There were recessioans in 1974, 1981, and 1991. in addition we would have had one in 2001 if the Fed and the Howard government hadn't stimulated the economy after twin towers terrorist strike Sept 11 2001. At the time that seemed quite logical, but in hindsight perhaps not that clever. delaying that natural correction, with the resources boom on top of it has made house prices more vunerable.

    Median prices are a strange animal, they do reflect changing house values, but they can also hide trends a little in the short term especially in upper end house values.

    Anonymous - JB does own a home on the Gold Coast. Right now house vaklues there are terrible, it is the worst hit area in Australia. In fact it has always been a risky area, with high volatility.

    That doesn't mean that JB's house value won't rise for him in the future, it has always come back before.

  71. Thanks PF - feels like you're sticking up for me!

    Feels kinda weird lol

  72. Peter Fraser14/3/11 11:39 PM

    JB - I don't wish harm on anyone, I just get upset by incorrect advice or information.

  73. Great! This is now just a blog about JB!

    Carry on kids.

  74. Aah come on Anomoly ... don't worry - come here - i've got a nice big lolly for you!

    In the meantime, go out and play and dont hurt yourself.

  75. Peter Fraser15/3/11 9:08 AM

    Golly - Shadow is absolutely correct as always. National median household incomes have kept pace with national median dwelling prices. That is not the 6 cities index, it is the national all dwellings index.

    But here is a thought for you, have house prices moved to keep up with incomes, or have incomes been elastic enough to keep up with house prices. Think about this carefully, have the indebted changed jobs, taken on more overtime, taken second jobs, wife gone back to work, sold goods at weekend markets, whatever, to ensure that families have sufficient income to meet commitments.

    AND - assuming that is the case - how did the economy satisfy that demand for additional employment.

    AND - If people were not looking for overtime or second jobs etc, would we have a lower unemployment level that the current 5% and how low would it really drop to.

    I'm not aware of any recent studies on this. Andy do you have any info?

  76. Hi Peter Fraser - Golly might be correct in saying that house prices to incomes have flatlined over the last 8 years. And I assume the implication is that house prices are therefore, not unusually high now. However, over the 8 years prior to that, the ratio almost doubled. Therefore, the conclusion I draw is that they have remained abnormally high for the last 8 years.

    You do raise some very interesting questions about cause and effect and the elasticity of income. And unfortunately, I don’t have any further info for you on this.

    However, I tend to think the relationship of house prices to rent (rather than house prices to wages) is more indicative of a bubble because ultimately, an asset should reflect the income that it produces.

    Your thoughts?

  77. Peter Fraser15/3/11 12:11 PM


    Golly was questioning whether incomes had remained constant to dwelling prices, it was shadow who made that assertion.

    It depends on what index you choose, and shadow is referring to the all dwellings national index, not the capital cities index where gains have been greater, so shadow is not wrong on that fact. People who argue with shadow usually make the mistake of not doing their homework.

    I'm also in agreement with Fred Bear - this does indeed feel like 1991, although in Qld we are well into that cycle, and I think we have arrived at the flattish part of the curve. On the Gold Coast luxury homes are selling at 50% of previous values, and even low end is selling 25% below previous values for astute buyers.

    Fred, you will also recall that late in the nineties the market rebounded with a boom, every cycle whether it be down or up, comes to an end. With a continuing resources boom, low unemployment, I think we will come out of a housing recession faster than in past instances. Due to our strong dollar we will still be expensive on an international comparison.

    But for the exact results we will all have to wait and watch.

  78. Peter Fraser - yes sorry, it was Shadow’s assertion I was questioning, not Golly’s. I concede he’s not technically wrong. But as I mentioned, I think he’s drawing the wrong conclusion from that fact.

    Regarding coming out of this housing recession faster than in previous instances, I’m much more pessimistic than you are. I think that the record size of the boom and record amount of debt means that the housing recession will spread to an economic recession and the scars will likely be deeper than we’ve ever experienced in Australia.

  79. The boom has a long way to go yet, we have only just begun boom part two.

  80. Jeff

    Glad to see you're no longer posting as 'Anonymous' ...

  81. Peter Fraser15/3/11 1:24 PM

    Andy - Jeff could be right, this could be nought but a hiccup in a supercycle for Australia. Large debts can be paid down by a country producing large trade surplus's and with a strong income.

    We are in a "Dutch Disease" cycle, but it could be worse.

  82. PF
    so are you saying you agree that the Australian property market may be at the foot of a massive bull run ahead as opposed to a massive downward correction?

  83. JB - I am not "anonymous", I am Jeff.

    My thought is that there is no strong impetus, either way, at the moment, for large gains nor corrections.

    Certainly not in the next 12 months. After that, well, anything could happen. Up, or down. Logic would tell us, it's up, up, and away.

    As for predictions - I doubt that anyone predicted last week that the Nikkei would be down 10% by Tuesday.

  84. To JB, Fred and the others who claim Sydney house prices fell 25%... where is your data? Can you link to some data proving this?

    I already linked to a chart showing that prices did not fall 25%. Some bears questioned the trustworthiness of that chart (typical response from bears... any data that doesn't suit the agenda must have been falsified), so here is another chart, this time from the RBA...

    RBA House Prices 1989-2010

    I suppose now you'll now claim the RBA data is also false? If so, then please provide some data of your own (real data, not anecdotes).



  85. Jeff
    What planet have you been on for the past couple of years??

    You say there are no indicators current as to what property will do? Really?

    Well you could have fooled me mate!

  86. Peter Fraser15/3/11 2:45 PM

    JB - what I am saying is that it is possible this could be a relatively short lived correction, followed by another bull run in housing.

    That can only occur if our wages increase, but almost everyone I talk to these days is earning over $100,000 pa so although it isn't my expectation, I can't rule it out. Wages have certainly jumped for many people.

  87. PF
    I believe the people who are earning in excess of $100K are a very small minority of the population.

    Even so, i'm earning close to that and certainly could not afford even a "median" priced house in Australia.

    I assume you dont believe then that the ratio of house prices : income is abnormal or unsustainable at present? On the contrary, you seem to believe that prices could soon recommence their skyward move...

    So our already out of touch ratios of property prices : income could in your opinion increase still further?

    It's currentluy around 9:1 so i'm guessing you believe that there's scope for that to move up further... perhaps to 15:1 or 20:1 ?

  88. PF
    I believe the people who are earning in excess of $100K are a very small minority of the population.

    Even so, i'm earning close to that and certainly could not afford even a "median" priced house in Australia.

    I assume you dont believe then that the ratio of house prices : income is abnormal or unsustainable at present? On the contrary, you seem to believe that prices could soon recommence their skyward move...

    So our already out of touch ratios of property prices : income could in your opinion increase still further?

    It's currentluy around 9:1 so i'm guessing you believe that there's scope for that to move up further... perhaps to 15:1 or 20:1 ?

  89. JB, of course someone on 100k can afford a median priced house in Australia.

    Don't be stupid. A median priced home, would cost less than $3000 per month to purchase. a 100k will give you close to $6500 per month in net income.

    Yes, it's not meant to be easy. A median priced Australian house, is, as all surveys consistently show, one of the best possible lifestyle's on the entire planet. You think people are going to give that up? haha You want to live at the top of the pile for the whole planet, but not pay the price? haha.

    Wage inflation is also a well known problem in Australia, expect incomes to rise quickly, and property prices to increase modestly. Rent's are also on the move.

  90. JB - there are no indicators showing a large median fall in the price of Australian property is coming.

  91. Anonymous

    You want some indicators?

    How about the ratio of median house price : median income in Australia?

    How about the rental return of property?
    Oh yes, that right - over 70% of Australian property investors are running at a loss, so there is NO RETURN ...

    ummm - how much more of an indicator would you like???

  92. Peter Fraser15/3/11 3:28 PM

    JB - the problem with your argument is that a lot of people are earning $100,000 or at least $70,000 plus a wifes income of about $55,000 so a median home in Brisbane at $450,000 is about 3.7 times income, or on the Gold Coast less than 3 times gross income.

    In fact you have confirmed that your own income is close to $100,000. Tax scales are far lower than they once were, interest rates are half of what they were, so in fact paying off a $380,000 home on a household income of $120,000 or more should be a breeze for someone savvy with their money.

    So your claims of a multiple of 9 just don't stack up. People who are earning less buy homes of a lesser value, so even with a breadwinner earning $60,000 and a second part time wage of $30,000 the multiple on a home costing $300,000 is just over 3, which is nowhere near the 9 that you claim.

    What you will find if you dig into peoples financial situations (which I do) is that many are overburdened with credit card debt, they buy the latest Iphone when it gets released, and they spend the rest of their money on crap. Even if we paid those people to take a free house they would lose it.

    I see people everyday on "average" incomes with great savings of $50,000 or more, whilst others on a similar income level have nothing. It isn't merely house prices that make a difference, it is lifestyle choices.

    Be honest with yourself, look at your expenditure and just see what can be eliminated or reduced. there is a lot more for people to spend their money on these days, with mobile phones, foxtel, restaurants, takeaway foods, luxury cars, jewellery, handbags and shoes. All of theses absorb much more of peoples income than they once did, but that is lifestyle choice, and people have the power to say "NO" but they don't.

  93. I do not believe any of those "indicators" will that cause the median property price in Australia to dramatically fall.

    There have been no significant levels of foreclosure, unlike in the USA, for example, where levels of foreclosure were significant *before* the median price drops.

    Wage inflation in Australia is a well known problem, so the ratio of price:income is getting lower.

    Please provide a source indicating that "70% of Australian property investors are running at a loss. More importantly, please show a source showing what the average loss is. Is the loss $1, or is it $50,000?

    Without accurate figures, how can you make a serious determination on this issue?

    I am open to this issue, are you?

  94. JB - your claim of not being able to afford a median priced house, when earning 100k per year, must mean that you have other financial issues. It is not evidence for this debate.

  95. Hmmm... I posted a link to an RBA chart a while ago showing there was no 25% crash in Sydney, but my comment seems to have vanished?

    Here's the chart again...


    Cheers, Shadow.

  96. I personally know somebody who earns less than 40k per year, who is a single father with two children, who purchased a property for $210k, at the peak of the GFC.

    He has retained it for more than three years so far, and apartments in the same building have been selling very recently for up to $280k (all apartments in this building are identical).

    The "affordability issue" is simply a myth. There is much evidence to show that people on low incomes can be home-owners.

    It's all about priorities.

  97. Peter Fraser15/3/11 3:43 PM

    Anonymous - I take it that you think the present market is a bear trap.

  98. Of course it is Peter.

    I fail to see any evidence or strong indicators for a "massive" drop in the median australian property price.

  99. Anonymous:

    Have a look at this:


  100. Peter Fraser15/3/11 4:00 PM

    Anonymous - we are seeing a correction in Qld, and especially on the Gold Coast where JB lives, so you can understand that affects our viewpoint.

    I concede that Sydney probably won't be as badly affected, although I still see a correction as being likely nationwide.

    It will be very area specific, with as much influence from local issues as national issues.

    The Gold Coast has about 5 years supply of new home units that will overhang on the residentail market there for some time - excellent buying at the moment on the GC.

    But that isn't the case in the Sydney inner city area.

  101. anonymous:

    I'm not sure why you might think i have "other" financial problems?
    I also dont understand why you people seem to think that the high mortgages are afffordable??

    I currently have a mortgage of around $330K - which is WAY BELOW what the average mug buying an average (cr@ppy) house in Australia would owe on his mortgage. Yet i feel i am already maxed out as far as affordability is concerned.

    Even now, my mortgage takes pretty close to half of my net earnings each month.

    The other half needs to pay for the rest:
    rates and taxes, water, electricity, petrol ,food, clothing, and all the other things required by any young family.

    I'm not sure why its such a surprise to some of you, but we do happen to live in one of the most expensive countries on earth as far as cost of living is concerned!
    I mean - where on earth would one pay $700 for car rego????
    that's right - right here in Queensland!

    So please, dont tell me that our sky high prices are affordable because they certainly are not.

    i dont have any credit card debt, or car debt - my only debt is my mortgage.
    yet the cost of living is so sky high here in Australia that i am only just coming out and that with an above average income and a below average sized mortgage.

  102. Peter Fraser15/3/11 4:07 PM

    JB - I'll let you into a little secret - one thing that all Australians do is cheat on their tax. Residential housing investors arrange their borrowings in such a way as to maximise their tax deductions, and on top of that every curtain or small expense for their own home gets written off as a deduction on their own home.

    So the reality is probably less tha 50%, and of that 50% many would be only marginally negative.

    So it is a misleading statistic, but it makes a great headline.

  103. Thankyou JB, for helping to prove the point.

    A small amount of maths if you will (all figures taken from YOUR source):

    Losses : 8,600,000,000 (8.6 billion)

    Landlords : 1,700,000 (1.7 million)

    Total loss per landlord : $5058.

    Assuming a very conservative average of about 30% tax deductability:

    Total loss = $3540, per landlord (or, $68 per week)

    Now, assuming the median house price of about $450k, a $3.5k loss is equal to about 0.7% of the investment capital.

    So, your evidence for "massive price correction" is based upon people making a $68 per week loss on a $450,000 investment? (on average).

    I fail to see how this will cause "massive price correction".

    A 10 - 15% increase in annual rental income would wipe out this loss, and turn the investment to being positively geared!

    Being ultra bearish - a two percent increase in the median house price ( less than the rate of inflation, or the rate of wage inflation) would provide twice the capital gain as the "trading" loss.

    Clearly, the evidence, as you provided, does not indicate a fall in property prices.

    Precisely the opposite, as the cycle continues.

  104. JB, if you are earning 100,000 per year, your net income would be close to 6.5k per month.

    A 330k mortgage could easily be negotiated to about $2200 per month. Leaving you close to $1000 per week to live on.

    This is more than affordable, that is the easy life.

    To live in one of the best locations, on earth, for that small level of commitment, is a great privilege.

  105. Peter Fraser15/3/11 4:21 PM

    Anonymous - we could reduce his tax by getting him an investment property.

    Why it would pay for itself......

  106. Anonymous

    there is that little thing in Australia called "super" which is currently 9% of one's gross income which is stolen by the ATO each and every month.

    Then on the remaining money, tax is deducted - more theft - and i get whats left - which amounts to a little over $5 000 net per month.

    My mortgage costs me nearly $2300 per month.
    Like i said, given the high cost of living - the remainder is not that much to live on, and i dont have huge amounts left over to save.

    thanks to further theft from the government in the form of other taxes as well as sky high cost of living.

    You can be sure that whether you're talking about cars, cell phones, electricity, banking, food, or just about anything else - here in Australia we pay the highest if not close to the highest for any and all goods and services anywhere in the western world!


    so let's get back down to earth and stop trying to kid ourselves that we're so wealthy. cos we aren't!

  107. Peter - i was going to suggest, with that level of disposable income, JB should really investigate purchasing another property, but didn't think he would respond very well...

  108. JB, you are not addressing the facts, you are using hyperbole and your personal situation (which seems to be changing post-to-post ...if you were earning close to 100k, you would be taking home almost $6500 per month)

    In any case, you need to look at, and address, the facts.

    Your ranting is not adding up to a compulsive argument.

    I am still waiting for an indicator of the impending massive australian median property price fall.

  109. JB, super is not "stolen".

    If you wish, you can set up your own super, and watch it grow yourself.

    Or, put it into a cash investment.

    You seem to have a great deal of personal financial difficulty, and this is clouding your judgment of the entire housing market, and financial world in general. I am sorry you are having a difficult time, living on an above average income.

    My suggestion is you look at things more objectively, and your own financial situation will improve.

  110. Anonymous

    I wont waste my time further because reasoning with you is like trying to reason with a donkey - and trying to convince you is not a priority of mine.

    If you believe Australian property is in good shape then that's your prerogative.

    I've already alluded to two world accepted pricing indicators for property
    1. price:income
    2. rental income: property costs

    Both are abysmal here in Australia.

    There is currently a flood of properties on the market - basically there is an endless supply of properties for sale, with very few buyers, so it is 100% a BUYERS MARKET, which is why prices are taking thoughout the country.

    But none of these facts matter to imbeciles such as yourself.

  111. Properties are not tanking throughout the country, this is another incorrect statement.

    The median Australian property price has not tanked. You are now resorting to making up your own figures. This doesn't make sense, and is a clear indicator of why you find yourself financially struggling.

    Investors do not try an "convince", they critically analyse the information available.

    Both of the indicators you posted, IMPROVED last year. So, how does an improving ratio mean a drop in prices?

    Of course, it doesn't.

    Here's a new headline from today, to counter your "prices are tanking argument":


    WA's mega rich property record

    KIM MACDONALD, The West Australian
    March 15, 2011, 11:46 am

    WA has a record number of million dollar suburbs, with 26 areas last year laying claim a median-priced homes with a seven-figure price tag.

    The increase in million dollar homes has come despite the generally sluggish real estate market, and has increased since 2009 when the figure dropped to just 18 suburbs during the global financial crisis.

    In 2008, 25 suburbs were in the million dollar club, up from 20 in 2007, 16 in 2006 and four in 2005.

    The research by consultancy RP Data also shows that WA’s Peppermint Grove had the highest median priced home in Australia for the third year in a row, at $4.6 million.

  112. JB, there are many buyers at the moment. In many areas around Australia, the number of properties for sale is dropping.

    Again, you need to uses real facts.

  113. OK - I see that my comments are being deleted.

    (I posted an article to record selling prices, and spoke about price/income ratios falling).

    Not much point in discussing further then, with this censorship.


  114. Hi Anonymous,

    Blogger has an automatic spam-detection system which is a bit of a mystery to me. I have released your comment so you should be able to see it now. Sorry about that.


  115. Thanks Andy, I was a little worried about that!

    Now, back to JB.

    "Prices are tanking thoughout the country"

    "But none of these facts matter to imbeciles such as yourself"

    Given that you are using "the country" as an example, could you please provide any evidence to show that the median Australian house price is "tanking".

    Any. Evidence. At. All

    Without posting any evidence to back up your claims - it will become clear who is the imbecile for making such outrageous claims.

  116. Jeff

    Despite your potestations to the contrary earlier it would appear that i was correct that you were in fact posting as 'Anonymous' ...

  117. JB, please provide evidence of the Australian median property price falling, or I will have to assume you are in fact the imbecile. As well as the other readers of this blog.

    (PS, there is definitely more than one anonymous on here, confusing for me as well)

  118. Jeff:


    I'm pretty sure i can find more, but you asked for one - so there it is...

  119. Jeff, that article shows that (on news.com.au mind you):

    a) Capital city dwellings dropped 1.6 per cent (seasonally adjusted) in January, while regional residences lost 1.2 per cent of their value.

    b) A 0.4 per cent capital gain for the month of December, which has been revised slightly to 0.3 per cent with the addition of further sales data.

    So, even taking a two month timeframe, the median price dropped about 1%.

    Perhaps some of the cheap media may use that as "tanking", in an attention grabbing headline, but 1%, over the course of 8 weeks, is clearly too small to show a statistically significant trend either way.

    I guess if your definition of "tanking" is 1%, then I guess "massive correction" could be, what, 3% (3 times the level of "tanking").

    The facts are that over the course of the last 12 months, the Australian median price has hardly changed.

    Incomes continue to rise, as does the population, at the same time unemployment is trending down.

    You're running out of "facts", young JB.

  120. Jeff

    You're an idiot

  121. Peter Fraser15/3/11 6:08 PM

    JB - you will get better responses from other bloggers if you are less antagonistic.

    It may seem "cool" to let fly, but it's not.

  122. Whenever facts are short at hand, result to personal insults.

    JB, you cannot be taken seriously.

    I wish you well.

  123. Peter, JB is clearly not interested in debating rationally.

    Not once has he made an accurate verifiable counter-claim.

    His personal issues are clouding his judgement.

    I would suspect he is angry at his father.

  124. Peter Fraser15/3/11 6:35 PM

    Anonymous - no he can discuss things rationally. The MMA blog where he posts is a bit undisciplined, especially since I stirred things up recently over what I considered to be inappropriate posts - but lets leave it at that.

  125. JB

    I agree with you and Andy.

    The permabulls here are not interested in reason. In any case, i believe it is only one or two people posting as anonymous property bulls and then coming back and posting under a 'name' such as Jeff. The style (or lack thereof) gives them away as being one and same person.

  126. Guys, having multiple people called ‘Anonymous’ is confusing and ruins the flow of the conversation.

    It is still possible to posts anonymously, without using the being called ‘Anonymous’. Simply select ‘Name/URL’ and enter a nickname/screen name. URL is optional.


  127. 8.45 anonymous, you agree that the median price of australian property has tanked?


  128. lol

    Yes indeed - i believe there are only two people on here who share the same crazy ideas about Australian property - Peter Frazer and Shadow.
    All the rest are simply their sock puppets ...

  129. Great comeback JB.

    Why should people listen to you on financial advice, when as you have stated yourself, you can barely manage a 330k mortgage when you earn 100k a year.

    I will listen to those who have financial success.

  130. Anonymous / Jeff

    You're as dense as a doornail, so i dont really care what you think of me or my financial abilities.

    At least i have the ability to see a property bubble while i'm in the middle of one, whereas you are as blind as a bat and as dumb as they come!!

    I'll be laughing all the way when mugs like you are forced to sell your overpriced properties.
    I'll be buying a home cash at the trough of the market when mugs like you will be a dime a dozen.

  131. Jeff / Anonymous asshole

    One of my fellow bloggers on Money Morning stated it quite eloquently as follows:

    I can’t wait for the crash. I can’t wait to see all those f#cking arsehole property spruikers standing at road intersections cleaning f#cking windscreens. I can’t wait to see their f#cking arshole kids put in government schools and have the sh#t beaten out of them.
    I can’t wait to see their f#cking botoxed wives with their Dow Corning tits dressed in trackie dacs and moccasins living in Doveton.
    Anyway-that’s my beef for the day. Back to the grumpy pills.


    This pretty much sums up the widespread anger there is out there due to sh!t4brains oxygen thieves such as yourself

  132. NO, JB, you can't see a property bubble, because you can't even understand your own personal finances.

    As you stated, you can't afford a 330k mortgage on 100k per year.

    So how the hell can you understand the complex world of bubbles? Answer - you can't. Why would anyone believe anything you say about finance? They won't.

    You also don't understand mathematics.

    You actually have deluded yourself into thinking:

    a) Property will fall, massively
    b) You will be the only person in the world with a job and money
    c) You will buy half the East Coast for the price of a can of baked beans

    The flaw is this:

    a) You can't count
    b) You are shit at finance
    c) You will be the first to lose everything (refer to points a and b for explanation

    You have hatred for those that have more money than you.

    That's a mental illness buddy, you should really seek help.

  133. Anonymous asshole

    You are truly delusional ... i lolled hard at you.

    First of all - you're the idiot who cant see we're in a housing bubble - for myself and the REST OF THE WORLD - it's as plain as day!

    Secondly, i manage my finances perfectly fine thank you. IN SPITE of the fact that i listened to ignoramus property spruiking scum such as yourself and bought property in 2008 - i am still way ahead of the curve ito my finances.
    In fact if i wanted to pay off my entire mortgage now in one payment i could due to my investments.

    Once i sell my property i will then have much more cashflow with which to continue my already very successful investment plan. Owning property in the present climate is a stupid thing to do - best left to lame brained assholes such as yourself.

    and yes, i will buy myself a luxury home on the Gold Coast CASH in a few years time, when dumb barstads such as yourself are forced to sell at firesale prices. lol

  134. C'mon guys, no personal attacks please. It’s important that people can comment freely without fear of abuse.

  135. Peter Fraser16/3/11 2:38 PM

    Andy - are you able to confirm that I haven't used a sock puppet as JB insists, or don't you get that information.

  136. JB, you continually change your tune.

    First, you can't afford a 330k mortgage with a 100k income, and have no money left over each month

    Then, you're a successful investor with a large investment portfolio. Obviously, that's not true. Nobody would believe that. You can pay your mortgage off with one payment, and yet you struggle, as you yourself stated, with a single monthly payment?

    Not adding up is it.

    The facts are, less than 1% of all people are forced to sell their homes in Australia. This is a F.A.C.T fact.

    I can guarantee, that people who can't control their finances now, will not be the ones succeeding if property drops.

    You are going to somehow get a luxury house, because you are smarter than everyone else? Even though you admit you made a huge financial error in 2008? Not going to happen. The smart money is getting into property now, whilst everyone is fearful.

    Like many people, you didn't do the maths. You didn't invest for the long term, you thought you could make a quick gain.

    ..and now, you're still thinking the same way...

    Doing the same thing over again and expecting a different result, is straight up insanity.

    This is not a personal attack - it is simply to point out the folly of those who jumped into the market, expecting short term gains.

    Now, they're on blogs talking about how they're going to make short term gains, again.

    Lesson 1: Property is long term.

    You really need to start at the beginning, JB.

    Sell your assets, use the money to get some financial education.

    I wish you well.

  137. PF, sorry I don’t get that information. If it helps, I believe you.

  138. I can tell you that I am not Peter Fraser.

    JB - your actually *trying* to break the number one rule in investment! - you're meant to buy when prices are low (now) and sell when they are high (in the future).

    Not vice-versa.

    If the prices start to fall, how will you know when they have bottomed out? Without financial knowledge, you can't analytically make this determination. You will more than likely get in at the wrong time. Again. History has a knack of repeating itself.

    I encourage everyone to educate themselves.

  139. Anonymous, why are you so sure that Australian house prices are low, when every measure (house prices to income, rental return, houses price to broader inflation) shows otherwise?

  140. First off - i never said i cant afford my home. i said i can barely afford it - which means that at the end of every month i have a surplus of a few hundred dollars - hardly what i would call a fortune. I used my own situation to illustrate that somebody on an above average income with a below average mortgage, and with no debt, is still not exactly drowning in excess cash each month, which goes to prove that your assertion that Australain households can afford to absorb still higher mortgages is just plain and utter rubbish!

    I am very sorry i bought property in 2008 as that was at the height of the property bubble. Had i simply continued to rent i would be about $40 000 ahead today, which i could have added to my existing investment portfolio, and along with opportunity costs, this means i am around $100 000 down on where i would have been had i continued renting.

    Yes, i could cash in my investments now and pay my mortgage off, but that would be stupid as my investments will grow at a far higher rate than the 7% interest i'm paying on my mortgage.

    In short i will take this loss of around $100k on the chin as a very expensive financial lesson to never believe property spruikers again - which includes about 3/4 of the Australian population by the way ...

    I will only invest in property again someday in the future when i feel that property has reached a low point in terms of value.

    You gave me this reference yourself, but i will post it here just to refresh your memory:


    As can be plainly seen - Australian property is heading DOWN DOWN DOWN ....

  141. Andy, there are no indicators precipitating a significant drop in house prices.

    The indicators you mentioned, have been that way for many years.

    Yet, only about 1% of owners are late on their monthly (30 day) payment. 0.54% are late at 90 days.

    Does this indicate an affordability problem? Clearly, not.

    There is no impetus to turn the ship around. I really can't stand when people group us all into "spruikers" or "doom and gloomers".

    I just want intelligent discussion on the issue.

    So, rents continue to rise. There has been almost 20% increase in the eight-city median rent price in the last three years. Indicators are that this will continue for another three years.

    With rents 20% higher, even if property prices fall, they will be on the move again quickly, due to yield.

    So, given that there is no strong reason for people to sell, and no indicators that people are in trouble, and new buyers are still entering the market (perhaps trending down, we will need to see the year out to make an accurate determination on this), unemployment is forecast to drop, wages forecast to rise, inflation forecast to rise, rents forecast to rise, immigration levels strong, government pro-property, interest rates not forecast to rise significantly..

    ..in my analysis, there is nothing that will make the median price of australian residential property drop any significant amount.

    A few years out, I would give it a 100% chance of the prices being higher than they are now.

  142. Anonymous

    So you reckon Australian property is cheap do you??

    Well this says different:


  143. Andy

    Not sure what the goes is with this site, but I have now - on two occasions - simply lost my post.
    I have correctly entered the code, yet my post did not appear.

    Looks like one has to write each post in a word doc or something in case the posting goes wrong. it really is quite irritating

  144. http://www.youtube.com/watch?v=NVPzZ1dUduU

  145. JB, all that graph shows me that the gold price is in a bubble state.

    How can you seriously provide an example of something that is 100% speculative (the gold price) and has a real yield of ZERO percent, whilst talking about the speculative nature of property, which not only provides a service (shelter), but also provides a real return?

    If people are willing to spend that much on a metal, as pure speculation, then it just makes me think how undervalued property is in comparison.

    If you are truly contrarian, you will sell your cold and buy property.

    If you want to believe the mainstream media (who are now constantly reporting the troubles in property) for your financial advice, well, I have news for you: they are wrong almost 100% of the time.

    Where were the media saying to buy gold in 2000? nowhere.

    You are being herded like a sheep JB. Smart investors will take advantage of you again.

  146. lol @ Anonymous

    We've been hearing for the past 14 years that gold is in a bubble...

    Gimme a break! You asked for facts - well that graph does not lie. Gold is gaining quickly on property ... THIS IS THE TREND... like it or lump it!

  147. JB, not sure how it works, but there is automatic spam detection. I’ve released your posts, so you should be able to see them and hopefully the system learns you are not a spammer. I’ll see if there’s a way that I can get notified if something goes in spam so I don’t have to monitor it.

    You have to enter a code? For every comment? Has that always been the case? I’ll see if I can switch that off.

  148. Andy

    Yes - i have to enter a code every single time. if you can switch that "feature" off it would be much appreciated.

  149. Should be off now JB.

  150. Anonymous

    You are highly amusing...
    So you reckon gold is in a bubble but property isnt?

    that's hilarious because gold is not the asset which is bought using credit - property is.

    Gold represents the same store of value now that it has for many thousands of years. its price is simply going up due to the bankers printing currency like there's no tomorrow. Gold still has a very long way to go before it will end its bull run.

  151. andy

    Indeed - just posted my first post without having to enter a code. much better thank you

  152. JB :

    Please show a graph of the gold price vs median incomes over the last decade. Yes - clearly, by your very own reasoning, gold is in a bubble.

    This is not my reasoning - this is your reasoning.

    Your hyperbolic claim of "hearing or the past 14 years that gold is in a bubble" has nothing to do with facts.

    The facts are, like housing, gold cannot indefinitely continue to appreciate at a rate vastly exceeding wage growth or inflation.

    I am not going to speculate on the gold price. It may go up, it may go down. It may go sideways. Whether or not it is "gaining" on property is quite irrelevant to this discussion.

  153. JB, printing currency does not produce inflation.

    Spending of currency does.

    This is really basic economics stuff, you need to educate yourself.

  154. Really?

    Tell that to the people rioting all over the Middle East where the people spend most of their income on commodoties and food.

    Tell THEM that Bernanke's mad money printing is not causing inflation...

    It seems it is YOU who is ignorant!

  155. Anonymous:

    People dont need to buy gold - in fact very few do. However, they do need a roof over their heads, which is why ultimately the prices for rent and the cost of housing MUST follow income trends, and any lenghty disjoint between the two can only be followed by a crash - it is a mathematical certainty.

    again - it is you who is the uneducated one.

  156. Peter Fraser16/3/11 4:42 PM

    Anonymous - how can Gold be in a bubble - it has fallen $200 per ounze over the last two years in $AUD

    I'd say it was tanking.

    How did gold and silver go overnight??

  157. By your own reasoning:

    "ultimately the prices for rent and the cost of housing MUST follow income trends"

    Income is trending up?

    Finish the sentence yourself, it's pretty obvious you have once again changed your position.

  158. aah Peter - no surprises there to see your comment.

    Looks as if CB and Nick were right about you all along.

  159. Peter - I don't actually believe gold is in a bubble (I have no opinion on the matter either way). I was using the example to point out the folly of JB's erroneous reasoning.

    Very interesting point you make though - Property has actually outperformed gold in Australia over the last two or three years!

    Yet another completely inaccurate statement from JB! If he had of invested in gold, he would be down! Wow. No surprise, his choices don't seem to be very good when it comes to investing (or should I say, imaginary investing)

    (I should have assumed what he was saying was 100% inaccurate, please excuse my slip)

  160. PF:
    You should stop talking to yourself - it really is a sign of insanity ...

  161. Peter Fraser16/3/11 4:58 PM

    But JB I'm right. Check it for yourself. Gold peaked around $1560 AUD some time back.

    I never give incorrect information, whilst cb and Nick are telling you that the earthquakes were likely to have been caused by a HAARP machine, flying saucers come to your door, and the oldest piece of bullshit on the internet, the Rothchilds or the zionists control the world.

    Time you worked out exactly who is bullshiting you mate, and it is certainly not me, only the very gullible get taken in by the lines they push.

  162. Peter Fraser16/3/11 5:03 PM

    Anonymous - JB will probably give you the link to his mentors blog - it really is a hoot.

    They have been taken in by every internet fraud over the last 20 years, and yet they are so serious in their conviction that they know the truth.

    It's like watching 10 year olds walking through the darkest forest.

  163. Peter Fraser16/3/11 5:09 PM

    Anon - well silver has worked out well for him, so he has done well there.

    Really in a time of a GFC losing on one investment but making it up on another is pretty good, and I fail to see why he is whinging when many have lost everything.

  164. Jeff @ 3:33 - I never said there was an affordably problem. The measures I mentioned point to over-valuation and a speculative bubble. Just because people can currently “afford” to pay bubble prices, doesn’t mean it’s not a bubble.

    You mentioned that not many people are late on their repayments. But as I said in a previous post:

    “While house prices are rising, this kind of reckless lending goes largely unnoticed. If the homeowner can no longer pay the mortgage, they simply sell their house for a profit and pay back their loan – everyone’s happy. It’s when house prices start going down, and homeowners owe more than they own, that we’ll discover it’s not different here after all.”

    Finally, you mentioned that there has been almost 20% increase in the eight-city median rent price in the last three years. Do you have a link for this out of interest? In any case, do you acknowledge that house prices have dramatically outpaced rents over the last 15 years?

  165. http://www.prosper.org.au/2011/03/15/prosper-calls-for-buyers-strike/

  166. Peter Fraser16/3/11 6:06 PM

    JB - like we haven't seen that on every other blog.

    Did you check on the fall of the $AUD gold price over the last two years?

  167. Andy, if I was purchasing a house for myself, what would be the correct price to pay?

    How would I measure "fair-value"?

    JB - yes, there was a similar strike about buying petrol for more than a litre.

    That didn't work either.

  168. PF

    What does the gold price in Australian dollars signify? Why not the price in US dollars?

    Obviously you want to skewer the view of gold by looking at it in AU dollars. The AU dollar strengthened by 40% during the last 2 years relative to the greenback. So pretty much the price of ANYTHING when measured in AU dollars over the past 3 years will be misleading to look at.

    It wont take much for the AU dollar to collapse again back to $0.65 US like it did last time. Why dont you ask me THEN again to comment on the gold price in AU dollars??

  169. Here is a graph showing the Ozzie vs greenback for the past 2 years:


  170. Jeff

    Regarding how to determine fair value - as discussed ad nauseum i believe we would measure 'fair value' by applying exactly the same measurements as the rest of the world does...
    1. ratio of price to income
    2. rental yield

    Yet another method - which is my favourite - is pricing property in ounces of gold. During the current property cycle, the average house averaged around 600 ounces of gold in 2005. Since then that price has decreased and is currently around 350 ounces of gold.
    Past experience would indicate that property here still has a long way to fall - and i expect that property will drop to a level where one could purchase the average family home for around 100 ounces of gold.


  171. Jeff – one idea is to compare the cost of buying a place to renting a similar one. Taking away any assumptions about future price movement, you’ll likely find that at current prices, it’s a lot more expensive to buy.

    You’d then need to weigh up the non-financial benefits of owning vs. renting. If owning comes out in front, you’d need to decide if that extra cost is worth it to you.

  172. Yes, the extra cost is worth it.

    70% of Australians agree with me.

  173. JB, fortunately, as you stated, Gold is on an upward trajectory. Meaning, it won't take a movement of house prices at all, because if you follow the trend, once ounce of gold will buy the average Sydney mansion in about three years time.


  174. Anonymous asshole

    Pull your head out your ass mate!

    I said that it would probably decrease to around 100 ounces of gold,

  175. Anonymous, I wouldn’t be surprised if a large chunk of those 70% of Australians change their minds once they realise that house price can go in two directions.

    Just look at what happened to the American dream of owning your own home once U.S. homeowners went under water in their mortgage whle struggling to pay for their depreciating asset

  176. It has been 70% since at least 1960.

    Through ups and, downs, and sideways movements.



  177. What’s your point Anonymous - that because 70% of Australians agree with you, that prices cannot fall? Home ownership rates are only marginally lower in America than here.

  178. That's right - this time it is different.
    The western world is bankrupt...

    But i guess for you - its business as usual right?

  179. Peter Fraser16/3/11 10:32 PM

    JB - another way of looking at that is the value of the $USD fell 40% which pretty much ties in with what cb is saying.

    So gold and the $AUD have marked time during the GFC.

    It's done nothing has it...

    Face facts...

  180. JB, do you think the price of gold in AUD, falling over the last two years, will inspire people to invest in a safer asset, such as property?

  181. Andy, what is your point? We are not America. If you're going to use another nation as a basis for comparison, where laws, in particular non-recourse mortgages, have had such an enormous impact on the market.

    Or use, say Manhatten as an example. Prices since 1997 are up almost 10% per annum, per square foot (best way to measure Manhatten property), despite recent drops.

    It's very tiring hearing baseless comparisons between the US and AUST.

    Additionally, JB, I just triple checked - gold has been falling in AUD for more than two years.

    Sounds like a great investment plan you have there : speculate in an asset that is dropping, and has no yield. Good luck with that one.


  182. Why dont you ask that question in a couple of years time? i'm sure the answer to that question will become painfully obvious

  183. you're actually 100% right - i do have a great investment plan. in fact i've made 70% profit in less than one year.


  184. 70% on not much is not much.

    Here's what I have been up to:

    Last property bought for 500k, with a 50k deposit.

    3 x units constructed on block, cost 400k.

    Sold 3 x units for 3average 85k each. Associated costs, approx 95k.

    Total profit = $135k. Cash on cash return, of my 50k = approx 170% per annum.

    I have done this 9 times in the last 10 years, that was the most recent venture. Other ventures have been far more profitable, that was almost the smallest one.

    (currently sitting on liquid assets, and just my PPOR - mortgage free, value approx 2 million, purchase price 800k - up or down, I'm keeping it forever)

  185. Anonymous - my point was simply that you don't have a point when you say 70% of Australians agree with you.

  186. Anonymous

    You've done very well financially - congratulations. You obviously found a winning formula and have repeated your success over many years.

    by contrast i only started investing less than a year ago. if i knew what i do today ten years ago i would have started investing then already and would have been a multi millionaire by now.

    oh well, i suppose 10 years from now i will be very happy with what i have accomplished.

    anyway, i am genuinely impressed! ;)

  187. Anonymous/PF/Jeff

    This guy explains what i believe to be true in a much more eloquent way.
    Any comments welcomed ...


  188. Peter Fraser17/3/11 8:59 AM

    JB - you have achieved that success on silver, and mate that was just dumb luck. You took the advice of someone you don't know on an internet blog.

    The next time it won't be that easy. The moment you think you know what you are doing, you will trip over a basic mistake. No-one is more vunerable than an over confident investor.

  189. PF

    Was that comment of yours applicable to me or to Anonymous?

    I accept what you say and this is the reason that i continually update my knowledge on current events and on the investment world in general.

    Regarding my investment in silver - i'd hardly call it dumb luck. I had been researching the subject for quite some time and was convinced of the fundamentals that silver was extremely undervalued. It still is.

    I'm very happy with where i'm currently at ito knowledge and am eager to learn each day. I'm open to learning - even from you.
    That said, so far most of what you say appears to be misinformation as it is usually the opposite of that which i learn via my own investigations.
    But who knows, perhaps someday i may discover something which you say which is on the money.

    to be fair to you though, i am very happy about the link you supplied a month or two back and to which i have referred to above:

    That was most helpful - thanks for that.

  190. Yep, very impressive Anonymous! Can I ask - are you planning on continuing this system over the next 10 years?

    Also, I like how you reported profit (this happens to be mentioned in my next post – which is almost complete).

  191. Andy

    I know you have recently looked at the prospect of investing in physical silver after seeing some of the exchanges between PF and myself on MMA ...

    Do you think that silver has strong fundamentals?
    Or do you agree with PF that it was just "blind luck"?

  192. Hi JB - looking into gold and silver is still on my to-do list and I’ve made a note of that book you recommended. So at this stage – I've got no idea.

  193. Peter Fraser17/3/11 12:02 PM

    Andy - why do my posts take and then disappear

  194. I'll try again -

    JB - happy to have provided you with a useful link.

    JB I never indulge in misinformation, if you look at all of my posts I have tried only to warn of the risks. Sometimes I did tease cb and Nick, but it wasn't misinformation, I pride myself in my honesty.

    Now I don't think for a second that cb or Nick mislead you on silver, they really believe that it will continue to rise, as did others whom I talk to, the difference is that most of the others are much better informed, and they do not believe that it will rise by a factor of four.

    If you wanted to become better informed, you should talk to wulfgar at Credit Crunch or Hawkeye also at Credit Crunch and he also posts at the site that Sandra recommended. They are honest bloggers, although wulfgar does get a bit eccentric at times, but he won't lie to you.

    I have three loans to do today, so I'm a bit stretched for time, but I try to look in on this blog.

    Just one last thought - the Gold Coast has always been volatile, and unfortunately you bought at the worst possible time, clients of mine have bought recently and they are very very pleased with their buy. All you need do is ride out the downturn, and it will come back. Always remember you haven't made or lost anything until you sell.

    In my experience people who hold stock or investments too long end up selling well below the peak, sometimes it is better to take a profit while it is on offer, rather than miss out altogether as many do.

    If you are ever in two minds, sell half at a profit and take a chance on the rest. If you have made 70% profit you could recoup your initial outlay and own the rest at no cost to you, and pay the sale proceeds off your home loan, and reduce the loan payments to enhance your lifestyle.

    That would put you in a "no lose" position, and that is what all investors should work towards.


  195. PF – it went straight to spam for some reason. Released now. It seems to be happening for the very long comments. So for those ones, might be safer to keep a copy in Word – which it seems you did.

    Problem is I don’t find out if something went to spam unless I check it.

    Sorry about that – will investigate further.

  196. PF


    do you have a link to the site Sandra recommended?

  197. Peter Fraser17/3/11 1:53 PM

    Thanks Andy.

    JB - DR has a good article on silver today.

  198. Peter Fraser17/3/11 1:58 PM

    JB - sorry just getting back - Sandra posted the link more than once on the MMR site, mate I'm not going to wade through all of that gibberish, but you can ask cb, I'm sure he will have that link.

    I had a look at it and I thought it was a good site, and it had quite a few posters that I knew from other blogs, who although I may disagree with on some points, I believe that are genuine.

    If you can't get the link then tell me and I will get it from another source.


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