Australian Housing Bubble - about to burst?

nancy_lnl
By nancy_lnl on Fri, Aug 31, 2012 - 10:00am

Hi everyone,

I noticed a post somewhere (I think it was by Robert Essian who seems to be a prolific poster) that mentioned the Australian Housing bubble was looking like bursting.  There were no references to sources and as this is a topic that will effect me (and I imagine others in the group) a lot, I just wanted to check-in and see is anyone on the ground so to speak has any relevant info.

Thanks in advance,

Nancy

8 Comments

HelenaV5's picture
HelenaV5
Status: Member (Offline)
Joined: May 9 2012
Posts: 12
wish I knew

Hi Nancy, I wish I could provide some sort of opinion on this topic, but I have no idea about it!  There is no doubt that housing prices in Aust. are ridiculously high.  Not sure about other parts of Oz but Perth prices have steadied over the past 12 months (average).  I do wonder if supply/demand will keep prices stable for a while, as we seem to have an ever-growing population due to migration and perhaps housing supply hasn't been keeping up with demand - that's what the mainstream media says anyway.  Australia always seems like an outlier to me, in that we have been more resiliant than a lot of other economies so far - 21 years recession free - I guess the big question is, how much longer can that last?  Will economic slide in Aust. take everything else with it (housing prices etc)?  Not much of an answer!! I also wonder what others think.

nancy_lnl's picture
nancy_lnl
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Joined: Jun 5 2012
Posts: 13
Thanks for the input!

Hi Renee,

Thanks for your input - I'm sure this is one of the hardest kind of things to see from inside!  Canberra real estate also looks like its stabilising (but of course I'm only seeing this virtually, not on the ground) so I'm going to do a bit of research and if I find anything I'll post it!

Has anyone else started seeing changes in their part of Oz? Love to hear from you.

Nancy

Arthur Robey's picture
Arthur Robey
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Joined: Feb 4 2010
Posts: 3936
The Price of a Dozen Eggs.

The boys at Money Morning have been banging on forever about the imminent housing bubble bursting.

Prof. Steve Keen says that the reason that house prices are so high is because of fractional banking loans (Thin-air money), and competitive bidding with thin-air money.

People want to sell 3 bedroom houses here in Esperance for neigh on a million dollars. ( I wonder how much I can get for my bicycle? It is really fast.)

Everyone in Australia is trying to get rich off everyone elses rent. They are all singing from the same hymn book. This has not been thought through. Besides, stealing the kiddies' Christmas presents is uncouth.

No, Everyone in Australia cannot become rich by charging everyone else rent.

Still, there are a lot of votes to be won telling everyone that they can. We nod sagely and tell ourselves that Australia is a special case, exempt from economic catastrophe.

Housing is a consumer item, just like your fridge. And yes, we can live without them.

The traditional cost of a three bedroom house has been 16kg of silver. Mind you there was a house in Germany that went for a dozen eggs.

nancy_lnl's picture
nancy_lnl
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Joined: Jun 5 2012
Posts: 13
Thanks for the links Arthur -

Thanks for the links Arthur - very informative.

Living outside Australia and visiting once a year I am constantly amazed by the prices houses sell at - from here it looks like an obvious bubble ready to blow...  Selfishly I am hoping prices go down in the near future, but that would mean the economy had started to implode........

How does one get resilient without great wads of money to purchase without going into debt??  (I don't really expect an answer, just wondering to myself).  If only I could find one of those dozen egg houses!

MargfromTassie's picture
MargfromTassie
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Joined: Oct 21 2011
Posts: 3
Home » Groups » Australian Resilience.Australian Housing Bubble

There are plenty of decent, cheap houses in Australia - if you look outside the major capital cities.  I live in Tasmania, where house prices have declined significantly in the last 12-18 months.  Compared to England, especially southern England, which I recently visited, housing prices in Australia are quite reasonable and the houses are much better value. There's a pommie bloke near to us who bought a very nice 'manor'- type house on 3 acres in a lovely quiet street. He said that there's no way he could have afforded to buy a similar property anywhere in England for the price he paid. (About  $A 380 K three years ago - probably about the same or even less now). Plenty of young Brits seem to be immigrating to Perth in WA  too, because economically, they see life as much better than in the UK. There's the weather factor too of course ....  :)

HelenaV5's picture
HelenaV5
Status: Member (Offline)
Joined: May 9 2012
Posts: 12
food for thought

Hi Marg form Tassie, I think you are right that if you are prepared to look outside the 'box' you can find reasonably priced property.  Unfortunately you also tend to add a large commute if you work in the cbd (I don't know how anyone could stand a daily commute, I am lucky I have managed to avoid it).

Just a comment on Perth however, I am often curious as to whether the Brits that move here are severely disappointed...you are right, there are a lot of them.  However after our recent visit to England, I have to tell you almost nothing is cheaper here!!  We found food in particular SO MUCH cheaper in England and Ireland than here.  We could get a nice pub meal for 7 Pounds, in Perth you would never pay less than $20 for the equivalent meal.  Even just things like buying a bunch of bananas, 1 pound!  Over here if you can get a bunch for under $5 you buy two, but that's because we have a banana industry to protect, unlike Britain whiuch just imports the cheapest they can get.  It was like that with everything, even little cartons of juice for the kids we pay $3.20 each, they are 1 pound each over there - same contents, but we pay double the price.  Even factoring in exchange rates we are the biggest losers.  Pay rates over here are higher but only because everything costs more, the smallest crappest cup of coffee will cost you $4.  My husband who runs his own business has to pay his manager $55,000 per year, when even over east the same store manager only gets $35,000, the mining boom has just driven up ALL of our prices, so I'd be thinking a lot of Brits would be consoling themselves at least the weather is better, because I'd go out on a limb and say cost of living certainly isn't!

Sorry for my incoherent rambling, it was just something we were gobsmacked at ourselves, everyone said how expensive England is and we thought everything was cheap!

Which begs the question, what will happen when the mining boom is no longer?

Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 3936
Sling shots and sucking sounds.

There is a strange sucking sound whenever I go near Perth, Helena.

Somebody here seriously suggested that I buy his house in Esperance for $1 million. I'll bet he bought it for $40k. They have all been reading the same "Get Rich Quick with leveraged Real Estate" best seller. If it was so good why write the book?

The lever works both ways, on rising prices and falling prices. I get the impression that everyone is holding their breath for the tsunami of defaults that they know is coming. I am about to be inconvenienced by their terror.

Prof. Steve Keen says that because Australia is at the input end of the production cycle, the economy will experience the bull whip effect.

I prefer the trebouchet metaphore.

What fascinates me is the knowledge that a three bedroom house historicall costs between 6 and 16kg silver. (No. Don't be tempted to translate that into money first. It is a straight exchange, silver for the house.)

HelenaV5's picture
HelenaV5
Status: Member (Offline)
Joined: May 9 2012
Posts: 12
no one would believe you

Thanks for that Arthur, I followed your mention of Prof Steve Keen which led me to some interesting reading. I have been hounding my husband for the past year to get our mortgage down, as a matter of utmost importance, and after reading an article on Debtwatch stating real estate in Australia is 50% overvalued I'm quite pleased we have.  Try convincing anybody else there's a chance their valued asset will be worth significantly less in the future - no one will believe you, and I would have been one of them a few years ago!  When we bought this place, I remember saying to my husband 'imagine what this will be worth in 20 years time', $ signs floating in my eyes.  Sadly they have evaporated, and now I just hope we'll be able to keep it.  At least we are prepared (mentally), there will be a lot of people who will not be.  I'm thinking it'll be a case of, the bigger they are, the harder they fall?  Interesting about the silver, I think I might need a bit more than I've got...

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