Australia going to hell in a handbasket?

whiteonion

Australia seems to make the same mistakes as in Ireland. Their is no doubt a property bubble going on in Australia.

According to one article I read the current price for a house is about 7.5 times a whole families income.
http://www.moneymorning.com.au/20100617/aussie-property-bubble.html

According to Wikipedia Australian politicians have used various incentives to prop up prices.
http://en.wikipedia.org/wiki/Australian_property_bubble

This will be ugly.

PatsytheNazi

whiteonion wrote: »

Australia seems to make the same mistakes as in Ireland. Their is no doubt a property bubble going on in Australia.

According to one article I read the current price for a house is about 7.5 times a whole families income.
http://www.moneymorning.com.au/20100617/aussie-property-bubble.html

According to Wikipedia Australian politicians have used various incentives to prop up prices.
http://en.wikipedia.org/wiki/Australian_property_bubble

This will be ugly.

I hope the Aussie's take a look at what happened to us :mad:

sink

My folks were just over in Australia and were saying how Australians like to talk of nothing more than the price of property and how much their house is worth, exactly like the Irish in 06/07.

wildefalcon

sink wrote: »

My folks were just over in Australia and were saying how Australians like to talk of nothing more than the price of property and how much their house is worth, exactly like the Irish in 06/07.

Kaa BOOM!!!

Fr Tod Umptious

whiteonion wrote: »

Australia seems to make the same mistakes as in Ireland. Their is no doubt a property bubble going on in Australia.

According to one article I read the current price for a house is about 7.5 times a whole families income.
http://www.moneymorning.com.au/20100617/aussie-property-bubble.html

According to Wikipedia Australian politicians have used various incentives to prop up prices.
http://en.wikipedia.org/wiki/Australian_property_bubble

This will be ugly.

Interesting

I wonder how long it will take a poster to tell us that it's not really a bubble like all the other ones and that there will be a soft landing or some other sort of adjustment that will go against the historical crash and burn outcome

whiteonion

I suppose THIS TIME it will be different

Ramirez1

whiteonion wrote: »

Australia seems to make the same mistakes as in Ireland. Their is no doubt a property bubble going on in Australia.

According to one article I read the current price for a house is about 7.5 times a whole families income.
http://www.moneymorning.com.au/20100617/aussie-property-bubble.html

Yes, Australia is heading for sharp decline in prices, while our average house prices are back to the 3.5 times annual household income levels.
If I would be an Australian with own house, I would sell it now and buy a house in Ireland instead.

whiteonion

Ramirez1 wrote: »

Yes, Australia is heading for sharp decline in prices, while our average house prices are back to the 3.5 times annual household income levels.
If I would be an Australian with own house, I would sell it now and buy a house in Ireland instead.

If I was an Australian I would sell my house and rent, I would not buy a house in Ireland because the commute is a bit long...

starviewadams

Can't the Aussie's just print more money if things go tits up like they have here?

At least they wont have to borrow it at extortionate rates just to keep their banking system afloat.

alan85

starviewadams wrote: »

Can't the Aussie's just print more money if things go tits up like they have here?

At least they wont have to borrow it at extortionate rates just to keep their banking system afloat.

And they most likely won't have a simultaneous global crash or at least not one as big as the one we encountered. We had it on all fronts.... Our economy, their economy, our banks, their banks, our property, their property...

whiteonion

In Australia mining, farming, construction and tourism are big industries. If there is another huge downturn in a few years time there will be a global drop in commodity prices(base metals, precious metals agricultural commodities and so on) the mining and farming industries will suffer, if we get a big downturn you'd expect a lot less tourists coming to Australia. If this happens it will surely pop the housing bubble.

When it comes to bubbles it is difficult to predict when they will pop but I give this one no more than until 2015 to pop.

PatsytheNazi

starviewadams wrote: »

Can't the Aussie's just print more money if things go tits up like they have here?

At least they wont have to borrow it at extortionate rates just to keep their banking system afloat.

Yeah just printing money works out very well, just look at Germany in the early 1920's......

wildefalcon

How dependent are they on crude oil prices?

Denerick

To be fair, Australia has a diversified economy, a combination of high tech business and old fashioned agriculture + mining. Their population is swelling, immigration is serious... If house prices did decline over there they wouldn't be in nearly as much bother as we were.

Ramirez1

Denerick wrote: »

To be fair, Australia has a diversified economy, a combination of high tech business and old fashioned agriculture + mining. Their population is swelling, immigration is serious...

The same (except mining) could be applied to Ireland too, just 5-6 years ago

PatsytheNazi

alan85 wrote: »

And they most likely won't have a simultaneous global crash or at least not one as big as the one we encountered. We had it on all fronts.... Our economy, their economy, our banks, their banks, our property, their property...

Our manufacturing, agricultue industry etc is actually doing quite ok. It's the banks mainly and to a much lesser extent the Govt debt due to our over paid and over staffed public service. But yes, thanks to Ahern, Clowan, Fingers, Seanie Fitz etc we are in a hell of a hole.

Ramirez1 wrote: »

The same (except mining) could be applied to Ireland too, just 5-6 years ago

Exactly and we were told it couldn't possibly happen to us. As Ahern used to say " the economic fundamentals are sound " .........

RATM

There's no way Australian property is in a bubble. And those who say it is should go and commit suicide :rolleyes:

amacachi

Ramirez1 wrote: »

The same (except mining) could be applied to Ireland too, just 5-6 years ago

The mining makes a massive difference though since the exports are real exports and not on-paper exports like we have. Also the immigration pattern and reasons for it are completely different to here. Also thanks to all their mineral wealth they can do what they like. Also thanks to having not been idiots and keeping wages down over the last decade and more they can inflate their way out of it without losing competitiveness.

It's a pretty different situation.

whiteonion

If a house costs 7.5 times an average family's income those prices are unsustainable. They should fall about 50%. One thing I have learned in life is that everything will at some point revert to the mean.

When a bubble bursts the pendulum usually shifts to the other extreme so we can expect undervalued houses for a period of time. So prices could well fall even more than 50%.

alan85

• What percentage of their workforce are employed in property developement? Ours was 30% at the crash!
• How much tax do the government depend on house sales for tax? Ours was too much!
• How's the rental market compared to income? If it's high then I'm sure that's going to attract a lot of speculators taking out mortgages just like here.

I think those 3 factors will tell you how bad a property crash will be if there is one...

JustinDee

starviewadams wrote: »

Can't the Aussie's just print more money if things go tits up like they have here?

The Pauline Hanson school of economics wouldn't work. The point is to maintain a strong dollar. Print more money and you devalue it obviously.

I've a house on Far North Coast of NSW. There's a building freeze in the town for past 13 years so values, while rising over that time, have been steady due to low level of speculative buying.
The economy there isn't as dependant on property market as it was here, by the way, in employment, investment, and revenue.

greendom

amacachi wrote: »

The mining makes a massive difference though since the exports are real exports and not on-paper exports like we have. Also the immigration pattern and reasons for it are completely different to here. Also thanks to all their mineral wealth they can do what they like. Also thanks to having not been idiots and keeping wages down over the last decade and more they can inflate their way out of it without losing competitiveness.

It's a pretty different situation.

Australia's export of minerals is pretty dependent on the high growth rate in China. If China sneezes, Australia will catch a nasty cold.

Pure Sound

If/when the bubble bursts in Australia it is likely that it is Irish people that will suffer once more, think of the amount of Irish tradesmen that are living in Australia. Hopefully the Irish there haven't made the same mistake as the Irish here running away with themselves and buying up the houses at seriously overinflated prices. Even now house prices are far too high here.

whiteonion

We Need Community wrote: »

If/when the bubble bursts in Australia it is likely that it is Irish people that will suffer once more, think of the amount of Irish tradesmen that are living in Australia. Hopefully the Irish there haven't made the same mistake as the Irish here running away with themselves and buying up the houses at seriously overinflated prices. Even now house prices are far too high here.

One other thing, wages are very inflated in Australia. When I was in Western Australia and working in bars I made $16 per hour which is more than €11.60, wages in Australia are ridicolous and they will have to come down, which means house prices will also fall.

Dionysus

Ramirez1 wrote: »

Yes, Australia is heading for sharp decline in prices, while our average house prices are back to the 3.5 times annual household income levels.

No, they are not. Please stop propagating that myth. Far, far from it. The average industrial wage in Ireland is €33,000. Just what will you get for €116,000 in Ireland?

Permabear

This post has been deleted.

alan85

alan85 wrote: »

What percentage of their workforce are employed in property developement? Ours was 30% at the crash!
I think those 3 factors will tell you how bad a property crash will be if there is one...

About 9% according to this are employed in construction.

I don't know if any of the other sections could be included eg Rental, Hiring and Real Estate Services 1.8%
or Manufacturing 8.7%

http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/6105.0Apr%202011?OpenDocument

catbear

another plus that oz has over Ireland in dealing with a housing bust is its attitude to bankruptcy, too much debt was rolled over for too long in Ireland to avoid Irish courts. At least in OZ as with other western economies efficient bankruptcy laws act as a release valve rather than the debtors prison they are in Ireland.

Fr Tod Umptious

Just read the article in the OP

It reads like a history lesson from 2000s Ireland.

House prices huge multiples of incomes
Banks exposed to property left right and centre
Banks that are 'too big to fail'
Chance of interest rates creeping up.

As another posetr says a lot depends on how much the Austrlian Govt depend on property based taxes and wheterher they make the same maistke ans Ireland and ignore developing other sectors and foucsing so much on property

paul75

Are the aussie banks pumping loads of cheap credit into the market and are the aussie regulators asleep?
If not then the crash will not be as bad.
We have a proptery crash + world economic tsunami + worst banking failure in history, all at the same time

bnt

whiteonion wrote: »

If a house costs 7.5 times an average family's income those prices are unsustainable. They should fall about 50%. One thing I have learned in life is that everything will at some point revert to the mean.

At the peak of the Irish bubble the price/income ratio was well over 10x, which suggests that the Australian bubble has some way to go before it pops. However, the article also mentions the mortgage interest rates there, which are already well in excess of anything Ireland saw in the last decade. (The author refers to the rates being "as low as 10%" two years ago, and suggests they will reach this level again soon.)

Higher interest rates slow the formation of a bubble ... in theory. It depends on whether anyone does the calculations of how much they would pay back over the full term of the mortgage. But if you have an interest-only mortgage, and expect to flip the house for a profit in a year or two, what's a couple of percent extra interest anyway?

catbear

Are the Ozy banks rolling over bad debt. Remember the Irish sequence; developer fails to sell and doesn't cover what's borrowed from bank, bank says "no worries, we'll roll over the debt until there's a pick up!". Pick-up doesn't happen, construction industry starts shedding jobs impacting on the greater economy through jobs lost servicing construction. Shareholders start running for the exits dumping bank stock, banks about to go bust until government rolls over bank debts, taxpayer bails out government, europe IMF bail out Irish taxpayer,...................