Housing bubble in Australia

[magneto]

As we all know it's getting more and more expensive to buy a house, and the rate of growth currently associated with investing in a house is just phenomenal, and obviously too good to not be a bubble. We all know that. However, WHEN will this bubble pop?

More and more houses are being built but the demand for it just continues to go up. And many houses are bought and just left to sit there, not even rented out, fueling the problem further because investors just want a safe and profitable investment.

What do you think the governments can do to avoid this? Put a limit on houses per person? Your opinions?

[pinkflower]

Theres nothing the government can do as they are beholden to the bankers. Do you remember what Obama did during the financial crisis of 2008? Instead of leaving it alone and let the depression take its course, he allowed the US treasury and the Federal Reserve to pump more money in the system by bailing the fraudsters out. Why? Because hes up for reelection.

[ktabb]

As we all know it's getting more and more expensive to buy a house, and the rate of growth currently associated with investing in a house is just phenomenal, and obviously too good to not be a bubble. We all know that. However, WHEN will this bubble pop?

More and more houses are being built but the demand for it just continues to go up. And many houses are bought and just left to sit there, not even rented out, fueling the problem further because investors just want a safe and profitable investment.

What do you think the governments can do to avoid this? Put a limit on houses per person? Your opinions?

Housing is not a bubble. Our current situation is extremely different from 2008. In 2008, banks were giving out loans to people who were clearly incapable of paying them back, and then selling bonds full of those loans at the same price as bonds that were full of good loans that were much more likely to be paid back... basically there was massive fraud going on. Furthermore, stocks were more expensive then ps-ratio-wise.

Housing prices will be going down soon, but not because they are a bubble... because interest rates are rising and the incoming waves of potential buyers are knee-deep in student debt. This does not mean housing will crash, but rather it means that prices will slowly decline.

[talkbitcoin]

no we don't all know that!
i don't know if you realize this but things are very different in different countries. and you forgot to mention which country you are talking about. for example where i live (which i don't mention it either ) the real estate market has been down for at least 6 months with prices falling even.

it usually is an economical thing and is directly related to how developed or underdeveloped the country is. in developing countries the real estate is usually hot and price are rising. some even consider it a good investment. which is why i am going to buy my first house real soon - thanks to bitcoin price rise i have enough money to do it now!

[magneto]

no we don't all know that!
i don't know if you realize this but things are very different in different countries. and you forgot to mention which country you are talking about. for example where i live (which i don't mention it either ) the real estate market has been down for at least 6 months with prices falling even.

it usually is an economical thing and is directly related to how developed or underdeveloped the country is. in developing countries the real estate is usually hot and price are rising. some even consider it a good investment. which is why i am going to buy my first house real soon - thanks to bitcoin price rise i have enough money to do it now!

Ah, i see. Well i'm talking about australia in general, especially sydney.

It's crazy because the median house price is 1.15 million AUD and there are 80 towns where the median house price is 2 million AUD+, which is crazy. Compared to US's $200,000 as the median house price in the US.

As we all know it's getting more and more expensive to buy a house, and the rate of growth currently associated with investing in a house is just phenomenal, and obviously too good to not be a bubble. We all know that. However, WHEN will this bubble pop?

More and more houses are being built but the demand for it just continues to go up. And many houses are bought and just left to sit there, not even rented out, fueling the problem further because investors just want a safe and profitable investment.

What do you think the governments can do to avoid this? Put a limit on houses per person? Your opinions?

Housing is not a bubble. Our current situation is extremely different from 2008. In 2008, banks were giving out loans to people who were clearly incapable of paying them back, and then selling bonds full of those loans at the same price as bonds that were full of good loans that were much more likely to be paid back... basically there was massive fraud going on. Furthermore, stocks were more expensive then ps-ratio-wise.

Housing prices will be going down soon, but not because they are a bubble... because interest rates are rising and the incoming waves of potential buyers are knee-deep in student debt. This does not mean housing will crash, but rather it means that prices will slowly decline.

Interesting. Maybe this is country specific, as things are definitely too hot over here in Sydney.

[ktabb]

Sorry I totally missed the part where you said Australia! I don't know anything about the housing market in Australia, I was talking about the US. Maybe it's similar, idk... you can disregard my comment though haha.

[pearlmen]

As we all know it's getting more and more expensive to buy a house, and the rate of growth currently associated with investing in a house is just phenomenal, and obviously too good to not be a bubble. We all know that. However, WHEN will this bubble pop?

More and more houses are being built but the demand for it just continues to go up. And many houses are bought and just left to sit there, not even rented out, fueling the problem further because investors just want a safe and profitable investment.

What do you think the governments can do to avoid this? Put a limit on houses per person? Your opinions?

It actually depends on the mentality of the people engaging in it and I am surprised that its happening in far away more advanced country Australia. Over here, the believe was that if you dont have a house to yourself even though its of no economic value to you, you are not an a complete being. And I think that is the mentality over there and the fact that is can stand as collateral is another reason that contributes to that.

[slaman29]

It's not just in Australia. Property in general in Asia and even in Europe are always in some kind of bubble. And when that bubble bursts, it seems they fall 15% maximum before going on the next bubble again. I've been waiting for property/housing to drop in my country, but it seems people just keep holding or dropping slightly below listing, before rising again.

[Hydrogen]

What do you think the governments can do to avoid this? Put a limit on houses per person? Your opinions?

Housing bubbles are caused by the average wage of poor to middle class income brackets declining over time.

Lower wages lead to less homes and real estate being bought. This leads to the average value of real estate declining on reduced demand due to less consumers being able to afford them.

It might be fair to say: housing bubbles are symptomatic of wealth inequality/wage inequality. All of the wage increases which were supposed to go to poor to middle income earners instead went to CEO's. This wealth and wage inequality weakens the economy and creates negative effects such as: housing bubbles.

There are a few different perspectives to the housing issue. The media seldom covers any of the relevent ones.

[odolvlobo]

Interest rates will slowly climb over the next year or two, and then people will not be able to afford the houses and the bubble will pop. It happened in 2008. It will happen again.

[tabnloz]

What do you think the governments can do to avoid this? Put a limit on houses per person? Your opinions?

Housing bubbles are caused by the average wage of poor to middle class income brackets declining over time.

Lower wages lead to less homes and real estate being bought. This leads to the average value of real estate declining on reduced demand due to less consumers being able to afford them.

It might be fair to say: housing bubbles are symptomatic of wealth inequality/wage inequality. All of the wage increases which were supposed to go to poor to middle income earners instead went to CEO's. This wealth and wage inequality weakens the economy and creates negative effects such as: housing bubbles.

There are a few different perspectives to the housing issue. The media seldom covers any of the relevent ones.

Bubbles are caused by cheap credit. See US after dot com implosion - rates were lowered way too much for way too long. The advent of MBS's meant that loan originators didn't have to 'keep' the loans on their books anymore - they sold them on (for fees) to bigger institutions, who packaged them into MBS's (for fees) and sold them off. Not wanting to lose their fees (and bonuses), participants all the way up the line found ways to keep making / packaging / selling more and more loans to more and more borderline customers (who were either greedy, liars or duped).

The common sentiment was that housing could not crash nationwide as it had never done so before, and further, there were only a handful of people who actually understood how the housing bond market worked. Even CEO's of the biggest funds had no idea. They just knew packaging them up and selling them on was very very profitable.

Australia survived the 2008 meltdown, largely due to Chinese stimulus and demand for resources. However it did see an eventual drop in interest rates as global demand slowed in every sector apart from mining. Wage growth has gone nowhere even close to matching house price growth. Low wages hasn't led to less real estate being bought, it has seen people go into more and more debt (check out household debt to gdp stats). Credit is cheap and easy to get. The upswing in housing prices comes from record interest rate lows coupled with a stable job market (now ex perth, Darwin). Wages may not have gone up in years but the cost of servicing a loan has lowered (until recently) - even when you traded off low rates vs price increases.

The problem for Sydney now is that yields are well below inflation, so there is no logical reason to buy as an investor other than chasing capital gains. it is a mania, and has become so unaffordable that a large % of wages now go to mortgage debt. The result is that the retail sector is dying. Rents are high but demand is weak because most of it goes to paying off the banks.

If rates were to rise even 1%, around 20% of households would be screwed, in severe mortgage stress. Australia doesn't control the wholesale rate it pays for credit, that it mostly driven by the wholesale markets. On top of that, Australia's banks are heavily weighted towards residential mortgages, some have over 40% assets in interest only loans and property makes up nearly half of the banks assets. Its an accident waiting to happen.

[sana54210]

It's not just in Australia. Property in general in Asia and even in Europe are always in some kind of bubble. And when that bubble bursts, it seems they fall 15% maximum before going on the next bubble again. I've been waiting for property/housing to drop in my country, but it seems people just keep holding or dropping slightly below listing, before rising again.

Yes, not only in this property or real estate business, we can see that where ever the involvement of the whales is found the bubbles do arises and the pump and dump is part of the business so it is nothing something huge to be worried about.

Looking at the property business the pump and the dump are normally not that huge like the Bitcoin. In the bitcoin when there is a dump the prices go down more than 30-35% while in the real estate this ratio is quite less up to 10% or 15%.

[mindrust]

Unless the Australian government bans real estate sales to foreigners, the bubble will never pop. Most of the buyers are Chinese and there is no shortage of Chinese population. They will zergrush your homeland till it becomes another China state. Good luck.

http://www.zerohedge.com/news/2017-04-01/australia-has-worlds-worst-money-laundering-property-market

China...
https://youtube.com/watch?v=RDrfE9I8_hs

[anryze]

Australia, as you now, is one of the countries that hasn't had any economic/financial crisis since 1991. And such news is very interesting.
World economic crisis 2008 started from housing bubble.

[el kaka22]

As we all know it's getting more and more expensive to buy a house, and the rate of growth currently associated with investing in a house is just phenomenal, and obviously too good to not be a bubble. We all know that. However, WHEN will this bubble pop?

More and more houses are being built but the demand for it just continues to go up. And many houses are bought and just left to sit there, not even rented out, fueling the problem further because investors just want a safe and profitable investment.

What do you think the governments can do to avoid this? Put a limit on houses per person? Your opinions?

This is a genuine problem everywhere nowadays not only in Australia. However this is not something that the government should restrict, like every other commodity or asset the inflation in the prices of houses as well. We cannot say that the only reason for the increase in the price of a house is because people are holding more than one or many at the same time.

The real estate is a business where you have to do this all and the investors in the real estate business are doing the right thing for their future. Also if someone is wealthy enough that he can afford more than one house I guess there is nothing wrong in it.
I don’t think the government will play any such role like restricting it to one house per person.

[eternalgloom]

What do you think the governments can do to avoid this? Put a limit on houses per person? Your opinions?

I don't believe that this would be a very good idea, it kinda defeats the purpose of capitalism.
Anyone should be able to acquire as much property as one wants.

Also, bubbles are actually a side effect of capitalism and when the bubble pops, it gives room to new investors/people to get into the market.

[Hydrogen]

Bubbles are caused by cheap credit. See US after dot com implosion - rates were lowered way too much for way too long. The advent of MBS's meant that loan originators didn't have to 'keep' the loans on their books anymore - they sold them on (for fees) to bigger institutions, who packaged them into MBS's (for fees) and sold them off. Not wanting to lose their fees (and bonuses), participants all the way up the line found ways to keep making / packaging / selling more and more loans to more and more borderline customers (who were either greedy, liars or duped).

The common sentiment was that housing could not crash nationwide as it had never done so before, and further, there were only a handful of people who actually understood how the housing bond market worked. Even CEO's of the biggest funds had no idea. They just knew packaging them up and selling them on was very very profitable.

Australia survived the 2008 meltdown, largely due to Chinese stimulus and demand for resources. However it did see an eventual drop in interest rates as global demand slowed in every sector apart from mining. Wage growth has gone nowhere even close to matching house price growth. Low wages hasn't led to less real estate being bought, it has seen people go into more and more debt (check out household debt to gdp stats). Credit is cheap and easy to get. The upswing in housing prices comes from record interest rate lows coupled with a stable job market (now ex perth, Darwin). Wages may not have gone up in years but the cost of servicing a loan has lowered (until recently) - even when you traded off low rates vs price increases.

The problem for Sydney now is that yields are well below inflation, so there is no logical reason to buy as an investor other than chasing capital gains. it is a mania, and has become so unaffordable that a large % of wages now go to mortgage debt. The result is that the retail sector is dying. Rents are high but demand is weak because most of it goes to paying off the banks.

If rates were to rise even 1%, around 20% of households would be screwed, in severe mortgage stress. Australia doesn't control the wholesale rate it pays for credit, that it mostly driven by the wholesale markets. On top of that, Australia's banks are heavily weighted towards residential mortgages, some have over 40% assets in interest only loans and property makes up nearly half of the banks assets. Its an accident waiting to happen.

................

Home loan standards are being reduced worldwide as a form of damage control to compensate for falling wages.

Cheap credit isn't a primary cause, its a symptom of underlying issues involving growing wealth and wage inequality, a higher inefficient tax burden strangling economic growth and prosperity with increasingly restrictive regulations which strangle the livelihood of small businesses we rely upon to create jobs.

[KennyR]

In this government can't make strict regulations, because people are building with their own earnings and hoping for a bigger Profiting. What the government can do is just make the taxation heavier with the person having ownership for two or more houses.

[ubitcoin]

no we don't all know that!
i don't know if you realize this but things are very different in different countries. and you forgot to mention which country you are talking about. for example where i live (which i don't mention it either ) the real estate market has been down for at least 6 months with prices falling even.

it usually is an economical thing and is directly related to how developed or underdeveloped the country is. in developing countries the real estate is usually hot and price are rising. some even consider it a good investment. which is why i am going to buy my first house real soon - thanks to bitcoin price rise i have enough money to do it now!

Yes, it varies from region to region and from country to country but in a general perspective if we talk about the real estate business it is the best business in the world with the high profit margin. On the top is the business of ammunition which gives you the top money making margin in the world which is useless I guess, we should stop supporting it.

Anyway coming back to the real issue that this is one of the best revenue generation businesses for the government and the governments always favor this business to support it and it is good for the citizens as well.

[DRaGoN RaNTaRo]

i don't know if you realize this but things are very different in different countries. and you forgot to mention which country you are talking about.
which is why i am going to buy my first house real soon - thanks to bitcoin price rise i have enough money to do it now!

I think he is talking about Australia,the real estate prices are in a sort of bubble and i hope it will calm down pretty soon as it cannot go up further,congrats on making it big with bitcoin,may i ask how much you have invested in bitcoin for you to be able to purchase a house and when did you invest.