Here we go again with the housing industry blaming things like stamp duty (and interest rates, which are still at all time lows) for housing affordability problems today while the real reason - HOUSE PRICES (which they are largely responsible for being at the outrageous level they're at) conveniently 'flies under the radar' once more.

I said some time back on another forum that the point would soon be reached where people would no longer be able to - or want to - pay the ridiculous prices (caused purely by GREED) being asked for these days just to have a roof over one's head.

The housing industry should have been heavily regulated years ago. Then, maybe house prices and private rents would not be as unaffordable as they are now and we wouldn't have tens of thousands of Australians on ever increasing public housing waiting lists with many of them living on the streets and in cars, etc.

It's the housing bust. Every boom has a bust....eventually. This would have happened over a year ago, except for the FHOG, which kept the prices over inflated. Perth prices have dropped massively in some areas.

It will be interesting to see if the government will think up some way to intervene this time. Maybe, because I'm sure they have the odd investment property that they will need to look after.

I predict the govt. will stick their nose in to keep the housing industry going, after all, that is our main industry.

Where would we be if our housing and mining industries busted in the same year? Mining.....that's another story.

Ex Dame Pansi wrote on Nov 15^th, 2010 at 7:35am:


so they want to encourage the punters to go into more debt just to keep the bubble inflated just so the real estate scammers can get their pound of flesh !! And all in the name of helping out first home buyers of course LOL

Lets see what can they do ?

- quadruple the first home buyers scam ?

- let more non residents come in and buy up property ?

- give more tax concessions to greedy property speculators and hoarders ?

what a joke this place is

nail you've not read how many properties are being sold to foreigners?? prices will not fall until that is removed from the equation, you can rant and rave all you want but property has doubled in price every 10 years since 1900s.

Today and tomorrow is no different.

You need to find another topic, preferably one you have a clue about.

From Money Morning....

The Real Estate Institute of Victoria (REIV) announced today:

“The Clearance rate this weekend is 61 per cent, compared to last weekends 59 per cent.

“There were 836 auctions reported this weekend, of which a total of 508 sold and 328 were passed in, 210 of those on a vendors bid.”

Funnily enough, last week the REIV said that “920 [auctions] expected next weekend…”

Which tells you that roughly 10% of the auctions that were supposed to take place this weekend didn’t. Or if they did, the real estate agents don’t want to tell you about them.

In other words, rather than a clearance rate of 61%, you’re looking at a clearance rate closer to 55%. And that’s for Melbourne which is supposed to be the housing auction capital of Australia.

And if you look at the handy chronology of auction results and previews on the Castran Gilbert Real Estate website, you can see how the number of actual auctions taking place each weekend is becoming significantly less than the number predicted the week before.

The trend is telling you that more and more properties are going up for sale, but fewer and fewer are being sold.

You can expect this to get worse as sellers become ever more desperate to flog off their over-leveraged properties… and so much for the property shortage, the REIV says, “over 1000 auctions expected for each of the next three weekends and buyers are more cautious in light of the banks decisions to increase rates above the decision of the RBA.”

The spruikers wouldn’t be worried would they? Of course they are. They’re petrified in fact.

Our old pal Michael Pascoe over at The Age is clearly on edge at the number of housing bubble stories doing the rounds. For instance, he makes the typical mainstream mistake of assuming higher income earners are safe from mortgage stress. He writes:

“As for the National Centre for Social and Economic Modelling’s ‘mortgage pressure tipping point’ of 30 per cent of disposable income going on repayments, it means little without consideration of how large that disposable income might be and the other demands on income. If a household takes home $150,000 and chooses to spend $50,000 of it on buying a roof, living on $100,000 is hardly any form of absolute ‘pressure’.”

Really? Obviously Mr. Pascoe doesn’t appreciate that most people tend to live up to and even beyond their means. Which is rather the point about why excessive borrowing is having the impact it is.

Those with $150,000 of disposable income are likely to have the lifestyle of someone with a $200,000 income, just as a $50,000 income lives the life of someone with a $70,000 income – hence the reliance on debt Michael!

Besides, he shouldn’t forget that most of the newbie borrowers, sucked in by the first home buyers bribe are forking out 50%, 60% or more of their income on mortgage repayments.

But perhaps the best way of showing the impact of what’s happening is a chart we came across when we were fiddling around on the Interweb at the weekend. We thought we’d pay a visit to the website of our old pal, Prof. Steve Keen.

Last week the prof wrote an article saying that Australia has already experienced competition in the banking sector, and that further competition wasn’t necessary. Instead of competition:

“What we need are methods to regulate the volumes of debt offered by the banks to stop this happening again, without putting upward pressure on the cost of households have to pay for it. That may sound like an economic impossibility, and it would be if ‘free competition’ between banks were expanded.”

As you know, we believe regulating something is a waste of time. The banks are supposed to be regulated already, but that doesn’t stop them from issuing ever greater amounts of debt so that now the banks have little more than a few cents out of every dollar of depositors’ money on hand to meet their obligations.

This has been the result of manipulation of interest rates which has kept the rate artificially low and encouraged more people to borrow. As Prof Keen notes:

“Be careful also about wanting a lower price – in terms of the margin between the RBA’s base rate and the variable mortgage rate. One way price can be driven down in competition is by offering a lower quality product…”

We couldn’t agree more. But we wouldn’t say that it’s competition that’s to blame. Competition in any part of an economy is always good for the consumer, even in banking.

But it’s the manipulation of the interest rate plus other forms of government interference that is the main cause of excessive borrowing rather than competition.

Anyway, here’s the chart from the Prof that caught our eye:



Source: Debt Deflation


As you can see, since the early 1990’s the value of mortgage debt as a percentage of gross domestic product (GDP) has gone through the roof.

The Prof states:

“Back when ‘the recession we had to have’ began, mortgage debt was a mere 17% of GDP.”

Now, if you look at the chart, it’s hit almost 90% of GDP. In other words, over a four-fold increase in mortgage debt exposure during the last twenty years.

But the thing that really interested us the most was the comparison with unemployment that the Prof used on the chart. If you put them in a ratio, then in 1990, the amount of mortgage debt against the unemployment rate was about 3:1.

Today, the ratio is around 16:1.

Worst slump in 2 years....wellllll what can anyone say except thats labor for you!

laborfornever wrote on Nov 15^th, 2010 at 1:09pm:


is that doubling with or without the first home buyers scam and tax concessions that favour greedy speculators and hoarders ?

Just another one of the gimmicky property myths designed to suck punters into massive debt which way exceeds their meager salaries and ability to pay off

Where did you get the data to support your claim that house prices double every 10 years?
I know of times that the property prices did more than double in 10 years, the late 70's, but at that time the wages of labour increased even more.

Here is Last "Chicken Little" Nail again, telling us all the sky is falling.

You have been telling me that for years Nail yet Im still making money out of it.

Verge wrote on Nov 15^th, 2010 at 9:27pm:


is that you making money with or without the first home buyers scam to keep the bubble inflated ??

Poor old Verge expects first home buyers to borrow way beyond their means to buy his overinflated properties but is the first one to cry foul when low income workers demand a fair pay rise so they can pay off their overinflated mortgage debts

Yes its alright when easy money is being funneled into your pockets without worrying about the consequences of how it has to be payed back

Verge wrote on Nov 16^th, 2010 at 10:57am:


You have only done well out of chiseling off other people who don't abide by your fathers advice. Who did you sell your last house to ?? Was it one of those first home buyers that you have no sympathy for ?? If it was do you still think you have done well at the expense of someone else's financial misery ??

You expect to reap the benefit from people who have been conned into the euphoria of a Government induced property bubbled but at the same time you are completely dismissive of the punters who have borrowed way beyond their means just so they can feed leaches like yourself

This is not the worst slump in 200 years or the worst in 20 years, this is the worst slump 2 years.

Quick, abandon your homes everyone and head for the hills, it's the financial armageddon that was foretold in the Book of Revelation.

And loe the Grinning Agent shall smile and tell ye that your home is still not worth more than what someone is willing to pay for it. There was much wailing and gnashing of teeth among the property owners for they had been kidding themselves after watching too much reality TV.

But as the saviour promised, soon will cometh the recovery and thy homes shall still be worth what someone is willing to pay for them as it was before and will again.

All hail the recovery and Better Homes and Gardens for they are the true prophets of home ownership.

culldav wrote on Nov 16^th, 2010 at 11:32am:


What you have quote is simply someone who is dreaming.

People need to look objectively at property.  For example, if the building is worth $200k, fencing $5k, Garden $20k and Shed $10k that leaves a land value of $114k.  No peice of dirt can go up 43% in 7 months unless something amazing happens like a new mine or a massive manufacturing company locating there. 

Because the costs of building, fencing etc are still there.

Verge wrote on Nov 16^th, 2010 at 12:03pm:


Thanks to the Government induced property bubble and the REIV repeatedly talking about property hot spots in the media and the next big boom suburb this is what has been happening Don't miss out - buy before house prices double in the next 6 months !!

Where are the property hot spots now ? Where is the REIV to pump it up on Today Tonight ??

No mention in the Herald Sun except a slump. How times change quickly

Just like Joesph Goebels said if you tell the same lie enough times people believe it as the truth

Sir lastnail wrote on Nov 16^th, 2010 at 12:39pm:


My responsibilites lie soley with my wife and soon to be child above all else, then my family, then friends.

Call me selfish, but to be honest I can sleep at night with decisions I have made.  I have never ripped anyone off and anyone who has bought from me did so with no pressure.  They seen value in what I have sold.

If someone wants first off what took me 10 years to achieve, thats their problem, not mine.

Sir lastnail wrote on Nov 16^th, 2010 at 3:03pm:


Geese, I'd like to be debt free by my 60th birthday....being debt free by 35 is a Paris Hilton dream....

Sir lastnail wrote on Nov 16^th, 2010 at 3:03pm:


Firstly, I didnt tell anyone anything.  I set my price, people made an offer and I either accepted or rejected.  I dont do negoiation well.  I just say yes or no.  When I buy, I do the same thing, I make once only offers and state that when putting them in and give them 48 hours after which I take it off the table and thats it.  That way I know my price and they too can either accept or reject.

Secondly, I bought what would be called renovators delights and did just that because its one of my favourite pastimes. 

Thirdly when you come from a building family you can do top notch work for little price.  You buy structurally sound homes and work with them.

Fourthly, Ive rolled profits into the next one, hence my upgrading.

You seem to have me confused with what you think I am because of my voting leanings.  I started at 18 with zero and no backing from my family, and have done well.  While most were pissing up weekends and travelling I was working, be it on the house or at work.  Everything we have is because my wife and I have worked very hard and been wise with our money.  We have never overextended.

My advice to first home buyers, start off with a two bedroom weatherboard and apply a bit of elbow grease and hard work and make something your own.

Instead, I see first home buyers building houses larger than the one we are building now, but because they have never done any decent building work prior have no idea what things cost, what sizes work and layouts.  All they are thinking about is a room for the pool table and a bar.

perceptions_now wrote on Nov 16^th, 2010 at 5:54pm:


Exactly right.
We've had ONE poor weekend of auction results. Which really isn't surprising considering the politicians and media have been working themselves into a frenzy about the Banks raising interest rates over the past couple of weeks.

Ex Dame Pansi wrote on Nov 17^th, 2010 at 5:56am:



I see you have aquired your PhD in both economics and strategic defence issues, well done. 

Ex Dame Pansi wrote on Nov 17^th, 2010 at 7:39am:



Surely you're not equating my typo with your cretinous statements . One is a product of fat fingers and careless review and the other is a product of ignorance and the Dunning-Kruger Effect, guess which applies to you. 

BTW, I didn't say anything about the housing slump, just about your mind numbingly stupid comments about economics and defence.