Discretionary spending falters at expense of housing bubble
February 13th, 2011

Two years ago we ran an comprehensive story on what we believed would be the effects from propping up the housing market with the First Home Owners Boost. Titled Time to pick and choose: Housing or Jobs we suggested that propping up and keeping house prices artificially high would eventually see discretionary spending fall, once the capacity to borrow for any shortfall dried up. Simply put, something has to budge in the household budget, if house prices were to continue to outstrip wages. At the time we wrote :

   The housing market remains the key to the problem. The longer house prices remain artificially high in comparison to household incomes, the more households will need to spend on this expense, and hence the less money that can be spent on other goods and services underpinning domestic jobs.

Two years later and the effects is starting to take effect. Blair Speedy from The Australian newspaper reported yesterday :

   IF the army is looking for somewhere to put a new shooting range it might want to consider one of Australia’s many shopping malls.

   Judging by the number of lunchtime shoppers this week in Melbourne Central, one of Australia’s busiest shopping centres, they could be pretty certain they wouldn’t hit anybody.

Growth in annual retail turnover for December is now at the weakest level since 1982 and its believed the market has deteriorated further. According to Russell Zimmerman, the Executive Director of the Australian Retailers Association “The first week of sales after Christmas went quite well, but beyond then, things slowed right down.” He told the Australian, that some retailers reported falls of up to 15 percent last month (January).

Department Store Myer CEO Bernie Brookes, reported a “significant and rapid deterioration” in sales in January. Mr Brookes, a retail veteran of more than 30 years said “I’ve never seen the consumer so fragile,”

Chief Executive of the Australian National Retail Association, Ms Margy Osmond said “Clearly their [customers] attitude is now that it has to be a bargain, and it had better be the best bargain around, before they’ll spend on anything discretionary.”

http://www.whocrashedtheeconomy.com/

hmmm, might be some buying opportunities around the corner.

Verge wrote on Mar 3^rd, 2011 at 11:54am:


The Sydney domestic property market is rising. That's a fact.

We need to focus on where we are at present .. in order to work out wtf we're gonna do next (ie in the future).

Anyways .. as I've posted earlier .. I'm off this Saturday to bid in THREE back to back auctions.

I am predicting the following will occur:

1) ALL THREE homes will sell well above their reserve price.

2) I will be bidding against other fellow Aussies AND cashed up Asians with heaps more money thanks to the cheaper interest rates which THEY can access and we Aussies can't.

3) ALL THREE homes will be sold .. to the Asians as per 2).

I've seen it all before .. and for some time now.

I am hoping to come back on here and post that I was wrong. Why? Because if I am wrong .. it will mean I was a successful bidder and I've bought one of the homes.

I swear to come back to this topic on Saturday night and tell the truth, the whole truth and nothing but the truth so help me Mod lol

No as highlighted I was not talking about the Sydney Market.

BTW if you came 2 hours up the freeway your 1.5 would buy you a hell of a lot more with lake or Ocean views thrown in.

- dsmithy

Where roughly? Newcastle?

Verge wrote on Mar 3^rd, 2011 at 11:54am:


The Sydney domestic property market is rising. That's a fact.

We need to focus on where we are at present .. in order to work out wtf we're gonna do next (ie in the future).

Anyways .. as I've posted earlier .. I'm off this Saturday to bid in THREE back to back auctions.

I am predicting the following will occur:

1) ALL THREE homes will sell well above their reserve price.

2) I will be bidding against other fellow Aussies AND cashed up Asians with heaps more money thanks to the cheaper interest rates which THEY can access and we Aussies can't.

3) ALL THREE homes will be sold .. to the Asians as per 2).

I've seen it all before .. and for some time now.

I am hoping to come back on here and post that I was wrong. Why? Because if I am wrong .. it will mean I was a successful bidder and I've bought one of the homes.

I swear to come back to this topic on Saturday night and tell the truth, the whole truth and nothing but the truth so help me Mod lol

Verge wrote on Mar 3^rd, 2011 at 11:54am:


and there will be some chink outbidding you on the bargains as well

I've got a better idea. Why don't we all down tools and go on strike. Let the chinks with their cheap loan money run the economy and they can buy as many houses as they want. They can run as many two dollar shops as they like and they can import as much sh.t from china as they like. Let them pay taxes for a change and the rest of us aussies can go on an indefinite holiday and live off the dole !!

That's what the government is asking for IMHO !! Why would you bust your gut paying taxes when the Government is so keen to sell you out to a bunch of foreigners who have contributed nothing to the country except decimate its manufacturing base. These Governments are really really sick.

- Last Nail

Last Nail .. you're basically having a tantrum now lol .. and that's perfectly understandable. (NB I have those all the time before I head off to an auction).

You and I go back a long way as MB friends .. and you know my family and I are obsessed with passionate about real estate. True?

This is what I think we ought to do .. we need to ride the annoying and frustrating wave of govt policy idiocy insofar as domestic real estate in Oz is concerned.

In short .. I am saying we as Aussie citizens .. need to function around it in the hope that some govt in office will finally be voted in and do something revolutionary ie .. something sane.

I don't believe giving up is the way if we're going to move forward (thanks Julia lol)