what_next wrote on Mar 20^th, 2011 at 5:40pm:


no wonder why prices just kept on rising ..

China found a way to rort the west and their capitalism by making us believe they are better off than they are. They built that crap to fool the west into thinking their economy is flourishing....nothing more than to boost their GDP.......it's a false economy. We are sucked into thinking that China's booming economy will keep us afloat.

We have a similar thing happening in Qld....high rise apartments.....empty, no one to rent them and no one to buy them.

Carry on with the drivel.......bye

>> sighs <<

Last Nail .. you MAKE money in real estate OUT OF LAND NOT AIR SPACE!!!!

Next time I'm in Melbourne .. we're definitely getting together for a coffee and a chat about real estate ok?

BTW has Bobby spoken to you yet?

Lisa Jones wrote on Mar 24^th, 2011 at 1:05pm:


Yes he has

Yes I understand about the behaviour of real estate and share markets. Both should behave similarly but in different time frames. Still the same adage applies. Buy low sell high but not when Governments start intervening with bailout packages and tax concessions which causes distortion of the market.

Your opinions are reminiscent of someone who once said said that you should stick to blue chip shares because they are a safe bet and then what happened after the last dot come crash ?? No company was spared in the fallout

Sir lastnail wrote on Mar 24^th, 2011 at 1:23pm:


It isn't exactly the same though. Property behaves differently to stocks and shares. They're both beasts but they're different beasts (so to speak). Not all beasts are the same.

Ok so you now know also. Is he ok? I held back as long as I could before speaking to him.

All that’s required for house prices to fall is for people to think that house prices will fall.  Just in the same way that share prices can fall when they reach a peak.  Sellers look to get out first before everyone else gets the same idea.

But because it can take so long to sell a house, the stock of housing on the market can build up quickly.  And before sellers know it, they’re no longer the only house on the street for sale… they’ve got competition.  And as you know, in all areas of an economy, competition tends to drive down prices.

And let me tell you something, there’s a whole bunch of competition on the market right now.

Competition among sellers

This week SQM Research sent out its latest analysis of housing stock on the market.  As you’ll see in the table below, there’s been a huge increase in the number of houses up for sale:

Source: SQM Research

In fact nationally there has been a 46% increase in the supply of housing for sale, compared to the same time last year… 46%!

Talk about a housing glut…forget the housing shortage lies.  Australia has a huge excess of housing.  Incidentally, we did hear our old pal Peter Switzer banging on about the housing shortage last night on Sky Business Channel… it seems you can’t keep a good excuse down.

But what will the glut do to prices?  That’s right, push them down thanks to increased competition.  I can picture buyers now, “Why should I pay $500k for your house when there’s one down the road for $480k…”

Forget “large external shocks”, or a “doubling of unemployment or interest rates”, all it needs is increased competition… and we’ve got it.

But Ms. Irvine also ignores the fact that different sellers are in different circumstances.  Someone who bought a house for $100k, may be happy to accept $300k, whereas someone who bought for $350k may not be so happy.

But that won’t stop the first house from selling.  And it won’t stop house prices from falling just because someone chooses to hold out for a higher price – which may never arrive if buyers can get something similar for cheaper.

You see, the idea that something major has to happen in order for prices to fall is nonsense.  There doesn’t need to be a big bang catalyst to spark a house price rout.

All that’s needed is for the fundamentals of supply, demand, price and quantity to play out.  And that’s happening right now.

Interest rates are up 20%

But what about the idea that interest rates need to double?  Not true.  When interest rates are kept artificially low, it sucks in a whole bunch of borrowers.  Those that wouldn’t otherwise have borrowed are drawn into the market.

As with anything, artificially low interest rates create malinvestments.

And as Ms. Irvine correctly points out, it encourages lower lending standards too.

Because so many borrowers have been sucked in on low interest rates, it distorts the market.  But at some point the demand for borrowing will begin to dry up, and investors who would otherwise have put savings in the bank will look elsewhere for higher returns.

That creates a problem for a Ponzi banking system.  Banks need to keep filling the hopper.  They need more deposits and more borrowing to keep the Ponzi finance flowing.

When that slows down – as it has – the banks need to raise interest rates.  Simply so they can encourage savers to deposit money, or to encourage investors to buy their bonds.

Remember all the crazy offers the banks were making to attract deposits last year?  Yeah, of course you do.  That’s Ponzi finance in action.  It was an indicator of the market starting to tip over.

But here’s the thing.  If the bank has lowered its lending standards and kept interest rates low for too long, interest rates only have to rise marginally in order for it to have a big impact on borrowers.

It’s just like leveraged investing.  It works great when things are going your way… and… not so great when things are going against you.

For instance, the ANZ Bank reckons the median house price is $559,000.  Let’s say someone has taken out an 80% mortgage, borrowing $447,200.  An interest rate of 5% would mean repayments of $2,401 per month.

But should the interest rate increase to 7%, repayments increase to $2,976 per month.

That’s an extra $575 per month of after-tax money.

And if interest rates go to 8%, then you’re looking at monthly repayments of $3,282… an extra $881 per month.

“Oh, that won’t happen,” the spruikers say.  Really?  Too late, we’re almost there.  Mortgage interest rates got down to about 5% in 2008.  Today they’re above 7%.  And that’s why prices are on the way down.  That’s about a 20% increase from the low point.

“Oh, but people are ahead on their mortgages, the RBA says so.”  Don’t trust those figures too much.  Sure, plenty of people would have gotten ahead on their mortgages.  Especially as interest rates dropped in 2008 and 2009.  But trust me, it won’t take long for that benefit to be wiped out.

cont...............

what_next
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You surely can't be right, Bligh is a Labour politician, they are not in business of real estate, they are to look after the little people.
I'am I completely wrong?