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goneski

The Great Australian Property Boom/Bubble/Ponzi

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Personally I hope it crashes hard. I've been following the Australian economy for a few years now including housing and think it's largely just a gigantic bubble. I think it's disgusting the way in which government policy and greed have turned the basic necessity of shelter into a speculative asset with people thinking they are somehow clever "investors" for sinking money into an unproductive asset seeking capital gains.

We've had the GFC, crashes in Ireland and other countries to mull over plus warnings from the OECD, IMF and countless other bodies yet here we are -- increasing unemployment, mining falling of a capex cliff, falling iron ore prices, future decline of the car manufacturing industry, decreasing terms of trade, a massive brain drain of skilled workers (scientists, engineers, etc) emigrating, an oncoming recession -- and all we have left are properties to sell to one another at inflated prices. The 'lucky country'.

I really hate to say I hope it crashes hard, but I don't feel there's any other option at this point. The can has been kicked down the road for long enough, and nobody seems interested in any meaningful reform. It seems as though the Australian economy (not just property) is a poisoned chalice, and both of the major parties will do everything they can do keep it propped up which just makes the prospect of a crash even more frightening and damaging. It will be a harsh but well deserved lesson, IMO.

Thoughts? :)

I'm sure I could add a heap more here (discussing misallocation of capital into property from productive investments, infrastructure, government policy -- negative gearing, CGT, SMSF leveraging into property, the banking sector, etc) but it's a massive topic and would be interested to hear other people's opinions before just blurting out a massive stream-of-consciousness diatribe.

I suppose the main reason I only bought this topic up now is that it seems to have become quite prominent in the media as of late. I think there are two potential outcomes here -- people leverage in due to the fear of missing out, or investors become spooked and start panic selling.

What are your thoughts? Do you think there is a problem with housing affordability and a bubble? If so, is it nationwide or contained to Sydney/Melbourne and possibly mining regions? (We've already seen price collapses in some areas of QLD and WA). If you think there's an issue -- how do you think it can be resolved? Or can it be resolved? Do we all just need to "get a job that pays well" ~ Joe Hockey?. Are you bearish/bullish/don'tgiveashitish? Do you believe the Australian economy is a one trick pony that has been completely hollowed out and we're now on the downslope toward bearing the consequences?

I thought this might be an interesting place to ask..

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The value of property historically comes by virtue of the fact you can GROW FOOD ON IT. :blink:

We seem to have largely lost sight of that. :unsure:

Get your fruit trees planted and vegie gardens in order would be my best advice, along with some chooks...

I was listening to a RN program on this topic the other day. It's a bubble alright, regardless of the skirting/downplaying of the topic, and it will burst. Major cities will ostensibly go first though, I guess? :huh:

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I agree with much of what you say goneski..There is definitely a bubble in property across big parts of the country. I am acting to limit my personal exposure right now.

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Contrary to what most think, i believe it is crashing, that Australia is in depression, unemployment is high, the gov't isn't helping by implementing work for the dole which actually takes more jobs away. Of course the gov't says our economy is strong but it's a false economy. As you have stated, there are so many things wrong with the country's and I think it can mostly be blamed on the gov't, their policies and the fact that the gov't and business are corrupted, i.e. gov't of people not for people. Only have to read the paper they are telling us, rubbing it in our faces how corrupt things are, and by doing so they are saying 'we can do nothing about it'....

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Don't forget all the shitty 'austerity' measures in last year's budget (such as the waiting period for Newstart). It's amusing to see how they've since backtracked and claimed the economy is 'strong' despite having an increased deficit (can't remember the amount -- but the forecast has doubled), drop in iron ore prices, increase in unemployment, etc.

I wonder if the Coalition are half expecting Labor to win the next election and hoping it all blows up in their faces so they can bitch & moan when in opposition whilst blatantly lying about being 'good economic managers' during their term.. But don't get me wrong, I also despite Labor.

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I really dont know enough about the economy to make a comment but i borrowed just enough to buy a small house, decent sized block on the outskirts of melbourne and im happy with my small patch i call home.

It was a bit scary how much the banks were willing to lend us (800k) and we are far from well off. We would of struggled to repay the loan and sooner rather than later would of had to forfeit on the loan

Get your fruit trees planted and vegie gardens in order would be my best advice, along with some chooks...

Got them sorted :-)

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I wonder if the Coalition are half expecting Labor to win the next election and hoping it all blows up in their faces so they can bitch & moan when in opposition whilst blatantly lying about being 'good economic managers' during their term.. But don't get me wrong, I also despite Labor.

well considering coalition=business I don't think so, and business groups want to introduce a raft of measures including lowering penalty rates/minimum wage and increasing consumption taxes, mostly for the purpose of freeing up money to give business tax cuts. increased consumption taxes are a given but wages are a pretty sacred cow and tough to hit, much like housing policy.

I thought it was telling seeing hockey and his wife's property investment portfolio, they'd get quite a bonus off all the tax breaks afforded to home owners. do you know if there's a list of how many politicians own investment properties? i'd bet there's a fair few of them who benefit directly off housing policy. it's not illegal but is it ethical?

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What is also disturbing is that this housing bubble has encouraged lazy fund managers to push money into the market, creating a feedback loop, and at the same time, diverting money from investment in technology and research. This lack of investment now will come back with a massive vengeance when the economy declines due to the bursting bubbles in housing and mining.

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Smoke and mirrors economics indeed

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