Australia: Hard or soft landing?

21 Replies to “Australia: Hard or soft landing?”

1. It sounded bad up until your last comment about Swan knowing his job. Now is sounds impossible.

   If his job description is Fabian redistribution of wealth and instigating class warfare by fanning the flames of jealousy in a desperate bid to hold onto power, then it is job well done.

   1. Impossible would be an understatement.

   2. And Joe Hockey would be any better ?

2. As far a Wayne Swan is concerned I think that is a big ask

3. Our housing prices are being keep artifically low by the Foreign Investment Review Board. Remove the restriction on foreigners buying houses in Australia and then we would see the true value of houses in Australia.

   1. Then to be fair we should also also remove capital gains concessions and negative gearing on investment properties.

4. Their predecessors only pretended to know their jobs. Their hubris is why we’re in this mess. Despite any rhetoric the current lot have continued to show similar form. How can we rely on these ‘new’ pretenders to put their ego’s aside & do the right thing by the masses instead of their own & other powerful vested interests? Nothing but puffed up Sock Puppets – the lot of them!

   1. They spend all their time playing politics and little time doing their jobs. Which is why I favor the Swiss model of government.

      1. AGREE absolutely Colin , run the place like a business not a charity

5. Colin—I don’t think you have clearly made your case for a downtick as opposed to an uptick , which I hope for.
   Take housing—I tell people this is the best buying opportunity in 20 years. New supply is down, Net migration over 200,000 pa , Natural Increase is high ( bonus helps) —so demand is growing. So Supply down , demand up generally means one thing.
   Oh and almost forgot —lowest interest rates I can remember and almost full employment.
   Question—-does continual negative outlook from commentators cause us to stay bogged ?
   Of course it does.

   1. Appreciate your views.

      If supply grows at a slower rate than population then you would expect prices to rise but there is another factor besides population growth that impacts on demand: availability of credit. If the banks won’t/can’t lend, demand shrinks. So we compare housing credit growth to supply growth. If the former exceeds the latter, prices will rise. If not, they will fall.

      1. I see no evidence that Banks can’t/won’t lend. Sure lending standards are tougher ( they needed to be )
         but rents are rising ( as supply falls ) so the Investment case is stronger The US housing market is definately passed bottom ( Feb 12 ) and gets a little better each month.
         Property has always been a way to wealth in Australia ( with blips every 10 years ) . Soon the cashed up investor will make a move & the Banks will lend because these people have substantial deposits.
         I remain positive.

      2. “I see no evidence that Banks can’t/won’t lend.”

         How about falling credit growth and shrinking net interest margin?

      3. There is , imo, no evidence of Banks not willing to lend. The falling margin is simply a relection of falling Interest rates. People are reluctant to borrow, and a lot of this lack of confidence is the constant stream of negativity from financial commentators and doomsdayers. Look at the recovery in US housing . Sheepish australians will eventually regain confidence when Uncle Sam says its ok to do so.

6. Working as a real estate agent it is plainly obvious that the contraction in credit is helping to drive house prices lower, it is becoming increasingly harder for people to borrow anywhere near the levels that they have in the past few years. Anyone who says the banks are still lending like they used to are just kidding themselves, the contraction in credit is happening throughout the world and will most likely continue for many years to come.

   1. Thanks for backing up the stats with a view from the coal-face. I suspect you are right: the contraction will continue for years to come.

   2. Frank—The Banks are not lending like they used to—and this is good—-far too loose previously—and people introuble now as a result of obtaining loans that they should not have got—- But Banks will lend to people with sufficient capital—Sidelined Investors may come back to the market as FTD rates decline. I tell my clients that this is the best buying opportunity in 20 years—-

7. It is very risky for home-buyers to fully extend themselves financially in times of low interest rates. A prudent buyer will ask their mortgagee what their repayments would be if interest rates were 10 per cent. He/she will then make repayments at that level thereby reducing their capital debt now, as well as limiting the risk of increased repayments in the future. If the buyer cannot afford the repayments based on a 10 per cent interest rate, he/she simply should not purchase property. The real prospect of a forced sale and/or negative equity must be avoided.

   1. Otherwise lock in a fixed rate for 15 years or more.

8. I will pay Stam Duty to Goverment from Taxed money (double dipping), I will take all risk of investing property,
   rental income risk,
   Insurance cost
   Mortgage pyaments
   Damages by tenats,
   maanaging costs, etc

   then I will pay half of the profit as Capital gains, I will worry for all Tax returns, At the end If I am not going to have some considerable profit Why will I invest?

   Negative gearing is really applies If you have big salary, and 50% CGT discount applies after a year holding.

   If Govermnet wanst people to invest on property they should give more incentives like removing or reducing Stamp Duty.

   Atila Esener

   1. Reliance on stamp duty by the states is unhealthy for the housing market: they try to entice first-home buyers to prop up an overbought market.

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