Is australia living in a massive bubble and will it go pop if not why not

[VERYSTORMY]

Where I see an issue is the lending practices or the banks. I know everyone says they are not doing the same as the UK and USA were, but from my experience they are doing far worse. We were shopping around for our first Oz mortgage last year and the amounts banks were willing to loan was incredible. Close to my net income! We ended up using a broker who was telling us that there are no a huge amount of mortgages with no deposit as although the banks don't loan zero deposit, the brokers arrange a personal loan with a separate bank to cover the deposit.

[Guest]

Do you understand what GDP debt means? It's comparing the debt as a percentage of our Gross Domestic Product - which means when they quote the debt league tables, they're taking the size of our economy into account.

 

Here's the table. Unfortunately it's in alphabetical order but it's easy to see that Australia is way, way, way down the list and remember, this is in proportion to our size, not raw data.

 

 

http://www.oecd-ilibrary.org/economics/government-debt_gov-debt-table-en

 

 

Yes I know what it means but i was talking about the economy and its ability to work its way out of these coming problems rather than the debt itself. % figures mean nothing really and can be manipulated to show what you like given different factors.

Fact is Europe etc are on the way back up - Oz is on the way down. Look at QLD, no roads to be rapaired etc as the interest on their debt is about a billion, there bust. All Oz can do to prop up the country's inflow of cash is open the flood gates to immigrants etc... they will bring their cash and spend

[heyyu]

[i imagine many on this forum have never lived in Australia during a recession] i have a couple in my 50 years in the building industry here and we just kept on working,a hiccup,as to the mining industry collapsing it will not stop ,it will slow but its not going to stop. i can't see these companies investing billions of dollars in mining if they think it will just stop dead. as for real estate the chinese are investing big in australian property and paying cash why, i doubt they would be doing that if they foresee a huge crash.they are a very canny race of people

[flag of convenience]

Abbott is doing his best to talk down the economy. Consumer sentiment has plummeted since the budget was announced. People are feeling apprehensive about the future - so spending and investment will take a dive too. It is crazy when Australia has one of the healthiest economies among developed nations that the government is talking doom and gloom.

 

Yes this government has but to my mind personal debt has to be reined in. The constant over confident reading of the economy does little good this side of the boom. Housing for example cannot be allowed to continue to rise. Far too dangerous for the health of the banking system not to say the social implications which are considerable to contend with.

[flag of convenience]

[i imagine many on this forum have never lived in Australia during a recession] i have a couple in my 50 years in the building industry here and we just kept on working,a hiccup,as to the mining industry collapsing it will not stop ,it will slow but its not going to stop. i can't see these companies investing billions of dollars in mining if they think it will just stop dead. as for real estate the chinese are investing big in australian property and paying cash why, i doubt they would be doing that if they foresee a huge crash.they are a very canny race of people

 

No. Chinese are the world's ultimate gamblers. Their housing market is in dire straights. Chinese investors are active world wide not just Australia. They are in the game for different reasons, but mainly to park money overseas away from their government eyes and many are very rich and long term players.

It would be a pretty poor situation if the main players in expensive main city prime locations are only the rich and Overseas Chinese selling to one another.

 

Housing issues go well beyond the mining slowdown. It is a question of affordability. Australia has never had housing so out of whack between earnings and cost before. It only takes interest rates rising to add further affordability issues. Previous downturns in late 90's saw government intervention. First Home Owners Grant for example. Prices have gone beyond first home buyers now and clearly a deficit of ideas in what to do by government and RBA further clouds the affordability issue.

[flag of convenience]

Yes I know what it means but i was talking about the economy and its ability to work its way out of these coming problems rather than the debt itself. % figures mean nothing really and can be manipulated to show what you like given different factors.

Fact is Europe etc are on the way back up - Oz is on the way down. Look at QLD, no roads to be rapaired etc as the interest on their debt is about a billion, there bust. All Oz can do to prop up the country's inflow of cash is open the flood gates to immigrants etc... they will bring their cash and spend

 

Yep. Immigration will not solve the serious underlying issues involved here. A lot with heads firmly buried in the ground. Affordability already a major issue set to escalate. Fact being too much is over priced considering earnings.

[flag of convenience]

Where I see an issue is the lending practices or the banks. I know everyone says they are not doing the same as the UK and USA were, but from my experience they are doing far worse. We were shopping around for our first Oz mortgage last year and the amounts banks were willing to loan was incredible. Close to my net income! We ended up using a broker who was telling us that there are no a huge amount of mortgages with no deposit as although the banks don't loan zero deposit, the brokers arrange a personal loan with a separate bank to cover the deposit.

 

Never ceases to amaze me how many express joy at being granted a mortgage on this forum even. A wonder how many realise the cost and implications of payback?

[Shellybingobingo]

Never ceases to amaze me how many express joy at being granted a mortgage on this forum even. A wonder how many realise the cost and implications of payback?

 

 

I understand and what you saying , you sound like my hubby haha , but it the joy of getting a mortgage off the renting crappy **** we have to put up with , example , when we vacated not long ago . .... Hi to my oh , there is a frying pan missing , and you have left a bath mat and waste bin , which were bran new , I just thought it made the hell hole look a bit better ...

 

if you carnt get back to the property , we will be happy to remove these items and replace the frying pan for 100 dollars out ya bond .

 

i went crackers , got other half email back for I told em bollocks , my oh wrote , hi there , I am willing to come and get the keys to remove these items , but the frying pan was not in the flat when we took it on , my wife has also bought the flat a bran new iron , would you like us to remove this too? Also my wife has paid rent until the end of the week , can we have a refund on the extra 4 days we are owed please .

 

Next minute ute phone rings , give us you bank details we will call it quits full bond refunded ,.

 

They take the micheal heal im sick of it , carnt wait for my house sell back home although I'm not fully settled here think that may help .

 

But I fully get why people are over the moon at whatever Cost does my piggied nut in . My other half does have to reign me in though because he thinks totally different lol . :wink:

[heyyu]

No. Chinese are the world's ultimate gamblers. Their housing market is in dire straights. Chinese investors are active world wide not just Australia. They are in the game for different reasons, but mainly to park money overseas away from their government eyes and many are very rich and long term players.

It would be a pretty poor situation if the main players in expensive main city prime locations are only the rich and Overseas Chinese selling to one another.

 

Housing issues go well beyond the mining slowdown. It is a question of affordability. Australia has never had housing so out of whack between earnings and cost before. It only takes interest rates rising to add further affordability issues. Previous downturns in late 90's saw government intervention. First Home Owners Grant for example. Prices have gone beyond first home buyers now and clearly a deficit of ideas in what to do by government and RBA further clouds the affordability issue.

i agree they are huge gamblers but they also have an eye to the future not just a couple of years down the track,that is probably why the chinese government is buying huge tracts of oz land to secure their food supply. as you live in inner city perth you either have a huge mortgage or have had enough to pay cash. i also lived through the 18 percent interest rate period but i managed as most australians did,no large abandonment of homes,no banks going broke we just tightened our belts and got on with it

[Ausborn]

Yes this government has but to my mind personal debt has to be reined in. The constant over confident reading of the economy does little good this side of the boom. Housing for example cannot be allowed to continue to rise. Far too dangerous for the health of the banking system not to say the social implications which are considerable to contend with.

 

Maybe people have a positive frame of mind as they are movng along with life reasonably ok. I've just bought another house. $366 000. 4 bedroom, media room, lounge , family. Great design. Repayments being $390 a week. A couple working at a supermarket could easily afford the repayments on that. Land sales manager (his 24 has 4 investment properties) having record sales across the state for lend lease. Matter a fact if you buy a block of land at the moment on some of his developments , it wouldn't be ready to move into tell November next year as it's that busy. See Australia is getting the worlds biggest gold mine , we are the second biggest supplier of gold in the world and mining companies saying profits improving.im sure you know all about profits from gas, coal ect. Companies here screaming for form workers pay great , can't find them. Employment for mining positions increasing.Good friend at Toyota says mining companies buying up lots of cars again. This might be why Aussies tend to be quite positive n regards to the economy. Oh yer I built homes and trust me their is 20yr old buying homes at the moment. Not out of reach as you think old boy.

[flag of convenience]

i agree they are huge gamblers but they also have an eye to the future not just a couple of years down the track,that is probably why the chinese government is buying huge tracts of oz land to secure their food supply. as you live in inner city perth you either have a huge mortgage or have had enough to pay cash. i also lived through the 18 percent interest rate period but i managed as most australians did,no large abandonment of homes,no banks going broke we just tightened our belts and got on with it

 

No mortgage due to in 2000 it was cheap enough to pay cash. As was most the houses we looked at including the Burbs. Goes to show just out of whack property has become. Yes I know of the period when interest rates where sky high. But prices were far lower. I'd imagine it would have been better waiting and renting than buying during that period?

I still suggest these times are very different. It is housing affordability not interest rates(which are corrected from time to time) A correction on the obviously over inflated house prices could be expected to impact not just on the folk that bought too expensively but also the banks. Not as easy to rectify as it was back in those days when it was obvious the high rates were the problem.

[flag of convenience]

Maybe people have a positive frame of mind as they are movng along with life reasonably ok. I've just bought another house. $366 000. 4 bedroom, media room, lounge , family. Great design. Repayments being $390 a week. A couple working at a supermarket could easily afford the repayments on that. Land sales manager (his 24 has 4 investment properties) having record sales across the state for lend lease. Matter a fact if you buy a block of land at the moment on some of his developments , it wouldn't be ready to move into tell November next year as it's that busy. See Australia is getting the worlds biggest gold mine , we are the second biggest supplier of gold in the world and mining companies saying profits improving.im sure you know all about profits from gas, coal ect. Companies here screaming for form workers pay great , can't find them. Employment for mining positions increasing.Good friend at Toyota says mining companies buying up lots of cars again. This might be why Aussies tend to be quite positive n regards to the economy. Oh yer I built homes and trust me their is 20yr old buying homes at the moment. Not out of reach as you think old boy.

 

Many don't think very much and follow the herd. Housing in Australia especially the capital cities is seriously unaffordable. This doesn't necessary mean folk don't buy. Out of fear of missing the boat and following the lines saturating the popular press with one sided views on the positivity of real estate many are enticed, regardless to the hardship needing to be endured.

 

How sad if 20 year olds are as you say buying houses. They should be experiencing life rather than committing to mortgages at that age. Yes housing far out can be purchased for the prices mentioned for those wanting to live in such locations. Trade off being usually very long drives to work and poor public transport and social life/environment.

 

To put it into perspective Urban Economics states two thirds of Australians earn less than $52,000 a year. A whopping eight in ten earn less than $78,000 a year.

 

Now take a very modest house costing say $400,000. A worker on $50,000 is facing a price multiple which is eight times their gross pre tax income.

 

Basically two thirds are stuffed in forms of affordability of a $400,000 on the market.

 

Less than 15% of Aussies are on the more reasonable p[rice multiple of five times income of $80,000 or more. By any measure houses are seriously over priced in Australia. Interest rate rises and falling property prices will see any number in houses they over paid for.

[Paul1Perth]

No mortgage due to in 2000 it was cheap enough to pay cash. As was most the houses we looked at including the Burbs. Goes to show just out of whack property has become. Yes I know of the period when interest rates where sky high. But prices were far lower. I'd imagine it would have been better waiting and renting than buying during that period?

I still suggest these times are very different. It is housing affordability not interest rates(which are corrected from time to time) A correction on the obviously over inflated house prices could be expected to impact not just on the folk that bought too expensively but also the banks. Not as easy to rectify as it was back in those days when it was obvious the high rates were the problem.

 

Even in 2000 you would have had to have a fair amount of spare cash to be able to pay cash flag. We got our house in 1992 and haven't paid the mortgage off yet. We aren't particularly bothered about it, it's a part of life and we had a mortgage in the UK and would have got to the end of that one too some day.

 

We haven't been trying to pay it off quickly tbh, it's been handy a couple of times as when you have a mortgage and need to borrow some for home improvements or anything it's pretty easy and the banks will lend you without going through lots of paperwork. Especially if you've been paying your mortgage with them for years.

[Ausborn]

Many don't think very much and follow the herd. Housing in Australia especially the capital cities is seriously unaffordable. This doesn't necessary mean folk don't buy. Out of fear of missing the boat and following the lines saturating the popular press with one sided views on the positivity of real estate many are enticed, regardless to the hardship needing to be endured.

 

How sad if 20 year olds are as you say buying houses. They should be experiencing life rather than committing to mortgages at that age. Yes housing far out can be purchased for the prices mentioned for those wanting to live in such locations. Trade off being usually very long drives to work and poor public transport and social life/environment.

 

To put it into perspective Urban Economics states two thirds of Australians earn less than $52,000 a year. A whopping eight in ten earn less than $78,000 a year.

 

Now take a very modest house costing say $400,000. A worker on $50,000 is facing a price multiple which is eight times their gross pre tax income.

 

Basically two thirds are stuffed in forms of affordability of a $400,000 on the market.

 

Less than 15% of Aussies are on the more reasonable p[rice multiple of five times income of $80,000 or more. By any measure houses are seriously over priced in Australia. Interest rate rises and falling property prices will see any number in houses they over paid for.

 

I don't know anyone of my circle or friends in general that want to live in cbd districts . Australia is set up with offices, industrial , warehouses all outside cbd areas. office and sales staff don't need to be close to city centres if they chose not too. If from the outside looking in its a big bubble , it doesn't look like bursting anytime soon. My lands( same block ) gone up $4000 in the next stage since I purchased it 8 weeks ago. Builder now selling the house for $14 000 more than I got it for cause all the building companies got wind were coming into a building boom again. Way the cookie crumbles. Now with the mining CEOs saying Australia is coming back in the game things not looking good for the big doomsday to Australia.

And flag, as you know it's 2014, most households have two incomes or one working and one getting government help somehow. A mortgage looks more achievable now .

[Shellybingobingo]

To come into a building boom people have got have jobs , you click on poms in perth and see how many people are going back because they carnt get work . Who's going buy these houses if no income coming in . I think personally **** will hit the fan and it will get worse .

 

Hope I'm wrong .

[Ausborn]

Sorry I should of said in regards to the building side I'm talking about brisbane Queensland. My brothers in Perth. Basically talks the same thing. He is flatout . The keep on at him to hire more blokes but he doesn't like big Brickie gangs. Impressive money too. You just have to drive around outskirt areas to see all the residential building going on. Councils are flatout with approvals. Which causes problems.

[Shellybingobingo]

Yeah flat out for how long though knock on effect will happen and is happening , however don't know much about brissie although I'm here . My hubbies fine now here but I still worry .

[Paul1Perth]

Yeah flat out for how long though knock on effect will happen and is happening , however don't know much about brissie although I'm here . My hubbies fine now here but I still worry .

 

I've been wondering how long it can go on in Perth.....for the last 22 years and it's still going. I guess it's slowed down a bit though, Perth couldn't just keep absorbing 1500 people a week, like it was doing. according to the news in January. Don't know what the figures are now but it must have slowed a bit.

 

Every time I drive out towards Yanchep or the other side of Wanneroo I can't believe how many more houses are there and how it's changed since the last time. We hardly ever go South of Perth but I'm guessing that's going to be the same.

[Shellybingobingo]

I've been wondering how long it can go on in Perth.....for the last 22 years and it's still going. I guess it's slowed down a bit though, Perth couldn't just keep absorbing 1500 people a week, like it was doing. according to the news in January. Don't know what the figures are now but it must have slowed a bit.

 

Every time I drive out towards Yanchep or the other side of Wanneroo I can't believe how many more houses are there and how it's changed since the last time. We hardly ever go South of Perth but I'm guessing that's going to be the same.

 

 

I dont know paul , it's just I know lots of people going back , a post the otherday I read getting beyond a joke now carnt afford to eat , theve been looking for months .

 

I feel sorry for people really , a lot of 457 are being laid off though .

 

Lot of rentals available there .

 

Bet people are well peed off with it . I know I would be on the first flight home if I couldn't afford eat . What a dream hey , so **** . X

[flag of convenience]

Even in 2000 you would have had to have a fair amount of spare cash to be able to pay cash flag. We got our house in 1992 and haven't paid the mortgage off yet. We aren't particularly bothered about it, it's a part of life and we had a mortgage in the UK and would have got to the end of that one too some day.

 

We haven't been trying to pay it off quickly tbh, it's been handy a couple of times as when you have a mortgage and need to borrow some for home improvements or anything it's pretty easy and the banks will lend you without going through lots of paperwork. Especially if you've been paying your mortgage with them for years.

 

Not really just that property on a global level was cheap. So said property risen a whopping 300% or around there . Nothing but good luck in the timing and declined bank offers of loans to purchase additional housing at the time. Of course on reflection would have made a substantial profit but more than happy with the path taken. As such I know banks will practically throw money to sign up a customer mortgage or no mortgage. Still get it today with the offers of financial advice. I'm my own advisor thank you very much.

[flag of convenience]

I don't know anyone of my circle or friends in general that want to live in cbd districts . Australia is set up with offices, industrial , warehouses all outside cbd areas. office and sales staff don't need to be close to city centres if they chose not too. If from the outside looking in its a big bubble , it doesn't look like bursting anytime soon. My lands( same block ) gone up $4000 in the next stage since I purchased it 8 weeks ago. Builder now selling the house for $14 000 more than I got it for cause all the building companies got wind were coming into a building boom again. Way the cookie crumbles. Now with the mining CEOs saying Australia is coming back in the game things not looking good for the big doomsday to Australia.

And flag, as you know it's 2014, most households have two incomes or one working and one getting government help somehow. A mortgage looks more achievable now .

 

That's another point we differ. Most we know would love to live closer to inner city locations. They all visit us far more than we them due to the closeness of eating places and pubs. No drinking/driving issues, they can stay the night and get a bit of vibe at the same time.

 

From inside I'd say folk are oblivious to the bubble. Head in sand, don't want to see the situation up close and way laid by the continuous sea of industry related positivity. I mean housing is not even a good return in as far as yield. You can earn 4% in a normal bank account and though taxed do not have rates, water, management company costs, insurance, government fees, followed by servicing a mortgage before one cent is paid of the principle.

 

As I said house prices declined last month. Something in the region of 1.2% from memory. Affordability is a major issue and as for being 2014, the money lenders factored duel earning house holds way back in the 80's.

 

Crunch the figures. While 30% of households do bring in a combined income of over $120,000 a year, meaning a whopping 7 in 10 bring home less. Pretty unaffordable by most reckoning. Those estates built on city outskirts likely to be the first to decline in value.

 

Besides prices in decline, the number of rentals is ever increasing. A sure sign boom conditions have wanned.

[flag of convenience]

To come into a building boom people have got have jobs , you click on poms in perth and see how many people are going back because they carnt get work . Who's going buy these houses if no income coming in . I think personally **** will hit the fan and it will get worse .

 

Hope I'm wrong .

 

No a correction has to come as prices are out of whack with declining wages and growing costs. Yes wages have had there biggest fall since the early 90's, close on a quarter of a century. Things don't happen over night. The decline takes time to impact on housing and the like. Part could well be to do with the budget and gloomy economic talk but wages are falling.

The question will be by how much and how far half the population is impacted by these falls or perceptions of getting poorer.

[flag of convenience]

Sorry I should of said in regards to the building side I'm talking about brisbane Queensland. My brothers in Perth. Basically talks the same thing. He is flatout . The keep on at him to hire more blokes but he doesn't like big Brickie gangs. Impressive money too. You just have to drive around outskirt areas to see all the residential building going on. Councils are flatout with approvals. Which causes problems.

 

Same in Perth, but remember the time lapse from drawing board to commencement of construction to completion is considerable. It is not an overnight impact. We are not long into the winding down process along with negative sentiment being expressed about the economy by present government.

Last month was the first where wage increases dropped behind increasing costs. The impact of folk feeling poorer has not fully seeped through yet as takes time. Not only did we see wages in decline but we saw house prices in decline in the Perth market at least and rents as well in decline.

 

Of course Sydney, Melbourne and to a lesser extent Brisbane have the Overseas Chinese shoring up the market to an extent. Just take a look at First Home Buyers activity to get an idea of the state of the housing market.

[flag of convenience]

I dont know paul , it's just I know lots of people going back , a post the otherday I read getting beyond a joke now carnt afford to eat , theve been looking for months .

 

I feel sorry for people really , a lot of 457 are being laid off though .

 

Lot of rentals available there .

 

Bet people are well peed off with it . I know I would be on the first flight home if I couldn't afford eat . What a dream hey , so **** . X

 

I think the government's attitude would be along the lines of plenty more where those came from. Folk should realise immigration is but a business and the what $30,000 spent in the entire process is a win for Australia even if a loss for the migrant.

 

Wait till we see more Aussies leaving for greener pastures.

[Shellybingobingo]

I think the government's attitude would be along the lines of plenty more where those came from. Folk should realise immigration is but a business and the what $30,000 spent in the entire process is a win for Australia even if a loss for the migrant.

 

Wait till we see more Aussies leaving for greener pastures.

 

yes that's exactly what my hubbie said , come to perth , Australia needs you , we will sell you the dream for business , but we want your money . Haha . Not funnie though .