Is anyone else concerned about the Australian economy?

[SusieRoo]

I am becoming increasing concerned that many Australians don’t appear to we aware of the dark clouds gathering.

A year ago it was just a few internet profits warning of 30% fall in house prices and I just put this down to conspiracy theories and fake news. Back then everything was rosy in the mainstream media, but now there is an ever-increasing flow of news stories warning of more problems ahead. Even a senior research analyst from CorLogic is now predicting further significant falls in prices this year. (see https://www.abc.net.au/news/programs/the-business/2019-04-15/extended-interview-with-cameron-kusher/11017472?jwsource=cl)

According to Property Council Of Australia, property accounts a 1 in 4 jobs. Below is an extract from a 29 Jan 2018 report,

I’m not an economist, but it’s a fair assumption that the problems in the property market are going to have an impact on the wider economy. Which will in turn exacerbate house prices falling still further.

I have friends who lost out in the Irish crash of 2009 and many ordinary families are still reeling from the devastating impact of negative equity losses. You can’t understate the impact this crisis had on the people’s health and wellbeing. It’s easy to read 32% of all Irish bank loans were ‘None Performing’ without truly understanding what this was like for the individuals involved.

Also worth noting how badly wrong the Irish Central Bank and the regulators were in 2009. Below is an extract from Wikipedia.

The same dark clouds were present in Ireland, back then nobody understood (or cared) how bad the situation was. Is this now the same in Australia?

[Perthbum]

Australia economy relies on China, a very large portion of Australia's exports are to China, It can only get worse as China struggles with trade wars with the USA.

[Peach]

There you go again with the property doom and gloom.  When are you hoping to buy?

[Marisawright]

You have to remember that property developers have a great deal of power in the Australian political system.  They're the ones spouting the myth that "Australia's economy relies on property", because they want to keep that power.  If house prices go down even a little, or if governments pass laws which might affect prices (as Labor is proposing) they lose.     So as soon as there's a price reversal or sales of housing slow, they mount a concerted  campaign to get the  government to act (by doing things like cutting the interest rate). Some very august-sounding bodies are just mouthpieces for the developers.  

House prices have not tanked in Australia overall.   They have dropped in Sydney, Melbourne and Perth, the three cities where prices shot up suddenly over the last few years.  I know that in Melbourne the "dramatic price drop" hasn't even brought the price back to where it was two years ago, so it's more about correcting an aberration than a price drop.  

https://www.smh.com.au/business/banking-and-finance/the-graph-that-puts-falling-home-prices-in-perspective-20181204-p50k33.html

[Ausborn]

I would be concerned .some of  Australia’s biggest project builders sales are down over forty percent . One of our biggest builders supplying homes to investment buyers in Queensland has gone from record sales being at number one over the last two years to barely selling anything this year . 

I’ve been in construction twenty years and we are about to go through hardest time I’ve dealt with . All my builders are adjusting accordingly and preparing now. Nothing is selling . 

Between the banks issues  and the chance of labor getting voted in , Investors will be staying away from housing investment and first time buyers are being hit harder now . Getting rid of negative gearing at this vulnerable point is mental  , along with the rest of labor’s crazy ideas . 

The whole industry seems to be on edge now . Commercial work luckily doesn’t seem as bad.  

Edited April 17, 2019 by Ausborn

[rammygirl]

Australia has used the housing sector to bolster the economy, this was not sustainable. Government has become dependent on taxes from this too.  Construction has grown and must now be checked. Too many cashed in on the boom, negative gearing should be restricted too. 

Sorry but housing isn’t just there to make money we need affordable places to live too. A correction is overdue and banks should still be cautious with lending. 

Been there, seen it.....more than once. 

 

[Paul1Perth]

If you've been like us over the years and not got sucked into buying "investment properties" for negative gearing, expecting everything to be rosy, then the downturn isn't going to affect you one bit.

It was only a couple of years ago that stories were on TV  about some 25 year old who had a portfolio of properties, calling themselves a successful entrepreneur. After the banking royal commission those same people are on TV in tears, blaming the banks cos they lost everything. Pure greed led to it and it's their own fault. If Labor get in there'll be another hit on prices with negative gearing changes. One of the few things I agree with their policies. 

People who bought their house as they liked it, liked the area, wanted to settle and didn't over extend themselves shouldn't be concerned at all.

[Marisawright]

2 hours ago, Ausborn said:

I would be concerned .some of  Australia’s biggest project builders sales are down over forty percent . One of our biggest builders supplying homes to investment buyers in Queensland has gone from record sales being at number one over the last two years to barely selling anything this year . 

I'm not surprised. I've lost count of the number of dodgy real estate companies flogging over-priced Queensland rental properties to naive investors.  It only worked when the banks weren't doing proper valuations (at one time, the Commonwealth Bank's idea of a valuation was to get a retired bank manager to drive past and confirm the property existed).   

An awful lot of investors have been conned into buying investment properties which make a loss, on the promise that they'd make a killing on the capital gain.  No one who really understands real estate would do that.  When I bought investment properties, I bought homes that made a loss on paper only.  In reality I was making a profit  - and thanks to the paper loss, I got a big tax break too.  But even though I took advantage of it, I always knew that negative gearing was a rort and I'll be pleased if the Labor government gets rid of it.

[Ausborn]

Paul , people that rent might want to be concerned though . Be the first thing investors do is increase rent . With housing shortages , as investors have stopped buying it will increase again . The government don’t built government housing here . 

Going to be a few problems it’s going to create for the people that don’t need anymore problems .

 

[newjez]

10 minutes ago, Ausborn said:

Paul , people that rent might want to be concerned though . Be the first thing investors do is increase rent . With housing shortages , as investors have stopped buying it will increase again . The government don’t built government housing here . 

Going to be a few problems it’s going to create for the people that don’t need anymore problems .

 

What housing shortage?

They are still building in Perth in the worst market I have ever seen. First buyers grant on new properties has a lot to answer for.

[Paul1Perth]

17 minutes ago, Ausborn said:

Paul , people that rent might want to be concerned though . Be the first thing investors do is increase rent . With housing shortages , as investors have stopped buying it will increase again . The government don’t built government housing here . 

Going to be a few problems it’s going to create for the people that don’t need anymore problems .

 

You never know mate. Houses might fall enough in price for renters to buy. Especially if a lot of investors get out of the market. There's certainly no shortage of houses for sale here in Perth.

Lots of new building still happening. Can't sell existing units and some big  projects put on hold.

[Paul1Perth]

9 minutes ago, newjez said:

What housing shortage?

They are still building in Perth in the worst market I have ever seen. First buyers grant on new properties has a lot to answer for.

First buyer grants just get added to the cost of the home. If they go the houses will be even cheaper.

[Marisawright]

1 hour ago, Ausborn said:

Paul , people that rent might want to be concerned though . Be the first thing investors do is increase rent .

 

No, the first thing investors do is don't buy, because they can't get the finance OR they think negative gearing is the only reason to buy property, so they won't do it.

Serious investors won't be put off, but if house prices drop, then they can buy properties cheaper, so they won't need to charge higher rents.

[Whey aye]

So my house has gone from around $38K in the early 1980's to around $400 K now.

 

Back then it cost around 4 years average wages,now it can be bought for around 5 years average wages,at far lower interest rates.

 

My westpac shares went from around $2.50 each in the early 80s to around $27 each today.They paid a dividend every year and have never missed paying a dividend .

The experts have told me the sky is going to fall down every day since I for here.Nobody has ever been able to afford to buy anything.They' ve predicted 14 of the last  3 crashes and recessions.

 

I' ve seen unemployment rates in WA at around 12% ( the recession we had to have).Interest rates for a mortgage at around 19%, mortgages at around 4% now 

Sun came up still,experts get everything wrong still,why would you listen to anything they have to say.

[calNgary]

The rate the new estates are being built around here there is no downturn in the property market. In the 11 years we have been here there hasn't been much change in prices ,a house selling for $350k 10 or 11 years ago will now be around $400k so pretty steady really. Property is selling quite quickly too. I think some States and cities are more affected than others.

Cal x

[grizzly111]

Property in Australia is artificially propped-up by negative gearing. Also superannuation. Lots of mum and dad investors out there that don't quite understand how it all works, hoping to get rich.

In Australia it's been easy-going for too long. The low interest-rate environment needs to end. The RBA knows this and so do those in power. Look at the situation in the USA - low interest rates is like an addictive drug.

In the US many thought they were wealthy owning several properties until the bust cycle - wealthy on paper then suddenly it all vanished.

Remember: you aren't a true millionaire until you become a cash millionaire! 

Edited April 17, 2019 by grizzly111

[Ausborn]

29 minutes ago, calNgary said:

The rate the new estates are being built around here there is no downturn in the property market. In the 11 years we have been here there hasn't been much change in prices ,a house selling for $350k 10 or 11 years ago will now be around $400k so pretty steady really. Property is selling quite quickly too. I think some States and cities are more affected than others.

Cal x

Be surprised Cal , Yarrabilba , Beaudesert and park ridge have had a massive downturn . Work is still filtering through from sales end of last year . This year has been terrible . I was sent figures from the project builders sales from a supervisor  . Worst in 15 yrs from the big companies . Why you seeing all the new ads runnings with really great offers . 

Move got friends who have shut down there work and gone back into mines cause money dropped and can’t find enough work . 

I sold my place at Yarrabilba , didn’t make anything . Moved to Sunshine Coast . It’s the opposite up here , house shortage  , they just won’t release the land . Southerners want land up here . 

[newjez]

2 hours ago, Whey aye said:

So my house has gone from around $38K in the early 1980's to around $400 K now.

 

Back then it cost around 4 years average wages,now it can be bought for around 5 years average wages,at far lower interest rates.

 

My westpac shares went from around $2.50 each in the early 80s to around $27 each today.They paid a dividend every year and have never missed paying a dividend .

The experts have told me the sky is going to fall down every day since I for here.Nobody has ever been able to afford to buy anything.They' ve predicted 14 of the last  3 crashes and recessions.

 

I' ve seen unemployment rates in WA at around 12% ( the recession we had to have).Interest rates for a mortgage at around 19%, mortgages at around 4% now 

Sun came up still,experts get everything wrong still,why would you listen to anything they have to say.

The world is not going to end.

But there are times you should take risks and times you shouldn't.

 

[SusieRoo]

5 hours ago, Whey aye said:

So my house has gone from around $38K in the early 1980's to around $400 K now.

 

Back then it cost around 4 years average wages,now it can be bought for around 5 years average wages,at far lower interest rates.

 

My westpac shares went from around $2.50 each in the early 80s to around $27 each today.They paid a dividend every year and have never missed paying a dividend .

The experts have told me the sky is going to fall down every day since I for here.Nobody has ever been able to afford to buy anything.They' ve predicted 14 of the last  3 crashes and recessions.

 

I' ve seen unemployment rates in WA at around 12% ( the recession we had to have).Interest rates for a mortgage at around 19%, mortgages at around 4% now 

Sun came up still,experts get everything wrong still,why would you listen to anything they have to say.

5 years average wages? I think you will find many young people have recently signed up for mortgages at 10 or 11 times earnings with small deposits. These poor souls are going to struggle if prices don’t change, and if there is worse to come, there lives are going to be destroyed. Does this not concern anyone in Australia?

I fully appreciate you have seen it all before, but I fear it’s not going to be so easy this time. Australia now has some of the highest personal debt levels in the world.

I just don’t think the political system is ready for a big downturn and the RBA is too close to the Banks instead of fulfilling its duty to Australian people. There is currently a Glass-Steagall type bill before the Senate, to separate retail banking from the risky casino behaviour. But this too appears to get little attention from the media (or politicians), yet it is probably the most important legislation for future generations of Australians ever (unless you think debt-slavery will be good grandchildren).

[Paul1Perth]

On Wednesday, April 17, 2019 at 23:44, SusieRoo said:

5 years average wages? I think you will find many young people have recently signed up for mortgages at 10 or 11 times earnings with small deposits. These poor souls are going to struggle if prices don’t change, and if there is worse to come, there lives are going to be destroyed. Does this not concern anyone in Australia?

I fully appreciate you have seen it all before, but I fear it’s not going to be so easy this time. Australia now has some of the highest personal debt levels in the world.

I just don’t think the political system is ready for a big downturn and the RBA is too close to the Banks instead of fulfilling its duty to Australian people. There is currently a Glass-Steagall type bill before the Senate, to separate retail banking from the risky casino behaviour. But this too appears to get little attention from the media (or politicians), yet it is probably the most important legislation for future generations of Australians ever (unless you think debt-slavery will be good grandchildren).

What sort of house are those "poor souls" buying though? A lot of the youngsters I know expect to move straight into  new buy 4x2 with garage.

On top of that they'll have a car each, massive tv, phones each, internet. Then wonder why they can't make ends meet.

Have to live within your means. A lesson sadly lost since easy credit, charge cards and low interest rates.

[AJ]

On 17/04/2019 at 23:44, SusieRoo said:

5 years average wages? I think you will find many young people have recently signed up for mortgages at 10 or 11 times earnings with small deposits. These poor souls are going to struggle if prices don’t change, and if there is worse to come, there lives are going to be destroyed. Does this not concern anyone in Australia?

 

And I am sure that no one twisted their arms to sign up for that amount of debt!  Maybe these young people would be better starting small and working their way up instead of having to have to get a house bigger and better than their mates so they can show off!

[SusieRoo]

Very true, but it's our fault! We have created a society that has caused this excessive debt to become normal. How can a tiny block at the end of the track be worth £400,000+ (land only), when Australia is vast and relatively empty. We have allowed big business (and self-serving politicians) to ride roughshod over our children. We have inflated one of the largest debt bubbles in human history. Now we sit back, gloat and blame the millennial generation.

[Marisawright]

39 minutes ago, SusieRoo said:

How can a tiny block at the end of the track be worth £400,000+ (land only), when Australia is vast and relatively empty.

Australia is relatively empty, but there is a very good reason for that - there's not enough water, and the land is too poor to farm.   I used to live in the north of Victoria and it is quite a revelation how dry and barren it is - and that's not even classed as the outback.

There is a scientific definition of "habitable land".  If you apply it to the UK, it works out at 70% of the land surface. If you apply the same standard to Australia, it works out at 10%.

Edited April 19, 2019 by Marisawright

[grizzly111]

SusieRoo your question is perceptive.

The UAE can build cities in the middle of deserts. 

Now the main reason land prices are high is because councils won't release new land. This artificially inflates the prices. Remember: the Australian Government loves their taxes. It is very, very tightly controlled. And it's not good.

 

[Marisawright]

2 hours ago, grizzly111 said:

The UAE can build cities in the middle of deserts. 

Now the main reason land prices are high is because councils won't release new land. This artificially inflates the prices. Remember: the Australian Government loves their taxes. It is very, very tightly controlled. And it's not good.

Where do the UAE get their water from?  Most of their drinking water comes from desalination plants.  There is a limit to how far one can pump water inland from the sea.    It's certainly true that Australia could manage their water better, but it is still a major barrier to development inland.  

Even Sydney and Melbourne need to rely on desalination plants at times, and they're on the coast with good rainfall.

I wish councils in Sydney would stop releasing land, because the Sydney basin is some of Australia's richest farming land and they've already allowed far too much of it to disappear under housing.   

https://www.dailybulletin.com.au/the-conversation/15013-urban-sprawl-is-threatening-sydney-s-foodbowl

Currently governments don't seem bothered by this - we just import the fruit and veg from Asia instead - but if there's ever any conflict in the region, Australia is at grave risk of not being able to feed itself.

 

Edited April 19, 2019 by Marisawright