Reader asks "How desperate is St George ?"

Mr A writes.

Do you think a bank should be doing this – encouraging and inflating the housing bubble?

As a “good” customer of theirs they gave me this little beauty when I logged online to check my account.

Welcome to An Investors Guide to the Nation, commissioned by St.George exclusively or you as a Gold Service customer.

This report looks at the performance of the Australian residential property market within each of the capital cities, breaking the market down into its broad regions: the inner, middle and outer rings.

Based on this analysis, RP Data provides insight about where property owners have fared best in terms of capital growth during recent years and which regions buyers should be targeting to maximise the potential of capital growth over the coming years.

The report includes a series of easy to understand tables and maps which highlight the results for each capital city on an annual basis across the past five years. The Appendix also includes detailed statistics for all suburbs within the capital cities including the median price, number of sales, distance from the city centre and growth rates for median prices.

The report is usually valued at $279, but we’re delighted to offer it to you compliments of St.George. We hope you make the most of this unique opportunity

Wow !! So on top of attempting to claim that rent paid is a deposit for a loan, now St George is “suggestive selling” property McDonalds style.

Mr A is correct to ask “Do you think a bank should be doing this?” Our answer is No, it wreaks of desperation.

We will not bother you will the details of the attached report, if you have read one you have read them all. Noone has ever seen this chart before, have they ?


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Comments

  1. This is what the banks don't want you to know…

    1. For an asset market to clear, buyers meet 100% of the sellers at mutual prices.

    2. The buyers must have the money (the credit) the sellers are demanding OR the sellers must reduce prices or withdraw from selling.

    3. Obviously you cannot get a sale if the money is just not there!

    The equation…

    • Housing market value = (Annual new housing credit created / median mortgage LVR) / (annual turnover velocity of existing housing stock + annual new housing construction rate) X 100

    When new credit created was running at $150 Billion p.a. (15% of $1 – 1.1 trillion GDP) three – four years ago (having done 15 – 16% p.a. on average for 15 years) the equation yielded the answer = $3.98 Trillion

    In Australia PRESENTLY housing is priced at ~ $4.2 Trillion

    These are the numbers for this equation 2010

    = ($90B / 0.65) / (0.04 + 0.018) X 100

    = $2.39 Trillion

    This equation is sensitive to the rate of new credit creation whereas the other numbers really do not vary much over several years.

    The market does not seem to agree with me… YET… but let’s watch for a year or two

    If credit growth remains in the 7.5% range the housing market price will collapse 40 – 50%

    I expect it will decline 10% 2011 if nothing changes

  2. Thanks Peter…I am more bearish for 2011. I cant see how landlords wont panic and all rush to the gate. 2011 Australia is different to 2007 US, as they were in chartered territory and people may have thought they could ride it out. People in Oz will panic a lot more and the correction will be more severe.

    Just as the Australian 'love of housing' was so strong pre-2010, post-2010 our disgust oh housing will be equally as strong.

  3. Stavros

    I somewhat agree.

    It's possible the velocity of existing stock turnover may have been pushed up by the large amount of new credit created during the past 15 years however now that the rate of new credit creation has declined the existing stock turnover velocity may decline without much disruption to the market price, but I doubt it.

    There are only two money buckets to settle a transaction deposits + credit and its a fact that the LVR of the entire market is 0.3 (30%) whereas the LVR to clear transactions (sales prices) occurs at an LVR of 0.65 (65%) so this must imply transactions can only occur by pulling more money out of the additional new credit bucket.

    We have already seen the Government give away deposits (the FHOG) and those deposits used to create new credit.

    The median LVR ratio could rise or fall and again the FHOG caused a temporary rise in the median LVR ratio.

    It's obvious that Government intervention can temporarily support the market price by manipulating some elements of this equation to facilitate market clearance at the present price in the absence of an additional 6 – 7% GDP of new credit creation.

    Again… Good luck