High-rise Harry sees an FHB strike

Gotti has an interesting take from High-rise Harry Triguboff this morning:

In the last two months it has become apparent that the current generation of first home buyers is different from the generations that have dominated post-war Australia.

The lower interest rates are not causing them to rush into new dwellings.

Australia’s largest apartment builder, Meriton’s Harry Triguboff, says that he has never experienced anything like it and admits that he has been caught by surprise, as have many other builders and developers.

In the past, when interest rates were low and housing affordability increased first homebuyers moved into the market. Now Meriton’s research is discovering that most will not buy a dwelling until the repayments are less than what they are paying in rent. And that first home buyer view covers most forms of dwellings.

For example, in outer suburbs house prices are usually lower than city apartments but outer suburban rents are also lower. If Triguboff and Meriton are right it means that as the mining investment boom subsides next year we are going to be looking at much lower interest rates.

In Triguboff’s view reducing interests rates by one quarter or half a per cent will have no effect on first home buyers. It may boost the spending of consumers with mortgages but it will also cut back what retirees can spend. In Triguboff’s view it will take a 1 per cent fall in rates to take repayments on mortgage loans below the rent levels – in other words, to where buying the first home is cash positive.

This will be no surprise to MB readers, which are dominated by the 30-50 age bracket. There is one more possibility. Canberra wades in with another First Home Buyer Grant and turns this good sense into another round of panic buying. As the mining boom unwinds, such stupidity is possible.

As an aside, RP Data’s Buy versus Rent Report for October revealed that it was cheaper to rent than buy in 93% of locations around Australia (see below chart and table).

Moreover, RP Data’s report underscored the financial benefits of renting, since it assumed the buyer had a 10% deposit (in itself a financial cost) and did not include a raft of costs associated with home ownership, including stamp duties on the purchase, ongoing maintenance costs, body corporate fees, and rates.

Based on RP Data’s analysis, Triguboff’s claim that a 1% cut in interest rates would be enough to take repayments on mortgage loans below rent levels looks shaky.

Comments

  1. My 32-yr old son has enough money to buy a house, but he and his peers have decided that prices are absurd and they’d “rather suck pus from an abscess” (thanks, James Bond, for that phrase) than get into mega debt for the rest of their natural lives.

    Common sense, surely?

      • He and his friends (a whole bunch of ’em). It’s a widespread attitude, at least among the educated young.

        • My wife and I fit Revert2Mean’s description; educated 30-somethings with the exact same opinion. Not all of our friends are the same, sadly, but we and a few others we know are of the same opinion.

          Bring on the abscesses!

        • Yep, I can confirm that the same is true for all of our Aussie, well educated young friends.

          Talk to less educated young Aussies and you’ll still get the spruik and rent-is-for-losers talk.

          Talk to someone 10 years older and the story changes, usually because they already own a home.

          Talk to skilled professionals from Asia and they will say that homes in Oz are cheap compared to the cities where they are from (Although I’m finding it hard to believe that without seeing proof).

          • What’s REALLY for losers is making minimum repayments on a home.

            Ten seconds with a calculator will show you that minimum repayments only cover the interest – dead money – barely building equity at all.

            If you can’t afford to pay off significantly MORE than the minimum amount each week, you are not building equity in your home – you’re just renting from the bank.

            At twice the price of renting the normal way.

        • dumb_non_economist

          If what you say is true the present up and coming crop of uni educated must have leanrt something their forbears didn’t. My experience is that the “rent is dead money” is wide spread. My boss just a few months ago was told by his accountant that he needed to buy a property as he was paying too much tax!! I was reasonably successful in talking him out of it.

      • The very article we are posting on suggests that this view is becoming representative (buyers not prepared to pay today’s prices), but I doubt many are in the position to buy outright…

      • GunnamattaMEMBER

        I guarantee you I can pay outright

        and I would rather suck puss from an abcess too

        regardless of whether I could service a mortgage or not, the simple fact of the matter is that Australian Real estate prices are insane, and a casual glimpse at property prices in most of the rest of the world shows you can get better there.

        beyond a certain level it is a simple matter of working out ‘should I pay to be Australian?’ or ‘take the punt on going elsewhere?’ – If you think the place is likely to get a serious economic kicking at some point, then there is a fair bit of merit in at least holding off on buying for a while.

        interesting piece on what constitutes reasonable debt load over at the Bull http://www.thebull.com.au/premium/a/33577-what-is-a-reasonable-amount-of-debt-.html

        You think about it. If you are earning circa 80-100 is it in your economic interest to load up with a large mortgage (which may not actually get you all that much).

        This isnt rocket science.

        • +100!

          My wife and I are looking at moving back to the US as we can buy *outright* a huge 4/3 in a good neighborhood in NorCal for what we sold our *1-bedroom unit* for in Canberra (a Queanbeyan 1-bedder, for goodness sake!).

          Mix in the craziness that is living expenses here in Canberra and it’s looking to be a no-brainer.

          Now… going back to my “homeland” doesn’t sit 100% well with me, but worst case we’re all blonde-haired and blue-eyed, so we’ll fit reich in at least 😉

          • GunnamattaMEMBER

            Mate, my wife is Russian, and we are seriously considering heading back the moment we have our next kid born.

            The other thing I would suggest is Spain – economic basket case I know, but they are looking very seriously at handing out residency to people buying property worth USD 200K -EUR 160K.

          • This is the second time I’ve seen you use a nazi reference about your returning to the US. I’m blond haired and blue-eyed, too, but that makes me a minority in my home town of NYC – as I suspect it would in SF, unless you left in 1950.

        • ‘should I pay to be Australian?’

          Exactly! And compared top the generation that left my homecountry in the 50’s I wasn’t leaving the economic situation. I came here to IMPROVE lifestyle.

          Now I’m just worried that I wouldn’t be able to take care for a family without going BACKWARD in lifestyle compared to what I had in The Netherlands.

          Add the skewed work-life balance here and you can imagine why I’m seeing this as a fantastic experience rather than a definitive move.

      • reusachtigeMEMBER

        I too could buy outright. But I rent a place making about 2% gross return for my landlord that would cost me about 3 times as much to buy than rent. I’ll happily let the landlord subsidise me and lose money while I invest the money I save elsewhere making a shed load more in returns than he is. It’s a symbiotic relationship! lol

        • reusachtigeMEMBER

          For those unsure if this is possible. Check out rentals around Strathfield in Sydney and compare what they are selling for. Lack of rental demand versus strangely high buyer demand. Crazy, but may as well take advantage of this situation.

          • DelraiserMEMBER

            I hear ya…….my wife and I live within rock throwing distance of Strathfield and a 2 bed apartment of liveable size would go for around $550k.

            Assuming a buyer can walk in with $50k (and not many do by the sounds of things), that still leaves $3500 per month in repayments against a $500k loan (at 25 years, not 30).

            Now to rent, the same would cost ~$2100 per month (that is high end, and falling if my local research is correct), minus the Stamp Duty and minus the ~$4k a year in strata and the regular maintenence these crappy builds constantly need.

            I guess some might argue that $17k a year in savings is nothing compared to the “security” of ownership, but the great fear here would be that $550k price and how it would hold up over the next 5 years. I just don’t see it, hence renting just seems to make sense.

      • pingupenguinMEMBER

        My wife and I would be another example (early 30s, double income professionals), and many of my friends fall in the same category. Big enough deposit to easily buy something now. but why would I want to waste it on an overpriced dogbox when we can keep saving?

        I don’t think it is a ubiquitous attitude as I still get the occasional “you are always ahead if you buy, renting is for suckers” comment, but most people I talk to either agree with me or don’t question my sanity at deciding to keep renting.

        I just hope that the crash is not too severe when it comes. The can has been kicked down the road so far I don’t have much faith that it can unwind in an orderly fashion. I’d quite like to keep my job.

      • It’s starting to become more widespread. I’m 26 and i can muster a 100K deposit if need be, but i’m not buying. Luckily i live rent free with my older brother. Many of my friends of the same age or slightly older are in the same boat. Some are better off financially too, but prefer to rent for the time being. One of my friends who is 28 built a home and pimped it out for about 550-600k last year, and he recognises the Perth market is overvalued, but as a participant in the mining boom (he earns close to 200k pa) he really just wanted to get out of home and doesn’t care if he overpays short to medium term.

      • Myself and my friends mostly have this attitude, although one has a wife that bought a home (in her own name) and another friend (that I don’t see as much any more) just bought one recently.

        That is to say, this is hardly representative as I know plenty of 20-40 year olds that still think buying a house is the one and only method for making money.

    • I’m in the same bracket – 32, have a 40% deposit but choosing not to buy now due to overinflated prices. Even though I could afford to buy now without much pain, I’d rather let my deposit continue to grow and buy when prices are more reasonable.

    • My wife and I are in a similar situation- not as big a deposit (about $165,000) but could not see the sense in buying right now (Melbourne).

      That caution has paid off recently as my wife just lost her job in research science (along with a lot of other people across numerous labs) after the last round of NHMRC grants were announced. She is pregnant with our second child (due May) and now misses work maternity leave & commonwealth maternity leave.

      Anyway, while it is a blow, we are much happier heading into this situation with that cash in the bank and the flexibility of renting, rather than having a huge mortgage and the associated stress/risk.

    • I am 32 also, and, aside from the lack of a deposit (for various personal reasons), I am of the same sentiment: I refuse to pay those prices, for what you get, for how long it take to pay it off, to the degree/fraction it sucks off my wage,the degree of risk it exposes you/family to,in this uncertain climate (and I work in mining!)…and, not to mention, that I do not want the market to think I am actually OK with these prices.

      There as SO MANY of my peers that are falt out refusing to buy, due almost entirely to the extremity of the asking prices; the ones that have bought are doing so on two wages and have done so whilst rolling their eyes and citing “lesser of evils”. I don’t blame them, but I’m just not paying those prices…

      My 2c

    • With 120 000 empty residences in Sydney the big question is how long it will take someone to start setting them on fire.

      If the government is not going to impose a cost on wasting land, someone else will have to.

      Not a new problem…

      one of the Isaiah’s said it best (Isaiah 5:8)

      “Woe to you who add house to house and field to field until there is no space and you live alone in the land.”

  2. Harry will crash the market.

    Developers are unknowingly offering incentives which is destroying the market.

    Looking at Merition product in NSW they are offering to pay the stamp duty and give vendor finance for 2 years at 4.95% rates.

    Come two years when the developer is out of the area and forced sales reduce the value of all properties in that development you will see a lot of properties flood the market due to finance issues.

    It will be a blood bath in these large developments.

  3. Okay, this is a FNBer story; but it’s not just them! Those of us who have escaped the clutches of the real estate market are reluctant to re-enter it when it makes no financial or logistical sense. When it’s more than just signing a loan document at the local bank store, and it becomes a matter of actually writing out the cheque for the purchase price, it’s surprising how sobering that potential experienced can be! At the other end of the property spectrum, more and more people are going to realise ‘this is all I have or ever will have’ and convincing them to spend that when the alternative, renting, is cheaper or the same, and more flexible is going to prove difficult.

    • GunnamattaMEMBER

      Exactly, it isnt just FHBuyers it doesnt make sense for almost anyone to buy in this environment.

  4. People are educated and getting more educated everyday thanks to the internet. It is this fundamental difference that makes things different in the modern world. No longer can the rich lobby gov and get the masses to follow what gov wants. To many people are waking up, learning and doing their study or reading the study of others.

    This is a problem that China faces, it use to be cheap exploitable labor, but as the country has become more educated people are starting to stick up for themselves and their rights.

    Anyhow, Australian housing market is headed for a bad time. I rent, I have a deposit but I won’t buy until things drop by at least %30.

    • Yes – more and more people are digging around and finding alternate points of view. This is increasing week by week and month by month.

      Harry and RGs shock merely confirms how quickly it happening

      Issues that get discussed on sites like this would only be discussed by complete insiders even 10 years ago.

      Crikey – even the mass delusion that low interest rates are always good providing inflation behaves is starting to crumble.

      • +1 The heightened sense of desperation in the monthly pre-RBAmeeting Meriton press release heralds a new phase in the HRH game.
        HRH’s business model of “fund it, build it, lobby for protection/stimulus and they will come” is wobbling severely.
        Heavily exposed by his self-funded model HRH’s Mariana Trench deep pockets are being tested for the first time.

  5. reusachtigeMEMBER

    Good to see that the Home Buyers Strike is still going strong. It never had to remain an organised event on some crappy issues voting site. It’s the mantra that has been created that counts.

    • reusachtigeMEMBER

      But how long can that go on before the locals rebel? Are we so weak, tame and blind nowadays that we no longer fight?

      • Yes! Too much self-interest in keeping prices high. Suppose you let prices slide…less need for houses,less building, more bankruptcies, unemployment, less demand for restaurants coffee shops etc…more unemployment….
        OK Who, commenting in here, is in favour?

        • Mining BoganMEMBER

          It will be ugly yes but that’s the way of the world.

          Live an unhealthy lifestyle and the docs will saw off the leg at 40 because of diabetes.

          Keeping the leg will cause more damage.

        • Yes, banking, real-estate and building industries are benefiting from increasing house prices but huge household mortgage repayments are taking away spending from the rest of the economy, eg. retail, tourism.

          If households funds are stretched by large mortgage repayments I don’t think restaurants and coffee shops are going to do well unless the equity keeps growing.

          • I am really enjoying the common sense comments on this thread.

            AI, yours especially so. The erosion of discretionary income is one of the reasons that the house price bubble HAS to kill the economy. It is like a cancer that has to kill its host eventually.

            Another significant reason is that inflated house prices are a workforce cost pressure. The the cost of land for businesses is also a problem.

        • reusachtigeMEMBER

          Totally in favour. No doubts. Needs to happen and must happen. A total reset that is required so that lessons are learned and the filth is flushed!

        • Flawse, I think most younger potential buyers are prepared to take that risk. At the end in your scenario cash becomes king even if it earns nothing as the debt laden would be crushed first. Last man standing among the ruins kind of thing.

          I think that is the real thinking. I don’t blame them to be honest. They’ve done they’re numbers and in their eyes it makes no sense. I’m just glad I have no mortgage anymore (and no rent) but I can see their quandary. It just doesn’t add up.

        • More unemployment, huh ? No thanks. I’d rather keep my moderately paid service sector job that pays down my moderate mortgage, preventing my bank from increasing its bad debt provisions, allowing it to maintain its profit margin and capital base, thereby continuing to enable the legion of lawyers, fund managers, accountants, financial analysts, database administrators, accounts receivable officers, coffee and cupcake entrepreneurs setting up outlets at 20 metre intervals in the CBD, delivery drivers, cleaners, the childcare workers raising my children, the importer selling my kids cheap nasty novelty items from China they don’t really need but which helps to move peasants off a life of agricultural subsistence, and just keep the whole think ticking along nicely thankyou very much. If I have to put my macroinvestor subscription on Visa and pay it down over the next 10 years, then so be it. If the Chinese or Russians own Goodman Fielder, Wesfarmers, ANZ and Macroassociates in 20 years, then who am I to argue ? It’s globalised consumer capitalism, baby. Learn Mandarin. Them’s the rules. Think you can hide from it ? Ha !

    • Failed Baby BoomerMEMBER

      This Auckland propoerty bubble-within-a-bubble is intriguing. I wonder how it is going to play out and how the locals deal with it. Janet, you are very perceptive and have boots (high heels?) on the ground there. What is your take on this Auckland property situation?

  6. As Harry’s business model (selling overpriced dog boxes to overseas investors) unwinds, he is turning to local saviours RBA and Gotti to help him out.

    I am sure RBA willl dutifully oblige. But the real power rests with the buyers. All the more reason to join “Don’t Buy Now”. FHBs should not be in the business of rescuing the failed business models of billionaires and their stooges in business media.

    Mirvac has confirmed it’s refunding off-the-plan deposits for a 263 apartment development in Hamilton Brisbane and a 71 apartment development in Townsville. In Brisbane even though the apartments were priced from only $345,000 The Courier Mail reports that only three had been sold.

    Hahah.. I had missed this part about only 3 apartments being sold.. No housing shortage close to Brisbane CBD then, eh ? 😉

    • General Disarray

      Yep. The timing of these fluff pieces tells you exactly what the intention is.

      So, they’ll cut, possibly get some “greater fools”, and then we’ll revisit this same situation in a couple of years – except we’ll have even more leverage in the system.

      Sound like a plan.

    • “No housing shortage close to Brisbane CBD then, eh ?”

      To be fair, Hamilton Wharf is a good 7km out of the CBD, halfway to the airport.

  7. I started with a sizable deposit which due to holding off is growing nicely, to the point where should I make my purchase my repayments would be close to lower than my rent.

    I could make my move anytime, but what I look at is just how much negative equity I’m facing, even with a 10% correction it chills me to the bone.

    Zeitgeist is the spirit of the times, clearly the rules have changed in relation to FHB psyche ie drop interest rates n throw in a new car and watch the suckers come running in.

    RE sprukers are frustrated and the BB and NG investors are in disbelief but the buyers strike is holding. There are few downsides to renting compared to buying, that’s why it has almost always been cheaper to buy. The mega mortgaged morons to brag about owning a home when in fact the bank owns it. Little more than an ego thing imo and a very very expensive price to pay for vanity.

    Right now I need a home with 4 bedrooms for my kids and an office for my business, if I were to buy this house or one similar, by the time I finish paying it off I’d have three guest rooms doing nothing!

    What’s more (now I’m on my soapbox) I have seen firsthand, New estates bought up by young couples, smart and hardworking, only to see the demographic slide as the government bought 30% of the houses for low income families. In a matter of months the streets took on the air of a set from a underfunded Mad Max movie complete with dead cars on the lawns and a near constant police presence due to youth crime.

    I was lucky and could simply up sticks to a nicer spot, didn’t hear much bragging from my mortgaged neighbors. They were all lamenting the decision to buy.

    I’m sure this wasn’t an isolated case but seeing it for myself opened my eyes.

      • 4869

        Edmonton Qld was the area of the new estate.

        The whole sale of the estate stalled and the Qld gov stepped in and bought up loads.

        One house was advertised for mid $400k. Most were bought for $350-360 ish. Wouldn’t be able to sell for over $300 now. Higher prices are no longer the social filter people thought they were.

        Now I know there are fixed ratios that are ment to minimize saturation of low income housing but either they went outside of these or they counted emergency housing etc differently.

        End result was the place is a hole. I saw Q build carrying sheets of plaster board in after a family moved out after just a few months.

        • Mining BoganMEMBER

          Wow! I was going to be a smartarse and say it sounds like south of Cairns.

          There’s a similar area on the north side. Bloke I know paid $220-230 something for what had been going for around $350-400. There’s carnage in the north.

    • God, now that I was not expecting – great insight!

      “New estates bought up by young couples, smart and hardworking, only to see the demographic slide as the government bought 30% of the houses for low income families. In a matter of months the streets took on the air of a set from a underfunded Mad Max movie complete with dead cars on the lawns and a near constant police presence due to youth crime”

    • I was a renter in a Meriton in QLD about 5 years ago. I was the first person to move in after construction. There was a litany of problems for the whole year from electrics to plumbing to uneven floors. Crazy that it would be cleared as habitable.

    • F€*#k me, $800k for a 2 bedroom apartment.

      MERITON WILL REFUND YOUR STAMP DUTY^ on Infinity apartments up to $750,000 – for a limited time only, conditions apply.
      4.95% VENDOR FINANCE* AVAILABLE with up to 90% lend
      Owners: $15,000 First Home Owner Construction Grant*
      Investors: Guaranteed Tenant on Settlement*

      What is Meriton going to do if buyers start defaulting on vendor financing? Sounds risky..

    • Meriton will have a 10% unrepayable deposit on at least 90% of the units. How they go after completion will depend on their financial position. I note that the vendor will finance 90%, so they could force people to pay damages or take their finance in an extreme case, presuming that they can get the deal to service, and I suspect that won’t be hard in most cases. In Qld a contract is a contract, as you will already know.

      • Mining BoganMEMBER

        ‘In Qld a contract is a contract, as you will already know.’

        Ha! I grew up in Joh’s brown paper bag era so that sentence made me chortle.

        🙂

      • But, but..the “contract is a contract” will give HRH only 10% of his price.

        It is up to the merchants of debt to deliver the other 90%. Will they oblige in cases where vendor financing is not available?

        • No problem, in those cases Harry can sue for damages if he chooses to.

          I doubt that you fully appreciate how this works. A buyer either puts down a 10% cash deposit or he will arrange a deposit bond. If he puts down a cash deposit then he probably has the capacity to get more money from other assets, or he can meet repayments on a loan. At this point the contract to buy is unconditional, it isn’t subject to finance.

          If he chooses to walk away from his cash deposit, then he still has the concern of a possible lawsuit that can be filed at a later date.

          If he has arranged a deposit bond, then the bond issuer will have to pay the 10% deposit. The bond issuer has already done an in depth analysis of the buyers financial position, and determined that he can pay off a loan and he has other assets to cover the deposit – so a lawsuit is virtually guaranteed from both the bond issuer and Meriton.

          If you have no intention of fulfilling contracts, then don’t sign them. This is the real world that we live in.

          • If he puts down a cash deposit then he probably has the capacity to get more money from other assets, or he can meet repayments on a loan.

            That is a big assumption on your part. Do you have any thing to back that up? Do developers do due diligence on the buyer’s ability to pay when they collect the 10% deposit?

            Let me get this straight – Are you suggesting HRH should legally go after first home buyers who have already lost 10%, based purely on your assumption that these poor folks have the ability to pay the other 90% of the cost (~$390k)? HRH is not an idiot, I hope, to sue when he has no hope of ever collecting anywhere near that amount.

            Now that would also play out nicely in the court of public opinion. HRH needs all the free publicity he can get, eh? It just shows how detached merchants of debt are from reality.

          • If you have no intention of fulfilling contracts, then don’t sign them. This is the real world that we live in.

            If you haven’t done the due diligence on buyer’s ability to pay, don’t expect a pot of money to magically appear up on the back of a binding contract.

          • Defaulting presales are not the immediate concern for HRH (although it maybe in the future).

            The real concern on this project must be the lack of presales (with or without deposit).

            HRH is carrying the risk on this one, largely all on his pat and we should all be eternally grateful to him : )

          • My apologies, clearly I haven’t explained it in sufficient detail for you.
            We have two different means of satisfying the deposit. Let’s take the deposit bond first. The bond issuer will have done their in depth assessment on the buyers capacity to complete the contract. No one is going to stump up 10% deposit on someone elses behalf if they don’t have faith in that persons ability to fulfill the contract. The deposit bond issuer will also have the buyer bound to their own contract.

            So the developer/vendor knows that those buyers can afford to pay, without having to do any due diligence.

            Do we have agreement on that?

          • The next type of deposit is the cash deposit. Anyone who can save a 10% deposit obviously has employment and can save money. So without even performing a due diligence on the buyer, they have a pretty fair idea of the buyers circumstances.

            Now if the vendor ends up taking a lesser sale price for a unit that a buyer walked away from, then they only need to sue that buyer for the difference between the two sale prices less the deposit forfeited, plus legal costs.

            Whether Harry choose to take that legal action is a commercial decision that he can make as he chooses. The decision would probably depend on the extent of any losses and the assessment of the buyer. Quite often just the threat of legal action will be enough to bring the buyer into an arrangement – people don’t enjoy pressure.

            Whether those buyers are FTB’s or not is quite immaterial to the legal process.

            I repeat – don’t sign contracts unless you fully intend to complete them – they are not playthings and they are binding each way.

          • The Pat – if Harry commenced the construction with only a small number of presales, that tells me that he just isn’t relying on finance, or only has minimal reliance upon finance.

            He may be quite happy to build them and rent them until the market returns are where he wants them.

            He has been very successful in a game that has broken some very smart operators, and he has been doing that for longer than most of us have been on this planet – were I a betting man I would gladly put a few bucks on Harry.

          • Doh! From TP’s description of the pre-sales figures, it seems the discussion about buyers defaulting on the contract is redundant.

            I repeat – don’t sign contracts unless you fully intend to complete them – they are not playthings and they are binding each way.

            Don’t sign Now, eh?.. Pete, good to see you joining up for David Collyer’s “Don’t Buy Now!” campaign. 🙂

          • Doesn’t HRH sell 90% of his boxes to CCP party members or their families. They may lose their 10% deposit but he has no chance of chasing them down for the rest if they default.

          • mav – probably good advice for unsophisticated recipients of a free lobotomy gone wrong, but I will abstain from signing that pledge.

            Don’t let me talk you out of it though.

          • Any post involving Triguboff should include this defining admission.

            “Apartment billionaire Harry Triguboff was surprisingly candid at a lunch held by the American Chamber of Commerce last October.

            He told the audience he was able to pay “very little tax”.

            “I keep a lot of my properties. And if you keep them and there’s capital gain it’s beautiful,” he says “You don’t pay tax. I don’t lease them so I don’t pay tax on the rent, but I get depreciation.”

            He paid tax on apartment sales but that’s where the land banking came in.

            “You have to buy lots of empty land,” he said. “You keep the land and it brings you no income, so you claim it against your tax.”

          • unsophisticated recipients of a free lobotomy gone wrong

            Why is it “unsophisticated” and be a “lobotomy” patient in order to rent and save? Is it because there isn’t any trailing commission for a merchant of debt in that? No corners to be clipped, eh?

            TP, Like most billionaires,self-awareness is not one of HRH’s strong points. He seems to think to be greedy == To be Smart. Yves Smith calls it “unenlightened self-interest”

          • It’s pretty obvious not many contracts are being signed.

            Harry won’t have to worry about a long court list against the little people at this rate but HE may have a whopper of his own with the banks!

          • dumb_non_economist

            Peter,

            For starters if cash wasn’t an issue why would the builders need to try and bribe potential buyers, plus I bet a few lawyers would be laughing at the threat of legal action. I doubt that they couldn’t “whittle” away any assets over the 2-3 yrs the legal action would be dragged out over by their lawyer.

    • re Infinity

      I have followed the construction of this “little beauty” from close quarters.

      Now at around 45 of 85 floors completed.

      Building at around a floor a week.

      Expected completion mid/late 2013.

      Presales less than 50% after 2yrs of marketing.

      Nasty worksite accident last week. WH&S shut it down immediately. Only skeleton staff onsite since.

  8. My 2 cents…

    I used to be in the camp of waiting for house prices to substantially decline.

    However, the issue I saw that is that with under 1,000 properties for sale in Victoria in week, that is the requisite number of participants needed to ‘meet the market’ is actually quite low.

    If 100,000 people choose to sit on the sidelines because the prices are too high. Only 1% of that number are required to participate to create ‘market value’ regardless if 99% think that prices are overinflated.

    If prices declined a little you wouldn’t need too many to change their minds to keep prices high, or on par.

    In this group there would be an ever-changing number that would decide that prices are now affordable to them.

    The only way prices will significantly reduce is if there were no takers across the board on all the properties available. I don’t see that happening any time soon as there are always enough people capable of entering the market.

    • By that logic, prices shouldn’t have fallen anywhere that they have.

      What you’ve just described if often called, “a market”. To think that prices will always be stable in a market, because lower prices encourage demand, is to think that bubbles can’t exist.

      • It’s not that bubbles can’t exist. It’s that prices seem to remain stable past the point they actually are and then bubble then bursts because buyers have entirely withdrawn from the market.

        • Stable prices are in effect falling slowly (as inflation eats away at the value of a property).

          Unless you’re paying very little in repayments and upkeep, a stable market means a new homeowner starts losing money right away.

          A crash is different – it requires people to be forced to sell . Two things that could trigger this are increasing unemployment or baby-boomers retiring with property holdings that are losing money (also known as negative gearing!)

    • The alternative logic is that once prices start going down you are rewarded for keeping your capital out of that asset class, leading to price capitulation. or Melbourne as its now known….

    • According to you, 1% of potential FHBs have to change their mind every week for your case to work. That means that 50% of all potential buyers have to change their mind for prices to stay high.

      • The point I am trying to make (albeit poorly) is that ‘affordability’ is in a constant state of flux due to the benchmark of affordability being different for each person.

        And that affordability is overstated as far fewer people have to participate, than not participate to establish market values.

        • Affordability is easy

          Low interest rates = High Affordbility

          Just ask HIA/APM/RPData/Doc Wilson etc

        • Here’s a couple of thoughts on this topic:
          – The magic puddin’ property market has been the failsafe supplier of a feeling of prosperity in Oz for around 20 years. Once it sinks in to people that this model has broken (this process has already begun) you will see a significant long term drop in consumption which will trigger unemployment and forced sales, dropping prices. At this point, I believe unemployment still has quite a way to run.
          2. Unemployment brings not only forced sales but also a drop in the number of renters and therefore rents, reducing still further the attractiveness of holding an investment property, causing prices to slide further as investors hit the exits.
          3. Would be FHBers, already wary, see prices are on the slide and are now canny enough to access opinion other than the “never been a better time to buy” rubbish from the vested interests and their handmaidens in the MSM. Their resolve hardens and they feel a rush as they watch their opportunities in life improve month on month.

          These interrelated phenomena in concert can be quite powerful and even result in a overshoot on the downside. As an example, the apartment that I unfortunately still hold in Dublin (too slow to move when the SHTF) has a gross yield of around 6.8% on current prices. At the peak (when rent was higher), gross yield was closer to 3%.

    • That’s dodgy BUY side maths

      The SELL side is presently 400,000 + 140,000 additional new dwellings p.a.

  9. splut splut splut… is that the engine that’s replacing the mining v12?

    Construction as an engine will only work when you have mugs to pass the debt onto – Australians are starting to decide they don’t want to be those mugs. Good for them.

    • GunnamattaMEMBER

      OK,

      Plan 1 is Mining – Mining easing: Check
      Plan 2 is Housing Construction and RE speculation – Buyers are going missing: check
      Plan 3 is a falling AUD makes services and tourism and manufacturing globally competitive once again – AUD is pinned to the roof by yield seekers, central banks and ‘reserve’ status: check

      Plan 4 is hold hands and yell out fffffaaaaaaaaaarrrrkkkkkkkkkkk!!!

      • “Plan 3 is a falling AUD makes services and tourism and manufacturing globally competitive once again”

        – at the same time bringing the the inflation in the pipeline in China to our shores. Do we raise rates or ‘look through’? The ‘look through’ is a 50 year time frame but we’ll try it anyway.
        So we’ll get compensatory price and wage claims from the powerful leaving the less powerful to carry all the damage…what’s changed?
        The main tool we’d use to get the dollar down would be a drying up of the short term money flows…whoops where is all the credit going to come from? How will we finance our imports? Retail spending collapses bringing further widespread unemployment.

        There is no magic wand. We ran out of any good options long ago.

      • Mr SquiggleMEMBER

        Surely somewhere between plan 5 and plan 10 will be:

        Plan X: Ramp up the migration numbers with more than 120,000 skilled migrants coming in each year. Cross-check to ABS labour force data and find that annual net jobs increase is about 60,000 pa.

        Do 120K skilled migrants fit into 60K new jobs?

        Hold hands out and yell out $5#[email protected]!!!!!

    • As it stands it’s a 2 stroke engine, stroke on, stroke off! 🙂

      but nevertheless – stroke – like you’ve never stroke before! 🙂

      bunch of strokers 🙂

  10. Why does it take a ‘study’ to establish the bleeding obvious??

    In Sydney, if a FHB mortgage on a very average suburban dwelling is $1,000 a week over 25 – 30 years (not including ‘other’ expenses)… while renting that same very average dwelling costs 1/3rd to 1/2 as much, and at the same time capital growth is clearly negative… a 1/4 century long mortgage that you will surely make a loss on as prices continue downwards!

    Interest rates have got NOTHING to do with it!

    • I am amazed, having read down this far in the thread, that no-one has pointed out that a glaring disparity between renting and buying is “evidence number one” of a bubble in prices.

      But MB is such a good forum and the commenters are so bright, that this is probably regarded as obvious and no-one bothers to re-state it.

      For those who have discovered MB only recently, in normal undistorted housing markets renting does NOT make sense, because rents are normally roughly the cost of financing the purchase of the house (by the landlord), plus a profit. This is why the mythology is that renting is a waste of money – it WAS a waste of money, in your parents time and your grandparents time.

      The basic reason that rents get left way behind in a price bubble, is the same as the reason that dividends get left way behind in a share market bubble – the price is being driven by expectation of capital gains through FURTHER RISES. In other words, it is pure Ponzi, and pure psychological gaming. There is nothing “rational” about it. It is a mass mania, a frenzy, a delusion.

      It is a disgrace to society in civilised countries, that a basic necessity, housing, ends up treated in this way. Shares and gold are not basic necessities, and bubbles in them do not gouge wealth out of society’s young people and treat them as the “final suckers” who lose the MOST when the racket collapses.

      If the older generation were advising their young wisely, they would have advised them for the last few years to rent and NOT buy, because things are totally different now to what they were in their day. If they are too thick to see this, they should not be offering well-meaning advice, and the young certainly should be telling them where to get off – on this point.

  11. Current net rental yield for median properties in Australia is around 3.5% (4.5% gross yield). To be cheaper to buy than rent: ongoing buying costs (repayments, fees, water, etc) to be lower than rents, mortgage interest rates have to be below 2%.

    Mortgage interest rates have to go down to 3.5% and deposit rates down to 0% for interest paid to bank to be lower than money paid for rent.

    RBA is not left with enough ammunition to help this case. The only way to be cheaper to buy than rent is price fall.

    Even with the lowest possible mortgage rate of around 4% (if RBA slashes to ZIRP mortgage interest rates in Australia will not go much below 4%) prices have to go down 25% to be cheaper buying than renting. If rates stay around 6% prices will have to drop almost 40%.

      • GunnamattaMEMBER

        Do you have a view on how much lower from now (ahead of presumably -25bp tomorrow) the RBA could actually go?

        The way I see it with rate cuts they are pushing on string. The banks need to the funds from OS which I would have thought meant that circa 2.5% would be as low os the RBA could go…..then there are those inside the RBA arguing they need to keep something in the kitty should things worsen in 2013. Are we there already?

        • Under current circumstances, I think rates may will not go below 3%.

          If economy gets much worse (unemployment jumps to 7%) rates could go down to 2.5%. If we get into deep recession, rates might go down to 2% or even 1.75% but not lower than that.
          That level will be our ZIRP. In that case mortgage rates, might go down below 5%, but not much.

          • Raveswei’s calculations are very helpful, but this is all a ghastly policy muckup anyway; Greenspan low interest rates did not make house prices rise in Texas, and neither has Bernancke low interest rates.

            But until the bubble bursts, lowering interest rates in a supply-quota’d market only makes the prices go up still further. It is not likely that interest rate cuts will change the relationship in favour of buying rather than renting.

            But even if it did, and first home buyers willingly propped up the market for one last hurrah, what happens at any time in the next 20 to 30 years when interest rates have to go back up again? First home buyers would have to be idiots to fall for the interest rate honey trap. It would be different if the mortgages they were offered were non-recourse, like in California, or the interest rate was locked in for 30 years.

          • If the RBA can’t do ZIRP, then unconventional monetary policy (QE) will be impossible too, for the same reasons.

            If foreign investors in Australia are faced with low rates, or being repaid in printed AUD, why bother investing here, given the risks? They’ll just take the low rates and printed US/European currencies where assets are already ‘cheap’, instead of ‘about to be cheap’.

      • Good observation.

        2% would be the basement I expect, 2.5% the floor

        this is the whole problem with the safe harbour/haven meme.

        If we’re a haven for international capital, no problem.

        If we’re only a harbour and it gets a bit too choppy inside and the breakwater starts to crumble…..

        • GunnamattaMEMBER

          You ever heard of a safe haven running endless CADs on the greatest Terms of Trade surge in its history, with a government looking to replace commodity exports with housing construction for a population 145% under the card?

        • Indeed.

          But then again, it seems the market is – for now – ignoring those little facts.

          Its the whole “cleanest sheet in a basket of dirty linen” thing.

          Sorry for the metaphor avalanche…

  12. Diogenes the CynicMEMBER

    Don’t buy if don’t have to. My uneducated cousins have all bought recently – they are all geared to the hilt have kids (or kids on the way) and have no idea what is about to happen – well they ignore my warnings!

    • I know how you feel…… it is hard to get anyone close to me to take any notice of my warnings either.

  13. i’m gen x, wife & 2 kids, with about a 60% deposit I could make on the leafy green suburban house i rent for 2.5% gross yield. We are sitting on the sidelines, although I do get the fact that I am being screwed by the tax system and govt policies which encourages bad investment and discourages prudent investment. To this end I have just upped my super contributions to the 25k threshold. This saves me 8k in tax pa and more on the dividends / cgt assuming there is growth over the next 25 years. Although I cant touch it until retirement, my theory is I have “indirect” access to it based on the fact that if I have a big enough nest egg I can afford to spend more and save less in my 50s.
    This seems the only sensible option at present – if the market becomes sensible again (and I dont bank on that as govt interevention, socialisation of losses and general stupidity are powerful forces) then I will be able to buy outright. If not at least I am getting some tax breaks somewhere and will continue renting at one quarter the cost of buying.

  14. Just an observation: I read through most of the comments and did not find a single comment saying anything like:
    I have plenty of money to buy a house BUT I’m choosing to invest in creating/growing/developing/buying my own business.

    It seems to me that true RE buyer demand only disappears when most potential buyers decide that some other investment suits their long term financial needs better than RE. Until this happens there is too much capital (and demand) sitting on the sidelines for any significant RE devaluation to occur. Many may claim they are waiting for a 40% devaluation but chances are they’ll never see their -40% prices because too many others are waiting for -10% or -20%.

    • but those holding out for 10-20% might decide to stay put and hold out for more reductions. These things often work with negative feedback loops – that said, I do accept our banker loving govt will be trying their best to ensure feedback loops only occur ont he way up.

      • In the case of a monotonic 15% drop in prices I can see what you are saying, BUT large monotonic drops in commodities prices are extremely unusual. So the market shake out occurs as a series of quick falls each with a dead-cat-bounce. There would need to be a liquidity crisis of some sort before potential buyers simply stood by and watched as prices fell 40%. This liquidity crises is what made the GFC such a unique event resulting in such large corrections.

        It is possible that a small RE correction (say 10%) will lead to a recession resulting in the evaporation of consumer confidence. We have seen this play out in Spain / Greece/ Ireland so why not Australia?

        Why not Australia?
        I think the answer rest in the likely source of an Australian recession (i.e. China). If China really starts to fail then, there is a lot of hot money that will be looking for an exit strategy / parking spot. Even over priced Sydney RE is likely to look very attractive if the wheels fall off China’s wagon.

        • There are all sorts of differences between house price bubbles on both the upside and the downside. I don’t know anyone who is any good at picking peaks, let alone what kind of downside is going to occur.
          Japan has been having a slow unwind of prices for 25 years.
          Ireland and Spain both had a drop of something like 45% in two years. Las Vegas and Phoenix behaved with similar volatility, and so did some isolated markets in California. The reason for this is that the price inflation in the first place, was accompanied by insane over-supply. Yes, it is possible to have over-supply and bubbling prices. The mechanism is a “quota” in supply.

          Non-recourse mortgages tend to increase volatility on the downside. California and some other US States.

          Outright relentless under-supply that has persisted through several price cycles, as in the UK, tends to keep the price trend relentlessly high, so that the price “troughs” tend to be higher as well as the “peaks”.

          It also matters whether the central bank tried to keep the bubble inflated for long or not. US monetary policy under Greenspan was volatile enough that it both inflated the bubble (which was a bubble in California and a few other places, not the whole USA by a long shot) quite rapidly, and then burst it quite abruptly, and then tried to “clean up the mess afterwards”.

          The RBA is trying not to do that, but I am aghast at the RBA’s total loss of focus since Stevens and Richards and co were so definite about the problem that “supply” of housing presented them. In this, they were following in the steps of Brash and McShane in NZ in the 1990’s.

          When supply of housing is inelastic due to regulations, monetary policy is rendered partly impotent, because interest rate cuts partly just pump up the house price bubble rather than stimulate the economy, and interest rates increases barely dent the bubble even if they are killing the productive sector. The parts of the USA with elastic housing supply were ROMPING under Greenspan interest rates and they are romping today under Bernancke interest rates. These low interest rates translate far more into increased household discretionary spending WITHOUT increasing debt (as happens with equity-withdrawal spending in a house price bubble) and also into productive investment. But where housing supply is inelastic, all that happens is that the house price bubble inflates a bit more, and after the bubble has burst, “QE” struggles to restart the productive economy at all, while house prices that should be adjusting to affordable levels get a bit of pump-priming to keep them unaffordable and even resume a new bubble.

      • I agree – the hassle of being in business and actually hiring people and making stuff and providing services, needs to be reduced and made more profitable i.e. lower taxes.

        I have always regarded company taxes as the ultimate “spite tax”. Company profit is not income for any actual people until it is distributed as dividends. I say that taxing company profits that are re-invested in the business, creating more employment and economic growth, is the ultimate class-warfare “spite tax”.

        But the class-warfare rhetoricians in politics are too thick, and especially their followers are too thick, to see that they should focus their spite on DIVIDENDS. Instead of taxing profits at 30% and then dividends at 30% (say), they should tax only the dividends at 51% (the equivalent of the foregoing in terms of effect on tax take), and the effect on economic growth would be far less damaging.

        I know that taxing dividends too high is bad for investment and economic growth too, but reform step one should always be to abolish the company tax completely.

        The US States with no urban growth constraints, affordable housing and affordable commercial land, “right to work” laws, low regulatory obstacles to resource extraction and use, and lower local taxes, are the sector of the world economy to watch now. They are performing like Germany did in the EU for years: being in a monetary union with other States that have ruinous local policies, is a real winner, because benefit is reaped from an exchange rate dragged down by the under-performing States, and benefit is also reaped from low central bank interest rates that boost actual economic activity rather than destructive asset bubbles (which happen in the ruinous-policy States as the main response to the low interest rates).

        • see that they should focus their spite on DIVIDENDS. Instead of taxing profits at 30% and then dividends at 30% (say)

          That’s called dividend imputation.

          Australia does do that, one of the few countries that do.

      • I can’t think of a single reason why any country would intentionally make it difficult for willing investor to establish a new business. Yet Australia seems to have literally hundreds of laws that are specifically anti small business. The game is already stacked against small business without resorting to legislatively distorting the playing field.

        • Because the country has been captured by big business?

          There is nothing big business hates more than competition.

          • Or because it has been captured by ‘middle Australia’ or ‘working families’ who now expect a never ending handout of tax cuts and welfare, all paid for by small business.

          • The welfare money collected by families is just increased discretionary spending they perhaps should have received from their increased productive output.

            Business is the beneficiary of these welfare policies, they aren’t ending up as privatised current account surpluses that’s for sure.

            Small business in Australia deserves what is gets for being stupid enough to not tar and feather Heather Ridout when she was ‘looking after’ their interests at the BCA.

      • This is the real problem. People don’t want to invest in business.

        With their experience of how the average business is run in Australia (either as customer or employee), can you blame them ?

      • Ever been to somersoft? Property investors consider themselves business people.

        That’s where it all went.

    • China Bob – I do know a few people like that – late 20s, big share portfolio, no interest in housing – but I’m sure they are a very small minority.

      Likewise those who are looking to buy a house overseas rather than in Aus.

      Most would be happy with a “no risk” option like cash while we watch what happens. Doesn’t need to make a big profit – just no net loss is good enough in the stormy 24 months to come.

    • Yes, quite. I have a sneaking feeling that rather than starting a new business right now, a good investment would be something like precious metals.

      Global warming, the biggest issue any of us will see playing out over our lifetimes, will mean a panicky stampede into renewables. I mean a GIANT stampede — think wildebeest!

      Now here are the Silver fundamentals:
      1) Vital for all forms of Solar Energy in an era of Global Warming,
      2) Wide range of industrial uses (no substitutes for most of them), 3-Poor Man’s Gold,
      4) USGS predicts extreme scarcity by 2020,
      5) Carbon tax will limit mine supply,
      6) Peak Oil will limit mine supply,
      7) Much less of it above ground than gold, so it’s a tiny market that can go ballistic. 😯

      You heard it here first 😉

      • how has investment in renewables gone so far? A lot of people would have lost their shirt betting on solar, wind, fusion et al.

        While i agree on silver fundamentally, its not silver at any price which a lot of the precious metal bugs seem to suggest…

        re supply, new technology and techniques can erode demand (substitute products) and create huge supply seemingly overnight. Look at nat gas only 10 years ago, now we are swimming in it.

        • If you want to hear someone make the same case about silver, but with more panache, try Dr Stephen Leeb:

          Download/listen

          * Note: thin film panels do NOT use silver, but they are much less popular because far more square meters of TF panels are needed to produce the same power as PV panels, and roofspace is scarce.

          • Not sure what you mean, but we will never ever be “swimming in an ocean of silver” as has happened with natural gas. It is difficult and energy-intensive to extract, and most of it has been used up industrially, and cannot be reclaimed. And there is much more above-ground gold than silver.
            But please, fee
            l free to ignore my tips. 🙄

          • dw I wouldnt take investment advice from a rank amateur.

            look at the dude history and why he is pumping up the silver story, he may be right but there is an angle

          • Oh yes, of course he’s biased and pushing an agenda. So always do your own due diligence. Does one even have to say that? Use your own BS detector. I have.

            I’m not selling you anything.

            I have more than doubled my investments in the last decade with precious metals. YMMV

      • The only other piece of logic i can add is food manufacturers re global warming,too many people on the planet etc I believe rosella is now in foreign hands

    • Many may claim they are waiting for a 40% devaluation but chances are they’ll never see their -40% prices because too many others are waiting for -10% or -20%.

      It might be well and good to have a large deposit, but if you don’t have a job then you are not going to be purchasing any overpriced property.

    • I fit your criteria Bob.

      My partner and I have invested in our manufacturing and retail business rather than buy a massively over priced house.

      We still have a rather stonking deposit but view housing as a poor investment choice at the moment.

      We loathe renting but even with the ludicrous rents in our area, its still cheaper than buying.

      • My comment is in response to China Bob’s question waaaaay up near the top.

        “Just an observation: I read through most of the comments and did not find a single comment saying anything like:
        *I have plenty of money to buy a house BUT I’m choosing to invest in creating/growing/developing/buying my own business.*”

  15. One of the biggest failures of common sense in “housing market analysis” around the whole world, is the belief that “numbers of potential customers” drive price possibilities rather than SUPPLY possibilities.

    Ratan Tata has introduced a $6000 car in India, the Tata Nano. But on the reasoning of the punters who drove the Irish and Spanish house price bubbles, and now the Australian one, Ratan Tata should be selling the Nano for $100,000, “because there is such a massive market in India consisting of all the people who don’t own cars yet”.

    And no, it would be a false analogy to say instead that Tata should be selling Ferraris or Rolls Royces. Houses in house-price-bubble markets tend to be Tata Nano product at Ferrari prices.

    To do what Tata is doing for “first car buyers” in India, for “first home buyers”, it is necessary to have genuinely competitive supply. In Malaysia for years, the local car maker Proton had a monopoly due to import restrictions. This of course was “to protect local jobs”. But the monopoly-holding Proton cars tended to sell in Malaysia at prices around 3 times what Toyotas sell for in free markets, even though Protons were basically obsolete Mitsubishi models.

    The fact that more local jobs could have been created with Proton selling against competitors, at prices at which more people could afford them, did not really enter into it. The dictatorial PM of Malaysia Mahathir Mohamed was not nicknamed “Mr Ten Percent” for nothing……

    Similarly, housing supply “planning” allegedly to “save the planet”, has its own “Mr Ten Percent” vested interests too. The economy would be much better off with supply matching the potential demand, instead of a quota scheme in land for urban development refocusing everything on “price maximisation” – and stuff the first home buyers actual income levels.

    Ratan Tata has worked out that there are “X” million Indians with no car, who earn enough money per year to afford a car for $6000. Australia’s “experts” need to work out how many young people there are, WHAT THEY EARN, and what a fair house price is – not interpret the increasing numbers of “non first home owners” as a reason that the prices (and the returns to mortgage lenders) can stand a bit more gouging yet.

    • The Nano is $2,000. It wouldn’t pass Australian standards, though o get your point.

      His vision is Say’s Law actually working, but you can’t have Say’s Law and ‘trickle-down’ at the same time.

      I wouldn’t worry about the nano, Indonesia also makes cheap cars that also don’t pass Oz standards, but you’d expect that to change at some time.

      GMH had better home protection is the de jure policy standard by then.

    • Australia’s “experts” need to work out how many young people there are, WHAT THEY EARN, and what a fair house price is – not interpret the increasing numbers of “non first home owners” as a reason that the prices (and the returns to mortgage lenders) can stand a bit more gouging yet.

      0% non-tradable inflation targeting would help.

      It would help if the general public, if lacking broader economic knowledge understood this one thing.

      “Increased productivity is generally deflationary”

      We adjust money supply to ensure nominal deflation isn’t observed, but that’s just a calibration, not a real outcome.

      We have this insidious phenomenon right now where

      i) the trickle down lie has convinced a plethora of useful idiots, and appealed to their narcissism of individual exceptionalism, that they’re all budding, rightful billionaires except for gum’int waste and, dole bludgers and boat people, and;

      ii) Paying virtue to chronology, where debating, even pleading with baby boomers that they are canniblising the future of our youth falls on deaf ears because their entitlement has always been boosted by welfare, and will not be curbed with reason.

      All empires decline not because of increased welfare, not because of racial or secular demographics, but because a small elite turn a country into a quasi-democratic state, with increased militaristic desires and a dumbed down population of think-nots. The entire resource base (human resources included) for the benefit of the elite, parasitic few.

      This decline is never rapid, over 20 years or less, its takes multiple generations.

      It sees the dumbing down when educational institutes serve the primary purpose of reducing corporate costs, instead of improving the individual.

      It occurs when the elite grab 70% of the wealth over the past 20 years, and yet the debate is about how much welfare recipients receive or wages are too high despite wage share declining over 10%.

      We had the Gen Y of the U.S. rightfully occupying the vocational area of the greatest economic vandals of the past 400 years, and accomplish nothing.

      This is the decline, it can’t be arrested by non-revolutionary means, yet revolution (either through the ballot box or more stringent means) can not be raised without observing apathy at best, and personal slurs at worst.

      That would make decline appear inevitable.

      You’re best advised to enjoy the decline.

      • Have to agree with a lot of that. There is a strong sense of history repeating itself these days.

        “The sun shone, having no alternative, on the nothing new.” Samuel Beckett

      • @RP
        I wish that most Aussies were as interested in reforming their economy as they appear to be in Climate change.

        Frankly I don’t get it they see nothing wrong in disadvantaging Aussie based businesses even when Australia’s contribution to global warming is negligible. The biggest single thing that Aussies could do to reduce global warming is to deny China access to Aussie coal and iron ore, but that’s not going to happen.

        Instead they pass laws that disadvantage their own locally based businesses I guess “Stupid is as Stupid does”!

  16. Gives one a little hope for the future to see a growing number of young people using their scone instead of buying into the Australian Dream at any cost.

    Well done to the MacroBusiness team for the educative role it plays in calling out all the real estate scammers.

    • “Mr Kusher said that in light of the data, which is scrutinised by the Reserve Bank of Australia, a further interest rate drop was unlikely when the board meets tomorrow.

      “The RBA is likely to be fairly comfortable with the modest increase in home values over recent months as well as the increase in dwelling approvals and will be hoping that current interest rates settings, or any changes they choose to make, will allow the housing market to continue on a path of modest growth,” Mr Kusher said.”

      I’m sorry … is it the RBA’s job only to look to the property market when setting interest rates? Silly old me – there was I thinking that it was supposed to be minding the economy at large.

    • One of the worst headlines of 2012 – noted and saved.

      news.com.au is IMO the worst news site in Australia, just behind The Australian

      Its like imgur and reddit 5 days late combined with every PR release from a property spruiker…

      Did anyone else note that the article above was about the end of the world in 2012? laughable..

      • It is run by David Penberthy. As the story goes he used to run the Adelaide Uni newspaper and took every opportunity to flog the Advertiser at every opportunity.

        He applies for a job at the ’tiser and has an interview with editor at the time, Piers Ackerman. Ackerman asks why he’d employ someone who spent so much time besmirching his paper? Penberthy tells him it’s nothing personal, just a simple case of knowing and writing for your audience.

        Hired.