RBA: House prices “a long way” from a problem

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While Tony Abbott is busy embracing the Swan/Gillard “it’s all good” economic narrative, the Reserve Bank  has taken its jawboning campaign to New York via the WSJ:

The Australian dollar is still too high and remains a brake on economic growth, but it is likely to fall further in coming months, a Reserve Bank of Australia board member said.

…It is “still a bit too strong to help, to the extent it could, in the transition we need to make,” he said.

…Mr. Edwards said the next leg down for the Australian dollar will come when the U.S. Federal Reserve begins to scale back its bond-buying “quantitative easing” program, which he said is likely in the coming months. The start of the tapering process “is highly likely to be associated with a strengthening of the U.S. dollar and a weakening of our dollar, which will be good for us,” Mr. Edwards said.

…”We are seeing some good signs that the transition is happening. Housing is a bit stronger but not as strong as I think we will need to see it,” Mr. Edwards said. “Exports have been good, but we do need to see a bit more in the area of non-mining investment, and we’ll need to see it a bit faster in housing.” Mr. Edwards also said recent concerns that record low interest rates will fuel overheating in Australia’s property market are premature.

“We are a long way from it being a problem,” he said

An encouraging activism on the dollar and very discouraging complacency on housing.

Comments

  1. wasabinatorMEMBER

    “A problem” will be a 30% rise from where it is now. Naturally at which point that will be the new floor and prices will never be allowed to fall below that #cynical

      • wasabinatorMEMBER

        But wait, there’s more. Aus house prices will be the only asset class to survive the imminent WWIII completely unscathed. It’s the cockroach of asset classses.

      • Yeah, like a cancer that actually survives the death of its host.

        I use cancers and hosts as the perfect analogy for house price bubbles and the economy they are embedded in.

      • Absolutely. All you need to do raise the floor to a new level is give people money to afford more expensive houses.

        It’s too obvious to do things like FHOG. You’ve already got negative gearing.

        What else? I know! Why not introduce a PPL. In its marketing of the policy the Coalition has even said it helps with mortgage payments. That’s right, mortgage payments on that investment property need to continue to be made even after having a baby.

        So we take money out of the productive economy or add to national debt to pay for the same scheme……. but….. we’ve got ourselves a new floor.

  2. Abbott isn’t embracing the Swan/Gillard ‘all good’ economic narrative – remember the Tardis – he has seen the future under a Coalition government.

    All good.

    • I guess it depends on which dimension he is transported to. I’m sure in a parallel universe somewhere all will be good.

  3. “House prices are higher but not as high as we need to see them”

    We have some of the most overpriced housing in the world…and we need to see it higher?

    “We are a long way from it being a problem,”

    Mr Edwards is a long way from reality. He is damaging the economy.

    Sack him.

    • I don’t think the actual quote used the word “higher” did it? If you read the actual quote: “Housing is a bit stronger but not as strong as I think we will need to see it”, it seems he was talking about housing *construction*, not prices. Although there is a relationship between the two, as Glenn Stevens has pointed out before.

      • reusachtigeMEMBER

        Yeah, exactly … high house (land) prices are killing construction, not the other way around as idiot Stevens suggests is the solution.

      • Question for Mr Edwards.

        Do higher residential land prices help increase the rate of housing construction?

    • Just needed the rest of the sentence P. “..long way from a problem for me and the rest of my public service banker mates sucking on the public teat and buying investment properties”

      (probably missed the pistol shot and the wink as well)

    • Everyone can see the sweat pouring down his head, they only defense they have against a housing bubble is denial, and still they can’t seem to stabilize the Forex.

    • I have often analogised commenters like him to Marie Antoinette…..”let them eat coke”.

      Send for the tumbrils.

    • Sack the lot of them, and our major parties. Then whack a law in that says you can’t own ips if you’re in government or work on the RBA board. Done.

      Oh and I think $700k a year is a bit much for Stevens. More than the PM? No.

    • Pat,
      no the government is now doing something about affordability, well in Queensland anyway, yes they are allowing blocks to be subdivided down to 200sm and maybe even 100sm blocks.

  4. Housing is a bit stronger but not as strong as I think we will need to see it,” Mr. Edwards said. “Exports have been good, but we do need to see a bit more in the area of non-mining investment, and we’ll need to see it a bit faster in housing.”

    And there you have it.

    • And there you have it indeed.

      The frank admission that the RBA’s plan is to fuel house price inflation with record low interest rates.

      Their dumb, mortgage-debt-fueled, negatively-geared-speculator-driven , financially-repressive, inflationary plan.

      • “Their dumb brilliant, mortgage-debt-fueled, negatively-geared-speculator-driven , financially-repressive, inflationary , nation-enslaving plan.”

        Ban Usury. Again.

        Problem Solved.

      • You missed out, “next generation-enslaving”…..

        Home ownership: how the property dream turned into a nightmare
        In this exclusive extract from his book, The Default Line, the economics editor for Channel 4 News traces the origins of the housing bubble and argues that we’re condemning a whole generation to paying absurd prices for what is a basic human need – and it doesn’t have to be this way

        http://www.theguardian.com/books/2013/aug/18/default-line-extract-faisal-islam-housing?CMP=twt_gu

        “…..Remarkably, through the credit bubble the likes of Northern Rock and Bradford & Bingley boasted to investors that Britain’s “very limited” rate of housebuilding supported their doomed strategies. Successive governments delivered that help. The deal for Britain’s young has transpired as follows: pay taxes, pay high rents and endure the sharpest points of austerity in order to help support a housing system that is delivering wildly expensive houses, or none at all, and to help bail out the failed banks that were built on that system.
        Are we going to load the burden of adjustment from a decade-long bubble on to people who happen to have been born in the 1980s and 1990s? Progressive voices keen to redistribute through benefits have said very little about the overarching negative redistribution caused by the trebling of house prices. All political parties claim to want to foster “social mobility”, yet it seems that where you live will be determined more now by where your parents lived.
        The recent history of property in Britain is wrapped up in notions of freedom and the social mobility of owner-occupation and right-to-buy. Yet right now, Britain faces a return to a more traditional relationship with the land, in which property is the principal agent for holding back opportunity for all……”

      • reusachtigeMEMBER

        Yep, they want to pump this bubble HARD! It just adds to my longing to see the whole thing blow up into a severe mess! Well deserved indeed it will be.

  5. GunnamattaMEMBER

    House prices are never a problem.

    As long as a single person is left in the market buying a single entity which could conceivably be called a house, House prices are never a problem.

    2/3 of the people in houses (owning outright or paying off a mortgage) will tell us they are not a problem.

    The media which relies on real estate advertising will tell us they are not a problem.

    Those japesters in parliament and the administrative side of things who have investment properties, and oversee mechanisms for reporting on any problems in who is buying, selling, how much they are paying and where, will tell us they are not a problem.

    The real estates agents showing potential buyers and renters through homes being sold or rented will tell us they are not a problem.

    Who else is there for whom they could conceivably be a problem?

    • wasabinatorMEMBER

      I have friends who are looking to upgrade and in this scenario the stupidity is so visible it’s hilarious. They simultaneously cheer the price inflation of their existing dwelling, while complain that the places they want to buy aren’t affordable. Honestly, what hope is there for this nation when people can’t understand basic math let alone appear to learn everything about finance from the sports pages of the local papers?

      • I find it extremely distressing and depressing. One moron I know cheers on house prices rises because she thinks it’s some grand achievement instead of a hideous sickness, she’s too retarded to do anything remotely challenging and because they bought for about $200k less, but doesn’t think one iota of her two kids.

      • Always remember that half the adult population has an IQ below 100.

        It helps put things like this in perspective.

    • Who else is there for whom they could conceivably be a problem?

      I person who needs to live somewhere.

    • DarkMatterMEMBER

      That sums up the situation perfectly – housing, bankers, unemployment just don’t impact the top few percent of our society so they can’t see a problem. The Great Unwashed are effectively unrepresented. I believe this was covered some time ago in Plato’s Republic.

      The most insidious and nasty argument that arises in a wealthy nation like Australia is this:-

      Nobody starves, nobody is persecuted, and most of the worlds population would give their eye teeth to live in Australia. The weather is great and they pay you to have babies. Therefore, the rich and the powerful can do anything they like to amass personal wealth – because its a “victimless crime”. No harm, no foul.

      Besides, anyone can be rich – poverty is a personal choice. For example, take Gail Kelly – a rich and powerful woman. Any woman could be just like her if they made exactly the same choices as she did over her life. Every misstep by other women is their own fault where they chose failure over success.

      And there you have it – simple, incontrovertible logic that takes us step by step from a decent society to a brutal and nasty one.

      • End quote from the “reporter”

        “Amazing insights there…”

        (and those “amazing” insights were: interests rates are low, forward orders are up, the dollar has come down)

        I am amazed the interviewer could talk with his tongue jammed up so far the Stockland CEO’s arse

    • DC,

      I guess you are probably fairly busy ATM but have you had a chance to clarify the reported Jun 2013 landbanks of Stockland, LendLease etc yet.

      I find it increasing difficult to extract this information from their reports.

      • Thanks Pat. I will trawl again this year. Some will not have reported this metric. Always deeply buried. After the election.

        And please everyone, do the sums. In almost all cases it is cheaper and risk free to rent. Build a share portfolio or study or travel instead. Observe the global controlled depression we have so far escaped. This is a very bad time to go long and geared residential RE.

        Mr Market will pop this land price bubble and we will be scraping off sticky stuff for years.

        If I never own another property – I have had three in sequence – then so be it.

        Don’t Buy Now!

  6. I’m not sure we could expect John Edwards to say anything other than what he has! The fact that he ‘has to’ is what’s important to me. If all was hunky dory, then he need not have said anything…it would have spoken for itself…

    • Unlike Glenn Stevens and Anthony Richards, who have said some very sensible things about housing in the past and obviously been gagged, this Edwards guy possibly has no prior record…..

    • Well said Janet! If they keep saying things are good and there are more positive signs, eventually the norm will believe it. If a person keeps lying, eventually he/she believes that his/her lies are actually true! It is a state of mind! Unless you are above the norm and see things for what they are! Unfortunately there are not many wise individuals around, and they just simply follow the rest! So keep putting your head into the sand and every thing will be fine! Believe it And it shall happen! LOL

  7. “We are a long way from it being a problem,” he said.

    Followed by “but, by jove, we’re doing everything we can to get there!”.

  8. He’s basically saying: “Sell-off the AUD! We are very prepared to cut the OCR much further – even if it is causing an asset bubble, infact even if I have to cut his nose from my face, we will cut rates further damn you!”

  9. I wish those clamouring for more rate cuts from the RBA stop projecting their good intentions on the RBA (HnH, yes). Haven’t we all had an ample evidence that confirms helping economy is not on the RBA’s agenda—and I may say, it never was.

    • “Haven’t we all had ample evidence that confirms helping economy is not on the RBA’s agenda—and I may say, it never was.”

      +∞

      Pleased to see the absence of a question mark at the end of your sentence.

    • reusachtigeMEMBER

      Of course that is goal number one! Our nation can’t operate without ever inflating house prices. It trumps everything else by far.

  10. More of the same predictable straw chewing yokel guff from the RBA.

    “House prices are pretty fine – nuffin to do with us”

    Chew chew

    “Currency goes up, currency goes down – nuffin to do with us”

    Spit some tobacco juice.

    “Household debt is secured by the wealth of our fabulous houses – nuffin to do with us”

    Hoist up britches with sagging braces.

    “Our banks are making record profits – what priddy sight to see”

    Chew chew chew.

    “We chased the pensioners and savers into risky assets”

    Dagnabbit!

    Time for a snooze in the afternoon sun Jethro.

  11. ceteris paribus

    HnH,

    You can stop all your worry about the Australian economy. Tones has it all in hand- with a poker-machine-led economic recovery.

    Advance Australia under Abbott (AAA)

  12. “The start of the tapering process “is highly likely to be associated with a strengthening of the U.S. dollar and a weakening of our dollar, which will be good for us,” Mr. Edwards said.”

    Since when did the RBA outsource Australian monetary policy to the Fed? If they are waiting to see how tapering plays out, then that is a pathetic outlook to have.

  13. I wonder what impact tapering will have on Aussie interest rates. No mention of that anywhere.

  14. Australian property trusts reported returns in the high teens last year. The economy is going well.

    Leveraged returns on residential property through a tax effective SMSF can return between 30 and 40%. Almost a certainty with house prices rising 7% pa forever. Anyone would be a mug not to be highly geared into this money maker.

  15. Why does the RBA see rising petrol prices as a brake on the economy and undesirable but rising house/land prices as stimulatory and desirable?

    • wasabinatorMEMBER

      They conveniently leave out the cost of sheltering ones-self from the CPI. It’s utter madness.

    • @The Patrician
      “Why does the RBA see rising petrol prices as a brake on the economy and undesirable but rising house/land prices as stimulatory and desirable?”

      Maaaate,
      How many oil wells does the RBA board hold between them??

      If you find that out I expect you will have the answer to your question.

  16. First they ignore you, then they laugh at you, then they fight you – & then you win.

    Well we’ve experienced the first 3, but I doubt whether Ghandi had seen Aussie house prices or he might be considering another approach.

    • i agree, if you really want change, prepare for a fight.
      (but if the guy that you wanna fight is dying anyway, it may be easier to just get out of his way as he falls)

  17. “We are a long way from it being a problem,” he said

    I wonder what a ‘long way’ is from Mr Edwards’ perspective?

    12-18 months perhaps? or more of a 2-3 year timeline?

  18. Vested interests aside, I think the up tops from the banks (maybe the IMF as well?) have been in the ear of Stevens and the gov. Somethings along the lines of “We better keep this going or you guys will be in a lot of s**t. We’ll still have our bonuses s**kers”.”

    I think they have little choice to play along. Had the oz economy performed worse through the GFC, it might have been a different case.