Popping CBA’s ‘no bubble’ bubble

Poor old CBA just can’t leave this scab alone. Then again, given everyone outside of Australia, including many that fund the CBA, knows very well that the Australian housing bubble is very real, perhaps it has no choice. From the AFR:

Commonwealth Bank of Australia, the nation’s largest home loan provider, has dismissed suggestions of a housing bubble, claiming recent investor interest in housing was “a rational response to the low interest rate environment created by the central banks”.

The bank laid out five points as to why the housing market was not in bubble territory in its presentation to analysts. They were:

  1. There’s more demand than supply, especially as Australia’s population grows and the supply side is responding;
  2. Low interest rates had led to rising risk appetite and the pursuit of yield;
  3. Lending standards are tight in Australia, more so since the GFC;
  4. Housing credit growth is subdued as most borrowers get ahead on mortgage payments. Banks are building in interest rate buffers in writing new loans;
  5. The Australian economic growth outlook is respectable with low unemployment and arrears.

These arguments are so hackneyed and weak that it’s hardly worth responding again but here you go:

  1. Demand and supply are a function of the bubble not separate from it. If supply is growing then look out!
  2. Every bubble, every single one, is underpinned by loose credit. This is proof of a bubble not the opposite.
  3. Lending standards are better than pre-GFC, not tight, at all. See 2.
  4. See 3.
  5. Unemployment is still reasonable and arrears are good but both are rising at the margin. Moreover, both are trailing indicators of a bubble not leading indicators.

And two final charts for ya. No bubble here:

ScreenHunter_3690 Aug. 08 11.48


Or here:



It’s real alright. The only question is: when will it burst?

Houses and Holes
Latest posts by Houses and Holes (see all)


  1. If it don’t pop then it aint a bubble.

    The CBA nailed it although I would expect the market to soften quite a bit in 2016 as the supply almost meets demand.

    • Come on Pete, even you have to admit the Sydney investor market has gone a bit silly. Things might be a lot more sane up in Brissie, but the Sydney market dwarfs Brisbane.

      • Sydney is not Australia and it will cool down in 2015/2016.
        Most of the Australian market will cool down due to the surge in supply.

        If it don’t pop it ain’t no bubble. Maybe it will fizz a little in some cities and suburbs.

      • 2015/16 looks fairly ill-timed for a surge in supply if there are any further increases to unemployment, which are likely to keep young people in their parents’ homes and send many Australian resident ex-pats home.

      • Sydney and Melbourne pretty much is Australia, and they’re both a bit silly.

        So its all a supply issue then Peter? There’s nothing odd about the investor market going bonkers while owner-occupiers are fairly subdued? Nothing on the demand side that might be driving prices higher than they otherwise would be?

      • Inadequate supply meets high net migration to both Sydney and Melbourne, not so much Brisbane anymore.

        http://www.abs.gov.au/ausstats/[email protected]/Lookup/4102.0main+features102014

        I can see from your discussions with the Claw that you disbelieve the supply argument, but I believe. However this market has been allowed to run for some time and there is a lot of supply on the way.

        Have a read of the HTW warning for the oversupply of units in Brisbane CBD. Read the August report.

        I haven’t looked in depth but I expect to see the same thing with Sydney and Melbourne. In a couple of years we will have an oversupply in the CBD of our major cities and probably on the outskirts for 4/3/2 homes on small blocks.

        Some areas will hold their value (good homes well situated)
        But in the oversupplied areas there will be vendor stress – how much I don’t know.

        I wouldn’t expect a bang but maybe a fizz on some localities.

        EG Brisbane – if I wanted to buy a nice family home in St Lucia I would buy now because they are going up, but if I wanted a one bed unit in or near the CBD I would wait. If I wanted a starter home on the fringe I would probably wait.

        I would expect the same conditions in most other cities until the population build up to negate the oversupply.

        Does that answer the question?

      • So ultra low interest rates, foreign demand, and the tax-preferred status of housing is having absolutely no impact whatsoever on housing prices in Sydney and Melbourne?

        What we’re looking at is a perfectly functioning market responding to a shortage of supply and delivering the world’s highest house prices?

      • @ PF

        Yeah, it’s all FUNDAMENTALS eh Pete??!! No surprise to see an uber spruiker such as yourself wheel out the supply shortage to defend prices. You are indeed the 3d1k of housing.

        It’s not just a bubble, it’s a bubble on a bubble. Just because it has become the main game in town at the expense of all else doesn’t make it any more sound.

      • Lorax – the tax preferred status for investment housing has been in place since Federation except for a very brief stint under Keating – you are flogging a dead horse. Why wasn’t it an issue in 1932?

        The overseas investors buying houses in Sydney and Melbourne are a boon for future Aussie home buyers One day you will realise that.

        Hi MM – if it’s a bubble on a bubble then it will become a pop on a pop – but it isn’t is it?

      • What I love about MB is the way that each thread operates in a vacuum unaware of any other thread.

        Does ‘China panic on sudden credit stop’ have no bearing on ‘overseas investors buying houses in Sydney and Melbourne [who] are a boon for future Aussie home buyers’ ?

    • Strange Economics

      The CBA claims its protected anyway because 70% of any house drop is all covered by mortgage insurance.
      Pity the mortgage insurers are all massively undercapitalised (as property never goes down). They are the sacrifical lambs protecting the banks.

    • PF – “supply demand” it’s that simple right?

      Let’s have a look at the economics in a less naive fashion.

      The demand curve reflects the willingness to pay for a good at certain prices. So saying that as long as “demand (as in Quantity) exceeds supply (also simply Quantity) means that prices go up forever and ever” is …well… naive.

      As prices hit nose bleed levels and pushes people’s capacity to pay (let alone willingness to pay) guess what happens? Quantity demanded at the current price drops.

      Supply and demand eh? Well I suppose it convinces your customers.

      • Wages are still rising, interest rates are still falling.

        yep I think that there is still some life left in it. Maybe in 2016 it will run out of steam as I stated above.

      • Wages are still rising

        Not it in real terms.

        Interest rates might better be described as ‘steady’ rather than ‘falling’ given no movement for a year.

      • Wages are rising, they don’t have to beat inflation to matter, and banks have been reducing the borrowing rates even without RBA assistance.

        You are deliberately avoiding the real issues because they contradict your bias.

        If people here were correct house prices would be falling or remaining stagnant – they are not, they are rising. Clearly your analysis is wrong. It’s time that people here dealt with that issue. Five years is a long time to be wrong for.

    • I’m sorry but does no one see pre GFC warning signs here?

      1. Jobless rates rising
      2. Anyone and his dog is able to get a mortgage
      3. Banks recording record profits based on lending money to people that soon won’t be able to pay it back! The bankers are making hay while the sun shines! 2006/7 US all over again.

      Banks should be cooling / tightening there lending but they are increasing it. What does that tell us? That more and more people are relying on debt not just to buy a house but buy a car, education and live

      There is only one way the Australian economy is heading and I’ll give you a clue it’s not up!

      This is a natural cycle that all capitalist economies must go through, Australia has just managed to avoid the cycle for 30 years. But the higher you rise the further you have to fall back to earth.

      Australia is the most over priced democracy in the world. My advise save save and save some more, wait for the fall out and build yourself back up again.

  2. tighter lending standards my backside. Two years back I did one of those ‘how much can I borrow calculations and ran it again today using the model from one of the Big 4. Using exactly the same inputs like rates, incomes, expenditure etc, I could borrow much more today than I could 2 years back. CBA is talking absolute rubbish and they know it and simple tests like these prove it. They have serious model error still because they run their capital requirements off a 25yr tail event on house prices regardless of prevailing circumstances. For example even though we are at historical lows in interest rates, they only allow a 2% rate buffer when calculating affordability. Their models also suffer survivorship and trend bias – because house prices have trended up in recent years the CBA now believes the past is the only predictor of the future so house prices falls in the future will be negligible if at all.

    This is exactly the same flawed analysis that gave us the sub-prime crisis in the US and will again in Australia.

    The big banks still use the henderson poverty index, still test affordability off 2% rate rises even though we are at historically cyclical lows and still expect house prices to behave within the normal curve on the downside despite being significantly skewed upside in recent years. Oh and of course they still ultimately rely on monoline LMI insurance for their highest risks,

    • That is correct. Nothing much has changed, the only criteria for a loan is that you put sufficient capital at stake (be it saved, borrowed or stolen), capacity to meet the loan payments, or risk of capital loss to the borrower, is neither here nor there.

      Check out the mania on super funds piling into property.

      • Yeah, that’s another evidence of a bubble. When it’s already looking like its run about as far as it can, whole new classes of investors who have actually held off before, start to get involved.

    • So is Genworth going to be the short of the decade? Does anyone know how much LMI market share they have?

      • They have less than QBE but there is a reason why GE flogged them off at the top. I know firsthand that GE Australia was panicking in 2008/9 when a few smaller LMI providers went bust or consolidated. This is why they got rid of their LMI business recently via the float. Now the LMI business really is just QBE LMI. All the riskiest mortgages in Australia insured with basically one LMI insurer. This will be THE canary in the coal mine when the housing market goes bust. Look at QBE’s results – they effectively say their worst tail loss provisioned for equates to less than 1 years premium. Its like saying for home insurance, the worst claim we will ever experience is less than what you pay in 1 year premium. And APRA allows them to provision and capitalise on this basis. LMI = SIV in 2007.

      • @Jim

        Great insight thanks.

        I have a mate who’s encountered a bit of misfortune and was worried about his ability to borrow and repay a million bucks. He was offered 30% above that without negotiation, and still can’t figure out why.

      • Not as much as you think. Both Genworth and QBE have ring fenced their potential losses.

        The losses will revert to the banks, which means the taxpayer and productive business

      • rusty penny – it would be great to understand how QBELMI has ring fenced its loss and is able to put such loss back to the banks. Are you referring to excess of loss or quota share reinsurance contracts? If so I’d argue this is a false assessment. The solvency ratios reported by QBELMI and Genworth are calculated on a net of reinsurance and net of put back risk, i.e. its the solvency of the risk they write on their own books. And its deficient. There is no further ring fencing or put back to the banks any more than a car insurer can put back risk to you on a car claim beyond your excess, But if you are aware of something in this vein it would be great to know.

    • You cannot be expected to be taken seriously by the economic elites of this country. Like Luci of RBA, you need to use stick figures to explain that. /sarc.

      (PS: Great post)

    • Actually Jim the banks now use the “Household Expenditure Measure” (HEM) developed by the Melbourne institute of Technology with a buffer and some have variations according to postcode for cost of living variations. It’s quite a targeted allowance for basic living costs.
      A family with 2 children have a living cost in the vicinity of $2600 per month whilst a single person has a living cost of about $1200 per month. Those are out of pocket costs not recurring expenses like rent, insurances, child support etc.


      Looking good on an internet serviceability calculator is no guarantee of a loan.

      • Peter you must be speaking to different banks / RMBS providers that I am as the ones I speak to still use the HPI or a derivative of it under a different name for affordability. The HPI also has variances to dependencies and expenditure – the basic premise behind both methodologies is if you can survive a 2% interest rate rise off current levels and effectively live off baked beans then you are awarded the loan,

        And I never mentioned using an internet calculator was a guarantee of a loan but it certainly is a reliable like for like comparison to how much banks were willing to lend then compared to now, which was the point I made.

      • Jim a few lenders are still using the HPI but not the bigger ones, they migrated to the HEM some time ago. Both are acceptable.

        On memory the CBA was the first maybe 2 years ago.

      • Ummm, reality check. It’s not fhob that are flocking for loans, it’s investors who are measured on a totally different metric.

      • Maybe, but as I pointed out in numerous previous discussions, the NAB offered to lend me an amount that would nearly eat up our whole post-tax income. Around 8x our joint income.

        And we do not have unusual circumstances, other than no other debt (eg cars).

        That is NOT prudent lending.

        Additionally, we know several couples who own homes that they cannot afford to live in. Only -ve gearing and rental affordability saves them.

        This is not a rational credit market.

      • Strange Economics

        I asked the bank what they would offer on a home loan.
        They will give you more money than you can ever pay back !
        Certainly a lot more than I would like to borrow.
        4 to 5 times income – no problem.
        Assumes about 50% of income goes to interest !
        And thats a conservative bank. If you go to the little lenders….
        Add a 20% deposit and Price ratio of 5.5 to 1 easy.
        That will still only buy 2/3 of a house within 20 km of melbourne though. All those houses are on 7:1 to 9:1 ratios.
        And half are sold to overseas cash buyers for more anyway.

    • “….they only allow a 2% rate buffer when calculating affordability. Their models also suffer survivorship and trend bias – because house prices have trended up in recent years the CBA now believes the past is the only predictor of the future so house prices falls in the future will be negligible if at all.”

      A New Normal. You nailed it Jim.

  3. The CBA retail banking margin rose from 2.55% to 2.62% over the last 6 months.

    Hence, banks have been holding on to the improved funding costs rather than passing them through to consumers over the last six months.

    I.E retail banking margins rising and corporate banking margins fallin

    • But their dividend payout is also rising so it doesn’t mean they are setting aside the addition NIM as capital. In fact you will see both specific and general provisions across both books falling due to the same model error where the backward looking sample period falls out of their test period, i.e. if they looked back 5 years to predict future performance, the ‘tough’ years of the GFC have fallen away and the abnormal years of recent times is seen as the new normal. Classical VaR type errors that lead to so much damage.

    • And the really good thing about all of this is that when it all blows up, you as taxpayers of Australia, will have the distinct honour of bailing them out.

  4. 1. There’s more demand than supply, especially as Australia’s population grows and the supply side is responding;

    Weeeooo! Weeeooo! Weeeooo! SHORTAGE!

    2. Low interest rates had led to rising risk appetite and the pursuit of yield;

    The pursuit of yield is real alright but people aren’t piling into housing for yield.

    3. Lending standards are tight in Australia, more so since the GFC;


    4. Housing credit growth is subdued as most borrowers get ahead on mortgage payments. Banks are building in interest rate buffers in writing new loans;

    Perhaps owner-occupiers but investors have gone bonkers.

    3. The Australian economic growth outlook is respectable with low unemployment and arrears.

    Well, if you believe Adam Carr that’s true.

      • The truth is they probably have.

        The last recession was more than 20 years ago. Anyone who was on the board at that time surely has moved on…

        This is what scares me about bankers/financial advisers. They only know good times. The share market goes up and housing goes up.

        Adviser to 55 year old client: You’re about to retire? Have 70% exposure of your super to equities (Australian…) with a yield of 6%, don’t worry about fluctuations of capital, it’s the dividends stupid, you’ll be fine….

      • The chairman and a couple of other directors are aged around 69. They weren’t too close to the boardroom during the last recession, but should be able to remember it,

        More interesting, Ian Narev, the youngest director is 47, so around 23 at the time of the early ’90s recession (at that time he was a New Zealand resident). Give he has double degree in Law/Arts (i.e. usually a five-year course of study) and a Masters in Law, it is entirely possible he was a student at that time, not in the workforce.

        The next youngest director is 52 (Carolyn Kay)

    • Given their history of the current financial planner fiasco, i wonder if the CBA is thinking how many loans they have provided for housing that were documented in a similarly inappropriate fashion.

      They seem to be desperately spruiking to avoid a possible detrimental housing decline (if it occurs) that may lead borrowers to cue up and accuse CBA of similar financial mismanagement a la the financial planning scandal. If that happens they can expect to be under a hell of a lot more scrutiny than before.

    • 1. There’s more demand than supply, especially as Australia’s population grows and the supply side is responding;
      Weeeooo! Weeeooo! Weeeooo! SHORTAGE!

      Silly words aside, the above statement doesn’t make sense. If supply responds effectively, then there would not be MORE demand than supply and a shortage would not result or get worse.

      • I suspect CBA chose those words very carefully indeed – make all the noises that there’s a shortage so the casual listener thinks shortage, yet not actually claim shortage for risk of being exposed as wrong. Or worse, inviting a detailed response that shows they’re talking rubbish, undermining the casual listener’s confidence in their future musings.

        It’s impossible to disprove a statement that makes no sense. A sure sign we are down the rabbit hole.

        “Have you any idea why a raven is like a writing desk?”

    • ‘3. Lending standards are tight in Australia, more so since the GFC;’

      ‘In one loan application, their combined income was put at $300,000 per annum, when the previous year’s tax return had their combined income at $50,000. ‘



      I didn’t realise the Investor Club renamed themselves the Property Club. I wonder if they’re still placarding the RBA on rates day every month?

  5. The supply chain on some of these apartment projects is quite long and if they are already funded they will coming onto the open market for a long time. If the pop has occurred, this could drag things out for a long time.

  6. My definition of a property bubble (dont steal it without giving me credit)

    A bubble is when a large portion of current owners could not afford to purchase their home today at current prices / wages (and logevity of age so pretend a 50 year old is 20) with out equity from their existing house.

    That is basically a bubble in my book. Beacuse when it comes time for the next generation to take their house/land and their jobs/wages as these people retire/die/down size they too will not be able to afford such house at such a price.

    Find statistics on this and you find your bubble.

    Anecdotally I know many people in million dollar properties making 80k combined still paying off their 200k mortage from 1990’s . Only their equity will allow them to move house of equal “value” not their ability to produce money via work.

    Thats a bubble!

    • fair enough but its at the margin where it impacts prices. In your example, prices could fall 50% and these people wouldn’t give a shit. Or maybe they would…depending on whether they’ve continued to draw on their equity (although with combined income of $80k, there’s a limit to that).

      it’s higher unemployment that will be the critical issue. The marginal buyer of debt is the second income earner…only when (and if) you start seeing households lose an income will it show up in household stress.

      But for many, they’ve got a pretty big equity buffer.

      • I could almost buy this but its false. You claim that property market crashes happen in a vacuum and that the rest of the economy isn’t impacted. But don’t recognise the intertwined nature of the FIRE sector in Australia. As we saw the only areas of employment have been in the FIRE sector. So when the sector unwinds so will employment in one horribly correlated mess. Not to mention it will happen at the same time the mining sector goes off the deep end and probably China rotates through its next round of planned adjustment where its requirement for commodities falls down even lower. And around the same time our manufacturing sector is well and truly dead with the car manufacturers calling it a day.

        Yes the currency may fall to improve out export competitiveness but the problem is (a) we killed any export sector apart from mining years ago so have nothing to send apart from tourism and education (b) inflation will rocket because of the import component of finished goods as evidenced by the yawning trade gap.

        It also fails to recognise the dent to confidence and dent to lending standards. If retail is in the dumps now with credit cheap and easy and house prices high, how do you think it will perform in recession? How do you think your bank manager will react when you look to up your credit card because you’ve lost your job?

        This is reality folks, go look at Greece, Ireland, Spain etc etc. All killed by poor lending standards and bad bank regulation. Australia is no different. Of course the CBA is out banging the drum on housing bubbles – it actually encourages me when they get the cheer squad out as it shows they are clearly worried enough about it to spend money on it. I’m sure Narev is actually aware there is a bubble and is quite concerned of it – Chronican from ANZ actually admitted it a month or so back. But what do you expect CBA to do – stop lending, let shareholders down, allow the other banks to suck up the market.

        This will carry on as long as the market will allow it, then it simply won’t. Then every excess that has been caused over the past 10 years will be given back, and it will overshoot terribly for a few years before adjusting back to long term reality.

    • A bubble is also when upgraders can not function as the difference in price is greater as all homes move up. They will just not get the credit to upgrade.

  7. Well, in news today China’s richest man Wang Jianlin is planning to spend $1.7 billion on Australian property. That’s just one guy, and there a lot more where he comes from.

    I’d say the CBA business model is looking pretty good for the forseeable. Measures like the ratio of prices to Australian incomes are of little relevance when there’s a tsunami of foreign money coming in.

    • huh?

      By definition, any country has exactly one person who is the richest. Seems a bit like saying there are plenty more Americans like Bill Gates…

      To be slightly more charitable, there are around 150 – 170 billionaires in China, but no more than 70 have $1.7 billion to spend on anything.

      EDIT: Dalian Wanda have already developed a similarly valued RE project in London, and are also negotiating to start one in the US. Doesn’t seem to be an Australian thing, just an overall strategy of global RE development.

    • “including the construction of a $900 million beachfront resort on the Gold Coast.” So much of that money is going into just one project. I’d suggest the rest will be similarly applied….

    • Chinese want assets anywhere that is not denominated in chinese Monopoly money ( money that is worth something in china but cant be easily shifted and used else where)

      Chinese with money just want it out, it doesn’t matter the cost. ( even if it is a bad asset) Rich Chinese are worried that the government at any time will take from their accounts in the event of a economic emergency. Its a communist country after all.

      I am currently helping my Chinese friends with investing in Australia/Europe for this exact reason.

      • Dj I don’t think it’s really the Chinese money they are so worried about. They are sitting on nearly 5 TRILLION of USD and Euro monopoly money and yes they want real assets to replace that. We are and have been happy to sell our country to them to maintain our profligate ways.

      • Jumping jack flash

        Flawse nails it.

        To some extent it is a case where liquidating boomers cannot offload to the local population, because, well, just look at wages, look at industry, and the fact that almost all eligible buyers are already serving 30 year sentences after the decade of exuberance ending with Rudd’s final push.

        The only choice is to look overseas for buyers, or the whole thing falls over, and nobody wants that. Not banks, with 60+% of their books in property, not boomers who want to offload at the inflated price, and not anyone with a mortgage – who wants to be paying back a bubble-sized mortgage after prices have halved?

        So I’m afraid it is here to stay as long as it possibly can before the entire economic system falls apart.

    • So Mr Wang Jianlin is rich, why would this be good for the CBA? Firstly, he has his own money, he doesn’t need to borrow from the cba. Secondly, if he wanted to borrow he would go to HSBC or the Bank of China. Thirdly, we’ve seen the Japanese do exactly the same in the late eighties. When the bubble burst, all the funds pulled back home.

    • Yep, housing is now our biggest export. Just as the mining boom comes off, the world falls in love with our real estate. We truly are the chosen people.

  8. It’s not about this one guy. That was just for colour. The point is that foreign investment can drive prices, rendering irrelevant domestic measures of affordability.

    • Yes…and no. It’s the marginal buyer that sets the price of any commodity. That thought operates at both ends of the spectrum. Take away the capacity of the ‘bottom end’ to buy property, and the whole mechanism above it, falls. As any real estate agent will proudly tell you, it’s ‘getting on the ladder’ that starts the whole thing off. Take the capacity to take that first step away ( cost of finance; regulatory restriction etc) and those above don’t go up either. Sure, there’ll be outside influences. But let’s try to remember what the property stock of any country is really for….to house its own people. And it’s not the value of that shelter than makes a country prosperous, but what the occupants do when they leave home and go to work.

      • As much, if not more, their choice, actually.

        If they offer prices over the odds, of course we’ll sell.

        But if they lose interest, for any reason at all, our ability to choose is done.

      • Foreign money is the very definition of hot money and will be out the door before you can blink as soon as this turns. Its amazing how quickly history repeats itself and how quickly people forget, I distinctly recall back in the 80’s there was another Asian nation which had grown exponentially due to innovation and new production methods. It had abundant external reserves but there were concerns around the transparency and solvency of its banking system. It too spent much of its new found wealth on golf courses and resorts in Queensland right around the same time Australia was experiencing great commodity prices. Around the same time Australian banks had lent heavily to commercial property too and I’m sure we saw similar comments on how the market was sound and that the unbroken bliss would continue.

        Then this Asian country ran its course. Its trade and manufacturing miracle wasn’t so great after all and had been propped up by collusion, inefficiency and fraud in its banking sector. Its currency fell sharply, its exports were impacted and many of its banks were insolvent and had to be bailed out and merged. Those savvy investors sold their Gold Coast golf resorts at firesale prices. Those Australian banks exposed to commercial property very nearly went bankrupt with Mr Packer stepping in to bail one out.

        Sound familiar? China is Japan repeating itself all over again. And our country are the idiots thinking ‘this time is different’

  9. “a rational response to the low interest rate environment created by the central banks”.

    Actually the CBA are absolutely correct. The environment has been created by Central Banks, legislators, AND by the stupidity of modern economic thinking everywhere. What we have is the result of 60 years of mis-education, stupidity, and downright academic fraud in Universities. Positions of power in Banks and the Bureaucracy are now totally occupied by unthinking idiots who passed through the Economic faculty doors in that time.

    It’s not CBA is the problem. It’s not even Glenn! It’s the whole stupid world of modern debt-driven economics.

    • Agreed 110%. Let’s now get off this dumb Keynesian policy nightmare and get positive money going.

    • All true Flawse. Of course CBA haven’t been reticent in taking full advantage of that set of circumstances, the situation probably not assisted by the fact that certain twits who couldn’t manage an economy decided to privatise the one institution that might have had some sort of social charter.

      Release the hounds.

  10. I wish we had an accurate idea of exactly how much pressure foreign purchases have placed on Aust. land prices. Can anyone hazard a reasonable estimate? Are we talking 2 or 3% or could it be more like 8-10%?

    • According to the Q2 2014 NAB Residential Property Survey the percentage of total established dwelling sales to foreigners is about 8% nationally and 10% of new dwelling sales.

      That is about 50,000 sales per year

      • OK thanks. And is the inference in here that the ‘real’ number is likely greater than that? Or I misreading it?

      • Noone knows what the real number is. The lack of data is astounding. I have not seen anyone challenge that estimate.

        The real issue is that only 10,000 of those 50,000 sales to foreigners have been approved by the FIRB.

        That means that potentially 35,000 sales of existing dwellings in the last 12 months are unapproved, illegal and voidable.

        If Kelly O’Dwyer is going to do anything she must conduct an independent audit of the last 12months worth of sales of existing dwellings in Syd/Mel for FIRB compliance asap.

  11. The housing bubble will destroy the entire economy one day regardless of how much “coping mechanisms” made things look like they could be propped up. It will involve house prices collapsing anyway when the time comes and the will be nothing that can be done about it because all the ploys will already have been done.

    Doing something about it now will be less painful. There are fewer people in debt, to be affected by it, today, than there will be in the 10 years time that is my pick for the absolute last possible date that this can be propped up for. The problem is, the crash will come after everyone has stopped listening to the bears because they have been wrong for so LONG; and bitter young people will have given up waiting for the crash and will have mortgaged up to the eyeballs for the new 50 square metre hovels that will have been permitted by then as “affordable housing” – debt will be at an absolute max – THEN the big crash will come.

    I have been convinced of this sort of scenario from the work of Phillip J. Anderson, which is strongly recommended by Catherine Cashmore (hence my reading it in the first place – hat tip to Catherine).

    • I have been convinced of this sort of scenario from the work of Phillip J. Anderson, which is strongly recommended by Catherine Cashmore

      That guy also did fantastic work with duct tape, a car battery and household odds and sods.

    • The currency will just be readjusted. Strangely, nearly the whole population values assets in fiat, and fiat is very flexible. Although there is likely to be a big deflation shock initially – IMHO this is the opportunity.

      • @flawse

        Indeed. I am sure PF will say that’s an isolated incident. Well in a place like Oz, such isolated incidents should not happen.

        The fact that there is widespread reporting of this shows it is not isolated.

  12. Jumping jack flash

    Nicely done, H&H.

    95% LVR loans are easy to find, maybe not from a big 4, but they are there.

    For point 4’s rebuttal, I’d also mention hidden unemployment like the almost 1m people on disability pension, plus their “carers”, for all manner of shonky illnesses.

    Imagine if they got a rocket up them, the number of unemployed would just about double.