The dumbest bubble in history

With warnings suddenly flying thick and fast, the history of bubbles has never seen the likes of what is unfolding in Australian property now.

Some bubbles have sprung from unlikely sources such as tulips. Others have inflated around bright ideas that held little reality such as the South Sea Company. In stock markets bubbles have certainly been destructive but equity can handle that and they have also left historic legacies of technological advancement. The Roaring Twenties was one, built upon expanding railroads. The millennial tech bubble was another, launching the internet.

On the other hand, history’s dumbest bubbles have all been in property prices. Pick your example – US, Ireland, UK, Spain – these leave nothing but economic waste in their wake. Banking systems are wrecked, savings are destroyed, and no lasting legacy is built in the real economy except an overhang of useless debt.

So what makes Australia’s current property bubble so unique? Three reasons.

First, no other property bubble has ever had such a clear warning in advance of its blowoff. Just six years ago, the world writhed as a multitude of property bubbles spectacularly imploded. We saw it and it scared the bejesus out of us. Yet here we are, well short of a half generation later doing exactly the same thing.

Second, we have only just had the same long term property bubble bailed out by the biggest mining boom in history. Post GFC we rebuilt denuded savings and reliquified banks as mining poured billions into projects and jobs, while international markets collapsed all around. The serendipity was gigantic, easily big enough not just to protect us from the GFC but to redefine the basis of the economy towards sustainable prosperity for generations. But instead of being grateful and prudent we succumbed to the hubris of exceptionalism.

Third, the deteriorating economic circumstances of the commodities bust that we currently face have been obvious for three whole years (if not all along). We knew the boom was narrowly based in China. We understood the magnitude of investment. We knew the size of the supply expansion. We knew prices were going to fall a long way. We knew a capex cliff was coming. But authorities did nothing to prepare for the end point except to deliberately reinflate a housing bubble supposedly to float us blithely over the carnage.

Certainly the history of capitalism has seen bigger bubbles than Australian property. There have been stranger bubbles too.

But none is more dumb.

Houses and Holes
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  1. Three more reasons.

    Greed. Not just your normal garden variety of greed but a “culture of greed”. (I now see a move toward a culture of hate)

    Poor education (exercising choice to remain dumb)

    Lazy. John Howard created a mass market of aspirant capitalist, who were or are speculators in a zero sum game.

    • Howard killing the reform proposals after his 2004 PM’s Taskforce report on Housing Affordability, was a major, major tragedy for Australia. It could have been the Texas of the South Pacific by now. Of all sad words of tongue or pen, the saddest are these: what might have been.

      • notsofastMEMBER

        Also the lack of progress on reform in the Australian Car Manufacturing Industry during the Howard and Costello years has been instrumental in the looming closure of that industry.

    • ThicklySliced

      ….and don’t forget, the current crop are also the dumbest politicians in history. A difficult trick with so much intense competition.

      Point to note though – it’s only ever a bubble……….. if it BURSTS!

      • It will burst and it will collapse the economy as it did in Japan in 1989 and the U.S. in 2007/8.
        Both economies have not yet recovered.

      • @Phil,

        Kev captures the Strayan mindset perfectly:

        “Hey Santa claus you c–!

        Where’s me f__ng bike?

        I’ve unwrapped all this other junk and there’s nothing that I like.”

    • in addition to greed you forgot to mention fear and shame

      all bubbles are psychological constructs driven at the beginning by greed, later more and more by shame and fear toward the end.

      • @X

        Not in addition to as the fear and shame you so correctly include are derivatives of greed and poor education.

        But yes I agree entirely.

      • @doG
        All the markets are manipulated by central banks.

        If home loans were at 13.5%, home prices would be half what they are now.

        Of course, that’s what will eventually happen when the RBA decides we’ve had enough deflation from the ZIRP, then enough money printing to replace the deflation which will cause enough devaluation to rid us of two thirds the debt.
        That’s when they’ll increase the interest rates to 20% for 12 months to get rid of the inflation, after which the home loans will be 13.5%.
        At each turn the RBA will say “who could have seen that coming” despite having created each problem with unusual

        When will we ever learn?

        The speculators follow each and every turn, making money hand over fist, while the other 98% get on with our lives.

      • I hate our politicians, the boomers that vote them in, the RBA and everyone in the FIRE industries.

        (And they hate me for refusing to be the last rung on their ponzi – I’m a lazy, self-entitled, latte-sipping, world-travelling, i-phone collector, apparently)

      • “And they hate me for refusing to be the last rung on their ponzi – I’m a lazy, self-entitled, latte-sipping, world-travelling, i-phone collector, apparently”

        You should wear that tag with pride. Smartest generation for a very long time (far too left for their own good though; it’s part of the con job that’s destroying your opportunities).

    • In a surprise move, the RBA is today expected to raise rates 2 bps in a decisive strike to tame potentially dangerous speculation in the Australian property market.

      The RBA advises strong messaging is required to restrain excessive property price rises in Australia, which already has some of the highest housing prices in the world.

      Governor Stevens, ‘Despite verbal warnings to avoid excess the property market has exhibited worrying degrees of speculative activity which, as we have seen elsewhere, can end badly resulting in major difficulties for financial institutions and Governments alike.’

      ‘We remain committed to ensuring all Australians retain access to affordable housing which provides substantial social benefit and underpins the fabric of Australian life.’

      ‘In addition to restraining property price excess, we are confident the rate rise will come as some comfort to savers and the many Australian individuals and businesses who consume imported goods and enjoy holidays overseas.’

      ‘We expect the impact on the AUD to be within the bounds of recent years but below the highs. As a nation we have lived with the phenomenon of a relatively strong currency for several years.’

      Analysts expect AUD0.85.

  2. “supposedly to float us blithely over the carnage.”

    But, but, it could work out that way.. Oops, I think I just nailed a plank of wood to my head again..

    The stupidest part is something will probably turn up to save our collective butts again. It seems luck, combined with central bank monetary experiments, are far more important than prudence, wisdom or hard work.

    • As Dan says just below, the latest “butt saving” factor is “selling property to corrupt Chinese elites who are getting their ill gotten gains out of China”

      I admit to having been so distressed at this bubble not bursting long ago – I agreed with Steve Keen (and he was wrong) – that I have become agreeable to theories like those of Phillip J. Anderson that would support “no bust until 2022 – 2025”.

      The tragedy about delayed crashes like these is that by the time they come, everyone has given up waiting for it, and the maximum possible number of victims will be wiped out, including young people who have been enticed by “innovative” forms of “housing” and “finance”, into million-dollar mortgages that they will end up $800,000 in negative equity on. In fact it almost seems that a pre-condition FOR a crash, is that “nearly everyone” has become a hostage to the bubble. As long as there are more hostages remaining to be taken – like potential FHB’s accepting they are priced out – it seems the crash will not oblige us by turning up.

      • Yeah, screw that. I fear negative equity far more than I desire a box of bricks to call my own. I’m not gonna end up Irish.

      • Yeh what is it now in Sydney, a $100 a brick….get real or $2000 a square meter…we must be joking.

      • Timday’s: “I fear negative equity far more than I desire a box of bricks to call my own.”

        Enunciates the turning point in all this. Fear will trump greed. Anyone with a smattering of economics knows which is the more powerful emotion.

        Negative equity is agony.

        Don’t Buy Now!

      • Give it a rest.

        The idea that a 6 year bubble that has taken us the stratosphere of being the most over valued real estate market on earth EVER is somehow going to continue to inflate for another decade in the face of guaranteed economic catastrophe is the quite literally the dumbest thing I have ever read.

        It was forecast to crash between 2014/2016, yes that has taken 6 years, but here we are precisely as predicted. Why anyone would decide it isn’t going to crash two feet from the brick wall at 200 kph is beyond me.

      • I would actually prefer it if you are right, Leviathan.

        But at least there is a plausible theory to fall back on if you end up having to retreat in confusion as the crash stubbornly refuses to materialise. Read “The Secret History of Real Estate and Banking” by Phillip J. Anderson. There is a few things in it that I don’t agree with, but still things worth taking on board.

    • Good points, there is also super left as well. I doubt that it will be used for retirement if the markets tanks.

      • Well it’s called diversification, so with some cash and bonds there will be some left thanks very much. Damn it’s cold here at the moment, gotta go and put some more brown coal in the fireplace… See ya

      • Super will not be put in. It would be beyond catastrophic for this country and at least the politicians know this.

      • “And if the stock market tanks too? How much super will be left?”

        Depends on how much is invested elsewhere.

        I would think that local cash and bonds could do alright and there’s the rest of the world to invest in as well.

        I hope everyone has taken advantage of the last few years of massively overvauled AUD to buy non-Australian assets hand over fist.

      • In hindsight it probably wasn’t the best idea to allow punters to set up their own SMSFs and ‘invest’ by leveraging into real property. Sure the banks have limited recourse security but many trustees (mums and dads) have signed personal guarantees which puts their main residence at risk as well.

      • @alex. Is that true? I thought all super loans are non recourse? Unbelievable if that’s happening. What a mess.

      • moderate mouse

        @ rich42

        You can bet your @ss that the banks have covered theirs….

        And given the recent “revelations” in regards to the integrity of financial advisors at the Big 4 Mortgage Companies (that was a surprise…NOT!), you can also bet your @ss that many, MANY people have had the wool pulled over their eyes.

        The only commission these crooks should get is a royal commission.

  3. The latest phase of the bubble, selling property to corrupt Chinese elites who are getting their ill gotten gains out of China is perhaps the most alarming.

    We have an asset owning generation approaching retirement essentially feeding it’s younger generations to the wolves in the name of taking outrageous profits.

    When this blows up will Gen Y and X finally realise what has been done to them and start sharpening the figurative pitch forks? or will they be so mired underneath a burden of misery that they will just take their predestined fate?

    • the only reason why young people will riot is because they will be hungry

      old people will be hungry as well but …

      • The key is slow cooking. Interesting fact, Indian restaurants and takeaways actually use mutton in all their lamb dishes.

    • Gen X and Gen Y don’t matter, we are importing people at a large rate that fully subscribe to the hoard housing at all costs, they are more then capable of picking up the slack. I am surrounded by newly arrived hoarders at my work, all busily building property empires.

    • Don’t underestimate the power of propaganda to keep people stupefied. Proclamations of a recovery ” just around the corner”, the war against terror and the evil Russians etc ” requires sacrifice” ” we are at war” , mocking of negative attitudes as “UnAustralian” in public discourse, blaming the victims” you lazy young people” etc etc

  4. Yes and No, Dan
    The generation that will suffer the most, ironically, will be the Boomers! Just look at what they are all doing! Give them a pay-out from their Super and they’re off to the real estate agency to leverage the lump, up – that’s what low interest rates has compelled them to do – everywhere. Not only are they going to lose their house, but their savings as well, and the last hope of support, their children, will be broke as well. The advantage that X & Y have is ….time. They have the rest of their lives to recover from what’s coming. Many, perhaps most, Boomers are going to die in abject poverty. (NB: I’m from the 46-64 generation)

    • Yep agree, it will be the boomers who will suffer the most when this next market correction hits. It will be a decade or more before things recover for many Australians, and you will have boomer couples working into their eighties before they can even think to retire. There is more than enough time for a bull market to re-occur for the Gen X and others to benefit afterwards…

      • Heaven’s sake, then I’m bucking the trend big time, as a boomer who retired at 50 😯

      • Only a handful of people in their eighties are going to be well enough, alive enough or successful enough in evading redundancy to remain in the workforce. If there’s a crash that wipes out the value of their super and their homes, and trashes the tax base which provides their pensions, abject poverty it is.

      • If I were a Boomer, I would have got together with some of my mates and set up a retirement home that I would be happy to live in in my twilight years.

    • Gen Y maybe, but I fear Gen X will hit hugely recessionary conditions right when they’re at their peak earning age and have a supersized mortgage to boot

    • ThicklySliced

      IF there is a bubble, a bubble that bursts, there is many a Boomer, Glen Stevens, who will have no perceptible drop in living standards and ‘lifestyle’ whatsoever, Joe Hockey.

    • Give them a pay-out from their Super and they’re off to the real estate agency to leverage the lump

      Yep, most boomers are true believers in the never ending housing boom, and why wouldn’t they be, it made them rich after all.

      They might blow their super on housing but they’ll keep their family homes so they’re not going to die in abject poverty.

      • Well see!

        We all know how leverage works. It often expands to encompass all household assets. How many people have gone to the bank to sell up that profitable renter, only to find that they aren’t allowed to because the yet-to-be-profitable ones depend upon the profitable ones for their cross-collateral – the family home ultimately being the core of the pyramid. As my fellow Boomer cohort find that the equity in their portfolios, shares and property alike, has evaporated, the family home will the the last port of call for whoever wants their money back.
        The family home is not immune from risk, and given the boom in parents guaranteeing their childrens’ loans today , the whole family structure is at risk.

      • They might blow their super on housing but they’ll keep their family homes so they’re not going to die in abject poverty.

        What happens when the annihilation of the tax base leads to massive cuts to health care, and boomers living in million dollar houses whose only cash flow is the pension(by then $500k houses) get billed the true cost of their six week stay in hospital after a quadruple bypass?

      • @ Janet

        Like this guy that bought in Mandurah?

        “Timothy Koehler • 14 days ago

        Good treatment of a single example, but the original headline is still close to valid. We bought a property off the plan in Mandurah on the canals in the Ocean Marina South, with a business plan to rent it for $1,200 per week. Sub penthouse, on the canals, 320 degree views, 2 balconies, 3 bedrooms, quality appliances, all on one level, almost all of the 4th floor, private lift entrance. We are getting $400 per week, and trying to sell, looks like we will have to drop the price to $600,000. It cost us over $1.3 million in 2006, but it took 4 years to build. The developer avoided the 3 year grandfather clause by registering the strata plan before it was finished, and it was not the strata plan that we signed off on. So this is not the Pilbara, and an isolated case. There are many as bad as this, and with an annual loss of nearly $50,0000 per year, we are not going to see 30% of our money back. We have sold other positively geared properties at zero capital gain on the promise of help from the banks in selling this one, and the banks have reneged. We have lost all of our 28 years of Super savings, and I will have to work at least another 4 years till I am 72 to get out of this. So don’t tell me the market hasn’t dropped 70% in many cases.”

    • Janet
      Lots of people have guaranteed their children into houses to avoid paying the Loan insurance!!!!
      Messy is not the word for this!

    • objectively BBs will suffer less but their pain will be much bigger, mainly because of expectations

      their dreams and lifestyle will disappear

      Dreamless Gen Y is used to work for food and shelter only … for them very little will change …

      • That’s true, but our dreams include seeing our children and grandchildren in their own homes.

        Whichever way you look at it the banks in general, and the members of the Board of the Reserve Bank of Australia in particular, have a lot to answer for.

        With many years of hardship ahead, when a more accusatory government (nothing resembling the present parties)
        is in place, it may revisit these years and decide that these people require a custodial sentence for their total lack of care in being custodians of their country’s future.

      • Most of BBs dreams do not include seeing their children in their own homes, otherwise many boomer would gift them their IPs

        there is nothing “more normal” than parents giving their wealth to kids and kids taking care of parents once they get old

        but BBs do not believe in this … the most they are willing to do is help kind get into super-mortgages to be able to buy crappy homes from other boomers at higher price

      • I’m sorry that has been you experience, but not all parents are as bad as yours….

      • I’m Gen X and my parents were Silent Generation and they gave to me and my brother more than anyone could hope for – happy childhood, excellent education (overseas), opportunity to travel and live in many places around the world, as well as financial help and inheritance (as much as they were able to do)

        So my experience was a good one, unfortunately not very many people born some time after me in Australia had it that way. I have many friends who are struggling as renters while their parents waste money buying pointless crap (designer furniture, new cars, …) and travel around the world using money they make from investment properties they own..

      • Those good baby boomers, I’ve net all three of them.

        However in not going to prejudice an entire generation as being decent human beings based on a tiny minority that are.

    • moderate mouse

      “Many, perhaps most, Boomers are going to die in abject poverty.”

      Thanks Janet, that has put a smile on my face for the rest of the day.

      Bring. It. On.

      • No they won’t. They’ll vote for what’s left of Australian assets to be sold and GenY will watch them while discussing glass ceilings and childcare or something similar.

        GenY have to stop this left wing BS and understand what’s being done to them or THEY WILL LOSE EVERYTHING.

        Boomers will not lose. Stop kidding yourself.

    • Hopefully we might see the BBs finally downsize and move out to “lifestyle community” land.

      There’s an awesome caravan park across the road from the lake up in Toukley (Central Coast, north of Sydney). Great way to draw out the retirement $$$.

      We’ve all got to get creative. I’m early 40s and am basically screwed. Have been reading about the simple living movement, including following the Minimalists blog and reckon that’s the way for me. You ‘can’ save 50% of your income apparently.. wow, changes ahead.

    • That’s right, I’ll probably leave the country (Gen Y) if shit gets too bad and find a job overseas for a while. Better than paying off the debts caused by greedy specufestors for the next 10 years via taxes.

      Basically punished for something I didn’t participate in…

      I’ll buy “shelter” when it hits the low point a year or 2 after the bust. I already lived through the Irish crash (I didn’t buy into their market) and saw what it did to them. Funny they are doing the same thing again in their market like they never learnt a lesson.

      I just hope when everything goes to shit we take the opportunity to fix the tax system and put regulation in place to protect the Australian economy for all future generations. But most importantly make housing affordable for all again. Which is what allowed the country to proposer in the first place.

    • The BBs will just reverse mortgage the homes and live off that.

      The big 4 wont let values fall more than 10-15%, if they do it will lock Australia’s financial system.

      My bet – house prices stagnate and by the time the boomers are dead, the big 4 own 75% of all boomer property. They’ll probably sell it all for development and make our cities higher density. We are still one of the most urbanised advanced economies in the world and can squeeze some more out of the land around our cities yet.

  5. Well called, H&H

    I just said yesterday:

    March 2, 2015 at 2:57 pm
    Yes, as if having a bubble “like the Irish” was not bad enough – making you look at least AS stupid as the Irish; having an even bigger one years LATER is surely the ultimate in terminal stupidity?The highest median multiple at the peak in Ireland in the Demographia Reports, was 6.5 in Dublin. Most cities were between 4 and 5.Sydney and Melbourne are both in “9” territory now and hardly any city is below 6.5

    • The Irish bubble was different in that ridiculous amounts of housing was built, a lot of it in the West in the middle of no-where – much of it abandoned (I have seen some of it, and it has to be behold). The critical difference about Australian housing (did affect Irish and Spanish housing busts) is the valuation bubble, largely affecting existing housing inventory…

      • 400k a year, it’s just so outrageous! When I came here in the 1980s, the number was around 90k, which I thought was incredibly high even then.

        Immigration has been an economic prop for successive governments here.

      • those 600k are empty homes, they are extra homes left unused after all the immigrants settle down

        over the last 10 years we built 1.85 million new homes, our population increased by 3.3m with average household size stagnant at 2.6

        so we built 1.85m and only 1.25 are used as primary residence – we built 600 000 empty homes in a decade.

        this is roughly the same number of additional empty homes that census data provides

      • Not to mention that immigration turns quickly into emigration as per Ireland. The kiwis are already flooding back.

      • 400K per year, bullshit!

        “For the year ended 30 June 2014, Australia’s preliminary net overseas migration (NOM) estimate was 212,700 people. This was 9.7% (23,000 people) lower than the net overseas migration estimated for the year ended 30 June 2013 (235,700 people).

        NOM arrivals decreased by 2.1% (10,300 people) between the years ended 30 June 2013 (502,800 people) and 30 June 2014 (492,400 people).

        NOM departures increased by 4.7% (12,600 people) between the years ended 30 June 2013 (267,100 people) and 30 June 2014 (279,700 people).

        The preliminary net overseas migration estimate for the June quarter 2014 (33,400 people) was 36.1% (18,800 people) lower than the estimate for the June quarter 2013 (52,200 people).”[email protected]/Latestproducts/3101.0Main%20Features2Jun%202014?opendocument&tabname=Summary&prodno=3101.0&issue=Jun%202014&num=&view=

      • Its almost as if Australia is a vastly smaller country than Ireland, and we have concentrated all our building in the very centre of one city.

        Are you even joking with this crap ?

        Go for a drive one day – there are vast developments in the middle of absolute butt-puck-nowhere one after another after another sitting in the middle of empty cow paddocks.

        You are having an absolute lend with this surely.

      • If 33k NOM in one quarter while the HIA forecasts 200k+ new homes to be built this year, that brick wall Lev keeps talking about looks very close.

        All time record NOM was 299,000, set in 2009. The 400k is gross arrivals in recent years – the change in NOM has a lot to do with rapidly climbing departures, something no amount visa rule loosening can stop.

      • I was there at the time. They didn’t seem like ghost estates before the crash. So what’s going to happen to all those towers built for Chinese investors, do you think?

      • McPaddy: brilliant insight:

        “They didn’t seem like ghost estates before the crash.”

        One important factor in all this is that so much growth gets deflected by the planning fads, miles away from where it is actually needed. Green fields are “preserved from urban sprawl” by the planners, and people end up living tens of miles further out still.

        Then when the crash comes, the planning faddists all crow that “those exurban developments have turned into ghost towns, see, we always said sprawl was bad”.


        The hard and fast rule is that travel costs and time savings capitalise into prices anyway, so it is a falsehood that there is ever money to be saved by paying a whole lot more for something “closer to work” (and 80% + of people work somewhere dispersed anyway). You will find “housing plus transport costs” indices on smartgrowth-promoting web sites that are a pack of half-truths to put it mildly. They always involve some predictable breaches of statistical probity to get to where they do.

        After a crash, many people lose their homes and there is a shaking down of where everyone lives – bankrupts move in with family or into social housing. Of course those left standing get a bit of choice regarding location efficiency (choice that was more limited before), hence the abandonment of the inefficient locations.

  6. Spot on Janet.
    Superannuation funds will get belted in a property correction, especially as so many funds are heavily weighted toward Australian equities, which are dominated by…the big four banks. For all the concern over intergenerational inequity (and I have major concerns) the boomer generation are going to cop it hardest as they may have already retired or be close to it. The growth in SMSF is especialy concerning.

    For those retired that have paid off their house it might be OK, but if they lose a big chunk of their retirement savings, and then struggle to sell their property to downsize, a retirement on a much much lower income than hoped for is the probable result. Without wanting to be dramatic, life expectancies could see retirement income requirements stretching out for 30 years or more in the next couple of decades. A correction will punch a big hole this.

    • moderate mouse

      Life expectancy could also correct once the Boomers realise their wealth was illusory. Levels of alcoholism amongst the geriatrics will explode, as the nouveau broke drink themselves into an early grave.

      LOL…cheers to that!!

    • ThicklySliced

      Terrific video..a must view.

      Problem is, no one is speaking in these terms in high profile enquiries in Australia.

    • Thank you so much for posting. I’ve shared that widely.

      Sometimes its easier to understand your own circumstances when they are mirrored by others.

      I particularly liked his turn of phrase in describing it as “a vacuous financial confidence trick”.

    • Next time you hear somebody bemoaning the lack of confidence as being at the root of Australia’s economic ills, remember McWilliams ‘s point re a confidence trick. Confidence should flow from sound fundamentals, not the other way around. We’ve been putting the cart before the horse for a generation.

  7. Love the irony of the “Land For Sale” pop-up add that accompanies this article.
    Looking forward to the “two-for-one” offers to our cashed up foreign investors, post-bubble.

  8. Pretty disappointing to hear Andrew Leigh on Q&A last night bang on about increasing housing supply when asked about housing affordability. Turnbull said something similar recently as well.

    Increasing housing supply is always the easy answer for federal politicians of all flavours when asked about house prices. No-one ever wants to touch negative gearing, capital gains tax concessions, leveraged property investment via SMSFs or any of the other distortions in the tax system that fuel house prices.

    Best part of all is supply regulation is not a federal issue, so the blame is conveniently shifted onto local councils. State governments are under pressure to do something about housing supply, so when a developer pops in to see the State planning minister with a brown paper bag, its an easy win to overrule local council decisions with stupid planning decisions.

    Lets just free up supply and “streamline” the planning process and all will be good. This is music to the ears of property developers (hello Hugh Pavletich!) and their apologists like Saint Bob Day.

    • SweeperMEMBER

      Even in response to a direct question re NG and the CGT concession Leigh managed to waffle on about the supply side distraction and not mention either once.

      • And what makes debt much cheaper to service Andy?

        There’s your problem. Target that instead of the cash rate and dollar, so you don’t hurt the only genuinely productive people in the economy: Exporters!

      • @Lorax I’m all ears? I couldn’t care about the cash rate asuch – it’s the mortgage rate and savings rate that’s the problem. I know they’re intertwined but a mortgage levy of 300-500bp could be implemented to compensate savers for hypertheft etc.

    • Malcolm Turnbull is owned by Wall Street and the City of London. From the SMH in 2011:

      “MALCOLM TURNBULL was perched on the edge of an abyss in 1999. On one side beckoned enough millions to blast him on to BRW’s much-vaunted annual rich list. On the other lay an uncertain future as the chairman of a rapidly growing but cash-hungry technology company.

      As a founding director of internet service provider OzEmail, Turnbull – now the federal opposition spokesman on communications – was sitting in the library of law firm HWL Ebsworth on a telephone, telling a counterpart representing US technology heavyweight WorldCom: “You don’t want to lose this deal by nickel-and-diming.”

      Thankfully Turnbull had his former Packer chief Trevor Kennedy hovering at his elbow. Kennedy promptly took the phone from Turnbull’s hand and said: “And that applies to you too, Malcolm.”

      Owned and turned into Malcolm Turnbull Inc. There is no saviour people.

      • In the end Turnbull probably understands the debt reality better than most in parliament – but will be just as powerless to stop it even if he was so inclined.

      • Why would he try to stop it? The only obvious answer is to prop up the house of cards until you can hand it over to the next sap. It’s not just an economic ponzi scheme, it’s a political one too.

      • moderate mouse

        Sorry, I miss the point. So Turnbull had a successful career in business and law – in your view this precludes him from being Prime Minister?

        What would you prefer – career politicians that have gone from shouting matches in university politics to shouting matches in parliament?


    • Hey, a greens voter talking about freeing supply.

      The greens exist solely due to being a mechanism to inhibit supply.

      Their embryonic funding beyond fruit loop status was by land owners who sought to prevent increased supply, and used the veil of environmentalism as a crux.

      • Actually I thought the Greens exist solely to protect the environment, but hey, if you want to compare the “evil” of Greens campaigning for sensible, sustainable development versus the “evil” of corrupt politicians taking donations from developers to overrule local planning decisions, I’m up for it.

        Have we learned nothing from ICAC in NSW?

      • I don’t think that Green equals NIMBY, or that Green equals Land Banker.

        They are not perfect but I currently have more faith in them thinking about the problem, looking at a range of solutions, choosing one (with their own justifications of course) and coming up with something that has some long term benefit than the two major parties.

        More good independents with a desire to reform are what I think is needed. But I could be just as wrong as everybody else has been.

  9. There really is nothing to worry about. . Denmark has negative interest rate mortgages , and has seen MBS trade with negative yields also. For a tiny country with not much going for it except being geographically placed at the foot of an economic volcano this is truly amazing .
    So fear not if Denmark can have negative mortgages we can too. Just think how much you can borrow with negative interest rates and negative gearing !
    The Bubble will live forever

      • That just proves they did not go negative enough sooner. Imagine where their house prices would be if they had negative 10% interest rates and full tax deductibility of the positive cash flow against other income ?

        Considering we are headed to 2% rates today with the unemployment rate only 6.4% we will need to be inventive if people are to borrow.

        I think Glenn and the Martin Place Group think committee will realise soon enough that sometimes goods or services like credit are not wanted at any price, even a negative price. With such a massive overhang of private debt growing credit like the old days at 10% + will require some unusual inducements.

      • 6.4% unemployment is not “only” – it’s huge,

        because of the way it gets calculated these days it’s actually higher now than during 97% of the time since WWII, it was higher only during one 6 months period in 80s and one 18 months period in 90s

  10. The roaring 20’s was not the railway boom. It was more the Auto industry, new Media (radio & film) and mass production.

    • Yes I think the railway boom was 1860’s or around there in the USA and maybe earlier in the uk(1840’s) Was that around the time of Walter Baghot?

  11. HnH, while I agree with you in essence I can see why you would never cut it as a restaurant reviewer

    Why stop there when it comes to dumb? It is a lot like strolling into a Michelin 3 star and ordering a parmigiana and chips.

    The spectacular thing about Australian dumbness is not about something as mundane and simple as advance warning, exceptional national hubris and central bank and political myopia (quite valid though they may be) it is about so much more. It is about the dumb experience so profound as to make one wonder if there could ever be a world other than dumb, a world where dumb is the new black or the new normal or the cup from which a sip by intelligence starved lips could be the path to the vision splendid. It is a dumbness omnipresent, a dumbness underneath our feet and at the core of our beings, and a dumbness exuding such a myriad of fantastical and exotic forms as to beggar belief. It is dumb a’la mode, it is ultima dumb, it is a dumb of such orgasmic proportions that our earth really has moved for us too. The most exquisite essence of dumb, sprinkled with dumb truffles, splashed about like deodouriser in a pub dunny.

    A prime minister and treasurer telling us for years that ‘We have never had it so good!’ or that ‘We don’t know how lucky we are’ – Dumb, you say? I say dumbness of genius proportions. An aspiring treasurer dividing his nation into ‘lifters’ and ‘leaners’ while ignoring superannuation concessions and negative gearing of existing residential real estate, with a PPL on top, and an imaginary $20 billion medical research fund nobody called for on the back of a $7 nickel and dime exercise for the sick when visiting the quack, in the pursuit of a balanced budget which cant even make it past the senate – Revel in that dumbness and glory in its fecundity I say! Then a current prime minister who can basically fuck up any given message promulgation process – but who chose to define himself historically and forever after by doing so with a ‘Captains Pick’ knighthood for Prince Phillip – that is diamond encrusted 24 carat dumbness that is. That is dumbness which should be on display alongside the Mona Lisa in the Louvre or with a cantilevered observation platform above it to allow viewers to take it in, in all its magnificent splendour. Dumbness which should be World Heritage listed.

    A national media that has ululated for the better part of a decade to the effect that we are gods chosen property investors, on a bed of real estate dependant media proprietors in hock to their eyeballs festooning every last communication channel with the ‘never been a better time to buy’ message? –sports events, prime time movies and the news! [the ‘buy of the week’ with the auction results on Saturday eves!] or endless TV shows. All served with a parliamentary sauce featuring thousands of politicians at a federal and state level owning millions and millions of dollars in real estate who cannot ever mention real estate prices, all desperately ignoring any unfortunate raising questions about the house price issue while looking for something else to talk about………That isn’t dumb, that is intellectual Lamarckianism of the highest order at a whole of society level! Then have a dumb dessert of a Foreign Investment Review Board which supposedly looks at applications by foreign nationals to buy existing real estate which hasnt laid a glove on a dodgy foreigner looking to launder money in existing Australian real estate in 8 years and which ‘approves’ more than 99.9% of all ‘applications’, or an Austrac which supposedly looks at the veracity of money coming in to speculate on Australian assets, while youtube channels highlight people buying real estate with suitcases full of cash. That is so dumb it is visionary. Dumbness which will echo in refrain for generations inspire legends. It is a dumbness more virulent for a nation which knows its economy will be dead before it leaves the table if it addresses its dumbness, while knowing, at the same time, the longevity of its dumbness untouched is measured in weeks or months, all leading to a schizophrenic near death dumbness, which almost makes sense and is stultifying in its enormity for all who observe. It is dumbness as a belief system and opiate of the masses at the same time – dumbness as a diagnosis and dumbness as a palliative.

    A nation having undergone a generations worth of economic reform in crafting an externally focused competitive economy told to be ‘relaxed and comfortable’ while coughing up the proceeds of that reform to substitute for a mining investment boom by foreign owned companies – does dumb do justice to that? To invest massively in infrastructure to provide a generations worth of declining prices for what have become the major national exports, while the nation levers up, blows its employment cost structure out of the water and exports once competitive industries – any given word would fail the herculean task of encapsulating the dumbness of that. There comes a point where dumb gives way to something far more epic – This is a Polish cavalry versus the panzers style dumbness, a walking on the beach looking at starfish after the waters have receded following an earthquake style dumbness, inspirational in its tragedy, and redolent of watching someone wearing wings made from bird feathers proving to an emperor they can fly by jumping from a cliff style dumbness.

    Revel in our time, sir. For ours is the dumbness and the glory. A second sun arising in the morning with a vast neon sign saying ‘We are the dumb’ would not say it any more plainly than we have said it in a million brilliant and bedazzling ways. It is a dumbness which would be no less confronting if it levitated above our beds and spewed bile over us while impaling priests on fence posts, accompanied by a thousand chanting monks in chorus. Ours is not a mere dumbness, it is something transcendental, pushing dumb beyond the very limits of known dumb. Its is a dumbness brave, dogged and perspicacious, a dumbness defiant and a dumbness that will not die, and is never beaten. It is a dumbness definitive, and definitive of us.

    • THIS is why I will not raise my kids in Oz.

      It reads like comedy and sarcasm but unfortunately it captures a very real and significant trait of Aussie culture.

      It goes beyond dumb, it extends to distrust and dislike of smart. Anyone who has something sensible to say is distrusted because of the authority that comes with sensibility. Authority is something Aussies do not tolerate.

      It’s not new either; a friend of me told me a story of how his uncle came to Australia from overseas decades ago, could not get a foothold/job here, went on to build nuclear plants in the US and is now living in Europe again. How someone with those skills cannot gain a foothold here boggles me.

      If anyone thinks Gunna’s comment is over the top I challenge you to remember this and view the world with this in mind as you watch tv, listen to the radio, read the media or talk about property at a BBQ.

      • Gunna is delib going OTT thick with irony here, and the example of your uncle is exactly on point for what he is saying.

        For how long has our economy been a property ponzi funded by national asset sales. It’s the failure to be smart, it’s the party system that has sold easy dumb to the people. We are a nation of property asset speculators only and we have sold our assets, our industry and our smarts with it.

      • his uncle came to Australia from overseas decades ago, could not get a foothold/job here, went on to build nuclear plants in the US and is now living in Europe again. How someone with those skills cannot gain a foothold here boggles me.

        Um, we don’t have any full scale nuclear facilities here, so…

        Speaking more generally, over that time frame, far more facilities requiring sophisticated engineering have closed down than been opened, so far from surprising.

      • aj I was born and raised in Australia and I don’t think Gunna is going over the top here. AnonNL is right, it goes beyond dumb to actively distrusting intelligence. I was a high achiever at school, got high marks studying engineering and have worked with some of the biggest resources and construction companies in the country.

        Whenever I suggest a new way to solve a problem, or even just an innovative solution that has only been done once before overseas, it’s immediately overlooked or even actively ignored because “that’s not how we do things”. After almost five years working now I’ve gotten over this treatment and instead just sit back in meetings watching the clock tick by, getting my work done in half the allotted time and spending the other half looking overseas for roles in my field and daydreaming.

        Most of the guys in the office (who are almost all my age or older since we basically don’t hire graduates anymore) are on at least an hour a day, and if they’re not doing that then they’re talking about their renovation plans for their fourth investment property on their second 45 minute coffee break for the day.

        There is zero drive to be competitive, innovative, to take risks, etc. in both the private sector and the public sector, and I think that it ultimately stems from this dumbness that Gunna has so eloquently waxed lyrical on. If you still think that Gunna’s post was mostly hyperbole, just look at what is on prime time TV these days, hours of watching washed up ‘celebrities’ sit around a camp ground scratching their bloody arses! If that’s not a startling indictment of the intelligence of the average Australian then I don’t know what is.

      • @StatSailor

        Aware of that, but my point was that someone with the engineering skills to do what he did should have been embraced.

        Who knows what kind of innovation an influx of actively used skills would lead to?


        Similar experience – and result – here. I will not accept that happening to me and my kids though which is why I must go back to Europe. (This is despite some things being absolutely fantastic in this country btw!)

      • Fair enough, but thanks to the decline of Australian manufacturing/ process industries there are plenty of highly skilled engineers who gave up soon after hitting one brick wall or another early in their career, or who run Jim’s Mowing franchises after being let go later in life.

        Their skills remain an untapped resource – how would more wasted talent help things?

        EDIT: That is, I contend that any influx of skills will not be “actively used”.

        Having said that, from time to time, Australian engineering knowledge is used to solve an authentically Australian problem:

        “After an Engineering degree and some years working as a Safety Risk Engineer, Rhys decided to…create a sheep manure extractor.”

    • Fecundity
      “In demography and biology, fecundity is the actual reproductive rate of an organism or population, measured by the number of gametes (eggs), seed set, or asexual propagules. Fecundity is similar to fertility.”


      past tense: ululated; past participle: ululated

      howl or wail as an expression of strong emotion, typically grief.

      “women were ululating as the body was laid out”
      Great post Gunna!

    • “An aspiring treasurer diving his nation into ‘lifters’ and ‘leaners’ while ignoring superannuation concessions and negative gearing of existing residential real estate…”

      He is a man of the people, Gunnamatta. Of the silver spoon variety..

    • “If it is ones lot to be cast among fools, one must learn foolishness.-The Count of Monte Cristo”

      I really started noticing this dumbness you speak of around 1998; around the same time I started calling ‘bubble’ and reality tv came into popularity. It took me a few years but I came to realize that nobody seemed concerned with the growing inanity and vapidness in society and that I was basically pissing into the wind. Rather than drive myself crazy I decided to remove myself from the game, to change the context of the issue. Since then I’ve gotten on with life and removed myself from the whole idiotic merry go round.
      There is intelligence around, these days but you have to go out and actively look for it. Trying to understand Australian housing is not the place.

      Read “The Golden Fly’ by Algernon Blackwood.

    • You know how sometimes when you’re watching a movie, and the fear stricken, running Lady finally succumbs to fear and exhaustion, and when the chainsaw is about to make contact with her, you cover your eyes?

      That’s how I ended up reading this post after the first paragragh. Through the tiniest gap between my fingers.

      One big visceral NOOOOOOOOOOOOOOOOOOOOOOOOOO, painfully shakes out of me. Like the guy in Planet of the Apes finding the half buried Statue of Liberty.

      Gunna, is that really the meaning of life?

    • without mirth… maybe we are a wicked people, and will be punished by the gods in biblical fashion.

    • Thank you Gunna for summarising much better than I could my very own feelings on this matter.

      On a personal note: I’ve lived most of 2000-2015 outside of Australia (Dublin, Tokyo and now Hong Kong). Until around 3-4 years ago it was always my intention to return there to raise my children. And the reason I’m still reading MB is that I retain an interest for this reason. But now the resolve is firming not to do so.

      I heard a new acronym at a BBQ (hosted by Australians) the other day. “We’re going to join the SAAD crowd.” See Australia and die. Meaning they will only return to Australia to retire. Those expats who have stayed away long enough to have been de-programmed realise that Australia is turning itself into a kind of Florida. Except it’s the whole country, not just a small part of it as in the actual state of Florida.

      Those of us who are making our lives overseas still hold huge affection for Australia, but we also realise it’s no place to build a life any more. Even if the crash comes very soon, it will be more than a decade before we climb out of the hole we’ve dug for ourselves, assuming we actually learn the lesson.

      The far more likely outcome, in my view, is that the wrong “lessons” are learned and the true culprits are not exposed, guaranteeing we fail to mature beyond our national adolescence. We simply don’t have the quality of public discourse to achieve this. (MB is an obvious exception and I hope it gains more profile after the meltdown, but I’m not very optimistic, sorry.)

      Why would I expose my children to it? Australia has now become for me a “nice place to visit”. The venality/stupidity/immorality of it all is incredibly frustrating.

      • I’m not far from the same boat chief. I came back nearly three years ago after a decade overseas, mainly to give my kid (and I have since had another) something of an Australian upbringing. But I am now just waiting for my wife to get an Australian passport and then I think it is a matter of sparing my kids growing to maturity here (particularly with the combination of education cost and career outlook they will have).

        Thats what my wife and I keep thinking – ‘why expose the kids to it?’ It is a safe environment, but its a lot like a padded cell.

      • It’s really the definition of a national failure, isn’t it? Turning the country into a place that thinking people (as I’d arrogantly like to consider myself) who grew up there very happily don’t want to raise their own children in.

    • C.M.BurnsMEMBER

      If I’m ever in Geelong I want to buy you a beer Gunna. It would be a fascinating discussion.

    • So the Koukometer is glowing red with “Quite easy to service an avg mortgage now”


      • Yep, but it’s the principal that’s the problem not the interest… But can’t expect guys like Kouk to understand that, in their view private debt is an irrelevance.

        How they can still hold that view post GFC is beyond me. Have they not noticed that the US housing market has not really recovered despite the lowest interest rates in history? Once a population loses its appetite for debt its very hard to get it back.

      • “Yep, but it’s the principal that’s the problem not the interest… But can’t expect guys like Kouk to understand that, in their view private debt is an irrelevance.”

        Yeah, he’s a idiot who ignores the fact that it’s far better to have a small principle with high interest rates during a time of high inflation and wage growth than a large mortgage during times of low interest rates, inflation and wage growth.

  12. As fl. has repeatedly alluded to this is all funded by selling national assets. I’d like to see some figures but the pace of agricultural asset sales (including land holdings) appears to be accelerating – a day doesn’t go by without a major asset sale in the news.

    Population ponzi and national asset sales is the solution the politicians are bringing to the people that demand to get rich through house price increases. How much can they sell? A lot!

  13. ‘Straya is in the midst of a very frothy bubble of ignorance, stupidity and arrogance. Maybe this nation really does have a chronic skills shortage after all?!

  14. Co-worker walks into my office this morning and says “have a look at this!”

    Boomer couple bought a 1 bed spruiker apartment in Melbourne in 2009. Paid 270k plus 10k to some fly by night operation who was guaranteeing tenants. They can’t even find those guys any longer, so they’ve had a gutful and decided to get it valued – 165k

    The good news? The loan(s) are interest only and they don’t have a cent in it, and yes you heard right loanS. They borrowed 40% from one lender and 60% from another. NAB and CBA respectively.

      • Client came to see him, he was showing me through the documents he left him.

        Mind blown. Why the hell do you use two lenders if you’re not considered a huge risk? It’s not the first time I’ve seen it either.

        Share the love I guess.

      • Think it was in Carlton. It’s not up for sale currently. No idea what their plans are after this bombshell. They expected they’d sell for what they paid. Underlines there’s probably a heap of people sitting on losses they don’t know about on spruiked properties.

    • Mate of mine just sold a 1bdr apartment jn Collingwood that he bought at the lowest point of the gfc with huge government stimulus on new builds.

      Overall he made about $40k net after negative gearing, stamp duty etc, which is pretty much the amount of the government stimulus. In effect, no increase in value. He’s said he’s glad to have got out as there’s hundreds of 1bdr apartments about to release around him.

      Moral is he has played the market perfectly and still made sweet FA compared to equities. And now we have thousands of apartments coming online in Melbourne.

      Melbourne will be Ireland.

      • Think the big factor here was the spruikers loaded all their BS price inflations onto it and the rude awakening only comes when the owner comes to sell.

        Your mate would have had a clear idea of what he’d bought, where, why, who and how to get out.

      • “…still made sweet FA compared to equities..”

        Yes – but I am sure his skin has a beautiful sheen and he has a thick mane of wavy hair.

        Property ownership brings rewards that money cannot buy.

        Or so I am led to believe.

      • I simply do not understand the price rises being seen in Melbourne.

        I go through all the suburbs and every single one is losing money on asking prices and yet the indexes are going up.

        A great example is St Kilda Rd – prices along this strip are absolutely tanking in nominal terms and obliterated in real. Here is a very typical example.

        3 3 3 Apartment

        Last Advertised Price : February 2015 $1,795,000
        Historical Prices:

        December 2009$2.3 Million

        Thats half a million down on 2009. And this is typical. I am seeing this right across the city.

        So I am just completely stuffed as to how these indexes are being calculated.

        I monitor several satellite towns like Korumburra – stock has gone ballistic, prices have tanked across the board, nothing is selling – yet indexes are showing price rises.

        I have no other words its absolute bull dust.

      • @Lev

        As far as I am aware, the indices are computed from self reports from agents just like clearance rates. They may get adjusted later but I am not sure…

      • I agree new build apartments are a BIG avoid, especially around Richmond, Abbotsford, CBA, Southbank, St Kilda, etc.

        There is so much supply. And really the stock is so generic that rental competition is guaranteed.

      • @Leviathan
        It’s due to over the top amount paid for old houses in the suburbs, which will soon be converted to units or apartments.

      • @rich add inner northern suburbs to that list, collingwood/fitzroy in particular is about to have a boom of empty one bedroomers as they had an abundance of ex-factory sites that are prime for 100+ apartment buildings

      • lol please be patient, i’m still scanning private documents so I can put them up online for proof of verification

      • olaf bukowskiMEMBER

        was watching sky business news and property spruik show (Margret Lomas) last night. My comedy hour.

        Caller rings in. Bought Melbourne apartment 5 years ago OTP for $375K. Reckons she’s dropped $90K of her personal in that time. Now she reckons its worth $350K max. has $100K equity and was asking for advice. so here;s the advice:

        “You probably won’t get $350K at sale as this is what new apartments are going for. Go get a bank valuation for $350K. This valuation is valid for 12 months. Use the $100K equity and leverage up in another property”.

        Fuck me.

        • Now that is dumb………….

          Deny the losses no matter what – that is one thing
          But doubling up into the losing punt at this stage of an obvious bubble – that is something special

      • LOL. I bet they suggested another apartment, probably through one of the guest’s related companies………….rent guaranteed. There’s one born every minute.

  15. The property bubble has nothing to do with capitalism, and is driven by fractional reserve ponzi-scheme fiat money and central banks.

  16. I’ll tell you how this goes down gents.

    Australia will be broken up and stolen in the same manner as Greece.

    Controled by an IMF grouping of international banking interests after an unwanted bailouts and bailins.

    Pennyles and soaked in our collective shame, few will have the minerals to defend us and punish the guilty. Ultimately we should gail the individuals and strip the assets of the political stooges that facilitated this mess, including any assets they try and shift out to family and friends.

    Invest in pitchforks and torches, the anger will arrive first when the Boomers start to not get their way.

    • Not pitchforks and torches. Big dogs and barbed wire. It’s going to get ugly and your neighbour isn’t going to worry about soaking the pollies and rent seekers when he can’t feed his kids.

    • That would not surprise me in the least.

      The current government would sign any piece of paper that an ‘esteemed’ international group put in front of it without any thought about the consequences.

  17. reusachtigeMEMBER

    Bubble? AHAHAHAHAHAHA! Been hearing that one for over a decade now. Youse are all just jealous youse missed out and got ugly in the process. AHAHAHAHAHA!

  18. Can’t wait to see the reaction here at 2.30 pm when the RBA announces that rates are down 25 bp.

    Pass the popcorn.

    • It’s a done deal. Let’s start now! 🙂
      GS has already got a boozy celebration lunch booked at the rocks from 3:30pm

  19. It is not just Australia, it is happening in other countries like UK. Culprit central banks and their 0% interest rate and printing money.

    Luck for them, they are not answerable to anybody!

  20. The Patrician


    Dumb indeed, dumb and entirely deliberate. Cutting interest rates to record lows while we have no real MP, NG on existing dwellings, the FIRB approving foreign purchases of existing dwellings …in the middle of the biggest housing bubble this country has seen….could well be the most wilfully negligent and dumb application of monetary policy ever by an RBA governor.

    Glenn’s big dumb bubble.

  21. This really is the DUMB country! Not only do we have the 2nd most unaffordable land prices in the world…. in the most uninhabited continent on the planet, but a certain generation voted in the dumbest PM in history who from day 1 has made Australia the laughing stock of the western world… setting us back decades by vandalising our transition into the next generation of industry (renewables and plug-in vehicles) … No wonder there is a brain-drain…. it’s become embarrassing to say you live here!

    • ThicklySliced

      Yes……and now Barefaced Abbottoir is back CLIMBING in the polls according to MSM yesterday!

  22. It’s not a bubble, it’s a mania that is being propped up by illegal foreign buyers. If the government genuinely cracks down on illegal foreign purchases it may well prove to be the turning point.

    I’d suggest that with the looming mining CAPEX cliff and auto industry closure, along with general weakness in the economy – particularly the death of manufacturing, that we may be facing an Irish-style crash rather than a Japanese slow burn. The bottom could quite conceivably happen within seven years which would be a drop similar to the 1890s.

    • >within seven years

      LMAO – that is quite literally absurd beyond measure.

      Another seven years of what has happened in the past 18 months and a one bedroom apartment will cost around $5 million.

      I don’t understand how people can come up with such lunacy.

      • I said -bottom- within seven years, not the top. We may have reached that point.

        It may be the elevator on the way up and out the window on the way down.

    • Most of it is due to ourselves, and we should lay the blame at our get when it blows up. If it was mainly caused by foreign investors, you wouldn’t see private debt rising at our stupid pace.

      • The bubble was ready to pop, then Rudd reinflated it with the FHOG and opening a floodgate of foreign purchases. Foreigners are not “to blame” but as price is set at the margin they have given prices another lift higher.

        The point I’m making is that if the government seriously cracks down on foreign purchases then we may have reached the summit and it’s downhill skiing from here on. Rate cuts or no rate cuts. If SMSFs can’t leverage as well then I’ll bet my left nut we’re pretty much at the peak with no return.

        This is a perfect alibi for the government to pop the bubble. They can blame foreigners, real estate agents and solicitors… easy scapegoats.

      • @ kevintxu “If it was mainly caused by foreign investors, you wouldn’t see private debt rising at our stupid pace.”

        It’s not just foreign investors, though they have made a huge impact to high prices, especially in certain areas. But there are other components as well to this bubble.

        @ MrMedved, you are spot on about Rudd. If there was only one person to blame for all this he is definitely the one. But he didn’t just only open the floodgates to foreign investors. He also opened the floodgates to a massive amount of immigrants in his urgent quest for a Big Australia. And he was the one who allowed SMSFs to leverage into property which they couldn’t before.

        But I don’t agree with you that the government is seriously cracking down on foreign purchases. We must remember at all times that both parties are absolutely committed to maintaining a housing bubble. By imposing a fee on foreign purchases, this is not to detract them, it is simply revenue-raising. And there’s nothing wrong with them raising revenue, though they could make the fees much higher without foreigners batting an eyelid.

        I wish they would crack down though. Or at least enforce the laws in place. But nothing has been mentioned about enforcing the laws, just keeping a register. Whatever that means.

        So the government is not looking for a “perfect alibi” to pop the bubble. Remember, every politician has a property or three. Or more. Why would they want to pop the bubble?

  23. Why does anyone listen to macro business for investment advice? If I listened back in 2010 I would have been sitting in cash while equities and property boomed. MB were bemoaning how dumb equity markets were back then “is the market a dill?” for being so overvalued in the face of global economic turmoil. They were wrong and dumb themselves.

    The fact is asset valuations are high across all asset classes not just residential property. If long bonds are right then equities are relatively cheap as is property. Tell me when bonds sell off and Ill tell you when equities and property valuations fall.

    • MB doesn’t do investment advice.

      Clearly you haven’t read the site in 4 years so I’ll forgive you but since then we’ve called all sorts of bull markets.

    • And there you have it. Easy meat for the spruikers and get-rich-quick merchants of debt – Exhibit 1.

    • I read MB for long term outlooks, not next week’s trades.

      MB is spot on with identifying long term risks to Australian economy and society.

    • charlie67, yes property especially has boomed since 2010, and especially since 2008 when Rudd implemented a whole lot of bubble-making policies. But we were already in a housing bubble before that. The bubble should have popped in 2008, and in fact did start to pop. A lot of regions across the board fell drastically with more falls to come. But Rudd threw everything, and I mean EVERYTHING at reinflating this bubble. Nobody could have predicted the effort (and expense) he was going to go to to blow that bubble sky high.

      So yes, a lot of people have been made to look rather foolish. But when it does all blow up, it will be a doozy.


    Many will learn that the debt sold to them on the promise that they too, could become wealthy with relative ease, is precisely the ‘end game’ for the international ‘voices’ who have organized this looming disaster.

    Re-written (comic book style) so the folks could stay with and identify with the story, the government obliged the ‘voices’ who cleverly dropped the Italian suits and donned the hi-viz and steel cap boots and learned to roll their own smokes too.

    Tally up the acquisition costs (commish, stamp duty, loan up front and loan trails etc, management fees) and the ONLY way the story will work is very fast appreciating values which have been seen ( and over-reported) by some lucky ones at the top.

    Sadly, the vast majority below the toppers will never realize these mythical gains and will be left upside down. And, as can be predicted now, a kind of ‘penance for their greed’ will be manifest in the continuation of the loan agreement until ‘things turn around’; which is precisely the best outcome for the ‘voices’ who care not whether one’s equity is + or -.
    Enabled by captured political members who likely by now, actually believe in the ‘wealth effect’, the property train hurtles along and increases speed and will eventually reach the gorge where the bridge beams are packed with C-4.A And in that tumult, cash deposits and hybrid securities will prevent the banks from imploding and the nation’ super funds will be ‘tapped’ to prop the Gov’t who in turn, helped prop the banks.

    And, as always, the catastrophe will become a memory and then, the ‘teaching’ about debt and speculation will be different than it is today and the ‘trusting’ folk will tell their tale and their descendents will question everything. And finally, the charming lad / lass who helped convince the countless people that ‘no wiser path existed’ will be seen as agents of the enemy that they truly are.

    • Ronin8317MEMBER

      I expect,history will be rewritten, 1984 style, to indicate that:

      1) Nobody predicted the bubble
      2) It was all the fault of government regulation
      3) The subsequent bailout is justified
      4) The bubble only affected a small number of people anyway.

      Onward to the next bubble!!

    • Yep. This is a big point. I remember my mum relating in breathless tones how much one of her friends had made from a 5 year stay in a property they ended up selling.

      The back of an envelope told me they were in fact $100k+ worse off than they would have been if they’d rented the very same property for the same period.

      People don’t want to do the sums. It seems somehow un-Australian.

      It’s the perfect crime. Even when they’re being fleeced they think they’re making money.

  25. I am sorry, but the interest rates have been lowered to reduce the carry trade and try to keep companies and individuals buying and investing. If they stop then the recession starts period.

    Prices are silly, but waiting for them to return to the pre-2000 level is futile, as if they did it would be the mother of recessions and few would have a job to buy them.

    The boomer got in ahead of us and own the bulk of the property, that’s life. They were lucky in the time they were born, but our grandparents grew up in a depression and fought a war, they had it harder.

    Y’s will inherit fortunes from Boomers in 10- 20 years, I’ve had my inheritance and it wasn’t much.

    Rising prices keeps us spending, as we feel richer. I own a house outside a regional town, I have only casual employment, so does my wife. We have two great kids, vegie patch, animals, orchard and own wood. Most of my clothes and my families come from the OpShop, but they are new or new to us. We have cars, three meals a day; I am a pragmatic Xér I could have a better career in Melbourne or Sydney, rent or live in a crap house in Footscray costing $550,000 and falling apart, or I can live on 3 and 1/2 acres with a four bed house, grow 60% of my own food, eat our own eggs (chicken, duck and goose), plus eat them and the odd sheep we use as lawnmowers. It cost us eight times my casual salary, but I sold our first house when we moved and we paid it off.

    On paper I would be better off renting in Footscray and send the kids to the local school, I could work 50 hours a week in a corporate job I hated again. The kids could have no real chance in the local school and we could sit on a train or in the car for two hours each weekend to go somewhere nice to have an overpriced latte. Or I could live somewhere nice all the time, except casual work (Uni Tutor and trainer), plus odd property development for mainly boomer tree changers and just except life isn’t fair.

    You can live on very little in Australia, I come from London and there you can’t. Regional towns are great here, we had the old lady from next door come round to us after we had been moving in all day and say she had cooked too much and would we like tea. In Footcray after we finished moving in I counted what was stolen from the truck as we unloaded.

    On paper richer in money, in reality, large garden fresh food, nice school, clean air – it a value thing.

    • Recession is baked in. Embrace 😀

      And cool story about your lifestyle change, thx for sharing.

    • $550K in Footscray….where?!

      Great story, that is the true meaning of wealth in my book. It’s odd how 100 years ago you lived that way because you were poor, but these days you only get to live that way because you’re rich. Think about it. Well done.

    • arescarti42MEMBER


      I’m still not sure what the Lib’s end game is with this.

      They could have played the xenophobic card just as easily with far less serious action.

      What they’re proposing has the potential to really impact on the Sydney and Melbourne markets.

    • My concern is that when Tony and Joe get tossed Malcom will wind these initiatives back on the pretext (possibly not a false pretext) that they are just pandering to the worst tendencies. A classic case of throwing the baby out with the bathwater. I actually think this is good policy by accident, which makes it vulnerable. There has been no grown up public debate on the issue.

      • Thats what I thought but this will get votes and will become bipartisan! My concern is that only a few high profile cases will get prosecuted.

      • If it makes them popular, these cases will keep coming for a little while yet. On the other hand, if it gets media coverage outside Australia, only a handful will be needed to put people off, especially if 90 days turns out to be insufficient time to get a decent price for the property.

      • As per StatSailor, it’s the psychological impact of the move that’s important. It could put off a lot of potential customers, and there could be a bunch of present owners who just pooped themselves, and may even try to sell up to avoid prosecution.

        Could also add even more demand for new apartments if existing property now seen as off limits.

  26. I am truly impressed by the strength of the rhetoric about housing here. It seems to grow stronger every day, but what I’m not seeing is fresh analysis and a questioning of what is now the underlying rationale at MB. You have to keep questioning yourself, and as the Catholics figured out ages ago, you need a devil’s advocate. Can you find someone you respect enough to blog here and argue the case that perhaps the housing market is sustainable. Perhaps we can keep inflating prices through high immigration, cheap money, SMSFs, eating the future of the youth, et al. ad infinitum.

    Catherine Cashmore wrote beautifully about our housing market up until November last year.

    Her rhetoric grew stronger with every one of her weekly blogs until she reached a crescendo and then just stopped. Perhaps as Sydney and Melbourne continued to inflate in defiance she was bludgeoned into sullen silence, or perhaps her blog wasn’t making enough money, maybe she got sick or maybe she had said it all and nothing remained. I miss her. I fear that all this beautiful rhetoric is hot air. I fear that unless this bubble bursts soon all the energy here at MB will evaporate. It’s a fear because fundamentally I agree with you and respect your approach.

    So for the second time in a week, at the end of a long list of replies, which probably won’t get read, I am urging you all to seriously consider getting into politics. Start an MB party. Fight the good fight. Be incorruptible. Grass roots. Evil prospers when good people do nothing. Don’t let all this energy just dissipate and watch all at MB head overseas for a better life.

    BTW what happened to Mig?