Yawn: Harry Dent says property bubble will burst!

Via Martin North:

A second global bust for housing markets, he says. That’s a 25% risk case.

The 50% base is China won’t bust but will grind into stagnation.

The Australian government will throw everything at local property to hold it up and will probably succeed until China slows enough to kill the budget. There’s also 25% bull case they can engineer some kind new boom.

The current property rebound is therefore most likely a bull trap but how far it gets is an open question. As an owner occupier, listening to Harry Dent may cost you a lot in lost time. Your decision is a political economy one, which could leave you paying a big emotional price for not buying when you’d like to.

The risk/reward calculus for investors is worse and selling into strength is the play.

Comments

  1. Geez I really hate what modern australia has become and its principally related to housing

    I hope we have a real stonking recession here that brings the place to its knees…lots of juicy job losses thrown in would be nice

    • we destroyed our manufacturing base. Destroyed our car industry. Drought is crippling our agriculture.

      We have three things still employing people:

      Government sponsored health care.
      Government sponsored infrastructure.
      Construction employment.

      Sydney alone had more cranes than all of North America. Combine that with Melbourne and all the state capitals and regional centers and you get an idea that literally the entire economic employment model is based around apartment construction.

      Now – take away two of those.

      Yeah – theres a massive crash coming.

      If China slows- take away all three.

      • Health care will remain a major employer, even in the anaemic version of its former self that it is rapidly becoming i.e. frozen bed numbers / operating theatre days / Doctors as the population continues to swell with offspring of the last 10 years of intake and whatever ongoing arrivals the Government can get away with. The result will be per capita declines but it will still be a major employer, especially if you group aged care into it. Of course the private health insurance system will have collapsed and your Medicare levy (for those of you with jobs) will be 15-20%.

        Infrastructure – yes gone, unless a suitable deal on tolls can be done with a private builder and even those will be come scarcer as the large funds realised that the last drop has been wrung from the economy and even the toll concession lurk is no longer a licence to print money. Significant spending on non tolled infrastructure (e.g. schools and hospitals), forget about it for the next 30 years. There is already a national freeze on new hospitals in place until 2025 post Northern Beaches and Palmerston coming on line last year.

        Apartments – yes, dying now and following the current major defects and cladding concerns will come escalating stories of more and more sales of the post 2000 build stock selling at a loss. Over 60% of tradies / small outfits engaged on projects now will not only be out of work i.e. no new income but will go through the same wave of unpaid debts from insolvencies up the food chain as we see on the Gold Coast every 20 years. Even the balance that limp by on maintenance jobs (with budgets cut to the bone) will not be out spending big, nor buying houses themselves.

      • I was reading top 10 economies forecasts and history, Japan’s bust is one of the worst and likely where both Aus and China will end up, a lost decade, stagnation, negative rates, QE.
        It will again be the US that causes the next GFC, but they don’t rely on capital investment to sustain growth

      • I am concerned that our economic diversity is on par with Zimbabwe, and as our buying power per person keeps falling
        we don’t have a way to recover. Our economy took a big hit in the last year relative to other developed countries. Beyond that our uni education standards keep falling due to accommodation to low English skills third rate intake means harm to our own. Our scientists and scientific research including medical was top class by world standards.
        Intelligence and education offered a way up bit no more.

  2. reusachtigeMEMBER

    LOLOLOLOL! I can imagine that foreign #fakenews guy’s image you’ve used but at 100 years old with the same “trying to do a sh1t” face saying “housing in Australia is gonna crash I tells ya”. LOLOLOLOLOL!

      • reusachtigeMEMBER

        Saw that. Well done. But unless you take the savvy step and start buying multiple investment properties you’re still not good looking enough to get a party invite. Maybe one day you’ll be successful enough. You’re on the right path now.

          • boomengineeringMEMBER

            WTF. The wife just said ”at least he didn’t listen to you pack of losers”.
            Congrats. A late one from me as was at the Central Coast then long surf.

          • Boom only bought because it was small loan size and minimal debt. Repayments will be half my current rental in Sydney and J. 5 years it should be paid off if I keep paying same rate of rent onto the mortgage. So really I should be fine. Even if 1 of us is unemployed for a few months.

          • boomengineeringMEMBER

            Could turn for the better as no where safe in the down turn anyway, and you will love the freedom of unfettered tinkering.
            I did entertain the idea of selling but the math and complications didn’t add up so you will probably end up in that boat if that idea came to mind in future.
            Take a lesson from the Chinese and Hong Kongers, if the tide changes, at least with Aussie real estate even if it goes down you still have something rather than being left with nothing.

        • Yes of course. Probably only worth $600k but I take some comfort in the fact that if I was to try and replicate the same quality of build today that it would likely cost me $700k and that’s before the cost of land.

          So I’m happy either way, as I know the cost to build from scratch as my mum had to do it when her house in the country burnt down.

          • I’m glad you didn’t end up in Franger/Franghanistan as I know you were looking there at one stage

          • Me too, although I do think Franga will become better over time. With the beach and Peninsula down that way. I think it will gentrify, but it’s a bit rough. I like the Green belt suburbs of Victoria.

  3. ContrarianMEMBER

    A global repricing of risk is a very real possibility, NIRP is a complete failure ZIRP has had very limited success.
    H&H is correct the government will throw everything at the housing bubble the problems will come externally.

  4. the only thing that matters at the moment is construction bust
    Ireland and US and Spain … crashed only when construction crashed … we had greater construction boom relative to anything (no. of new homes per new residents, construction related employment as % of total, construction finance, construction related retail, …) in last few years than they ever had
    Without the construction bust issue it would be easy to orchestrate another boom by just flooding market with more easy credit but construction revival is going to be super hard and no infrastructure stimulus will help.
    Immigration ponzi that helped fuel the last boom will now pull the other way either by pushing unemployment up (if immigrants stay here) or causing high vacancy rates and rent collapse if they leave Australia (beside fake students that are here to make money, most of real foreign students work and most of those who complete their studies need real jobs)

      • +1
        You’ll note though that there are plenty of people who think the ‘can’ can be kicked indefinitely – which is the same way as saying the currency can be printed in infinite quantities with no consequences.

  5. “The risk/reward calculus for investors is worse and selling into strength is the play.”

    The trouble is, if every investor tries to “sell into strength” that will crash the market. Oh, I see what you are getting at.

    • It’s funny how people become convinced by ideas of permanently high plateaus and ‘soft landings’ – they simply cannot imagine life being materially different to the one they know today. Policymakers are going balls to the wall trying to keep us from sliding into another crisis and so far it’s appeared to work – but only insomuch as we haven’t endured a heart-stopping crash. Yet.

      It’s coming because the laws of economics cannot be repealed and ‘value’ cannot be conferred on worthless bits of paper printed up in vast quantities by central banks.

      • And there are values that are not realised until a sales transaction. Look at the value of a farm in NSW, what is it worth ? Zero.

        Houses in drought effected areas on NSW and Qld are near worthless as are high rise units in some areas of the capitals. Zero.

      • boomengineeringMEMBER

        Dom, people. Most people can only think linear, that’s why their expectations always over shoot the mark up and down so the bottom will be below intrinsic value.

        • Actually, linear thinking would be an improvement. Most think punctually: “I chose this point in time because it suits me, and I will hold and defend it until I die”.

          • Remember, concentrate on the moment. Feel, don’t think. Trust your instincts. And the Force will be with you.

      • It will reset in one way or another but it is not clear how. Multiple scenarios are possible as to which path the reset can take.

        The two obvious ones are the Zimbabwe solution (aka the Weimar solution or the Venezuela solution) and the Greek solution. Less likely ones include the Robespierre solution and the Bolshevik solution, but who knows?

  6. I remain convinced they’d probably steal your super and confiscate savings to offer deposits to prop it up. If you want an affordable house move to another country.

  7. Hill Billy 55MEMBER

    Now Gav’s bought, who else is out there? Even the for rent boards around my place are up for weeks on end. Brisbane has died. The funeral will be announced shortly.

      • Give yourself to the Moron Side. It is the only way you can save your family. Yes, your thoughts betray you. Your feelings for them are strong. Especially for… your wife. So, you have a fine wife. Your feelings have now betrayed her too…. If you will not turn to the Moron Side, then perhaps she will….

    • There is no escape. Don’t make me destroy you. Hill Billy 55, you do not yet realize your importance. You have only begun to discover your power. Join me, and I will complete your training…..

      • Ah no, it doesn’t count as capitulation while the buyers “still hope it crashes and burns”. Not until you buy one IP for each member of your family in addition to 10 IPs for yourself!!

  8. Goldstandard1MEMBER

    Nice one Gav, every situation is different.
    I just sold my small family home looking at getting a bigger one in same area. My wife and I have chosen to rent 1-2 years knowing this thing has to burst given the soft economy. If it doesn’t, well we’ve lived in a beautiful home in the meantime and still have money to buy. Every situation is different but one thing remains constant…….nobody should max themselves out in this market. Buy only if you can wear a 20% loss and it won’t destroy you well being.

    • If buying and selling in the same market, I don’t think it matters to be honest. If prices fall I’m happy, as it means my next step up will be cheaper and lower stamp duty. For me renting for longer was a risk, as I was scared of how my savings may be deflated in value. So I decided to jump in, pay it down as fast as possible and just get on with life rather than worry about being able to buy in later. As you say each situation is different. I may decide I hate owning and go back to renting in future.

      • You have done well, my young apprentice. And now I sense you wish to continue your search for investment properties…..

        Do what must be done, Lord Gavin. Do not hesitate. Show no mercy. Only then will you be strong enough with the Moron Side to save your missus.

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