FOMO accelerates into virus property bust

Concerns over the coronavirus have yet to infect Australia’s property market, with pre-auction sales reaching a 10-year high in Melbourne:

In February alone, 16.7 per cent of properties up for sale in Melbourne — or 587 properties — sold prior to auction, Domain data shows, and the proportion hovered between 16.6 per cent and 16.8 per cent in the last three months of 2019.

It’s well above the 11.2 per cent recorded in February last year and also higher than during 2017, when property prices across the city first peaked.

Domain senior research analyst Nicola Powell said before-auction sales had jumped back in October last year…

While early offers can make a sale quicker for buyers, for vendors it can relieve the pressure of going through a formal auction…

Gary Peer, of Gary Peer and Associates, said properties popular with buyers would always have pre-auction offers in hope they would not have to face bidders forcing the price higher.

“When it comes to buying or selling before auction, the buyer has an opportunity to beat out the competition and make sure the emotional bidder doesn’t step up to the plate,” Mr Peer said…

Some so-called housing experts believe the housing market will magically avoid the economic fallout from the coronavirus. For example, here’s ANZ:

ANZ economist Adelaide Timbrell says a short-term impact on the housing market [from the coronavirus] is unlikely, given ultra-low interest rates and pent-up demand from buyers pushing the market forward.

“While we’re seeing huge impacts on consumption and oil prices, the property market is a bit more sheltered in the short term,” Ms Timbrell said.

Whereas Jonathan Chancellor is moderately concerned:

But I do worry about its impact on the housing market. Perhaps not immediately as rates are so low, and so many borrowers are ahead in their payments and can dip into these if required.

Additionally many more property owners now have a second property, which means this time if required they will sell their investment property and stay in the family home.

Last time the banks simply evicted homeowners from their own homes across Sydney when they’d lost their jobs and fell behind on the then rather high interest repayments.

Of course the debt is substantially higher these days.

Damien Klassen, the Head of Investments at the Macrobusiness Fund, nicely encapsulated why the housing market is facing its Wile E. Coyote moment:

Pundits on every channel have emerged, suggesting a small economic dip followed by a massive stimulus package means that it is time to bid expensive houses even higher.

Meanwhile, in the real world: 

  • Central banks around the world are cutting rates to try to get in front of a looming economic shock 
  • Corporate debt markets are shut. Corporate debt levels are at record highs. Corporate interest rates are spiralling higher. Supply chains have been smashed for manufacturers. Demand has been smashed for services. The probability of a corporate debt crisis is high.
  • Coronavirus lockdowns are circling the globe. There is no short term fix.
  • Even the “economy is doing great” Australian government is preparing the biggest fiscal stimulus since the financial crisis to fight off looming increases in unemployment

The attitude is the housing market is bullet-proof, ScoMo has its back and that all investors have to fear is fear itself.

Unemployment holds the key… Perth showed us that during the same 2012-17 period:

Perth Housing Crash vs Sydney/Melbourne Boom

A globally co-ordinated massive fiscal stimulus might change my mind. But in the current fractured political environment, I’m going to file that under “I’ll believe it when I see it”.

Our regulators, governments and central bank have wasted most of the good policy options in a desperate attempt to hold and already expensive house market at high levels. Now we have a genuine external shock, most of the remaining policy options are bad ones.

I have no doubt our housing-obsessed government will try many of those policy options. But they won’t work.

Housing booms don’t normally finish because governments want them to. Booms usually end in spite of governments (captured by vested building interests) doing all they can to extend the boom.

The most likely outcome is the same here. The real unknown is how much longer the housing market will levitate before realising there is no solid ground underneath.

Spot on.

While current momentum in the housing market is strong, Australia will very likely follow other nations into a complete shutdown. If so, schools will close. Public gatherings will cease. Workers and children will be quarantined at home. Consumption spending will cease, potentially leading to widespread business failures. Confidence will crash. And banks will see severe stress in business loans plus credit tightening.

The entire Australian economy will be severely impacted as unemployment skyrockets.

This scenario will inevitably spillover to Australia’s housing market with virtually zero transactions for six months.

Now is not the time to be loading up to the gills in debt to secure a grossly over-priced home.

Leith van Onselen

Comments

      • The price of Australian houses will never be allowed to go down. The whole economy and government is focussed on keeping house prices high.

        This is why Scott won the election. He will do whatever it takes to keep house prices from falling. Shorting Aussie homes is a widow-maker trade, a sign you don’t understand the political system here.

          • St JacquesMEMBER

            True enough, but as far as I can tell this government is so uniquely obsessed with protecting our already hugely inflated housing bubble that has been diverting them from taking the timely action they need to take to reduce the inevitable casualties from the epidemic. Even the queues now forming outside supermarkets in the morning are providing a vector for accelerating its spread as is the failure of the Feds to force all schools in the country to shut, something that should have happened a couple of weeks ago along with the banning of any mass gatherings of any type.. In short they are trying to maintain the “business as usual” as best they can to the very last moment.

          • that just means it will crash later (and we are already a decade behind) and will crash harder (50% on average will look like a joke)

          • correct dr. no country can stop it forever. don’t forget that they will trash the AUD to keep nominal house prices rising even if on a PPP basis they do fall by heaps. From an USD:AUD of 1:1 houses in Oz are already a lot cheaper.

        • I have news for you: Govts can influence but they have no ultimate control. It is not in their power. Stock markets are telling you that – loud and clear. This market action is unprecedented in history. You can print money but you can’t print jobs.

          • They’ve just started QE. In Japan the BoJ doesn’t only buy bonds, they buy shares.

            In Australia I expect the RBA to use newly printed money to buy houses: QRE Quantitative Real Estate

          • I wouldn’t put anything past them but does that inspire confidence in buyers? I doubt it.

            In any event, taxpayers would go spastic over such a policy, the AUD would set course for zero and the political risk (of the QRE policy being rescinded by a subsequent administration) would be way too high.

            Nope.

        • You put a lot of faith in this Government being competent enough to prevent a fall. Scotty from marketing was out of his depth during the fires. He will be out of his depth when the great housing apocalypse arrives in short order.

        • Bright eyed Bushy Tailed W0ke

          15%to20% this time next year snakes and ladders yes gov will step in to minimise. The smart people started cashing there ips 3 years ago and hold cash will dive back in myself June next year

    • Just an FYI on real estate listings this morning – Domain has EBOLA – it is puking and eviscerating its internals all over the place – surprised it hasn’t crashed.

      I would say more than a dozen alpine ski apartments listed in Mt Buller alone.

      Second homes and holiday houses in coastal towns are being vomited onto the site. Quite hilarious – you can literally refresh and see new ones.

      Anyone thinking this wont affect house prices – the AFL is about to be cancelled – NRL is asking for handouts – the Prime Minister just said 150,000 Australians will die.

      Blows my brain the thinking of some people.

    • as a beginner teacher in 1985 she was making around $350 per week and IRs were over 12% and her wage was growing 10% per year so the house was 3 times her income, she needed to save $11k (20% of her income for around 2.5 years for 20%) and her initial repayments were $5.5k or around 30% of her single teacher’s income.
      By paying 30% of the income she was able to pay off almost a median price house in 10 years (her income increased almost 50% in 5 years)

      what would a starter teacher in Melbourne be able to buy now with $74k wage? How many years to save 20% of a median house? how much would be repayment on $800k house? and how quickly she would pay it off with 2% wage growth?
      saving 10 years paying 50% of income over 25 years

      she had it tough

      • The fact that she doesn’t understand that there is no equivalence in circumstances proves her ignorance and cements the view that it pays to be ignorant sometimes.

        Anyhoo, she may just be on the verge of becoming an un-millionaire. It would be nice to hear from her again in a year’s time.

      • In those days all you had to do was buy something and you made money. Inflation did the heavy lifting. It wasn’t tough. She is right about prices being too high today. Thank Chinese buyers, the population ponzi and the RBA for that.

  1. ANZ economist Adelaide Timbrell says a short-term impact on the housing market [from the coronavirus] is unlikely,

    Adelaide is correct. There won’t be a short-term impact.

  2. Not holding my breath. In fact, the opposite may happen: given the lack of other sensible investment options, punters may decide (again) that property is the last safe haven, as long as jobs and wages are not being cut. Not to mention the standard toolkit available to Scummo (tripling of FHBG, throwing an open invitation to foreigners…).Deja vu in Scummostralia?

      • You ain’t seen nothing yet. Scummo will be judged on one metrics only: how well he manages to support the property prices in his tenure. And we don’t live in a policy vacuum, we live in Scummostralia. Never underestimate the ability and determination of those in power to save the property sector.

        • There is no single greater correlation in any two indexes on earth – absolutely nothing comes close – than the relationship between stock markets and house prices – they are 100% lock step, and for a very good reason. House prices are 100% a function of the economy.

          Now – go look at the economy. If you are unsure where to look – its called the S&P 500, Dow Jones or Nasdaq.

          The world is insolvent. Honestly – seriously think about this for one second – how do you think a bank is going to respond when you walk in and say “hi I want to borrow half a milion dollars for a two bedroom sh1tbox in Yarram”.

          Last week – no worries. This week “Here, heres a half pippy shell I found on the beach at St Kilda – best i can do – it has a hole in it and is cracked”.

          You are smoking something you are not capable of handling. Try a bit of leaf next time, stay off the purple.

        • MountainGuinMEMBER

          To save housing, scomo would have to ensure that the perceptions of aussies that home prices are rock solid, ensure access to finance even to people who have lost hours/jobs, ensure foreign credit sources keep backing the debt of aussie backs and ensure continued foriegn buyers. And ensure that emerging supply from bankrupt or dead owners does not pull prices down.
          Yes Scomo has a few levers, but not enough. The closest may be to seek really high inflation that keeps notional values up while real values plummet.

          • Yup this is a good point – government puts its projected death toll at 150,000 – I seriously can not see it getting anywhere NEAR below 250,000 – absolutely no chance

            Boomers – all boomers.

            Its not just the forced sales – its the collapse in demand as well.

        • He’s definitely motivated, Tezza. For starters he’ll have his boss, Harry Highpants, on the phone giving him both barrels. But what can he do practically? The RBA is basically out of ammo, unemployment is about to do a moon-shot / working hours slashed etc. There are enough marginal owners and IP owners to unleash a cascade.

          All the Govt can do is ban existing home sales, which is crazy and impractical given that the States would collapse on no Stamp duty. The options for Govt are very limited at this time.

          • None of the points you make means that Scotty can’t support housing, it just means that the support he creates will come at a greater cost.
            The RBA has plenty of ammo it just comes with a Negative sign in the first column, it still works the same way in that it creates liquidity it just creates some weird consequences especially when considering flow through to the Current account..
            But I don’t think weird consequences will ever stop our Scotty, I know how he thinks he is a bit like me in that he’s just not that bright, smart people will explain the consequences but he will be 100% focused on the “can it be done” side of the equation, that’s our Scotty and it’s why we love him.

          • Yes, by rights house prices should fall, however that other country with extreme house prices, China, house sales seem to have been the first thing to recover & are still leading the charge. I’d like that that explained to me. Is it the plunge protection teams new assignment or the punters (though not sure on prices, are they stable?)

          • To all three of you ^^^
            1. Wills and ways – meaningless
            2. High unemployment married with stagnant wages and an economy in recession do not typically co-exist with high house prices (at least, not in the real world). The RBA has committed something like $6bn to QE – if they wanted to prop the housing market up they’d need $200bn+. And maybe that’s where this goes but it will be at a cost i.e. AUD at .20.
            3. China’s property market is not comparable – they have a closed account and a banking system (at the state’s behest) that lends recklessly to people to keep on buying more properties i.e. endless rounds of fake collateral being used to make the next purchase and almost no lending standards at all. That game is up now. And figures telling you different are state-sanctioned lies. “All is well!” Lol

          • Chinese guy at work, although more Aussie, was in the same camp as most of us, until he was forced into an IP through his wife.
            He has mates who said Chinese money won’t leave Oz, mostly because they would identify themselves as getting money out of China, furthermore they have projects lined up for years and will continue to inject dirty money even if market drops, so his Reasoning is that there is a floor on how much property can Fall.
            What % though, would think it’s enough tbh

  3. I ask the Q, why does every market before it crashes do this
    DOM said FOMO
    What else causes this insanity
    It’s why it’s so hard io see rhe bubble when you are in it
    it’s fascinating to observe
    My GF boss knows what we’ve told him, he’s a very smart guy but he’s running around auction KEW Balwyn with panic & FOMO, saying people are going nuts paying $300k over reserve etc
    The Q is why do people like going insane at the top.
    AFL cutting players pay 20%, saw NRL may not survive etc
    It’s pay cut loss of job …. everywhere

    It’s just one market after another
    Equities boom rhen bust
    Man this property bust post Easter is going to be a bust for the history books, think AUST will take GOLD for the greatest ever bust
    It’s going to be a “doozy” when the bubble bursts
    This is going to end in TEARS

      • What I realised on the weekend was whether your home goes up 10% down 20% ASX up down
        If you can’t get food other essentials , and virus pandemic sick next will be gas electricity shortages
        Honestly who cares if you have 10 inv properties.
        It’s becoming obvious it’s a change of guard from greed to sharing.
        A shift to a more empathetic society
        J RIVKIN “The empathetic civilisation”
        Most people are going to lose all their $ wealth, especially the more privileged
        They will be eating from the soup van
        It’ll make them better people they just don’t know it yet
        The pain is coming
        The global debt Ponzi scheme is coming to a close

          • I would love if DLS and co add status “legend” beside your avatar for your social awareness and one for Gav his house purchase brought this down 🙂

        • There will be a growing call for an increase in Newstart payment.
          As more and more people find this is their only income.
          Yes there will be tears unfortunately.

          • This is why they are not granting residence to temp holders I reckon, they can just go home

        • Sorry to dissapoint you bc, but the utopia you describe isn’t going to happen.
          Much like the US in the GFC the wealthy will increase their wealth through the crisis, with the middle and lower classes losing out.

          • This.

            Going to be a massive transfer of assets from middle class/marginal to high net worth. Coupled with massive paper and real losses.

      • Fckn hell please don’t say that, I’m not interested in that ego carp
        I’d rather have bcbich than legend
        I’m just an ex trader, one thing I was really good at, that’s been through very challenging times so I’m aware of how hard it’ll be
        Being through hard times makes you a more compassionate person
        You have to feel it to understand
        No legend pls, the last thing I’d want

        • BoomToBustMEMBER

          For those of us who refused to join the herd and buy a ridiculously over priced $h1thole and wait things out, we have been doing it tough, everyone from the real estate agent that comes to our place every 6 months to check we are good tenants and judges us, our social group who think we are crazy and doom and gloom. The inlaws who think we should just buy now as everything always goes up. We have stood our ground for 5-6 years knowing this party will end in a lot of tears, just never knowing when it would end.

          I believe we are now at that point in time we have been waiting for where all our predictions will come true. The maths has never worked and people dont see it. You cannot have the largest debt bubble in history with the largest over valuation of assests along with flat to negative wage growth and cost of living prices insanely high, while pumping more people at a high rate into our major cities.

          This was always going to end badly, it was just a matter of when. Now when the chips are down, times are tough and those of us who have done it tough to hold a different view will be asked to provide sympathy and mercy and assist. Sorry to say it will not be coming from us. We will not forget who our friends were in our tough times, nor those who mocked us and our point of view.

          • Be patient BTB
            The black swan is about to pop it’s head out of the lake
            RISING out of cycle home loan rates
            The bubble is about to burst
            Don’t rush in falls will be up to 70% over next 36 months

          • I’m not so sure that I can see the difference between you and the other guys.
            except maybe that you seem to believe that cash has a greater value than Property.
            In the end your goal (owning a house) is exactly the same as their goal you just want to get it for less money.,If you had written how all your available money is deployed in this or that venture which you believe will out perform RE then I’d say good-on-ya, but that’s not what you’re saying, or maybe it’s just not what my ears are hearing.

          • This is an excellent post and entirely true.

            The last ten years have been an unrelenting greed fest, one of the most perverse betrayals of Australian culture and identity – the sheer self congratulatory indulgence and arrogance of people who literally think their self worth and value has been demonstrably validated through their house purchases.

            Its honestly disgusting.

            Smug bogans constantly belittling highly intelligent people on any subject, no matter how obscure and academic based on nothing more than the fact – they have done well out of real estate – its mind blowing to say the least.

            The worst part about all of this greed has been the destruction of the urban, natural, built environment, manufacturing, academia, schools, health, public ammenety – literally everything sacrificed for peoples “get rich quick” schemes of selling off absolutely everything for a few bucks.

            It has been absolutely grotesque.

          • @swampy 🙂 I’m just a middle aged Aussie bloke trying to make sense of it all.
            I left school early so there are lots of things that I never got the opportunity to study but I still try to understand what’s happening around me. Sometimes I can follow along but mostly the level that you guys are at is way beyond my understanding.

          • darklydrawlMEMBER

            Hi Dumb-as Dirt – RE: “I’m not so sure that I can see the difference between you and the other guys”. You ask a good question and yes, our goal is to own a family home here in Oz. Do I wish I purchased property back in 1980? Damn right I do.

            Investing in RE (especially when timed well) is an excellent way to make money and I recommend it highly. Do I enjoying renting? Not particularly – sure It’s ok most of the time (There are considerable pros and cons on both sides of the equation) but like most people I would prefer the stability of owning our own home. However I am not prepared to sacrifice our health and wealth on a single risky (and hard to move) asset, especially when there are far faster and better opportunities out there.

            To answer your question re alternatives – we’ve done well by putting our money just about everywhere else but RE in Oz. We own an investment property, but not in this country – shares, businesses and few other things. We are supremely lucky (and most grateful) that we have some excess cash after rent / expenses that we can invest (and have been doing so for a long time). Cannot complain.

            One thing I love is our broad diversity in investments vs an ‘eggs in one basket’ asset class. Even today if I could purchase 100 different investment ideas for $10K a piece or one house, I would choose the diverse option – sooner or later one of those ideas will do great and I can get the house anyway – literally have my cake and eat it too. That takes time and a bit of research though. You don’t have to be a wizard to trade shares and do this stuff, just read broadly and you will start to join the dots.

            What gripes me though about the OZ RE obsession is the way people look down on us as we “still rent” – as if that makes us 2nd class citizens, despite having almost zero debt, a nicer rental house than they own and far less stress than they do, we are somehow ‘loosers’ (<– tm) and unworthy in their eyes – people literally look down upon you, weird but true. If I am honest with myself, part of wanting a crash is pure schadenfreude – to say "what did you honestly expect?". The other part is I do want to buy a house at a 75% discount to current prices. I don't wish pain upon people, but I cannot see any other way to reset the system and attitudes.

            You say you are not smart, but you are here, reading and contributing and asking great questions. You're already way smarter than plenty of folks I met daily. Hang in there. I am no guru. Will the path we have chosen be successful? Don't know – I feel there is a decent probability it will, but even if it doesn't we are doing ok and I cannot ask for more than that.

          • @Darkly
            I probably didn’t say exactly what I meant, or exactly what I was thinking, so let me try again
            It seems to me that in order to buy something that is of limited supply (and therefore valuable) you need to part with something that is equally valuable, which is to say of equally limited availability.
            Now as we have seen since the GFC, Money (in any of its forms) is not a scarce commodity and it is especially not scarce when times are tough. So your plan as I see it is to wait for just the right moment and then trade lots of money for a house.
            Sort of sounds like a plan that might work until you add in the fact that all the worlds major banks have been printing like crazy since the GFC and will continue printing like crazy if this Virus really takes hold.
            Fundamentally there is not at the moment a scarcity of money nor would one expect a scarcity to develop at any time in the near future (given the behaviour of all the major players) yet you still expect to be able to snap up a bargain basement priced house by paying cash.
            That”s the part that I just don’t get, Why do you guys seem to think that your cash is better than some other guys cash plus debt?
            I think a lot of guys on this site let morality (my hard earned cash) vs (their borrowed money) get in the way of completing their goal (to buy a house), the last time I checked most people selling a house only care that the cheque clears, as for one bidders money being righteous while the other bidders is immoral, that vendor might exist but I haven’t ever met them.

          • darklydrawlMEMBER

            @Dumb-as Dirt – if you are saying (and apologies if I misunderstand your intention) that money is becoming worthless – If so, then I would agree.

            The thought scares me actually. History has shown what happens when Governments start handing out money like it is a monopoly game – it ain’t pretty.

            Part of me thinks moving some money out of the ‘money system’ entirely and into gold (or even crypto) is likely prudent – even as an insurance measure, but crypto is all over the place (mostly down!) so maybe not.

            The gotcha here with Oz property (IMHO) is it is hopelessly over inflated – more so than cash is right now. So the more play money they give us the higher the prices will go (until it all falls over as these things always do). I guess the trick is to have property fall over before your cash become devalued – this might be a risky gambit (?). Happy to hear your (and others) thoughts on this. Certainly not an expert and still learning.

          • @Darkly
            I don’t think that money is the problem because money is simply a means of exchange.
            The problem is that we have insufficient assets being developed that are considered an acceptable exchange for Money. In the absence of newly created valuable assets we get Asset inflation because the available (ever increasing money) chases only existing assets. As we’ve seen the system when in this state (chasing existing assets) is incapable of (and unwilling to) produce new assets which will act to directly devalue existing assets.
            We therefore produce sub standard assets (Opal tower) which act to maintain the value of real assets.
            In my mind this is not a complex issue, it’s unbelievably simple.
            So as for Gold, it is for the most part an existing asset so focusing on this as an asset class is really no different to focusing on Houses.
            What I would like to see is a system develop where new assets are more highly prized than old assets, but I suspect we’re all so imprisoned by the existing system that this outcome is impossible.
            Crypto is certainly an example of a new class of assets but I’m not sure how one can really turn Crypto into a reliable money flow, at some level I believe that it is the reliability of the money flow which ultimately sets the value of the asset.

    • darklydrawlMEMBER

      It’s good to have you back bcnich. Agree 100% with your analysis here. This is a once in 100 year event and most people have seen nothing like it (or read history). They are like deer in the headlights. Holy crap… I firmly believe this is one for the history books.

    • Goldstandard1MEMBER

      Last time you asked the question I answered (because my peer group demonstrate it within inner east Melb):

      1. Too big to fail confidence-get involved!

      2. Cheap money

      3. FOMO

      3 disappears when either of 1 or 2 goes. That’s now.

      So I think Dom is right in the sense that you get almost EVERYONE involved at the end because of FOMO because your money is going backwards vs your friend’s money and lifestyle (new car, holiday etc. because of the house).

  4. Well I’m no expert. If you had told me there would be millions of people panic buying toilet paper I would have laughed. The point is people are not rational. I think in these times it’s very very possible that people will sink more money into real-estate because they believe it will protect their money. I also think scumo is going to remove all restrictions on foreigners purchasing real-estate. There must hundreds of thousands of Hong kongerz chomping to get out and into this country. 2 weeks isolation? No problem. Here we come with our money suitcases.

    • Fishing72MEMBER

      I think people will become acutely aware that increased immigration leading to increased pressure on our hospital system is not some irrelevant, abstract statistic and will become vocally upset when their elderly parents are unable to find a hospital bed , whilst new people are flooding into the country and becoming eligible competition for those same beds without a word of English .

      • Exactly. Add to the pot those who lose their income, and have to sell up the family home, only to see it picked up by a foreigner.

        People know where this virus came from. It isn’t called the Chinese Coronavirus for nothing.

      • If you want to free up the hospital system simply send home anyone not a citizen or permanent resident. 10% of the population evaporates at the stroke of a pen.

    • I think you’ll find, under cover of this mayhem that the Chinese have ramped up capital controls and that includes HK. The lack of dollars flowing into the Chinese mainland (and HK) must be pressuring the Yuan. With so little commerce actually taking place at this time it’s probably fairly easy to keep track of FX flows out of the country. Anyway, at times like these paralysis tends to be the order of the day – not action. Saving ones life takes precedence over everything else. In the long run, more people will probably want to leave China to get away from Xi’s authoritarian grip and are angry at his handling of the virus – but at the same time I think we’re going to dial back this crazy immigration experiment here. The world is going to experience a sea change and hopefully some new non-globalist political blood.

      • This.

        It is otherwise inconceivable that under these extreme financial market ructions the yuan has remained beautifully and resolutely just below the 7.00 to the USD line. Which it has.

      • What many people do not truly understand is just how pathologically obsessed the Chinese are with SAFETY. The tumult, terror and tears in the last couple of centuries in China is something they are very aware of. Australia has benefited because of location (close, same time zone), perception of Goldilocks nirvana (climate, easy environment that doesn’t kill you, easy and comfortable lifestyle) and it is a well run Western democracy with some the the best education, health care and legal infrastructure (plus the cops actually do part of their job in protecting you) in the world.
        We all know the fallacies in the above but this is their perception. It has been slowly eroded over the past decade with the more well informed and educated Chinese. The poor handling of the fires has exploded the idea of incompetent management into the Chinese mindset. The CCP will use our Covid 19 mis-steps as a massive propaganda campaign and Australia will suffer irreparable reputation damage. I think that mass Chinese migration from the mainland continuing for the reasons it has, over the past 2 decades, is over. That group of potential migrants will look for a country that handled Covid 19 better. If they don’t find it (which is possible, they can’t all go to Singapore, South Korea or Taiwan) then things will become interesting. It is possible our reputation for providing safe consumer goods is at risk. We shall see what happens. Interesting times indeed.

  5. I like how desperate people become to find a positive metric – this website has used corelogic Auction clearance rates for months – when that fails miserably we switch to Domains sold prior to auction – and all new metric at its highest ever.

    What next – “highest ever sold by left handed mongolians juggling pumpkins” – get in quick.

    ..

    • GunnamattaMEMBER

      Then there’s the most massive asset bubble of all, real estate. Millions of properties delusional owners still think are worth $1.4 million will soon revert to a more reality-based valuation around $400,000, or perhaps even less, meaning $1 million per property will melt into air.

      ……could cause a bit of a stink, what…….

      • Yep … what we are going through at the moment could be described as the entree (economic / employment downturn) before the main (dwellings crash).

        There is roughly $A3.5 trillion of the $7.0 trillion market to vaporize in Australia … some $NZ600 – $NZ700 billion of a $1.2 trillion market in New Zealand.

        We have been ‘scratched records’ with the past 16 (yes 16) Annual Demographia International Housing Affordability Surveys Gunna ! … access http://www.demographia.comhttp://www.PerformanceUrbanPlanning.org .

        This lethal vulnerability has been staring us in the face for decades … but they have chosen to do nothing about it … and instead, deliberately decided to learn the hard way.

      • SoMPLSBoyMEMBER

        Great point on the likely outcome and plunging prices and it won’t take much *drop” on market vals of Ozzie property before the big five lenders are insolvent.
        On average, they have $ 1.0m of loan being supported by a thimble full of equity ( ~$70,000).

    • Zerohedge is killing it at the moment. Loons in the comments though – “Its all hype”.

      Oil – carries massive debt – Exxon down graded.

      Really great explanation of the impact of the GFC stimulus with people ramping up on debt – to have the “mark to market” taken away and then low earnings + debt leading to insolvency really hit home.

      Global economy is now insolvent – just wow.

      • BoomToBustMEMBER

        As we have been saying for years, the entire global financial system is a massive house of cards, once it begins to fall it cannot be stopped and it will GFC 2.0, but vs GFC 1.0 it will be on steroids. Then throw a global pandemic fuel on this fire and devastating will be an understatement.

    • BoomToBustMEMBER

      What will a $1 Million property be worth at the bottom of the cycle?? 10%, 20%??

      From my understanding of Basel capital requirements as property prices decline the cash on hand is required to increase, does this mean banks will start to put interest rates up independent of the RBA while the market is in decline ?

  6. Display NameMEMBER

    Come on, the party will continue, Auctions will still increase, run remotely over the phone and internet where the intubated raise hand signals from their ICU beds as they bid up their 3rd investment property using the negative interest rates on offer. The kitchen sink is yet to come,..

    • ErmingtonPlumbingMEMBER

      don’t forget that foreigners/ new arrivals have to self isolate for 2 weeks and maybe even longer soon,…so I’m predicting a boom in property sales with immediate settlement requirements.
      Who wants to self isolate in a hotel!

    • Can I get one beep at 900,000? BEEP! Thank you to the gentleman beaming in from RPA. Can I get another at 910,000? BEEP! Great, thank you to that lovely lady dialling in all the way from ICU Westmead – and her nurse, for helping her out there. Very kind of you. Will I get another at 920,000? Anyone….people, please either mute yourselves or turn your respirators down, I’m getting a lot of backgound noise here. 920 anyone? BEEP!! Excellent, thank you to that couple bidding all the way from Beijing, the Australian Dream belongs to everybody my friends. Moving up to 930,000 now…BEEP! Well done sir, back to our friend at RPA. 930,00 going once….twice….sold! Congratulations sir! BEEEEEEEEEEEEEEEEEEP….. Sir? Hello? Ok, it looks like we may lost him…bidding to resume at 920,000….Can I get a BEEP at 920?

  7. Return of the first home buyer’s (vendor’s) grant. This time up to 20% on the price of the home.

    The government will do anything necessary to keep house prices inflated. That’s the only thing which is guaranteed.

    • Banks will only lend based on the value of the house and your ability to repay.

      No one will be getting a million dollar mortgage – so no. Just no way.

      Its finished – and they absolutely know it – announcing anything like that right now would be total political suicide – they would be completely crucified – look at the NRL’s request for support.

      Imagine hospitals running out of beds, masks, ventilators – but real estate agents getting a hand. Please. Just stop.

      • It’s self reinforcing. In Australia, if your job is not a government job (which includes indirect government jobs) where your salary originates from collected tax, your salary is more than likely to be originating from someone’s home loan (construction, trades, real estate, banks, insurance, etc.) Pump house prices and jobs can be created out of thin air.

        The amount of people in Australia whose livelihoods are reliant solely on house prices continuing to rise and therefore also on more and greater home loans being created is mind boggling. And absurd.

        • Relax. prices went down 10% in 2018/19. It barely caused a ripple in the economy. Nothing drastic would happen when it continues the downwards trajectory.

          • Is that sarc Kelly?

            I have it first hand from an EGM in a big 4 bank that their Chief Economist said (wouldn’t do so in public) that if the RBA hadn’t cut rates after the election and Apra hadn’t removed the 7.5% buffer and if Scomo hadn’t whacked out his FHOG with no LMI, the banks would have been insolvent had house prices gone much further south. They can’t wear the negative equity given they borrow offshore short to lend long domestically. Rolling over that offshore credit is now going to be a major problem.

  8. reusachtigeMEMBER

    What I love is that if you fckers get your impossible mythical crash it’s all going to be be blamed on the virus and nothing else. It was the virus what done it!

  9. Two friends have been waiting since Dec to settle on a place. Stockland and the council are taking their time to get the sign off done so they can be sold. I wonder what the provisions in the contract are for getting out of the transaction. I haven’t wanted to bring it up with them…

  10. It is a non surprise really. Even couples in Australia with two good incomes are up to their eyeballs in debt. Everybody knows it. Very few have saved for a rainy day. Now everybody wants a bailout.

      • #MeToo
        I used to be against taxpayer funded bailouts – now I think they’re a heap of fun. Bring it on.

        Mortgage holiday and $10k (to start).

      • Why? Do you think they mean that you don’t need to repay? Suspend just means “don’t worry about it this month, but make sure you pay double next month”. Does that really help you?

  11. Jumping jack flash

    “Unemployment holds the key… Perth showed us that”
    Unemployment is only the key due to self-imposed debt availability and maintainability standards.

    As I’ve said before, to get the next leg up in this economy based on debt, we need to make debt much easier to obtain. Only then will we get the growth. Debt is completely essential now, so there is no reason why it should be so difficult to get.

    Nonproductive debt on its own naturally absorbs money from the economy as interest. The interest rate on mortgages that the average rube pays will never be zero.

    The magic happens when debt grows quickly enough so it can repay its own interest!

    The way to get debt to grow is by getting more out there. The way to getting more out there is to remove these stupid and restrictive standards that only limit the economy’s growth. Give debt to kids. To the unemployed. No job? No worries! Here, have some debt.

    By now we should all know for once and for all that due to the cunning property valuation model, the more debt added to the property market the higher the asset prices will become. This completely solves the problem of risk when you only use LVR to measure it. Banks needn’t worry then about recovering their debt and the interest because if the owner of the property dies or becomes unemployed the bank can simply sell the asset for its current debt-inflated value which will cover the remaining principal plus any interest by simply handing out whatever the required amount of debt is to cover it to the person who wants to buy the house.

    It is a remarkable system but the banks aren’t using it to its full potential because of these ridiculous standards.

    So what is actually stopping the banks from taking the plunge and removing these silly restrictions on debt availability and maintainability? Aren’t they confident enough about their own system?

  12. Scummo must do everything in his power to save our struggling property sector! Like, each foreigner buying a $1m property receiving the Scummostrayan citizenship as a bonus. And if spending multiple millions, receiving multiple Scummostrayan passports (prefilled or blank, their choice, wink, wink…). See how many policy levers are still there? Come to think of it, some of those must have been enacted ages ago.

  13. Creation gave the land for free. Thugs & knaves grabbed bits and set a price against newcomers. All land price is theft from first peoples, humble folk and future generations. Land price should and will become be nil plus value of the man-made improvements. Only this makes honest sense. The community itself creates land value. Collect the annual rental-value of cadastral sites as the sole source of public revenue, in lieu of all taxation of effort & transactions (all this too is theft). An economy built upon this theft and that theft cannot thrive. When land price is nil, the correct rental-value is being collected. Only the value of sites should be socialized. Let the losses lie where they fall. All have been warned.

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