First home buyers should strike!

Back in the good old days when there was such a thing as Australia we saw this:

The above headline can’t have escaped the attention of many Australians yesterday. It sat at the top of the SMH, The Age, Brisbane Times and WA Today websites all afternoon. I can’t remember the last time I saw 500 comments on a Fairfax story (I literally can’t remember so it may not be that long).

I can imagine how the powers that be view it. If they bother taking note at all, they probably conclude it’s some renegade act of economic vandalism.

But it isn’t. And I’ll tell you why. Australian housing doesn’t have anything to do with economics. It long since ceased being a “market” at all.

Rather, it is a political complex – a quango – that represents the single largest page in the socio-economic contract between the government, the Australian financial system and an ageing baby-boomer population.

The campaign failed. And would probably fail today too given how preoccupied with other issues of equity Millennials are.

But that doesn’t mean it’s not great idea. In fact, the timing could not better. Such a strike today would crash house prices.

Why so? Four reasons.

First, immigration is dead for the foreseeable future.

Second, foreign buyers are gone.

Third, property investors are dumping properties like they’re full of Chinese virus. This has no end in sight as rents crash.

Fourth, credit is getting tighter as bank’s are spooked by the above.

The conclusion is that the ONLY thing preventing an outright house prices crash today is owner-occupiers:

And first home buyers in particular:

All excuses for high house prices are gone. The government is so far out on the stimulus limb that it would just add more as the economy took the hit.

First home buyers only have themselves to blame for high house prices now and they should use that power to strike and strike hard!

David Llewellyn-Smith
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Comments

  1. I remember this quite well. It started with David Collyer (The Don’t Buy Now guy) and ended up as a campaign on Getup which was on the front of their community led campaigns for months. As well, there was one against negative gearing that was even more popular. However, GetUp ended up canning it giving some pathetic reason that it was supposedly not in the interest of members. A more likely explanation was that GetUp director Simon Sheikh had strong ties to Labor which was in charge at the time, and didn’t want to embarrasses them. After that debacle GetUp even went so far as to change the format of their page so that it would be impossible for such a community driven campaign to ever gain the same kind of traction again.

    Was funny to see the hypocrits at GetUp suddenly take the position that Negative Gearing wasn’t ok at the last election. I remember getting a random call about donating and gave them so much abuse about their previous stance.

    • reusachtigeMEMBER

      I pity the poor suckers who fell for the “don’t buy now” propaganda. They would have at least doubled their money in most locations by now and in some even trippled if they did buy then. And they’d be half paid off on their loan by now. Instead they are ruined and evil in their want of destruction to the successful.

  2. Stewie GriffinMEMBER

    “Back in the good old days when there was such a thing as Australia”

    In the end there’s no escaping the conclusion we now live in the EZFKA.

  3. Arthur Schopenhauer

    CJ to SFM: “ONLY thing preventing an outright house prices crash today is owner-occupiers”.
    Could that have been the topic discussed at the footy?

      • darklydrawlMEMBER

        You know they must be extra healthy when you can close a hospital and replace it with apartments. It’s a good move. Everyone knows sick people are leaners! (they can be a real downers too, and, sssssh, not that good looking either).

    • AngryMan,

      Subiaco Oval was redeveloped into a high school (Bob Hawke College) and an oval. Not residential.

      PMH is still there. Given how badly apartment sales are going in Subiaco and elsewhere in Perth, I very much doubt that the aspirational development is going to go ahead in the near future, if at all. Subiaco is half dead. CBD is 75% dead. There is no economic activity to support service businesses that are required for people wanting to move into “vibrant areas”.

      I already reported this some tome ago, but speaking with Development WA (formerly known as LandCorp) a year ago, they were having trouble selling real estate in CBD, and had two cancellations for one new contract in outlying areas like Alkimos. Things have not improved.

  4. I’m a millennial. At the old end of the scale. I don’t own a home. The last time I was looking, I attended many auctions and every time when it was someone around my age winning, mummy/daddy boomer was there holding their hand.

    Millennials are more concerned about labelling people bigots than their age group being financially and welfare (i.e. to have an abode of their own) disadvantaged.

    The property market really doesn’t need first home buyers to stay afloat and continue increasing at a rate disconnected from wages. It can survive on investors (increasingly SMFS) and Chinese cash.

      • Iron HorseMEMBER

        I’m not so sure Les. This may have been the case in the past however data posted over the past few days has shown investor financing is in severe decline and I understand SMSF’s are being increasingly audited for compliance with their trust deed and getting fined if they are out of kilter (ie: overweight property )

    • fitzroyMEMBER

      In situations like this look what has happened before. My kids are a little older and are very happy not to have purchased. Those boomers you saw will suffer the same fate as the middle class in the US that was wiped out. It is chronicled here by Vernon Smith, a Nobel Laureate in economics.
      https://youtu.be/aEZCDXTeIYo
      It will not help if you are wiped out too. The US has never recovered.

      • DominicMEMBER

        Yep, because of the sheer concentration of exposure to property in this country a crash would comprehensively level the economy – certainly the amount of wealth.

        OO, IP, SMSF, bank of mum and dad, bank stocks ….. that’s some hit to wealth.

    • SMSFs are a huge influence on property prices and never get a mention. I haven’t even seen any of the big four banks put out public data of their activity in the market.

      • ParadigmMEMBER

        Hi Les,
        The Big Four don’t lend in the SMSF space, hence no data. There are very few lenders that will currently lend to SMSFs. Something to do with risk I believe 😐

        • darklydrawlMEMBER

          Many lenders are wary of the limited recourse set up that is a requirement/’feature’ of SMSF mortgages.
          “The lender must only have limited recourse against one particular asset. This means that in the event of a loan default, the lender must not be able to claim any other assets of the fund.”
          This makes it potentially more difficult to recover a bad loan than ‘mortgage 101’ arrangement.

          https://www.homeloanexperts.com.au/smsf-loans/

          • The Penske FileMEMBER

            The lenders I see still get personal guarantees from the borrowers so in effect they are still covered if something goes a miss. Sure you can’t chase the SMSF but you chase the borrower. Also, don’t forget the lenders in this space borrow the initial money via bank warehouse facilities anyway. Most of the SMSF loans that I’ve seen (100’s) are the victims of spruikers etc. that ASIC simply didn’t control and bought off the plan garbage that will be underwater still now. I think the banks don’t want to lend direct into this space due to this type of brand damage however I know for a fact they like to clip the ticket via the non banks. Also, these loans by design tend to be long term investment / divestment plays that will slowly bubble through to us all. Also, a lot of SMSF lending at 80% LVR broke the 90% in one investment rule in the SIS act however that doesn’t matter. The only debatably smart SMSF play is for the owner occupied commercial purchase. Other than that I haven’t seen a winner yet.

          • darklydrawlMEMBER

            Thanks ‘Penske File’. That was an interesting and informative read. I learn additional details everyday.

          • Agreed Penske – chasing the guarantor (Personal) rather than the Borrower (SMSF).

            That is an interesting angle with the owner occupied commercial premise. What’s the angle? The Dr has his surgery in his SMSF and gets charged ‘overs’ for rent which goes to his SMSF tax advantaged. That is a nice clip.

  5. The millennial generation can’t be classified into a financial class.

    Half of strayan millenials don’t even need to work based on their boomer parents’ wealth and subsequent inheritance. Yes, half. It’s very different to any other generation. The millenial generation is probably the most clearly cut and divided haves and have nots (in relation to wealth) but the most closely aligned on social opinions. It’s exactly what the lefitist global agenda wanted.

    • fitzroyMEMBER

      I think you overestimate the boomers wealth. Fundamentally it is based on property which is based on debt. Returns on investments are being crushed and savers slaughtered. It is as if all those years working were for nothing.

        • fitzroyMEMBER

          Some boomers are wealthy, others are not. Australia has the second highest household debt after the Swiss. Many have ridden the land bubble to riches, but most have not. A land crash will smash many boomers. I live in Melbourne where the worlds biggest land crash occurred. It can happen again.
          There is a book called “The land boomers” by Cannon. Those boomers didn’t have a printing press and the banks went broke.

          • The boomer generation has these inequalities as you state fitzroy. However with inheritance those inequalities will widen as I’ve seen in the millennial generation. Wealthy parents keeping kids in their homes in pristine suburbs while other children are left to make it on their own relying solely on the labour market increasingly casualised (this favors wealthy people with stable homes who can handle inconsistent income streams) with higher youth unemployment. Wealth makes more wealth; this is also true across generations.

        • Mining BoganMEMBER

          I’m mid 50s and the amount of my cohort and older who hold significant debt is jaw dropping. The old adage of out of debt by 50 and save save save was replaced by hold debt and borrow borrow borrow. We’re going through restructuring at work with the majority of the 60+ crowd not being able to take a package and retire because they still owe money.

          They’ve had good lives but in reality not a cent to their names.

        • Jumping jack flash

          “… it’s now worth 1.6m is that based on debt?”

          YES!

          who has 1.6m laying around? If anyone can get their hands on an easy 1.6m it will most certainly be debt, or someone else’s debt that’s been passed up the line, in the vast, vast majority of cases.

          and don’t get me started on our amazing valuation system.
          The house down the road just has to be sold for 1.6 million debt dollars and suddenly every house in the street, and possibly surrounding streets is now magically worth 1.6 million.

          Millennial RE agents just google it. They have no idea.

      • DominicMEMBER

        +100. Inheritances look great today, but what will they look like tomorrow? Values do not have a floor. They don’t get locked in.

        To Les’s point though, there are a hell of a lot of people factoring in inheriting ‘a large sum’ in the years ahead, which I believe, impacts behavior today. This includes, being comfortable with large debts to fund expensive homes, flash cars and ritzy foreign breaks.

        • darklydrawlMEMBER

          The other risk is much of this wealth effect is correlated. People are comfy with their huge mortgage as they think they’ll get a windfall from Mum and Dad when they shuffle off to the Hotel Paradise and the kids sell that asset. That can work well when values are rising, but it is all thin air when they are not. It also assumes no major lingering health or cashflow issues with the olds.

    • Narapoia451MEMBER

      It’s what the global neoliberal agenda strives for and has spent the last 30 years engendering. They’ve been really public in announcing their intentions about it as well, so it’s odd that you have attributed it to ‘leftists’.

    • This might apply to half of “Australians” if you mean people born in Australia. Immigrants are generally not in a position to inherit. You make a good point, though. If someone is now in their 30’s and is expecting to inherit money in their 50’s, they might be in a position of not needing to work too much. But, they would need to cut down their expenses in the short term; one way of achieving this would be to avoid buying a house.

  6. So all the bubble supports are gone (immigrants, investors, foreign buyers) and still the prices stay up. It’s almost as if there were some other reasons underlying high prices. Hiding in the blind spot.

    For mine, I’d guess perhaps people need places to live there is an unresolved housing shortage (less so in Perth) and teh interest rates have been lowered irresponsibly (across the land).

    The FHBs striking last time have rogered themselves pretty thoroughly because they misunderstood the situation so badly.

    The would be strikers this time around are probably in with a somewhat better chance. But even the most bearish bears probably can’t really imagine prices returning to the levels of when the last “strike” was attempted (2010/2011).

    • Bear Bullwinkle

      If only they were all gone. We’ve still got the house price activist federal and state governments to contend with. Nonetheless, prices are going down.

      • “There’s never been a housing shortage in the history of Australia.” the latest in a series of Ben-Hur assertions from you Les. Sounds grandiose but even if true or provable what is its significance in the current circumstances?

      • Hi triage, so do you disagree with me?

        What’s your counter argument? It’s good that you’re always having a stab at me but you need to bring some substance. Otherwise, your comments are simply a mish mash of symbols on screen. And that just wastes everyone’s time as opposed and in addition to your own.

        • Unemployment is 20% and houses are $1m in Sydney.

          And you want “statistics”? Why? To help you not see the forest for the trees?

          I think I might go on walkabout again. Too many guys here that are too dumb.

          • Bear Bullwinkle

            I’m shocked that the Boomers didn’t dump their mansions at $200K a day after the unemployment print.

          • Bear Bullwinkle

            Based on what?

            For all the trolling about “18 months”, it seems like bulls sincerely expect housing prices to drop instantaneously whenever the economy goes sour or else the economy doesn’t matter?

      • Jumping jack flash

        “There’s never been a housing shortage in the history of Australia.”

        100% Correct. Debt-bubble demand is a wondrous thing.
        If everyone who wants to can suddenly pay whatever the inflated asking price is for a cockroach-infested shack in Sydney using the correct amount of debt, that will create a fair bit of demand.

        Then “unlock equity” [ie, take on more debt] as prices naturally rise from the debt and use that to buy IPs = even more demand.

        Its marvelous.

    • I think just the illiquid nature of the asset, taking its sweet time to discover prices. Absolutely now believing in the gap down.
      The squeals from the banks lately about suggesting that people may have to face the music and sell if their circumstances require it, is a new phenomenon for Aussie housing market.
      I don’t really see frydenturd or scummo coming out and saying “how dare the banks say aussie battler has to sell their store of wealth.”.. Instead Scummo is out there soothsaying to stop the rush going “oh but it’s not a speculative bubble, there is underlying resilience blabla”.. it’s basically ensuring the frog stays in the boiling pot in case it catches on and decides to jump out too early. Gives Scummo 6 months to save his developer mates with Homebuilder. It feels like now, they’re just trying to manipulate the timing of the imminent crash.
      I expect Scummo to disappear (literally from the country if possible) when this actually starts to happen. He doesn’t want to be the face of bad news for Aus. Been his PR trick lately to just zip up and disappear while your chosen minion, where it be state premiers, health officers or bank heads, deliver the bad news.
      RBA is a bit of fly in the ointment, they’re doing it back to em. After RBA rolled in with those billions in march, they’ve let scummo-turd & their fiscal policies be the face of the recession through out… Even MB has laid off them lately.. mostly. For this, RBA do deserve credit.

      • mikef179MEMBER

        Yep. Agree. It is just the illiquid nature. The smart ones are getting out but they are only a small percentage. The dumb ones are hanging on, hoping and praying it all gets better in 6 months to a year.

    • Jumping jack flash

      “So all the bubble supports are gone…”

      Has cheap debt gone?
      Maybe close, but not officially yet.
      When interest rates rise to even the still incredibly low, once “emergency” level of 3%, or probably more likely, if the banks start to raise mortgage interest rates independently, that is when the bubble is officially over.

      In my opinion there’s still plenty of options available to lower debt eligibility hurdles and get the debt out there to the people, and get it growing again. Plenty!

  7. reusachtigeMEMBER

    The failure of that strike crushed the will to fight on in many a housing bear at that time. It was the beginning of the end and the start of the beginning of boom times always in Aussie housing!

  8. It never was a true strike because there is no defined membership base. It was purely an outlet for discussion and venting frustration. You can’t expect an entire generation of people to act in solidarity when self interest suggests they will act according to their means.

    Far better to turn attention to the political structures, the self interests of those making the (tax) laws and the commercial malfeasance of the lenders. That’s how you tear it down.

    • Jumping jack flash

      NIRP or more QE/UBI by Christmas.
      Bill was asking for NIRP not so long ago. He’ll probably get it. He usually gets what he asks for.

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