In the wonderful land of OZ, The mortgage debt is much easier to handle than the cost of living in Australia! I have said this repeatedly....everyone is focusing in on housing and general debt as the problem when the real problem here is the enormous inflation rate....let's break it in two: cost of living and monetary and debt inflation, just to make it easier to see.
While some blogs are focused in on housing prices ad infinitum, calling for housing collapse ad infinitum, they point they miss is that the thing that will rip mortgagee and home asunder is the cost of living not massive speculation ; and you will not see a housing collapse.
What I think will happen is that the greatest wealth transfer in Australia will transpire via property, as per past.
Like stocks, for every seller there is a buyer. And houses always sell here, very few go back to the bank. My bank manager here at the Gold Coast said that in her 10 years at the branch, she has never had a house repossession, she is also seeing very few struggle with mortgage repayments...now, the Gold Coast would be the heart of property speculation in Australia.
The types of properties mainly speculated upon here are apartments.
There is so much money here in Australia, it boggles the mind. (China is dumping her trillions here too, not only in resources but some real estate not resource related.) That is why I have also said, watch China for Australia's outlook. Watch the inflation rates here and then go short when China exits, wages drop and unemployment soars.
Distressed houses and apartments that get sold historically , going back through 1987 property crash ( -5% was the mean dip) and the depression, did not go back to the banks, they were bought out by wealthy land lords or investors securing property at lower prices.
The same will repeat, as history often does here and everywhere....the air will come out of the property market at some point, but not collapse overnight as per US Sub Prime market because we never had a sub prime debt market. The nature of loan structures here and the 20% deposit rule make things very different when forced selling is an issue., houses will just get snapped up by the 20% who own the 80% of everything. Voila... transfer of wealth to the wealthy not directly to the banks. As well, a twenty percent deposit gives owners a big safety margin and buys time to sell a home without a fire sale, should the owner need to sell.
NOW, what will drive selling of homes in the near future? Here is the greatest pressure that any middle class family with a mortgage, kids etc can stand....THE COST OF LIVING....even with two full time incomes.
THE AUSTRALIAN has run an article today that has captured the problem here. Remember, we are on full steam economically, we have a dire housing shortage, prices are not plummeting.
I am trying to buy a block of land at the Gold Coast to build on one half of the block and sell the other half. I have been looking for a year and waiting for the prices to drop. I have attended about 10 or more auctions.
I can tell you, boots on the ground and in and out of property, that Mike Shedlock has it completely wrong in his timing and scope. Shedlock also misses the point that the inflation will destroy the middle class here and make everyone renters before mortgage rates and debt will. We are also not a bunch of morons, savings rate here is high as it can be considering the horrific pressure of inflation.
My husband is an engineer. His main work over the last 10 years has been engineering and project managing old Boral cement quarries in outer Sydney to turn the land into housing and now he is working fast and furiously on decontaminating commercial sites so that much needed housing can be built. These low priced houses are about 1-2 hours commute from Sydney Central Business District. They are snapped up by families, not speculators.
My warning stands about couch potatoes writing blogs from afar whose track records and timing have been appalling....study your timing and facts before you short anything on their lists.
Here is the REAL problem in Australia that the 'open- minded -challenged' are missing.....Aussies are struggling with inflation running at about 11% or more, while they continue to save as much as they can under rampant cpi and meet pay mortgage payments, it is tough. Our bankruptcy rates are the lowest since 2005, by the way. This article highlights that people mainly own one property, their home, not 8 as other blogs assert :
Australians struggle with household costs
- AAP
- April 18, 2011
THE rising cost of essentials such as health care, utilities and fuel means more households are struggling to keep on top of their bills, a financial survey says.
The cost of living has increased, on average, 7.5 per cent across the nation, more than double the official inflation rate of 2.7 per cent, financial group ING Direct says in its Financial Wellbeing Index for the first quarter of 2011.
"Governments need to realise households are under more pressure than official figures are showing," said ING Direct chief executive Don Koch.
"That pressure extends across the entire household budget from consistent costs like mortgage repayments to everyday essentials like food and fuel."
The report, released Monday, says median savings have declined from $9238 in the last quarter of 2010 to $7214 in the first three months of this year.
One in three households are uncomfortable with their level of savings, and close to half have no investments outside the family home, the report said.
Queenslanders, who are still recovering from disastrous floods and cyclones, suffered the biggest hike in living costs - 8.3 per cent over the past year, compared to 6.3 per cent in NSW.
Also in NSW, eight out of 10 households say electricity and phone costs have become more expensive over the past six months. More than 80 per cent also say fuel and transport costs have risen.
In South Australia, 11 per cent of homes say they are finding it impossible to pay bills on time, while 44 per cent are uncomfortable with their ability to keep up with essential expenses.
Median savings in SA are just $2741 - well short of the national average.
"On a positive note, South Australians have the lowest credit card debt and lowest median mortgage balance in the country, which could potentially contribute to a healthier household balance sheet," Mr Koch said.
ING Direct's index was compiled from responses of 1033 households across the country.
The rather gloomy figures of the index contrasted sharply to another survey of consumer sentiment released on Sunday.
Financial researcher CoreData found Australians were more optimistic about their financial outlook as pressure eased on household bills.
Andrew Inwood, managing director of CoreData, said more people had a regular income and were saving or investing more money.
"Household finances have improved considerably since the end of 2010, with more Australians able to save and fewer just being able to make ends meet or are running into debt," Mr Inwood said.
CoreData's Investment Sentiment Index, a survey of 877 people, showed 49 per cent were able to save money, a jump from 42 per cent in the previous quarter.
It said SA and NSW were the most optimistic states about the next quarter's economic situation and, overall, fewer respondents were running into debt.
The reports come less than two weeks after the Reserve Bank of Australia (RBA) voted to keep interest rates unchanged for the fifth straight month, saying near-record highs for the dollar had helped to keep inflation in check