Home prices in Australia are crashing. Western Sydney is Ground Zero in the Interest-Only Mortgage Bust.
Business Insider reports Sydney property listings hit the highest level since the GFC.
“Sydney residential property listings are now at the highest level recorded since February 2009, surpassing the peak in listings recorded during the 2010-12 housing downturn,” said Louis Christopher, Managing Director of SQM Research.
Whose Fault is This?
Whose fault is it that people ridiculously over-paid for houses with variable interest rates?
I suggest it’s theirs. Yet, as one might expect from human nature and bubble investing, a Rate Rise Fury Swamps Australia with Many Homeowners Venting their Frustrations Online.
>In the last week, many of Australia’s banks, including three of the Big Four, slid up their variable mortgage interest rates. Westpac by 0.14 percentage points, Commonwealth by 0.15 percentage points, and ANZ by 0.16 percentage points.
>Australia is furious. Social media is overflowing with people calling banks things we simply cannot reprint in a family website.
>It is not just Facebook and Twitter that are on fire. Swiss investment bank UBS has accused the Australian banking sector of being an uncompetitive feather bed where big banks can raise profits with a flick of the wrist.
>“Today’s announcements demonstrate the oligopolistic nature of the Australian banks and their ability to pass on additional funding costs and more to their customers,” said UBS analyst Jonathan Mott and colleagues in a note to clients.
What a hoot.
Of course, the Reserve Bank of Australia kept interest rates too low, too long, creating a bubble. Yet, presumably Australians can read.
They totally ignored what happened in the US. Australia was supposedly different. It wasn’t. Home prices are now crashing, finally, so it’s time to place the blame. Elsewhere. People seldom self-assess.
Mike “Mish” Shedlock
What choice did a homeowner have? Either way overpay for a home or way overpay in rent. People have to live somewhere. Maybe they could have moved somewhere with low housing costs and no jobs. I blame the central banks. If the central banks didn’t provide unlimited credit at low interest, there would not have been enough money for home prices to skyrocket.
+1
Enacting zoning laws barring people from accessing water, except through “agreeing to” go into eternal bondage to the Goldman Water Company; then saying it’s their fault that they overpaid, is a bit disingenuous.
The important ting to recognize, though, is that the cheaper houses get, the better off people are. Just as is the case with water. Not one lick of difference whatsoever, as noting is ever diiiiferent, except in the intellectually weak minds of animals, children and the dumb. For the rest of us, gravity is universal. Not up to “interpretation” in a “court of law”, nor to voting over whether it feels good.
A housing “crash” removes no houses. Nor does it increase fertility nor immigration. The number of homeless, nor access to housing, changes not one iota.
Instead, all a “housing crash” is, is convenient newspeak for a purely financial event. It reduces the relative purchasing power arising from preferential access to finance, meaning closeness to the money printers along some dimension. Vis-a-vis purchasing power arising from real value creation, aka productive work. Hence, it benefits productive workers, at the expense of reductive, or at best zero-value-add clowns in the asset and financial rackets. Hence, is good for people. Full stop. Without exception. Ever.
The only thing of importance, is to mind transition cost. The focus needs to be on resolving insolvency as quickly, cheaply and finally as possible. At all levels, from over indebted home owner, to pension funds, “investors”, banks and governments. So that there is no incentive to hold up the process. No incentive to engage that other pillar (in addition to the banksters) of progressive dystopias, ambulance chasers, on the pretext that Iiii’m speeecial, and deseerve preferential treatment. 10 minute bankruptcy, without any possibility whatsoever, for anyone, to contest the result; then move on.
This time in a better world. With fewer, and poorer, members of the bankster and other nonproductive leeches classes; who have been granted ever increasing license to feed off the productive over the past half to one and a half century. And hence with richer members of the productive classes.
Again, the houses are still there. They will just require fewer hours of labor to acquire. That’s always a good thing. No matter how many dimwits have been suckered, by the newspeakers, into believing a “crash” is somehow a baaaad thing.
“What choice did a homeowner have?”
The obvious answer was the home buyer had the choice of paying for a fixed interest loan, which obviously have higher payments than adjustable interest loans due to the risks involved.
As Mish points out, the buyer is responsible for their choice. Another choice would have been to rent until interest rates went up, and home prices went down. Further, one can almost always choose a lower priced home. And often one can choose to move to somewhere where prices are lower.
There are always a lot of choices. If you didn’t like your choice, you’ve only yourself to blame. Your complaint reflects on your choice.
Does Australia have mark-to-market accounting or like in the US since March 2009, it is mark-to-fantasy accounting? If it is mark-to-market, they have a tool to handle any crisis. Also they can call on the three musketeers, Paulson, Bernanke and Geithner, who have the experience of saving the world and have been preening about it lately. Since Australia also has the printing press (unlike EU countries), RBA can take on board “Housing never falls and Shower money” Bernanke. He will have the courage to act unlike the Australians.
Trust me, the housing bubble in Australia is the single most important facet of that economy. The authorities will throw everything (and the kitchen sink) at this, if it becomes a real issue. They have been importing hundreds of thousands of immigrants every year to try and keep this bubble aloft and continue to do so. Sadly, Chinese money has declined somewhat and most other immigrants don’t have the financial capacity to access a $500k+ loan to buy a one or two bedroom apartment.
While Australia does have its own printing press its economy is small and relatively inconsequential so the amount of printing the CB can do before the market punished the currency is way less than that of one of the big economies: US, Japan, China etc. Australia is also drowning in (household) debt. It is a dire situation.
There is no doubt that the housing bubble is the single most important facet of the Australian economy. The vested interests will keep the bad news away from the hoi polloi. The housing bubble is so important and directly aligned with employment that any downturn will have a significant impact on the whole of Australia.
Here’s some anecdotes the general vested interests don’t want known.
I sold my town house on an upmarket area last year in July. The new owner has renovated that property. If he put that same property on the market today, I could buy it back for 80% of the price I sold it for.
The vested interests are playing these price reductions down.
Having said that.
The Aussie dollar is down. The U.S. dollar is up.
Australia, because of mismanagement of it’s own energy resources imports most of it’s fuel.
Fuel costs at the pump are up to almost to 2008 levels.
Energy costs are one of the most important costs to the average aussie. Energy costs impact everything in the average aussies life.
Cost of living goes up then there is less to cover the housing mortgage.
Canada is next within next 6 months.
House speculators are going to find out what an adjustable full recourse loan truly is.
And how hungry the alligator (croc) is…
Let’s hope everybody leaves the banks in the lurch, since they are in it as much as the home-owners who thought they were going to get a free ride (appreciation).
banks have nothing to worry… they have mark-to-fantasy accounting and central banksters to provide all the cover they want
It sure is people’s fault that they overpaid. And they think they’re entitled to be bailed out from any change in price forever.
No damn way. There’s risk in every other investment, this should not be an exception.
Moral hazard and all.
“… any change in price forever …”
My friend, these people expect price appreciation forever and if they don’t get what they’re expecting they’re likely to get very annoyed. Seriously, it is accepted as fact that house prices will rise for eternity and that house ownership and speculation is the road to riches. This is the story the plebs in Australia have been spun by all the roaches and parasites that make a living from the real estate industry. And Govt and the media have encouraged this falsehood.