Bear.asx

[stoploss]

Hi Daytr,
Personally I think think the correction has only just begun in OZ . There is a generation that has never seen a property price correction of a decent magnitude. Over the GFC the govt basically spent 80 Bio to prop
everything up .... so all they learnt was no worries when times get bad the Govt will bail us out ...... This time and look at those mining service companies at the moment ....., they have no money in the kitty . My pick is the RBA will be lowering interest rates as the next move not a hike as every economist seems to pick .

[mark100]

Hi Daytr,
Personally I think think the correction has only just begun in OZ . There is a generation that has never seen a property price correction of a decent magnitude. Over the GFC the govt basically spent 80 Bio to prop
everything up .... so all they learnt was no worries when times get bad the Govt will bail us out ...... This time and look at those mining service companies at the moment ....., they have no money in the kitty . My pick is the RBA will be lowering interest rates as the next move not a hike as every economist seems to pick .

I'm not that bearish despite being 70% cash at the moment. House prices may have boomed in Sydney and Melbourne the past 2 years but everywhere else they haven't done much. Where I live I reckon they are down around 10% the past 2 years. Mining sector is shrinking but in many respects that is good. Mining pushed up the currency and and hurt manufacturing, ag, tourism etc. I reckon in 12 months the AUD will be another 10% lower. That will give a decent boost to other sectors. In my view mining simply paid a lot of $$$ to a small pool of workers. It's a good thing to see this fall back.

I reckon in 18 months the lower dollar combined with 2.5% interest rates will have things moving along quite nicely. Also the population growth in Aust is one of the fastest in the western world. I personally don't thing that is a great thing but for GDP growth and the stockmarket it's a good thing.

[Daytr]

[QUOTE=mark100;512001]I'm not that bearish despite being 70% cash at the moment. House prices may have boomed in Sydney and Melbourne the past 2 years but everywhere else they haven't done much. Where I live I reckon they are down around 10% the past 2 years. Mining sector is shrinking but in many respects that is good. Mining pushed up the currency and and hurt manufacturing, ag, tourism etc. I reckon in 12 months the AUD will be another 10% lower. That will give a decent boost to other sectors. In my view mining simply paid a lot of $$$ to a small pool of workers. It's a good thing to see this fall back.

Property prices have boomed for almost 20 years in Australia, not just the last two!
The main reason for this is immigration & that can't be discounted going forward or Chinese money either coming in.
However compared to most place around the world Australian property prices particularly in the major centers or state capitals are well over valued.
However it has been that way for some time, so who knows when it will correct. There are though some fairly bruising implications going on in the Aussie economy right now that could be a catalyst.

I reckon in 18 months the lower dollar combined with 2.5% interest rates will have things moving along quite nicely. Also the population growth in Aust is one of the fastest in the western world. I personally don't thing that is a great thing but for GDP growth and the stockmarket it's a good thing.

[Daytr]

KW, you could be basically describing NZ as well, as the same is happening here. Substitute Dairy for mining & NZ is facing similar issues.

[mark100]

A structural reset needs to happen - its happened in the US and most of Europe. Wages and Property prices need to come down to make businesses more globally competitive, and in some cases, simply viable. I think its already begun - the artificially high wages that were caused by the mining sector soaking up large amounts of labour and trades is now in reverse, which should flow through to the prices urban companies pay staff. Just need the commercial property market to come off the boil and lower costs for business owners. Putting limits (or enforcing the ones that already exist) on foreign investment would help - at the moment the only people building houses and buying commercial property are the Chinese. Either Australia agrees to sell everything to foreigners at prices too rich for Australians or they do what Canada and the US have done and shut it down before Australians truly do become the "poor white trash" of Asia.

Energy costs is the third problem - electricity and gas cost too much in Australia, and is out of step with other economies despite being awash with coal and gas resources.

If things don't reset, Australia will just stagger along with more and more companies closing down or moving offshore. Which is not good for employment long term, especially in a country that relies on immigration to keep its growth rate up - all those immigrants need jobs to come to.

The Govt is counting on infrastructure spending to hold up the economy, but if the market believed that was going to happen, LEI and JHX would be roaring - but they are both in firm downtrends.

Agree in some respects. Aust really needs to get it's productivity growth back up. I can't see non mining wages falling, it's just too hard to implement. Instead I think we will become more competitive with a lower currency. For most of my life (mid 30 years) the AUD has bought around US$0.70-0.75. And just to be a bit cheeky, if we are looking for the 'poor white trash' of Asia I'll mention nominal GDP per capita of US$60k for Aust versus US$40k for NZ. Maybe NZ is too far away to be part of Asia...

[mark100]

[QUOTE=Daytr;512006]

Property prices have boomed for almost 20 years in Australia, not just the last two!
The main reason for this is immigration & that can't be discounted going forward or Chinese money either coming in.
However compared to most place around the world Australian property prices particularly in the major centers or state capitals are well over valued.
However it has been that way for some time, so who knows when it will correct. There are though some fairly bruising implications going on in the Aussie economy right now that could be a catalyst.

Well I think the boom started in 2000/2001 when interest rates were cut a lot in response to US recession / Sept 11 attacks etc. During the 90's property didn't do much. I bought a flat in 2001 for the same price the seller paid in 1994.
Part of the high prices are due to construction costs. Where I live it is not currently possible for an investor to buy land and pay all costs associated with building a duplex and then sell for a profit. It works for a builder (just) but not an investor who has to pay a builders margin. So you could say our high prices are due to construction costs (and associated regulation)

[Daytr]

I arrived in Aussie in 1997 & the property market was just starting to take off then in Sydney, so I suppose that's my reference point.
Anyway my point is the Australian property market has ben running hard for a very long time & really only took a breather during the GFC.
It could be propped up though by Chinese buyers as Australia is a tiny market comparatively.
Personally I think Australia needs a very big correction in property values for its on going economic health.

[mark100]

I arrived in Aussie in 1997 & the property market was just starting to take off then in Sydney, so I suppose that's my reference point.
Anyway my point is the Australian property market has ben running hard for a very long time & really only took a breather during the GFC.
It could be propped up though by Chinese buyers as Australia is a tiny market comparatively.
Personally I think Australia needs a very big correction in property values for its on going economic health.

I think of Sydney, the inner areas anyway, of being more a global city these days similar to London / New York etc where property prices are driven by overseas money and do not resemble what is going on in the rest of the country. I disagree with the RBA adjusting interest rates or implementing any other control measures to cool a Sydney property boom. You only hurt the rest of the country and have virtually no impact on the Sydney market anyway.
Property prices are high relative to incomes everywhere but that's partly due to high construction costs. A big correction would not be good for the economy in my view. Rather a decade of flat prices would be better

[stoploss]

Well that's not going to happen - just saw this
http://www.theage.com.au/business/vi...16-116u42.html

All the Aussies better book their INA trailer home soon LOL

Wonder if they will have the same problems as we have had here ...
Seems a few of the people that got in under this class here , promised big things, and it's come to very little .More hassle than it's worth in most cases.

[NZSilver]

Hi - interesting stuff above all, enjoyable reading. Whats your thoughts on market correction in NZ - both property & sharemarket? and do they often make each other occur?

Thanks in advance.