C’MON, THERE’S *ALREADY* A BUBBLE!

Land Values Oz

SOME OF THE DENIERS …..

“Such warnings [as in China]” are necessary in some countries, but Australia isn’t there yet, and when a few pertinent statistics are put into context then talk of a bubble starts to look sensationalist.”

–       Adele Ferguson, Just breathing, not blowing bubbles, The Sydney Morning Herald 19 September 2013

“The Reserve Bank has cautioned against ‘unrealistic alarmism’ about a possible property bubble in Australia, a day after it offered a muted warning to banks about prudent lending standards.

–       Pat McGrath, ABC 19 September 2013

 

REPRESENTING THE MORE CAUTIOUS ……

“Houses are a particularly dangerous asset because they involve a lot of debt, and a small percentage move in prices represents a lot of money. Even if you believe the chances of a house price crash are low, the size of the impact of such an event means that your optimal strategy may be to reduce your risk.”

– Daily Reckoning, Money for Life Letter, 23 September 2013

 

AND THE ACCURATE ……

“The volume of debt contained within the height and breadth of the recent residential bubble offers a strong degree of confidence to suggest that Australia will experience a severe economic recession within two years of the graph retreating back below the 19% bubble line.”

–       Bryan Kavanagh, Unlocking the Riches of Oz, May 2007

 

But the Land Values Research Group called the bust on 3 March 2009 – and more than two years have passed since that time?

Yes, but the Australian government, having learnt from US and British experience, has managed to “kick the can down the road” by such fiscal stimuli as giving everyone $900, providing pink insulation batts for roofs, and the “building education revolution” construction boom. The national debt attests to the significant level of pump priming that has been necessary to stop the bubble from bursting on the watch of the Labor government.

But dilatory tactics can’t obviate the crunch. It’s inevitable. (Sorry, Adele, sorry RBA; them’s the facts!)

There’s a sort of rough justice in a Liberal government being in power to attend to the leveraged calamity of the bust, because by far the greater part of the residential property bubble was permitted to develop under the Howard Liberal government.

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One thought on “C’MON, THERE’S *ALREADY* A BUBBLE!”

  1. Maybe the bubble has already well and truly burst, we are just not being told about it.

    The rationale being endless ground observations of the huge number of properties for lease or for sale. Endless stories in the local neighbourhood of properties selling at a loss when compared to purchase price of only a few years ago. Losses that go unreported in the media and don’t find there way into the Hedonic Index. Auctions that fail to get a bid going unreported in the clearance rate.

    Don’t be surprised if the vested interest groups and the powerfull property lobby are purposely manipulating and distorting the data to hide the crash that is already upon us all in the name of keeping the confidence fairy alive and kicking.

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