Redmond Neck wrote on Feb 15
th, 2014 at 8:02am:
This guys prophecy of impending doom in the real estate market has got me wondering what actually happens to existing mortgages if suddenly house prices crash by say 30%.
Americans have an oversupply of under-priced houses, we've got an under-supply of overpriced houses. A big difference. And their home prices might have peaked 10% higher, ours are as much as 10X what they should be (they had a housing price balloon, we've got a Hindenburg).
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Will the banks be able to suddenly demand large increases in mortgage repayments as i think happened in America resulting in lots of forclosures?
As long as there is a housing shortage there won't be a big collapse in prices. And it's more likely that we end up with runaway inflation, which means easier repayments for those on fixed mortgages rates.
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This is very likely I think as I think most new home buyers are borrowing far too much relative to their ability to repay!
It's part of the Aussie rules to pay too much for everything. Rupert Murdoch, for example, paid too much for just about everything he bought. Lucky for him that he'd predicted a favorable trend and had caught the right wave.
Quote:Nightmare vision of impending property crash
American economist and demographer Harry S Dent jnr says there is a bubble in Australian house prices and we should brace ourselves for a spectacular collapse starting this year.
I'd predicted back in 98 that we would have a housing price collapse within 5 years, boy was I wrong. We got this massive price hike instead. My mistake was in underestimating just how stupid the Aussie sheeple really are.
Quote:Dent is in Australia to speak at seminars and to promote his book, “The Demographic Cliff”. He says that house prices are unsustainable and will fall by at least 27 per cent in Sydney and Melbourne over the next several years.
Your real estate is so high it has to come down.
Dent told Money in a video interview that the trigger for the collapse of Australia's house price bubble will be the bursting of the Chinese house bubble.
How high can property go?
Dent says Sydney and Melbourne property markets are being held up by foreign buyers and that cannot last forever.
“China has a bubble [in house prices] that makes Australia's look like nothing,” he says.
“I think China's bubble is going to burst and I cannot see any way that Australian property prices can keep going up," he says.
If his forecasts do not come true it will be because governments “wave the magic wand and kick the can down the road again”.
The Reserve Bank of Australia and most Australian economists say there is no bubble in Australian house prices. But Dent is sticking to his guns.
“Nobody in real estate development or government can afford to say that 'we have got a bubble',” he says. “They will always say it is not a bubble”.
But what of our special factors - we are a very large country with a unique economy and most of the population concentrated in a few conurbations - don't they count against the general rules for bubbles and their ending. Dent says he has studied every bubble in history and every time a bubble comes whether it is in tulip bulbs, gold, stocks or housing they are always described by those on the inside as being different, and unlikely to burst.
“I am saying that China has the biggest [bubble] and that is going to trigger [the bursting of] your bubble. Your real estate is so high it has to come down in the next few years."
Read more:
http://www.theage.com.au/money/investing/nightmare-vision-of-impending--property... Dent's an American, and they are freedom loving people who don't like getting ripped-off, unlike us. And what happens is, like sheep, the Aussies all huddle together in a corner too scared to move out across the paddock. Consequently prices in that 'corner' are going to be staying high.
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