Sunday, September 11, 2011

Bloggers Vs. Banks

Maybe it's the date and I'm in a conspiracy mood, but I smell a hedge fund with a lot of shorts behind this article. Otherwise, why is Bloomberg even noticing?

Australian housing debt to disposable income is 155%. Whoo hooo. The U.S. at the time of our crash was 133%.

Loans more than 30 days overdue is at 1.79% but low-doc loans are at 6.74%. What? Australia has low-doc loans?

$1 trillion in outstanding mortgage debt is far more than half the GDP of Australia.

Home-Shortage Myth Pits Blogs Versus Banks in Call Australia Set for Crash
More than two-thirds of the government’s shortage estimate arises by including people who can’t afford housing, such as the homeless or those living in trailer parks, Sayce said. Collyer at tax-reform lobby group Prosper Australia says there’s actually a surplus of more than 250,000 dwellings after 15 years of overbuilding, while Keen argues the shortage estimate is swollen by inflated demand from handouts to property buyers of as much as A$21,000 ($22,300).
Banks in Australia have more than A$1 trillion of housing loans outstanding, with the four-biggest lenders accounting for about 87 percent of the total. The Australian Bankers’ Association said it doesn’t have a position on the so-called housing shortage myth and declined to comment.
In its inaugural report in March 2009, the council broke down the estimated gap of 85,000 homes in the year to June 2008. It included 9,000 dwellings needed to house people who were homeless, 35,000 properties for those staying with friends or relatives, 13,000 dwellings needed to house people living in caravan parks, and 26,000 needed to increase the rental vacancy rate to 3 percent, and rounded that to the nearest 5,000.
If you did a restaurant table shortage analysis using the same method you would be laughed at.

Housing shortage or not, access to credit is still what sets the price. People would double and triple up in the existing housing stock if credit were not so accessible, and prices would be lower, and housing costs for all would represent a more reasonable economic drain.

“When residential property prices blow into a bubble, the tragic error often made is in attributing price rises to housing shortages,” Melbourne-based Collyer said. “The U.S. experience shows this conviction is shattered as soon as price declines begin.”
This. House flippers and accidental landlords are sitting on a lot of housing stock. And it will all hit the market when the decline becomes indisputable and everyone's personal finance spreadsheets scream "cut your losses, fool".

While an increase in the number of people per dwelling would reduce the Housing Supply Council’s assumed shortfall, the increase itself could in part be attributed to a lack of adequate supply, the Housing Supply Council’s Donald said.
You would think that as houses get cheaper that those wanting more elbow room would get out and buy, thereby reducing the souls per household, thereby soaking up any excess stock (if it does exist). But that's not the way it works out. Once the banks start to hurt and the recession takes hold, the number of people per household goes up, heavily discounted housing or not.

1 comment:

Shaun said...

It's different in Australia, really . . . ;)