Alan Kohler is one of Australia’s most experienced commentators and journalists. Alan is the founder of Eureka Report, Australia’s most successful investment newsletter, and Business Spectator, a 24-hour free business news and commentary website. He also hosts Inside Business, a half-hour Sunday programme on the ABC, is the finance presenter on the ABC News - and producer of the nightly graph (or two).
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Comments on this article
Comments PolicyChristopher Joye's expectations of rate cuts for mortgage holders contradicts Robert Gottliebsen's comments on a looming credit crisis emanating in Europe. If Germany can't find buyers for its debt, what are the chances Australian borrowers will find money on easy terms? (Breathing life into Aussie property, November 23.)
My Joye seems to avoid facing the fact that the reason interest rates may be heading south is that this is what the RBA see as the most appropriate course of action for an economy approaching crisis (Breathing life into Aussie property, November 24).
Given the reliance by our banks on overseas funding and their recent inability to attract decent rates even when using a "covered" bond, it may unfold that despite the reduction in the cash rate, medium term bank / home loan rates will not be as attractive as first thought. Banks may be forced to be out of step with the RBA.
Mr Joye also seems to say house prices have remained flat (I did skim read). I would suggest that with the (real) clearance rate somewhere below 50 per cent, the discovery of real prices simply has not occurred as vendors have refused to meet the market.
I'm happy to be on the sidelines for now thanks, Mr Joye.
A few more months of even slightly negative house/unit prices and a lot of press about European and probably US recession might persuade buyers to wait for even lower prices no matter how big the rate cuts, particularly if unemployment starts to rise. (Breathing life into Aussie property, November 24)
Total building approvals by value are at about a 12 month low and the 12 month moving average is also well down.
Another three months might see unemployment start to increase which would also act as a negative impact on buyers and increase sellers among those stressed by unemployment or reduced hours.
Not a forecast, just a reminder that rate cuts occur when an economy is recessed and there are other influencing factors on buyers and sellers during a time when recession is being felt by any significant portion of homeowners/buyers.
So... The world is crashing, rates are dropping and our bank's liabilities need to be socialised. But it means more borrowing and more inflation through housing costs, which is a good thing?
Are you serious? (Breathing life into Aussie property, November 24.)
What a ponzi scheme this real estate economy is becoming. We have to entice new greater fools with cheap money to bail out the current holders of real estate (Breathing life into Aussie property, November 24).
Probably, the reduction in rates will only serve to accelerate the repair of many individual balance sheets by reducing their debts. They have cut rates in many Western countries and yet the real estate prices keeps slowly falling. Go figure.
A December cut might put some smiles on people's faces in the shopping centres, but the price of housing hasn't fallen much yet and is at historical highs. Unemployment is the key to this debate.
With all the turmoil surrounding the world and plenty more unknowns this is not the time to buy a house regardless of whether interest rates are cut. Christopher you and all the other property spruikers need to be mindful of constantly pushing property as you just mind find yourselves facing a class action by all those that end up losing if the situation in Australia deteriorates (Breathing life into Aussie property, November 24).
A property insider associating "healthy markets" with price rises. Who'da thunk it? (Breathing life into Aussie property, November 24.) When I think about "breathing life into Australian property" that means increased transactions and a more liquid market. Now that property (the property bubble?) is clearly deflating, clearance rates won't rise (in Melbourne at least) until vendors are more realistic about what buyers are willing to pay.
Christopher Joye appears to have overlooked one important fact (see 'Breathing life into Aussie property', 24 November 2011). The RBA may well "cut rates another six to seven times by the middle of next year", but Australian banks simply can not afford to match or pass on those rate cuts. Whatever the prognosis for Europe, one fact is clear, the cost of obtaining funding will increase and increase a lot. It is not the supply and demand dynamics of the Australian housing market at work, but the supply and demand dynamics of the world's wholesale money markets.
The RBA killed property confidence by jacking up interest rates at mind boggling speeds (Breathing life into Aussie property, November 24). BHP can borrow at 1.2 per cent over 3 years. Where's my 1.2 per cent interest rate? The reality is, debt is a modern form of slavery – just ask Greece.
Where are the usual posters that are asking for the interest rates to rise to control those bad people that borrow money to provide a house for their family? Where are the superannuates screaming for interest rates to rise to protect their incomes? (Breathing life into Aussie property, November 23.) It seems all that are left are those people who will not buy cheap houses in unfashionable areas. Rather they demand that prices drop to meet their budget and expectations. If property prices drop, substantially as they hope for, it will be because we are all in a real pickle with massive unemployment. Unfortunately that will only provide a massive redistribution of wealth to those with employment not necessarily those with great housing expectations.
This whole housing debate is getting rather tiresome. Once again MR Joye fails to mention our alarming levels of household debt and the rising stress levels concerning the repayment of said debt (Breathing life into Aussie property, November 24). I believe the more astute observers can see the writing on the wall, particularly when the worsening global debt crisis is taken into account.
Trying to talk the market up when faced with so many negatives is by any measure a fools errand. Australian Real Estate is a ticking time bomb.
Commodity prices are falling, China's economy is slowing, Europe is a basket case and the US can't get off the floor with very low interest rates. Can you explain to me Christopher, how is Australia going to be immune to all this and house prices increase? (Breathing life into Aussie property, November 24.)
Oh, I forgot. The big miners are also going to reassess investing in Australian mines now that the mining tax has been passed through parliament. Also the carbon tax is on its way. I have got my seatbelt on, strapped tight and hanging on for the ride down the bumpy slope. The next 6-12 months is not going to be pretty, economically, for Australia.
What if rates fall and housing does not respond? (Breathing life into Aussie property, November 24)
This is exactly what has happened overseas.
Clearance rates in Sydney have been lower since the rate cut? This is not positive when Sydney is the strongest property market in Australia by a long way. I think there is a smell of desperation off this article (Breathing life into Aussie property, November 25).
It seems this time around perhaps the author has finally find some common grounds with Dr Keen - after such energetic debates with him since 2008 (Breathing life into Aussie property, November 24).
I have a predicament. Do I advise my son who is a first home buyer to go ahead and purchase his house before the stamp duty concession ends on the 31 December 2011 or advise him to wait until next year when he will have to factor this in when he eventually purchases a property? (Breathing life into Aussie property, November 25)
Buying land and building a modest house on it in the Hunter Valley is still more expensive than a house already built.
So I've rubbed my crystal ball and predict that house prices will drop next year and any savings should compensate for the stamp duty charges as this will put off many first home buyers from entering the market.
With Europe in full blown recession and America a basket case as well the most worrying thing for Australia will be China. If it slows then demand for our resources slows and commodity prices will fall and our dollar will dive.
The MRRT will be a joke by this time as will the carbon dioxide tax.