Inevitable bursting of Real Estate Bubbles in Australian inner cities.

Inevitable bursting of Real Estate Bubbles in Australian inner cities.

by tonytran2015 (Melbourne, Australia).

Click here for a full, up to date ORIGINAL ARTICLE and to help fighting the stealing of readers’ traffic.

(Blog No. 158).

#Real Estate, #property market, #bubble, #bursting, #crash, #Australia.

Inevitable bursting of Real Estate Bubbles in Australian inner cities.

As the Central Banks of major countries send interest rates slightly positive, property owners who have not been verse in calculating return and risks may have to carry out fire sales as they cannot afford the interest payment on the mortgage taken to buy those properties.

1. Owners have bought at the top of the market and there are few new buyers.

Figure: A bubble in any Real Estate Market is not much different from the bubbles in Share Markets.

There are reasons to think that Australian Real Estates are currently overpriced:

Some unseasoned owners had been tricked by Real Estate agents that Chinese immigrants would keep coming in, bringing with them gold and fortunes from China to buy up local Australian over-priced properties.

The Chinese government is not stupid to let corrupt officials move their ill-gotten wealth oversea through bank transfer.

Any undocumented money transferred to USA or Australia will be considered drug money by USA or Australia and will be confiscated by USA or America.

There is also a worry of loss of national identities that rises against high influx immigration, this will reduce current very high level of immigration.

2. Properties have been sold at more than economic utility values.

People only buy a property to have a place to rest and sleep and to go for work in the next day. When property prices are too high people don’t buy there, they will just go another extra hour or so to a cheaper area where they live with their families.

New train lines can bring people further from city centers and this lure new home owners into new suburbs opened up by new train lines. This will keep down property prices in the centers of existing cities.

3. Bank interest may go up, triggering the fire sales.

When bank interest was 0.1% or even negative people can borrow any outrageous amount of money with no worry. When interest start rising, they have to do the real work of paying the interest. This is when people have to do a fire sale to get back the money to discharge their mortgage. The problem is worse for people who used LOW DOC loans to borrow more (by overstating their incomes and currently owned assets) than they can actually afford in the long term.

The ones who sell late may lose a lot. There may be quite a rush at selling out all properties bought at outrageous price with borrowed money.

4. Federal Capital Gain Tax is applied with dishonest indexation.

When a property are sold, owners are usually liable to Capital Gain Tax. The index has not been honestly set by governments resulting in property investors having to pay more capital gain tax than on their actual capital gain.

5. Federal government policies to reduce insufficiency of housing.

To make more housing available to the population, the government may have a number of rule:

a. Foreigners cannot buy properties and have to divest from Australian Real Estates.

b. New kind of tax on unused rooms in properties (taxes on empty rooms) has been contemplated.

6. Local governments becoming parasites feeding on property owners.

To make the matter worse, many local governments in charge of day-to-day issues have now fed on property owners like leeches. They have forgotten how to run their main day to day tasks of:

Collecting rubbish,

Maintaining local roads, parks

Maintaining primary schools, kindergartens, child health care centers.

The service should only be based on their costs. There is no reason why council rates should be based on property values.

Now the councils (local governments) enjoy imposing outrageous “rates” on property owners to fund oversea trips of councilors, talking on World scale issues (like Global Warming), promoting ideologies (like LGBT campaigning, changing traffic signs to reflect feminist and LGBT promotion).

Councils now pay outrageous salaries to their top employees. The justification for that is NOT due to the quality or quantity of the work done by those employees but by the values of “rates” collected as a percentage of property prices in the councils! This is outrageous.[4]

7. A booming population of parasites feedings on property owners.

A number of properties owners have now offloaded their properties due to parasitic practice against property owners:

a. Some tradesmen now quotes repairs, construction prices not based on their parts and labors but on the value of the property they attend to !

b. Body Corporates of communal housing (which was designed to have low running costs) specializing in giving blown up costs to rip off unit owners (who thought that communal lives bring saving).

c. Real Estate Agents now are not professional but only of flight by night quality. Many now specialize in ripping off property owners with overblown maintenance and management fees.

8. Conclusion.

There will be a scramble for the exit on property ownership. The next bank interest increase may efficiently trigger it.

References

[1]. http://thegreatrecession.info/blog/housing-market-collapse-rapid/

[2]. https://us-issues.com/2018/08/02/housing-market-collapse-2-0-accelerates-rapidly/

[3]. https://straightlinelogic.com/2018/08/01/a-housing-bubble-pops-update-on-australia-by-wolf-richter/

[4]. http://knowyourcouncil.vic.gov.au/guide-to-councils/finance-and-planning/rates-and-charges

Added after 2018 Aug 02nd:

[5]. https://johnib.wordpress.com/2018/08/02/bank-of-england-raises-rates-to-highest-level-since-2009/

[6]. https://www.news.com.au/finance/economy/australian-economy/australia-six-weeks-from-a-housing-collapse-us-report-warns/news-story/866d2fdee41b1227ce654f66ed8d9837

LITTLE DOCS LOANS

[7]. http://mobile.abc.net.au/news/2018-03-13/banking-royal-commission-alleged-cash-for-loans-bribery-ring/9543280?pfmredir=sm

[8]. http://mobile.abc.net.au/news/2017-11-30/why-banks-dont-want-property-lending-to-fall-under-scrutiny/9211376?pfmredir=sm

[9]. https://www.theguardian.com/australia-news/2018/may/06/the-biggest-scandal-ever-campaigner-hopes-for-banking-justice

[10]. https://www.ratedetective.com.au/articles/home-loans/predatory-lending-australia-117/

The Australian bank customers who lost everything

[11]. https://www.bbc.com/news/world-australia-44478508

Banking royal commission interim report released; blames greed for misconduct

[12]. https://www.bbc.com/news/world-australia-45674716

[13]. http://mobile.abc.net.au/news/2018-09-28/banking-royal-commission-interim-report-kenneth-hayne/10315908

[14]. https://johnib.wordpress.com/2018/10/15/desperate-chinese-middle-class-take-big-risks-to-move-money-and-themselves-overseas/

[15]. https://johnib.wordpress.com/2018/10/15/violence-public-anger-erupts-in-china-as-home-prices-slide-household-wealth-was-helping-to-sustain-consumption-in-china-despite-slowing-income-growth/

UK bed room tax threat

[16]. https://www.simplybusiness.co.uk/knowledge/articles/2018/08/landlord-regulations-on-room-sizes/

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Living with a probable bubble market.

Living with a probable bubble market

by tonytran2015 (Melbourne, Australia).

Click here for a full, up to date ORIGINAL ARTICLE and to help fighting the stealing of readers’ traffic.

(Blog No.73).

#bubble, #market, #speculate, #bankrupt,

Living with a probable bubble market.

Please note that this blog is only a sharing of life experience. This blog does NOT give any FINANCIAL ADVICES.
Whether it is a house for living in or a government bond with positive (and hopefully inflation compensated, if you can still find them) interest for incomes, or some shares of a listed company on your local share markets for gambling thrill plus income for few years, you don’t want to buy that when it is priced in a bubble market.
The following shows how to spot the signs of a bubble market.

1. A bubble market can badly burn your business plan.

A bubble market is one where the prices are too high for any long term plan and those prices are predicted to fall down to level afforded by buyers.

If you buy too high in a bubble market you will not be able to pay bank interests on your business loans and suffer an asset loss when the bubble bursts. You yourself may go bankrupt.

Even for a speculator planning to sell to a greater fool, there is still a real chance that he will be the last one holding the speculated stock !

2. Common excuses from sellers/marketers in a bubble market.

2a. “The economy is different this time”:
The dotcom’s excuse that clicks are more important than incomes in its “New Economy” has been an expensive lesson to many speculators.
The FUNDAMENTAL PRINCIPLE of economiccs is forever UNCHANGED: Money earned minus money spent is the left over in the cash box.
2b. The whole nation is asleep with only your seller and you staying awake to do the half baked financial analysis:
This childish reasoning is not for reasonable investors.
2c. The seller is sharing privileged information with you:
If the information turns out to be false you will have no financial recourse to recover your money.
2d. A different plan is coming from the government this time and it will alter all financial planning !
However all government plans do follow the same method and the government has to uphold accountability. History should be a guide to those plans.
All companies also want to avoid their plans revealed causing their unjustified expenses. Is your seller a good anticipator of their moves?

3. Characteristic of a bubble market.

1. Price increases in a bubble market are not in line with historical records. The effects of any excuses given by sellers are still too small for the jump in prices.
2. The supplies and demands are one sided in a bubble market: The manipulators of the market have bought most available stocks before starting the game.
They then increase the current purchase prices on the market to send up the value of their existing stocks to obtain even more loans from the banks. They then would off-load all their stocks at high price and realize their profits before any crash.
3. There are not a variety of sellers. This makes it easier for someone to manipulate the market.
4. The register of current owners has no increase in long term investors/businesses: Only speculators own the stocks and their prices are not justified by the benefit of ownership. All respectable investors have sold out their holdings when the prices have been high enough.
However, accessing the register may not be easy for ordinary investors.
5. If you can still comfortably operate your long term business in the market, facing all anticipated ups and downs, then that market definitely has NO BUBBLE to you and you may only just missed its cheapper period. On the other hand, if you cannot operate your long term business in the market then that market IS A BUBBLE MARKET

4. Any bubble market still has its own long term buyers.

Those people who just sold something into a bubble market can still immediately buy something else from it with that same amount of money.
There are also investors who have to realize their capital gains every year and they will sell shares from one account while simultaneously buying back on another account. They do it to smooth out their yearly income taxes.
For someone who has not sold anything into that bubble market he would be wise to GO FOR ANOTHER TYPE of investment and to come back to buy from that market only after the bubble has bursted. It may take a few year or even a very long while for the bubble to burst but by that time he would have made much more profit on the other type of investment.

5. Conclusion.

If there is any suspicion that a market has become a bubble and you have not been involved in that market for a long while then you should GO FOR ANOTHER TYPE of investment while researching on it.
If the benefit of ownership is MUCH MORE than the payment of the purchase then the market is definitely not a bubble market for you, you just missed its cheaper period: You can still execute your purchase despite all talks about the any bubble bursting.

References:

[1]. Greg Jericho, http://www.theguardian.com, April 06, 2017.

[2]. Michael Janda, http://www.abc.net.au, May 29, 2017.

[3]. Jackson Stiles, thenewdaily.com.au, June 02, 2017.

[4]. Lana Clements, thenewdaily.com.au, June 02, 2017.

[5]. Shane Hickey, http://www.theguardian.com, June 17, 2017.

[5]. Shane Hickey, http://www.theguardian.com, June 17, 2017.

Added after 2018 May 04:

[6]. http://us-issues.com/2018/05/04/the-crisis-next-time/

[7]. https://usawatchdog.com/global-debt-a-parabolic-ponzi-scheme-craig-hemke/

[8]. http://www.goldtelegraph.com/the-dark-cloud-of-global-debt-the-perfect-storm-looms/

[9]. https://www.zerohedge.com/news/2018-07-10/global-debt-hits-record-247-trillion-iif-issues-warning

[10]. https://www.mauldineconomics.com/frontlinethoughts/the-debt-train-will-crash

[11]. https://hat4uk.wordpress.com/2018/07/23/gold-why-rationing-and-price-destruction-foretell-crash2/

[12]. https://mikeyy.org/2018/07/29/anthony-migchels-how-money-rules/

[13]. https://johnib.wordpress.com/2018/07/30/regional-lenders-chinas-most-dangerous-banks/

[14]. https://us-issues.com/2018/08/13/bankruptcy-soars-as-the-country-grapples-with-an-unprecedented-debt-problem/

Added after 2018 Nov 10:

REAL COMPANIES VERSUS HEDGE FUNDS

Understanding the disconnect between an actual company on the stock market, and the bets for and against that company stock, helps to understand what can happen when fiscal policy is geared toward the underlying company (Main Street MAGAnomics), and not toward the bets therein (Investment Class).

[15]. https://theconservativetreehouse.com/2018/11/10/peter-navarro-warns-wall-street-globalists-stand-down-or-else/

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