Australia bubble close to bursting!

[larky28]

Secretly Broke in Australia

The housing boom in Australia is now an escalating bust. Many Australian homeowners put every cent they had into their homes and they needed double incomes to just scrape by. Unfortunately, those jobs are disappearing in a construction and commercial real estate bust.

I warned about this event for years, but in Australia, like everywhere else "It's Different Here" until it's not.

60 Minutes Australia picked up the Secretly Broke story in "The Big Squeeze". Click on link for a 60 Minutes video. Here is a partial transcript.

ALLISON LANGDON: To the world, Tracy and David Dodd are the very model of Australia’s relaxed and comfortable middle-class. They’re living the dream – three kids, a mortgage and a suburban family home on an acre block. But Tracey and David have been keeping a secret from their family and friends – they’re drowning in debt. No-one to look at you would think that you are struggling.

TRACY: It might look like we have got everything but you don’t see the mortgage, you don’t see the loans. You don’t see everything and nobody wants to talk about it you know, because it is embarrassing.

ALLISON LANGDON: Has it taken a toll on you both?

TRACY: Mmm…sorry.

DAVID: Oh it has – it has taken its toll but you’ve just got to do it.

ALLISON LANGDON: Like most young couples, the Dodds invested their heart and soul and every spare cent they had into the ideal of home ownership – the biggest mortgage their double income would allow. But last June, Tracy lost her job in the construction industry and David was made redundant. Just to keep money coming in, he’s taken a lower-paying job. Ever since, the Dodds, like tens of thousands of middle class families have been going secretly broke in the suburbs.

TRACY: We went from having a really great income including a company car, fuel card, phone – things like that – to basically losing all of that.

ALLISON LANGDON: So do you have more money going out each week than what you’ve got coming in?

TRACY: Absolutely.

ALLISON LANGDON: How much difference are we talking about?

TRACY: Probably – it’s getting very embarrassing – probably about 400 bucks…$400.

ALLISON LANGDON: This is the outskirts of the Gold Coast. When you look around and see the big, shiny new houses, the nice lawns and two cars in the driveway, you can’t help but think, ‘life must be pretty good here.’ But this version of the Great Australian Dream is just a facade – nowhere is mortgage stress being felt more keenly than right here. And the figures are staggering – one in 50 families are at risk of losing everything. The number of Australians behind on their mortgage repayments by more than a month is at an all-time high. Areas of mortgage stress can be pinpointed right around the country. Mostly in areas, that just five years ago, were booming. Families who borrowed to the limit in the real estate gold rush are the ones who are now struggling to pay their bills.
Blame Galore

The story continues with Phil and Sandra Box who claim they never did anything wrong. Of course they did. So did Tracy and David Dodd.

Not only did they pay too much for a house, they had no cash cushion if one or more of them lost their job.

Up until May 2011 or so, I received numerous emails every week from persons in Australia telling me how Australia was different, how China and commodities were a sure thing and would keep housing afloat, and how the Australian stock market would not sink. Those emails continued but at a dwindling pace for another month or two.

This is what the Australian stock market looks like now.

$AORD Daily Chart

click on chart for sharper image

Poof - Just like that 20% evaporated since Mid-April. Moreover, China is clearly slowing which will put a damper on commodities. Indeed the world appears poised for another global recession.

The RBA was actually thinking of hiking last week. I said they wouldn't and it would not matter one iota once the housing bust got underway. The housing bust has now smashed commercial real estate as well.

So who is going to be hiring now?

Flashback January 2, 2011: Australia Heads For Economic Crunch; Similarities Between Australian and Chinese Stock Markets; Global Property Bubble Cycles
The party is over in Australia. Many anti-dollar investors and Pollyannas living down under just don't realize it yet. Nonetheless, Australia faces an economic crunch as family finances collapse under the burden of record debts, rising interest rates and utility bills.
Flashback January 10, 2011: Australia's "Tulip Mania" About to Crash; 44% Jump in Property Listings Proves the Proposed Housing Shortage is Gargantuan Myth; Playable Actions
For years I have been hearing about a housing "shortage" in Australia. That myth has been shattered by latest stats that show a 44% jump in property listings.

I rather doubt those interest rate hike are coming. I would guess there is one more hike at most. Then at some point there will be panic cuts by the Reserve Bank of Australia.

History suggests it will not matter one bit once.

Remember the housing "shortage" in Florida? People stood in lines overnight and entered lotteries for the right to buy condos. Others were going door to door making offers on homes that were not even for sale.

From that aspect, it sure looked like there was a shortage. There wasn't. It was nothing more than a speculative mirage much akin to the shortage of quality tulip bulbs in the year 1635 during Holland Tulipmania.

Playable Actions

The day of reckoning has finally arrived for Australia. A day of reckoning awaits Canada, China, and the UK as well. It's too late now to do much of anything except

Exit the Australian stock market
Get out of the Australian dollar
Pick up some popcorn
Stay on the sidelines and watch the collapse unfold
I am curious, did anyone down under reading that post exit the stock market and pick up some popcorn?

Flashback April 13, 2011: Housing Denial in Australia Feeds Off Same Myths We Heard in the US
It is amusing to watch Australian analyst after analyst cite the same silly myths regarding housing that we saw in the united states.

Five Facts

It's Not Different in Australia
There is Not a Shortage of Housing
Australia is in a Bubble
Now is Not a good time to Buy
It's Better to Sell Now than Next Year
May 13, 2011: Economic Bust in Australia:Near-Record Corporate Bankruptcies, Employment Drops Unexpectedly; Rise in Bad Home Loans;Record Low Property Transactions
Those looking for bad news can find plenty of it in Australia, which in my opinion is soon headed for recession and rate cuts.
RBA Calls For Unemployment Rate to Drop

What the hell is it that the RBA sees that I don’t? The property bust is underway and going to accelerate, retailers are going under, and consumers are tapped out.

How exactly does that translate to lower unemployment rate?’

Norris Way to Optimistic

I disagree with the CBA chief executive Ralph Norris on nearly every point.

I highly doubt the RBA hikes twice more.
I expect cuts as the Australian economy slumps into a big recession.
I expect delinquencies to rise further.
I expect profits at CBA have peaked or will soon do so.
Except for my economist friend Steve Keen, I have to ask: Has anyone down under learned anything from the property bust in the US?

May 16, 2011: Australia Real Estate Bulls Trot Out Every Cliché Known To Man
Select Clichés from the Article

"It's definitely a buyer's market" - Richard Wakelin, director of Wakelin Property Advisory
"This is a really good time for people to be trading up" - Richard Wakelin, director of Wakelin Property Advisory
"Buyers should be sitting back and watching for opportunities, looking for properties that have been passed in on the weekend" - Mark Armstrong, from Armstrong Property Planning
Century 21 director Charles Tarbey suggests buyers focus on the $400,000 to $600,000 range in coastal and tourist properties.

Alternative Mish Suggestions

Trading up now will greatly increase losses
Tourist properties will be especially hard hit
Now is a poor time to buy in general
Wait 5 years, then see what prices are
In the meantime, rent

Australia's bust has just started. Expect a 5-year decline minimum. As a point of reference, the US housing bust will be 6 years old this summer.
July 10, 2011: Permanently High Plateau Theory Touted for Australia Housing; Real Estate Agents Refuse to Disclose Sale Prices
At the height of every boom, bullish clowns inevitably come out of the woodwork touting the "permanently high plateau" prices will not drop much theory.

Such a theory is presented in the Herald Sun although one might not quickly spot it because of the headline Decade of pain for Melbourne's property market
August 4, 2011: Eighty-Five Australian Building and Construction Firms Go Under in a Month; Crazy to Buy a House in Australia Now
The implosion in Australian housing is now in full swing as Eighty-five building and construction firms go under in a month.

Uncertainty? What Uncertainty?

Peter Jones at Master Builders Australia is blaming "uncertainty". The irony is that it would make far more sense to blame "certainty".

It is quite certain that Australia's housing bubble is now in crash mode. It is equally certain there is not a damn thing the Reserve Bank of Australia or any of the home builders can do about it.

Crazy to Buy a House in Australia Now

If you live in Australia and are thinking about buying a home, here is everything you need to know in a single sentence: It's still a crazy idea to buy a house in Australia at the current prices.
This story is so sad because Australians had every warning in the world. All they had to do was watch the US housing bubble burst. However, you cannot explain anything to anyone with a firm conviction "It's Different Here".

Australian homeowners are now finding out they do not own their home. Instead, their home owns them.

 

[depeche]

Thanks for the warning!

 

[axe168]

Secretly Broke in Australia

Your comment is nothing new.. A duplicate from Aussie Prick.. the Aussie world is about to fall, highly likely to crash or imminent danger ! zzzZZZZ
If GFC can't cripple us, what else will ?

You may gain PAP's recognition for casting "Fear". BUT, a beer on my right hand and grapping my rock solid balls on my left, will have nothing to fear.

My hse value in Melbourne is holding well.. there is no 1/4acre supply available within 7km.. Demand down but no supply ?!

May the force be with you and me.

 

[axe168]

i also migrating soon.

Instead of fighting in SG for near zero success rate, you should be forcusing on planting your seeds in the foreign land and cultivate it and enjoy good harvesting..

We continue seeking for quality life... will continue to pass on to our off spring and generations.

People said Aussies are lazy and SG is efficient. Hmm, if we do not need to work long hours to feed our family and there is excellent job security for locals, why would we work like crazy Singaporean ?

In Australia, to achieve my goals, I'm using half brain cell and half the time.. hehe

 

[larky28]

Unemployment "Unexpectedly" Rises in Australia

Here is another case in point: Australian Jobless Rate Rises Most Since 2010

Australia’s jobless rate unexpectedly rose to an eight-month high last month as employers cut full-time staff, prompting investors to increase bets the central bank will lower the developed world’s highest interest rates.

Unemployment jumped to 5.1 percent in July from 4.9 percent a month earlier, the first increase since October, the statistics bureau said in Sydney today. The number of workers fell by 100 after a revised 18,200 gain in June. That compares with the median estimate for 10,000 additional jobs in a Bloomberg News survey of 25 economists.

David Jones, the nation’s second-biggest department store chain, today reported second-half same-store sales declined 6.9 percent, with Chief Executive Officer Paul Zahra saying “we are facing an extremely difficult trading environment.”

Investors are betting the central bank will cut rates by at least 125 basis points by December, interbank cash-rate futures show. Economists surveyed by Bloomberg News on Aug. 9 say RBA Governor Glenn Stevens will keep borrowing costs unchanged at 4.75 percent this year.
Complete BullSwill from Australian Treasurer

If you live in Australia (or even if you don't) and want to hear complete "bullswill" about the Australian economy, I can deliver. Simply listen to this nonsense from Australian Treasurer Wayne Swan.
<script src="http://player.ooyala.com/player.js?video_pcode=oza2w6q8gX9WSkRx13bskffWIuyf&height=250&deepLinkEmbedCode=RpMDNxMjoc4q4Zjz0fbDl_qOEN3w67vQ&embedCode=RpMDNxMjoc4q4Zjz0fbDl_qOEN3w67vQ&width

Is anyone else tired of this bullswill?

In a sense I am appreciative because it makes for easy-to-rebut commentary, but if Bloomberg had a clue (Bloomberg do you have a clue?), it ought to be talking to Australian economist Steve Keen, not some political hack with a vested interest in sounding the perpetual drumbeat that "everything is rosy".

 

[The_Hypocrite]

can someone please tell me when the bust is? I have been hearing it for years and its still the same

 

[larky28]

Panic is setting in. Prominent broker Charlie Aitken has warned that the industry has a cost base tailored for a boom year such as 2007, when volumes are more in line with 2002."

Retailers rocked as debt crisis spreads

December 20, 2011
THE nation's shoppers have firmly closed their wallets amid fears of a full-blown debt contagion in Europe, while Billabong shares were smashed by 44 per cent yesterday after the iconic surfwear company released a shock profit downgrade.

The Billabong malaise extended to other discretionary retail stocks such as David Jones and JB Hi-Fi, as more than $30 billion was shed from the value of local equities.

4 out of 5 Australians Worry about Debt

The Sydney Morning Herald reports Most Australians worried about debt

December 19, 2011
Four out of five Australians are worried about their ability to meet future debt repayments, a survey shows.

The biannual survey by data intelligence company Veda, found 82 per cent were worried about their ability to meet debt repayments in the future, up from 75 per cent a year ago.

The survey also found that one in five Australians was struggling to repay their current credit commitments.

However, about 29 per cent of this sub group were considering applying for more credit in the next six months, the survey found.

"It is concerning that there are people struggling with their current debt levels but are turning to more credit as the answer, potentially edging closer to a debt spiral," Veda senior adviser Matthew Strassbourg said in a statement.

Here is a stat straight from the Twilight Zone: 82% are concerned about debt yet 29% of those worried want more credit.

New Reality - Owing More Than You Own

The Age reports on the "New Reality" Owing More on Your Home Than You Own

Rising property values have been an article of faith in the housing market for a generation of Australians who borrowed big as real estate prices marched ever upward.

While the percentage of home owners with so-called negative equity remains tiny - about one in fifty of the 3 million households with mortgages - the number may well swell in 2012 if home prices extend their declines as some analysts expect.

The emergence of a sector of the housing market ‘‘under water’’ on their mortgages may hurt an already fragile real estate market. Any forced sales would obviously dent individual household wealth but further drops in home prices would deter investors from buying residential properties.

Tony writes "Hey Mish, Negative equity is a new buzz word slowly entering the lexicon."

Yes indeed. For starters, I highly doubt that only 1-in-50 are underwater. Regardless, I expect that number to be 40-in-50 of those who bought or did a substantial cash-out refi in the last four years. I do not know what percentage that is, but I do known it is far more than 2%.

Shocking Year for Corporate Collapses

Tony comments "Hey Mish, panic is setting in as retail chains go broke daily. The banks are warning that next year will be very tough. It is a vicious cycle and it is gathering speed as panic spreads and people stop spending"

SmartCompany reports Tools chain Glenfords placed in voluntary administration

The shocking year for Australian corporate collapses has continued, with discount tools chain Glenfords now up for sale after being placed in voluntary administration last week.

The sale of the chain comes as the do-it-yourself sector has reached a major transformation point, with market leading hardware chain Bunnings now battling the Woolworths-backed Masters chain.

Analysts have said mid-tier and smaller operators will slowly be pushed out of the market as Bunnings and Masters stores dominate areas once controlled by SMEs.

The construction industry has been one of the worst hit this year – it suffers the highest number of insolvency appointments out of any sector. Glenfords has likely suffered alongside that drop in demand.

Talent Two and Billabong Shares Smashed

Tony writes ... "The interesting downgrade was Talent2, these guys have been very successful for a long time but it seems white collar jobs are drying up fast"

The Australian reports No 'ho ho' from Billabong, Talent Two

December 19, 2011
THERE'S no ho ho ho on the bourse today, as hopes for a consumer-led recovery evaporate as quickly as snow on an outback nativity set.

Talent Two and Billabong -- smashed by 50 per cent and 37 per cent respectively -- tell two parts of the dismal story.

Talent Two, a leading recruiter, reported current-half earnings wouldn't come within cooee of expectations because of reduced hiring caused by “fears of European contagion and the volatility of financial markets”.

Talent Two's full-year EBITDA is expected to come in at less than half the expected $30m or so, but the shares probably received an extra dollop of punishment because the “market update” was issued at beer-o-clock on Friday.

Talent Two focuses on white-collar hiring, especially in the financial services sector where fearful workers rue their lack of skill at driving mining earthmovers or sealing S bends with O rings. It doesn't take a (still employed) rocket scientist to work out scared workers won't be buying electronic gizmos or surfwear, hence JB Hi-Fi's surprise downgrade last week (also after market close) and the ever-erratic Billabong's shocker this morning.

Retail Malaise Spreads Like Wildfire

The Age Reports Myer to close or shrink stores as retail malaise bites

Last week, failed apparel retailer Fletcher Jones said it would close a third of its stores immediately and shed 61 staff as administrators try to revive and sell the company.

Myer stores at Tuggeranong in the Australian Capital Territory and at Forest Hill in Melbourne's east will close early next year. Others outlets will be shrunk when the shopping centres in which they operate are redeveloped.

Real estate stockbroking analysts suggested the Myer stores at Dandenong Plaza and possibly in Wollongong, south of Sydney, could also be closed.

It is not just the stores that are shrinking. Myer has already reduced the range of white goods, electrical items, DVDs and CDs it offers, and is also reducing the number and range of location devices such as GPSs in response to changed sales conditions.

Harvey Norman is following suit, shrinking the space devoted to electrical goods in response to a plummet in prices, which means the retailer has to sell many more television sets, for example, to make the same money.

Spotlight on Australia

For those who think Australia can do no wrong and the Australia is the place to be, need to take another look at Australian housing, Australian retail, and also the slowdown in China.

I contend things are going to get very nasty for those down under.

 

[Ash007]

I wonder why the *cough* trolls *cough* are stepping up their efforts recently. You would think there is something to do with the recent debacle in SMRT? Flooding?

 

[neddy]

G'day everyone,

In case this is the last reply I post, Happy Xmas & New Year. Next year will be a roller-coaster, but if you look at the right places, there is nothing to fear.

Talking about looking at the right places, I saw this interesting post.

Panic is setting in. Prominent broker Charlie Aitken has warned that the industry has a cost base tailored for a boom year such as 2007, when volumes are more in line with 2002."

Spotlight on Australia

For those who think Australia can do no wrong and the Australia is the place to be, need to take another look at Australian housing, Australian retail, and also the slowdown in China.

I contend things are going to get very nasty for those down under.

This is no big news. I have already know that for ages and prepare for them. (eg Refer to 7-8 May 2011 edition of the Aus financial Review)

I have mentioned before. The politicians and mass media have their reasons for doing things, namely to win voters and to profit from readership respectively.

In Singapore, you have no choice. Many are so helpless and poor at making decisions* that they listen to the sweet comforting talk from the govt and its media. That is how the country works. Bo Pian.

Main street Singaporeans are always kept in the dark, until some kind chap like Scroobal shred some light. (In Australia, the govt also like to hide things, but we have a lot of busybodies/whistleblowers/FOI around to help us)

It is no difference from North Korea where the latest campaign for the people is to be seen as sad because the Dear Leader is dead and the ruling generals are just as keen to protect & invest in their own privileged lifestyle. In America, Congress is doing the same to protect themselves, except for Ron Paul.

There are many poor folks in Australia who made the same bad decisions, esp those who has not seen the banana republic days > 20 yrs ago. Good luck to them. Their voices are been heard.

If a Singaporean is smart enough to migrate and/or seek dual nationality, I ask them to seek good advice from qualified professionals.

Don't get me wrong, pollies are good for networking too, if you want them to do certain things within their roles (eg getting references or getting things approved). But there is a reason why Wayne Swan is a pollie and not an economist, financial advisor, etc.

Ask the right people and you get the right answers. It is not difficult.


Another advice. Singaporeans love cheap stuff.

Anyone who want a cheap garage can either look for their mates who are in the business who can give you a good deal in return for future favor for them. (Don't just take and not give)

Or you can find out the hard way that the cheap handyman is a drunk ex-Yugoslavian who will cut corners and make sure that the crap garage will not last the next big storm.

If you are lucky, you get an apprentice who is desperate for job/eager for future good reference from you or a newly migrated Irish who had experience working on one of those 300,000 housing projects that broke Ireland. Just make sure they use good proven long-lasting materials for your project.


Finally,
Be nice to your Aussie public servants. Not all are fat cats. Many are getting peanuts for the jobs they are doing.
I was offered a substantive senior governmental position that I turned down.
The pay was sub-$150k and they did not even offer a nice car to compensate for the low pay.
A basic Hyundai i45 underpowered variant with no navigation system. Consider the long distance I am driving on country roads, I expect a V6 Commodore, for safety reasons. But with cost-cutting, the next guy may get a Great Wall Chinese car. The truckies at the roadhouse will be wondering what are public servants doing with toy cars in the rough outback!

For Govt, Uni workers seeking another/a job in Govt, you can transfer your Leave, Level + Grade if the transfer is done with in 2weeks? or 30 days? (check with the right people, HR, first)
If you are away from public sector for too long, you still can continue the Long Service Leave from where you left off.

Take care!
I am not sure what else I can contribute to this forum.




* Eg I was told about the business craze of setting up bubble teas.

 

[depeche]

A perfect storm is coming...X'mas!!!