What brings an end to an exuberant speculative driven market? The government changing legislation or changing the playing field first and then a trigger kicks?

Take the Australian property market. After explosive growth in its capital cities, particularly in Sydney and Melbourne, they're now reeling in unlawful chinese buying in their residential property market, with an initial 200 home purchases being investigated and this being mentioned as the tip of the iceberg.

It may be worth looking at what transpired in Singapore some years ago, and whether the same forces are at work in different ways in Australia. Singapore ended with a 40% top to toe haircut after their government made significant changes over time and then the Asian crisis hit. Will the same occur in Sydney, Australia?

anonymous writes: 

Your post is titled, "this is the end" and it is substantively similar to the useless idiots who warn others to exit the stock market before it "crashes" … But your logic is arguably worse because a home is a consumption good that has a store of wealth value with substantial transaction costs.

If you want to contribute something useful to Speclist, might you share with us the rate of return on average Sydney/Melbourne home prices from the top tick in 1996 to the present time? I'm certain you will find that it's significantly above the rate of inflation. I'd also guess that you don't own a home.

I have recently done some simple studies of the prime/average Australian real estate market. I find the local pundits to be ignoring the cost of comparable real estate in other world capitals. The typical story says that average prices are 9x income. But the way those numbers are calculated are completely bogus — including taking account of mortgage rates that have declined from >8% to 4ish%. The Australian market looks rich compared to its historical valuation, but it's not rich compared to its peer markets. Since its been the marginal foreigner buyer that is making the headlines, the peer markets need to be considered as the benchmark.

I am not making a call on the Australian real estate market. But if the market value of my home is going to decline 40%, why should I care? But if you think the National Bank of Australia is going bankrupt, then there's a trade there. But that's not what you said. 


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