What's your prediction on the Australian Dollar?

[whatmeworry]

No worries. Median house price at something like 10x median income. Couples in their twenties earning barely $100k buying million dollar shoeboxes with parents as guarantors. What could possibly go wrong ?

Some parts of Sydney close to 30x.

 

[RAM]

Some parts of Sydney close to 30x.

There always are the ranges that is why you need to work off the 'median'.

There are some parts of Sydney where it is 4x Median income as well.

Median means the same number of observations above and below the figure. That's why most pollies, lobbyists, charity groups often talk about the average instead - it suits their particular point.

Say these are all the house price sales for Sydney one weekend ('000s left off).

700, 800, 800, 800, 900, 900, 11900 (Vaucluse).

Median price = $800,000
Avg Price =$2,400,000

Guess which one the media, real estate agents and pollies will spruik. Which figure gives a better picture of what is really going on?

Not as extreme an example as you may think.

Other point to look at is cost of servicing not straight ratio of income to price.

In early 2000s mortgage rates were around 10%, today you can lock away 3.6% so like-with-like it costs nearly 65% less to service a mortgage than 13 years ago.

In the 1990s mortgage rates got as high as 18% - so compared to then it costs 80% less to service or look at it another way - was 5x as expensive to service as now.

Makes the change in median income to median price ratio more understandable.

Not good but understandable.

 

[whatmeworry]

There always are the ranges that is why you need to work off the 'median'.

There are some parts of Sydney where it is 4x Median income as well.

Median means the same number of observations above and below the figure. That's why most pollies, lobbyists, charity groups often talk about the average instead - it suits their particular point.

Say these are all the house price sales for Sydney one weekend ('000s left off).

700, 800, 800, 800, 900, 900, 11900 (Vaucluse).

Median price = $800,000
Avg Price =$2,400,000

Guess which one the media, real estate agents and pollies will spruik. Which figure gives a better picture of what is really going on?

Not as extreme an example as you may think.

Other point to look at is cost of servicing not straight ratio of income to price.

In early 2000s mortgage rates were around 10%, today you can lock away 3.6% so like-with-like it costs nearly 65% less to service a mortgage than 13 years ago.

In the 1990s mortgage rates got as high as 18% - so compared to then it costs 80% less to service or look at it another way - was 5x as expensive to service as now.

Makes the change in median income to median price ratio more understandable.

Not good but understandable.

You can spit out numbers but without quantifying whether the property sold is a House, a Unit or Flat then your point is moot.

 

[RAM]

You can spit out numbers but without quantifying whether the property sold is a House, a Unit or Flat then your point is moot.

I did say in the line directly above the numbers that it was house sales btw. This was just an example to illustrate the difference between median and average.

You may have missed that point.

What is a more meaningful figure of the 'sales' for that weekend?

(Imaginary) Front page Telegraph/SMH:

• Sydney average house price sold last weekend $2.2 million; or
• Sydney median house price sold last weekend $ 800,000?

Where 87% of house sales were plus/minus 100,000 of $800,000?

 

[Boca68]

You can spit out numbers but without quantifying whether the property sold is a House, a Unit or Flat then your point is moot.

Ditto on the fact you've missed the point.

Where, when, how, how big, doesn't matter for a basic statistical analysis.

You used the phrase "some places its 30x" , which may be correct? But, by your reasoning, your own point is moot, right?

 

[JohnK]

In real terms housing is at least 4-5x as expensive as it was forty-odd years ago (and the number of people who think this is a good thing is staggering, though I'm sure they've made out like bandits without having to do anything).

Middle management and executive salaries have grown exponentially in the past 30 years. The growth of those salaries has exceeded growth of property prices.

My salary is still not double what it was 25 years so adjusted for inflation a lot of people are not as well off as you think.

 

[cove]

In the US I have witnessed 2 different episodes of jingle mail where the lenders receive back the house keys in the mail.
If Australia has a property shock the folks who would lose the most would be the multiple property owners with debt finance.
If foreigners withdraw their support of our $AUD it will be harder to get house finance and exacerbate the drop.
People have been predicting this for two decades so far......but that does not mean it cannot/will not happen.

 

[CaptJCool]

I did say in the line directly above the numbers that it was house sales btw. This was just an example to illustrate the difference between median and average.

You may have missed that point.

What is a more meaningful figure of the 'sales' for that weekend?

(Imaginary) Front page Telegraph/SMH:

• Sydney average house price sold last weekend $2.2 million; or
• Sydney median house price sold last weekend $ 800,000?

Where 87% of house sales were plus/minus 100,000 of $800,000?

And this is why pricing keeps going up. DINKS (empty-nesters or younger) can borrow a truckload because overall 'servicing' is a mix of interest and principal (unless interest only loans in which case YOU never own the place. It's just long-term rent from the bank ON YOUR TERMS rather than a one year lease from a dud of a landlord who can kick you out anytime they like).


Since when did we swap housing from an essential human right to an "investment vehicle"?


So you can borrow a larger lump sum if the interest repayment is lower because your overall capacity to repay is what matters. Trouble brews only if YOU lose your high-paying job or babies /young children indispose one of the parents from earning or Interest rates escalate.


Now there are LOSERS in the low interest rates - it's not the banks, it's not the shareholders, it's the retirees who have a freehold house and adult children who can now only earn maybe 5% who maybe able, because of the tax holiday for over 60s, push the loss onto the Govt because of top-ups from Age Pensions, healthcare and hospital and PBS.


Govt deficits will only settle down once inter-generational wealth transfer happens through parental death but this will only last for a time BEFORE the current lousy Super for the 20s and 30s age group, results in persisting endless Govt deficits. Living within your means is problematic if there's no way to earn from work or investments because robots took over a pile of the work. Remember, ultra-wealth isn't about "working for the money' - it's about "making money while you sleep". Clearly Australia has to reconcile just how the money ought split. Do we really want the fortunate few, with endemic homelessness and people living under bridges and 'stealing to get by'. Oliver Twist, anyone ?

 

[whatmeworry]

In the US I have witnessed 2 different episodes of jingle mail where the lenders receive back the house keys in the mail.
If Australia has a property shock the folks who would lose the most would be the multiple property owners with debt finance.
If foreigners withdraw their support of our $AUD it will be harder to get house finance and exacerbate the drop.
People have been predicting this for two decades so far......but that does not mean it cannot/will not happen.

Reading somewhere the RBA only cuts when they think the economy is not doing so well, hence the latest cuts.

Foreign investment rules have also been tightened which will impact new apartments in the next year or two.

If Labor wins, they will reduce support for new negative gearing which might lower home prices a couple percent whereas the if LNP wins, changes to super rules might drive that money into negative gearing.

Throw into mix the possibility of a possible downgrading of Australia's credit rating.

Their was a good article today how this long election campaign is not good for the economy because of the uncertainty. What ever way the election goes, the next government needs to be able to work with the minor parties and crossbenches.

According to Antony Green, if the Liberals win they will still have problems with the Senate, whereas if Labor wins they might have better success dealing with the Greens.

 

[RAM]

Foreign investment rules have also been tightened which will impact new apartments in the next year or two.

If Labor wins, they will reduce support for new negative gearing which might lower home prices a couple percent whereas the if LNP wins, changes to super rules might drive that money into negative gearing.

Tightening of FIRB guidelines is more smoke than mirrors.

Have a look at property developer "Greenland". 100% owned by Shanghai City Council - now top unit developer in Australia and marketing some developments solely to Shanghai residents (perfectly legal and in accordance with FIRB new rules.

Or have a look at who the largest donor to both Lib and ALP is (7.30 report did a great piece on him in June 2015).

This is the mysterious billionaire property developer behind some of the largest political donations in Australia - 10/06/2015

Also the Ponzi scheme with the banks requires high net migration lest it all come unstuck. Have a look at the rise in mainland Chinese as a proportion of Aust population since 2000. Similar figures for Indian as proportion.

Now 3rd and 4th highest and at rate of growth will move into 2nd & 3rd by 2020. Indian born near trebled as % since 2005 to 2015 and that is masked by growing size of total Aust pop'n.

So effectively increased by factor of nearly 5x in 10 years. Mainland Chinese born Aust citizens went up 4x in same 10 years.

Plenty of purchasing power being imported as well as washing of 'corrupt money' as reported.

Australia's property money laundering disgrace - MacroBusiness

www.macrobusiness.com.au/.../australias-property-money-laundering-dis...


Oct 14, 2015 - It appears international pressure on Australia to police money laundered into Australian real estate has finally spurred some action, with the ...

Chinese investors flooding billions into the Australian real estate ...

ABC.NET.au/...australian-real-est...


Australian Broadcasting Corporation


Oct 11, 2015 - The former head of Australia's anti-money laundering agency calls for ... prevent Australia from becoming a safe haven for foreign corrupt funds.

Despite highly credible warnings that large volumes of illicit money leaving China were being laundered in Australia, a Four Corners investigation found no Australian agency was charged with identifying the true source of foreign funds being invested into the economy.
Until recently, Australia's principal authority responsible for the monitoring of offshore funds coming into the country — the Foreign Investment Review Board (FIRB) — deemed the issue of dirty money to be outside its scope of responsibility.
Two former board members have confirmed to Four Corners that concerns about offshore corruption were rarely discussed.
That is despite $US1.25 trillion ($1.7 trillion) worth of corrupt and criminal proceeds from China estimated to have been spent around the world in the decade to 2012.

 

[drron]

Some analysis I have read on the effect of the changes to super funds suggest that it will reduce negative gearing.People used non deductible contribs to super for deposits on negatively geared properties so that avenue is now closed.
For most retired people with SMSFs negative gearing is not on their radar.They need as much certainty re income as possible.

 

[whatmeworry]

Tightening of FIRB guidelines is more smoke than mirrors.

Have a look at property developer "Greenland". 100% owned by Shanghai City Council - now top unit developer in Australia and marketing some developments solely to Shanghai residents (perfectly legal and in accordance with FIRB new rules.

Or have a look at who the largest donor to both Lib and ALP is (7.30 report did a great piece on him in June 2015).

This is the mysterious billionaire property developer behind some of the largest political donations in Australia - 10/06/2015

Also the Ponzi scheme with the banks requires high net migration lest it all come unstuck. Have a look at the rise in mainland Chinese as a proportion of Aust population since 2000. Similar figures for Indian as proportion.

Now 3rd and 4th highest and at rate of growth will move into 2nd & 3rd by 2020. Indian born near trebled as % since 2005 to 2015 and that is masked by growing size of total Aust pop'n.

So effectively increased by factor of nearly 5x in 10 years. Mainland Chinese born Aust citizens went up 4x in same 10 years.

Plenty of purchasing power being imported as well as washing of 'corrupt money' as reported.

Australia's property money laundering disgrace - MacroBusiness

www.macrobusiness.com.au/.../australias-property-money-laundering-dis...


Oct 14, 2015 - It appears international pressure on Australia to police money laundered into Australian real estate has finally spurred some action, with the ...

Chinese investors flooding billions into the Australian real estate ...

ABC.NET.au/...australian-real-est...


Australian Broadcasting Corporation


Oct 11, 2015 - The former head of Australia's anti-money laundering agency calls for ... prevent Australia from becoming a safe haven for foreign corrupt funds.

Despite highly credible warnings that large volumes of illicit money leaving China were being laundered in Australia, a Four Corners investigation found no Australian agency was charged with identifying the true source of foreign funds being invested into the economy.
Until recently, Australia's principal authority responsible for the monitoring of offshore funds coming into the country — the Foreign Investment Review Board (FIRB) — deemed the issue of dirty money to be outside its scope of responsibility.
Two former board members have confirmed to Four Corners that concerns about offshore corruption were rarely discussed.
That is despite $US1.25 trillion ($1.7 trillion) worth of corrupt and criminal proceeds from China estimated to have been spent around the world in the decade to 2012.

Searchable Panama Papers come out tomorrow, so I think their will be a worldwide shock tomorrow.

 

[cove]

This should be a very good read.

 

[footy99]

Aussie down 4-5 cents against the US in the last few days, more or less mirrored against the rest of the basket (78-73 US, 86-79 Yen, 68-64 Euro, 54-51 Pound, 1.12-1.07 Kiwi, etc).

This time started by a slightly lower than expected inflation figure, triggering a rate cut, then everyone trying to sell everything they own in aussie dollars asap. More or less the same trend that has brought it back from 1.05 3 years ago to 0.73 today - massive reactions to bad news, muted reactions to good news.

I suspect we're just in an aud currency bear market. Although when it ends (and thus my travel re-commences!) is anyone's guess.

 

[whatmeworry]

Fresh prediction the Aussie dollar will go down to 67c.

Mr Rennie points to the Japanese yen, the New Zealand dollar and the Canadian dollar as potential crosses which may prompt traders to begin picking up the Aussie at these rates.
However, some economists see the Aussie sliding as far as US67¢ in the coming months, as the Reserve Bank of Australia continues to cut rates.
"I don't think there's a central bank on the planet that hasn't been surprised to the downside by inflation," said Mark Walton, senior economist Asia ex-Japan at BNP Paribas.
"But judging by the RBA's statement on Friday, I don't think the bank is convinced the situation will improve of its own accord and as such our forecast is for US67¢."
Without much in the way of local economic data this week, the Aussie will continue to be at the mercy global data, particularly of data coming out of China.

Read more: Volatile Australian dollar seen falling to US67¢
​

 

[Foreigner]

The aussie at 0.73 looked vulnerable this morning and indeed has come as low as 0.7287 so far today.

 

[Pushka]

I just cancelled a cruise that was in USD. I had topped up paying it off when the AUD was high. Just received all my payments back plus around $400 extra due to the AUD falling.

 

[marki]

US stocks slumped to a one-month low as the US dollar climbed, after the biggest gain in American retail sales in a year reignited speculation the Federal Reserve may lift rates as early as June. Oil retreated.

Read more: Wall St tumbles as retailers miss, oil retreats | afr.com
Follow us: @FinancialReview on Twitter | financialreview on Facebook

Blast not happy with our Aussie going so low. It gets harder to travel don't they understand?

​

 

[RAM]

US stocks slumped to a one-month low as the US dollar climbed, after the biggest gain in American retail sales in a year reignited speculation the Federal Reserve may lift rates as early as June. Oil retreated.

Read more: Wall St tumbles as retailers miss, oil retreats | afr.com
Follow us: @FinancialReview on Twitter | financialreview on Facebook

Blast not happy with our Aussie going so low. It gets harder to travel don't they understand?

​

Just un-Australian if you ask me!

 

[cove]

I experienced the US at sub 0.50 so stop thinking the current exchange rate is low. It was a business trip so the ATO were helpful by covering off their share of the damage. The trade show hotel was a snip at $280 USD plus tax a night.