RBA warns banks could exacerbate the housing slowdown
In a speech yesterday to mark 10 years since the begining of the global financial crisis (GFC), the Reserve Bank of Australia deputy governor Guy Debelle warned that the current Australian banking industry's habit of acting as a pack could exacerbate the housing slowdown.
"Their similar behaviour and similar reaction to events such as falling house prices run the risk of amplifying the downturn in the housing market." he said
He said that during the GFC, the countries that could keep lending flowing fared significantly better than those that did not.
"That lesson is relevant to the situation today in Australia, where there is a risk that a reduced appetite to lend will overly curtail borrowing with consequent effects for the Australian economy," he said.
Are you concerned about the potential housing slowdown?
The RBA's reference to 'extreme measures' and 'quantitative easing' (! - the euphemism for just printing more money) is very worrying. I cannot recall the usually very starched RBA ever using language like that before.
Tome for the federal politicians, all of them, to stop playing political games and personality politics. -Especially where that involves talking down the economy and screwing with the value of the most significant asset that the majority of the public will invest in, in their lifetime.
The positive with QE is our sharemarket will get a welcome boost
and the Aussie dollar will tank
Well it may get a small lift but that's gonna depend on how much money is printed in my opinion.
The OECD has warned the federal government to prepare contingency plans for the effects on the economy if house prices fall.
In another report, Bill Shorten is unsure when Labor's cuts of negative gearing will start when he becomes PM.
Interesting times.
Re Bill Shorten ... wise move after the other economic data coming to hand. Enough looming problems as it is.
I agree RnR, hopefully we will see an end to politicians who are unable to readjust their policies to meet market demands, rather than continue with bad policy in order not to appear weak. Inflexible plans are a sign of intelectual weakness and a lack of self worth.
Hugely concerning to hear the RBA Governor's quip at retail banking to keep the money flowing, while the OECD is saying that it is helping to soften the fall. Is the RBA Gov got a handle on things or is it a misplaced ideological political swipe at the banks? Either way, this was the sort of language we heard in 2008 comming out of the Rudd camp which made everyone nervous.
As I like many on this site own my own home and probably do not intend selling in a hurry or at a time when prices are low it is of no concern to me.
Owning a home has its own stabilizing effect, if I sell low it will follow that in replacing my home I will buy low, ownership is the key, if you are selling low to buy high, maybe you should have someone to help with your finnances?
The one thing that really confuses me are the people who seem to think that houses are too expensive one day and then complain that there is a reduction in housing values the next, their opinions seem to be driven by the breeze.
It (property slump) is of no concern to those who have little understanding of how others are affected and how they themselves may eventually be affected. So much of Australian's wealth is tied up in real estate that a severe drop in values can cause a problem for us all, yes even those who dont own a house as well as those who do, regardless of whether they have the deeds or not. A tank in values will almost certainly see a major devaluation in our currency, as well as high unemployment bringing about changes to fiscal and monetary policy. As an Australian citizen you cannot be immune. We are all hoping for a soft fall. I am also hoping that we dont put economic vandals in charge at the wrong time, as we did in 2007.
No need to worry, no way will the economic vandals remain in power.
Economic vandals ?
You mean the party that stemmed our debt spiral
labor left is with a $170bilkin debt and annual deficit of $43 billion
LNP has turned the ship around
& the ship is heading for the rocks
only rocks are those in your head
Shorten's equivocation on the implementation date, formerly to date from when he assumed the prime ministership, on cuts to negative gearing and capital gains tax are an open admission that contrary to what Labor and its pundits have been saying all along, that the changes WILL have negative consequences for homeowners and tenants and will put a damper on developers, with flow-on effects for all sections of home construction, suppliers, trades and blue collar workers.
These are bad policies designed to raise more taxes while driving a class war wedge into society. However, it appears that the main targets and the collateral damage of Labor's class war will be the ordinary worker who has used the family home to save for the future as superannuation and may also be sacrificing current quality of life to pay for an investment property for children's education.
As was seen when for security reasons trucks were banned in a large zone during the Commonwealth Games in Qld and building trades and laborers had to be laid off, the financial pain is felt immediately by those workers and many more related services. Unlike politicians and union bosses, many workers depend on the money and the overtime coming in weekly and do not have any reserves. When the pay stops and they are relying on the extra hours too, the family may not get fed and the rent or mortgage might not get paid.
Shorten will rapidly be revealed as the hated man who trashed the housing industry and the financial status of millions of ordinary workers, simply to realise his ambition to become Prime Minister and get to ride in the C1 limo. As if any of the many professional career politicians in his caucus, most coming from student union and Labor machine backgrounds, would have any understanding or compassion for the ordinary worker and small business tradie.
It seems to me..a few on here are doing their best to build up panic..and I can think of no other reason than political motivation. If this panic building is a ploy to get people to vote for a particular party..then it is not working. These days investors big or small are more discerning. Any investor worth his or her salt knows, making a decision based on emotions especially fear, is creating the very thing we fear.
If there is a housing slowdown..so what..no one knows this for sure and how long it will last.. if it does happen. The value of a house for most home owners is its capability to provide shelter from the elements..not so much its financial value. If the value of your house suddenly falls..the real purpose for which you bought that house is still there…however..if you want to move for some reason in a poor market..the house you are going to purchase has also fallen..so still no real problem.
The main way a housing crash might affect some owner occupiers is if they plan to sell the house and use the money for something else..then it might be prudent to sell now if you’re that worried. Most important is not to be swayed by the agitators.
No - you’re being simple
a significant housing downturn will affect all those who work in or service the housing industry leading to economic slowdown and massive unemployment
Oh and don’t forget about those who will then have to take massive losses on their houses through forced sales
Sophie, are you accusing the RBA of scaremongering?
"If there is a housing slowdown..so what."
So What??!!!
We are in a housing slowdown now. Both Melbourne and Sydney have many many suburbs experiencing a downturn in the order of 10%.
Great post Sophie. Ignore the deluded twins.
For a long time now, I've not read any of your posts micha, which could be seen as contributing to a discussion point. All we ever get from you, Regan and Banjo is criticisms of other posters. This is very sad mate for all of you. Your low self esteem can be overcome if you joined in the discussion. The YLC forums are a great opportunity for you to share your ideas. Do you have any ideas on the RBA statement?
Lothario, his posts dont affect me at all, its just that his posts are very similar to Reagans and Banjos in that regard. They appear to be down on everyone except each other. Its just not healthy. I know I should be sending them a PM but they are safe in their anominity and its best to have open discussion IMO. As you probably know, often people arent aware that their depression is doing them harm. If he didnt spend so much time at the computer he would still be able to see the little guy.
Unlike you two dyed in the wool, far far righties, I am gainfully employed from 6am to 1pm so don’t have time to waste with two old bats, one sitting and staring at the dough that never rises, hahaha and the other playing with a blow up doll all day haha. That’s my office in the pic below. Btw, Aquarius, needless sending me a PM, I never reply to crap, nor do I open any emails especially if they're from two dumb dumbs who know nothing about business and are not even willing to learn.
I have noticed around here that houses are taking longer to sell, whether that is because of the uncertainty or not I have no idea, it's just an observation. Prices are pretty flat too. It's been happening for quite a while so maybe it's just the market re-adjusting - as it does. Or it could be the 'beware of Bill campaign', who knows. Either way, selling now to beat the fall might already be too late.
It's mostly the higher end houses and they have always taken longer, but it seems to have blown out even more. One nearby house was on the market around two or three years ago and sold in a reasonable time for close to the asking price. It went back on the market over six months ago and appears to be languishing. The asking price indicates there isn't going to be much (if any) profit in the sale either.
Bulls in a china shop.
There is no doubt at all that federal political interference in the housing market and specifically, Shorten's deliberate and calculated disruption over recent years have created uncertainty and chaos in an otherwise fairly orderly market.
Investment money runs from disruption and it is going to be damned hard and it will take a long time to encourage investment back. Housing development requires long-term planning and added to that are the lengthy delays of getting proposals through government. The margins are low and it doesn't take much uncertainty, especially where regulatory risks (Shorten!) are concerned for a developer to shelve the whole project.
Cynical Bill Shorten is already casting about for others to blame and twisting his own words.
Sophie is quite right, about house prices falling not affecting most people. If you sell your house at a lower price than a couple of years ago and buy another straight away it will also be at a lower price. It will, of course, have effects on other people though, and not just those with multiple properties.
House prices falling is nothing new, it has happened before. I remember back in the mid to late nineties. A young couple we knew sold their home and waited just a bit too long to buy another. Prices almost doubled in a matter of months. They found themselves stuck in the rental market for years.
Falling prices also affect renters. Young people have been complaining, loudly, about being priced out of the property market for quite a while now, stuck in the rental market and unable to afford a place of their own. A fall in house prices will be welcomed by them until they realise that investors leaving the market will mean fewer rentals available, so higher rents, making it harder to save up for that needed deposit.
And then there are the people who may have just bought their first home (my son) and could well end up with a mortgage that is higher than the value of the property. I wonder what the banks would do if that happens because I seem to remember reading on here somewhere that it is now illegal to lend more than the property is worth.
So many good things come out of investigations and Royal Commissions but the cure is sometimes more worrisome than the disease, much as I hate to admit it.
Not affecting most people?????
What happens when construction companies go bust, no jobs for tradies and the economy keeps spiralling down?
A lot of people don't seem to understand how housing wealth is related to spending , housing demand and the impact on the macro economy
Like I said it has all happened before and the sky didn't fall. No jobs for tradies? You can't be serious.
The housing market shifts backwards, or stays flat, for years and then recovers. Construction companies come and go. The good ones seem to survive.
The only difference is that these days there are so many people turning every movement into some sort of political statement and looking to level blame.
I don't know, maybe it's always been that way and I have just had my head in the sand.
Yes - you have your head in the sand and you dont understand
The RBA must be really concerned about the fall in house prices to consider printing more money? You would have to wonder at what point is a realistic bottom? I've noticed in my area not many people are building new houses as it is far cheaper to buy existing and renovate/remodel. I suppose our standard of living has been too good for so long now compared to other economies'. We can only hope they get it right. Interestingly the Chinese proprty buyers have been getting out since 2015.