Financial Armageddon!!

[Don't believe the Hype]

And this is how property prices will continue to rise in real terms

https://www.9news.com.au/national/mortgage-companies-announce-40-year-loans-for-first-time-buyers-australia-news/a2682387-3a1f-4eb3-8ede-7121e4315c8e

[eri]

if the price of new builds were to drop suddenly

the house of old houses might drop

but i can't see anything that council or gov. are doing that does anything but increase the price of new builds

[Chris W]

if the price of new builds were to drop suddenly

the house of old houses might drop

but i can't see anything that council or gov. are doing that does anything but increase the price of new builds

Question: Under what conditions can the price of new builds drop suddenly?

[LifeBroker]

If money supply is drying up, I'd suspect price drop on new and old builds

but that would take another GFC - is it possible?

Question: Under what conditions can the price of new builds drop suddenly?

[eri]

Question: Under what conditions can the price of new builds drop suddenly?

dramatic over-supply?

not seeing that either...

[Bob Kane]

Question: Under what conditions can the price of new builds drop suddenly?

Usually under no realistic conditions.
If you could produce a lot of free land then you could drop the price of a new build.
If you could halve the cost of materials and/or labour you could drop the price.
Could a financial squeeze do it?
Nope.

[Davo36]

And this is how property prices will continue to rise in real terms

https://www.9news.com.au/national/mo...e-7121e4315c8e

Yep, what will they do next.

They just keep coming up with ideas to lend more and more and more.

[Chris W]

Yep, what will they do next.

They just keep coming up with ideas to lend more and more and more.

Davo36,

Banks do face constraints on lending. If you know what constraints they face and the conditions in which they may reach their limits, then you will understand under what conditions there will likely be a credit constrained environment.

Look at the banking crises during 2008/ 2009 period in countries such as US, Greece, Ireland, Iceland. Or look at late 1980's / early 1990's in NZ when BNZ required recapitalisation from the NZ Government.

[Chris W]

dramatic over-supply?

not seeing that either...

Eri,

Think back to 2008/2009 in Auckland. I recall you recounting some stories about price drops during that period.

[eri]

if the next financial crisis

is as big, or bigger, than the last one

and if it happens in the next couple of years

yes

we could see another big round of mortgagee sales and teetering banks
downtown auckland is covered in cranes and road work cones, signifying we may be at peak building...

everyone should be prepared for another crash since we are overdue and are starting to see many of the early signs

Parts of the U.S. yield curve have been inverting since last November. Now, the key 10-year yield is lower than the 3-month T-bill yield. ... Currently, yield curves are inverting around the world. The Euro area, the U.K., Switzerland and Canada all have inverted yield curves at shorter maturities.May 30, 2019
https://www.forbes.com/sites/frances.../#5d4fb2466d04

but not sure if anyone should count on mortgagee sales as a way of bootstrapping themselves out of renting and into home ownership

the banks probably won't lend more to already highly leveraged investors, or renters without large deposits

but if the next big crunch happens when the coalition are on watch

who knows what crazy actions "solutions" could be floated and possibly imposed

history doesn't repeat, but it does rhyme

[eri]

Business confidence continues to slide, with New Zealand companies the most downbeat in a decade, since the height of the global financial crisis.
The Quarterly Survey of Business Opinion (QSBO) for the June quarter, released on Tuesday, showed a fall in general confidence.
More importantly, the majority of businesses surveyed said they expect their own activity to contract in the coming quarter.

ASB responded to the news by predicting that it now expected the Reserve Bank to cut interest rates twice,
both at its next meeting in August and again in November, to a new record low of 1 per cent.

https://www.stuff.co.nz/business/113...to-stall-speed

[Don't believe the Hype]

Australia just cut interest rates for the 2nd time in 2 months... there is a variable rate in market in Aus now of 2.89% - almost free money

[eri]

australia

After the announcement, JP Morgan predicted another two cuts, taking the cash rate from 1% to 0.5% by mid next year.
It said the risks to this view were that the bank “gets there earlier, not later”.

https://eveningreport.nz/2019/07/02/...w-of-1-119744/

[chook]

A sure sign of an economy in big trouble!

[Davo36]

A sure sign of an economy in big trouble!

Yep. What is it they know but aren't telling us?