[sjn]

$this->bbcode_second_pass_quote('jtmorgan61', '')$this->bbcode_second_pass_quote('', '�')��The worldwide rise in house prices is the biggest bubble in history. Prepare for the economic pain when it pops.”

-- The Economist

[Badger]

$this->bbcode_second_pass_quote('skiwi', 'A')nd here in New Zealand a lot of people are going to be just as screwed
And from the attitude of most people I've spoken to in the last few weeks

Burn baby burn you've got it coming

Household borrowing rampant

There is little evidence that the Reserve Bank has broken the back of the housing market boom, with households still borrowing.
Reserve Bank figures showed that borrowing rose more than 15 per cent in the June year, with household debt up about $16 billion to about $112 billion.
Last week the Reserve Bank said the housing market represented "an upside risk for the future path of household spending and inflation".
The blistering rate of growth in household borrowing has been steady for the past nine months around 15 per cent.
The racking up of debt was "frothy", according to Bank of New Zealand economists, and was aligned with continuing strength in the housing market.
But households were not the only big borrowers.
Business debt was up 15.6 per cent, by $7 billion, in the June year. Farmers borrowed another $3.3 billion, up 15 per cent.........

[shady28]

$this->bbcode_second_pass_quote('sjn', '
')There has never been a situation like this before, so you can't say that normally prices just stay flat. Typically at the end of major financial bubbles, prices deflate rather than remain the same. Certainly after the housing bubble in the 80's here in the UK house prices did fall. People were left with negative equity where they had bigger mortgages than their homes were worth.


When large numbers of people can't make their repayments the mortgage lenders will force the sale of their properties. These distressed sales will further depress prices across the rest of the market. Property prices will deflate.

This will present an opportunity for for people with high liquidity to buy properties at lower than the long term mean prices. The guy referred to is obviously predicting that the peak in the housing bubble is imminent, maybe he's right?

[tokyo_to_motueka]

looks to me like some of you people have been reading commentaries by Stephen Roach.

anyway, in Japan in the 90s, a slow but steady slide in the stock market eventually led to the bursting of a massive property bubble around 1992-93.

all property: commercial, residential, the lot.
and mountains of bad debt and zombie companies and insolvent banks...and deflation albeit relatively gentle

prices in the housing market dropped 50-90%.

you gotta remember that the theoretical value of the Imperial Palace grounds in Tokyo was worth more than the theoretical value of all the land in California in 1989.

i'm starting to think the NZ housing market is as screwed as the US.
Bollard must be shitting himself...

as soon as US interest rates rise, it's bye-bye to NZ's hoard of 5%-equity home "owners" and amateur property "investors"
you're gonna be mince meat

[spot5050]

$this->bbcode_second_pass_quote('jtmorgan61', 'D')illigent Economist readers know that Britain's bubble already popped, with the effect that growth dropped from 4% to 2%.

[spot5050]

$this->bbcode_second_pass_quote('shady28', 'T')here are a lot of signs that China is beginning to enter a deflationary period already.

[tokyo_to_motueka]

$this->bbcode_second_pass_quote('spot5050', '')$this->bbcode_second_pass_quote('shady28', 'T')here are a lot of signs that China is beginning to enter a deflationary period already.

[spot5050]

tokyo_to_motueka, so the statement "beginning to enter a deflationary period" to you means that the current explosive rate of growth of the Chinese economy will decrease?

For absolute clarity, you are saying that "beginning to enter a deflationary period" means "will not expand as rapidly"?

[tokyo_to_motueka]

$this->bbcode_second_pass_quote('spot5050', 't')okyo_to_motueka, so the statement "beginning to enter a deflationary period" to you means that the current explosive rate of growth of the Chinese economy will decrease?

For absolute clarity, you are saying that "beginning to enter a deflationary period" means "will not expand as rapidly"?

[shady28]

$this->bbcode_second_pass_quote('spot5050', 't')okyo_to_motueka, so the statement "beginning to enter a deflationary period" to you means that the current explosive rate of growth of the Chinese economy will decrease?

For absolute clarity, you are saying that "beginning to enter a deflationary period" means "will not expand as rapidly"?

[shady28]

Here's what I'm talking about. See if you can spot the dot-com implosion on this graph of inflation - it's really easy to do. Better yet, try spotting the 'asian contagion' when many asian countries had to be bailed out by the IMF :

http://inflationdata.com/Inflation/imag ... 050714.gif

The Fed's easy money policy has cancelled out most of the deflationary forces so far.

[sjn]

I can see both deflation and inflation occurring simultaneously. Inevitable increases in energy prices will force up the prices of commodities including food, while luxury goods, perhaps electronics, housing and real estate will fall as demand collapses and the financial bubbles deflate.

[shady28]

http://www.morganstanley.com/GEFdata/di ... 2-tue.html


"The Chinese economy has started to slow owing to excess capacity.
...
As inflation turns into deflation, the share of household income in GDP should recover.
...
Declining commodity prices are causing less capacity addition in these industries. However, the expansion of the commodity industries was a major source of demand for commodities. Commodity prices are declining now owing to overproduction and may fall further owing to demand retrenchment on reduced capex.
"

[threadbear]

If they allow their currency to float, you'll get more of an idea of where they actually stand. Right now it's under govt. control

[threadbear]

$this->bbcode_second_pass_quote('sjn', 'I') can see both deflation and inflation occurring simultaneously. Inevitable increases in energy prices will force up the prices of commodities including food, while luxury goods, perhaps electronics, housing and real estate will fall as demand collapses and the financial bubbles deflate.

[marko]

$this->bbcode_second_pass_quote('sjn', 'N')o the housing bubble hasn't (yet) popped in the UK. It's just not inflating anymore or at least not so quickly. ...

There is far more mania in the US over the housing market (and indeed over other markets too) than in the UK. Concern over rising interest rates seems to be compelling more people to take on more risks in order to into the bubble game. British people I think are culturally more cautious than people of the US.