Sydney

Post #45 – The Five Stages of Australia’s Housing Bubble

So recently I blogged about some of the common myths surrounding the Australian housing market. That post also hinted that I believe our housing market is entering a very fragile phase, where finally, after many false prophecies of collapse, our luck might finally run out. I am predicting that the Australian housing market will enter a volatile period within the next 9-12 months, with a drop of approximately 20-40% in the next two to three years after that. And I’m going to borrow the theory of an obscure and oft-forgotten 1960’s economist by the name of Hyman Minsky to explain exactly how this housing market bubble will pop and collapse.

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Hyman Minksy

This man’s ideas have never really been applied to a housing market though, dabbling predominantly in the world of finance. However, I believe that the financialisation of the housing market in Australia means that the leap between his theory and the housing market in Australia can be made. Let me quote BBC News to give you a brief introduction to this man:

American economist Hyman Minsky, who died in 1996, grew up during the Great Depression, an event which shaped his views and set him on a crusade to explain how it happened and how a repeat could be prevented…

Minsky spent his life on the margins of economics but his ideas suddenly gained currency with the 2007-08 financial crisis. To many, it seemed to offer one of the most plausible accounts of why it had happened.

He referred to his theory as the Financial Instability Hypothesis (FIH), and argued that lending goes through certain stages in a capitalist economy. Considering housing in Australia is no longer just a roof over your head, but rather seen as an investment and an asset, it’s easy to apply his different approach to finance to the housing market here. This is how it flows:

1. THE HEDGE POSITION: Your expected inflows are expected to be less than your committed outflows for the foreseeable future. You’re good.

2. THE SPECULATIVE POSITION: Your committed outflows are larger than your inflows, but enough to pay interest. You must refinance to pay the principal. You’re playing with fire, but still… you’re good.

3. THE PONZI POSITION: Your interest payments are greater than your inflows. You’re fucked.

I’m going to outline the steps below, and explain how they can be applied to what we have seen, and what we are currently seeing in the Australian housing market.

PHASE I: RECOVERY

This is the first stage, when banks and borrowers are cautious. They’re usually cautious because the inherent contradictions of capitalism have once again fucked things up, the housing market is a shambles and everybody is broke. You can take your pick which economic downturn you’d like to focus on. For example, (more…)

Post #43 – 10 Myths of the Australian Housing Market

Every time I try to suggest to my family and friends that the Australian housing market is in a bubble – the likes of which no developed Western nation has ever seen before – I’m dismissed as a bit of a ‘crackpot’. Amongst the sneers and chuckles, I’m told that the Australian housing market is ‘different’. Yes, different. What makes it ‘different’ is something nobody can really tell me – but here are a few of the excuses I’ve heard:

ARGUMENT 1: WE’VE GOT BIG HOUSESLargest in the world by some counts. According to our former Treasurer Joe Hockey, this means that Australia has a fundamentally different ‘asset’ class. Here’s exactly what he said:

A lot of Australians put a lot of new capital into their homes – renovate their homes, upgrade their homes – and we have the largest homes on average perhaps in the Western World, and the world more generally. So it’s a very different asset class in Australia than in other jurisdictions.

This means, naturally, we have to pay more for our houses – because they’re bigger than everyone else’s.

DEBUNKED: Hockey is correct in saying that a bigger house costs more than a smaller house. However, it doesn’t excuse why a median house price in Sydney is $1 million, whilst in Houston, a city of comparable size and wealth, it’s about $US146,600. Americans tend to challenge us for the title of most obnoxiously big houses in the Western world, so we’d hope to see some correlation there. But we don’t, the maths just simply doesn’t add up.

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Post #40 – Beefcake-Bro Culture: The New Wave of Bogan

I left the suburbia of Penrith a few years ago for the big smoke of Sydney. At the time I told people the reason I was moving from the place I was born and raised was for convenience and accessibility. What I didn’t tell them was that I secretly couldn’t stand Penrith anymore. Despite being only an hour from Sydney’s CBD, in many respects it feels like its a million miles away from the beaches, the sky-rises and the trendy inner suburbs that define Sydney’s core. It certainly wasn’t the locale of Penrith that didn’t sit easy with me – the snaking Nepean River with the majestic Blue Mountains as a backdrop, the fresh air and wide open spaces mean Penrith provides a welcome reprieve from the hustle and bustle of the city. Nor was it the ‘typical westies’ that (sometimes) unfairly characterise the outer western suburbs of Sydney. No part of Sydney is immune from these so-called ‘uncultured’ characters, and I find the down-to-earth larrikin nature that inflects the good people of the Western suburbs refreshingly welcome in comparison to their Eastern counterparts. However, what ultimately drove me from my hometown was the rise of what I refer to as the ‘Beefcake-Bro Culture’ – a new wave of disturbing bogan culture festering in the youth of suburbia.

The re-birth of Australia’s muscle bro culture in not unprecedented – Australia has seen a rise and demise in both the surfie culture of the 1960’s and the ‘get big’ gym phase of the 1980’s amongst its blokes. But this new era of ‘roided boganism contains a much more dangerous and volatile streak amongst the suburban youth of today. It really is a perfect storm of factors that has given rise to the latest manifestation of boganesque masochism rampant within Australian youth culture, but particularly apparent in the Western suburbs of Sydney. It’s not just cultural either, with economic, political and ethnic factors also contributing to this ‘Bro Culture’. From Ambarvale to Abbottsbury,  Bankstown to Blacktown, Castle Hill to Campbelltown, and Parramatta to Penrith, Beefcake Bro Culture reigns dominant. Here are the factors that have given birth to this new wave of blatant boganism:

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Post #26 – My Rules For Living In A Share-House

So I know my blog posts have predominantly been about politics and economics, but sometimes, just sometimes I go a little crazy and write about something like beer or Taylor Swift… I’m that unpredictable!  Anywho, my last few posts have been pretty deep and arguably a little wordy. So I thought I’d ruffle through some of my old stuff and give you something a little more upbeat. Below represents a chapter in my life when I used to live in a share-house in a bohemian and hectic part of this wonderful city called Sydney. At any one stage I lived with about 8 other people, and our landlord owned another Federation-era carbon copy of our building right next door at #125 – with another 8-9 people residing there. So 16-18 transient people from all over the world, all roughly the same age, with all our mates coming and going – living together. To say it was a lawless mad-house is an understatement. Days were crazy and nights were crazier. So crazy in fact, this OCD-riddled control freak had to write up some house-rules for the dwelling – 123 Bedford St. I’ve posted them below – word for word. These rules were printed out and put around the house for all to see. They’re tongue-in-cheek (most of them) so I hope you’ll find them humorous, and if you’ve ever lived in a share-house I’m sure you can relate. Enjoy!

13 LUCKY HOUSE RULES FOR BEDFORD 123

  1. WWJD (WHAT WOULD JESUS DO?) – Well, probably not live in a share house for a start. But if he did, he probably wouldn’t take other people’s stuff without their permission. Don’t believe me? It’s in a little something called The 10 Commandments’ (it was referring to livestock mostly, but can be applied to things like (more…)

Post #4 – The WestConnex: Roads are for Chodes

Roughly two weeks ago I dragged my girlfriend along to a rally in the middle of our Christmas present shopping/hangover recovery walk through Newtown. It was essentially an occupation, the likes of which I’ve never quite seen before – in a skinny suburban street in the centre of St. Peters. Although the mood was jovial – with drum’n’bass DJ’s and pugs with sweaters aplenty – the reason for this rally was very serious indeed. Hundreds of people had gathered to occupy a main thoroughfare (and a park) in the centre of St Peters that is set for demolition (or so I’m told) if the state and federal government’s get their way. What the government is proposing looks a little something like this:

  1. a widening of the existing M4 Motorway from Parramatta to North Strathfield from two or three lanes each way to four;
  2. cuttings (or “slots”) along Parramatta Road from Strathfield to Taveners Hill;
  3. a tunnel from Tavener’s Hill to St Peters;
  4. a viaduct from St Peters to Tempe;
  5. a tunnel from Tempe to Bexley North; and
  6. a widening of the existing M5 Motorway from Bexley North to Beverly Hills from two lanes each way to four.

All sounds good once the proposal is summarised into numerical point-form as such, does it not? Who would be opposed to a new road, especially in such a congested, car-loving city like Sydney?

The two fellows that I referred to in my previous post also make an appearance this time around. Mike Baird, the Premier of NSW, and Tony Abbott, the Prime Minister of ‘Team Australia’ – both wholeheartedly embrace the WestConnex. And to let history repeat itself twice, I’m going to say that these two can get fucked, and I remind you that they are both manipulative arseholes. It’s a terrible idea and I will briefly tell you why in 10 easily digestible points. (more…)

Post #3 – Siege

So I sat in front of my computer at work about 9 in the morning on Monday the 15th, mulling over what to write for my third blog. I knew the government’s MYEFO was to be released at about midday, and a lot had already been leaked to the press – I assume as a way of softening the blow of such a massive budget blow-out. It was big news (I thought) and would most likely dominate the headlines for the rest of the week. How wrong I was…

At exactly 10:19, I received an email from my girlfriend into my work inbox. It was short, succinct and at that stage, confusing. It simply read: ‘Office in lock down :/’

Below this rather vague one-liner with a ridiculous emoticon in tow was a link to ABC News – whose information at this stage was also limited. “Police operation under way. It is believed a police officer has his gun drawn in Martin Place. More to come.” I looked up to the TV screen at work – the news-cast on the box also knew very little. For whatever reason, terrorism did not cross my mind. I questioned the intelligence of the man (or men) who decided it would be a good idea to hold up a cafe specialising in round little chocolate balls. Sure, they might have a few hundred dollars in the till, but an escape route from such a busy, central locale was near on impossible. Then I saw the flag planted – live – on the window of the cafe. He’s not planning on escaping – whoever has done this is right where he wants to be.

I was soon speaking to my girlfriend via mobile, who at this stage was worried. She works directly opposite the Lindt cafe and could see right inside the store. Their faces, the flag, the police with their weapons drawn – everything. Then the panic really set in. Rumours of the airspace shut down, reports of explosives inside the cafe and also strategically (more…)