If something's worth saying, say it three times. We wouldn't...

If something's worth saying, say it three times. We wouldn't argue with that.

We've certainly banged on enough times about Australia's corrupt banking system, the lies spruiked by the property spruikers, and the rubbish you generally get from the mainstream on the health of the Australian economy.

But surely this effort by the web boffins at The Age takes the biscuit:

1 article... what 525 ooo buys you in melbourne...marika dobbin
2.article... what 525 ooo buys you in melbourne...marika dobbin
3.article... what 525 ooo buys you in melbourne...marika dobbin


So desperate are the property spruikers to keep the property lie going that they've embarked on new tactics. How long will it be until they fill the entire property section with just one story?

Why stop there. Why not the whole business section devoted to one property story spinning lies about the never ending advance of the Australian property market.

Heck, turn the whole newspaper into one gargantuan property spruik? They're not far from that now anyway.

Read the story for yourself and you'll soon realize - as your editor has, that this is final confirmation that we should just ignore any statistics the property pushers feed to us.

Not one of them is independent research. The main sources of house price research are either from property spruikers, the Reserve Bank of Australia (RBA), or Australia's zombie banks - banks that can't survive unless property prices keep going higher.

So let's see what those three identical articles have to say, "A Melbourne house costs at least $100,000 more than it did a year ago", Marika Dobbin of The Age shrilly blurts.

Grammatically she's probably right. We're sure there is "a" house somewhere that is $100,000 more than a year ago. In fact there are probably several "a" houses that are $100,000 more than a year ago.

Unfortunately Dobbin doesn't disclose where she got the $100,000 number from, but she knows for a fact that it's due to "The population boom and housing shortage pushed the median price to $525,000 in October, compared with $415,000 last October."

The general theory behind Dobbin's article is that the median Melbourne house price has risen 26.5% in the last twelve months.

There's only one thing we've got to say about that - but it's not fit for publishing!

Any statistic that claims the average Melbourne home has climbed 26.5% deserves to be taken with a semi-trailer full of salt.

We're happy to stick our neck out right and tell you that the average Melbourne house has NOT gained in value by 26.5% in the last twelve months. We don't care what dodgy numbers Christopher Joye and his property spruiking chums come up with.

Any price that requires 4.5 PhDs to determine what it is cannot be taken seriously. Just to refresh your memory, here's the method of calculating the hedonic index that Joye has come up with to determine house prices:



Click to enlarge

Apparently all that equals $525,000 for Melbourne. My foot it does!

But after Dobbin had stepped on the accelerator on Saturday with her "houses are $100,000 more than a year ago" article, yesterday she's slammed on the breaks.

Because next year is going to be a much more stable year for property prices as "the nation's top housing analysts have forecast modest residential price growth of about 5 or 6 per cent in 2010."

That's right, a stable year doesn't mean prices flatlining or going down, it means they'll go up - only not so much as before.

That makes us even more convinced the property slump is somewhere around the corner, ready to pounce.

And what settles the matter for us the quote from erstwhile property bear Steve Keen, "I'd expect a five per cent or so fall (in residential house prices), probably returning to somewhere between the current peak and the previous one in September 2008."

5%! Goodness me, if we thought a 5% fall was the worst it would do we wouldn't even bother sharpening our property-bubble-bursting-pencil in the mornings.

We feel as though we're the only one left who believes property is set for a crash. Is it possible we're wrong on this? Is it? Will that endangered species of "Property Bears" become extinct?

No of course not. Because the fact is we haven't seen the worst of the property slump yet. Let's get serious about this.

Even if we do believe the dodgy numbers from the property spruikers, then we've already had one property crash this year. According to the Real Estate Institute of Victoria (REIV), "In the March quarter the median house price in Melbourne hit a low of $405,500, down from $472,000 in the December quarter of 2007."

That's a 14% fall. And that was during a time when the Australian property market was supposed to be resilient. But as we say, you should even take that number with a semi-trailer load of salt.

The government, banks, real estate spruikers, and the RBA did all that was in their power this year and last to stop the banks and property sector from collapsing.

Even all that effort, and putting taxpayers on the hook for billions of dollars couldn't prevent the Melbourne housing market falling by 14% - if we believe the REIV numbers.

Just remember that despite the nonsense in the mainstream press, such as yesterday's Australian Financial Review (AFR) feature, "Once bitten: how our banks dodged the crisis," - 'our' banks didn't dodge the crisis at all.

Or the follow on feature in today's AFR, "As the financial world sailed blithely on, buoyed by the tide of money, Australia showed more caution." Ha, ha, ha, ha, ha, etc...

As Kenneth Williams would say, "Stop messin' about!"

This idea that Australia got through unscathed due to the bank problems in the 1980s is just not true. Although it hasn't stopped Bob Joss from rolling out the claim again in yesterday's AFR:
"I think one of the main reasons things went so right in Australia for the major banks is that they went so wrong in the 1980s and early 1990s."
It's all rubbish. Australia's banks are no more cautious than the dodgy UK or US banks. This idea that overseas banks were leveraged up on collateralized debt obligations (CDOs) and other derivatives whereas Australia's banks weren't, may be true but it ignores what was underlying the CDOs - mortgages.

And that my friends is exactly the exposure Australia's banks have too - mortgages. Over 50% exposure in the case of the Commonwealth Bank.

You can see the fear in the banker's eyes with all the talk about the banks having to strengthen their capital positions. That such a small change in capital should bring out such a response from the banks gives you a pretty good idea that they aren't as conservative as they'd have you believe.

As we've written before, the Australian property market and banking sector are inseparable. One goes they all go.

That property perma bear Steve Keen seems to have jumped off the property crash bandwagon makes it even more likely in our eyes that there will be a catastrophic widespread failure in the Australian property market.

Even the emails coming into the Money Morning mailbox are starting to show signs of fear from readers that they've missed the next property boom.

But you see, far from having dodged the property and banking crisis, Australia has merely postponed it. And it's all thanks to that other unsustainable bull market - China.

If the AFR wants to find a real reason why Australia has been lucky so far then they should look no further than the resource consuming beast to the north. Just as the price of property cannot possibly continue to rise without a severe correction, neither can China.

Whether 2010 is the year when it all goes horribly wrong, we can't be sure. But what we do know is that preparing for the end of the China bull run and Australian property boom should be at the forefront of your plans for next year.

Cheers.
Kris.

"http://www.moneymorning.com.au/20091222/property-bears-becoming-an-endangered-species.html

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