This is 1990 all over again, but without the high mortgage interest rates.
Then, job losses and high mortgage repayments sent the property market spiralling. After the legislated interest rate cap of 13.5% on home loans was deregulated by Keating some borrowers were paying 17.5%. But atleast houses were still only valued at around 3 times income, except in 1988 when they ballooned in value post the stock market crash.
Now houses are valued at 9 times average income and interest rates are around 7.3%. Far worse scenario now.
What's interesting though is the job shedding by the Big Banks. This will have some way to go but is reminiscent of the Victorian Govt. slashing jobs in the early nineties that led to the property bust in Melbourne.
The recession of 1990 et. al. saw ANZ and Westpac teetering. State Banks (which primarily dealt in home loans) went broke in Victoria and Sth Australia. Keating used the CBA (then still Govt. owned) to bail out the State Banks. Keating's deregulation of the Banking sector saw new entrants take up some of the employees dismissed by the big four.
Banks are sending white collar jobs overseas. ANZ has sent two floors worth of jobs in Melbourne off to Manila. This trend will see many highly paid white collar workers in Melbourne searching for a Jims Mowing franchise.
On top of this you now have the manufacturing base in Victoria under serious threat. Ford is instituting a one model policy world wide. It will be produced where costs are cheapest. GMH and Toyota will no doubt follow. The next few years will not be pretty.
People forget we used to have a massive Nissan car plant in Melbourne back before the 1990 recession. It disappeared along with the State Banks, car parts manufacturers, tyre manufacturers and food processors.
The big industry over the past few years has been trading paper assets, writing loans and selling dreams. This is slowing disintegrating in my opinion.
