property crash now in dangerous 2nd phase !

Hi folks, let's have a civil debate about the above. No need to get angry or personal, I am merely giving you food for thought. Read my points and contribute....

Well, I don't know why people are getting so excited over another round of REIV comic relief and the Westpac prediction (frankly it's either a desperate jaw boning exercise or they see sheet hitting the fan or BOTH). I can assure you, if this crap came from the RBA instead, the AUD would have dropped to 95 cents before the weekend.

I'll explain about REIV's folly later on.....but to cut a long story short, the REIV will report price falls pretty soon as more agents join the dole queue.

If anything one should be panicking because Westpac (as one the most exposed to the mortgage market can see some pretty ugly stuff about to unfold). A 1% rate cut in an environment where inflation is still more likely to rise than fall (if it eventuates implies a serious recession with steep job losses).

Anybody knows the lion share of Australia's employers in: Retail, Industrial, Banking & Finance, Manufacturing, Hospitality, Tourism and Building & Construction (residential & commercial) have been tanking for almost 12 months and the deteriorating is accelerating.

Unemployment is not a snap-shot indicator of activity. It is a lagging one by around 12 months. Companies are now freezing hiring and the next step they will start retrenching. If you don't believe me, a disturbing anectodal evidence is the very very scary number of "for lease" signs starting to line up the entire length of St Kilda road in Melb. Haven't seen anything like it since 1990 - yep the recession we had to have.

Okay, many (including at least a few here on HC) who tried to get out of the property market still can't get out. Now they see a false hope that a huge deluge of sheep coming to the slaughter will offer the chance to pass the hand grenade will have a rude awakening. The listing volumes start to inundate the market but despite the "best time to buy" message falling on deaf ears for 6 months, nobody listened. Now we get a variation of "best time to buy" but this time based on a PREDICTION 5 months down the track? One that is accompanied by the caveat - JOB LOSSES. They also hear other banks are contradicting Westpac. Hmmmm...looks like more properties and few sales and plunging auction clearance....

And remember if another GFC hits (arising from a banking crisis in Europe), Aussie banks can kiss their biggest source of funding goodbye. End result- loan rationing + rate hikes irrespective of what RBA does.

Problem is there are still no first home buyers taking the bait. They have seen too many FHB human wreckages in the last 12 months to be wary. Chances are the properties and suburbs they hope to buy into are mortgagee or distress sales of FHBs who took the bait just before. Even if there are rate cuts, it was exactly the same GFC scenario causing rate cut to lure the tens of thousands into the meat grinder.

Now, on the supply side. The dumb sellers (and there are plenty of them) now feel somewhat emboldened by an unbelievably amazing house price rise (okay I'm sure you already know for median price rise through the stratosphere, all that the REIV needs to do is to convenient chop a few transactions off each suburb, which they would never do I am sure. That would not be in keeping with their high standards of ethics).

Leading to --> The market is once again flooded. The sellers just as stubborn (they ask what happened to the price rise ?). The macro economic news worsens by the day. FHB once bitten twice shy (assuming they have both the appetite to take on credit at a time of being fearful of getting a tap on the shoulder by the boss and that they can get credit) don't turn up at the meat works.

Result - another 20% agents get the flick and the REIV in the face of transaction drying up announces big falls in house prices to get stock flowing again.

Then they realize that's the mistake they made last year when they takked up prices. But then they also realized by talking down prices, it also didn't help.

Oh..oh....