Wednesday, August 10, 2011

Financial pain in the Australian housing collapse

Excellent story on the Australian verison of 60 Minutes which is covering the Australian housing collapse. You can watch the whole segment here.

From the intro to the story:
  • We dodged a bullet this week. The Reserve Bank decided to keep interest rates on hold yet again. And with good reason. Record numbers of Australians are struggling to keep up with their mortgage repayments. Home ownership has never been tougher or more thankless. A generation ago, buying a house was the done thing - the one investment that was considered as good as money in the bank. If you didn't own the roof over your head, you'd failed in some way.   Not anymore. Now, renting might just put you ahead of the game.

As American blogger Mish Shedlock has noted, this story is so sad because Australians had every warning in the world. All they had to do was watch the US housing bubble burst.

It is a lesson that Canadians, particulary those here in the Village on the Edge of the Rainforest, have ignored.  You simply cannot explain anything to anyone with a firm conviction "It's Different Here". As Mish says, "Australian homeowners are now finding out they do not own their home. Instead, their home owns them."

Before too long we here in Vancouver will learn that harsh lesson too.
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  1. The correlation between Australia and Canada are striking. Any speech by Steve Keen can be applied directly to Canada.... he is an Australian who has made a name for himself predicting the financial future of the Australian household. Both countries did the same thing.... we juiced our way through the recession by making it dead easy for the next generation to buy into the housing market. That group has now been spent..... meaning we have a vacuum to follow up with. In the time of higher inflation, and fewer jobs ... and less access to credit... its begining to look a bit like... its our turn.

  2. Canada is getting very very close to popping that bubble!!! I hope everyone is ready!