Confessions of a Charlatan

Dear Reader,

Greg Canavan is a charlatan.

At least according to property market commentator Terry Ryder in an article published this month in Property Observer.

Ryder says anyone who claims to be able to predict what the nation’s property market will look like in 2013 is a ‘charlatan’.

He went on to say there is no such thing as ‘the Australian property market‘. And that you should instead view Aussie property as a collection of separate geographical trends.

Ryder sees Perth and Darwin continuing their upward trends in 2013. Sydney and Brisbane will experience a ‘solid increase’. Adelaide will see moderate improvement

Greg makes a compelling case here for property prices starting to go down, pretty much everywhere. He’s spent the best part of the year on a report that traces the fuse of the global financial crisis to its final destination…right here in Australia. To the housing market…and then the banks.

The conventional view is that we managed to avoid the carnage playing out in the rest of the world because of better economic management, better regulation in the banking sector, and, of course, the China boom.

As Greg shows graphically here, that view is very, very wrong.

The video shows we are ALREADY in recession territory. Which explains why many people ‘feel’ like we’re in a recession even though the headline numbers look good.

And it shows what is likely to happen next.

If you haven’t watched it yet, you should look at the evidence and decide for yourself if Greg is being a ‘charlatan’ in predicting the end of the Aussie property boom. Or just a realist.

But is a nationwide property crash REALLY a possibility in 2013?

As Dan Denning wrote earlier in the year:

‘Guy Debelle of the Reserve Bank of Australia assures us that improbable events will probably not happen. Specifically, Debelle says the chance of a housing crash in Australia is, ‘not something that keeps me awake at night.’ We’ll have whatever bottle of wine he’s drinking with dinner!

‘Seriously though, why do we insist on bringing up the obvious fact of how ridiculously overpriced Australia housing is? Is it because we want people to buy shares instead of homes, so they’ll need our share-tipping newsletters? Is it because we rent rather than own and are profoundly bitter and jealous? Or is it because your editor is a self-centered American projecting our American experience on an Australian housing market that we don’t really understand?

‘It’s none of those things. We write about an Australian housing crash because it’s a threat to your financial wealth. That’s it. It’s one of those improbable financial events that have an oversized impact on your life if and when they happen. That alone makes it worth analysing and offering a contrary view on.

‘Besides, credit booms are always obvious to central bankers in hindsight. You can count on many in-depth stories into how it all happened by the same newspapers that derive revenue from the real estate, mortgage lending, and construction industries today. A little advance warning when you’re in the middle of a credit bubble can prevent you from making a mistake it takes you years to recover from, if you recover at all.

‘And for what it’s worth, the standard arguments made by the people whose professions depend on rising house prices – no oversupply, higher lending standards, low unemployment – aren’t arguments for why housing can’t crash here. They’re only arguments (some of them not even valid) for why it hasn’t crashed yet. No sensible person would dispute that paying half a million dollars for a house is crazy. At a national level, it’s an enormous misallocation of capital and savings. But that’s a story for another day.’

Now it’s a story for another year!

Simon Munton
Assistant Publisher
Markets and Money Australia

Markets and Money offers an independent and critical perspective on the Australian and global investment markets. Slightly offbeat and far from institutional, Markets and Money delivers you straight-forward, humorous, and useful investment insights from a world wide network of analysts, contrarians, and successful investors. Founded in 1999, Markets and Money is published in 7 countries with a worldwide readership of almost 1 million people.

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3 Comments on "Confessions of a Charlatan"

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“‘Besides, credit booms are always obvious to central bankers in hindsight” Crumbs, really? I cannot possibly believe insiders don’t know of and also frontrun their own bank and government policy generated, credit bubbles. However in recent years, predicting a market event over short term time frames has proven unreliable fellas. The mortgage credit bubble for example has been pushed sideways further than we all thought possible. Not that I am denying that the market has weakened a bit. We can see interventions (with CB’s for just one example) across the globe have helped produce an extend and pretend period which… Read more »
I watched Greg’s considered presentation via the link, on the coming big bust. 4 points: 1. The big question is when. Greg says 2013. though also opines a “series of detonations”, probably over years. That seems more probable in a credit bust, given the time it will take for property to come onto the market to the point where some of it will clear and thus register as statistics. I wonder whether full time private sector employment will be a better indicator. 2. Greg mentioned Goldman’s “trade of the century” as a bet against the aussie. But the trade is… Read more »

As an expat, I’ve read DR’s predictions of an Australian housing crash for over six years now. Why must Greg, alone, bear the ‘charlatan’ tag? Can’t it be more fairly distributed among his DRA brethren?

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